Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • 30 Organizations Join the 2017 Edition of the CFPB’s “Your Money, Your Goals Cohort”

    Consumer Finance

    On March 10, the CFPB announced the 30 organizations selected to join the Your Money, Your Goals Cohort. These organizations, selected from a pool of respondents to the Bureau’s October invitation to submit letters of interest, will receive training and technical assistance on how to use the program’s “financial empowerment materials” to better serve low-income and economically vulnerable populations.

    Consumer Finance CFPB Consumer Education

  • FTC Enters Settlement Resolving Investigation into “Bogus Online Investment” Telemarketing Scheme

    Privacy, Cyber Risk & Data Security

    On March 13, the FTC announced a $25 million settlement with the operators of a national telemarketing scheme who allegedly stole millions of dollars from consumers in violation of the FTC Act and the Telemarketing Sales Rule. According to the complaint filed by the FTC in 2016, the defendants allegedly sold “bogus online investment opportunities” to consumers nationwide in the form of schemes such as opportunities to buy or invest in e-commerce related websites or credit card company/e-commerce website profit-sharing programs, and then pocketed the payments—some of which exceeded more than $20,000. The defendants did not admit or deny the facts alleged in the complaint in the stipulated final order with the FTC, which imposed a $25 million monetary judgment that was partially suspended.  The order also prohibits the defendants from telemarketing, marketing investment opportunities, and selling or otherwise benefiting from consumers’ personal information.

    Consumer Finance FTC Telemarketing Sales Rule Privacy/Cyber Risk & Data Security

  • FDIC Announces Enhancements to Financial Education Program for Older Adults

    Consumer Finance

    On March 13, the FDIC announced enhancements to Money Smart for Older Adults, its financial education program geared toward preventing elder financial exploitation. The program, which the FDIC developed in partnership with the CFPB, was designed as a response to the growing concerns about financial abuse of senior citizens, which often goes unreported. Statistics provided by the National Adult Protective Services Association show that “only one in 44 cases of financial abuse comes to the attention of authorities, and 90 percent of victims are exploited by a relative, friend, or trusted acquaintance.” The program, which covers topics such as identity theft and scams that target homeowners, also provides tools to help better educate seniors on money management and financial awareness. The recently-announced enhancements include new information and resources aimed at preventing elder financial exploitation.

    Consumer Finance Consumer Education FDIC Elder Financial Exploitation

  • CFPB Denies Data Provider’s Petition to Set Aside CID

    Consumer Finance

    In a Decision and Order released last month, the CFPB denied a Petition to set aside or modify a civil investigative demand (CID) directed to a data provider (“Petitioner”). The order also directed Petitioner to produce responsive information within 10 calendar days. 

    The CFPB originally issued the CID on January 5 in connection with its efforts to gather information about Petitioner’s business, products, services, and operations. According to Petitioner, the stated purpose of the CID “purport[ed] to exercise jurisdiction over [Petitioner] under the Fair Credit and Reporting Act (‘FCRA’) or under ‘any other federal consumer financial law.’” On January 25, Petitioner moved to set aside or modify the CID arguing, among other things, that: (i) the Bureau lacks jurisdiction over Petitioner because Petitioner is neither a consumer reporting agency (“CRA”), nor a “covered person” or “service provider” under a “federal consumer financial law”; (ii) the CID’s Notification of Purpose is impermissibly vague in that it fails to adequately state the “nature of the conduct constituting the alleged violation” and/or “the provision of law applicable to such violation”; and (iii) the CID is “impermissibly overbroad and seeks information which cannot possibly be related to or reasonably relevant to the inquiry at hand (which itself remains unclear and undefined).”

    Ultimately, the CFPB determined that none of three objections raised by Petitioner “warrant[ed] setting aside or modifying the CID.” In response to the argument that the CFPB lacks jurisdiction, the Bureau interpreted its authority under the Consumer Financial Protection Act to include investigative authority to issue CIDs to “any person” who may have information “relevant to a violation” of any federal consumer financial law, regardless of whether that person or entity is subject to CFPB authority. In response to Petitioner’s argument regarding the vagueness of the CID’s Notification of Purpose, the Bureau stated that the argument fails because “it is well settled that the boundaries of an agency investigation may be drawn ‘quite generally.’” Finally, as to Petitioner’s objection that the CID was overbroad and/or sought irrelevant information, the Bureau concluded that this was merely a restatement of the jurisdictional argument and fails for the same reasons.  The CFPB explained that the question of whether Petitioner is properly subject to CFPB authority need not be answered at the outset of an investigation, because it is the type of question “the investigation is designed and authorized to illuminate.”

    Consumer Finance CFPB CIDs FCRA Consumer Reporting Agency

  • In a Split Decision, D.C. Circuit Denies John Doe Company’s Request to Remain Anonymous Pending Appeal Challenging CFPB Subpoena; Judge Kavanaugh Dissents, Reiterates Critique of CFPB

    Courts

    On March 3, 2017, the U.S. Court of Appeals for the District of Columbia Circuit denied the request of an anonymous California-chartered, finance company based in the Philippines to remain anonymous pending the resolution of its challenge to a CFPB administrative subpoena. See John Doe Co. v. CFPB, March 3, [Order] No. 17-5026 (D.C. Cir. Mar. 3, 2017) (per curiam). In a 2-1 decision, the court found that the company had failed to show either that it was likely to succeed on the merits of its challenge to the CFPB’s constitutionality, or that it was likely to suffer irreparable harm from being identified as being under investigation. In denying the company’s motion, the panel majority emphasized, among other things, the fact that “[t]he Company’s sole argument regarding likelihood of success on the merits before this court and the district court has been to point to the now-vacated majority opinion in PHH.”   Judge Kavanaugh—who  back in October, assailed the “massive, unchecked” power of the single director-led CFPB—filed a dissenting opinion, in which he reiterated his call for how to fix the CFPB: namely, giving the president greater power to remove the agency’s director.

    As previously covered on InfoBytes, back in January, the John Doe finance company filed an action seeking to set aside or keep confidential a “civil investigative demand” served on the Company by the CFPB as part of an industry-wide investigation against companies that buy and sell income streams. The Company argued both that the CFPB had strayed outside the scope of its authority, and that in light of the pending challenge to the constitutionality of its structure in a separate case (PHH v CFPB), the Bureau should be barred from pursuing any investigation until the questions about its constitutionality are resolved. Fearing that the CFPB would post documents on its website revealing its identity, the company also sought a temporary restraining order to enjoin the CFPB from, among other things, disclosing the existence of its investigation and taking any action against the company unless and until the CFPB is constitutionally structured. John Doe Co. v. CFPB, D.D.C., No. 17-cv-00049 (D.D.C. Jan. 10, 2017). As covered in a recent BuckleySandler Special Alert, however, the D.C. Circuit on February 16, vacated the October 2015 panel decision in PHH v CFPB and will now rehear the case en banc.

    Courts Consumer Finance CIDs John Doe v CFPB PHH v. CFPB Litigation Single-Director Structure

  • Payroll Card Regulations in New York Are Struck Down

    State Issues

    In a Decision released on February 16, the New York Industrial Board of Appeals struck down the portions of a New York Department of Labor regulation (12 NYCRR 192), set to go into effect on March 7, that would have restricted a New York employers’ ability to pay its employees via payroll debit card. Specifically, the board ruled that the Department had exceeded its authority under New York labor law and encroached upon the jurisdiction of banking regulators when imposing fee limits and other restrictions on the cards. 

    The new rule – which was adopted by the Department of Labor in September 2016, and codified at section 192 of the New York Labor Law – set forth numerous regulations clarifying and/or specifying the acceptable methods by which employers in New York State may pay wages to certain employees. Among other things, the regulation required that an employer provide written notice to the employee and obtain written consent from the employee at least seven business days prior to taking action to issue the payment of wages by payroll debit card. The new rule would also have prohibited many fees, including charges for monthly maintenance, account inactivity and overdrafts, and for checking a card’s balance and contacting customer service.

    At issue before the Industrial Board of Appeals was a petition submitted by a single payroll debit card vendor challenging the Department of Labor’s authority to regulate payroll debit cards. Ultimately, the Board agreed with the vendor, finding that the Department sought to improperly regulate banking services provided by financial institutions – an area subject to the exclusive jurisdiction of the New York Department of Financial Services.  In reaching this holding, the Board noted that that the Department of Financial Services already regulates and has issued guidance concerning the fees that financial institutions may charge for banking services, including those related to checking accounts and licensed check cashers. The Board also noted that, should the Department of Labor wish to challenge the Decision, it may bring an Article 78 proceeding in New York Supreme Court, or, alternatively, it may choose to revise the Prepaid Card-related provisions identified in the Decision.

    State Issues Fintech Prepaid Cards Consumer Finance NYDFS

  • CFPB Submits Request for Information on Consumer Credit Card Market

    Consumer Finance

    On March 10, in accordance with the rules of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act), that mandates the CFPB prepare a report every two years examining developments in the consumer credit card marketplace, the Bureau submitted a Request for Information to solicit feedback from the public. As previously covered in InfoBytes, the first review occurred in October 2013 and the second review in December 2015. In preparation for the next report, the Bureau is focusing on several aspects of the consumer credit card market, as follows:

    • The terms of credit card agreements and the practices of credit card issuers
    • The effectiveness of disclosure of terms, fees, and other expenses of credit card plans
    • The adequacy of protections against unfair or deceptive acts or practices or unlawful discrimination relating to credit card plans
    • The cost and availability of consumer credit cards, the use of risk-based pricing for consumer credit cards, and consumer credit card product innovation
    • Deferred interest products
    • Subprime specialist products
    • Third-party comparison sites
    • Innovation
    • Secured credit cards
    • Online and mobile account servicing
    • Rewards products
    • Variable interest rates
    • Debt collection.

    Comments are due by June 8, 2017.

    Consumer Finance Credit Cards CARD Act

  • White House Releases Proclamation Announcing National Consumer Protection Week

    Consumer Finance

    On March 9, President Trump issued Proclamation 9577 announcing March 5 through March 11 as National Consumer Protection Week 2017. The President “call[ed] upon government officials, industry leaders, and advocates to educate our citizens about the protection of personal information and identity theft through consumer education activities in communities across the country.” As previously covered in InfoBytes, several events have been planned nationally to educate and empower consumers.

    Consumer Finance Trump Consumer Education

  • NY AG Schneiderman Releases List of “Top Ten” Frauds for 2016

    State Issues

    On March 6, 2017, New York Attorney General Eric T. Schneiderman released the state’s 2016 top ten list of consumer fraud complaints. For the past 11 years, Internet-related complaints concerning service providers, data privacy and security, and consumer fraud topped the list, closely followed by complaints about automobile sales, service, financing, and repairs. Credit complaints about debt collection, billing, debt settlement, payday loads, credit repair and reporting agencies, and identity theft were sixth. Complaints related to mortgages were ninth. Not on the top ten list but highlighted by the Attorney General’s office were complaints involving scam student debt relief companies as well as two common schemes known as the IRS scam and the Grandparent scam. Also provided were tips consumers should use to protect themselves and their families.

    State Issues Consumer Finance Consumer Complaints Fraud State Attorney General

  • CFPB Issues Disclosure Guide for Preparing Prepaid Accounts

    Consumer Finance

    On March 7, the CFPB issued a disclosure guide with instructions on how to prepare short form disclosures for prepaid accounts. The guidance provides steps for completing the disclosure but does not address other requirements under Regulation E, as amended by the Prepaid Rule, and is not applicable to government benefit accounts or payroll card accounts. The guide also covers information pertaining to insertion of fee amounts, static fees, additional fee types, statements explaining variable fees, informational statements, and size requirements.

    As previously covered in InfoBytes, the Bureau released its final rule (the “Prepaid Rule”) on prepaid financial products in October of last year in order to provide consumers with additional federal protections under the Electronic Fund Transfer Act and to also offer consumers standard, easy-to-understand information about prepaid accounts. However, on March 8, the CFPB announced that it may delay this effective date by six months. If approved, the proposed rule would push back the current October 1 effective date to April 1, 2018. According to the proposed rule filed by the Bureau, the extension comes in response to comments received from “some industry participants” who “believe they will have difficulty complying with certain provisions.” Extending the deadline for compliance “would, among other things, help industry participants address certain packaging related logistical issues for prepaid accounts that are sold at retail locations.” Comments on the Bureau's proposal are due next month.

    Consumer Finance CFPB Disclosures Prepaid Rule Regulation E EFTA

Pages

Upcoming Events