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FDIC expands #GetBanked campaign
On February 2, the FDIC announced the expansion of its #GetBanked public awareness campaign into the Los Angeles, Dallas, and Detroit metropolitan areas in continuation of the agency’s efforts to increase financial inclusion to the unbanked population. The FDIC stated that the campaign “is focused on areas where research finds that a significant number of Black and Hispanic households are unbanked,” with the goal of “encourag[ing] unbanked consumers to consider opening a checking account.” With a series of English- and Spanish-language digital, audio, and video advertisements, the FDIC intends to reach unbanked consumers, specifically during the tax filing season. The campaign also includes resources to help consumers choose the best account to meet their needs and identify low-cost bank accounts.
FCC proposes to classify ringless voicemails as “calls” under the TCPA
On February 2, FCC Chairwoman Jessica Rosenworcel announced a proposal that would classify technology that leaves ringless voicemails on consumers’ cell phones as “calls” under the TCPA and therefore subject to the FCC’s robocalling restrictions. If adopted by the full Commission, callers using this form of technology would be required to obtain a consumer’s consent before delivering a ringless voicemail. The announcement explained that the TCPA “prohibits making any non-emergency call using an automatic telephone dialing system or an artificial or prerecorded voice to a wireless telephone number without the prior express consent of the called party.” According to Chairwoman Rosenworcel, ringless voicemails should face the same consumer protection rules as other robocalls. The proposal is in response to a petition that asked the FCC to find that ringless voicemails are not calls protected by the TCPA.
District Court grants summary judgment in favor of debt collector
On January 31, the U.S. District Court for the Middle District of Florida granted summary judgment in favor of a defendant debt collector concerning alleged violations of the FDCPA. The plaintiff alleged that she received six phone calls from the defendant, starting in May of 2020, seeking to collect debt owed by the plaintiff’s granddaughter. The plaintiff allegedly explained to the defendant during the first call that she did not live with her granddaughter and that the defendant would not be able to reach the granddaughter through that number. She also allegedly requested the defendant stop calling. On June 27, 2020 the plaintiff filed suit alleging violations of Sections 1692d, 1692c(a)(1), and 1692e of the FDCPA and the Florida Consumer Collections Practices Act (FCCPA). The court dismissed the state law claim, as well as the plaintiff’s Section 1692d claim, after determining that “neither the volume and frequency nor the content of the calls constituted abusive or harassing conduct under the FDCPA or FCCPA.”
After reviewing the remainder of the FDCPA claims, the court ruled that the plaintiff’s Section 1692c(a)(1) claim failed because the protections afforded by Section 1692c(a)(1) are applicable only to a “consumer” meaning “any natural person obligated or allegedly obligated to pay any debt.” The court explained that because the plaintiff “did not owe the subject debt” the defendant was “entitled to judgment as a matter of law on” the Section 1692c(a)(1) claim. Additionally, the court determined that the plaintiff failed to show evidence that the defendant violated Section 1692e by making false, deceptive, or misleading representations when attempting to collect on the debt, because “[a] reasonable jury could not conclude from this record that the least sophisticated consumer would have been misled to believe that the purpose of the phone calls was to attempt to collect a debt from [the plaintiff].”
District Court approves class settlement in data breach
On January 28, the U.S. District Court for the Northern District of California granted a plaintiffs’ motion for final approval in a class action settlement alleging an online support services provider (defendant) failed to adequately secure and safeguard the payment card data and other personally identifiable information that it collected while customers shopped and interacted with customer service websites. According to the order, four companies contracted with the defendant to provide sales software, customer service software, and voice and chat agent services for sales support for online shoppers. However, according to the plaintiff class, the defendant was allegedly negligent in securing customers’ data, which permitted hackers to access their names, addresses, and credit card information, in violation of California’s Unfair Competition Law and Illinois' Consumer Fraud and Deceptive Business Practices Act. The plaintiff class also alleged that the defendant did not disclose the breach for a period of approximately six months after the breach was detected and fixed in October 2017. Under the terms of the settlement, class members are eligible to receive reimbursement from the defendant of up to $2,000 if documentation is provided to prove they incurred out-of-pocket expenses resulting from the intrusion, which includes unreimbursed bank fees, long distance calling charges and costs of credit reports or fraud reimbursement services purchased in the wake of the breach. Additionally, class members who assert that they spent three hours or less dealing with the breach can also separately receive compensation at a rate of $20 per hour for that lost time, and may claim an additional two hours of lost time “if they can provide adequate documentation of those additional two hours spent dealing with the [d]ata [i]ncident,” according to the order. The court also awarded class counsel $450,000 in attorney fees and litigation costs and expenses and $2,000 service awards to each of the three lead plaintiffs.
CSBS reminds Senate that FDIC Board must include a member with state bank supervisory experience
On January 31, the Conference of State Bank Supervisors (CSBS) sent a letter to Senators Charles Schumer (D-NY) and Mitch McConnell (R-KY), asking Congress to “uphold its commitment to the dual banking system” and confirm a member of the FDIC Board with state bank supervisory experience as required by Congress’ 1996 amendment to the Federal Deposit Insurance Act (FDI Act). CSBS explained that “the spirit of the law” and legislative history “indicate that this requirement is only met by a person who has worked in state government as a supervisor of state-chartered banks.” This requirement, CSBS pointed out, has not been met since former Massachusetts State Bank Commissioner Thomas Curry finished his term in 2012, thus leading to a nine-year period in which no one on the Board has had the legally mandated state regulatory experience. CSBS published a blog post the same day outlining three points for consideration: (i) the FDI Act’s legislative history shows Congress’s clear intent to include on the Board an individual (not including the Comptroller of the Currency or the CFPB director) with state government experience supervising state banks; (ii) an individual with “[e]xperience working for the FDIC or the Federal Reserve System does not meet the FDI Act’s requirement of an independent director with ‘state bank supervisory experience’”; and (iii) additional FDI Act provisions concerning state bank supervision reinforce that “‘state bank supervisory experience’ clearly refers only to service as a state government official with bank supervisory responsibilities.’” The letter added that “[a]s regulators of both banks and fintechs, state regulators have unique insight into emerging technologies and their impact on the financial services ecosystem. The FDIC Board would benefit tremendously from state regulators’ practical, real-life experience with innovation.”
Agencies file lawsuit in scheme targeting the elderly
On February 1, the California Department of Financial Protection and Innovation (DFPI), along with the CFTC and 26 other state regulators, announced a complaint against a precious metals dealer and its owner (collectively, “defendants”) for allegedly perpetrating a $68 million fraudulent scheme against more than 450 individuals nationwide, specifically against the elderly. According to the complaint, the defendants allegedly utilized false statements on its website regarding the risk and safety of their traditional retirement accounts and used fear tactics to convince senior citizens to purchase the precious metals. The complaint alleged that the company violated the federal Commodity Exchange Act by targeting the elderly and advising them to dissolve their savings and traditional retirement accounts in order to purchase their highly inflated and overpriced products, and that defendants had misrepresented their credentials and advised customers that the products were “a safe and conservative investment.” The complaint seeks disgorgement, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act, state regulatory laws, and CFTC regulations.
The same day, the SEC filed a complaint against the defendants in the U.S. District Court for the Central District of California for allegedly violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctions, disgorgement, plus interest, and civil penalties.
District Court dismisses discriminatory lending allegations
On January 27, the U.S. District Court for the Eastern District of California entered a stipulated final judgment and order dismissing the City of Sacramento’s suit against a national bank concerning alleged discriminatory lending following a decision issued by U.S. Court of Appeals for the Ninth Circuit, which affirmed in part and reversed in part the district court’s decision to partially dismiss an action brought by the City of Oakland, alleging a national bank violated the Fair Housing Act (FHA) and California Fair Employment and Housing Act. (Covered by InfoBytes here.) Oakland alleged that the national bank violated the FHA and the California Fair Employment and Housing Act by providing minority borrowers mortgage loans with less favorable terms than similarly situated non-minority borrowers, leading to disproportionate defaults and foreclosures causing (i) decreased property tax revenue; (ii) increases in the city’s expenditures; and (iii) reduced spending in Oakland’s fair-housing programs. (Covered by InfoBytes here.) In September 2021, as previously covered by InfoBytes here, the 9th Circuit issued an en banc decision concluding that the Fair Housing Act (FHA) “is not a statute that supports proximate cause for injuries further downstream.” The Oakland decision was binding in this action, and, following Oakland’s decision not to pursue a petition for writ of certiorari in the U.S. Supreme Court, the court dismissed Sacramento’s complaint with prejudice.
District Court grants class certification in robocall TCPA suit
On January 27, the U.S. District Court for the District of Arizona granted a plaintiff’s renewed motion for class certification in an action against a national bank defendant for allegedly contacting noncustomers with unauthorized robocalls, in violation of the TCPA. According to the plaintiff’s motion for class certification, the defendant allegedly placed calls with an artificial or prerecorded voice to the plaintiff class, who were not the defendant’s customers. The plaintiffs alleged that they did not consent to the calls, which regarded overdue credit card accounts, and sought to certify a nationwide class of those who received these calls since August 2014 despite not being a customer. Among other things, the defendant argued that the common questions of fact did not predominate because individualized determinations needed to be made to determine whether the defendant had consent to call a putative class member, and whether a prerecorded message actually played. The court determined, however, that the plaintiffs’ allegations were not only “typical of the class, they are largely identical.” Additionally, though the court noted that “some persons who otherwise would be class members may have consented to receive [the defendant’s] robocalls,” the court was ultimately “persuaded based on [the plaintiffs’] argument and past caselaw” that “individualized issues of consent can be overcome without resort to a series of minitrials.” The court further noted that “the basic questions in this case are the same for all class members: Did [the defendant] call a putative class member without authorization? And, did a prerecorded or artificial voice play during the call? If the answer to both questions is yes—and all evidence indicates that it will be yes for many putative class members—recovery is appropriate. Precedent ... demonstrates these questions can be litigated as a class.”
French Council of State confirms €100 million fine against tech company
On January 28, the French Council of State confirmed the French data protection agency Commission Nationale de l’Informatique et des Libertés’s (CNIL) jurisdiction to impose sanctions on a multinational technology company and its Irish affiliate related to the companies’ process for managing cookies. The judgment follows an appeal by the companies against a 100 million euro fine imposed by CNIL in December 2020, for failure to obtain users’ consent and provide adequate information before depositing advertising cookies on users’ computers. The 2020 decision cited three violations of Article 82 of the French Data Protection Act (the Act). In confirming the 2020 decision, the Council of State recognized that it is within CNIL’s jurisdiction “to issue sanctions regarding cookies outside the ‘one-stop-shop’ mechanism provided for in the GDPR and therefore confirmed the sanction imposed by the CNIL on the companies[.]” Specifically, the Council of State concluded that the GDPR’s “one-stop-shop” mechanism does not apply to the deposit of cookies, which is covered by the Act. Additionally, because the cookies in question are implemented in the context of the companies’ activities in France, the Council of State determined CNIL had jurisdiction pursuant to the Act, and consequently, did not have to forward the case to the Irish Data Protection Authority (the lead supervisory authority for these companies under the GDPR). Moreover, the Council of State held that the fines imposed by CNIL were “not disproportionate in view of the seriousness [of] the violations, the scope of the processing and the financial capabilities of the companies.”
SEC: Taking remedial actions may help companies avoid penalties
On January 28, the SEC announced a settlement subject to court approval with a private technology company to resolve allegations that the company, through its former CEO, falsely inflated key financial metrics and doctored internal sales records. The complaint, which alleged violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, claimed that the CEO significantly inflated the value of numerous customer deals, and then masked the inflation by creating fake invoices and altering real invoices to make it seem as if customers had been billed higher amounts. The company’s board of directors conducted an internal investigation, which led to the removal of the CEO, a revised company valuation, and remedial efforts including repaying investors. The company also hired new senior management, expanded its board, and implemented processes and procedures to ensure transparency and accuracy of deal reporting and associated revenues. While the company neither admitted nor denied the allegations, it agreed to be permanently enjoined from violations of the antifraud provisions. The SEC highlighted that the lack of a penalty in the settlement is significant, and demonstrates the Commission’s position that a company may receive credit if it makes significant remedial efforts in the wake of an internal investigation. “For companies wondering what types of remedial actions and cooperation might be credited by the Commission after a company uncovers fraud, this case offers an excellent example,” stated Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “[The company’s] remediation and cooperation included not just its internal investigation and revised valuation, but also repaying harmed investors and improving its governance—all of which were factors that counseled against the imposition of a penalty in this case.”