Compliance Blog

CFPB's April Actions: It's Raining UDAAP

April has been a busy month for the Consumer Financial Protection Bureau (CFPB), from delaying the debt collection and general qualified mortgage rules, to taking action against three different companies for three different violations.

First, on April 6th the CFPB issued a consent order against Yorba Capital Management and the company’s former owner in his individual capacity for violating the Fair Debt Collection Practices Act (FDCPA). The CFPB states that the debt collection company mailed litigation notice letters to consumers, “threatening to file suit against a consumer if the consumer did not pay [the debt] amount indicated on the letter.” The letters also contained language that implied that legal action against consumers had already begun and listed several methods by which the company could collect on a judgement. The CFPB found that these practices violated the Consumer Financial Protection Act (CFPA) because the letters were deceptive because “the letters falsely represented that consumers would be sued and that there would be further legal action if the consumers did not pay the debt amount on the notices.”

As explained in our blog FDCPA Series Part I: CFPB Issues Final Rule on Debt Collection, the FDCPA does not apply to credit unions that are collecting on their own debts, but this action against Yorba reemphasizes the CFPB’s ability to find debt collection practices a violation not only under the FDCPA but also under the CFPA for being unfair, deceptive, or abusive acts or practices (UDAAPs).

Second, on April 13th, the CFPB filed a complaint against SettleIt, Inc for not properly disclosing its relationship with its affiliates and for steering consumers to expensive loans with these affiliates. The CFPB found as a debt-settlement company, SettleIt favored repayment of debts owed to its affiliates CashCall and LoanMe, though SettleIt presented itself as an independent debt-settlement company. SettleIt marketed new loans offered by CashCall and LoanMe, which would include SettleIt’s fees in addition to the consumers’ debts, so consumers ultimately paid interest on a loan to pay SettleIt fees. The CFPB states that SettleIt engaged in abusive acts violating the CFPA, because “SettleIt took unreasonable advantage of consumers’ reasonable reliance that SettleIt would protect their interests in negotiating their debts by engaging in a form of self-dealing that benefitted SettleIt, CashCall, and LoanMe at consumers’ expense.”

Finally, on April 27th, the CFPB issued a consent order against Nationwide Equities Corporation, a mortgage broker and lender, for violating the Mortgage Acts and Practices Advertising Rule (MAP Rule), the Truth in Lending Act (TILA), and the CFPA. The CFPB found that Nationwide sent hundreds of thousands of mortgage advertisements and flyers that contained false or misleading representations about the fees and costs associated with the mortgages. Nationwide also sent solicitations with statements that misrepresented that the letters “were being sent by or on behalf of the borrower’s current lender or an entity related to the borrower’s current reverse mortgage loan.” The bureau also found that Nationwide sent multiple consumers the exact same “pre-approved” loan amount, but Nationwide did not actually possess the information necessary to make representations that borrowers were “pre-approved” or eligible for specific terms of credit. The CFPB found that these misrepresentations violated the MAP Rule and inadequate disclosures of payment terms violated TILA and Regulation Z.

Credit unions may want to review advertisements and communications with members to ensure the credit union is not engaging in any unfair, deceptive, or abusive acts or practices.

About the Author

Janice Ringler, NCCO, NCBSO, Regulatory Compliance Counsel, NAFCU

Janice Ringler, NCCO, NCBSO, Regulatory Compliance Counsel, NAFCUJanice Ringler, NCCO, NCBSO, joined NAFCU as regulatory compliance counsel in May 2020. In this role, Ringler helps credit unions with a variety of compliance issues.

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