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FTC Seeks Input on Privacy, Security Implications of Connected Consumer Devices
On April 17, the FTC requested input on the consumer privacy and security issues posed by the connectivity of consumer devices in advance of a public workshop to be held on November 21, 2013. The request notes that connected devices can communicate with consumers, transmit data back to companies, and compile data for third parties. While advances in connected devices provide consumer benefits, greater connectivity also poses privacy and security risks. The FTC seeks comment on (i) the significant developments in services and products that make use of this connectivity, (ii) the technologies that enable this connectivity (e.g., RFID, barcodes, wired and wireless connections), (iii) the current and future uses of smart technology, (iv) consumer benefits, (v) privacy and security concerns, and (vi) how privacy risks should be weighed against potential societal benefits. The FTC is accepting comments through June 1, 2013.
Connecticut Implements Electronic Mortgage Recording
Recently, Connecticut finalized regulations to implement changes to the state’s Uniform Real Property Electronic Recording Act that allows town clerks to accept electronic documents for recording on the land records. Prior to implementation of these changes, town clerks could only accept paper documents for recording. While they may continue to accept paper documents, the regulation permits them to accept delivery of and return electronic documents for the purpose of recording those documents in the land records, consistent with other states. The regulation is also intended to ensure that the records and recordkeeping systems will be maintained properly and securely. The state also has published FAQs for town clerks regarding the new regulation.
California Federal Court Dismisses Credit Card Interest Rate Class Action
On April 15, the U.S. District Court for the Northern District of California dismissed a putative class action in which the named plaintiff brought a breach of contract claim and other common law and statutory claims after the issuer stopped providing the cardholder an interest free grace period on new charges because the cardholder transferred a balance from another card account as part of an interest free balance transfer offer and did not immediately pay off that transferred balance. Barton v. Capital One Bank (USA), N.A., No. 12-5412, slip op. (N.D. Cal. Apr. 16, 2013). Applying Virginia law, the court held that while some cardholders may have accepted the offer and transferred balances “without realizing that, because it would cause them to begin carrying a post-due balance each month, it would deprive them of the grace period they had previously enjoyed,” the agreement was clear that “carrying a post-due balance -- whatever its source -- terminated cardmembers’ rights to the 25-day grace period.” For the same reason, the court held the cardholder’s claim that the issuer violated the CARD Act’s requirement that a “creditor shall not change the terms governing the repayment of any outstanding balance” similarly failed. The court also held that the cardholder failed to allege any contractual discretion to support her claim of breach of good faith and dismissed her claim under California’s Unfair Competition Law.
Illinois Federal Court Certifies Considerable Class in Data Company Privacy Suit
On April 2, the U.S. District Court for the Northern District of Illinois certified a class of individuals who downloaded and installed tracking software created and operated by a data company and distributed by one of the company’s third-party bundling partners. Harris v. comScore, Inc., No. 11-5807, 2013 WL 1339262 (N.D. Ill. Apr. 2, 2013). The plaintiffs claim the data company used the tracking software to collect information on consumers’ computers, including social security numbers and other personally identifiable information. The court estimated the software was installed on millions of computers between 2008 and 2011. The court refused to certify unjust enrichment claims due to variances in laws across states, but allowed claims of violations of the Stored Communications Act, the Electronic Communications Privacy Act, and the Computer Fraud and Abuse Act to move forward. Certification of such a large class is unusual for a privacy suit, but the company’s user license agreement and the downloading statement regarding the software provided a basis for shared injury not present in other cases.
CFPB Announces Collection of Money Transfer Complaints
On April 4, the CFPB announced that it is collecting money transfer complaints. Although the CFPB previously was accepting some complaints about money transfers under the “bank account” topic in its complaint system, it now has a complaint portal dedicated to money transfer complaints. The system categorizes complaints as relating to: (i) money was not available when promised; (ii) wrong amount charged or received (transfer amounts, fees, exchange rates, taxes, etc.); (iii) incorrect/missing disclosures or information; (iv) other transaction issues (unauthorized transaction, cancellation, refund, etc.); (v) other service issues (advertising or marketing, pricing, privacy, etc.); or (vi) fraud or scam. The announcement does not indicate whether the money transfer complaints will be published in the recently expanded public database at this time.
California Considers Revisions to its Money Transmission Act
On March 11, the California State Assembly Standing Committee on Banking and Finance held a hearing entitled “Emerging Technology and the California Money Transmission Act.” The hearing’s purpose was to discuss the MTA’s interactions with emerging technology and mobile payments and “bring common sense reforms to money transmission laws” to “account for the changes in technology.” This is especially significant since the MTA has been a source of concern for many businesses because of its broad scope and limited exemptions. These concerns have been especially amplified for emerging technologies in recent years given that many new technologies and apps, in particular, are beginning to combine service and third-party payment functions into a single interface; a feature which they fear could require licensing under the MTA. The Commissioner of the California Department of Financial Institutions noted during her testimony that the Department had received many inquiries from technology-related services since the MTA’s enactment and that the Department intends to clarify the matter in the near future.
State Law Update: Utah Alters Supervision of Money Services Businesses
On March 22, Utah enacted SB 150, a bill that modifies the Financial Institutions Act and Financial Institution Mortgage Financing Regulation Act. The bill adds a definition for money services business – to include check cashers, deferred deposit lenders, issuers or sellers of traveler’s checks or money orders, and money transmitters – and adds a supervisor of money services businesses within the Department of Financial Institutions. The bill also adds additional filing requirements for check cashers and deferred deposit lenders, and changes from April 30 to December 31 the annual registration expiration date. The bill makes numerous other technical changes. Most provisions of the bill take effect on May 14, 2013.
Nebraska Enacts Money Transmitters Act
On March 20, Nebraska enacted LB 616, the Nebraska Money Transmitters Act. Based on a model legislative outline drafted by a trade group of money transmitter state regulators, the new law repeals and replaces the Sale of Checks and Funds Transmission Act, while incorporating the license and renewal fees, a net worth standard, surety bond requirements, change of control notices, and material changes notices of the prior Act. The bill covers the receiving of money or monetary value for transmission to another location by any means, prepaid cards, stored value cards, certain bill payment services, payment instruments, money orders, and traveler’s checks. It establishes licensing standards and continuing duties, and sets up transition of the state’s licensing process to the NMLS starting July 1, 2014. The law defines and provides a system of conduct for authorized delegates and grants enforcement authority to the Department of Finance over authorized delegates. Finally, the law provides administrative and criminal sanctions for violations of the Act. By state rule, the new law will take effect three months after the end of the state’s legislative session, which is scheduled to conclude May 30, 2013.
Federal Reserve Board Report Reviews Consumer Use of Mobile Financial Services
On March 27, the Federal Reserve Board presented the findings of a November 2012 online survey of consumers’ use of mobile technology to access financial services and make financial decisions. The report follows a related March 2012 Federal Reserve Board report, and includes the Board’s general findings that (i) mobile phones and mobile Internet access are in widespread use, (ii) the ubiquity of mobile phones is changing the way consumers access financial services, (iii) mobile phones are also changing the way consumers make payments, (iv) security and usefulness concerns continue to be the main impediments to the adoption of mobile financial services, (v) smartphones are changing the way people shop, and (vi) mobile phones are prevalent among unbanked and underbanked consumers. The report points out that the use of mobile phones to make payments at the point of sale has increased more rapidly than the use of mobile phones for banking, and that there is “substantial growth potential” for mobile payments as the ability to make them becomes more widespread.
FinCEN Issues Guidance on Virtual Currencies
On March 18, FinCEN issued guidance to clarify the applicability of Bank Secrecy Act regulations to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies. FinCEN clarifies that a person that obtains a virtual currency to purchase goods or service (a “user”) does not fit within the regulatory definition of a money transmission service, and therefore is not subject to the relevant regulations. However, a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency (an “exchanger”), and a person engaged as a business in issuing a virtual currency, and who has the authority to redeem such virtual currency (an “administrator”), generally are considered money transmitters under FinCEN's regulations if they (i) accept and transmit a convertible virtual currency or (ii) buy or sell convertible virtual currency for any reason. The guidance reviews FinCEN’s specific determinations regarding different activities involving virtual currencies and the appropriate regulatory treatment of administrators and exchangers under each of the scenarios. Specifically, the guidance addresses (i) brokers and dealers of e-currencies and e-precious metals; (ii) centralized convertible virtual currencies; and (iii) de-centralized convertible virtual currencies.