Articles by Patrick Siegfried

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Court Refuses to Apply Federal Preemption to Loan Servicer Despite Bank’s Continued Interest in Loan

January 20, 2016
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In November 2014, the Pennsylvania Office of Attorney General (“OAG”) filed a complaint against a number of companies that did business with a group of payday lenders. The payday lenders were a Delaware bank and three tribal entities. The defendants provided marketing services and operational support to the lenders and in some instances purchased portions […]

When it Comes to Usury Law, Be Careful What You Ask For

January 8, 2016
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In a previous post, Creditor Fails to Navigate Usury Law “Minefield”, Ordered to Refund $1.3 Million to Debtor, I discussed a recent bankruptcy case in California. In the case, a lender had filed a claim in the borrower-debtor’s bankruptcy case. The debtor objected to the claim and brought a usury claim against the lender for […]

California Finance Lenders Push Legislative Agenda in Response to Growth of Alternative Small Business Finance Industry

December 8, 2015
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On October 10, 2015, California Governor Jerry Brown signed into law SB 197, a bill that allows licensed California finance lenders to pay commissions to unlicensed persons that refer prospective commercial loan borrowers to licensees that offer certain types of lower cost loans. The bill was co-sponsored by Opportunity Fund and the California Association for […]

CFPB Officially Begins Work on Small Business Data Collection Rule

November 23, 2015
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On Friday, the CFPB issued its semiannual update to its rulemaking agenda. The agenda lists the Bureau’s major current and long-term initiatives. Long listed as a long-term item, the Small Business Data Collection rule required by section 1071 of Dodd-Frank is listed on the update as a current initiative. The move is unsurprising given the […]

FDIC Issues Guidance that May Curtail Bank Purchases of Marketplace Loans

November 20, 2015
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bank vault

On November 6, the Federal Deposit Insurance Corporation (FDIC) issued Financial Institution Letter FIL-49-2015, titled “Advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations.” Though billed as an update to an advisory letter issued in 2012, the new guidance requires all FDIC-supervised banks and savings associations to implement a number of […]

Top Lawmakers Request Information About Online Small Business Lending

November 16, 2015
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US Senate

In the past two weeks, four ranking members of Congress have sent letters to the Treasury Department, SBA, SEC and CFPB requesting information about alternative small business lending. On November 3, Senators Jeff Merkley (D-OR), Sherrod Brown (D-OH) and Jeanne Shaheen (D-NH) sent a letter to the Treasury Department and the SBA requesting information about […]

Treasury Official Discusses Responses to RFI, Offers Mixed Review of Alternative Small Business Lending

November 3, 2015
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Treasury Department

Antonio Weiss, Counselor to the Secretary of the US Treasury, recently spoke at the Information Management Network Conference on Marketplace Lenders. In his prepared remarks, Mr. Weiss discussed the comments Treasury had received in response to its Request for Information about marketplace lenders. Mr. Weiss highlighted a number of themes about alternative small business finance […]

A Student Cash Advance?

October 27, 2015
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Some interesting legislation was introduced last Tuesday by Senator Marco Rubio. The bill entitled “Investing in Student Success Act of 2015” would allow individuals to enter into Income Share Agreements that bear some of the characteristics of merchant cash advances. The bill defines an Income Share Agreement as, [A]n agreement between an individual and any […]

Lenders Subject to Section 1071 of Dodd-Frank May Find Silver Lining in CFPB’s Roll Out of New HMDA Rules

October 23, 2015
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plenty of time

Last week, the CFPB finalized its update to the reporting requirements of the Home Mortgage Disclosure Act (HMDA) regulations. Under the new rules, the CFPB expects that the number of non-depository institutions that will be required to report may increase by as much as 40 percent. This will lead to a sizable increase in the […]

Former SBA Administrator Applauds Growth of Alternative Small Business Lending, Says Loan Brokers are Under Watch by Regulators

October 21, 2015
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industry being watched

Former SBA Administrator Karen Mills spoke at the LendIt Europe Conference yesterday. The title of her speech was “The State of Small Business Financing in the U.S.” In her talk, Ms. Mills summarized the negative effects that the last economic recession had on small business lending in the U.S. and how alternative small business lenders […]

Chairman of House Financial Services Committee Requests Information from CFPB on Fair Lending Enforcement Actions, Requests Interview with Director of Fair Lending Office

October 18, 2015
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capitol hill

Earlier this month, the Chairman of the House Financial Services Committee, Rep. Jeb Hensarling (R., Texas), sent a letter to the CFPB requesting information related to the Bureau’s recent investigations in to alleged fair lending law violations by auto lenders. This information may be helpful in understanding how the Bureau conducts fair lending focused exams […]

Whoops! Lender Drafts Choice of Law Clause with Wrong State; Court Finds Interest Rate Usurious

October 9, 2015
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Whoops!

A recent case out of Illinois serves as a reminder that when it comes to usury law compliance, its always best to double, or even triple check your contracts. Preferred Capital Lending, a Nevada company that provides cash advances to attorneys working on personal injury cases, agreed to make a loan to the defendant. The […]

Creditor Fails to Navigate Usury Law “Minefield”, Ordered to Refund $1.3 Million to Debtor

October 5, 2015
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law books

A recent court decision demonstrates the complexity and dangers faced by creditors attempting to navigate California’s usury laws. In the case, a lender agreed to purchase a debtor’s promissory note from a bank and refinance it for a lower amount. The entity that the lender used to purchase the note from the bank was a […]

CFPB to Begin Work on Small Business Loan Data Collection Rule After Completion of HMDA Revisions; Plans ECOA Examinations Within the Next Year

September 30, 2015
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CFPB

CFPB Director Richard Cordray testified yesterday before the House Financial Services Committee. During the session, Director Cordray was asked when the Bureau plans to begin work on its implementation of the Small Business Loan Data Collection Rule of section 1071 of the Dodd-Frank Act. Noting the recent calls for implementation of the rule by members […]

New Hampshire Attorney General Takes Action Against Two Out-of-State Credit Card Processors

September 27, 2015
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attorney general

On September 22, 2015 the Attorney General of New Hampshire announced that it had entered in to an agreement with two credit card processors to settle allegations that both companies had engaged in unfair or deceptive business practices in violation of New Hampshire law. The allegations stemmed from the processors’ solicitations of New Hampshire businesses […]

Lender Successfully Compels Arbitration in Response to Usury Complaint

September 23, 2015
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lender arbitration

CashCall and its affiliates haven’t fared particularly well in their recent efforts to dismiss complaints filed against them by state regulators. They found some success, however, in their recent efforts to dismiss a private usury action filed against them in Kentucky Federal Court. The plaintiff in the case received a payday loan from the defendants […]

FCC Issues Citations for Insufficient TCPA Disclosures

September 22, 2015
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no robodialing

The FCC recently issued telemarketing citations against First National Bank and Lyft, Inc., a ride-sharing service. The Commission cited the companies for requiring their customers to consent to receiving auto-dialed calls and texts as a condition of using the companies’ services. The FCC alleged that the companies’ requirements violated regulations issued pursuant to the Telephone […]

Court Finds Usurious Late Fees Unenforceable

September 19, 2015
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court ruling

Though usury caps are only applicable to loan transactions, courts often reference usury rates when determining the reasonableness of fees charged on amounts due. A fee that significantly exceeds the applicable usury rate may be found to be an unenforceable penalty and uncollectible. Companies that impose late fees or other types of charges on their […]

SBA Offers Balanced Review of Alternative Small Business Lending

September 15, 2015
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SBA P2P Lending Paper

In response to the Treasury’s RFI, I expect many industry commentators to encourage potential government regulators to engage in a careful review of the small business finance market before deciding on a course of action. As an example of the type of review necessary, these commentators could highlight the recent issue brief published by the […]

Multiple State Regulators Challenging Lender’s Use of Choice of Law Clause in Usury Enforcement Actions

September 11, 2015
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regulators battle lenders

A growing number of state regulators are challenging the use of choice of law provisions as a method of usury law compliance. On August 27, 2015, the Attorney General of North Carolina was granted an injunction against Western Sky Financial and CashCall¹. The injunction prohibits them from offering any loans to North Carolina consumers or […]