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District Court vacates CDC’s nationwide eviction moratorium
On May 5, the U.S. District Court for the District of Columbia vacated the CDC’s eviction moratorium issued in response to the Covid-19 pandemic, ruling that the agency exceeded its authority with the temporary ban. The nationwide eviction ban was recently extended until June 30. Other courts have ruled on the lawfulness of the eviction moratorium but have limited the scope of their decisions to apply only to the particular parties involved in those lawsuits (see, e.g. InfoBytes coverage here). However, in vacating the eviction moratorium, the court rejected the federal government’s request that the decision be narrowed. “The Department urges the Court to limit any vacatur order to the plaintiffs with standing before this Court,” the court wrote. However the court found that “[t]his position is ‘at odds with settled precedent’” and that “when ‘regulations are unlawful, the ordinary result is that the rules are vacated—not that their application to the individual petitioner is proscribed.’” The court further emphasized that “[i]t is the role of the political branches, and not the courts, to assess the merits of policy measures designed to combat the spread of disease, even during a global pandemic.” Specifically, the court noted that the “question for the Court is a narrow one: Does the Public Health Service Act grant the CDC the legal authority to impose a nationwide eviction moratorium? It does not. Because the plain language of the Public Health Service Act . . . unambiguously forecloses the nationwide eviction moratorium, the Court must set aside the CDC order.”
Following the ruling, the DOJ issued a statement announcing its intention to appeal the court’s decision, citing that the court’s order “conflicts with the text of the statute, Congress’s ratification of the moratorium, and the rulings of other courts.”
OCC counters CSBS’s arguments in fintech charter challenge
On April 29, the OCC responded to the Conference of State Bank Supervisors’ (CSBS) most recent challenge to the OCC’s authority to issue Special Purpose National Bank Charters (SPNB). As previously covered by InfoBytes, CSBS filed a complaint last December opposing the OCC’s alleged impending approval of an SPNB for a financial services provider, arguing that the OCC is exceeding its chartering authority.
The OCC countered, however, that the same fatal flaws that pervaded CSBS’s prior challenges (covered by InfoBytes here), i.e., that its challenge is unripe and CSBS lacks standing, still remain. According to the OCC, the cited application (purportedly curing CSBS’s prior ripeness issues) is not for an SPNB—the proposed bank would conduct a full range of services, including deposit taking. Further, the OCC stated, even it if was an application for a SPNB charter, there are multiple additional steps that need to occur prior to the OCC issuing the charter, which made the challenge unripe. As to standing, the OCC asserted that any alleged injury to CSBS or its members is purely speculative. Finally, the OCC contended that CSBS’s challenge fails on the merits because the challenge relies on the premise that the company’s application must be for a SPNB, not a national bank, because the company is not going to apply for deposit insurance but there is no requirement in the National Bank Act, the Federal Deposit Insurance Act, or the Federal Reserve Act that requires all national banks to acquire FDIC insurance.
CFPB sued over Covid-19 FDCPA eviction rule
On May 3, plaintiffs, including members of the National Association of Residential Property Managers, sued the CFPB asserting the Bureau’s recently issued interim final rule (IFR) violates their First Amendment rights. As previously covered by InfoBytes, the IFR amended Regulation F to require debt collectors to provide tenants clear and conspicuous written notice alerting them of their rights under the CDC’s moratorium on evictions in response to the Covid-19 pandemic. Under the IFR, failure to provide notice is considered a violation of the FDCPA. The plaintiffs argue that the moratorium, however, has been challenged and invalidated by several federal courts, including the U.S. Court of Appeals for the Sixth Circuit. As such, the plaintiffs contend that the IFR compels “false speech” and “requir[es p]laintiffs to lie about the lawfulness and availability” of consumers’ rights under the moratorium. The complaint asks the court to “enjoin this CFPB policy, declare it unlawful, and set it aside.”
11th Circuit revives FCRA claims against credit-reporting agency
On April 28, the U.S. Court of Appeals for the Eleventh Circuit vacated a district court’s judgment, holding that it was unclear whether a credit reporting agency (CRA) took “reasonable procedures to assure maximum possible accuracy of the information” as required under the FCRA after a consumer claimed his credit report contained inaccuracies. The consumer contacted the CRA after noticing his credit report showed he was delinquent on a mortgage that was discharged in bankruptcy. The CRA sent an automated consumer data verification to the mortgage servicer who confirmed the debt. The consumer claimed that the CRA did not take further steps to investigate the situation and failed to correct the credit report until after the consumer commenced the litigation against the CRA for willfully violating the FCRA. The district court disagreed with the consumer, concluding that under both § 1681e and § 1681i, the CRA’s actions were reasonable as a matter of law. Among other things, the consumer failed to provide the CRA “with specific information from which it could have discovered that he no longer owed money” on the mortgage, the district court found, determining also that the consumer’s “theory of liability was a ‘bridge too far’ because it would require [CRAs] to examine court orders and other documents to determine their legal effect.”
On appeal, the Eleventh Circuit disagreed that the measures taken by the CRA after it was notified of the inaccuracy in the consumer’s report were “‘reasonable’ as a matter of law.” The CRA did “nothing, although it easily could have done something with the information” provided by the consumer, the appellate court wrote. However, the court emphasized that its decision was a narrow one. “Just as we cannot hold that [the CRA’s] procedures were per se reasonable, we do not hold that they were per se unreasonable,” the appellate court wrote, noting that it also could not “hold that in every circumstance where a plaintiff informs a [CRA] of an inaccuracy, the agency must examine court records to independently discern the status of a debt.” Additionally, the appellate court determined that although a bankruptcy discharge does not expunge a debt, the consumer’s credit report was still factually inaccurate because he “was no longer liable for the balance nor was he ‘past due’ on any amount for more than 180 days.”
District Court dismisses shareholder sales-compensation suit
On April 27, the U.S. District Court for the District of Illinois granted an Ohio-based bank’s motion to dismiss a consolidated shareholder suit, ruling that investors “failed to allege facts that give rise to a strong inference of scienter” concerning whether bank executives intended to deceive them by not immediately disclosing a federal investigation into unauthorized account openings. The investors claimed, among other things, that bank executives made misleading statements and material omissions in the bank’s securities filings for 2016, 2017, and 2018 by failing to disclose a 2016 CFPB investigation into the bank’s sales practices. After the bank disclosed the investigation in its 2019 filings, the investors alleged the stock price dropped. The Bureau later filed a complaint in 2020 (covered by InfoBytes here) charging that the bank knew that sales employees “engag[ed] in misconduct in order to meet goals or earn additional compensation,” but purportedly “took insufficient steps to properly implement and monitor its program, detect and stop misconduct, and identify and remediate harmed consumers.” The investors claimed that bank executives’ assurances about the bank’s robust risk management and compliance practices “served to conceal [its] faulty reporting structure and their knowledge of its problems,” and that the CFPB’s ongoing litigation against the bank supported an inference of scienter because, among other things, bank executives were allegedly motivated to hide the Bureau’s investigation and underlying account issues because of a pending acquisition.
The court disagreed, ruling that the investors failed to allege any specific facts showing that bank executives knew of reporting structure deficiencies or that they “had personal knowledge of any problematic practices at the time when they made the statements at issue.” The court pointedly stated that it “does not find it appropriate to infer scienter from conclusory statements made in another litigation.” Moreover, with regards to whether bank executives concealed the Bureau’s investigation to make the company appear profitable, the court stated that “the general desire to keep stock prices high to make the company appear profitable or to close a deal” is not enough on its own to “allow a strong inference of scienter.”
District Court says “state of confusion” not an injury under the FDCPA
On April 26, the U.S. District Court for the Northern District of Illinois granted a defendant debt collector’s request for summary judgment and vacated a class certification order following recent decisions issued by the U.S. Court of Appeals for the Seventh Circuit, in which the appellate court held that “the state of confusion is not itself an injury.” The court’s order reversed an earlier ruling that granted class certification and partial summary judgment in favor of a class of Illinois consumers who alleged that the defendant sent misleading or confusing dunning letters that violated the FDCPA by incorrectly identifying the name of the creditor. However, after reconsidering several 7th Circuit holdings (see InfoBytes coverage of Pennell v. Global Trust Management, LLC here), the court concluded that in the absence of any evidence showing that the plaintiff suffered a concrete injury, the plaintiff lacked standing to bring his FDCPA claims. Specifically, the court held that the plaintiff failed to claim that his confusion led him to take any actions to his detriment. Being merely confused is not a concrete injury, the court ruled, emphasizing that the plaintiff “needed to do more than demonstrate a threat that he would fail to exercise his rights because he deemed the letter a scam—he must have actually failed to exercise those rights and suffered some tangible adverse consequence as a result.”
District Court certifies class challenging online lender’s rates
On April 23, the U.S. District Court for the Northern District of California granted class certification to residents who received loans from an online lender, allowing them to pursue class claims based on allegations they were charged interest rates that exceeded state limits for lenders claiming tribal immunity. The class of borrowers include California residents who collected loans from an Oklahoma-based tribe, and California residents who received loans from a Montana-based tribe before June 2016. The district court held that the proposed class met the requirements for certification, including that the borrowers brought a common, predominant claim, and found that data from a separate settlement, which contained defendant’s consumer-level account information, could be used to establish damages. Although the defendants highlighted an error in the data regarding a plaintiff's residency, the court held that such an error was not substantial enough to undermine the entire data set, because “[d]espite the error … [the] consumer-level data for each transaction provides a fair basis for identifying the scope of the class and aggregate damages for the California class.”
2nd Circuit: No standing if PII is uncompromised
On April 26, the U.S. Court of Appeals for the Second Circuit affirmed a district court’s dismissal of a proposed class action settlement, concluding that although, “in the context of unauthorized data disclosures,” plaintiffs may establish Article III standing on the theory that a data breach increases the risk of identity theft, the appealing plaintiff failed to show that her sensitive personally identifiable information (PII) had been misused or compromised. The plaintiff filed a proposed class action against a former employer after a company employee accidentally sent an email to approximately 65 company employees with an attachment containing PII for roughly 130 current and former workers, including Social Security numbers, home addresses, and birth dates. The plaintiff alleged that the defendant, among other things, violated several state consumer protection statutes, and contended that workers “were ‘at imminent risk of suffering identity theft.’” The plaintiff further claimed that workers had to spend time canceling credit cards, assessing whether to apply for new Social Security numbers, and purchasing credit monitoring and identity theft protection services. While the parties reached a settlement, the court ultimately denied the settlement and dismissed the case for lack of subject-matter jurisdiction after finding the plaintiff lacked Article III standing because she failed to allege “an injury that is concrete and particularized and certainly impending.” According to the district court, it was “arguably a misnomer to even call this case a ‘data breach’ case,” because, “[a]t best, the data was ‘misplaced’” internally rather than accessed by a third party.
On appeal, the Second Circuit agreed with the district court, concluding that the plaintiff failed to demonstrate an increased risk of identity theft and that the cost of taking proactive measures to prevent future identity theft is insufficient to constitute an injury in fact when the threat is speculative. “This notion stems from the Supreme Court’s guidance in [Clapper v. Amnesty Int’l USA], where it noted that plaintiffs ‘cannot manufacture standing merely by inflicting harm on themselves based on their fears of hypothetical future harm that is not certainly impending.’”
9th Circuit: Company cannot compel minor children to arbitration
On April 23, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s refusal to compel arbitration against a technology company, concluding that children are not bound by arbitration provisions in their parents’ service contracts with the company. The appeals court held that the plaintiff children, who were not signatories to the service contracts, could not be compelled to arbitration because “a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”
In their June 2019 suit in the U.S. District Court for the Western District of Washington, the plaintiffs alleged that one of the corporation’s services caught and documented their communications, in violation of state wiretapping law. The defendant asserted that “the children were bound by arbitration provisions in the service contracts signed by their parents because they directly benefited from the agreements.” In affirming the district court’s decision on appeal, the Ninth Circuit agreed that the doctrine of equitable estoppel did not bind the plaintiff children to arbitrate because they “are not asserting any right or looking to enforce any duty created by the contracts between their parents and the corporation. Instead, plaintiffs bring only state statutory claims that do not depend on their parents’ contracts.”
Supreme Court: FTC may not seek restitution or disgorgement under 13(b)
On April 22, the U.S. Supreme Court unanimously reversed the U.S. Court of Appeals for the Ninth Circuit’s decision in AMG Capital Management v. FTC, holding that Section 13(b) of the FTC Act “does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.” The opinion impacts petitioners who were ordered in 2018 to pay an approximately $1.3 billion judgment for allegedly operating a deceptive payday lending scheme and making false and misleading representations about loan costs and payments (covered by InfoBytes here). At the time, the 9th Circuit rejected the petitioner’s challenge to the judgment (based on, among other things, the argument that the FTC Act only allows the court to issue injunctions), concluding that a district court may grant any ancillary relief under the FTC Act, including restitution. As previously covered by InfoBytes, last year the Court granted review and consolidated two cases that had reached different conclusions regarding the availability of restitution under § 13(b): (i) the 9th Circuit’s decision in FTC v. AMG Capital Management; and (ii) the 7th Circuit’s ruling in FTC v. Credit Bureau Center (covered by InfoBytes here), which held that Section 13(b) does not give the FTC power to order restitution.
In examining “whether Congress, by enacting §13(b) and using the words ‘permanent injunction,’ granted the Commission authority to obtain monetary relief directly from courts and effectively bypass the requirements of the administrative process,” the Court unanimously held that § 13(b) “does not explicitly authorize the Commission to obtain court-ordered monetary relief,” and that “such relief is foreclosed by the structure and history of the Act.” As such, the Court determined that it is “highly unlikely” that Congress would grant the FTC authority to circumvent traditional § 5 administrative proceedings by collecting restitution or disgorgement as an equitable relief power. Moreover, the Court discussed § 19 of the FTC Act, which was enacted two years after § 13(b) and “authorizes district courts to grant ‘such relief as the court finds necessary to redress injury to consumers,’ including through the ‘refund of money or return of property.’” The Court noted that since § 19 has limited authority and is only available against those who have engaged in an unfair or deceptive act or practice through which the FTC has issued a final cease and desist order (i.e. through an administrative proceeding), the Court found it “highly unlikely that Congress would have enacted provisions expressly authorizing conditioned and limited monetary relief if the Act, via §13(b), had already implicitly allowed the Commission to obtain that same monetary relief and more without satisfying those conditions and limitations.” Further, the Court stated that it was unlikely that Congress would have granted the FTC authority to “so readily” circumvent traditional § 5 administrative proceedings.
The Court stated that nothing in its opinion, however, prohibits the FTC “from using its § 5 or § 19 authority to obtain restitution on behalf of consumers,” adding that if the Commission “believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority”—a request that the FTC made before the Senate Committee on Commerce, Science, and Transportation on Oversight of the Federal Trade Commission in 2020 and again on April 20, 2021 (covered by InfoBytes here). The Court reversed the judgment against the petitioners and remanded the case for further proceedings in line with its opinion.
FTC acting Chairwoman Rebecca Kelly Slaughter issued a statement following the Court’s decision: “With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”