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The Consumer Financial Protection Bureau yesterday ordered Navy Federal Credit Union to pay a $5.5 million civil penalty and $23 million to customers over allegations of improper debt collection practices, MorningConsult.com reported. The Vienna, Va.-based credit union, whose 6.3 million members include many veterans and military service members, unfairly restricted account access for members with delinquent loans and made false threats about debt collection between January 2013 and July 2015, the CFPB said. Navy Federal threatened to garnish the wages of members with slumped loans or take action against them, the CFPB said — actions it seldom took or did not have authority to take. The credit union also gave members with delinquent loans misleading information on the consequences to their credit, inflating the credit union’s influence on their credit ratings, the agency said.

A federal appeals court ruled yesterday that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional, fueling an election-year political fight over one of the signature government responses to the 2007-09 financial crisis, Reuters reported. The U.S. Court of Appeals for the District of Columbia Circuit threw out a $109 million penalty against PHH Corp in 2014, saying that the structure of the CFPB gives its sole director too much power. The three-judge panel, though, also sought to remedy the problem by giving the president the power to fire the director, which it said made the position similar to the Attorney General and other constitutionally sanctioned agency heads who answer to the White House. The CFPB is expected to request the entire appeals court conduct an "en banc" review of the case. The losing side will likely appeal to the Supreme Court. The ruling will affect other lawsuits against the agency in lower courts, but should not affect the government's $190 million settlement last month of fraud charges with Wells Fargo & Co. The CFPB was involved in that case.

The Supreme Court will decide this term whether the Bankruptcy Code impliedly repealed the federal Fair Debt Collection Practices Act, or FDCPA, and whether the filing of a knowingly time-barred proof of claim violates the FDCPA, according to today’s Rochelle’s Daily Wire. In Midland Funding LLC v. Johnson, the Supreme Court granted certiorari on Oct. 11 to resolve a split among the circuits. In Johnson, the Eleventh Circuit held in May that the later-adopted Bankruptcy Code did not impliedly repeal the FDCPA. The decision was no surprise because the Eleventh Circuit had held in 2014 in Crawford v. LVNV Funding LLC that filing a stale claim barred by a statute of limitations violates the FDCPA. In Crawford, the appeals court had not reached the issue of implied repeal. The issues are “exceptionally important,” Daniel Geyser told ABI in an e-mailed message, because these “questions have hopelessly divided the courts.” Geyser, of Los Angeles, represents the debtor in Johnson. Read more.

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The Obama administration’s crackdown on payday lending to low-income borrowers has generated unusually heavy public feedback, stoked by computer-generated comments and the escalating ideological battle over consumer financial issues, the Wall Street Journal reported today. The Consumer Financial Protection Bureau (CFPB) has received about a million public comments on rules governing payday lenders since issuing the proposal in June. That figure is the highest in the agency’s five-year history, far exceeding the 50,000 received on a May proposal restricting mandatory arbitration agreements and giving consumers more power to sue financial firms. Advocates say the use of software that prewrites comments for people to submit electronically has helped fuel the outcry. The payday-lending rule is the federal government’s first comprehensive effort to regulate small-dollar, nonbank lenders that often charge triple-digit interest rates and cater to about 12 million Americans. The proposal asks lenders to go through the process of verifying that consumers can pay back those loans before extending the credit, a requirement that advocates say will help keep borrowers from falling into cycles of debt.

The Consumer Financial Protection Bureau (CFPB) yesterday fined Flourish Inc., doing business as online marketplace lender LendUp, $3.6 million for allegedly deceiving customers by making false promises about its products, MorningConsult.com reported. LendUp started offering loans aimed at improving credit scores in 2012 but “did not deliver on its promises,” the CFPB said yesterday. The lender misled customers about the annual percentage rate they would have to pay, and it did not report credit information despite a pledge to improve consumers’ credit ratings, the agency said. The CFPB order includes a $1.83 million requirement to pay back victims, a $1.8 million civil penalty, and a mandate to stop deceptive lending practices and misleading advertisements.

The Consumer Financial Protection Bureau (CFPB) is fining the parent company of TitleMax, a title loan lender, $9 million for luring consumers into costly loan renewals with misleading information about terms and costs, The Hill reported today. The agency said yesterday that the company, which offers loans in exchange for a customer’s car title, also used debt collection tactics that illegally exposed information about debts to borrowers’ employers, friends and family. “TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal,” CFPB Director Richard Cordray said in a statement. "They then followed up with intrusive visits to homes and workplaces that put consumers’ personal information at risk.” The CFPB said it found store employees, as part of their sales pitch for a 30-day loan, were offering consumers a “monthly option” for making loan payments and giving out a “Voluntary Payback Guide” that showed how to repay the loan with smaller payments over a longer time period. However, the guide and sales pitch neglected to explain the true cost of the loan if the consumer renewed it multiple times.

A Long Beach, Calif., pastor admitted this week to running a mortgage scam that collected nearly $3 million from distressed property owners who paid him fees while he delayed foreclosures on their homes, according to federal prosecutors, the Long Beach Press-Telegram today. Karl Robinson pleaded guilty on Tuesday in federal court to one count of bankruptcy fraud related to the scheme, the U.S. Attorney’s Office in Los Angeles announced Thursday. Robinson’s attorney could not immediately be reached for comment. He faces up to five years in prison at his sentencing scheduled for Nov. 28. Prosecutors said Robinson’s scheme targeted homeowners who had defaulted on their mortgages. If the homeowners paid Robinson, he would stall their evictions by filing fake documents related to the foreclosure proceedings, according to the U.S. Attorney’s office. Robinson would start by filing paperwork that appeared to show a third party owned a stake in the property that was being foreclosed on, according to prosecutors. Authorities said Robinson would then file a bankruptcy petition in the fake third party’s name.

The Justice Department filed a lawsuit accusing several California loan modification companies of violating federal housing protection laws by discriminating against Hispanic homeowners, MorningConsult.com reported yesterday. The defendants named in the suit are The Home Loan Auditors LLC, Century Law Center LLC, SOE Assistance Center Inc. and Spieker Law Office, along with principals Omar Alcaraz, Araceli Castro, Oralia Gutierrez, Hortencia Leon, Raul Luna, Elena Ramirez and David Spieker. The mortgage servicers violated the Fair Housing Act and Equal Credit Opportunity Act by limiting Hispanic homeowners’ access to financial assistance and targeting them for predatory loan modification services, the Justice Department said in a release. The complaint, filed in federal district court in Northern California, alleges that the servicers encouraged Latino homeowners to pay about $5,000 for unnecessary loan audits, according to DOJ.

The Consumer Financial Protection Bureau’s (CFPB) moved to ban contract language prohibiting class action waivers proposal has generated thousands of comments, many from opponents who argue the ban would only benefit trial lawyers, the National Law Journal reported today. Insurance regulators have expressed their own concerns. Hundreds of law professors are backing the consumer agency’s proposed rule. U.S. lawmakers are divided. Broker-dealers have drawn distinction between investment contracts and consumer financial contracts — and they’re telling the CFPB to leave the regulation of their industry to the U.S. Securities and Exchange Commission. A trade group, the Securities Industry and Financial Markets Association, commented on July 1 that Congress did not intend in the Dodd-Frank reform law to give the CFPB and the SEC overlapping authority. On Aug. 11, a group of 19 state attorneys general — under the masthead of Massachusetts Attorney General Maura Healey — wrote that class action lawsuits complement their enforcement efforts.