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Financial Services Law Insights and Observations


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  • CFPB sets 2023 FCRA asset threshold

    Federal Issues

    On November 22, the CFPB announced the annual adjustment to the maximum amount that consumer reporting agencies are permitted to charge consumers for making a file disclosure to a consumer under the FCRA. According to the rule, the ceiling on allowable charges under Section 612(f) of the FCRA will increase to $14.50, which is a $1.00 increase from the ceiling on allowable charges for 2022. The rule is effective January 1, 2023.

    Federal Issues Agency Rule-Making & Guidance CFPB FCRA Consumer Finance Consumer Reporting Agency

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  • OCC, SEC comment on digital assets

    Federal Issues

    On November 17, acting Comptroller of the Currency Michael J. Hsu delivered remarks at the Financial Literacy and Education Commission’s public meeting, where he commended the “quiet trustworthiness of banks” amid the recent volatility in the cryptocurrency market. Hsu pointed to the OCC’s “careful and cautious” approach to crypto activities by national banks, and noted that this approach “helped mitigate the risk of contagion from crypto to the banking system.” Reforms stemming from the 2008 financial crisis have strengthened the banking system, Hsu added, which has made it “more resilient, more fair, and more trustworthy” and has “proven valuable with the rapid rise and fall of crypto this past year.”

    Earlier in the week, SEC Commissioner Jaime Lizárraga spoke before the Brooklyn Law School where he issued a reminder that it does not fall on the SEC to provide legal advice or analysis to digital asset market participants, but rather the responsibility lays with the issuer or the intermediary and their attorneys “to determine whether their products, business practices, or assets require compliance with the federal securities laws.” Lizárraga refuted arguments that the SEC engages in “regulation by enforcement,” stating that the “laws are well-established, and the cases brought to date have clear applications, as has been apparent in court rulings on these issues.” He also challenged assertions that the SEC has not provided guidance to the industry on whether digital assets qualify as securities. “The reality is that there’s an abundance of guidance, from the DAO Report, to the SEC FinHub Framework for ‘Investment Contract’ Analysis of Digital Assets, and multiple no-action letters issued by the staff of the Division of Corporation Finance,” Lizárraga said, explaining that it is not so much “a lack of guidance but more that the existing guidance may not be what many market participants want to hear.” He warned anyone considering purchasing or investing in digital assets to be as informed as possible about potential risks. 

    Federal Issues Digital Assets Bank Regulatory SEC OCC Cryptocurrency

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  • Senators urge FTC to investigate social media company’s privacy compliance

    Federal Issues

    On November 17, seven Democratic senators sent a letter to FTC Chair Lina Khan requesting that the Commission investigate whether recent changes made to a global social media company will impact the company’s compliance with privacy and security regulations. The senators also encouraged Khan to investigate any breach of the company’s 2011 consent order, which prohibits misrepresentation and requires the company to maintain a comprehensive information security program. The FTC was already alerted to allegations made by a former security employee concerning the company’s supposedly inadequate security practices even prior to the company’s recent acquisition, the senators said, adding that the company also previously agreed to pay a $150 million penalty to the FTC and DOJ to settle allegations that it violated the FTC Act and the 2011 consent order related to misleading claims about its privacy and security practices. (Covered by InfoBytes here.) The senators urged the FTC “to vigorously oversee its consent decree with [the company] and to bring enforcement actions against any breaches or business practices that are unfair or deceptive, including bringing civil penalties and imposing liability on individual [company] executives where appropriate.”

    Separately, Senator Charles E. Grassley (R-IA) sent a letter to the company’s CEO expressing concerns with its security practices. Citing an unanswered request for information sent to the former head of security related to alleged security failures, Grassley asked the current CEO to perform a threat assessment of the company’s security protocol to ensure user data and privacy is protected and requested that findings be submitted to the Senate Judiciary Committee.

    Federal Issues Privacy, Cyber Risk & Data Security FTC U.S. Senate

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  • DOJ, FTC, Wisconsin AG sue timeshare scammers

    Federal Issues

    On November 22, the DOJ, FTC, and the Wisconsin attorney general announced a civil enforcement action against 16 defendants for allegedly using deceptive sales practices to sell timeshare “exit services” to consumers, mostly involving senior citizens. The complaint, which was filed in the U.S. District Court for the Eastern District of Missouri, alleged that the defendants failed to assist consumers in exiting their timeshare contracts while collecting large fees for the incomplete service. The complaint also alleged that the defendants deceived consumers into registering for timeshare exit services by, among other things, falsely claiming that consumers could not exit timeshare contracts on their own, and that the defendants were affiliated with legitimate companies. The complaint further alleged that the defendants failed to notify consumers of their rights under federal and state law to cancel their contracts with defendants within three business days. The complaint noted that the defendants allegedly deceived consumers into paying over $90 million to the defendant companies for services that were not delivered. The complaint also stated that the defendants’ actions violated the FTC Act, the FTC’s rule concerning the cooling-off period for sales made at home or other locations, and certain Wisconsin state laws concerning fraudulent misrepresentations and direct marketing. The complaint seeks monetary relief, civil penalties, and injunctive relief. According to the DOJ, the defendants’ timeshare exit services are also the subject of lawsuits filed by the Alaska and Missouri attorneys general in June 2022.

    Federal Issues Courts DOJ FTC State Attorney General State Issues Wisconsin Deceptive Enforcement FTC Act

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  • OFAC sanctions Iranian companies for petrochemicals and petroleum sales

    Financial Crimes

    On November 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13846, against 13 companies in multiple jurisdictions for their involvement in the sale of Iranian petrochemicals and petroleum products to buyers in East Asia on behalf of sanctioned Iranian petrochemical brokers. According to OFAC, the designations are the fifth round of designations targeting Iran’s illicit petroleum and petrochemical trade since June 2022. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to sanctions or subject to enforcement. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals designated today could be subject to U.S. sanctions.”

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC Iran SDN List OFAC Sanctions OFAC Designations

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  • OFAC issues Russia-related general licenses

    Financial Crimes

    On November 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Russia-related General License (GL) 13C, which authorizes certain administrative transactions normally prohibited by Directive 4 under Executive Order 14024, Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. According to GL 13C, authorized transactions must be “ordinarily incident and necessary to the day-to-day operations in the Russian Federation of such U.S. persons or entities.” GL 13C also provides a list of transactions that are not authorized.

    Earlier, OFAC issued GL 54, which authorizes certain transactions “ordinarily incident and necessary to the purchase or receipt of any debt or equity securities” of the identified company that would normally be prohibited by Executive Order 14071, provided the debt or equity securities were issued before June 6, 2022.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Russia

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  • Counter ISIS Finance Group wants group isolated from international financial system

    Financial Crimes

    On November 18, the U.S. Treasury Department announced the release of a joint statement by the Counter ISIS Finance Group (CIFG) of the Global Coalition to Defeat ISIS, which coordinates efforts to isolate the Islamic State of Iraq and Syria (ISIS) from the international financial system and eliminate revenue sources. CIFG held its seventeenth meeting on November 8-9 to discuss ongoing efforts to combat ISIS financing worldwide. During the meeting, attendees discussed ISIS financing in the Middle East, Europe, Africa, and South and Southeast Asia, as well as “key systemic vulnerabilities in the global anti-money laundering and countering the financing of terrorism (AML/CFT) regime.” CIFG noted that ISIS facilitators prefer informal funds transfer methods, and to a lesser degree, virtual asset service providers most likely “because they offer anonymity, lack oversight across many jurisdictions, charge relatively low service fees, and often conduct quicker transactions than banks and registered money services businesses.” Attendees also exchanged case studies of recent investigations and prosecutions, and discussed other efforts to implement AML/CFT reforms to disrupt ISIS fundraising and financial facilitation networks. With a focus on international cooperation, CIFG members said they will continue to closely work with counterterrorism partners to disrupt ISIS funding sources and methods.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations ISIS Anti-Money Laundering Combating the Financing of Terrorism

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  • FTC, CFPB weigh in on servicemembers’ right to sue under the MLA


    On November 22, the FTC and CFPB (agencies) announced the filing of a joint amicus brief with the U.S. Court of Appeals for the Eleventh Circuit seeking the reversal of a district court’s decision that denied servicemembers the right to sue to invalidate a contract that allegedly violated the Military Lending Act (MLA). (See corresponding CFPB blog post here.) The agencies countered that the plain text of the MLA allows servicemembers to enforce their rights in court. Specifically, the agencies argued that Congress made it clear that when a lender extends a loan to a servicemember that fails to comply with the MLA, the loan is rendered void in its entirety. Moreover, Congress amended the MLA to unambiguously provide servicemembers certain legal rights, including an express private right of action and “the right to rescind and seek restitution on a contract void under the criteria of the statute.”

    The case involves an active-duty servicemember and his spouse who financed the purchase of a timeshare from the defendants. Plaintiffs entered into an agreement with the defendants, made a down payment, and agreed to pay the remaining balance in monthly installments carrying an interest rate of 16.99 percent, in addition to annual assessments and club dues. None of the loan documents provided to the plaintiffs discussed the military annual percentage rate, nor did the defendants make any supplemental oral disclosures. Additionally, the agreement contained a mandatory arbitration clause (the MLA prohibits creditors from requiring servicemembers to submit to arbitration) and purportedly waived plaintiffs’ right to pursue a class action and their right to a jury trial. Plaintiffs filed a putative class action lawsuit alleging the agreement violated the MLA on several grounds, and sought an order declaring the agreement void. Plaintiffs also sought recission of the agreement, restitution, statutory, actual, and punitive damages, and an injunction requiring defendants to comply with the MLA going forward.

    Defendants moved to dismiss, countering “that the plaintiffs lacked standing because they had not suffered any concrete injury and, even if they had, whatever injury they suffered was not traceable to the alleged MLA violations.” Defendants also argued that the loan was exempt under the MLA’s exemption for residential mortgages, and claimed that the MLA does not authorize statutory damages, nor did the plaintiffs state a claim for declaratory or injunctive relief. Further, defendants stated the court lacked jurisdiction to hear the case. The district court dismissed the lawsuit for lack of standing, agreeing with the magistrate judge that, among other things, plaintiffs “failed to allege ‘that the inclusion of the arbitration provision impacted [their] decision to accept the contract,’ and that they could not ‘seek[] relief based on a mere technicality that has not impacted them in any way.’”

    Disagreeing with the district court’s ruling, the agencies argued that plaintiffs have a legal right to challenge the contract in court because (i) they made a down payment on an illegal and void loan; (ii) the injuries are traceable to the challenged conduct since “their monetary losses are the product of the illegal and void loan"; and (iii) their injuries “are redressable by an order of the court awarding restitution for the amounts that plaintiffs have already paid on the loan, and by a declaration confirming that the loan is void and that the plaintiffs have no obligation to make additional payments going forward.” The agencies asserted that courts have recognized that economic injury is exactly the sort of injury that courts have the power to redress. 

    Moreover, the agencies pointed out that the district court’s ruling “risks substantially curtailing private enforcement of the MLA and limiting servicemembers’ ability to vindicate their rights under the statute. It does so by reading the MLA’s voiding provision out of the statute and reading into the statute an atextual materiality requirement. But it may be very difficult, if not impossible, for servicemembers to demonstrate that certain MLA violations had a direct effect on their decision to procure a financial product or caused them to pay money they would not otherwise have paid.”

    Courts FTC CFPB Servicemembers Military Lending Act Appellate Eleventh Circuit Consumer Finance Disclosures Arbitration

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  • FCC says consent is required for ringless voicemails

    Agency Rule-Making & Guidance

    On November 21, the FCC issued a declaratory ruling that entities using ringless voicemail products must first obtain a consumer's consent prior to using the product to leave voicemails. According to the FCC, it receives “dozens of consumer complaints annually related to ringless voicemail.” The unanimous ruling establishes that ringless voicemails are “calls” that require consumers’ prior express consent, and further clarifies that a ringless voicemail is a form of a robocall, and therefore subject to the TCPA robocall prohibition, which prohibits making any non-emergency call with an automatic telephone dialing system or an artificial or prerecorded voice to a wireless telephone number without the prior express consent of the called party.

    The FCC’s declaratory ruling denied a 2017 petition filed by a company that distributes technology that permits voicemail messages to be delivered directly to consumers’ voicemail services. The petitioner argued that ringless messages, and the process by which the ringless voicemail is deposited on a carrier’s platform, is neither a call made to a mobile telephone number nor a call for which a consumer is charged and, therefore, is a service that is not regulated. The FCC rejected the petitioner’s argument that ringless voicemail is not a TCPA call because it does not pass through a consumer’s phone line and that the TCPA protects only calls made directly to a wireless handset, and does not result in a charge to the consumer for the delivery of the voicemail message. The ruling noted that “consumers cannot block these messages and consumers experience an intrusion on their time and their privacy by being forced to spend time reviewing unwanted messages in order to delete them.” The ruling also noted that a “consumer’s phone may signal that there is a voicemail message and may ring once before the message is delivered, which is another means of intrusion. Consumers must also contend with their voicemail box filling with unwanted messages, which may prevent other callers from leaving important wanted messages.” According to a statement by FCC Chairwoman Jessica Rosenworcel, the rule makes it “crystal clear" that ringless voicemails are subject to the TCPA and that the Commission's rules "prohibit[] callers from sending this kind of junk without consumers first giving their permission to be contacted this way.”

    Agency Rule-Making & Guidance Federal Issues FCC Robocalls TCPA

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  • DOJ, DOE announce process for discharging federal student loans in bankruptcy

    Federal Issues

    On November 17, the DOJ, in coordination with the Department of Education (DOE), announced a new process for handling cases involving individuals seeking to discharge their federal student loans in bankruptcy. According to the DOJ, the process will leverage DOE data and a new borrower-completed attestation form to assist the government in assessing a borrower’s discharge request. The DOJ also noted that the process “will help ensure consistent treatment of the discharge of federal student loans, reduce the burden on borrowers of pursuing such proceedings and make it easier to identify cases where discharge is appropriate,” and “help borrowers who did not think they could get relief through bankruptcy more easily identify whether they meet the criteria to seek a discharge.” The DOJ and the DOE will review the information provided, apply the factors that courts consider relevant to the undue-hardship inquiry, and determine whether to recommend that the bankruptcy judge discharge the borrower’s student loan debt. The DOJ also distributed guidance outlining the new process to all U.S. Attorneys.

    Federal Issues DOJ Department of Education Student Lending Discharge Consumer Finance

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