November 2014 – Consumer Financial Services Watch

A K&L Gates and Paybefore Webinar: 870 Pages in 90 Minutes: What the CFPB’s Prepaid Proposal Means for Your Business

Nov 25 2014

4 December 2014
2:00 p.m. – 3:30 p.m. ET
Complimentary Webinar

The payments industry is only starting to digest the potential consequences of the CFPB’s sweeping proposed rule on prepaid accounts.

On December 4, 2014, at 2:00 p.m. ET, K&L Gates and Paybefore will present a complimentary webinar for the Paybefore community and clients and friends of K&L Gates on the proposed rules. The focus will be on the practical impact the rules will have on prepaid accounts, and what they may mean to prepaid issuers, program managers and processors. The goal will be to give listeners information and tools to evaluate how the rule will impact their business—and provide practical advice on how to address concerns about the rule with the CFPB.

CFPB Issues Guidance to Mortgage Lenders on Verifying Disability Income

Nov 20 2014

By: Melanie Brody, Stephanie C. Robinson, Jay M. Willis

On Tuesday, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) issued a compliance bulletin, CFPB Bulletin 2014-03, to help lenders avoid discrimination against recipients of Social Security Administration (“SSA”) disability income in violation of the Equal Credit Opportunity Act and its implementing regulation, Regulation B.

Creditors may occasionally feel stuck between a rock and a hard place when underwriting mortgage loans for disability income recipients. On the one hand, creditors have a legal obligation to ensure that applicants are able to repay any credit extended. When an applicant receives public assistance, Regulation B expressly allows creditors to consider the length of time that such assistance is likely to continue. On the other hand, while SSA provides recipients with disability benefits documentation, that documentation generally does not detail how long benefits will last. Creditors seeking to responsibly underwrite mortgage loans must somehow make that determination on their own.

Non-Direct Auto Lending: Is the CFPB Asserting Jurisdiction over the Capital Markets?

Nov 18 2014

By: Laurence E. Platt

The capital markets should look closely at the proposed rule of the Consumer Financial Protection Bureau (the “CFPB”) to supervise certain larger non-bank automobile finance companies because of the CFPB’s assertion of broad authority over large purchasers of auto loans and auto leases. The CFPB’s interest in indirect auto lending is not new. The proposed rule, however, purports to give the CFPB jurisdiction over any large purchaser of auto loans and auto leases, regardless of whether the purchaser had any direct involvement with the lender or reasonably could be construed to be the indirect originator. In its defense, the CFPB would stop its jurisdiction at the door of securitization, but any purchases up to that point may be fair game. The logic underlying this position could be extended by the CFPB to mortgages, credit cards, and virtually any other type of consumer product or service. Interested parties may want to comment by the December 8, 2014 due date.

To read the full alert, click here.

Another CFPB Loan Originator Compensation Enforcement Action

Nov 17 2014

By: Kris D. Kully

The Consumer Financial Protection Bureau (CFPB) has once again charged a mortgage lender with paying compensation to loan originators based on loan terms, which is prohibited under the Truth in Lending Act and its Regulation Z. This week, the CFPB asked a federal court to approve an order requiring Franklin Loan Corporation (which lends in California and Illinois) to pay $730,000 for allegedly paying loan originators quarterly bonuses based on loan terms.

A Cure for What Ails You – Or At Least One Thing That Does: CFPB’s Cure for “Points and Fees” Mistakes

Nov 17 2014

By: Kris D. Kully

In a recent amendment to Regulation Z, the CFPB offers a tonic to mortgage lenders and their assignees that have struggled with the “points and fees” calculation for Qualified Mortgages (QMs). The CFPB’s cure allows lenders or assignees of covered loans to reestablish the QM status of a loan for which the amount of points and fees inadvertently exceeds the thresholds set by the CFPB’s Ability to Repay/QM Rule. The cure is available for loans consummated on and after November 3, 2014, but it expires January 10, 2021.

To read the full alert, click here.

Eleventh Circuit Bolsters FCC Interpretation of “Prior Express Consent” under the TCPA

Nov 14 2014

By: Gregory N. Blase, Andrew C. Glass, Samantha A. Miko

The U.S. Court of Appeals for the Eleventh Circuit recently bolstered the Federal Communications Commission’s (“FCC”) interpretation of “prior express consent,” a key term under the Telephone Consumer Protection Act (“TCPA”).

In Mais v. Gulf Coast Collection Bureau, Inc., the plaintiff’s wife provided the plaintiff’s cellphone number on a hospital admittance form. The form disclosed that any information supplied could be shared with the hospital’s affiliates and used for any purpose, including for billing. After the plaintiff failed to pay a hospital affiliate’s invoice for treatment services rendered, the affiliate provided the plaintiff’s contact information to the defendant, which initiated collection activity, including contacting the plaintiff at the cellphone number that was provided on his admittance form by his wife. Read More

A Hard Rain Has Started to Fall A Product-by-Product Review of the CFPB’S First 60 Enforcement Actions

Nov 12 2014

By: Jon Eisenberg

Between July 17, 2012 and October 9, 2014, the Consumer Financial Protection Bureau brought 60 enforcement actions. According to our unofficial tally, they resulted in settlements requiring the payment of $2.2 billion in restitution, $174 million in CFPB civil money penalties, and, in a few cases, other forms of consumer relief. In this alert, we discuss the products and alleged practices that led to those recoveries. Our purpose is simple—what’s past is likely prologue when it comes to CFPB enforcement actions. Understanding the conduct that produced the first 60 enforcement actions will help companies avoid becoming one of the next 60 enforcement actions.

To read the full alert, click here.

FinCEN Acknowledges the Problem, But a Solution Will Require More

Nov 12 2014

By: David L. Beam

Money services businesses (“MSBs”) have been losing access to banking services. Increased scrutiny by bank regulators of MSB relationships have led banks to conclude that providing services to MSBs carries increased compliance and reputational risk. Even if these risks can be managed in theory through appropriate due diligence and controls, many banks have decided that costs and risks of offering banking services to MSBs outweigh the revenue that they generate. Read More

The First Circuit Clarifies That A Defendant’s Deadline to Remove is Principally Influenced by the Actions of the Plaintiff

Nov 12 2014

By: Robert W. Sparkes, III, Brian M. Forbes

The first questions any defendant served with a complaint filed in state court should consider are whether removal of the action to federal court is preferable and, assuming the action is removable, when must a notice of removal be filed. The “when” question continues to be a source of debate as federal courts across the country grapple with issues pertaining to (1) the triggering of the removal clocks under federal law and (2) the duty of a defendant to investigate the removability of an action. Joining other federal circuit courts of appeal to have addressed these issues, on October 24, 2014, the First Circuit Court of Appeals provided its answers in Romulus v. CVS Pharmacy, Inc. And, it may come as a surprise to some, the answers are largely dependent on the actions taken by the plaintiff.

To read the full alert, click here.

FCC Order Confirms that TCPA Regulations Require Opt-Out Notice on All Fax Advertisements, Even Those Sent with Prior Express Permission

Nov 10 2014

By: Joseph C. Wylie II, Molly K. McGinley, Nicole C. Mueller

On October 30, 2014, the Federal Communications Commission (“FCC”) released an Order that “confirms” that opt-out notices complying with rules and regulations adopted by the FCC in 2006, pursuant to the authority granted to the FCC under the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005, are required on all advertisements transmitted by facsimile, including advertisements transmitted with the prior express permission of the recipient. The FCC also granted retroactive waivers to parties that were reasonably uncertain about whether the opt-out notice requirement applied to faxes sent with prior express permission from the recipient. The FCC further stated that individual retroactive waivers may be extended to similarly situated parties that seek waiver requests prior to April 30, 2015.

To read the full alert, click here.

Archive:November 2014