Robert Maddox Quoted in American Banker on CFPB Seeking Limits on Collecting Delinquent HELOCs

Bradley attorney Robert Maddox was quoted in American Banker on the Consumer Financial Protection Bureau’s (CFPB) stance that banks can’t secure repayment on certain home equity credits by pulling funds from their delinquent customers’ checking accounts.

The bureau's argument in a court case filed by a customer of PNC Financial Services Group has implications for how banks structure home equity lines of credit (HELOCs), which are coming back into favor as interest rates rise.

In the PNC case, customer William Lyons argued that the bank should not have pulled over $3,000 from his checking account and that HELOCs are open-ended credit plans to be used essentially like a credit card.

If Lyons succeeds in this case, lenders will likely have to review their current HELOC programs with linked credit cards. In a scenario like this, banks would be unable to offset missed payments by withdrawing the funds from their customers’ checking accounts, Maddox explained.

“They’ll have to treat these like credit cards, and they’ll have to go down that collection path,” said Maddox. The CFPB argument is that HELOCs are once again gaining traction in the mortgage market as homeowners are increasingly turning to HELOCs and home equity loans, rather than refinancing their entire mortgage, to borrow what they need.

The full article, “CFPB seeks to limit banks’ ability to collect on delinquent HELOCs,” was published in American Banker on December 4, 2022.