Banking Law
Banking Regulators Release Interagency Statement on COVID-19 Related Loan Modifications
By Covington Financial Services, Covington & Burling LLP
On March 22, 2020, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, and the Conference of State Bank Supervisors released an Interagency Statement encouraging financial institutions to work with borrowers affected by COVID-19, consistent with safety and soundness standards.
Specifically, the guidance states that the agencies will not criticize financial institutions for working with borrowers, and will not direct financial institutions to automatically categorize all COVID-19 related loan modifications – such as short term (e.g., six month) payment deferrals, fee waivers, or extensions of repayment terms – as troubled debt restructurings (“TDRs”) for regulatory and financial reporting purposes. In addition, the statement provides that the agencies’ examiners will exercise judgment in reviewing prudent loan modifications, and will not adversely risk rate credits that are affected by COVID-19, even if considered TDRs. Finally, the guidance provides that short-term deferrals granted due to COVID-19 should not be reported as past due, and loans that are modified due to COVID-19 should not be reported as nonaccrual assets. The statement reminds financial institutions that such loans may serve as eligible collateral at the Federal Reserve’s discount window.
New York DFS Issues Emergency Regulation Requiring Regulated Financial Institutions to Provide Relief to Residents Affected by COVID-19 Pandemic
By Hudson Cook, LLP
On March 24, 2020, the New York State Department of Financial Services issued an emergency regulation requiring that, for the duration specified in Governor Andrew M. Cuomo's Executive Order No. 202.9 (which may be extended), New York State-regulated financial institutions are required to: (1) make applications for forbearance of any payment due on a residential mortgage of a property located in New York widely available to any individual residing in New York who demonstrates financial hardship as a result of the COVID-19 pandemic, and (2) grant such forbearance for a period of 90 days, subject to the safety and soundness requirements of the regulated institution. The emergency regulation also requires that, for the duration specified in the Executive Order, New York State-regulated banking organizations eliminate fees charged for the use of ATMs that are owned or operated by the regulated organizations, overdraft fees, and credit card late payment fees for any individual who demonstrates financial hardship as a result of the COVID-19 pandemic, subject to the safety and soundness requirements of the regulated organization. Regulated institutions also are encouraged to assist individuals impacted by the COVID-19 pandemic in any additional manner they deem appropriate, consistent with safe and sound banking practices.
No later than April 7, 2020, all regulated institutions are required to email, publish on their websites, mass mail, or otherwise similarly broadly communicate to customers how to apply for COVID-19 relief and provide their contact information. Regulated institutions are required to process and respond to requests for COVID-19 relief not later than 10 business days after they receive all information
Consumer Finance
California Attorney General Releases Second Set of Revisions to Proposed CCPA Regulations
By Webb McArthur, Hudson Cook, LLP
On March 11, 2020, the Office of the Attorney General of California released a second set of revisions to the proposed regulations implementing the California Consumer Privacy Act. The revisions include a number of substantive changes to the proposals. Some of the most notable changes are:
- Removal of guidance on term "personal information." The first set of revisions to the proposed regulations added a section that provided guidance on the term "personal information," reminding businesses that the law only applies to information retained in identified or reasonably identifiable form. This second set of revisions removes that proposed section without explaining the reason for the change.
- Online privacy policy content. The new revisions provide that a business's online privacy policy must include the categories of sources from which the business collected consumers' personal information and the business or commercial purposes for collecting or selling personal information.
- Notice at Collection scope. The new revisions add a section that provides that a business that does not collect personal information directly from consumers is not required to provide a Notice at Collection "if it does not sell the consumer's personal information." The proposed regulations do not offer any information about the intent behind this section.
- Notice at Collection for employees. The new revisions provide that employment-related Notices at Collection would not need to include a link to the business's privacy policy.
Businesses may obtain more information about the CCPA and the proposed regulations on the Attorney General's website.
CFPB Provides Guidance to Consumers Under Financial Duress
By Eric Mogilnicki & Lucy Bartholomew, Covington & Burling LLP
Like the rest of the nation, the Consumer Financial Protection Bureau has been focused on the COVID-19 pandemic. The Bureau has set up a CFPB Coronavirus Response Webpage that you may wish to bookmark to keep up to date on the agency’s activities and advice to consumers.
The Bureau's activities have included a blog post entitled “Protect Yourself Financially from the Impact of Coronavirus,” in which the Bureau provided steps consumers can take if they are having trouble meeting financial obligations, experience a loss of income due to the pandemic, or have been targeted by a scam. In another post, “Protecting Your Credit During the Coronavirus Pandemic,” the CFPB encourages consumers to get a copy of their credit report, contact lenders when payment is difficult, and report and dispute inaccurate information. The Bureau also has emphasized that older adults can often fall victim to scams and urges consumers to exercise caution towards emails, texts, and social media posts that may be selling fake products or giving fake information about the coronavirus outbreak.
Director Kraninger Statement on Joint HUD-FHFA Announcement on Foreclosure and Eviction Moratorium
By Eric Mogilnicki & Lucy Bartholomew, Covington & Burling LLP
On March 18, 2020, CFPB Director Kathleen L. Kraninger offered a statement after the U.S. Department of Housing and Urban Development and the Federal Housing Finance Agency announced a moratorium on foreclosures and evictions. In the statement, Director Kraninger commended HUD and FHFA for taking actions that provide Americans with peace of mind during the uncertainty caused by the global pandemic, and noted that the CFPB has encouraged financial institutions to work with their customers who are affected by the coronavirus. She highlighted the resources the CFPB has released to consumers on how to protect their finances and how to submit complaints, and reaffirmed that the CFPB is ready to help consumers resolve issues with their financial service providers though its consumer complaint system.
U.S. Supreme Court Hears Arguments on Bureau’s Constitutionality
By Eric Mogilnicki & Graves Lee, Covington & Burling LLP
On March 3, 2020, the U.S. Supreme Court heard oral argument in Seila Law LLC v. Consumer Financial Protection Bureau, a case centered on the constitutionality of the Consumer Financial Protection Bureau’s leadership structure. A transcript of the argument is available here. U.S. Solicitor General Noel Francisco (on behalf of the Bureau) as well as counsel to Seila Law argued that the Bureau Director’s statutory protection from presidential removal violates Article II of the constitution. Court-appointed amicus and former U.S. Solicitor General Paul Clement described the removal protection as in line with historical practice and the Court’s precedent. While the Court will take some months to issue an opinion, our best guess is that the Court will invalidate the Director’s removal protection but sever the provision from the remainder of Title X of the Dodd-Frank Act. Such a decision would likely leave the Bureau’s past and current actions untouched, while opening up the possibility that the Presidential election could lead to an immediate change in Bureau leadership and perspective.
CFPB Releases Updated Responsible Business Conduct Bulletin
By Eric Mogilnicki & Graves Lee, Covington & Burling LLP
On March 6, 2020, the CFPB issued a revised and updated version of its Responsible Business Conduct Bulletin. The Bureau had previously issued a bulletin on the same topic in 2013. The revised Bulletin is designed to further encourage compliance activities by making clearer that the Bureau will consider them relevant to the existence or scope of any enforcement action. For example, the revised policy may benefit companies that devote substantial resources to compliance, even if compliance did not prevent or detect the violations at issue.
Seventh Circuit Holds Bristol-Meyer Not Applicable to Federal Class Actions
By James Morrissey, Pilgrim Christakis LLP
In Mussat v. IQVIA, Inc., the plaintiff filed a nationwide class action alleging violations of the TCPA. But the defendant was not subject to general jurisdiction in Illinois and the district court interpreted Bristol-Myers as holding “that due process requires the defendant be subject to specific jurisdiction not only as to the named plaintiff’s claims, but also as to the absent class members' claims.” And because there was no “connection” between Illinois and nonresident class members to establish specific jurisdiction, the court struck the plaintiff’s class definition to the extent it included those individuals.
The Seventh Circuit reversed and held that Bristol-Meyer does “not apply to the case of a nationwide class action filed in federal court under a federal statute.” In doing so, the court characterized the defendant’s claim that “class actions have always required minimum contacts between all class members and the forum” as “nothing more than ipse dixit.” Importantly, Bristol-Myers involved a “mass action” under a California procedural rule permitting “consolidation of individual cases, brought by individual plaintiffs” but in federal class actions under Rule 23 “absent class members are not full parties to the case.” Thus, unnamed class members are “more like nonparties” and there is no need to “conduct a separate personal-jurisdiction analysis of their claims.”