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FTC Announces Mobile Privacy Enforcement Action, Issues Mobile Privacy Staff Report
On February 1, the FTC announced that it is requiring a social networking application company to pay $800,000 and make certain compliance enhancements to resolve allegations that the firm (i) misled and deceived users by automatically collecting and storing personal information from users’ mobile device address books even if the users had not selected that option and despite claims that the application collected only certain non-personal user information, and (ii) violated the Children’s Online Privacy Protection Act Rule by collecting personal information from approximately 3,000 children under the age of 13 without first getting parents’ consent. Pursuant to the consent decree, in addition to the monetary penalty, the company must establish a comprehensive privacy program, and obtain independent privacy assessments every other year for the next 20 years.
Concurrently, the FTC released a staff report that provides disclosure policy and other guidance to mobile platforms, application developers, advertising networks and analytics companies, and application developer trade associations. For example, the report urges platforms to (i) provide just-in-time disclosures to consumers and obtain affirmative express consent before allowing applications to access sensitive content like geolocation; (ii) consider providing just-in-time disclosures and obtaining affirmative express consent for other content that consumers may find sensitive; and (iii) consider developing icons to depict the transmission of user data. With regard to application developers, the report recommends, for example, that developers (i) provide just-in-time disclosures and obtain affirmative express consent before collecting and sharing sensitive information; and (ii) improve coordination and communication with advertising networks and other third parties that provide services for applications. During a call announcing the report, the FTC explained that the report is intended to influence industry standards, and that the Commission staff will reference the report for future policymaking. The FTC also noted that the National Telecommunications and Information Agency is developing a code of conduct on mobile application transparency, and, if strong privacy codes are developed, the FTC will view adherence to such codes favorably in connection with its law enforcement work.
FTC Chairman Announces Plans to Step Down
On February 1, the FTC announced that Chairman John Leibowitz plans to step down on February 15, 2013. Mr. Leibowitz has been a Commissioner since September 2004, and has served as Chairman for the past four years. During his tenure, the FTC has prioritized consumer privacy and financial fraud enforcement and policy development. With regard to privacy initiatives during his time as Chairman, the FTC issued a landmark report setting forth best privacy practices for all businesses, and recently updated the Children’s Online Privacy Protection Rule.
CFPB Launches Inquiry into Financial Products Marketed through Higher Learning Institutions
On January 31, the CFPB issued a notice and request for comment about how current and future arrangements between institutions of higher education and financial institutions could be structured “to promote positive financial decision-making among young consumers.” The inquiry also is designed to help the CFPB “develop a clearer picture of the financial products and services that are being offered to college students, as well as consumers’ experiences using those products and services.” Specifically, with regard to campus affinity relationships, the CFPB wants to know, among other things, (i) what types of campus affinity products are being offered to students, what features do they have, how are they being marketed, and what are their terms and conditions, including fees, (ii) what information about students is being provided to the education institution, (iii) the nature and volume of student complaints, (iv) what benefits are education institutions realizing through affinity relationships, and (v) the extent to which these products are bundled with student identification cards. The CFPB also seeks similar information about other financial products marketed to students. The CFPB is seeking comments from various stakeholders, including students, institutions of higher education, and financial institutions by March 18, 2013.
CFPB Names Acting Deputy Director
On January 31, the CFPB announced that Steve Antonakes will serve as acting Deputy Director, following the previously announced departure on the same day by Deputy Director Raj Date. Mr. Antonakes currently serves as the CFPB’s Associate Director for Supervision, Enforcement, and Fair Lending. He will retain all the responsibilities of that position while also serving as acting Deputy Director. Mr. Antonakes is a former state financial services regulator who joined the CFPB in November 2010 and last year was promoted from Assistant Director for Large Bank Supervision. Mr. Date was the first Deputy Director of the CFPB, and brought to the position his experience as a strategy consultant and bank executive.
Democratic Lawmakers Seek Information Regarding Independent Foreclosure Review Settlements
On January 31, Senator Elizabeth Warren (D-MA) and Representative Elijah Cummings (D-MD), House Oversight Committee Ranking Member, sent a letter to the Federal Reserve Board and the OCC seeking documents and information regarding the regulators’ decision to enter into settlements with certain mortgage servicers subject to consent orders issued in April 2011 to (i) resolve allegations that the firms engaged in improper mortgage servicing and foreclosure practices and (ii) end the Independent Foreclosure Review process established by the prior consent orders. The lawmakers are seeking (i) all documents regarding the performance of the independent consultants engaged by the servicers to conduct the foreclosure reviews, (ii) all documents created by the servicers or the consultants to update the regulators on the status of the foreclosure review process, (iii) all documents compiled by the regulators indicating the total amount of settlement funds paid to each consultant, (iv) the number of borrowers who requested review, by gender, race, zip code, and property value, (v) the total number of reviews initiated by each contractor, and (vi) the average time each contractor required to complete a review of a borrower’s file.
On the same day, House Financial Services Committee Ranking Member Maxine Waters (D-CA) sent a separate letter requesting that the regulators ensure the final agreements entered in lieu of the foreclosure reviews include certain specific provisions, including (i) reordering of the matrix categories, (ii) requirements that principal reduction be provided as a form of indirect relief, and (iii) appointment of an independent monitor. Representative Waters also seeks information about payments to the consultants and how the regulators decided on the $8.5 billion settlement amount. Finally, a recent report noted that Representative Carolyn Maloney (D-NY) initiated her own inquiry into the settlements and payments to the consultants. According to the report, the letter may be used to support a request that the regulators claw back some of the payments made to the consultants.
State AGs Announce Multistate Robo-Signing Settlement
On January 31, the state attorneys general (AGs) for 45 states obtained an agreement from a mortgage servicing and foreclosure vendor, and its former subsidiary, to resolve allegations that the company “robo-signed” foreclosure documents and engaged in other improper default servicing conduct. (See, e.g., announcements from the AGs for Iowa, Massachusetts, and New York.) The agreements require the company to pay a combined $120 million and finalize substantial revisions to its business and compliance practices. The company also must (i) properly execute documents, (ii) enhance oversight of its default services, and (iii) review of all third-party fees to ensure that the fees have been earned and are reasonable and accurate. The settlement also prohibits various conduct including, for example, (i) surrogate signing of documents; (ii) notarizing documents outside the presence of a notary; (iii) improper interference with the attorney-client relationship between attorneys and services; and (iv) unreasonable mark-ups or other fees on third party providers’ default or foreclosure-related services. The company must review documents executed during the period of January 1, 2008 to December 31, 2010 to determine if any must be re-executed or otherwise corrected. Borrowers also may request review and correction of any documents executed by the company at any time. The Michigan AG announced a separate agreement with the company on the same day, and three other state AGs previously settled similar allegations against the firm (see, e.g., Missouri AG settlement).
HUD, FHFA Extend Foreclosure Protections for Hurricane Sandy Victims
On January 31, HUD and the FHFA announced that the FHA, Fannie Mae, and Freddie Mac will extend for an additional 90 days protections against foreclosure actions for borrowers whose properties were damaged or destroyed due to Hurricane Sandy. Those protections were set to expire on January 31, 2013. For borrowers in certain counties, FHA is extending until April 30, 2013 its foreclosure moratorium and eviction suspension. Fannie Mae, through Lender Letter LL-2013-02, and Freddie Mac, through Bulletin 2013-1, also are extending their foreclosure and eviction moratoriums through the end of April.
DOJ Announces Departure of Criminal Division Chief
On January 30, the DOJ announced that Assistant Attorney General for the Criminal Division Lanny Breuer will leave the department on March 1, 2013. Mr. Breuer was confirmed for the position in April 2009. The DOJ press release credits him with taking “significant steps to fight corruption at home and abroad,” including by increasing enforcement of the Foreign Corrupt Practices Act, and “protecting the integrity of our banking systems and fighting financial fraud.” With regard to the latter, the release cites Mr. Breuer’s LIBOR investigation, and his efforts to develop the division’s Money Laundering and Bank Integrity Unit to support enforcement of the Bank Secrecy Act.
SEC Names Acting Enforcement Director
On January 31, the SEC announced that George Canellos will serve as Acting Director for the Division of Enforcement. Mr. Canellos currently is the Deputy Director of that division, and effective February 8, 2013, will fill the director role vacated by the departing Robert Khuzami. Mr. Canellos was appointed Deputy Director in June 2012 and, according to the release, has been instrumental in developing the division’s Cooperation Program, in generating numerous programmatic, policy, and legislative initiatives, and in critical decisions on national priority enforcement actions. He previously served three years as Director of the SEC’s New York Regional Office.
FTC Releases Debt Buyer Study
On January 30, the FTC released the results of a first-of-its-kind empirical study of the debt buying industry. The FTC looked at more than 5,000 portfolios of consumer debt with a face value of $143 billion, the majority of which was credit card debt, but which also included mortgage, medical, utility, telecommunications, and other debt. The report identifies a number of “key findings” related to (i) prices buyers paid for debt, (ii) information and account documentation that buyers received in the transaction, (iii) consumer disputes of debts, and (iv) debt age and statute of limitations. The FTC believes additional study of small debt buyers is required, as are reviews of debt buyers’ litigation practices and the accuracy of the information debt buyers receive and use to collect debts. While the report does not announce any specific policy or enforcement measures, the FTC notes that it continues to receive a high level of complaints about debt collectors, more than for any other industry, and that the sufficiency and accuracy of debt information remains a significant consumer protection concern