THE CARLAWYER©
The CARLAWYER©
By Eric Johnson, Partner, Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery® Here’s our monthly article on selected legal developments we think might interest the auto sales, finance, and leasing world. This month, the developments involve the Federal Trade Commission, Consumer Financial Protection Bureau, and National Credit Union Administration. As usual, our article features the “Case(s) of the Month” and our “Compliance Tip.” Note that this column does not offer legal advice. Always check with your lawyer to learn how what we report might apply to you or if you have questions.
FEDERAL DEVELOPMENTS FTC Provides Annual Report to CFPB on 2020 Reg. Z, M, and E Enforcement Activities. On June 1, the FTC provided its annual report to the CFPB concerning its enforcement activities during 2020 related to compliance with Regulation Z (Truth in Lending Act), Regulation M (Consumer Leasing Act), and Regulation E (Electronic Fund Transfer Act). The FTC’s report highlights, among other things, enforcement actions, rulemaking, research, and policy development related to vehicle financing and leasing, payday lending, credit repair and debt relief, electronic fund transfers, and the agency’s Military Task Force, which focuses on various initiatives to assist military consumers. CFPB Updates EFTA FAQs. On June 4, the CFPB updated its frequently asked questions document regarding the Electronic Fund Transfer Act to address unauthorized electronic fund transfers and error resolution issues. CFPB Issues Spring 2021 Rulemaking Agenda. On June 11, the CFPB issued its Spring 2021 rulemaking agenda. The agenda lists the regulatory matters that the CFPB is currently pursuing under interim leadership pending the appointment and 10 | THE FRONT ROW | WSIADA.COM Sep/Oct 2021
confirmation of a permanent director. The permanent director’s changes to the regulatory agenda will be reflected in the Fall 2021 rulemaking agenda. CFPB Examines Trends in Consumer Credit Delinquencies. On June 16, the CFPB issued the first in a series of blog posts examining trends in consumer credit outcomes during the COVID-19 pandemic. The current blog post specifically focuses on trends in delinquencies for mortgage loans, student loans, vehicle financing, and credit card accounts from July 2020 through April 2021. The report uses data from the CFPB’s Consumer Credit Panel, a nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting agencies. CFPB Issues Interpretive Rule on Authority to Conduct MLA-Related Examinations. On June 16, the CFPB issued an interpretive rule explaining the basis for its authority to conduct examinations of supervised institutions to detect and assess risks to active-duty servicemembers and their dependents arising from conduct that violates the Military Lending Act. In 2018, during the last administration, the CFPB discontinued MLA-related examination activities based on its belief that Congress did not specifically confer examination authority on it with respect to the MLA. The current CFPB leadership does not find those prior beliefs persuasive, and the CFPB will now resume MLA-related examination activities. NCUA Removes Prohibition on Capitalization of Interest for Loan Workouts and Modifications. On June 24, the NCUA approved a final rule that removes the prohibition on the capitalization of interest—i.e., the addition of accrued but unpaid interest
to the principal balance of a loan— in connection with loan workouts and modifications but maintains the prohibition on a credit union capitalizing credit union fees and commissions. The final rule also establishes certain consumer protections, like ability to repay requirements, to help ensure that the addition of unpaid interest to the principal balance of a loan does not hinder the borrower’s ability to make payments or become current on the loan.
CASE(S) OF THE MONTH Courts Discuss Military Lending Act's Applicability to Motor Vehicle Retail Installment Contracts that Financed Items in Addition to Cars: Two cases we report on this month discuss whether the Military Lending Act applies to motor vehicle retail installment contracts that financed items other than just the cars being purchased. In the first case, a servicemember entered into a retail installment contract with a dealership to finance his purchase of a used vehicle as well as add-on items, such as a GPS system and GAP coverage. The RIC also included an arbitration provision. The servicemember sued the dealership, and the dealership moved to compel arbitration. The magistrate judge recommended that the motion to compel arbitration be granted, and the servicemember objected. The U.S. District Court for the Middle District of Florida adopted the magistrate judge's recommendation to enforce the arbitration provision. The servicemember argued that the MLA prevented the dealership from compelling arbitration. The MLA states that an agreement to arbitrate a dispute involving an extension of consumer credit is void and not enforceable against certain groups, including active-duty servicemembers.
