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The Consumer Financial Protection Bureau (CFPB) yesterday proposed striking certain borrower safeguards from a 2017 regulation on short-term, high-interest loans, The Hill reported. The bureau yesterday kicked off a proposal to loosen the bureau’s rule on “payday” loans, a measure meant to protect vulnerable consumers from bottomless debt. The proposed rewrite would eliminate underwriting provisions under the rule meant to ensure recipients of payday loans will have the ability to repay them despite high interest rates. Senior CFPB officials said yesterday that the bureau based its justification for the repayment provisions on weak and insufficient evidence. The officials said that that ability-to-repay standards could wipe out close to 75 percent of payday lending storefront and drastically limit consumers’ access to credit.

Navient, the nation’s largest student loan servicer, yesterday filed a motion for a partial summary judgment on two of the 11 counts the Consumer Financial Protection Bureau has brought against it, accusing the CFPB of failing to provide evidence of its claims, Politico reported. The CFPB filed suit in January 2017, alleging that Navient had “steered hundreds of thousands of federal student loan borrowers experiencing long-term financial hardship” into forbearance, which allows borrowers to temporarily stop making payments, while providing little or no information about alternative repayment plans, among other counts. The bureau identified 32 borrowers to support its claims, according to the filing, before withdrawing all but 15 of them. Of those, the 14 the company has already deposed “were informed about [income-driven repayment options] including prior to and immediately after forbearance,” Navient said. The company has now added some of the CFPB’s original witnesses to its own potential witness list. Navient has also accused the CFPB of stalling for time in the case; factual discovery was initially set to close in May 2018, but the consumer bureau has obtained three extensions, moving the deadline to June 2019.

The Consumer Financial Protection Bureau is changing course on its previous decision to stop supervising lending to active duty service members, HousingWire.com reported. Kathy Kraninger, the recently confirmed director of the bureau, sent a letter to Congress yesterday, asking for “clear authority” to supervise for compliance with the Military Lending Act. This turnaround comes several months after Mick Mulvaney, who served as acting director of the CFPB prior to Kraninger’s confirmation, decided that the bureau would stop supervising lending made to active duty service members. Much to the dismay of congressional Democrats, who pushed the CFPB to retain oversight. Under Mulvaney’s changes, the CFPB relied solely on complaints from service members and their families to trigger investigations. Mulvaney had reportedly expressed that the bureau had overstepped its authority by proactively looking into cases against military members without receiving complaints. Now, Kraninger has sent a proposal to clarify the CFPB’s authority to supervise compliance with the Military Lending Act to Vice President Mike Pence and Speaker of the House Nancy Pelosi. The proposal outlines a case for spelling out clearly what authority the CFPB would have over supervising military lending and proposes amending several sections of the Consumer Financial Protection Act of 2010 to outline that, according to the draft, “the Bureau shall have nonexclusive authority to require reports and conduct examinations” in regard to lending to military service members.

The Consumer Financial Protection Bureau (CFPB) is expected to eliminate underwriting requirements in a highly anticipated revamp of its payday lending rule, according to sources familiar with the bureau’s proposal, American Banker reported. The CFPB in October signaled its interest in "revisiting" the ability-to-repay provisions in the 2017 small-dollar lending rule issued under former Director Richard Cordray. But sources familiar with the agency's thinking say the CFPB — now led by Trump appointee Kathy Kraninger — has concluded the best approach is to remove those provisions altogether. Under the current rule, which has not yet gone fully into effect, lenders must verify a borrower's income as well as debts and other spending, to assess one's ability to repay credit while meeting living expenses. Such a course would gut the centerpiece of a rule that consumer advocates had hailed as a preventive measure against spiraling debt for consumers who rely on short-term credit. The agency under then-acting CFPB Director Mulvaney signaled its intent to reopen the rule as far back as January 2018. Now the acting White House chief of staff, Mulvaney sided with two payday lending trade groups that sued the CFPB in April to invalidate the regulatory restrictions.

The Supreme Court yesterday attempted to resolve a legal question that could have broad ramifications on hundreds of thousands of Americans who are foreclosed on without a judicial process each year. A key issue in the matter is who or what can be considered a "debt collector," CNBC.com reported. The case centers on Dennis Obduskey, a Colorado man who defaulted on his $329,940 home loan in the aftermath of the 2007 financial crisis. The question in the case is whether Obduskey is entitled to legal protections for debtors provided by Congress in 1977, or whether the foreclosure is exempt because it is Obduskey's home, and not money, that is at stake. Obduskey obtained his home loan from a company called the Magnus Financial Corporation in 2007, before it was ultimately transferred to Wells Fargo. Like many other Americans, he defaulted on the loan in 2009. The bank then attempted to foreclose on Obduskey for six years, to no avail. Finally, in 2015, Wells Fargo retained a law firm — McCarthy & Holthus — to handle the foreclosure proceedings. But, as of the latest briefs in the case, Obduskey's home has yet to be sold. The question of whether a law firm seeking to foreclose on a property is a debt collector is one that could affect millions of Americans. In 2016, about 200,000 homes were lost to foreclosure in states that permit lenders to foreclose on a property without going to court. Business groups have argued that these so-called non-judicial foreclosures are more efficient and fair to borrowers. Progressives say borrowers are entitled to more protections. The case is Obduskey v. McCarthy & Holthus LLP, U.S., No. 17-1307, 6/28/18. The High Court is expected to issue a ruling by late June.

USAA Federal Savings Bank will pay over $15 million in restitution and fines to settle claims by the Consumer Financial Protection Bureau (CFPB) that the bank neglected stop-payment requests and reopened deposit accounts without customers' consent, American Banker reported. The CFPB's consent order, announced yesterday, alleged the bank refused to investigate when customers asserted that funds had been debited in error. The agency specifically singled out USAA's process for responding to disputed payday loan transfers as a source of the bank's faulty practices. The CFPB said USAA also engaged in unfair acts or practices from 2011 to 2016 by reopening closed consumer deposit accounts in certain circumstances without providing timely notice.

Lesser-known financial outfits such as Low VA Rates LLC are dominating the business of selling cash-out VA mortgage refinancing, which totaled $41 billion worth of new loans over the past year, Bloomberg News reported. This boom is alarming federal regulators. Lenders, who can charge thousands of dollars in fees, are encouraging veterans to extract as much as 100 percent of their home equity. Many of the borrowers have poor credit and low incomes, and they could soon find themselves deep underwater. Multiple refinancings helped spark the 2008 financial collapse. In a recent Federal Register notice, the VA itself says financial companies are reviving “subprime lending under a new name.” Lenders say that they’re providing a valuable service to cash-strapped veterans. Many borrowers use the money to pay off high-rate credit cards, medical bills, or home repairs. Founded in 1944, the VA loan program began as a way to offer a hand up to returning World War II service members. In the event of a default, the government guarantees 25 percent of the loan; the lender is responsible for the rest. Government-owned Ginnie Mae backs bonds based on these loans, which are packaged and sold to investors, such as pension and mutual funds. The loans have helped generations of veterans buy homes. But refinancings can be a costly way to free up money. In a cash-out transaction, borrowers get a new loan for more than they owe on their current mortgage. A VA borrower must pay as much as 3.3 percent of the loan amount to the federal government as a fee that offsets defaults.

For-profit schools dominate the cosmetology training world and reap money from taxpayers, students and salon customers, according to a New York Times analysis. They have beaten back attempts to create cheaper alternatives, even while miring their students in debt. In Iowa in particular, the companies charge steep prices — nearly $20,000 on average for a cosmetology certificate, equivalent to the cost of a two-year community-college degree twice over — and they have fought to keep the required number of school hours higher than anywhere else in the country. Each state sets its own standards. Most require 1,500 hours, and some, like New York and Massachusetts, require only 1,000. Iowa requires 2,100 — that’s a full year’s worth of 40-hour workweeks, plus an extra 20. By comparison, you can become an emergency medical technician in the state after 132 hours at a community college. Put another way: An Iowa cosmetologist who has a heart attack can have her life saved by a medic with one-sixteenth her training.