In parallel with the guidance and instruction from federal banking and consumer financial regulators, state banking and financial services agencies are promulgating rules and issuing guidance to address the impact of the COVID-19 pandemic on consumers. Efforts have focused on mortgage repayment relief, as well as the elimination of certain banking fees. While most states – such as California and Washington – have limited their guidance to voluntary "encouragement," New York has taken such guidance a step further and provided mandatory requirements for regulated institutions. Additional state guidance, as well as an increasing number of states with mandatory requirements, is expected as the effects of the pandemic continue to spread.
Following an emergency order issued by New York Governor Andrew Cuomo, the New York Department of Financial Services (NYDFS) has issued emergency regulations to provide financial relief to New York residents during the COVID-19 pandemic. The regulations apply to New York-regulated financial institutions and banking organizations and require certain forbearances and fee eliminations for consumers affected by COVID-19, subject to safety and soundness requirements. Specifically:
- Regulated financial institutions must provide residential mortgage forbearance on property located in New York for a period of 90 days to any individual residing in New York who demonstrates financial hardship as a result of the COVID-19 pandemic.
- Regulated banking organizations must eliminate
- fees charged for the use of automated teller machines (ATMs) that are owned or operated by the regulated banking organization,
- overdraft fees, and
- credit card late payment fees for any individual who demonstrates financial hardship as a result of the COVID-19 pandemic.
Regulated institutions must "e-mail, publish on their website, mass mail, or otherwise similarly broadly communicate to customers how to apply for COVID-19 relief and provide their contact information" no later than 10 days after the emergency regulations were issued.
Qualifying criteria for applicants must be clear, easy to understand, and reasonably tailored to the requirements of the regulated institution to assess whether it will provide relief, consistent with the goals of the Executive Order. Applications must be processed and decided on immediately, but not later than 10 days after a complete application is received. Regulated institutions must inform applicants of any missing information and work with borrowers to complete applications.
Decisions must be provided in writing "where reasonably feasible and warranted," and must include the following information:
- Whether the regulated institution granted the application and, if the application was granted,
- What, if anything, the applicant needs to do to secure the relief or, if the application was denied,
- The reason the application was denied, and
- A statement that the applicant may file a complaint with the New York State Department of Financial Services at 1-800-342-3736 or http://www.dfs.ny.gov if the applicant believes the application was wrongly denied.
The New York attorney general, governor, and state courts have implemented various other measures to try to protect the residents of New York. This includes protections in the consumer financial services space, specifically around the collection of debt. For example:
- Collection of debts owed to the state of New York is temporarily suspended. On March 17, the New York Attorney General's Office announced it would temporarily halt collection of all state medical and student debt referred to the attorney general for collection. The suspension includes the accrual of interest and will last until at least April 15, 2020, with a possible extension to follow. Borrowers with other kinds of debt owed to the state can apply for a temporary suspension of debt as well.
- Private debt collection is still permitted. However, consumer advocates and New York state senators have asked Governor Cuomo to put an emergency moratorium on all debt collection in the state, including stopping existing wage garnishments and levies, prohibiting new wage garnishments and levies, suspending entry of new default judgments, and suspending payments on current settlements with payment plans. Some debt collectors have already announced that they will suspend collection activities for consumers who demonstrate financial hardship as a result of COVID-19.
- Court services curtailed. On March 22, New York courts prohibited all new nonessential filings in state courts, including in debt-related cases, effective immediately. This announcement followed Governor Cuomo's executive order of March 20 tolling all statutes of limitations until at least April 19.
The California Department of Business Oversight (DBO), in response to an executive order from California Governor Gavin Newsom, has also issued guidance for financial institutions and for escrow agents, finance lenders and servicers, student loan servicers, residential mortgage lenders and servicers, and mortgage loan originators, all of which are regulated by the DBO. This guidance encourages financial institutions and lenders to meet the financial services needs of customers and communities affected by the pandemic. Among other things, the guidance urges banks and credit unions to waive some fees, such as ATM fees for customers and non-customers, overdraft fees, and late payment fees. The DBO also encourages banks and credit unions to increase credit card limits for creditworthy borrowers and to offer payment accommodations during the pandemic. Unlike the approach taken by New York, the guidance from DBO is a request and encouragement, but not a mandatory requirement.
The Massachusetts Attorney General has filed emergency regulations restrict creditors' and debt collectors' activities regarding Massachusetts consumers and debts other than mortgages, rent, and utilities, for the next 90 days. The rules make it an unfair or deceptive act or practice for any creditor/debt collector to:
- initiate, file, or threaten to file any new collection lawsuit;
- initiate, threaten to initiate, or act upon any legal or equitable remedy for the garnishment, seizure, attachment, or withholding of wages, earnings, property or funds for the payment of a debt to a creditor;
- initiate, threaten to initiate, or act upon any legal or equitable remedy for the repossession of any vehicle;
- apply for, cause to be served, enforce, or threaten to apply for, cause to be served or enforce any capias warrant;
- visit or threaten to visit the household of a debtor at any time;
- visit or threaten to visit the place of employment of a debtor at any time; and
- confront or communicate in person with a debtor regarding the collection of a debt in any public place at any time.
The rules also prohibit, with certain exceptions, any debt collector from "initiat[ing] a communication with any debtor via telephone, either in person or by recorded audio message to the debtor's residence, cellular telephone, or other telephone number provided by the debtor as his or her personal telephone number . . . ."
The Washington Department of Financial Institutions (DFI) has issued guidance to mortgage servicers encouraging them to provide relief to consumers affected by the COVID-19 pandemic. DFI's guidance "urges" services to take reasonable and prudent actions, subject to the requirements of any related guarantees or insurance policies, to support those adversely impacted mortgagors by:
- Forbearing mortgage payments for 90 days from their due dates;
- Refraining from reporting late payments to credit rating agencies for 90 days;
- Offering mortgagors an additional 90-day grace period to complete trial loan modifications, and ensuring that late payments made during the COVID-19 pandemic do not affect their ability to obtain permanent loan modifications;
- Waiving late payment fees and any online payment fees for a period of 90 days;
- Postponing foreclosures for 90 days; and
- Ensuring that mortgagors do not experience a disruption of service if the mortgage servicer closes its office, including making available other avenues for mortgagors to continue to manage their accounts and to make inquiries; and
- Proactively reaching out to mortgagors via app announcements, text, email, or otherwise to explain the above-listed assistance being offered to mortgagors.
Other States Taking Action
Other states have taken action or issued guidance regarding the provision of consumer relief by regulated financial institutions, including the following:
- Connecticut's Department of Banking has encouraged mortgage servicers to work with all borrowers (particularly individuals associated with industries more susceptible to volatility) whose ability to make loan repayments at this time may be impacted by COVID-19. Efforts to work with borrowers may include waiving late fees, offering forbearance plans or other deferment options, and having adequate staff available to proactively work with borrowers facing hardship as a result of the COVID-19 outbreak. The regulator also requested that mortgage servicers consider providing guidance to their internal and external collection teams regarding the servicer's policies and work to inform consumers.
- Kansas has ordered all financial institutions operating in Kansas to temporarily suspend the initiation of any mortgage foreclosures and commercial/residential eviction efforts.
- Maryland's Court of Appeals has stayed all foreclosures of residential properties in Maryland. Maryland's Commissioner of Financial Regulation issued guidance urging mortgage servicers to take reasonable steps in an attempt to offer assistance to all Maryland borrowers who have suffered a loss of income due to the COVID-19 pandemic or otherwise are unable to pay their mortgage. The guidance recommends waiving late fees, forgoing credit reporting, offering forbearance and other options, extending trial modification periods, and opening lines of communication with borrowers.
- Montana's Division of Banking & Financial Institutions has encouraged regulated financial services to take steps similar to those put forward in New York and California. The regulatory statement also invites institutions that may have difficulty meeting regulatory reporting requirements to contact the division.