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Florida enacts telemarketing exemption from credit counseling services law
On April 26, the Governor of Florida signed into law HB 1031 (the “Act”), which will amend Florida’s credit counseling services law to provide an exception for telemarketers and sellers that furnish “debt relief services” (as defined under the federal Telemarketing and Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule: i.e., the TSR). Generally, the law places certain disclosure, financial reporting, and fee charging obligations on any person engaged in “debt management services” or “credit counseling services.” The amendment will provide those telemarketers or sellers that “provide any debt relief service” within the scope of the TSR will not be subject to the provisions of Florida’s credit counseling law as long as they do not receive from the debtor or disburse to a creditor any money or items of value. The Act will go into effect on July 1.
DFPI annual report highlights consumer protection efforts and upcoming regulations
On April 25, the California DFPI released its Annual Report of Activity under the California Consumer Financial Protection Law (CCFPL), highlighting investigations, public actions, and consumer outreach efforts under the CCFPL. According to the report, the DFPI (i) experienced a 70 percent increase in CCFPL complaints, which predominantly involved crypto assets and debt collectors; (ii) opened 734 CCFPL-related investigations and issued 181 public CCFPL actions; (iii) launched the Crypto Scam Tracker and a new consumer complaints portal; and (iv) advanced two rules, including unlawful, unfair, deceptive, or abusive acts and practices (UUDAAP) protections for small businesses and new registration requirements (pending final approval by Office of Administrative Law) for earned wage access, debt settlement services, debt relief services, and private postsecondary education financing products.
The report emphasized that the new regulations specified that optional payments, such as tips, collected by California Financing Law (CFL)-licensed lenders would be considered charges under the law. According to the DFPI, these updates will reinforce the CFL by blocking potential loopholes and ensuring compliance among CFL-licensed lenders. Once these regulations would be approved, DFPI will oversee these financial service providers. Upon adoption, DFPI says it will be a pioneer in defining “earned wage access” as loans and regulating income advance services and the treatment of tips as charges, all through regulatory measures rather than statutory enactment.
Virginia amends its foreclosure procedures and requires an affidavit
Recently, the Governor of Virginia signed HB 184 (the “Act”) which amended the foreclosure procedures and subordinate procedures. Specifically, the Act added a requirement that if the proposed sale was initiated due to a default in payment under a security instrument, then the subordinate mortgage lienholder must submit to the trustee an affidavit affirming that monthly statements were sent to the property owner detailing any interest, fees, or charges assessed. The amendments also provided that the subordinate mortgage lienholder must provide a copy of such affidavit to the person who would pay the instrument with written notice for a request for sale. That notice must advise the person to pay the instrument if the person believed that fees or interest were assessed in error. If the court would agree, then the person will be entitled to recover attorney fees and costs against the subordinated mortgage lienholder after the date of the foreclosure sale. The Act also added a provision that any purchaser at a foreclosure sale provide certification that the purchase will pay off any priority security instrument no later than 90 days from the date that the trustee's deed conveying the property would be recorded in the land records. The Act will go into effect on July 1.
FDIC submits amicus brief in Colorado DIDMCA opt-out case
On April 23, the FDIC submitted an amicus brief to the U.S. District Court for the District of Colorado in support of the defendant: the Colorado attorney general. This case involved Colorado HB 23-1229 (the “Act”), which was enacted on June 5, 2023, and will become effective on July 1. As previously covered by InfoBytes, trade groups filed a complaint in the U.S. District Court for the District of Colorado and moved for a preliminary injunction seeking to prevent enforcement of Section 3 of the Act. Section 3 purported to “opt out” of Section 521 of the DIDMCA which had allowed state-chartered banks to export rates of their home state across state borders.
Section 525 of DIDMCA allows any state to enact legislation to opt out of Section 521 with respect to “loans made in such State.” In the brief, the FDIC argued that courts interpreting federal law have concluded “it is reasonable to conclude that interstate loans are made in the state in which the borrower enters into the transaction and in the state in which the lender enters into the transaction” and that “[i]t would be arbitrary and artificial to select one state when the parties enter into the transaction in two different states.” Thus, according to the FDIC, loans would be made in a state if either the borrower or the lender entered into the transaction in that state. Therefore, the FDIC argued that plaintiffs were incorrect in claiming that the opt-out would apply to loans made by out-of-state creditors to borrowers who were physically located in Colorado.
In addition, the FDIC disagreed with plaintiffs’ argument that FDIC General Counsel Opinion No. 11, 63 Fed. Reg. 27282 (May 18, 1998), which set forth the FDIC’s position regarding where a bank is “located” for purposes of section 27 of the Federal Deposit Insurance Act, was applicable to interpreting Section 525. The FDIC’s amicus brief stated that Opinion 11 does not address opt-out or Section 525. Moreover, the FDIC argued that “where a loan is made under Section 525 cannot be equated with where a bank is located under Section 521.” The FDIC disagreed similarly with plaintiffs’ reliance on the 1978 Supreme Court of Marquette Nat’l Bank v. First of Omaha Serv. Corp., on the grounds that it concerned where a bank was located and not considered where a loan is “made.”
The plaintiffs’ reply brief will be submitted by May 7, and a hearing of the pending motion for a preliminary injunction has been scheduled for May 16.
11th Circuit finds plaintiffs failed to show FCRA information is “objectively” available
On April 24, the U.S. Court of Appeals for the Eleventh Circuit found a defendant, a hotel timeshare company, not liable to two former clients for inaccurately reporting their unpaid debts to a consumer reporting agency (CRA) in violation of the FCRA, as alleged.
The plaintiffs stopped making monthly payments and, citing the terms of their timeshare agreements, considered their obligations to the company canceled. The hotel timeshare company disagreed and reported the plaintiffs’ debts to a CRA, prompting the plaintiffs to sue for an alleged inaccurate furnishing of data. The hotel timeshare company moved for summary judgment and the district court granted it after finding the alleged inaccuracies related to legal, not factual, disputes and therefore not actionable under Section 1692s-2 of the FCRA. The district court reasoned that “a plaintiff asserting a claim against a furnisher for failure to conduct a reasonable investigation cannot prevail… without demonstrating that had the furnisher conducted a reasonable investigation, the result would have been different.”
On appeal, the 11th Circuit held that furnishers were not required to resolve “contractual dispute[s] without a straightforward answer” when furnishing information, even if they could be required “to accurately report information derived from the readily verifiable and straightforward application of law to facts.” Because the underlying contract dispute in this case was subject to reasonable dispute, the court found that the information was not “inaccurate” and thus the plaintiffs did not have actionable claims against the defendant under the FCRA. The court pointed out that the consumers could sue for a declaratory judgment that they did not owe the debt and, if successful, use that as a “cudgel” to persuade a furnisher to stop reporting a debt. But the plaintiffs here had not done that yet. For these reasons the 11th Circuit affirmed the lower court’s judgment. As previously covered by InfoBytes, the CFPB and FTC filed an amicus brief while the case had been appealed in favor of the plaintiffs arguing that a furnisher’s duty under the FCRA would apply not only to factual disputes but also to disputes that are legal in nature.
CFPB report finds 15 million Americans with medical debt on their credit reports
On April 29, the CFPB released a report entitled “Recent Changes in Medical Collections on Consumer Credit Records” that showed that as of June 2023 some 15 million Americans (approximately five percent) still have medical bills on their credit reports. However, credit rating agencies’ changes have resulted in a decrease of approximately nine percentage points in the number of Americans that have medical debt on their credit report. Further, the report indicated that the CFPB’s efforts to combat medical debt collection issues (including, and as previously covered by InfoBytes, holding a hearing in July 2023 on medical billing and collections, highlighting the issue in their 2023 FDCPA report, and having its general counsel discuss the issue in April 2024) resulted in a greater expected decline in those with medical billing on their credit report. The CFPB attributed the difference between the forecasted decrease and the actual decrease to two factors: first, that the CFPB’s first report did not include the original date of delinquency; and second, there has been a trend towards reporting fewer medical collections, independent of collection reporting changes.
This year’s report showed that some states saw much larger reductions than others, but indicated a 38 percent nationwide drop in the total balances of medical collections on credit reports, continuing the trend shown in last year’s report that found a 37 percent decline in medical collection tradelines on credit reports (covered by InfoBytes here). Of the 15 million Americans that continue to have medical bills on their credit reports, this year’s report also showed the average reported balance increased from $2,000 to over $3,100, most medical collections tradelines that were removed were below $500, and those living in lower-income communities in the South have the most medical bills in collections for the largest amounts. The CFPB stated that fixing the credit reporting market, including issues that involve the reporting of medical bills, will continue to be a priority.
FTC alleges ROSCA, GLB Act and FTC Act violations against bill payment platform
On April 25, the FTC announced an enforcement action against a third-party bill payment platform and two of its co-founders (defendants) for allegedly running misleading advertisements that intercepted consumers attempting to reach their billers, using “dark patterns” to manipulate the consumers into using the platform under the false belief that they have reached the biller’s official payment site, charging “junk fees” in connection with the processing of payments, and in some cases sending untimely payments to billers. According to the FTC’s complaint, the company allegedly violated the FTC Act by making false or misleading representations that it was an official payment channel for the consumers’ billers. The FTC also claimed defendants violated the Restore Online Shoppers’ Confidence Act by charging consumers for goods or services before clearly and conspicuously disclosing to consumers all material terms of the transaction and obtaining the consumers’ informed consent to be charged, and enrolling consumers into a paid subscription service by automatically ticking a box without warning when consumers clicked on a “User Terms of Service” hyperlink. Additionally, the FTC alleged that the company caused consumers to incur late fees and other inconveniences by failing to make timely payment to consumers’ billers, despite having received timely payment from the consumer. The FTC’s complaint also alleged that defendants used fraudulent statements or representations to obtain consumer information such as bank account numbers, routing numbers, credit card numbers, and debit card numbers in violation of the Gramm-Leach-Bliley Act.
The FTC claimed that defendants received tens of thousands of consumer complaints, inquiries from two state attorney’s general offices, and temporarily lost access to a credit card company’s network due to the complaints, among other warnings regarding its practices. The FTC will seek a permanent injunction, monetary relief, and other relief.
Texas issues a cease and desist order against a securities firm
On April 22, the Securities Commission of the State of Texas issued an Emergency Cease and Desist Order pursuant to the Texas Securities Act against respondents for allegedly offering investments in a digital gold vault that “purportedly secured physical gold and generates passive income using fintech and blockchain technology,” and are therefore subject to the Securities Act. The Securities Commission alleged that the investments were being “illegally, deceptively and fraudulently offered in Texas” and issued the Emergency Cease and Desist Order to “stop the scheme and protect the public from immediate and irreparable harm.” Respondents were ordered to immediately cease and desist from: (i) offering any security in Texas until the security is properly registered or exempt from registration; (ii) acting as securities dealers, agents, investment advisors, or investment advisor representatives in Texas until they are registered with the Securities Commissioner or exempt from registration; (ii) engaging in any fraud in connection with the offer for sale of any security in Texas; and (iv) offering securities in Texas through an offer containing a statement that is materially misleading or otherwise likely to deceive the public.
Tennessee amends caller ID law
On April 22, Tennessee enacted HB 2504 (the “Act”), which amends the Tennessee Consumer Protection Act of 1977 to specify that it is illegal for: (i) “[a] person, in connection with a telecommunications service or an interconnected VoIP service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information to a subscriber with the intent to defraud or cause harm to another person or to wrongfully obtain anything of value”; and (ii) “[a] person, on behalf of a debt collector or inbound telemarketer service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information, including caller identification information that does not match the area code of the person or the debt collector or inbound telemarketer service the person is calling on behalf of, or that is not a toll-free phone number, to a subscriber with the intent to induce the subscriber to answer.”
The Act is effective on July 1.
Student loan servicer to pay DFPI $27, 500 for untimely response to information request
On April 24, the California DFPI entered into a consent order with a federal student loan servicer (respondent) that allegedly failed to provide the DFPI with timely access to requested borrower data. In late April of 2022, the U.S. Department of Education announced a one-time revision of income-driven repayments to address past inaccuracies. To take advantage of this adjustment, the Department of Education required borrowers to submit a loan consolidation application by April 30, 2024. The DFPI requested information from respondent on student loan borrowers for the purpose of completing outreach to impacted borrowers ahead of the loan consolidation application deadline. Respondent provided this information 17 days after the deadline set by the DFPI.
To resolve DFPI’s allegations, respondent agreed to pay a penalty in the amount of $27,500.