InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
9th Circuit amended opinion holds company not vicariously liable under TCPA
On April 4, the U.S. Court of Appeals for the 9th Circuit issued an amended opinion to further affirm a district court’s decision to grant summary judgment in favor of a defendant concerning allegations that it was vicariously liable for telemarketing activity in violation of the Telephone Consumer Protection Act (TCPA). The three-judge panel held that the defendant, who sells vehicle service contracts (VSCs) through automobile dealers and “marketing vendors,” was not vicariously liable under the TCPA for calls made by telemarketers employed by a company that sold VSCs for the defendant and multiple other companies. Last August, the three-judge panel determined that the company’s telemarketers acted as independent contractors, rather than as the defendant’s agents. In amending their opinion, the three-judge panel further determined that the telemarketers lacked actual authority (under express language contained within the parties’ contract) to place the unlawful calls, and that the defendant “exercised insufficient control over the manner and means of the work to establish vicarious liability under the asserted theory.”
Oregon amends debt collection statute to expand coverage to debt buyers
On April 3, the Oregon governor signed SB 1553, which amends Oregon’s debt collection laws to provide that a debt buyer (or a debt collector acting on a debt buyer’s behalf) engages in unlawful collection practice if it collects or attempts to collect a debt without providing a debtor, within 30 days of their request, documents which establish the nature and amount of debt.
District court rejects motions for summary judgement on FDCPA claims filed by CFPB, debt collection law firm
On April 9, the U.S. District Court for the Northern District of Ohio rejected motions for partial summary judgment and summary judgment filed respectively by the CFPB and a law firm accused of making false representations regarding attorney involvement in debt collection calls in violation of the Fair Debt Collection Practices Act (FDCPA) and Dodd-Frank. As previously discussed in InfoBytes, the CFPB alleged in its complaint that the law firm sent demand letters and made collection calls to consumers that falsely implied that the consumer’s account files had been meaningfully reviewed by an attorney, when, in most cases, no attorney had reviewed the account file. Among other things, the law firm countered that, because its communications truthfully identified it as a law firm and it was acting as a debt collector, these communications were not misleading to the “least sophisticated consumer”—a factor of measurement for analyzing FDCPA violations. The court ruled that “whether the communications at issue are misleading is a question of fact that must be determined by a jury.” The jury trial is set for May 1.
Agencies seek OMB approval on November 2017 Call Report revisions
On April 11, the Federal Reserve Board, FDIC, and OCC—as members of the Federal Financial Institutions Examination Council (FFIEC)—published a joint notice and request for comment for OMB review and approval regarding revisions to the Consolidated Reports of Condition and Income (Call Reports) for financial institutions. The finalized changes modify Call Reports applicable to banks with (i) domestic offices only and less than $1 billion in total assets (FFIEC 051); (ii) domestic offices only (FFIEC 041); and (iii) domestic and foreign offices (FFIEC 031). The changes include removing or consolidating certain data items and adding a new or raising certain existing reporting thresholds in the three versions of the Call Report. Comments must be submitted by May 11. Subject to OMB approval, the revisions would take effect as of the June 30, 2018 report date. As previously covered by InfoBytes, the changes were originally proposed in November 2017.
CFPB releases RFI on consumer complaints and inquiries
On April 11, the CFPB released its twelfth (and apparently final) Request for Information (RFI) in a series seeking feedback on the Bureau’s operations. This RFI solicits public comment to assist the Bureau in assessing its handling of consumer complaints and consumer inquiries. Pursuant to the Dodd-Frank Act, the CFPB is required to “facilitate the centralized collection of, monitoring of, and response to consumer complaints regarding consumer financial products or services.” According to the RFI, a “consumer complaint” relates to an issue a consumer has with an identifiable entity, whereas a “consumer inquiry” is a consumer request for information from the CFPB regarding a financial product or service, a CFPB action, or the status of a complaint. While the Bureau is seeking feedback on all aspects of its consumer complaints and consumer inquiries processes, the RFI specifically seeks comments related to (i) how the Bureau distinguishes between complaints and inquiries, including if there should be a process for companies to reclassify consumer submissions; (ii) the complaint submission process, including the channels of submission and whether consumers should be allowed to authorize a third-party to submit on their behalf; and (iii) whether the Bureau should develop a process for companies to provide responses to consumer inquiries. The RFI is expected to be published in the Federal Register on April 16. Comments will be due 90 days from publication.
The CFPB sought information on the publication of complaints in the Consumer Complaint Database and other forms of complaint reporting in an earlier RFI, previously covered by InfoBytes here.
Federal Reserve proposes changes to simplify capital rules for large banks
On April 10, the Federal Reserve Board (Board) announced proposed changes intended to simplify the capital regime applicable to bank holding companies with $50 billion or more in total consolidated assets by integrating the Board’s regulatory capital rule (capital rule) and Comprehensive Capital Analysis and Review (CCAR) and stress test rules. The proposal introduces a “stress capital buffer” (SCB) requirement which will replace the existing fixed capital conservation buffer requirement. Under the proposal, the size of the SCB will be based on the annual stress test and will be added to the bank’s capital requirements for the coming year. For globally systemically important banks (GSIB), a GSIB surcharge will be added to the determined SCB amount. According to the Board’s announcement, the amount of capital required for GSIBs will generally stay the same or somewhat increase, while non-GSIBs will generally see a modest decrease. Overall, the Board states that the changes would reduce the number of capital-related requirements from 24 to 14. Comments on the proposal are due 60 days after publication in the Federal Register.
FCPA class action against Brazilian aerospace firm dismissed
A class action against a Brazilian aerospace firm was recently dismissed by U.S. District Judge Richard Berman. The class action, which was brought in federal district court in New York, alleged that the firm had failed to adequately disclose the scope and possible financial impact of ongoing corruption investigations by the DOJ and SEC, harming the company’s investors.
In granting the firm’s motion to dismiss, Judge Berman held that the company’s disclosures were sufficient as a matter of law, and that requiring disclosures advocated by the putative class plaintiffs would effectively require reporting companies to acknowledge guilt for conduct that was still being investigated and had not yet been charged.
The underlying bribery alleged in the complaint (and being investigated by regulators) involves the firm’s October 2016 admissions that from 2007 to 2011, company executives made payments to government officials in several countries, including the Dominican Republic, Saudi Arabia, Mozambique, and India, totaling $11.5 million. The firm received government contracts resulting in profits over $83 million in exchange.
This decision is a clear win for publicly traded companies currently under investigation for corruption-related conduct. Had the case proceeded, companies may have faced difficult choices between making more detailed disclosures to investors regarding the potential merits of ongoing investigations and protecting themselves against incriminatory public statements about these same matters.
Former media executive pleads guilty to bribing UN official
A Chinese-born naturalized U.S. citizen reportedly pleaded guilty this week to violations of the FCPA related to a scheme to bribe the UN General Assembly’s former president. The citizen is a former executive of a media group that focused on promoting UN development goals, but she was accused of paying the bribe to secure diplomatic postings. She pleaded guilty this week in the SDNY to three counts, including violating and conspiring to violate the FCPA, as well as income tax fraud.
The charges relate to her payment of $500,000 to the former president in April 2013 in exchange for receiving a diplomatic posting within the government of Antigua, where the former president previously served as a UN representative. She is just the most recent in a line of other individuals who have faced FCPA repercussions for bribes paid to the former president (who died in 2016), including a Chinese real estate businessman, who was found guilty of paying the fromer president and another individual bribes worth at least $1 million, and a former head of a New York-based foundation who also pleaded guilty to paying the former president bribes in excess of $800,000. As part of the citizen's plea, she admitted that she had failed to report approximately $2 million in income to the IRS.
This guilty plea illustrates how prosecutors are able to unwind even complex bribery schemes by methodically targeting individual participants. The criminal charges against her were likely bolstered by the string of preceding bribery cases involving similar payments to the former president that likewise resulted in a guilty pleas and verdicts.
Court denies national bank’s motion to dismiss FDIC action seeking deposit insurance payments
On April 4, the U.S. District Court for the District of Columbia denied a national bank’s motion to dismiss or strike an FDIC complaint seeking $1.12 billion in deposit insurance payments. In January 2017, the FDIC filed a complaint against the national bank for $542 million based on the bank’s alleged failure to pay sufficient mandatory assessments under the Federal Deposit Insurance Act (FDIA) for the second quarter of 2013 through the fourth quarter of 2014. In April 2017, the FDIC filed an amended complaint to add a claim of unjust enrichment and allege that the national bank owes an additional $583 million for underpayments predating the second quarter of 2013. In denying the bank’s motion, the court concluded that (i) the FDIC could plead alternative theories of liability at this stage and therefore could allege a claim for unjust enrichment even when an adequate legal remedy is available under the FDIA; (ii) the FDIC adequately pleaded a claim for unjust enrichment; and (iii) it was premature to determine if the FDIC’s FDIA and unjust enrichment claims are time-barred.
State judge says Massachusetts can sue credit reporting agency over data breach
On April 2, a state court judge denied a credit reporting agency’s motion to dismiss claims for violations of state data security regulations. The court stated that while the “mere existence of data breach” does not translate into violations of the state data security regulations, the Massachusetts Attorney General plausibly suggests that the company violated such regulations by knowing of certain vulnerabilities and failing to properly address them. As previously covered by InfoBytes, Massachusetts was the first state to file an action against the credit reporting agency after its September 2017 announcement of a data breach which affected over 143 million consumers.