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Financial Services Law Insights and Observations


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  • CFPB Proposes Narrowing Application of Credit Card Fee Limit

    Consumer Finance

    Although not yet confirmed by the SEC, media reports suggest that the SEC has opened several investigations of publicly traded companies who contracted with FIFA. Indictments in the FIFA cases have alleged that certain companies paid kickbacks to officials of FIFA and related organizations in order to win marketing and apparel contracts.  The specific companies targeted in the SEC’s new probe have not yet been named.  Without the apparent involvement of a foreign official in the FIFA cases, presumably the SEC will be focusing on the books and records and internal controls provisions of the FCPA, along with other potential violations.

    Previous FCPA Scorecard coverage of this investigation can be found here.

    Credit Cards CFPB TILA Federal Reserve

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  • FTC Announces Settlement With Debt Relief Service Operators

    Consumer Finance

    On February 8, the FTC announced it had settled with four defendants alleged to have operated a phony debt relief service.  According to the FTC, the defendants used illegal robocalls to falsely promise consumers lower credit card interest rates in exchange for a $995 fee, and falsely promised refunds. The operation allegedly netted over $13 million from over 13,000 consumers. The FTC’s complaint alleges that instead of negotiating lower rates for consumers, the defendants at most tried to arrange three-way phone calls with credit card companies for some consumers. The defendants agreed in the settlement to be banned from robocalling consumers and from selling debt relief services, and to pay a $13.1 million judgment, which will be suspended upon payment of $159,000 by the settling defendants. Defendants’ assets are subject to sale by a receiver to recover additional funds. The settlement also bars the defendants from a variety of misleading or illegal practices related to phone contacts to consumers.

    Credit Cards NCUA

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  • Two Federal Appeals Courts Address Enforceability of Arbitration Agreements

    Consumer Finance

    This week, the U.S. Courts of Appeals for the Second and Eleventh Circuits issued rulings regarding the enforceability of arbitration clauses in customer agreements. On January 31, the Eleventh Circuit, on remand from the U.S. Supreme Court, reversed its earlier unpublished decision that affirmed a district court ruling allowing a consumer class action to proceed against a bank because the class action waiver in the arbitration agreement at issue was substantively unconscionable. The underlying case involves allegations that the bank improperly ordered customer transactions in order to maximize overdraft fees. The bank sought to enforce the arbitration clause in its customer agreement. Given the U.S. Supreme Court's holding in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), which held that the Federal Arbitration Act establishes a broad policy requiring arbitration of such disputes, and preempts state law that may allow class actions despite customer arbitration agreements, the Eleventh Circuit vacated its earlier decision and remanded the case to the district court for further proceedings and reconsideration of the bank's original motion to compel arbitration.

    On February 1, the Second Circuit decided not to enforce an arbitration agreement, notwithstanding the Supreme Court's decision in Concepcion. In this case, merchants sued a credit card provider arguing that the card provider's interchange fee system violated federal antitrust laws. The card company moved to compel arbitration and enforce a class action waiver provision in the merchant agreement. The Second Circuit vacated a district court decision to enforce the arbitration agreement. That decision in turn was vacated by the Supreme Court and remanded. The Second Circuit, though, did not find that Concepcion altered its original analysis, and the Second Circuit again held that the class action waiver agreement was unenforceable in this case because the practical effect would be to preclude the merchants' ability to pursue statutory rights, an issue not addressed by Concepcion. Consistent with prior Supreme Court caselaw untouched by Concepcion, the merchants proved as a matter of law that the costs of individual arbitration with the lender would be so costly as to deprive them of statutory protections granted by the antitrust laws.

    Credit Cards Arbitration U.S. Supreme Court

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  • U.S. Supreme Court Rules Credit Repair Organizations Act Does Not Override Arbitration Agreements


    On January 10, the U.S. Supreme Court ruled (8-1) that the Credit Repair Organizations Act (CROA) does not override the Federal Arbitration Act’s (FAA) broad requirement that arbitration agreements be enforced according to their terms. CompuCredit Corp. v. Greenwood, No. 10-948, 2012 WL 43514 (Jan. 10, 2012). This case involves a proposed class of consumers alleging CompuCredit violated the CROA when it marketed and provided a no-deposit credit card to consumers with poor credit and then charged fees against the credit limit. CompuCredit sought to compel arbitration to enforce the terms of the card agreement, which mandated individual arbitration of disputes. The district court and Ninth Circuit both sided with the proposed class, finding the arbitration clause in conflict with the CROA’s “right to sue” provision and therefore void. On appeal, the consumer respondents urged the Supreme Court to follow the Ninth Circuit and hold that because the CROA requires a disclosure that a consumer has the right to sue a violating credit repair organization, and because the CROA prohibits waiver of any right given under the CROA, the right to file suit cannot be waived by an arbitration agreement. The Supreme Court rejected the Ninth Circuit’s line of reasoning and reversed, holding instead that (i) the FAA establishes a liberal policy requiring enforcement of arbitration agreements according to their terms, (ii) the CROA is silent on arbitration and its disclosure provisions do not create a right to sue that overrides the broad FAA mandate, and (iii) Congress could have specifically prohibited arbitration provisions in the CROA.

    Credit Cards Arbitration U.S. Supreme Court CROA

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  • FFIEC Approves Revised Regulation Z Interagency Examination Procedures

    Consumer Finance

    In late December, The Federal Financial Institutions Examination Council's (FFIEC) Consumer Compliance Task Force approved revised interagency examination procedures for Regulation Z, Truth in Lending. The new procedures reflect changes to rules implementing the Credit Card Accountability Responsibility and Disclosure Act, as well as revisions required by the Dodd-Frank Act, including an increased threshold for exempt consumer credit transactions.

    Credit Cards Examination TILA

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