An appeals court in the D.C. Circuit has ruled that a Texas bank has standing to challenge the constitutionality of the Consumer Financial Protection Bureau, an independent federal agency that regulates consumer financial products and services. A three-person judicial panel unanimously overturned a 2013 district court ruling, which concluded that the plaintiff did not have standing and that its claims were not ripe. In State National Bank of Big Spring, TX, et al. v. Lew, et al., the U.S. Court of Appeals for the D.C. Circuit reversed and ruled that the bank has standing to challenge the constitutionality of the CFPB as well as the recess appointment of its director, Richard Cordray. The bank, joined by two nonprofit organizations, originally filed...

The CFPB last week finalized its earlier proposal to extend to Oct. 3, 2015, the effective date for its controversial integrated disclosure rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act: the so-called TRID. “The bureau believes that moving the effective date may benefit both industry and consumers with a smoother transition to the new rule,” the CFPB said in announcing the finalization. “The bureau further believes that scheduling the effective date on a Saturday may facilitate implementation by giving industry time over the weekend to launch new systems configurations and to test systems.” Further, “A Saturday launch is also consistent with industry plans tied to the original effective date of Saturday, August 1.” The ...

The CFPB last week ordered Citibank and its subsidiaries to provide an estimated $700 million in relief to eligible consumers harmed by allegedly illegal practices related to credit card add-on products and services. Citibank and its subsidiaries also will pay $35 million in civil money penalties to the CFPB. Roughly 7 million consumer accounts were affected by Citibank’s deceptive marketing, billing, and administration of debt protection and credit monitoring add-on products, said the bureau. A Citibank subsidiary also deceptively charged expedited payment fees to nearly 1.8 million consumer accounts during collection calls. More specifically, the bureau’s allegations of deceptive marketing include charges that Citi misrepresented the cost and fees for coverage, misrepresented the benefits of some products, used illegal practices ...

The CFPB last week brought an $18.5 million enforcement action against Discover Bank and its student loan affiliates for engaging in allegedly illegal private student loan servicing practices. The bureau’s enforcement action “demonstrates how Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank,” said the bureau. Thousands of consumers encountered problems as soon as their loans became due and Discover gave them account statements that overstated their minimum payment, the CFPB said. Also, “Discover denied consumers information that they would have needed to obtain tax benefits and called consumers’ mobile phones at inappropriate times to contact them about their debts.” The CFPB concluded that the ...

The CFPB and the Department of Justice resolved a $24 million enforcement action against American Honda Finance Corp. last week with a settlement that will put new measures in place to address discretionary auto loan pricing and compensation practices. The joint CFPB/DOJ investigation concluded that Honda’s policies resulted in minority borrowers paying higher dealer markups. “Honda violated the Equal Credit Opportunity Act by charging African-American, Hispanic, and Asian and Pacific Islander borrowers higher dealer markups for their auto loans than non-Hispanic white borrowers,” said the bureau. “These markups were without regard to the creditworthiness of the borrowers.” Honda’s policies also injured thousands of minority borrowers, according to the CFPB. “Honda’s discriminatory pricing and compensation structure meant thousands of minority borrowers ...

The CFPB has filed a complaint and a proposed $5.2 million consent order in federal court against Sacramento, CA-based Student Financial Aid Services for allegedly illegal sales and billing practices.The company has operated websites and related call centers where it offers fee-based assistance to consumers filling out the federal government’s Free Application for Federal Student Aid. According to the CFPB’s complaint, when consumers entered their payment information for certain financial advisory services, SFAS began to bill them for an annual subscription without their knowledge or consent. These recurring charges typically ranged from $67 to $85 each year and were renewed annually, according to the bureau. The company enrolled consumers in these annual subscriptions without adequate disclosures and imposed recurring ...

The CFPB recently won some and lost some when it comes to the debt-collection arguments it advanced in CFPB v. Frederick J. Hanna & Associates, which the bureau initiated in July 2014. According to the CFPB’s complaint, the firm and its three principal partners – Frederick Hanna, Joseph Cooling and Robert Winter – ran a debt-collection lawsuit mill that used illegal tactics to intimidate consumers into paying debts they may not have owed. Between 2009 and 2013, the firm filed more than 350,000 debt-collection lawsuits in Georgia alone, but the attorneys only spent less than a minute reviewing each suit, according to the CFPB. In its motion to dismiss, Hanna & Associates argued that the claims brought by the CFPB focus only...

Selling Source, LLC, a lead-generation company in Las Vegas, and Tim Madsen, a company employee and recipient of a civil investigative demand from the CFPB, recently petitioned the bureau to modify or set aside entirely the CID. First, the company argues that the CID should be set aside since it is not a “covered person” under the bureau’s authority because it does not offer or provide a “financial product or service” as spelled out in the Dodd-Frank Act. In its petition to the bureau, the company notes that a “covered person” is defined by Dodd-Frank as “any person that engages in offering or providing a consumer financial product or service,” or acts as a “service provider” and is a corporate ...

JPMorgan Chase last week ended six years of litigation by agreeing to a $388 million settlement to resolve allegations that the bank misled investors about the quality of pre-crisis MBS they had purchased. Still requiring court approval, the settlement would conclude one of the last remaining MBS purchaser class actions arising out of the financial crisis, according to plaintiff attorneys. The suit was filed...

The Department of Veterans Affairs’ Home Loan Guaranty program is planning to expand its quality-control process to help VA lenders improve the origination process. The goal is to make the VA program, which has seen a sharp spike in lending, work better for servicemembers and veterans, according to Michael Frueh, director of the VA home-loan guaranty program, during a recent panel discussion of government-backed mortgage insurance programs hosted by the Urban Institute. There are still obstacles to overcome, however, Frueh said. Delayed appraisals are a top complaint among VA lenders, who have to contend with the long wait to get VA appraisals back from appraisal management companies or appraisers. Lenders say that, in some of the hot real estate areas in the country, they have seen a number of contracts extended because appraisals were ...