In this month’s article, we share some of our top “bites” for the prior and current month covered during the September 2024 webinar.

Bite 10: CFPB Publishes Report on Cash-Back Fees

On August 27, 2024, the CFPB issued a report indicating that large retail store chains charge cash-back fees to customers using debit and prepaid cards, costing Americans millions of dollars in fees. The CFPB noted that these cash-back fees are occurring as various bank merger and branch closures have reduced the supply of free cash access points for consumers. The CFPB sampled eight large retail companies and assessed their practices for charging cash-back fees. The report found that the three large retail companies in the sample charged cash-back fees resulting in an estimated $90 million in fees annually. The report also indicates that many merchants pre-determine the withdrawal options, commonly between $5 and $50. The report indicates that three major retail chains (out of the eight sampled), like dollar stores and a grocery store chain, charged cash-back fees, while the 5 others in the sample didn’t. The report noted that consumers with lower incomes or fewer banking choices encounter cash-back fees disproportionately. For example, some stores are frequently located in small rural towns, communities of color, and low-income communities. Those areas, the CFPB claimed, are more likely to have fewer bank branch locations and more residents relying on cash for daily transactions.

Bite 9: CFPB Publishes Report on Medical and Rental Debt Collection

On September 5, 2024, the CFPB released its Annual Report to Congress on debt collection, focusing on medical and rental debt. In 2023, consumer complaints about medical debt in collections made up about 11% of all collections complaints to the CFPB. The CFPB stated that many of the same collection problems have persisted since last year’s report. The CFPB’s research and the complaints include claims that some debt collectors attempt to collect medical bills consumers already paid or bills eligible for financial assistance programs. The CFPB claimed it continues to receive complaints about medical financing products, and that debt collectors pursue patients for these bills even when the bills should never have been incurred in the first place. The CFPB started collecting complaints about rental debt collection in August 2023. From August 2023 through the end of 2023, the CFPB received more than 1,700 rental debt complaints. The CFPB’s research and the complaints include claims that some debt collectors collected on bills that are inflated due to illegal price fixing and tacked on rental fees, such as fees the CFPB calls rental “junk” fees from payment processing servicers.

Bite 8: CFPB Issues Consumer Advisory on Video Games

On August 28, 2024, the CFPB issued a consumer advisory concerning video games. The CFPB warned consumers that games use in-game currency to conceal the real costs of transactions and use gambling-like design tricks to conceal odds and encourage compulsive spending. The CFPB encouraged consumers to use gift cards, with a finite amount of dollars available, for in-game purchase to avoid surprise overcharging. The CFPB also recommended parental controls or specialized accounts for children that require a password before making transactions and considering games without in-game purchases. The CFPB also advised consumers to consider opting-out of data sharing and collection policies on accounts when possible. The CFPB claims that gaming technology collects and monitors a child’s physical location and social media activity, that virtual or mixed-reality headsets can collect biometric data, such as iris scans, eye movements, pupil response, gestures, voice, and facial expressions as well as scanning the size of the room a player is in and if any other people are in range. The CFPB has continued monitoring developments in the video game market and previously released a report on banking in video games in April 2024. A series of Hudson Cook articles on the CFPB’s activities involving gaming can be found here.

Bite 7: CFPB Publishes Guidance on Overdraft Fees

On September 17, 2024, the CFPB published guidance on overdraft fees, clarifying that financial institutions cannot charge overdraft fees without affirmative consent. Specifically, the CFPB published a circular that addressed whether financial institutions violate the law if there is no proof that the financial institution obtained a consumer’s affirmative consent before levying overdraft fees for ATM and one-time debit card transactions. The circular concluded that “yes,” a financial institution may violate the Electronic Funds Transfer Act and Regulation E, if there is no proof that it obtained affirmative consent to enrollment in covered overdraft services. Under the EFTA, banks cannot charge overdraft fees on ATM and one-time debit card transactions unless consumers have affirmatively opted in. Based on its supervisory and enforcement work, the CFPB has determined that some institutions have been unable to provide evidence that consumers had opted into overdraft coverage before they charged overdraft fees. CFPB Director Chopra said, “No Americans should be hit with bank account fees that they never agreed to.”

Bite 6: CFPB Wins Small-Business Data Rule Challenge

On August 26, 2024, a federal judge upheld the Small Business Data Rule after trade associations challenged the CFPB’s authority. The CFPB issued the rule in March of 2023, requiring financial institutions to collect and report several types of data from small business credit applications and to create a database of such applications. In July of 2023, a federal judge blocked the CFPB from enforcing the rule nationwide after the 5th Circuit decision on the CFPB’s funding structure. After the Supreme Court upheld the CFPB’s funding structure, the rule’s injunction was slated to end, and the American Bankers Association and Texas Bankers Association argued that the judge should block the rule on other grounds. The banking groups argued that the CFPB violated federal administrative law by adopting a rule whose data collection was so flawed that the rule undercut the statute’s purpose and increased costs for small businesses. The judge held that the groups’ arguments were disagreements over the CFPB’s determinations rather than a dispute over its statutory authority to adopt the rule. The CFPB previously extended the deadlines for lenders to comply with the rule. Those with the highest volume of small business loans are required to collect data by July 2025.

Bite 5: CFPB Takes Action Against Company Selling its Membership Card

On September 13, 2024, the CFPB sued a company and its CEO for allegedly tricking consumers into signing up for an expensive membership based credit card. The CFPB alleges that card charged almost $300 in annual fees, on a card with a $500 credit limit, and that the card could only be used to purchase goods from the company’s overpriced online store. The CFPB alleged that between 2017 and 2021, the company enrolled nearly 900,000 consumers in its membership program who collectively paid more than $51 million in fees. The CFPB alleged that 93% of these consumers never used any of the company’s products but accounted for over $45 million in fees. The complaint alleges that the company violated the Consumer Financial Protection Act and the Truth in Lending Act. The complaint also alleges that the company failed to mention the membership card’s considerable limitations, that the company’s fees exceeded the caps set by TILA and regulation Z, and that customers had a hard time canceling their memberships. The CFPB is requesting an injunction, an order to pay a civil money penalty, and redress to consumers.

Bite 4: CFPB Takes Action Against Mortgage Lender

On August 29, 2024, the CFPB issued a consent order in an action alleging that a mortgage lender violated the CFPA by misleading consumers about the cost of its cash-out refinances. According to the consent order, the company provided side-by-side cost comparisons, but the comparisons included only principal and interest payments for its refinance loans, whereas the original loan payment amount included principal, interest, taxes, and insurance. The company did not admit nor deny the allegations but agreed to pay a $2.25 million civil money penalty and to comply with applicable laws. In 2015, the CFPB entered into a consent order with the Company for allegedly deceiving consumers about a veterans’ organization’s endorsement of its products and participating in a kickback scheme for customer referrals. The previous consent order terminated in 2020.

Bite 3: CFPB Takes Action Against a Mortgage Servicer

On August 21, 2024, the CFPB issued a consent order against a residential mortgage servicer alleging that the company violated a 2017 CFPB Consent Order, the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Homeowners Protection Act, and the Consumer Financial Protection Act. According to the CFPB, the servicer took prohibited foreclosure actions against borrowers and interfered with loss mitigation relief options. The CFPB alleged that the company: flouted the 2017 consent order and continued to engage in prohibited foreclosure activities, failed to timely place holds on foreclosures, and failed to develop written policies and procedures to ensure compliance. The CFPB also claims the servicer failed to provide full information to borrowers about their loss mitigation options, overcharged for private mortgage insurance, and charged late fee amounts that were higher than allowed by the mortgage contract. The consent order requires the company to pay $3 million in consumer redress and a $2 million penalty into the civil penalty fund. The consent order also includes “corporate responsibility provisions” requiring the company to invest $2 million to update its servicing technology and compliance management systems. The consent order also puts limits on compensation to the company’s Chairman and CEO if he doesn’t take actions necessary to ensure compliance.

Bite 2: CFPB Takes Action Against National Bank

On September 11, 2024, the CFPB issued a consent order against a national bank for allegedly sharing inaccurate information about its customers to consumer reporting agencies. The CFPB alleged that the bank violated the Fair Credit Reporting Act, Regulation V, and the Consumer Financial Protection Act. The CFPB alleged that the bank failed to fix reporting errors, shared fraudulent information with consumer reporting companies, and failed to investigate and resolve consumer disputes. The bank agreed to pay $7.76 million in consumer redress and a $20 million penalty to the CFPB’s victims relief fund. The CFPB noted that this is the second enforcement action against the bank.

Bite 1: CFPB Takes Action Against Federal Student Loan Servicer

On September 12, 2024, the CFPB announced that it had taken action against a federal student loan servicer, issuing an order requiring the servicer to pay $120 Million and banning the servicer from acquiring or servicing certain loans. The CFPB alleges that the servicer and its debt collection subsidiary violated the Consumer Financial Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. According to the CFPB’s 2017 complaint, the organization steered borrowers into forbearance instead of income-based repayment plans, misled borrowers who were enrolled in income-based repayment plans, misallocated and misapplied loan payments, furnished inaccurate negative credit information to consumer reporting agencies, and misled consumers about certain fees and the impact of a credit rehabilitation program. The settlement bans the company from acquiring or servicing certain direct federal student loans and Federal Family Education Loan Program loans. The settlement also requires the company to pay $100 million in redress for affected consumers and an additional $20 million civil money penalty to the CFPB’s Civil Penalty Fund. The CFPB’s press release claimed that the student loan servicer is a “repeat offender.”

Still hungry? Please join Hudson Cook for their next CFPB Bites of the Month. If you missed any of their prior Bites, including the webinar that covered the above topics, request a replay on their website.

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This article is provided for informational purposes and is not intended nor should it be taken as legal advice.  The views and opinions expressed in this article are those of the authors in their individual capacity and do not reflect the official policy or position of the partners of Hudson Cook, LLP or clients they represent. 

WILMINGTON, Del. — Phillips & Cohen Associates, Ltd. (PCA), the global leader in deceased account care management and technology solutions, is pleased to announce the appointment of Chris Lagow as its new Global General Counsel.

Lagow brings over two decades of legal and corporate governance expertise. He has a distinguished career advising companies across the financial services sector, both in-house and at law firms.

In his new role, Lagow will oversee PCA’s global legal strategy, ensure compliance with employment laws and regulations, and provide critical legal guidance to support the company’s continued expansion across domestic and international markets.

“Phillips & Cohen is well-regarded for its innovative solutions in the receivable management space, and I am delighted to be joining such a dynamic and forward-thinking team,” said Lagow. “I look forward to contributing to the company’s mission and driving its legal strategies as it continues to evolve in the ever-changing regulatory space.”

“We are excited to welcome Chris to our leadership team,” said Howard Enders, President & Chief Legal Officer of Phillips & Cohen Associates. “His depth of experience and leadership make him the ideal choice to help guide our legal strategies as we continue to expand and innovate within our industry.”

About Phillips & Cohen Associates, Ltd.

Phillips & Cohen Associates, Ltd. is a specialty receivable management company providing customized services to creditors in a variety of unique market segments.  Phillips & Cohen Associates, Ltd is domestically headquartered in Wilmington, DE, with additional offices in Colorado and Florida as well as international offices in the UK, Canada, Germany, and Australia.  For more information about Phillips & Cohen Associates visit www.phillips-cohen.com. PCA provides Equal Employment Opportunity for all individuals regardless of race, color, religion, gender, age, national origin, disability, marital status, sexual orientation, veteran status, genetic information, and any other basis protected by federal, state, or local laws.

ROCHESTER, N.Y. — Continental Service Group, LLC d/b/a ConServe, is proud to announce that Pamela Baird, Chief Executive Officer was selected by the Rochester Business Journal’s editorial team as one of “2024 Power List for Banking & Finance” for their 2024 Power 100 list.

The Power 100 list includes individuals and businesses in banking and finance sectors who have helped members of their community navigate challenges during COVID, supply chain disruptions, rising interest and inflation rates, and economic unpredictability. These businesses kept clients updated on regulations, financing, and investment opportunities while driving innovation to address these challenges and lead the industry through uncertainty.

For more than 39 years, ConServe has focused on accounts receivable management, dedicated to improving the circumstances of both Clients and Consumers. Their corporate mission highlights the importance of enhancing the human condition while promoting a culture of ethics and compliance. Pam Baird, ConServe’s Chief Executive Officer, stated, “We have established a culture that prioritizes awareness, recognition, and reinforcement of our goals. We believe that emphasizing and sharing the core principles of ethics, compliance, and regulations positively influences the entire industry and aligns with our collective objectives.”

About ConServe:

ConServe is a top-performing accounts receivable management service provider specializing in customized recovery solutions for their Clients. Anchored in ethics and compliance, and steadfast in their pursuit of excellence, they are a consumer-centric organization that operates as an extension of their Clients’ valued brands. For over 39 years, they have partnered with their Clients to provide unmatched customer service while simultaneously helping them achieve their accounts receivable management goals. Visit us online at: www.conserve-arm.com  

About Rochester Business Journal (RBJ)

Since 1987, the Rochester Business Journal has been a leading source of business news and information in Rochester, New York. To learn more about he RBJ and the RBJ 2024 Power List for Banking & Finance, visit them online at:  https://rbj.net/2024/10/18/rbj-presents-the-2024-power-list-for-banking-finance/

CINCINNATI, OH — Slovin & Associates, a collections law firm headquartered in Cincinnati, OH, is committed to making a difference not only through their legal expertise but also by supporting important causes that uplift the most vulnerable. One such cause that the Slovin team identified is helping Lighthouse Youth Services (LYS), a non-profit organization dedicated to helping underrepresented youth and families in need, particularly those dealing with homelessness or runaway situations. 

Slovin & Associates recently made a donation to assist LYS in their efforts to provide Christmas presents and fulfill the basic needs of the incredible families they serve, many of whom reside in local shelters.

“Supporting Lighthouse Youth Services aligns perfectly with our firm’s values of community, empathy, and service,” said Randy Slovin, partner at Slovin & Associates. “We are proud to contribute to an organization that not only provides immediate care for these young people but also helps set them on a path to a better future.”

The Importance of Lighthouse Youth Services

Lighthouse Youth Services has been a cornerstone of the community since 1969, beginning as a halfway house for girls. Today, they provide a range of critical services aimed at supporting youth and families through difficult times. Their mission is more vital than ever as they address the needs of homeless and runaway minors, offering them hope and resources in their most challenging moments.

From housing assistance to educational programs, LYS offers comprehensive services that help young people navigate difficult situations and move toward a brighter future. Their holistic approach ensures that the physical, emotional, and social needs of the youth are met, providing them with a safe space to rebuild their lives.

The work of LYS is not just about providing short-term solutions—it’s about fostering long-term success. Through their programs, they aim to break the cycle of homelessness and give young people the tools they need to thrive, regardless of the challenges they have faced. With the holiday season approaching, LYS’s commitment to providing for the basic needs of their clients, including gifts and essentials, brings much-needed joy and relief to those who might otherwise feel forgotten.

Committed to Community Support

For Slovin & Associates, giving back to the greater Ohio area, and highlighting the incredible people that make up its local community, has always been a priority. Their donation to Lighthouse Youth Services is just one example of how the firm is dedicated to helping those in need. Whether it’s through charitable contributions or volunteering time, Slovin & Associates believes in using their resources to make a positive impact.

About Slovin & Associates

Slovin & Associates, Co., LPA aims to achieve the highest rating for creditors’ rights law firms in Ohio, Kentucky, and Indiana. Specializing in collections, commercial and consumer litigation, bankruptcy, leasing, and landlord-tenant law, their commitment is unwavering. The team strives to deliver swift and cost-effective results in a professional, low-maintenance environment, fostering enduring relationships with clients. Transparency, compliance, and staying abreast of industry changes are paramount, as evidenced by active involvement in over a dozen trade associations. These include the Receivables Management Association International (RMAI), ACA International, the National Creditors Bar Association (NCBA), and more. Through these affiliations, the firm ensures their practices are not only honest and compliant but also at the forefront of industry standards. Slovin & Associates stands as a beacon of excellence, providing unparalleled services and expertise to clients within the dynamic legal landscape of creditors’ rights law.

On October 15, the CFPB and DOJ announced an enforcement action against a mortgage company, alleging it engaged in redlining against majority-Black neighborhoods in the greater Birmingham, Alabama area. According to the complaint, defendant’s marketing and sales practices discouraged people from applying for mortgage loans in these neighborhoods, allegedly violating ECOA, the CFPA, and the Fair Housing Act.

Defendant allegedly concentrated its retail loan offices in majority-white areas and directed less than 3 percent of its direct mail advertising to consumers in majority-Black neighborhoods from 2018 to 2020. The complaint further states that defendant’s home mortgage lending activities was disproportionately focused on white areas, with the company generating loan applications in Black and Hispanic neighborhoods at a rate below that of its peer institutions. Despite data showing these disparities, defendant allegedly failed to take substantial steps to address the redlining risk before October 2022, other than instructing loan officers not to discriminate.

Defendant issued a response to the settlement on its website, stating among other things that it was unaware of the allegations in the agencies’ complaint until after the settlement was reached; that the complaint “significantly mischaracterizes the matter at issue and appears to be intentionally inflammatory in nature”; and that certain of the language used in the complaint was “mutually rejected by the parties prior to settlement…which suggest bad faith by part of the government.”

The associated proposed consent order, if approved by the court, would require defendant to pay a $1.9 million civil penalty to the CFPB’s victims relief fund. Additionally, defendant would be required to provide $7 million for a loan subsidy program to offer affordable home purchase, refinance, and home improvement loans in the impacted areas. The program may include lower interest rates, down payment assistance, closing cost assistance, or payment of initial mortgage insurance premiums. Furthermore, defendant would be required to invest at least $1 million to open or acquire a new loan production office or full-service retail office in a majority-Black neighborhood in Birmingham. The company must also allocate at least $500,000 for advertising and outreach, at least $250,000 for consumer financial education, and at least $250,000 for partnerships with community-based or governmental organizations to serve neighborhoods previously allegedly redlined by the company. Finally, the agencies noted that defendant cooperated with the investigation.

WEST SENECA, N.Y. — P&B Capital Group, a third-party collection agency headquartered in Western New York, has spent a portion of Q3 in 2024 looking for organizations to support as part of its ongoing community outreach efforts. To better serve its employees and the surrounding community, P&B Capital Group has made a sizable donation to Sto Lat Strong, a Breast Cancer Research Fundraising Group. And, to provide for the youth in its area, P&B Capital has once again offered financial support for a local youth softball team, providing their jerseys for the upcoming season. 

“At P&B Capital Group, we believe in giving back to the community that supports us,” Ryan Kazmark, Managing Partner at P&B Capital Group, said. “Our donations to breast cancer research and the youth softball league this quarter represent our commitment to causes that inspire hope and foster future generations. Whether it’s funding vital medical research or empowering young athletes, we are proud to play a part in making a meaningful impact.” 

Sto Lat Strong

P&B Capital Group has been in the Western New York area since its inception. As staples of the area, they are well aware of the challenges local ambassadors face. Earlier this year, P&B was made aware of Sto Lat Strong, a fundraising effort for breast cancer research started by Ania Duchon, owner of the local Sto Lat Bar. 

This initiative hit home for many employees, friends, and colleagues who often visit the area and visit Sto Lat. Aside from the personal connection many P&B employees share, this donation was a good opportunity to provide needed funding for breast cancer awareness and research. 100% of all donations to the Sto Lat Strong fundraiser go to the American Cancer Society, and to donate to this worthy cause, or to learn more about Breast Cancer Research, please visit the Sto Lat Strong campaign page. 

Youth Softball Team

For the other half of its Q3 donations, P&B Capital Group recently made a significant contribution to the local youth softball league by providing jerseys for the team. This is the second year in a row P&B has financially supported the team. 

By sponsoring the jerseys, P&B Capital Group reinforces its belief in empowering the next generation through sports, where valuable life skills such as discipline, teamwork, and leadership are nurtured. In addition, it gives the whole team a common cause to root for in the office, bringing the team closer together. 

Contributing to the success of the softball team is more than just a financial commitment; it’s a way of fostering community spirit and providing opportunities for young people to grow both on and off the field. By standing behind initiatives like this, P&B Capital Group hopes to demonstrate how businesses can have a lasting, positive impact on their communities, strengthening ties and supporting the growth of future leaders.

About P&B Capital Group

Established in 2004, P&B Capital Group has established itself as one of the nation’s most highly respected and successful mid-sized accounts receivable management providers. Fully licensed, bonded and properly insured in all 50 states, the company is a proud member of ACA and is an RMAI Certified Receivables Business. P&B is a long-time leader in the crusade to promote professional behavior and ethical conduct within the collections community.

News in the ARM industry moves at lightning speed; determining what’s important and what’s just noise can be challenging. This is why the editorial team at insideARM sifts through all the news and brings you the need-to-know highlights.  

On Tuesday, we published the CFPB’s Fall 2024 Supervisory Highlights report. It focuses on examinations of the auto-finance market from November 2023 to August 2024. Key findings include deceptive practices in auto loan marketing, inaccurate prepayment penalty disclosures, and wrongful repossessions despite consumers making payments. The report also highlights issues with servicing practices such as improper payment allocation, delayed title delivery, and mishandling of add-on products, including unauthorized charges and failure to provide refunds. Additionally, deficiencies in credit reporting, including delayed corrections of inaccurate information, were noted. The CFPB’s focus remains on ensuring consumer protection and compliance in the auto-finance sector. Although this highlight has a focus on auto financing, their comments may affect other types of debt. 

On Wednesday, we shared analysis on the state of AI due diligence in the M&A market. It requires a risk-focused approach, where the emphasis is on addressing concerns about potential risks rather than the benefits of AI tools. To navigate this process successfully, companies should establish clear precedents in three key areas: tracking AI tools, adopting relevant policies, and ensuring oversight. Tracking involves documenting AI usage and related contracts, while policies should include reasonable use guidelines for employees. Oversight, housed in a department like legal or the C-suite, ensures adherence to these policies. Addressing these elements helps companies meet the strict risk assessments common in AI due diligence. 

Finally, we shared an update from the Department of Labor. Starting January 1, 2025, the minimum salary for white-collar exemption under the Fair Labor Standards Act (FLSA) will increase to $1,128 per week ($58,656 annually), up from the current $844 per week. This $15,000 jump in the minimum annual salary for exempt employees has prompted legal challenges in Texas and Tennessee, but recent court rulings suggest these challenges are unlikely to succeed. In September 2024, the Fifth Circuit upheld the DOL’s authority to raise salary thresholds, affirming similar decisions from other circuits. Employers should prepare for this substantial increase to ensure proper employee classification and compensation. 

As always, we thank you for reading the weekly recap to stay on top of this ever-changing industry! For a breakdown of the week of October 7th, click here.  

Have a question about how your company should react to the news above? We have a group for that! The weekly peer call hosted by insideARM’s Research Assistant is the perfect place to ask a question and get advice from industry colleagues who are facing the same challenges you are. Not sure if it is for you? Try it on for size with our 1-month free trial. Click here to learn more!