2016 – Page 4 – Consumer Financial Services Watch

The Financial CHOICE Act; Legislative Text Revealed

Jun 28 2016

By Daniel F. C. Crowley, Bruce J. Heiman, William A. Kirk, Karishma Shah Page, Mark A. Roszak and Eric A. Love

On June 23, 2016, House Financial Services Committee Chairman Jeb Hensarling (R-TX) released as a “discussion draft” legislative text of the Financial CHOICE Act (“FCA”), a proposal to reform the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).

Importantly, the FCA is more than just another Dodd-Frank reform proposal; it is the culmination of several years of House Financial Services Committee activity. Many of its provisions enjoy bipartisan support at a time when Brexit focuses attention on global financial regulatory reform. Therefore, we anticipate that the bill is likely to be marked up before the election, and it could be a road map for post-election reform. In addition, some of its provisions could be enacted in year-end omnibus legislation.

To read the full alert, click here.

U.S. Supreme Court Declines to Consider Whether National Bank Act Preemption Extends to Purchasers of Debt Originated by National Banks

Jun 28 2016

By Andrew C. Glass and Roger L. Smerage

On Monday, the United States Supreme Court decided not to review whether National Bank Act preemption, which provides national banks with a safe harbor from state usury laws, extends to third-parties that purchase and collect debt originated by national banks. The decision to deny certiorari in Midland Funding, LLC v. Madden, No. 15-610 (U.S. Nov. 10, 2015) (“Madden”), leaves intact a May 2015 decision of the Court of Appeals for the Second Circuit. The Second Circuit had ruled that National Bank Act preemption only applies to purchasers of national-bank-originated debt where the purchaser is a subsidiary or agent of, or is otherwise acting on behalf of, a national bank. (The K&L Gates alert regarding the Second Circuit decision can be found here.)

It’s Time For An Upgrade — Outdated Technology Puts Mortgages Servicers At Risk For Increased CFPB Scrutiny and Potential Servicing Violations

Jun 27 2016

By Brian M. Forbes, Soyong Cho, and Hollee M. Watson

More than two years have passed since the Consumer Financial Protection Bureau (“CFPB”) implemented comprehensive amendments to the loan servicing provisions of Regulation X. Mortgage servicers have had to invest in technology and human capital to keep up with new regulatory requirements while saddled with expanded duties to respond to borrower inquires, disputes, and requests for information, in addition to new and extensive loss mitigation requirements. Outdated technology has put servicers at risk for increased enforcement and litigation issues. But, as the CFPB has noted, the problems are not “insurmountable.”

BREXIT Vote to Leave Expected to Lead to a Period of Uncertainty

Jun 24 2016

London – The UK’s historic vote to leave the European Union (EU) will have significant consequences throughout the UK, the EU, and in the global economy. The referendum vote is expected to lead to a high degree of uncertainty and disruption as businesses come to terms with the new normal of a post-Brexit environment. Businesses, governments, and regulatory bodies will need to take measures to adjust to the legal, financial, regulatory and technical ramifications of the referendum.

To fully prepare clients for the legal and business implications and potential disruption to their companies, K&L Gates LLP is directing clients and others to a suite of resources it has created to bridge any concerns brought on by the vote to leave.

U.S. District Court (Again) Rules that Parties Can Challenge a CFPB Information Request Without Revealing Their Identities

Jun 20 2016

By: Ted Kornobis

Last week, a federal court issued an opinion supporting the ability of an entity to file a court challenge to Consumer Financial Protection Bureau (“CFPB”) information requests without necessarily needing to “out” itself as a potential investigation target. Specifically, the court reaffirmed a prior ruling that recipients of a CFPB civil investigative demand (“CID”) who were potential targets of an enforcement action could challenge the CFPB’s attempt to take certain testimony by proceeding as “John Doe” plaintiffs in a federal injunctive action. The district court first allowed the plaintiffs to proceed pseudonymously late last year, and last week’s order denied the CFPB’s motion for reconsideration. A description of the case background and judge’s original decision may be found in our earlier post on this case.

Payday Loans Under Attack: The CFPB’s New Rule Could Dramatically Affect High-Cost, Short-Term Lending

Jun 06 2016

By Jennifer J. Nagle, Robert W. Sparkes, III, Gregory N. Blase, and Hayley Trahan-Liptak

On June 2, 2016, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) proposed a new rule under its authority to supervise and regulate certain payday, auto title, and other high-cost installment loans (the “Proposed Rule” or the “Rule”). These consumer loan products have been in the CFPB’s crosshairs for some time, and the Bureau formally announced that it was considering a rule proposal to end what it considers payday debt traps back in March 2015. Over a year later, and with input from stakeholders and other interested parties, the CFPB has now taken direct aim at these lending products by proposing stringent standards that may render short-term and longer-term, high-cost installment loans unworkable for consumers and lenders alike. At a minimum, the CFPB’s proposal seriously threatens the continued viability of a significant sector of the lending industry.

To read the full alert, click here.

Future of Fintech Regulations in the US

May 20 2016

By Charles Carter and Anthony (Tony) Yerry (ed. Cameron Abbott and Giles Whittaker)

Investment in financial technology (fintech) companies has surpassed US$24 billion worldwide since 2010, which consequently emphasises the importance of the relationship between fintech companies and regulators as they attempt to establish a culture of compliance while not stifling innovation.

As suggested by the industry experts according to The Wall Street Journal, the Office of the Comptroller of the Currency (OCC) may be the best federal agency to regulate fintech companies in the US. On March 31 the OCC during a speech at Harvard University on the innovation of the fintech industry released a white paper which attempts to launch formal discussions between regulators and the industry.

For more information and analysis of the OCC white paper please see K&L Gates’ e-alert here.

Take Notice of This Change: Supreme Court Adopts Recommended Amendments to Bankruptcy Notice of Payment Change Rule

May 20 2016

By Phoebe S. Winder, Ryan M. Tosi and David A. Mawhinney

Come December, the requirements surrounding notices of payment change (“PCNs”) for certain mortgage loans in bankruptcy will change. The Supreme Court, on April 28, 2016, adopted various proposed amendments to the Federal Rules of Bankruptcy Procedure, including amendments to the language of Rule 3002.1 aimed at clarifying when a secured creditor must file a payment change notice (“PCN”) in a Chapter 13 bankruptcy. Amended Rule 3002.1 will require secured creditors to file PCNs on all claims secured by the Chapter 13 debtor’s primary residence for which the debtor or Chapter 13 Trustee is making post-petition payments during the bankruptcy, without regard to whether the debtor is curing a pre-petition arrearage. The amendments to Rule 3002.1 further clarify that, absent a court order indicating otherwise, the obligation to file PCNs generally ceases once the creditor obtains relief from the automatic stay. The amendments take effect on December 1, 2016.

To read the full alert, click here.

CFPB Takes Aim at Marketplace Lenders

May 16 2016

By David Christensen

Last Fall, in its 2015 Rulemaking Agenda, the Consumer Financial Protection Bureau (“CFPB”) signaled its intent to “to develop rules to define larger participants in markets for consumer installment loans.”[1] Under the Dodd-Frank Act, the CFPB is authorized to issue “larger participant” rules to define entities in a particular market for consumer financial products or services. The issuance of such rules opens the door for supervisory and examination authority over such entities. Fast forward to Spring 2016, when the CFPB announced that it is accepting complaints from consumers regarding alleged problems with online marketplace loans, and it appears that the CFPB has marketplace lenders squarely in its sights.[2]

Supreme Court Vacates and Remands Ninth Circuit Decision on Article III Injury-in-Fact in Spokeo

May 16 2016

By Andrew C. Glass, Brian M. Forbes, Gregory N. Blase, Robert W. Sparkes III, and Roger L. Smerage

On Monday, the United States Supreme Court issued its long-awaited decision in Spokeo, Inc. v. Robins, — U.S. — (No. 13-1339). In rendering its decision, the Court reiterated that to establish Article III standing, a plaintiff must plead an injury-in-fact that is both particular to the plaintiff and concrete. The Court explained that whether a plaintiff has pleaded sufficient facts to allege a concrete injury requires more than just examining whether the plaintiff has pleaded that the defendant violated a federal statute. In particular, the Court held that “a bare procedural violation, divorced from any concrete harm,” does not suffice to “satisfy the injury-in-fact requirement of Article III.” Slip op. at 9-10. As such, the Spokeo plaintiff’s allegation that the defendant’s actions had violated the Fair Credit Reporting Act, 15 U.S.C. §§ 1681, et seq., would not, by itself, demonstrate a plausible injury-in-fact. Rather, “Article III standing requires a concrete injury even in the context of a statutory violation.” Slip op. at 9.

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