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Financial Services Law Insights and Observations


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  • 6th Circuit: CDC was not authorized to implement eviction moratorium


    On July 23, the U.S. Court of Appeals for the Sixth Circuit held that statutory language did not authorize the CDC to implement a moratorium on evictions in response to the Covid-19 pandemic. The plaintiffs, a group of rental property owners and managers, filed a lawsuit seeking declaratory judgment and a preliminary injunction, claiming the CDC’s order exceeded the government’s statutory grant of power and violated the Constitution and the Administrative Procedures Act. The district court found that the moratorium exceeded the government’s statutory authority under 42 U.S.C. § 264(a) and ruled in favor of the plaintiffs on the declaratory judgment claim. The 6th Circuit denied the government’s motion for an emergency stay pending appeal, citing that the government was unlikely to succeed on the merits.

    In affirming the district court’s ruling and addressing the merits in the current order, the 6th Circuit reviewed whether Section 264(a) of the Public Health Act of 1944 allowed the CDC to issue its moratorium. The appellate court held that while the statute allows the Surgeon General, with the approval of the Secretary, to make and enforce such regulations as are “necessary to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession,” it “does not grant the CDC the power it claims.” Additionally, the appellate court concluded that an eviction moratorium did not fit the mold of actions permitted under the statute’s language. The 6th Circuit emphasized that even if the language of the statute could be construed more expansively, it could not “grant the CDC the power to insert itself into landlord-tenant relationships without clear textual evidence of Congress’s intent to do so.” Writing that “[a]gencies cannot discover in a broadly worded statute authority to supersede state landlord-tenant law,” the appellate court explained that the government’s interpretation of the statute presented a nondelegation problem, which “would grant the CDC director near-dictatorial power for the duration of the pandemic, with authority to shut down entire industries as freely as she could ban evictions.” Furthermore, the appellate court concluded that any potential ratification taken by Congress last December when former President Trump signed the Consolidated Appropriations Act, which, among other things, extended the expiration date of the eviction moratorium, “did not purport to alter the meaning of § 264(a), so it did not grant the CDC the power to extend the order further than Congress had authorized.”

    Courts Appellate Sixth Circuit Covid-19 CDC Administrative Procedures Act Evictions

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  • 6th Circuit: “Anxiety and confusion” not an injury under FDCPA


    On May 28, the U.S. Court of Appeals for the Sixth Circuit held that a consumer’s alleged “confusion and anxiety” does not constitute a concrete and particularized injury under the FDCPA. The plaintiff alleged that the defendant’s debt collector, an attorney’s office, violated the FDCPA when it communicated with him, on behalf of a bank, by sending a letter stating the plaintiff’s mortgage loan was sent to foreclosure. The letter also informed the plaintiff that the bank “might have already sent a letter about possible alternatives,” further explaining how the plaintiff could contact the bank “to attempt to be reviewed for possible alternatives to foreclosure.” The plaintiff also alleged that the attorney’s office “sent a form of this letter to tens of thousands of homeowners and that it did so without having any attorney provide a meaningful review of the homeowners’ foreclosure files, so the communications deceptively implied they were from an attorney.” The plaintiff alleged the letter confused him because he was unsure if it was from an attorney, and that, moreover, the letter “raised [his] anxiety” by suggesting “that an attorney may have conducted an independent investigation and substantive legal review of the circumstances of his account, such that his prospects for avoiding foreclosure were diminished.”

    The 6th Circuit found the plaintiff’s allegations to “come up short” in regard to proving that the statutory violations caused him individualized concrete harm. In addition, the appellate court said that “confusion doesn’t have a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit.”

    Courts Appellate Sixth Circuit Debt Collection FDCPA Standing Spokeo

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  • 6th Circuit: SBA can’t prioritize race or sex for Covid relief


    On May 27, the majority of the U.S. Court of Appeals for the Sixth Circuit held that the Small Business Administration (SBA) cannot allocate limited Covid-19 relief funds based on the race and sex of the applicants. The plaintiff filed a lawsuit claiming the SBA’s practice of giving priority to certain Restaurant Revitalization Fund applicants (i.e. restaurants owned and controlled at least 51 percent by women, veterans, or the “socially and economically disadvantaged”) during the first 21 days violates the U.S. Constitution’s equal protection clause by impermissibly granting priority based on race and gender classifications. The plaintiff applied for funding on the first day the application period opened, but because the restaurant he co-owned 50/50 with his Hispanic wife was not owned 51 percent by a woman or a veteran, he faced an added evidentiary burden to show he qualified as “socially and economically disadvantaged” to get priority status. The plaintiff requested a temporary restraining order and a preliminary injunction to prohibit the SBA from granting funds unless it did so in a manner that ignored race and sex. The district court denied the request, as well as subsequent requests made by the plaintiff, ruling that he was unlikely to succeed on the merits of his claims.

    On appeal, the majority of the Sixth Circuit disagreed, concluding that the district court should have issued an injunction pending appeal since the SBA “failed to justify its discriminatory policy.” According to the majority, the SBA “injected explicit racial and ethnic preferences into the priority process” by “presume[ing] certain applicants are socially disadvantaged based solely on their race or ethnicity.” Additionally, the majority stated that the “added evidentiary burden faced by white men and other non-presumptively disadvantaged groups stands in marked contrast with lenient evidentiary standards set by the American Rescue Plan Act,” and pointed out that “broad statistical disparities cited by the government are not nearly enough” to suggest intentional discrimination. Because “an effort to alleviate the effects of societal discrimination is not a compelling interest,” the majority stated, “the government’s policy is not permissible.” The majority also rejected the SBA’s argument that the issue was moot because the priority period for the program has ended, commenting that race and sex preferences continue to factor in whether an applicant receives funds before the program’s money runs out.

    The dissenting judge argued, however, that the “Constitution permits the government to use race-based classifications to remediate past discrimination,” and added that the plaintiff has not demonstrated that he will be irreparably harmed by the way the program’s funds are distributed.

    Courts Appellate Sixth Circuit Covid-19 SBA

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  • 6th Circuit affirms dismissal of FACTA credit card receipt suit


    On May 11, the U.S. Court of Appeals for the Sixth Circuit affirmed dismissal of a putative class action for lack of subject matter jurisdiction, holding that while a merchant technically violated the Fair and Accurate Credit Transactions Act (FACTA) by including 10 credit card digits on a customer’s receipt, the customer failed to allege any concrete harm sufficient to establish standing. According to the opinion, the named plaintiff filed a class action against the merchant alleging the first six and last four digits of her credit card number were printed on her receipt—a violation of FACTA’s truncation requirement, which only permits the last five digits to be printed on a receipt. The plaintiff argued that this presented “a significant risk of the exact harm that Congress intended to prevent—the display of card information that could be exploited by an identity thief,” and further claimed she did not need to allege any harm beyond the violation of the statute to establish standing. The district court disagreed, ruling that the plaintiff “lacked standing because she alleged merely a threat of future harm that was not certainly impending” and that the merchant’s technical violation demonstrated no material risk of identity theft.

    In agreeing with the district court, the 6th Circuit concluded that a “violation of the statute does not automatically create a concrete injury of increased risk of real harm even if Congress designed it so.” Moreover, the appellate court reasoned that the “factual allegations in this complaint do not establish an increased risk of identity theft either because they do not show how, even if [p]laintiff’s receipt fell into the wrong hands, criminals would have a gateway to consumers’ personal and financial data.” The appellate court further concluded, “statutory-injury-for-injury’s sake does not satisfy Article III’s injury in fact requirement” and the court must exercise its constitutional duty to ensure a plaintiff has standing.

    Courts Appellate Sixth Circuit FACTA Credit Cards Class Action Standing Privacy/Cyber Risk & Data Security Consumer Finance

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  • 6th Circuit: Delegation clause in arbitration agreement keeps case out of court


    On March 4, the U.S. Court of Appeals for the Sixth Circuit determined that a district court “exceeded its authority” when it ruled that an arbitration agreement was unenforceable in a case disputing an allegedly predatory loan. According to the 6th Circuit opinion, the plaintiff claimed she was the victim of an illegal “rent-a-tribe” scheme when she accepted a $1,200 loan with an interest rate exceeding 350 percent from an online lender owned and organized under the laws of a federally recognized Montana tribe. The loan contract the plaintiff signed included a provision stating that “‘any dispute. . .related to this agreement will be resolved through binding arbitration’ under tribal law, subject to review only in tribal court.” The plaintiff filed suit, alleging, among other things, that the arbitration agreement violated Michigan and federal consumer protection laws. The defendant moved to compel arbitration, arguing that because the plaintiff agreed to arbitrate issues regarding “the validity, enforceability, or scope” of the arbitration agreement through a “delegation clause,” the court should stay the case and compel arbitration. The district court denied the defendant’s motion, “maintaining that the enforceability of the arbitration agreement ‘has already been litigated, and decided against [the defendant], in a similar case from the 2nd Circuit.’” The defendant appealed, arguing that the district court disregarded the delegation clause.

    On remand, the 6th Circuit stated that its decision does not bear on the merits of the case but merely addresses who resolves the plaintiff’s challenges to the arbitration agreement. “It’s not even about whether the parties have to arbitrate the merits. Instead, it’s about who should decide whether the parties have to arbitrate the merits,” the appellate court wrote. Focusing on the delegation clause—which states that the parties agreed that an arbitrator, and not the court, would decide “gateway arbitrability issues”—the appellate court held that “[o]nly a specific challenge to a delegation clause brings arbitrability issues back within the court's province,” which was a challenge that the plaintiff failed to make.

    Courts Appellate Sixth Circuit Arbitration Tribal Lending Predatory Lending State Issues Usury

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  • Court cites 6th Circuit, rules TCPA covers autodialers using stored lists


    On February 25, the U.S. District Court for the Northern District of West Virginia ruled that a satellite TV company cannot avoid class claims that it made unwanted calls to stored numbers using an automatic telephone dialing system (autodialer). The company filed a motion to dismiss plaintiff’s claims that it violated Section 227 of the TCPA when it made illegal automated and prerecorded telemarketing calls to her cellphone using an autodialer. The company argued, among other things, that the “statutory definition of an [autodialer] covers only equipment that can generate numbers randomly or sequentially,” and that “nothing in the complaint plausibly alleges that any of the calls were sent using that type of equipment.” According to the company, list-based dialing cannot be subject to liability under the TCPA. The court disagreed, stating that the TCPA makes it clear that it covers autodialers using stored lists. The court referenced a 6th Circuit decision in Allan v. Pennsylvania Higher Education Assistance Agency, which determined that “the plain text of [§ 227], read in its entirety, makes clear that devices that dial from a stored list of numbers are subject to the autodialer ban.” (Covered by InfoBytes here.) The court also referenced decisions issued by the 2nd, 6th, and 9th Circuits, which all said that the TCPA’s definition of an autodialer includes “autodialers which dial from a stored list of numbers.” However, these appellate decisions conflict with holdings issued by the 3rd, 7th, and 11th Circuits, which have concluded that autodialers require the use of randomly or sequentially generated phone numbers, consistent with the D.C. Circuit’s holding that struck down the FCC’s definition of autodialer in ACA International v. FCC (covered by a Buckley Special Alert). Currently, the specific definition of an autodialer is a question pending before the U.S. Supreme Court in Duguid v. Facebook, Inc. (covered by InfoBytes here). The court further ruled that three out-of-state consumers should be removed from the case as they failed to meet the threshold for personal jurisdiction, and also reiterated that the case could not be arbitrated as the company’s arbitration clause was “unconscionable.”

    Courts TCPA Autodialer Robocalls Appellate Sixth Circuit U.S. Supreme Court

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  • 6th Circuit affirms expansive autodialer definition


    On July 29, the U.S. Court of Appeals for the 6th Circuit affirmed summary judgment in favor of the plaintiffs in a TCPA action, holding that a device used by a student loan servicer that only dials from a stored list of numbers qualifies as an automatic telephone dialing system (“autodialer”). According to the opinion, a borrower and co-signer sued the student loan servicer alleging the servicer violated the TCPA by using an autodialer to place calls to their cell phones without consent. The district court granted summary judgment in favor of the plaintiffs and awarded over $176,000 in damages. On appeal, the servicer argued that the equipment used did not qualify as an autodialer under the TCPA’s definition, because the calls are placed from a stored list of numbers and are not “randomly or sequentially” generated. The 6th Circuit rejected this argument, joining the 2nd and 9th Circuits, holding that under the TCPA, an autodialer is defined as “equipment which has the capacity—(A) to store [telephone numbers to be called]; or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” This decision is in conflict with holdings by the 3rd, 7th, and 11th Circuits, which have held that autodialers require the use of randomly or sequentially generated phone numbers, consistent with the D.C. Circuit’s holding that struck down the FCC’s definition of an autodialer in ACA International v. FCC (covered by a Buckley Special Alert).

    As previously covered by InfoBytes, the U.S. Supreme Court recently agreed to address the definition of an autodialer under the TCPA, which will resolve the split among the circuits.

    Courts Appellate Sixth Circuit Autodialer TCPA FCC

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  • 6th Circuit denies stay of injunction against PPP Ineligibility Rule

    Federal Issues

    On May 15, the U.S. Court of Appeals for the Sixth Circuit denied the SBA’s emergency motion for a stay of the district court’s injunction against the agency’s Paycheck Protection Program (PPP) Ineligibility Rule. As previously covered by InfoBytes, the district court granted a preliminary injunction against the SBA’s PPP Ineligibility Rule—which, in relevant part, excludes from PPP loan eligibility “sexually oriented businesses that present entertainment or sell products of a ‘prurient’ (but not unlawful) nature.” The district court concluded that the Rule was in conflict with the Congressional purpose of the CARES Act, which houses the PPP, to protect workers in need during the Covid-19 pandemic, including workers for businesses that have been historically excluded from SBA financial assistance.

    The 6th Circuit agreed with the district court, denying the motion for a stay. The court noted that the CARES Act specifies that eligibility “is conferred on ‘any business concern,’” which “encompasses sexually oriented businesses.” It went on to state that “the public interest is served in guaranteeing that any business, including plaintiffs, receive loans to protect and support their employees during the pandemic.”

    In dissent, one judge argued that it is “unclear whether Congress meant that any business concern was eligible for a PPP loan regardless of SBA restrictions,” and therefore, the injunction should be stayed pending a decision on the merits.

    Federal Issues Courts SBA Covid-19 Small Business Lending Appellate Sixth Circuit CARES Act

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  • 6th Circuit holds condo company and law firm did not act as debt collectors in non-judicial foreclosure


    On May 4, the U.S. Court of Appeals for the Sixth Circuit held that a condominium management company, condominium association, and its law firm (collectively, “defendants”) acted as “security-interest enforcers” and not debt collectors and therefore, did not violate the FDCPA. According to the opinion, the homeowners lost their condominium to a non-judicial foreclosure after they fell behind on condominium association dues. The homeowners filed suit against the defendants alleging various violations of the FDCPA during the foreclosure process. The homeowners did not assert a violation of Section 1692f(6), which applies to security-interest enforcers. The district court dismissed the action, concluding that the homeowners failed to allege facts that the defendants did more than act as security-interest enforcers.

    On appeal, the 6th Circuit agreed, citing to the U.S. Supreme Court’s opinion in Obduskey v. McCarthy & Holthus LLP, which held that parties who assist creditors with the non-judicial foreclosure of a home fall within the separate definition under Section 1692f(6) as security-interest enforcers and not the general debt collector definition (previously covered by InfoBytes here). The appellate court noted that the homeowners’ complaint did not allege the defendants’ regular business activity was debt collection. Moreover, the appellate court rejected the homeowners’ argument that the defendants recording of a lien on their condo was a step beyond enforcing a security interest. According to the court, Michigan law requires the recording of the lien in order to enforce a security-interest and therefore, the action “falls squarely within Obduskey’s central holding.”


    Courts Appellate Sixth Circuit FDCPA Debt Collection U.S. Supreme Court

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  • 6th Circuit affirms access-device fraud and identity theft convictions


    On April 17, the U.S. Court of Appeals for the Sixth Circuit affirmed a district court’s access-device fraud and aggravated identity theft convictions, finding that there was sufficient evidence to support the court’s factual findings on both charges. According to the opinion, the defendant applied for a debit card for his great-grandfather’s bank account without authorization and used the card to pay for his own expenses. The defendant was also seen multiple times on bank security cameras withdrawing money from an ATM using this card. The district court also heard testimony that the defendant opened accounts and applied for loans under his own name but used his great-grandfather’s social security number. The district convicted the defendant on one count of access-device fraud and two counts of aggravated identity theft. The defendant appealed, arguing that the district court failed to make adequate findings of fact and that the government failed to present sufficient evidence to support the charges for which he was convicted.

    On appeal, the 6th Circuit reviewed the factual findings underlying the convictions, and first concluded that, with respect to the count of access-device fraud, the government proved each element: that the defendant (i) knowingly used an access device assigned to another individual; (ii) possessed an intent to defraud; (iii) obtained a thing or things with an aggregate value of $1,000 or more within a year using the access device; and (iv) affected interstate or foreign commerce in using the access device. The appellate court explained that there was ample circumstantial evidence to support lack of authorization from the proper owners of the accounts at issue, and that the card was issued in Kentucky and the bank issuing the card was headquartered in Minnesota. The appellate court next considered whether evidence supported the district court’s finding that the defendant committed aggravated identity theft under the bank-fraud statute by opening a checking account and applying for a loan using his great-grandfather’s social security number. The appellate court held that the defendant’s use of his great-grandfather’s social security number properly supported the district court’s finding that the defendant knowingly used, without lawful authority, another person’s means of identification and that the defendant committed a predicate felony under the bank-fraud statute.

    Courts Appellate Sixth Circuit Identity Theft Privacy/Cyber Risk & Data Security Fraud ATM

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