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Washington Department of Financial Institutions Denies ETA's Petition for Declaratory Order on Technical Grounds
On March 15, the Washington Department of Financial Institutions responded to the Electronic Transactions Association’s (ETA) December 2015 Petition for Declaratory Order, which sought clarification on the statutory definition of “money transmitter” under the Washington Uniform Money Services Act (WUMSA), RCW 19.230.020(9). Specifically, the ETA requested clarification that “money transmitter” excludes payment processors that do not have consumer-facing relationships or receive consumer payments for transmission to a third-party payee or other transferee. The ETA’s petition further requested that the Department issue a declaratory order that the payment processor exclusion in WUMSA “applies to payment processors that act on behalf of merchants, rather than consumers, to facilitate the merchant’s acceptance of credit and debit cards and that such payment processors are not subject to the Act.” The Department declined to issue such an order because the ETA’s petition failed to specifically identify any of its purported 500+ members “by name or as doing business in or having sufficient minimum contacts with Washington State to a degree that would presumptively make them subject to the Division’s authority under WUMSA.” The Department allowed that ETA could resubmit the petition, but also encouraged it to contact the Department’s staff and “have discussions about how best to resolve the alleged ‘uncertainty’ you have addressed.”
Eleventh Circuit Dismisses Plaintiff's Complaint: Assignee Not Liable under TILA for Servicer's Failure to Provide Payoff Balance
On March 1, the U.S. Court of Appeals for the Eleventh Circuit held that, as an assignee, Fannie Mae is not liable under TILA for a servicer’s failure to provide a borrower with a payoff statement. Evanto v. Federal Nat’l Mortg. Ass’n. No. 14-cv-61573 (11th Cir. March 1, 2016). The plaintiff alleged that, after foreclosure proceedings began, his servicer failed to provide the payoff balance of his mortgage within seven business days, as required under TILA 15 U.S.C. § 1639(g). Relying on the “plain meaning” of 15 U.S.C. § 1641(e), the court ruled that for an assignee of a creditor to be held liable under TILA, the violation must be apparent in the face of the "disclosure statement," which, according to the court, the payoff statement requested by the plaintiff was not because it is provided after consummation. The court opined that “[t]here is no way that the failure to provide a payoff balance can appear on the face of the disclosure statement . . . . we reject [the plaintiff’s] argument that we should fix a supposed ‘loophole’ in the statute.” Id. at *4.
Notably, the court relied in part on informational statements from the CFPB's website and Black’s Law Dictionary to define “disclosure statement" under TILA.
Maryland Auto Finance Bill Withdrawn from Consideration
On March 11, the Maryland House Committee on Economic Matters reported unfavorably on Maryland House Bill 530. Introduced on February 1, 2016, the bill would have repealed and reenacted, with amendments, Maryland Commercial Law and Annotated Code of Maryland by adding language requiring an assignee of certain documents – retail installment agreements, a note, or other evidence of a loan – relating to the finance purchase of a motor vehicle to provide payment to the seller of the motor vehicle within two business days after approval of the assignment. After the unfavorable report, the bill was withdrawn from consideration.
CFPB Accepting Online Marketplace Lending Consumer Complaints
On March 7, the CFPB announced that it is now accepting consumer complaints regarding the online marketplace lending industry. The CFPB simultaneously released a consumer bulletin defining the online marketplace lending industry as an online platform used “to connect consumers or businesses who seek to borrow money with investors willing to buy or invest in the loan.” The bulletin recommends that consumers take certain steps before applying for a loan or refinancing certain debt. CFPB Director Cordray did not expand on plans for how the CFPB will address the complaints, beyond noting that, “[b]y accepting these consumer complaints, we are giving people a greater voice in these markets and a place to turn to when they encounter problems.”
CFPB Releases Supervisory Highlights, Winter 2016 Issue
On March 8, the CFPB released its tenth edition of Supervisory Highlights, summarizing supervisory observations in the areas of consumer reporting, debt collection, mortgage origination, remittances, student loan servicing, and fair lending. The report covers the CFPB’s supervision work in the last quarter of 2015, generally between September 2015 and December 2015. Noteworthy findings in the report include: (i) violations of the Dodd-Frank Act’s unfair practice provisions by student loan servicers who would automatically default borrowers and co-signers on a private loan if either declared bankruptcy; (ii) violations of the October 2013 Remittance Rule, including providers failing to give complete and accurate disclosures to consumers, failing to cancel transactions within the required timeframe, failing to promptly credit a consumer’s account when an error occurred, and either not communicating the results of error investigations within the required timeframe or at all, or communicating them to an unauthorized party; (iii) inaccuracies in checking account information reported to NSCRAs by banks and credit unions; and (iv) violations of the FDCPA, with debt collectors failing to honor consumers’ requests to stop making contact with them and threatening garnishment against student loan borrowers who were not eligible for garnishment under the Department of Education guidelines. In addition to summarizing supervisory observations, the report provides an overview of the public enforcement actions taken between September and December 2015. Regarding non-public supervisory actions in the areas of deposits, debt collection, and mortgage origination, the report states that the CFPB collected more than $14 million in restitution to approximately 228,000 consumers in the fourth quarter of 2015.
FDIC Updates Flood Insurance Videos
On March 10, the FDIC issued FIL-18-2016 announcing updates to technical assistance videos on flood insurance. The FDIC’s videos “reflect changes in federal flood insurance laws, including changes regarding escrowing of flood insurance premiums and fees, insuring detached structures, and force-placed insurance.” The updated flood insurance series includes five separate videos: (i) Overview and Key Requirements; (ii) Building an Effective Compliance Management System; (iii) Common Violations and Consequences for Noncompliance; (iv) Frequently Asked Questions; and (v) Review and Resources. As highlighted in the letter, “the FDIC continues to emphasize to institutions the importance of managing compliance risk associated with making loans in areas having special flood hazards.”
SEC Announces Senior Staff Changes; New Office of Risk and Strategy
On March 8, the SEC announced a change in senior leadership, naming Robert M. Fisher the Managing Executive of the Office of Compliance Inspections and Examinations (OCIE). Succeeding Peter B. Driscoll, Fisher will be responsible for overseeing the OCIE’s business operations, technology servicers, examiner training, and Tips, Complaints and Referrals programs. The SEC also announced a new Office of Risk and Strategy within its Office of Compliance and Inspections and Examinations, naming Driscoll as its Chief Risk and Strategy Officer. The new office is intended to “consolidate and streamline the OCIE’s risk assessment, market surveillance, and quantitative analysis teams and provide operational risk management and organizational strategy for OCIE.” In his new role as Chief Risk and Strategy Officer, Driscoll will lead the Washington, D.C.-based Investment Adviser/Investment Company examination staff.
In a separate March 10 announcement, the SEC named Anthony S. Kelly Co-Chief of the Enforcement Division’s Asset Management Unit (Unit). Succeeding Julie Riewe, Kelly joins Marshall Sprung to lead the Unit, which focuses on misconduct by investment advisers, investment companies, and private funds.
FTC Issues Inquiry into Credit Card Companies' Compliance with Payment Card Industry Data Security Standards
On March 7, the FTC announced that it issued orders to nine companies requiring them to file a Special Report regarding their assessments of other companies’ compliance with the Payment Card Industry Data Security Standards (PCI DSS). Specifically, the FTC’s Order stated that it is “seeking insight into data security compliance auditing and its role in protecting consumers’ information and privacy.” Among other things, a company in receipt of the Order must state whether or not it performs PCI DSS Compliance Assessments, whether or not it provides any Data Security Forensic Audit Services, and whether or not it has been the “subject of any government or regulatory inquiry, private action, arbitration or mediation related to the provision of Data Security Services.” If a company performs PCI DSS Compliance Assessments, the Order requires that it submit certain information on the assessment process, including but not limited to, (i) whether or not Qualified Security Assessors are hired to perform the assessment; (ii) the number and percentage of clients for which it completed a Compliance Assessment, including the number it did not provide a “compliant” or “in place” designation on the Attestation of Compliance or the Report on Compliance, respectively; (iii) the policies and procedures related to the Compliance Assessment; and (iv) copies of a limited set of PCI DSS compliance assessments performed. Companies must file the Special Report within 45 days after the date of service of the Order, dated March 4, 2016.
FDIC Publishes Special Edition of Quarterly Consumer News: A Bank Customer's Guide to Cybersecurity
On March 8, the FDIC published a special edition of its Quarterly Consumer News entitled, “A Bank Customer’s Guide to Cybersecurity.” The guide provides consumers with, among other things, (i) safety tips for online banking; (ii) steps to take to ensure mobile devices remain secure; (iii) advice on how to avoid identity theft, including tips for keeping malware off computers; and (iv) an eight-question cybersecurity test based off the information provided in the guide. The guide also highlights federal regulations and law in place requiring financial institutions to establish programs that ensure (i) the security and confidentiality of customer information; and (ii) the minimization of consumers’ losses if they are the victim of unauthorized purchases. Finally, the guide warns small business owners “to be vigilant in protecting their computer systems and data” and provides them with tips similar to the basic precautions outlined for consumers.
FCC Releases Broadband Consumer Privacy Proposal Fact Sheet
On March 10, the FCC released a fact sheet regarding consumers’ rights in relation to broadband internet services. Significantly, the fact sheet highlights FCC Chairman Tom Wheeler’s proposed rule, which was recently circulated to the Commission for consideration, to ensure consumers have the tools necessary “to make informed choices about how and whether their data is used and shared by their broadband providers.” According to the fact sheet, Chairman Wheeler’s proposed rule “separates the use and sharing of information into three categories, and proposes adoption of clear guidance for both ISPs and customers about transparency, choice and security requirements for that information.” The Commission will vote on the proposal on March 31; if adopted, a period of public comment will follow the Commission’s approval.