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New York legislators are pledging to change laws that have allowed predatory lenders to use the state court system to seize the assets of thousands of small businesses across the country, Bloomberg News reported. Brad Hoylman, incoming chairman of the Senate Judiciary Committee, called the current situation “alarming” and said that he’d try to enact changes during next year’s legislative session. “New Yorkers would be astounded to find out that our state is an outlier when it comes to the use and abuse of confessions of judgment and the punitive impact on small businesses,” said Hoylman, a Manhattan Democrat. Confessions are legal instruments that lenders use to win court judgments against debtors without a judge’s involvement. Bloomberg News reported last month that merchant cash-advance companies have obtained more than 25,000 judgments against small-business borrowers since 2012 by filing confessions with New York county clerks. In interviews and court pleadings, borrowers described lenders who forged documents, lied about how much they were owed or fabricated defaults out of thin air.

Mick Mulvaney, as acting director of the Consumer Financial Protection Bureau, has softened the agency’s hard-charging approach that financial companies had long complained about. One year after his appointment, the industry is pleased, but not fully satisfied, the Wall Street Journal reported. Mulvaney, appointed by President Trump last November, over the past year has made a number of changes that the financial industry has hailed, including a pullback in enforcement actions, an easing of supervisory activities, and a pledge to redo a new payday-loan rule that lenders warned would decimate them. But many in the industry had expected Mulvaney to move more swiftly to blunt the power of the agency and ease regulations in areas such as mortgage disclosures, debt collection, and prepaid cards. The acting director has left a big imprint on the bureau, drawing criticism from consumer advocates and Democrats. He promised earlier this year to bring a more collaborative approach with businesses regarding supervision and enforcement. The CFPB has announced nine enforcement actions since he took over, down from 47 in the bureau’s final year was under Obama-appointed leadership.

The already astronomical interest rates for payday loans in Utah are rising, to an average of 528 percent, with the highest rate topping a stunning 1,500 percent. Still, 1 of every 5 payday loan stores in the state closed in the past two years, the Salt Lake Tribune reported. That’s according to new annual data compiled by the state about the industry — portrayed by critics as a “debt trap” that can easily hook and financially drain the poor, but defended by lenders as a needed service for people with poor credit and few other loan options. The annual report by the Utah Department of Financial Institutions also has encouraging news about payday loan customers: They are borrowing less, and 1 in 8 now take advantage of state-mandated programs that allow them to enter into interest-free, extended-payment programs to avoid default.

The Consumer Financial Protection Bureau (CFPB) yesterday announced a settlement with Cash Express, LLC, a small-dollar lender based in Cookeville, Tenn., that offers high-cost, short-term loans, such as payday and title loans, as well as check-cashing services, according to a CFPB press release. Cash Express owns and operates approximately 328 retail lending outlets in four states: Tennessee, Kentucky, Alabama, and Mississippi. As described in the consent order, the Bureau found that Cash Express violated the Consumer Financial Protection Act (CFPA) by deceptively threatening in collection letters that it would take legal action against consumers, even though the debts were past the date for suing on legal claims, and it was not Cash Express’s practice to file lawsuits against these consumers. The Bureau also found that Cash Express violated the CFPA by misrepresenting that it might report negative credit information to consumer reporting agencies for late or missed payments, when the company did not actually report this information. Under the terms of the consent order, Cash Express and its subsidiaries are barred from automatically taking money from check-cashing transactions unless certain conditions are met. Cash Express is further barred from making misrepresentations about its consumer reporting activities and its intention or likelihood of filing suit to collect a debt. The order requires Cash Express to pay approximately $32,000 in restitution to consumers, and pay a $200,000 civil money penalty.

A federal regulator plans to explain what it considers to be “abusive” practices by companies selling financial services, a move aimed at giving a clearer idea of what behavior would get companies into trouble under relatively new government enforcement powers, the Wall Street Journal reported. Mick Mulvaney, the Consumer Financial Protection Bureau’s acting director, said on Monday that the bureau is working on a regulation defining how it views unfair, deceptive or abusive acts or practices, known as "UDAAP." Most of the CFPB’s enforcement actions involve such claims and the 2010 Dodd-Frank financial law, which created the CFPB and gave it broad enforcement powers. Companies have long complained that the CFPB’s UDAAP approach was overly broad and nuanced, making what would trigger an enforcement action less predictable.

In the final months of President Obama’s administration, the government’s top consumer regulator was negotiating a large settlement with the student loan collector Navient, which it said had misled borrowers and made mistakes that added billions of dollars to their bills. But after President Trump’s victory, the talks between the company and the Consumer Financial Protection Bureau broke down, the New York Times reported. Two days before Trump’s inauguration, the bureau sued Navient, accusing it of “systematically and illegally failing borrowers at every stage of repayment.” Two states, Illinois and Washington, simultaneously filed their own suits in state courts. As the bureau has taken a softer approach toward industries, including payday lending, and had its own acting director say it too often exceeds its authority, the possibility that the Trump administration will ease up on Navient has prompted more states to join the legal fray. Five have now sued Navient, two of them within the past four months. “There is growing concern among myself and state attorneys general that the federal government is not only losing interest in holding student loan servicers like Navient accountable, but that the federal government is actively looking for ways to shut down state enforcement actions against Navient and other student loan servicers,” said Jim Hood, the Mississippi attorney general, who sued Navient in July. “The timing of filing our lawsuit reflects that concern.”

Last October, the Consumer Financial Consumer Bureau released its payday and car-title lending rule. The agency, under the leadership of Richard Cordray, spent five years developing these safeguards, which included input from lenders, faith leaders, veterans and military organizations, civil rights groups, consumer advocates, and constituents from across the country. But over the past year, predatory payday lenders have spearheaded an effort, with help from CFPB acting Director Mick Mulvaney, to stop the rule from moving forward, MorningConsult.com reported. Earlier this year, payday lenders pushed the House of Representatives and the Senate to introduce Congressional Review Act resolutions to repeal the CFPB payday rule. Americans from around the country called and wrote their members of Congress urging them not to bring the CRAs to a vote. Constituents won this fight, and lawmakers did not act on these resolutions before their deadline. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The Consumer Financial Protection Bureau and Bluestem Brands, Inc., Bluestem Enterprises, Inc. and Bluestem Sales, Inc. (the Bluestem companies) have filed an administrative consent order resolving the Bureau’s allegations that after consumers made payments to the Bluestem companies on debts that the companies had already sold, the Bluestem companies substantially delayed sending those payments to the third-party debt buyers, according to a CFPB press release. In the consent order, the Bureau found that the Bluestem companies violated the Consumer Financial Protection Act of 2010 by unfairly delaying the transfer of payments that customers had made to the Bluestem companies on charged-off accounts to the third-party debt buyers who had purchased those accounts. The Bureau found that between 2013 and 2016, Bluestem delayed forwarding payments for more than 31 days in 18,000 instances; in 3,500 of those instances, Bluestem delayed forwarding payments for more than a year. The consent order filed today requires the Bluestem companies to improve their processes to timely identify and forward customer payments on accounts that they have sold to third-party debt buyers. The Bluestem companies will also pay a civil money penalty of $200,000.