MBA of Greater Philadelphia: Meet Nicholas Smyth - Pennsylvania Office of the Attorney General

Philadelphia, PA [November 19, 2018]

Monday night’s MBA of Greater Philadelphia’s event at Center City’s Pyramid Club was a great success for our local organization. Len Bernstein, Partner at Holland & Knight, led an insightful discussion with Nicholas Smyth, the assistant director of the Bureau of Consumer Protection at the OAG. Mortgage industry leaders gathered to understand firsthand what the enforcement climate is here in the state of Pennsylvania under the recently elected Attorney General, Josh Shapiro, and what mortgage specific issues the AG is currently focusing efforts on addressing.

Shortly after introductions, Nick gave two case examples from his time at the CFPB that have worked to shape his philosophy for consumer protection. While there, he worked on the agency’s first law suit against the for-profit college, ITT Technical Institute. This case is where the meaning of the word “abusive”, from the CFPB’s then newly created UDAAP regulations, was defined in the case’s orders from the federal judge in Indianapolis. He also worked on the CFPB case involving US Bank and their third-party service provider, Dealer’s Financial Services. In this case, their Military Installment Loans and Educational Services (MILES) program allowed service members to repay auto loans through military allotments. Nick, and team, went to the Pentagon and with the help of Holly Petraeus, was able to change the allotment system and eliminate the use of allotments to repay loans.

Through these case studies, Nick showed not only his drive to stop bad practices, but also the approach to get to the root of the problem and work to fix statutes and regulations rather than using enforcement actions. A win for mortgage professionals that are screaming for clarity and guidance.

The OAG’s Bureau of Consumer Protection is “small but mighty”, said Nick. The office employees about 80 people, 25 of them attorneys, and concentrates efforts on consumer complaints and investigation/litigation. They work with both federal and state legislators exchanging valuable information about their oversight efforts while enforcing about 2 dozen state and federal laws like UDAAP, TILA, RESPA, FCRA and state laws like usury laws, and the state RICO law.

Currently, Nick and the Bureau are working on a few multi-state cases. One is a UDAAP case against Navient, a student loan servicer in which the Bureau is investigating both their origination and servicing activity. Another is a case against the Delaware vehicle title lender that is impacting thousands of Pennsylvania consumers.

Lastly, and most importantly to our region of Pennsylvania, we heard the Bureau’s take on the Philadelphia Redlining Issue that was sparked by a recent story published by Reveal, an investigative reporting firm, about the practice of redlining here in Philadelphia. This is a big priority for Shapiro, Nick explained. The Bureau is broadly looking at the definition of Redlining and making a case for disparate impact. Intention need not apply when talking about disparate impact.

Nick read from a recent press release, “We are investigating evidence that financial institutions either refusing to make mortgage loans in Philadelphia neighborhoods because of their racial or ethnic makeup, or otherwise unlawfully dissuading minorities people from applying for mortgage loans or doing other things in the process of the mortgage loan application process that puts minority applicants at a disadvantage.” He went on to explain that they are interested in looking at where lenders are locating themselves, where they are concentrating marketing efforts, and what kind of customers they are trying to attract. He explained how the Community Reinvestment Act, requires banks to do a certain amount of business in low- and moderate-income neighborhoods, have programs and locate their branches in a way that doesn’t have disparate impact, but that non-bank institutions are not subject to the same requirements. Could this change in the future?

Nick gave a few suggestions to the creditors in the room on how to comply. 1.) Monitor your activity, and 2.) make sure your front lines are treating everyone the same and are not unintentionally discriminating. Simple practices that are consistently applied is key. These include, making appointments or time for all applicants, always providing written quotes or preapprovals, and returning all phone calls.

In conclusion, those in the room learned that the Bureau of Consumer Protection at the OAG seems to be primarily concerned with UDAAP and disparate impact issues. Also, it seems that from Nick Smyth’s perspective the Bureau is more willing to provide clarity and to look at the underling statutes and regulations rather than relying on enforcement actions. Ultimately, it’s about protecting the consumers of Pennsylvania.


Amy Azorandia – Secretary MBAGP