2016 – Page 5 – Consumer Financial Services Watch

The OCC’s Request for Comments and Discussion on the Future of Fintech Regulation

May 16 2016

By Charles P. Carter and Anthony (Tony) Yerry

U.S.-based digital banking startups have raised more than $10 billion since 2010, and investment in financial technology (“fintech”) companies has surpassed $24 billion worldwide. These firms are attempting to disrupt the banking value chain by providing services such as lending, bill payment, wealth management, and mobile banking. The significant federal and state regulation of these services create an obstacle for these fintech companies that technology companies in other vertical markets, such as social, internet infrastructure, and enterprise technology, do not face. It is critical for these companies, at the earliest stages of development, to understand how and when to engage with regulators and to build a culture of compliance, and it is critical for regulators to listen and adapt to the complaint from traditional banks and startups that the current regulatory framework stifles innovation and is unable to provide oversight for new forms of finance and banking.

To read the full alert, click here.

Treasury releases white paper on marketplace lending

May 16 2016

By Sean P. Mahoney

On May 10, 2016, the US Treasury issued its much anticipated white paper on marketplace lending. The whitepaper follows Treasury’s July 2015 request for information. The white paper highlighted some keys risks and made six concrete recommendations for future action.

CFPB’s Proposed Rule Would Put the Brakes on Pre-Dispute Arbitration Clauses in Consumer Financial Contracts

May 12 2016

By Andrew C. Glass, Robert W. Sparkes, III, Roger L. Smerage, Joshua Butera

Congress enacted the Federal Arbitration Act (“FAA”) in the 1920s to deter hostility toward arbitration. Despite numerous Supreme Court rulings over the decades upholding that goal, arbitration continues to face hostility. The Consumer Financial Protection Bureau (“CFPB”), for example, recently issued a proposed rule that would significantly expand the scope of the Dodd-Frank Act’s restrictions on arbitration agreements. The rule would severely restrict the use of pre-dispute arbitration clauses by providers of consumer products and services, primarily by prohibiting the use of class action waivers. And under the proposed rule, the CFPB would exercise close scrutiny over arbitration proceedings by requiring consumer financial services providers to report certain information about arbitrations to the CFPB.

To read the full alert, click here.

“Take Me Out to the Ballgame?” Asked the Inspector: Saying “Yes” May Now Be a Federal Crime

May 12 2016

By Barry M. Hartman, Michael D. Ricciuti, Jasmine S. McGhee, Brian J. Smith

Imagine this hypothetical: A local fire marshal says to Mary Jones, who runs the residence halls at a major university, “It must be nice having seats at the Saturday football games.” Mary gets the message and thinks that if she agrees to offer the fire marshal tickets, he will be less likely to “nitpick” during his inspections of the residence halls. Could the government claim that this is a bribe by Mary within the meaning of the Hobbs Act’s proscription against “extortion” by public officials?

On May 2, in Ocasio v. United States, the U.S. Supreme Court broadened the reach of federal corruption law to cover private individuals who are involved in extortion conspiracies with government officials and held that anyone — even the bribe payor — who has conspired to engage in extortion can be charged for violation of the Hobbs Act, the federal statute that federal prosecutors use to indict state officials who solicit and take bribes, and can be convicted of conspiracy. In doing so, the Supreme Court has given federal prosecutors a new, and potent, weapon.

To read the full alert, click here.

The New Jersey Truth-In-Consumer Contract Warranty and Notice Act: What You Need to Know About “TCCWNA” and the Rise in Consumer Class Actions

May 10 2016

By Loly Garcia Tor, Patrick J. Perrone

Businesses with consumer products should be aware of the rise in class action filings based on the New Jersey Truth-In-Consumer Contract Warranty and Notice Act (“TCCWNA”). Although the statute has been in place since 1981, it was relatively dormant for decades and only recently became a favorite of plaintiffs’ attorneys. In the past five months, more than a dozen putative class actions have been filed based on alleged TCCWNA violations in the District of New Jersey alone. [1] This alert provides an overview of key points of which businesses should be aware.

To read the full alert, click here.

More To Know About “Know Before You Owe”: CFPB Acknowledges TRID Challenges and Announces July 2016 Notice of Proposed Rulemaking

May 10 2016

By Jennifer Janeira Nagle and Hollee Watson

The TILA-RESPA Integrated Disclosure rule (“TRID”) went into effect on October 3, 2015, and has posed significant implementation challenges industry-wide. Those challenges have been articulated to the Consumer Financial Protection Bureau (“CFPB”) by industry participants, trade groups, and congressional leaders alike. In response, the CFPB has issued guidance in the form of letters, webinars, educational videos, guides, and factsheets. Notwithstanding this informal guidance, and despite the CFPB’s assurances that its initial compliance examinations would be “diagnostic and corrective, not punitive,” see December 29, 2015 Letter from CFPB Director Richard Cordray to the Mortgage Bankers Association, the mortgage industry continues to experience uncertainty and risk in its efforts to implement TRID’s sweeping changes to TILA and RESPA. See January 29, 2016 Mortgage Industry Trade Group Letter to CFPB; March 11, 2016 Sen. Bob Corker Letter to CFPB.

In the wake of pressure for more formal guidance, the CFPB recently announced that it will issue a Notice of Proposed Rulemaking (“NPRM”) on TRID in late July. In an April 28, 2016 letter to mortgage industry trade groups, Director Richard Cordray acknowledged that “the implementation of the Know Before You Owe rule poses many operational challenges” and that “there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”

Not Starry-Eyed: Massachusetts Imposes Rigorous Standard on Fair Housing Disparate Impact Claims in Burbank Apartments

May 02 2016

By Andrew C. Glass, Paul F. Hancock, Olivia Kelman and Joshua Butera

The Massachusetts Supreme Judicial Court (“SJC”) recently answered the question of whether the Massachusetts anti-discrimination statute Chapter 151B recognizes a disparate impact theory of discrimination. In Burbank Apartments Tenant Association v. Kargman, the SJC held that Chapter 151B recognizes such a theory. In doing so, however, the SJC adopted the framework from the U.S. Supreme Court’s decision in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc., and held that in pleading a disparate impact claim under Chapter 151B, a plaintiff must satisfy a rigorous burden. Because the Burbank Apartments plaintiffs failed to meet the rigorous burden, the SJC affirmed the dismissal of their claims.

To read the full alert, click here.

“A Bridge Too Far:” CFPB’s Authority Grab Rejected by Federal Judge

Apr 22 2016

By Soyong Cho and Ted Kornobis

Judge cautions new agency against “plow[ing] head long” beyond its jurisdiction

On April 21, 2016, the Consumer Financial Protection Bureau’s investigatory powers and civil investigative demand (“CID”) authority were soundly checked by federal district court judge Richard J. Leon. The Court denied the CFPB’s petition to enforce a CID issued to the Accrediting Council for Independent Colleges and Schools (“ACICS”) seeking information regarding accreditation of for-profit colleges, because the subject of the CID fell squarely outside of the CFPB’s enforcement authority. [1] Judge Leon’s ruling demonstrates that the right to judicial review can provide a backstop to an overly-aggressive and broad investigation.

Untangling the Webb of Arbitrability: The Fourth Circuit Holds That Courts Determine the Availability of Class-Wide Arbitration

Apr 18 2016

By Andrew C. Glass, Robert W. Sparkes III, Loly G. Tor and Eric W. Lee

Is the availability of class-wide arbitration a “gateway” question for courts, or are arbitrators charged with such a decision once a matter is compelled to them? In Dell Webb Communities, Inc. v. Carlson, the Fourth Circuit Court of Appeals followed the lead of the Third and Sixth Circuits and held that courts — not arbitrators — should ordinarily make the decision. The Fourth Circuit’s decision should be welcome news to corporate defendants seeking to enforce individual (“bilateral”) arbitration agreements while preserving the ability to obtain meaningful appellate review of a determination allowing class-wide arbitration.

To read the full alert, click here.

Buy One, Get One Free: Appellate Court Strikes Deal to Permit Defendant’s Second Attempt at Removing Class Action Beyond Initial Thirty-Day Removal Window

Apr 18 2016

By Ryan M. Tosi

Addressing an issue of first impression, the Sixth Circuit Court of Appeals in Graiser v. Visionworks of America, Inc., recently upheld a defendant’s second attempt at removing a class action to federal court under the Class Action Fairness Act (“CAFA”), long after the thirty-day removal deadline applicable to traditional diversity jurisdiction expired. The Grasier decision confirms that the defendant does not have a duty to perform any significant investigation of facts relevant to federal jurisdiction independent of the information received from the plaintiff, and that the thirty-day removal period set forth in 28 U.S.C. § 1446(b) applies only after the plaintiff’s pleadings or documents provide the defendant with a clear statement of the damages sought or with sufficient facts from which damages can be readily calculated. As such, a defendant may remove a case under CAFA even if the initial thirty-day removal window has closed where that defendant later receives a document from the plaintiff from which it could be first ascertained that the case was removable under CAFA, thereby providing the defendant with “a new window for removability.”

To read the full alert, click here.

Archive:2016