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Financial Services Law Insights and Observations

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  • DFPI fines debt collector $375k in first action under the CCFPL

    State Issues

    On September 22, the California Department of Financial Protection and Innovation (DFPI) announced its first enforcement action against a California-based debt collector and debt buyer for allegedly violating the California Consumer Financial Protection Law (CCFPL) by threatening to sue consumers and furnishing negative information to a credit bureau without first notifying consumers about the alleged debt—a practice commonly known as “debt parking.” According to DFPI, consumers complained that their credit scores dropped significantly as a result. The respondent also, among other things, allegedly left voicemails that did not disclose the caller’s identity, threatened illegal lawsuits and wage garnishment (even though it never actually commenced any legal proceedings), and failed to notify consumers in writing within 30 days of transmitting negative information to the credit bureau. Under the order, the respondent is required to pay a $375,000 fine and must desist and refrain from unlawful acts or practices associated with the FDCPA, the Rosenthal Fair Debt Collection Practices Act, and the Consumer Credit Reporting Agencies Act.

    State Issues State Regulators DFPI Enforcement CCFPL Consumer Finance Debt Collection Debt Buyer FDCPA California

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  • District Court denies company’s bid to arbitrate in class action

    Courts

    On September 15, the U.S. District Court for the Southern District of California denied a defendant tech company’s motion to compel arbitration, dismiss or stay a class action lawsuit alleging that it violated the California Invasion of Privacy Act, among other things, by monitoring certain contract employees’ social media activity. The complaint alleges that the named plaintiff, a contract delivery driver for the company, and other contract employees, utilized an online platform to “discuss ‘a myriad of issues surrounding their employment,’ including strikes, protests, pay, benefits, deliveries, working conditions, and unionizing efforts.” The plaintiff alleged that the company was secretly monitoring and wiretapping the employees’ social media groups and created a team “to ‘monitor and/or intercept[]’ posts to closed [online] groups ‘in real time . . . using automated monitoring tools,’” without obtaining consent.   

    With respect to the defendants’ motion to compel arbitration, the company argued that, under the applicable terms of service, the plaintiff was required to arbitrate his claims on an individual basis. The court, however, found that that the plaintiff met his burden to demonstrate that the claims alleged do not fall within the scope of the arbitration provision.

    Courts Arbitration Class Action Privacy/Cyber Risk & Data Security State Issues California

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  • California announces additional small business grants as part of its broader California Comeback Plan

    State Issues

    On May 13, California’s Governor Gavin Newsom announced a new small business relief program, consisting of both business grants and tax credits, as a part of the broader “California Comeback Plan.”  The program adds an additional $1.5 billion in grants to the already announced $2.5 billion, and provides $6.2 billion in tax credits available to small businesses.

    State Issues Covid-19 California Small Business

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  • Court rules software service provider did not eavesdrop when capturing website data for retailer

    Privacy, Cyber Risk & Data Security

    On April 15, the U.S. District Court for the Northern District of California dismissed class claims alleging a software-services provider for a clothing retailer wiretapped consumers’ communication with the retailer in violation of California’s Invasion of Privacy Act and the California Constitution. The software at issue was sold to the service provider’s clients to capture and analyze data so companies can see how website visitors use their sites. The plaintiff alleged that during a visit to one of the retailer’s websites, the defendant’s software captured information including when she visited, the length of her visit, her IP address and location, browser type, and the operating system on her device. The plaintiff further claimed that, in addition to the aforementioned information, the software also captured personally identifiable information such as email, shipping addresses, and payment-card information. The defendant moved to dismiss, which was granted by the court. In dismissing the action, the court referenced its dismissal of virtually identical claims against another software-services provider and ruled that the defendant’s recording of activities such as keystrokes, mouse clicks, and page scrolling does not amount to wiretapping. “[The defendant] is not a third-party eavesdropper,” the court wrote, “[i]t is a vendor that provides a software service that allows its clients to monitor their website traffic.” Moreover, the court determined that information—“such as IP addresses, locations, browser types, and operating systems”—is not “content” under the plaintiff’s Section 631(a) claim.

     

    Privacy/Cyber Risk & Data Security Courts Third-Party Class Action State Issues California

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  • California regulator reminds mortgage lenders and servicers of pandemic-related relief

    State Issues

    On April 9, the California Department of Financial Protection and Innovation issued guidance to mortgage lenders and servicers to remind them of state law protections for homeowners and encourage them to work with impacted borrowers to avoid foreclosure. The regulator noted that, under California’s Homeowner Relief Act, if a mortgage servicer denies a forbearance request between August 31, 2020 and September 1, 2021, the servicer must provide written notice to the borrower that specifies why relief was not provided, and provide certain information to assist the borrower with defects in the application. The regulator also encouraged mortgage services to work with their customers to propose solutions to avoid foreclosure and stated that prudent efforts to do so will not be criticized by examiners.

    State Issues Covid-19 California Mortgages Foreclosure Forbearance

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  • California regulator reminds debt collectors of rental protections

    State Issues

    On April 9, the California Department of Financial Protection and Innovation issued a bulletin reminding debt collectors of protections associated with “Covid-19 rental debt,” which includes unpaid rent or other unpaid financial obligation of a tenant that came due between March 1, 2020 and June 30, 2021 (see previous coverage here). Starting July 1, creditors are prohibited from charging or attempting to collect late fees for Covid-19 rental debt if the renter has submitted the requisite declaration of financial distress, among other restrictions. Actions to recover Covid-19 rental debt cannot be commenced before August 1, 2021, and any action to recover such debt that was pending on January 29, 2021, is stayed until August 1.

    State Issues Covid-19 California Debt Collection Mortgages

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  • California begins accepting applications for their Covid-19 rent relief program

    State Issues

    On March 15, California launched their CA COVID-19 Rent Relief Program to aid landlords and renters who have unpaid rental debt due to Covid-19. In order to be eligible, a tenant must have “suffered a financial hardship” as a result of Covid-19 and have 80% or less of the area median income for their location. Landlords with eligible tenants may receive up to 80% of a tenant’s unpaid rent if they agree to waive the remaining 20%.

    State Issues California Covid-19 Mortgages Tenant Rights

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  • California delays implementation of tax treatment law for forgiven PPP loans

    State Issues

    On March 12, California Governor Gavin Newsom issued a joint statement along with the California Senate president pro tempore and Assembly speaker related to the tax treatment of Paycheck Protection Program (PPP) loans. California intends to delay those portions of Assembly Bill 1577 that was signed into law on September 9, 2020 relating to forgiven PPP loans, pending detailed guidance from the U.S. Treasury Department regarding certain provisions in the American Rescue Plan Act.

    State Issues Covid-19 California Lending Department of Treasury

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  • California extends commercial foreclosure and eviction moratorium

    State Issues

    On March 4, the California governor issued Executive Order N-03-21 extending the protections against commercial foreclosures and evictions arising from the nonpayment of rent or mortgage payments due to a substantial decrease in income or increase in medical expenses caused by the Covid-19 pandemic (previously discussed here and here) to June 30, 2021.

    State Issues Covid-19 California Mortgages Foreclosure

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  • California Department of Real Estate reissues FAQs regarding licensing process

    State Issues

    On February 10, the California Department of Real Estate reissued FAQs regarding licensing and examination processes of the department during Covid-19. The FAQs respond to questions regarding, among other things, capacity limitations at exam centers, how to reschedule a cancelled exam, the best way to complete a renewal of an expiring real estate license, completing continuing education requirements, how the shelter in place orders affect the fingerprinting process, and whether the DRE will accept electronic signatures on licensing documents.

    State Issues Covid-19 California Real Estate Examination Licensing ESIGN Fintech

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