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Just weeks after announcing that it set aside approximately $520 million for a potential settlement of FCPA matters being investigated by the SEC and DOJ, Reuters reports that a spokeswoman for Teva Pharmaceutical Industries Ltd. has confirmed that the Israeli company is investigating new potential bribes to state healthcare workers in Romania. Reuters claims to have reviewed emails sent in the past year by an anonymous tipster to Teva’s CEO and audit committee that detail bribes paid to healthcare providers in exchange for recommending the company’s drugs. Romania was not among the countries Teva identified as being part of the settlement discussions with the SEC and DOJ in its recent SEC filing, although the company has said it is conducting a worldwide investigation of its business practices.
Prior Scorecard coverage of the Teva investigation can be found here.
On June 19, the CFPB released a beta version of its consumer complaint database. The database includes credit card complaints received on or after June 1, 2012. The CFPB plans to add credit card complaint data received prior to June 1, 2012 by the end of 2012. The database provides summary information related to (i) the issue identified in each complaint, (ii) the date of the complaint, (iii) the company named in the complaint, and (iv) the status and timeliness of the resolution. The credit card complaint database is governed by a CFPB Final Policy Statement, which addresses comments received in response to a 2011 version of the statement. Concurrent with the database launch, the CFPB released for public comment a Notice of Proposed Policy Statement that would extend the scope of the database to include all other financial services and products within the CFPB’s jurisdiction. The CFPB is accepting comments on the proposed expanded policy through July 19, 2012.
On June 4, the United States District Court for the District of Maryland in a pending class action denied defendant’s motion for summary judgment, and ruled that the plaintiffs properly alleged that a federal credit union violated the TILA and Regulation Z prohibition on offsets when it withdrew funds from members’ deposit accounts to satisfy amounts due on the members’ credit card accounts without clearly establishing a security interest in such deposit accounts. Gardner v. Montgomery County Teachers Federal Credit Union, No. 10-02781, 2012 WL 1994602 (D. Md. Jun 4, 2012). The court rejected the credit union’s argument that it had a consensual security interest in the members’ deposit funds. In doing so, the court closely analyzed the Federal Reserve Board’s Official Staff Commentary on § 226.12(d) of Regulation Z, and determined that the credit union did not meet any of the conditions necessary to claim a security interest in the deposit funds.
On April 18, the U.S. Court of Appeals for the Seventh Circuit dismissed a class action seeking damages against Shell under the Fair and Accurate Credit Transactions Act (FACTA) for displaying four digits of customers’ credit card numbers on receipts printed at Shell gas stations. Van Straaten v. Shell Oil Products Co. LLC, No. 11-8031, 2012 WL 1340111 (7th. Cir. Apr. 18, 2012). FACTA requires that such receipts truncate card numbers to display no more than the last five digits of the card number. Shell’s practice was to print the last four digits of what it calls the “primary account number,” which is the number appearing before the last five digits of the sequence of numbers appearing on the front of the credit card. The plaintiffs did not allege that Shell’s practice created a risk of identity theft, but that Shell violated FACTA by printing the wrong four numbers. Writing for a three-judge panel, Chief Judge Frank Easterbrook indicated that FACTA does not define the term “card number,” but the panel did not have to define the term, “because we can’t see why anyone should care how the term is defined.” He added that ”[a] precise definition does not matter as long as the receipt contains too few digits to allow identity theft.” As to FACTA’s authorization of $100 to $1,000 for each willful violation, Judge Easterbrook noted that “[a]n award of $100 to everyone who has used a Shell Card at a Shell station would exceed $1 billion, despite the absence of a penny’s worth of injury.” Because Shell now prints no such digits on its receipts, “the substantive question in this litigation will not recur for Shell or anyone else; it need never be answered.”
The CFPB today put consumer lenders on notice that it “will use all available legal avenues, including disparate impact, to pursue lenders whose practices discriminate against consumers.” The CFPB intends to employ disparate impact when examining auto lenders, credit card issuers , student lenders, mortgage lenders, and other providers of consumer credit, allowing the CFPB to claim an institution has engaged in discriminatory lending based on the effects and not the intent of the lending practices. In remarks to the National Community Reinvestment Coalition today, CFPB Director Richard Cordray stated that “[t]he consequences of ‘disparate impact’ discrimination are very real and they affect consumers just as significantly as other forms of discrimination.” To help consumers identify and avoid credit discrimination, the CFPB also compiled and released new lending discrimination “tips and warning signs.”
Concurrent with the announcement, the CFPB published Bulletin 2012-04 to specifically reaffirm its commitment to applying disparate impact when conducting supervision and examination under the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. In support of this application, the CFPB cites what it refers to as the “consensus approach” outlined by a 1994 interagency Policy Statement on Discrimination in Lending, which notes court findings that discriminatory lending in violation of ECOA can be established through (i) overt evidence of discrimination, (ii) evidence of disparate treatment, and (iii) evidence of disparate impact. The CFPB also argues that the ECOA legislative history, as characterized in the original Regulation B adopted by the Federal Reserve Board, supports application of the disparate impact doctrine.
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.
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.
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.
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.
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.
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: The CFPB’s proposed debt collection rule
- Buckley Webcast: Trends in e-discovery technology and case law
- Brandy A. Hood to discuss "What the flood? Don’t get washed away by a flood of changes" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Mitigating the risks of banking high risk customers" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano, Kari K. Hall, Brandy A. Hood, and H Joshua Kotin to discuss "Regulations that matter in a deregulatory environment" at the American Bankers Association Regulatory Compliance Conference Power Hour
- Buckley Webcast: Data breach litigation and biometric legislation
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium