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Florida issues telephone solicitation restrictions
On June 29, the Florida governor signed SB 1120, which prohibits telephone solicitations and sales calls involving an “automated system for the selection or dialing of telephone numbers or the playing of a recorded message” without first receiving the prior express written consent of the called party. Among other things, the act (i) provides a “rebuttable presumption that a telephonic sales call made to any area code in this state is made to a Florida resident or to a person in this state at the time of the call”; (ii) provides a private right of action to enjoin such violations or recover the greater of actual damages or $500; and (iii) authorizes a court to increase the amount of the award for willful and knowing violations. Additionally, Florida law is amended to provide that it is an unlawful act or practice to, among other things, make “[m]ore than three commercial telephone solicitation phone calls from any number to a person over a 24-hour period on the same subject matter or issue, regardless of the phone number used to make the call.” Additionally, companies may not use technology to “deliberately display a different caller identification number than the number the call is originating from to conceal the true identity of the caller.” The act takes effect July 1.
Wyoming passes consumer lending act
Earlier this year, the Wyoming governor signed HB 8 to authorize sales-finance activities for some licensees and establish procedures and calculations for refunding certain credit-insurance products upon prepayment. Among other things, this act exempts certain supervised financial institutions from certain notice and fee requirements in the Wyoming Uniform Consumer Credit Code (the Code) and generally restructures the Code to repeal statutes for consumer-related and supervised loans, consolidating the provisions for those loans into existing laws for consumer loans. Regarding the MLA, the act authorizes that “the administrator may seek an appropriate remedy, penalty, action or license revocation or suspension.” This act is effective July 1.
Minnesota enacts student loan servicer, debt buyer provisions
On June 26, the Minnesota governor signed omnibus bill HF 6, which, among other things, creates a Student Loan Bill of Rights and outlines new provisions for student loan servicers. The act provides new definitions and, subject to exemptions, requires entities servicing student loans in the state to be licensed. The act outlines servicer duties and responsibilities, including those related to responding to borrower communications, applying overpayments and partial payments, handling student loan transfers, providing income-driven repayment program options, and maintaining records. Additionally, servicers are prohibited from (i) misleading borrowers; (ii) engaging in any unfair or deceptive practices or misrepresenting or omitting information related to a borrower’s student loan obligations; (iii) misapplying payments; (iv) knowingly or negligently providing inaccurate information; (v) failing to provide both favorable and unfavorable payment history to consumer reporting agencies; (vi) refusing to communicate with a borrower’s authorized representative; (vii) making false statements or omitting material facts connected “with any application, information, or reports filed with the commissioner or any other federal, state, or local government agency”; (viii) violating any federal, state, or local law; (ix) providing incorrect information regarding the availability of student loan forgiveness; and (x) failing to comply with outlined duties and obligations. Furthermore, the state commissioner has authority to conduct examinations; deny, suspend, or revoke licenses; censure servicers; and impose civil penalties.
Additionally, as part of the omnibus bill, the definition of “collection agency” now includes a “debt buyer,” which is defined as a “business engaged in the purchase of any charged-off account, bill, or other indebtedness for collection purposes, whether the business collects the account, bill, or other indebtedness, hires a third party for collection, or hires an attorney for litigation related to the collection.” The act also defines an “affiliated company” as “a company that: (1) directly or indirectly controls, is controlled by, or is under common control with another company or companies; (2) has the same executive management team or owner that exerts control over the business operations of the company; (3) maintains a uniform network of corporate and compliance policies and procedures; and (4) does not engage in active collection of debts.” The commissioner is also required to allow affiliated companies to operate under a single license and be subject to a single examination provided all of the affiliated company names are listed on the license. Under the act, debt buyers are required to submit license applications no later than January 1, 2022; however, a debt buyer who has filed an application with the commissioner for a collection agency license before January 1, 2022, and has a pending application thereafter, “may continue to operate without a license until the commissioner approves or denies the application.”
The provisions take effect August 1.
NYDFS announces fair lending settlements with indirect auto lenders
On June 29, NYDFS announced settlements with two New York banks to resolve allegations that the banks violated New York Executive Law § 296-a while engaged in indirect automobile lending. NYDFS alleged that the banks’ practices resulted in members of protected classes paying higher interest rates that were not based on creditworthiness. According to NYDFS, the banks failed to monitor “dealers that were charging members of protected classes, namely race and ethnicity, more in discretionary Dealer Markups than borrowers identified as non-Hispanic White.”
Under the terms of the first consent order, the bank—which had voluntarily discontinued its indirect auto lending program in November 2017—agreed to pay a $275,000 civil money penalty, provide restitution to eligible impacted borrowers, and make a $50,000 contribution to local community development organizations. The second bank agreed to “move to a flat-fee business model in connection with indirect auto lending,” provide restitution to impacted borrowers, and undertake fair lending compliance remediation efforts to increase its monitoring of dealers participating in its indirect auto lending program. The consent order also requires the payment of a $350,000 civil money penalty.
AGs support FTC disgorgement authority
On June 28, a coalition of 28 state attorneys general sent a letter to Congress in support of H.R. 2668, the Consumer Protection and Recovery Act. The bill would give the FTC authority to seek restitution and disgorgement, among other equitable remedies, for consumer protection and antitrust violations in federal court without first going through a lengthy administrative process. As previously covered by InfoBytes, in April, 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 ruling reversed a $1.3 billion restitution award in a case alleging that payday loan companies had deceived and overcharged customers. The coalition urged lawmakers to reinstate the “essential tools that the FTC needs to combat fraud and anticompetitive conduct and protect an honest marketplace.”
CFPB, Georgia AG allege debt-relief violations
On June 29, the CFPB announced a stipulated final judgment and order against a financial services company and its owners for allegedly deceiving consumers into hiring the company. According to the complaint filed in the U.S. District Court for the Northern District of Georgia with the Georgia attorney general, the defendants violated the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Consumer Financial Protection Act, and Georgia’s Fair Business Practices Act by using telemarketing practices to deceptively induce consumers to hire the company, by, among other things, falsely promising to help them: (i) reduce their credit card debts by advertising to potential customers through direct mailers; and (ii) improve consumers’ credit scores by claiming they could restore their credit scores and that they had a “credit restoration team.” In addition, the defendants “collected millions of dollars in advance fees, claiming that it provided a ‘debt validation’ program that used the debt-verification process set forth in the [FDCPA] to invalidate and eliminate debt and improve consumers’ credit record, history, or rating.” Under the terms of the order, the defendants are banned from the telemarketing of any consumer financial product and selling financial advisory, debt relief, or credit repair services. The defendants must also pay a fine of $150,001, $15,000 of which will be remitted to the state of Georgia, and a penalty of approximately $30 million in consumer redress (full payment of which may be suspended if certain conditions are met).
Maine enacts predominant economic interest standard
On June 21, the Maine governor signed S.P. 205/L.D. 522, which enacts and amends provisions prohibiting certain actions in the making of consumer loans to protect consumers from predatory, fraudulent lending practices. Among other things, the act prohibits covered entities from “engag[ing] in any device, subterfuge or pretense to evade the requirements of this Article, including, but not limited to, making a loan disguised as a personal property sale and leaseback transaction, disguising loan proceeds as a cash rebate for the pretextual installment sale of goods or services or making, offering, assisting or arranging a debtor to obtain a loan with a greater rate of interest, consideration or charge than is permitted by this Article through any method.” Loans that violate these provisions are “void and uncollectible as to any principal, fee, interest or charge.” The act also specifies that a person qualifies as a lender subject to the act’s requirements if, among other things, (i) “[t]he person holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan”; (ii) “[t]he person markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase the loan or a receivable or interest in the loan”; or (iii) “[t]he totality of the circumstances indicate that the person is the lender and the transaction is structured to evade the requirements of this Article.” Additionally, the act provides that a lender who violates the act’s provisions may not furnish information concerning a debt associated with the violation to a consumer reporting agency, nor may it refer the associated debt to a debt collector. The bill takes effect 90 days after legislative session adjourns.
Connecticut amends data security breach provisions
On June 16, the Connecticut governor signed H.B. 5310 to establish new data breach notification requirements related to state residents. Among other things, the act updates the definition of “personal information” to also include (i) taxpayer identification numbers; (ii) IRS identity protection personal identification numbers; (iii) passport and military identification numbers, as well as other government-issued identification numbers; (iv) medical information; (v) health insurance policy numbers or other identifiers used by health insurers; (vi) biometric information; and (vii) user names or email addresses combined with passwords or security questions and answers used to access an individual’s online account.
The act also requires businesses to notify residents whose personal information was breached or reasonably believed to have been breached within 60 days instead of 90 days after the discovery of the breach. Should a business identify additional affected residents after 60 days, it is required to provide notice as expediently as possible. Additionally, in the event that a resident’s login credentials are breached, a business may provide notice in electronic form (or another form) that directs the individual to take appropriate measures to protect the affected online account and all other online accounts. Businesses that furnish email accounts are also required to either verify that the affected individual received the data breach notice or provide notification through another method. The act also adds provisions related to compliance with privacy and security standards under the Health Insurance Portability and Accountability Act of 1996 and the Health Information Technology for Economic and Clinical Health Act, and specifies that information provided in response to an investigative demand connected to a data breach will be exempt from public disclosure, but the attorney general may make the information available to third parties in furtherance of the investigation. The act takes effect October 1.
District Court grants emotional damages award in FDCPA Case
On June 17, the U.S. District Court for the Western District of Washington awarded plaintiffs approximately $62,000 in damages, including $60,000 for emotional distress, after suing a debt collector for alleged Washington Collection Agency Act and FDCPA violations when the defendant allegedly attempted to collect more than what was owed and allegedly made false and misleading statements when attempting to collect. According to the amended findings of fact and conclusions of law, the court previously granted the plaintiffs’ motion for summary judgment, finding that the defendant’s actions had violated Sections 1692e, 1692e(2), 1692e(8), and 1692f of the FDCPA, in addition to a provision of the Washington Collection Agency Act entitling them to damages under the Washington Consumer Protection Act. These actions included attempts to collect amounts not owed in three separate phone calls with one of the plaintiffs, one letter that was sent to both plaintiffs, and repeated and ongoing credit reporting of an inflated balance. The defendant allegedly made false and misleading statements, including that a judgment had been entered for the alleged debt, claiming that “Plaintiffs’ wages would be garnished, that plaintiffs had been evicted, and that various charges and fees were legitimate.” Though the defendant admitted the statements were made in error, the court ruled that the plaintiffs “did not need to meet the intentional infliction of emotional distress standard to recover” in this case under the FDCPA. The defendant’s actions caused the plaintiffs “stress, anxiety, feelings of helplessness and hopelessness, and other forms of general emotional distress … at a particularly vulnerable time for both plaintiffs, as they were experiencing the joy and challenges of raising a new baby.” The court awarded each of the two plaintiffs $30,000 in emotional distress damages.
District Court: Underlying court judgment does not waive right to compel arbitration
On June 21, the U.S. District Court for the Western District of New York granted defendants’ motion to compel arbitration in an action accusing the defendant of violating the FDCPA by making false statements when attempting to collect outstanding debt. In 2018, the defendant purchased the plaintiff’s charged-off account and a year later filed a lawsuit seeking to collect on the outstanding credit card debt. Default judgment was entered in favor of the defendant, who then attempted to collect on the judgment by filing an income execution to garnish the plaintiff’s wages. The plaintiff filed suit, contending that the income execution contained false statements and failed to comply with various requirements under the New York State Consumer Protection Law. The defendants filed a motion to compel arbitration and to dismiss the complaint based on provisions in a credit card agreement between the plaintiff and the original creditor. The plaintiff argued that the arbitration provisions did not apply because the judgment obtained by the defendant on the underlying debt extinguished the agreement and, as such, “there is no longer an ‘account’ upon which to enforce the arbitration provision.” The court disagreed, noting that if the plaintiff’s assertion that “an underlying court judgment merges with and extinguishes an underlying contractual debt” was correct, “contracts would be rendered meaningless whenever a party breached any portion of an agreement and the other party obtained a judgment on such breach.” Additionally, the court noted that the agreement “expressly permitted parties to file suit without waiving the right to compel arbitration on subsequent claims.” Specifically, the agreement provides that cases filed to collect money owed by a consumer will not be subject to arbitration, but that a response to such a collection suit claiming any wrongdoing may be subject to arbitration. “Thus, regardless of whether an underlying court judgment merges with and extinguishes an underlying contractual debt, the contract itself and its obligations—including the ability to compel the arbitration of subsequent claims—do not similarly merge,” the court wrote.