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On February 3, 2021, California’s Department of Financial Protection and Innovation (DFPI) announced that it has commenced its first formal enforcement action and launched a separate investigation into student loan debt relief companies. Goodwin previously provided an overview of three new California consumer finance laws that became effective in January 2021, including the California Consumer Financial Protection Law (CCFPL), which expanded the scope of the California Department of Business Oversight’s powers and renamed the Department of Business Oversight as the DFPI, and the Student Loan Borrower Bill of Rights, which gave the DFPI broader authority to regulate student loan servicers.
REGULATORY DEVELOPMENTS
On February 4, the SEC published a request for public comment regarding potential reform measures for money market funds, as highlighted in a recent report of the President’s Working Group on Financial Markets (PWG). The PWG report discussed the results of the PWG’s study on the effect of the COVID-19 pandemic on the short-term funding markets and, in particular, on money market funds, including the general stress experienced by prime and tax-exempt money market funds. The report concluded that the events of March 2020 show that more work is needed to reduce the risk that structural vulnerabilities in prime and tax-exempt money market funds will exacerbate or lead to stresses in short-term funding markets. The potential reform measures as outlined in the PWG report seek to: (i) address money market funds’ structural vulnerabilities that can contribute to stress in short-term funding markets; (ii) improve the resilience of money market funds and broader
The California Department of Financial Protection and Innovation (DFPI) today launched an investigation into whether student-loan debt-relief companies operating in California are engaging in illegal conduct under the new California Consumer Financial Protection Law (CCFPL) and Student Loan Servicing Act (SLSA). The DFPI also issued a formal action against one such company, Optima Advocates, Inc., which took money from struggling student-loan borrowers while falsely claiming the company could get the student-loan debt dismissed.
“Student-loan borrowers seeking help with repayment deserve protection from predatory debt-relief scams,” said DFPI Commissioner Manuel P. Alvarez. “This action holds Optima Advocates accountable for its deceptive practices and will bring relief to those having a hard time repaying their student loans.”
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On January 29, 2021, the FTC announced that it filed a proposed settlement in the District of Nevada with two Nevada-based consulting companies, resolving claims that the companies violated the FTC Act, Telemarketing and Consumer Fraud and Abuse Prevention Act, Telemarketing Sales Rule, Credit Repair Organizations Act, and Consumer Review Fairness Act.
The FTC alleged that, since 2013, the two companies charged consumers to obtain “funding” to pay for trainings offered by a number of third-party companies with whom the companies partnered. The trainings consisted of seminar and coaching packages costing tens of thousands of dollars that purported to teach consumers how to make money by investing in real estate or operating an online business. The FTC alleged that the third-party training companies referred consumers to the defendants, who in turn charged consumers fees of $3,000 or more to submit nu