2Q 2015 Sees Increase in Enforcement Litigation

Thumbnail for 1318*Editor’s Note:  This post originally appeared on our sister blog, Consumer Finance Enforcement Watch.  Visit CFEW for more real-time reporting on the full range of public federal and state consumer finance enforcement activity.*

For the second quarter of 2015, Consumer Finance Enforcement Watch tracked 56 enforcement actions taken against consumer finance providers, a slight uptick in enforcement activity from the previous quarter’s 46 actions.  Although the 56 actions ranged from court-enforcement consent settlement agreements, administrative settlements, administrative actions, civil judgments, and new civil litigation in both federal and state courts, litigation-related enforcement activity increased nearly three-fold during the second quarter of 2015.  Somewhat surprisingly, the Maryland Attorney General’s Office emerged as one of the leading state actors in consumer finance enforcement having brought five (5) independent or joint actions, which matched or exceeded the number of enforcement actions brought by the attorneys general of more populous states such as Florida (5) and New York (3).

Several trends observed in the first quarter of 2015 have continued to characterize enforcement activity through the second quarter of 2015.  Of the 56 enforcement actions tracked in the second quarter, a majority (37) were brought by federal agencies, 14 were brought by state attorneys general and state regulatory agencies, and 5 were brought jointly by state attorneys general and federal agencies.  The Consumer Financial Protection Bureau (CFPB) again initiated the most enforcement actions (16), often conducting joint enforcement actions with other federal agencies (3), and state attorneys general (4).  Not surprisingly, the Consumer Financial Protection Act (13), the Federal Trade Commission Act (11), and the Truth In Lending Act (8) were the statutes most often invoked by enforcement agencies.

Mortgage lenders, mortgage servicers and mortgage service providers remained the prime targets of enforcement actions:  nearly half (24) of all enforcement actions in the second quarter targeted mortgage products.  Federal and state agencies continued to bring enforcement actions against debt collection service providers (10), auto lenders (6), student lenders (2), and credit card lenders (2).  By comparison, in the first quarter, auto lenders and payday lenders were, respectively, the second and third-most frequent targets of enforcement actions.

Federal and state actions resulted in over $300 million in civil penalties and settlement payments to state and federal governments in the second quarter.  The bulk of this amount ($212,500,000) resulted from a singleenforcement action brought by the U.S. Department of Housing and Urban Development (HUD) against a regional bank to settle claims related to quality-control and reporting deficiencies in the bank’s underwriting and origination of Federal Housing Administration-insured mortgage loans.  And the Office of the Comptroller of the Currency (OCC) obtained $30 million in civil penalties from consent orders entered into with a national bank over allegations that it failed to comply with the Servicemembers Civil Relief Act when attempting to collect consumer debts from military servicemembers.

Enforcement activity also resulted in over $250 million in direct consumer relief or restitution to consumers, nearly half of which was obtained through a single enforcement action brought by the CFPB, Federal Communications Commission, and state attorneys general against two cellular phone service providers.  To settle allegations that they had allowed merchants to fabricate charges on customers’ cellular phone bills, the providers agreed to return $120 million to affected customers.  Federal agencies also entered into settlement agreements offering indirect benefits to consumers.  For instance, a regional bank agreed to settle allegations that the bank had engaged in racially discriminatory lending practices by providing nearly $200 million in indirect consumer relief through originating, underwriting, or investing in mortgage loans in certain majority-minority census tracks.

Consumer Finance Enforcement Watch will continue to post quarterly and annually on trends in consumer finance enforcement activity.  For specific questions regarding trends by enforcers, industry, or other data, please feel free to contact us.