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9th Circuit says district court must reassess statutory damages in TCPA class action
On October 20, the U.S. Court of Appeals for the Ninth Circuit ordered a district court to reassess the constitutionality of a statutory damages award in a TCPA class action. Class members alleged the defendant (a multi-level marketing company) made more than 1.8 million unsolicited automated telemarketing calls featuring artificial or prerecorded voices without receiving prior express consent. The district court certified a class of consumers who received such a call made by or on behalf of the defendant, and agreed with the jury’s verdict that the defendant was responsible for the prerecorded calls at the statutorily mandated damages of $500 per call, resulting in total damages of more than $925 million. Two months later, the FCC granted the defendant a retroactive waiver of the heightened written consent and disclosure requirements, and the defendant filed post-trial motions with the district court seeking to “decertify the class, grant judgment as a matter of law, or grant a new trial on the ground that the FCC’s waiver necessarily meant [defendant] had consent for the calls made.” In the alternative, the defendant challenged the damages award as being “unconstitutionally excessive” under the Due Process Clause of the Fifth Amendment.
On appeal, the 9th Circuit affirmed most of the district court’s ruling, including upholding its decision to certify the class. Among other things, the appellate court determined that the district court correctly held that the defendant waived its express consent defense based on the retroactive FCC waiver because “no intervening change in law excused this waiver of an affirmative defense.” The appellate court found that the defendant “made no effort to assert the defense, develop a record on consent, or seek a stay pending the FCC’s decision,” even though it knew the FCC was likely to grant its petition for a waiver. While the 9th Circuit did not take issue with the $500 congressionally-mandated per call damages figure, and did not disagree with the total number of calls, it stressed that the “due process test applies to aggregated statutory damages awards even where the prescribed per-violation award is constitutionally sound.” Recognizing that Congress “set a floor of statutory damages at $500 for each violation of the TCPA but no ceiling for cumulative damages, in a class action or otherwise,” the appellate court explained that such damages “are subject to constitutional limitation in extreme situations,” and “in the mass communications class action context, vast cumulative damages can be easily incurred, because modern technology permits hundreds of thousands of automated calls and triggers minimum statutory damages with the push of a button.” Accordingly, the 9th Circuit ordered the district court to reassess the damages in light of these concerns.
FRBs to adopt new Fedwire format in 2025
On October 24, the Federal Reserve Board published a notice in the Federal Register announcing that the International Organization for Standardization’s (ISO) 20022 message format for the Fedwire Funds Service will be adopted on a single day, March 10, 2025. The Fedwire Funds Service is a real-time gross settlement system owned and operated by the Federal Reserve Banks that enables businesses and financial institutions to quickly and securely transfer funds using either balances held at the Reserve Banks or intraday credit provided by the Reserve Banks. A single-day implementation strategy is preferable to a three-phased implementation approach, the Fed said, explaining it is both simpler and more efficient and is likely to reduce users’ overall costs related to software development, testing, and training. The Fed also announced a revised testing strategy and backout strategy, as well as other details concerning ISO 20022’s implementation.
OCC releases enforcement actions
On October 20, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included among the actions is a cease and desist order against an New York branch of an India-based bank for allegedly engaging in Bank Secrecy Act/anti-money laundering (BSA/AML) program violations. The bank allegedly “failed to establish and maintain a reasonably designed BSA/AML compliance program ('BSA/AML Program') that adequately covers the required BSA/AML Program components. Deficiencies include (i) a weak system of internal controls; (ii) a weak BSA Officer function; and (iii) an insufficient training program.” The order requires the bank to, among other things, submit a BSA/AML action plan and develop a written suspicious activity monitoring and reporting program.
FTC final order fines company $62 million for misleading potential home sellers
On October 21, the FTC announced the approval of a final order against an online home buying firm accused of allegedly making misleading claims to consumers about how much money they could save by selling their home through the company’s services as opposed to selling on the open market. As previously covered by InfoBytes, the FTC claimed the company violated the FTC Act by, among other things, misrepresenting: (i) market value prices when making offers to buy homes by including downward adjustments to such values; (ii) the manner in which it made money on transactions; (iii) that consumers likely would have paid the same amount in repair costs whether they sold their home through the company or in traditional sale; and (iv) that consumers paid less in costs. The final order requires the company to pay $62 million, which is expected to be used for consumer redress, and prohibits the company from making deceptive, false, and unsubstantiated claims about how much money consumers will receive for their homes or the costs required to use the company’s service. Additionally, the company is required to have “competent and reliable evidence to support any representations made about the costs, savings, or financial benefits associated with using its service, and any claims about the costs associated with traditional home sales.”
CFPB releases education ombudsman’s annual report
On October 20, the CFPB Education Loan Ombudsman published its annual report on consumer complaints submitted between September 1, 2021 and August 31, 2022. The report is based on approximately 8,410 complaints received by the Bureau regarding federal and private student loans—a 59 percent increase from the previous reporting period. Of these complaints, roughly 2,000 were related to debt collection, while approximately 900 mentioned Covid-19 (the categories increased by 122 and 23 percent, respectively). The report discussed certain risks raised in the consumer complaints, including difficulty pursuing claims and defenses against predatory institutions of higher learning, improper collection attempts on non-qualified private student loans that have been discharged in bankruptcy, and processing errors and servicer misrepresentations that have caused federal student loan borrowers to not be able to take full advantage of pandemic-related relief.
The report advised policymakers to consider several recommendations, including: (i) examining whether holders of private student loans originated to fund predatory for-profit schools are abiding by state and federal law; (ii) ensuring holders and servicers of private loans are not collecting on non-qualified discharged debt; and (iii) examining whether servicers may be creating barriers to pandemic-related relief. The Bureau also advised policymakers to consider whether to make loan forgiveness programs “opt out” rather than “opt in,” and whether simplifying consumer-facing incentives for consolidating commercial Federal Family Education Loan Program into Direct Consolidation Loans could benefit borrowers if made permanent.
Senators urge CFPB to increase transparency on “Remittance Rule”
On October 19, a group of five Democratic senators sent a letter to CFPB Director Rohit Chopra requesting that the Bureau strengthen its rule regarding remittances transfers. According to the letter, though remittance providers are required to display the exchange rate and fees associated with a transaction, as required by a May 2020 final rule (covered by InfoBytes here), some providers collect additional revenue by increasing exchange rates. The senators explained that because of various “loopholes in the rules, remittance providers may technically comply with the CFPB’s remittance rule requirements while providing insufficient price transparency to allow consumers to make informed comparisons and choose the lowest-cost provider.” The senators requested that the Bureau “strengthen the remittance rule to ensure greater transparency” so that remittance providers are not able to “advertise ‘no-fee remittances’ while simultaneously inflating exchange rates without limit or without providing accurate third-party costs.” Additionally, the senators stressed that the Bureau “should require remittance providers to display mid-market exchange rates, while only collecting revenue through added costs, including fixed third-party fees, openly displayed as ‘total cost,’ as recommended by the Remittance Community Task Force.” The senators also recommended that the Bureau “rescind the permanent exemption for non-covered third-party fees and encourage the adoption of new technology that would provide transparent, pre-transfer cost information.”
CFPB discusses impact of overdraft fees on seniors
On October 19, the CFPB released an issue brief, Overdraft Fees and Economically Insecure Older Adults, examining the economic effects of overdraft fees on economically insecure older adults. The Bureau noted that older adults of color, older women, LGBTQ+ older adults, and retirees are more likely to be economically insecure and may face greater challenges with overdraft fees. The brief also found that older adults pay fees for overdraft services less frequently than other age groups but stated that the economically insecure could be “particularly impacted” because “they are often unable to adjust their carefully managed budgets” when they incur fees. Among other things, the brief provided recommendations to financial institutions for implementing age-friendly banking practices, such as offering view-only account access and/or convenience accounts for financial caregivers. The brief also noted that financial institutions should provide customer service to respond to consumers’ concerns about bank fees in person, by phone, and online. The Bureau stated that it will “track the impact of overdraft fees on older adults” through analysis of consumer complaints, among other things.
FTC to issue rulemaking on junk fees and fake reviews
On October 20, the FTC voted 3-1 at an open meeting to publish two rules for comments: the Advance Notice of Proposed Rulemaking (ANPRM) on Junk Fees (see here) and the ANPRM on Fake Reviews and Endorsements (see here). The first ANPRM addresses junk fees that are charged for goods or services that have little or no added value to the consumer. The ANPRM seeks comments on the prevalence of junk fees and the consumer harms arising from junk fee practices, among other topics. The second APNRM initiates a rulemaking proceeding addressing fake reviews and other endorsements, which can cheat consumers and honest businesses alike. The ANPRM seeks comment on the prevalence of fake and deceptive reviews and the consumer harms arising from them, among other things.
At the start of the meeting, members of the public provided feedback on the Commission’s work with some members of the public expressing concerns about how junk fees are harming consumers and businesses. Others also expressed consumers’ frustration with hidden fees that are added to bills that were not advertised up front. Regarding fake advertisements, some emphasized how consumers rely on reviews and how fake reviews can harm consumers and sellers. Commissioner Wilson, the sole ‘no’ vote on both measures, noted that the APNRM on junk fees “is sweeping in its breadth,” and said the APNRM potentially contradicts existing laws and rules, among other things. Chair Kahn, Commissioner Slaughter, and Commissioner Bedoya all voted yes for both measures. Regarding the junk fees ANPR, Commissioner Slaughter mentioned that she does not consider this to be “obscure” and expressed her support for the ANPRM, emphasizing that markets cannot function effectively with junk fees. Commissioner Wilson noted that she agrees that “fake and deceptive reviews are unlawful,” but does not believe public comment should be sought for this proposal because “the Commission already has a multi-pronged strategy in place to combat this issue,” such as FTC-published endorsement guides. Additionally, in October 2021, the Commission issued a notice of penalty offenses, which is explained in the ANPRM, and may enable the Commission to obtain civil penalties from marketers that use fake reviews.
FHA seeks comment on LIBOR transition
On October 19, FHA published a proposed rule in the Federal Register seeking public comment on transitioning existing FHA-insured forward and home equity conversion mortgage (HECM) adjustable rate mortgages (ARMs) from LIBOR to a spread-adjusted Secured Overnight Financing Rate (SOFR) index, after the one-year and one-month LIBOR indices cease to be published on June 30, 2023. The proposed rule also mentioned removing LIBOR and adding SOFR as an approved index for newly originated forward ARMs. According to the proposed rule, this change was made for HECM ARMs in Mortgagee Letter 2021- 08 and added to this proposed rule. As previously covered by InfoBytes, in March 2021, FHA issued ML 2021-08 announcing changes for adjustable interest rate HECMs as the market transitions away from LIBOR. Comments are due by November 18.
CFPB opines on junk data in credit reports
On October 20, the CFPB issued an advisory opinion, Fair Credit Reporting; Facially False Data, as part of a series of actions being taken by the Bureau to ensure consumer reporting companies comply with consumer financial protection laws. The advisory opinion emphasizes, among other things, that “a consumer reporting agency that does not implement reasonable internal controls to prevent the inclusion of facially false data, including logically inconsistent information, in consumer reports it prepares is not using reasonable procedures to assure maximum possible accuracy under section 607(b) of the [FCRA].” According to the Bureau, consumer reporting companies are legally required to follow reasonable procedures to assure maximum possible accuracy of information that they collect and report. As part of that requirement, companies must implement policies and procedures to screen for and eliminate junk data, including being able to detect and remove inconsistent account information and information that cannot be accurate. Additionally, companies’ internal controls must also be able to identify and prevent reporting of illegitimate credit transactions for a minor.
For more details on the CFPB’s advisory opinion program, please see InfoBytes coverage here.