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Financial Services Law Insights and Observations


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  • FTC alleges ROSCA, GLBA and FTC Act violations against bill payment platform

    Federal Issues

    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.

    Federal Issues FTC Enforcement ROSCA GLBA Junk Fees FTC Act Consumer Protection Third-Party

  • FTC bans all non-competes for workers and new non-competes for senior executives

    Agency Rule-Making & Guidance

    On April 23, the FTC released a final rule titled the “Non-Compete Clause Rule,” in a 570-page release, to “categorically ban” non-compete clauses in employment contracts with all workers after the effective date of the rule pursuant to the FTC’s UDAP authority, by rendering such clauses an unfair method of competition pursuant to Section 5 of the FTC Act. The final rule also renders most existing noncompete clauses unenforceable after the effective date of the final rule, with an exception for existing noncompete clauses for senior executives, which remain enforceable. The FTC explained that it viewed noncomplete clauses as “restrictive and exclusionary” with negative impacts on earnings, innovation, and market competition. The final rule defines “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.”

    While the FTC decided against adopting a rescission requirement for non-competes in the final rule, it adopts notice requirements for all workers who are not senior executives requiring “the person who entered into the non-compete” to provide “clear and conspicuous notice to the worker by the effective date that the worker’s non-compete clause is no longer in effect and will not be, and cannot legally be, enforced against the worker.” The Commission noted that employers concerned about protecting confidential business information, may avail themselves of the protections of trade secret law and further noted that there are several states that have already substantially banned non-competes, and that within these states employers have found alternative methods to protect their investments.

    The FTC’s final rule will go into effect 120 days after publication of the final rule in the Federal Register.

    Agency Rule-Making & Guidance FTC Non-Compete Federal Issues FTC Act

  • FDIC’s Consumer Compliance report outlines most frequently cited violations and observations

    On March 28, the FDIC released its March 2024 version of the Consumer Compliance Supervisory Highlights from the previous year, a report that enhanced transparency regarding the FDIC’s consumer compliance supervisory activities. The FDIC reported 16 formal enforcement actions and another 16 informal enforcement actions to address consumer compliance examination findings. The report highlighted how the FDIC conducted almost 900 consumer compliance examinations. The top five most frequently cited violations of moderate severity (levels two and three out of five of supervisory concern), which represented 74 percent of the total violations, included, in order from most frequently cited to least: TILA, and its implementing regulation, Regulation Z; the Flood Disaster Protection Act (FDPA) and its implementing regulation, Part 339; EFTA, and its implementing regulation, Regulation E; TISA, and its implementing regulation, Regulation DD; and Section 5 of the FTC Act. The report noted how Section 5 of the FTC Act dropped from the second most frequently cited to the fifth.

    The FDIC’s report outlined the most significant consumer compliance examination observations including the misuse of the FDIC’s logo, advertising of credit builder products, electronic fund transfer (EFT) error resolutions by third parties, mortgage broker relationships, and fair lending compliance. On the misuse of the FDIC’s logo, the FDIC found “a number of third parties” misrepresented the FDIC’s deposit insurance in violation of Section 18(a)(4) of the FDI Act. On substantiating claims in the advertising of credit builder products, the FDIC found that institutions collaborated with fintech companies on credit builder products and falsely advertised “these products would improve” one’s credit score, in violation of Section 5 of the FTC Act. On EFTs handled by third parties, the FDIC identified an issue with a security program in validating customer transactions in violation of Regulation E of EFTA. On payments for mortgage brokerage services, the FDIC found RESPA Section 8 violations involving mortgage broker relationships. On oversight of third parties, the FDIC identified issues with an institution that partnered with third-party lenders to offer unsecured consumer loans, finding the institution violated Section 39 of the FDI Act. Last and on fair lending, the FDIC found that most of the DOJ’s referral matters pertinent to discrimination related to redlining, automobile financing, and credit underwriting.

    Bank Regulatory Federal Issues FDIC Enforcement FTC Act TILA

  • FTC fines two fintech firms $59 million for PPP loan practices

    Federal Issues

    On March 18, the FTC announced enforcement actions against two companies that allegedly made “false promises” to small businesses seeking Paycheck Protection Program (PPP) loans. Both companies have agreed to settle with the FTC to resolve alleged violations of the Covid-19 Consumer Protection Act and the FTC Act. 

    According to the FTC’s complaint on the first company—a company that offers online financing products to small businesses—and its subsidiary allegedly engaged in a pattern of deceptive and unfair conduct by quoting shorter processing times for consumers’ applications, despite being aware of the significant delays. The companies also allegedly ignored consumers’ requests to withdraw their pending applications frequently. The FTC further alleged that roughly 40 percent of the companies’ consumers had their applications canceled or rejected. The proposed stipulated order included a prohibition against misrepresentations, an injunction concerning the companies’ application practices (which had prohibited them from failing to allow consumers to promptly withdraw their applications), and a $33 million judgment for monetary relief. The companies must also comply with reporting requirements detailed in the settlement.

    The FTC’s complaint against the second company—an online platform offering PPP financing services to small businesses—and its CEO, alleged that respondents made deceptive claims to consumers, many of whom were eligible but never received funding because the respondents failed to fix known technical issues with their system or provide consumers with assistance. According to the complaint, the company claimed that processing a loan would only take 24 hours through the “fast lane” service, but the company’s chat support was slow, as were its review and processing times. The FTC noted that the time-sensitive nature of PPP funding meant any delays had significant impacts on consumers. In addition to the $26 million monetary judgment, the settlement with the company and its CEO prohibited them from making any deceptive, false, or unsubstantiated claims about financial services or products.

    Federal Issues FTC FTC Act Enforcement Covid-19 PPP

  • FTC takes action against tax prep company for alleged unfair and deceptive practices

    Federal Issues

    On February 23, the FTC announced an action against a tax preparation company for alleged unfair and deceptive acts and practices related to the sale of tax preparation products and services. The FTC alleged in its redacted administrative complaint that the defendant unfairly pushed consumers into paying for more expensive tax preparation products. The FTC further alleged the company made it unnecessarily difficult to downgrade the consumer’s tax preparation plan, both by requiring the consumer to first speak with a representative and by requiring the consumer to re-input the data if the consumer chooses to downgrade to the lower-priced product. The FTC also stated that the company’s upgrade policy, in contrast, is notably simple compared to its downgrade policy, and consumers’ “data seamlessly moves to the more expensive product instantly.” The FTC also claimed that the company’s “file for free” advertisements are deceptive because not all consumers’ tax situations are eligible for the free service.

    This action follows the FTC’s action against another tax preparation software provider last month (covered by InfoBytes here).

    Federal Issues FTC Enforcement Unfair Deceptive FTC Act Consumer Protection

  • FTC encourages potential defendants to sign tolling agreements to avoid "undue delay"

    Federal Issues

    On February 20, Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, said in an FTC blog post, that although the FTC welcomes open dialogue with parties in open investigations, the Commission is prepared to quickly pivot to litigation in cases should companies cause “undue delay” to redress for consumers. In light of a 2021 Supreme Court ruling in AMG Capital Management, LLC v. FTC, the FTC can no longer pursue monetary relief under Section 13(b) of the FTC Act, which lacks a statute of limitations. Instead, the FTC said, it frequently turns to Section 19, 15 U.S.C. § 57b, which allows courts to order defendants to provide redress only if violations occurred within three years of the Commission’s action. To facilitate timely productive discussions, the FTC Bureau of Consumer Protection often requests tolling agreements from potential defendants to provide time for information gathering and dialogue while preserving the possibility of a pre-litigation settlement or closing the investigation in appropriate cases. Parties are encouraged to sign these agreements, as refusal may impact extension requests and meeting opportunities. If necessary, the FTC will recommend litigation to protect consumer interests.

    Federal Issues FTC FTC Act Litigation Enforcement

  • FTC, DFPI win MSJ against a fraudulent mortgage relief operation

    Federal Issues

    On February 13, the FTC and California Department of Financial Protection (DFPI) announced that the U.S. District Court for the Central District of California granted their motion for summary judgment against several companies and owners that the agencies alleged were operating a fraudulent mortgage relief operation. As previously covered by InfoBytes, the FTC and DFPI filed a joint complaint against the defendants in September 2022 alleging that the defendants violated the FTC Act, the FTC’s Mortgage Assistance Relief Services Rule (the MARS Rule or Regulation O), the Telemarking Sales Rule, the Covid-19 Consumer Protection Act, and the California Consumer Financial Protection Law. In granting the motion for summary judgment, the court found the defendants violated all five laws. According to the motion, the defendants falsely represented that they could lower homeowners’ interest rates and reduce the principal balances, but, after taking the payment upfront, rarely delivered any agreed-upon services. The defendants also allegedly made misleading claims during telemarketing calls with homeowners regarding home foreclosure and mortgage payments, among other claims, including with homeowners with numbers on the national Do Not Call registry.

    The court ordered the defendants to pay approximately $16 million in restitution and $3 million in civil penalties. Further, the court ordered that the defendants are subject to a (i) permanent ban on advertising, promoting, offering for sale, or selling, or assisting others in those acts, any debt relief product or service and all telemarketing; and (ii) prohibition against making misrepresentations or unsubstantiated claims regarding products or services.

    Federal Issues FTC DFPI FTC Act Enforcement Telemarketing Sales Rule Covid-19 Consumer Protection Act California Consumer Financial Protection Law Civil Money Penalties

  • FTC bans student loan “scammers” from debt relief industry

    Federal Issues

    On February 6, the FTC announced two orders (here and here) that will ban a group of student loan debt relief “scammers” (defendants) from the debt relief industry. As previously covered by InfoBytes, defendants allegedly misled consumers by charging them for services that are free through the Department of Education, claiming consumers needed to pay fees or make payments to access federal student loan forgiveness. As a consequence, the FTC filed a temporary restraining order resulting in an asset freeze, among other things.  

    As a result of the FTC’s action, and subject to court approval, defendants are banned from operating in the debt relief industry, as well as prohibited from making false statements about financial products or services and from using deceptive tactics to gather consumers’ financial information. Moreover, the proposed orders include a monetary judgment of $7.4 million, with a significant portion suspended due to financial constraints. Defendants must surrender personal and business assets, and if any of them materially misrepresent their finances, the entire monetary judgment will become immediately payable.   

    Federal Issues FTC Enforcement Junk Fees Student Loans Consumer Protection FTC Act Department of Education

  • FTC orders tax filing software company to cease and desist following ALJ decision

    Federal Issues

    On January 22, the FTC issued an opinion and order against the maker of a popular tax filing software.  The FTC found that the company engaged in unfair and deceptive acts or practices by marketing the software as “free” when it was not available as free to more than two-thirds of consumers and ordered the company to “cease and desist making the deceptive claims.”

    The FTC’s opinion and order were issued after its de novo review following the September 2023 ruling from an administrative law judge (“ALJ”), in the FTC’s March 2022 administrative complaint against the company (previously reported by InfoBytes here), in which the ALJ found that the company engaged in deceptive advertising. 

    The company is a publicly traded corporation that offers a variety of software programs. The software in question is a program that assists customers with preparing and filing their taxes. The FTC alleged that since 2016 the company marketed its tax filing software in violation of Section 5 of the FTC Act through television and online ads, stating consumers could file their taxes for free when less than one-third of taxpayers were eligible for the company’s free edition of the software.

    The FTC took issue with the company’s claim that the software was “free” when it restricted its eligibility for the free version to those with “simple tax returns.” While the definition of “simple tax returns” has changed over time, in 2022 it was limited to filed returns that included a Form 1040 with limited attached schedules. However, the FTC alleged most taxpayers do not have “simple tax returns” as defined by the company, including those with mortgage or property income, investment income, or charitable donations over $300.

    According to the FTC, from 2016 to 2022, the company ran “dozens” of unique ads through television, radio, the internet, social media, and other advertising channels, that garnered “billions of impressions.” The company and its ad agency understood that advertising its product as free would be a “powerful” lure to entice new customers, stating “Lead with [f]ree to raise heads and drive traffic and acquisition[.]” Although disclaimers are present in the ads, the FTC alleged the company’s disclaimers are inadequate to “cure the misrepresentations” faced by the consumer.

    The company continued to market its products as free for three years after multiple lawsuits were filed by the Los Angeles City Attorney and the County Counsel for the County of Santa Clara, California, alleging unfair and deceptive marketing of free versions of the software. Various state Attorneys General opened subsequent investigations that led the company to enter into a settlement agreement with all fifty states pursuant to which the company agreed to pay $141 million and submit to restrictions on its advertising and marketing of the software. Among other restrictions, the FTC’s final order prohibits the company from making any misrepresentations of the cost of its products and services, or the requirement that a consumer use its paid products or services in order to accurately file their taxes online or claim a credit or deduction. Additionally, the order imposes record-keeping and reporting requirements that will remain effective for a period of twenty years after the issuance date of the order.

    Federal Issues FTC Cease and Desist ALJ FTC Act

  • FTC obtains injunction and monetary judgment against telemarketing company

    Federal Issues

    On January 31, the U.S. District Court for the Northern District of Illinois finalized, in actions brought by the FTC, a permanent injunction and monetary judgment against a telemarketing company and certain individuals for violating the FTC Act, 15 U.S.C. § 45, and the Telemarketing and Consumer Fraud and Abuse Prevention Act, specifically the Telemarketing Sales Rule (“TSR”). The FTC’s motion for summary judgment was granted by the court, whereby the defendants were ordered to pay a monetary judgment for a civil penalty of $28,681,863.88 in favor of the FTC, and the defendants were permanently banned from participating in telemarketing or assisting and facilitating others engaged in telemarketing to consumers. The court found that the defendants violated the TSR by “initiating or causing the initiation of outbound telephone calls to consumers whose telephone numbers were on the National Do Not Call Registry… and by assisting and facilitating their inbound transfer partners’ violations of the TSR.”  This final action comes after the FTC was granted its initial order for permanent injunction and other relief in November 2023.

    Federal Issues FTC FTC Act Telemarketing TCPA Do Not Call Registry Telemarketing and Consumer Fraud and Abuse Prevention Act


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