Consumer Financial Services Watch – Page 6 – News and developments related to consumer financial services, litigation, and enforcement.

Back from the Dead: The D.C. Circuit Breaths Life Into RESPA Section 8 Safe Harbor

Feb 05 2018

By Brian M. Forbes, David D. Christensen and Matthew N. Lowe

Through its recent en banc decision in PHH Corp. v. Consumer Financial Protection Bureau, the D.C. Circuit reinstated the holding of the three-judge panel regarding the safe harbor provision in Section 8(c) of the Real Estate Settlement Procedures Act (RESPA). Specifically, the court reaffirmed that under Section 8(c), payments made by one settlement service provider to another do not violate Section 8(a), even if made in connection with a captive relationship or a referral, when the payments are reasonably related to the market value of the goods, services, or facilities provided. Although potentially overshadowed by the portion of the en banc court’s holding that the leadership structure of the Consumer Financial Protection Bureau (CFPB) is constitutional, the panel court’s reinstated holding regarding RESPA’s Section 8(c) safe harbor is notable and important for the simple confirmation that the safe harbor “is what it is.”

To read the full alert, click here.

A First in the Second (Circuit): On Remand, District Court Breaks New Ground by Vacating Arbitrator’s Class Certification Award

Feb 01 2018

By Andrew C. Glass, Robert W. Sparkes, III, Roger L. Smerage, and Elma Delic

In what appears to be a first-of-its-kind ruling, the District Court for the Southern District of New York recently concluded that a federal district court has the authority to vacate an arbitrator’s class certification award based on the due process rights of absent class members. That this potentially ground-breaking decision arose from the long-standing litigation in Jock v. Sterling Jewelers, Inc. is no surprise. Over the course of a decade in Jock, the district court and the Second Circuit Court of Appeals have rendered multiple decisions addressing the proper role of a court in reviewing an arbitrator’s authority to determine whether parties have agreed to class arbitration. In the latest decision, the district court became the first court to apply Justice Alito’s concurrence in Oxford Health Plans LLC v. Sutter to strike down an arbitrator’s ruling. The Jock court determined that, absent an express class arbitration provision in each putative class member’s arbitration agreement, an arbitrator does not have the authority to bind absent class members to a class judgment—even if they signed the same form of arbitration agreement as the named plaintiffs. As discussed below, this novel decision could have significant implications.

To read the full alert, click here.

Cryptocurrency 2018: When The Law Catches Up With Game-Changing Technology

Jan 31 2018

By: David E. Fialkow, Edward J. Mikolinski, Jack S. Brodsky

Blockchain technology and the virtual currency, or cryptocurrency, that uses this technology are revolutionizing the way businesses function and deliver goods and services. Even as cryptocurrency becomes a widely debated topic, gaining the critical attention of regulators and policymakers, individuals and businesses are investing billions of dollars in cryptocurrency annually.

To understand how blockchain and cryptocurrency may impact you, your business, and your industry, it is important to understand what cryptocurrency is and how the underlying blockchain works. This article provides a brief introduction to these concepts as well as a primer on cryptocurrency legal issues.

Ninth Circuit Clarifies Amount in Controversy Standard Where Borrower Seeks Only “Temporary” Foreclosure Stay Pending Loan Modification Review

Jan 22 2018

By David D. Christensen and Matthew N. Lowe

The Ninth Circuit recently limited the availability of diversity jurisdiction for certain cases with claims involving mortgage loan modifications. Specifically, in Corral v. Select Portfolio Servicing, Inc., the Ninth Circuit held that, where the plaintiff-borrower “seeks only a temporary stay of foreclosure pending review of a loan modification application … the value of the property or amount of indebtedness are not the amounts in controversy.” — F.3d —-, 2017 WL 6601872, at *1 (9th Cir. Dec. 27, 2017). Rather, to satisfy the amount in controversy requirement in such cases, parties must demonstrate that the value of the temporary delay in foreclosure exceeds $75,000, “such as the transactional costs to the lender of delaying foreclosure or a fair rental value of the property during pendency of the injunction” (in addition to any compensatory damages plaintiffs may be seeking). Id. at *5.

Payday Loan Rule To Be Officially Reconsidered

Jan 17 2018

By Jennifer Janeira Nagle and Robert W. Sparkes

As we noted yesterday morning, January 16, 2018 officially marked the effective date of the Consumer Financial Protection Bureau’s Payday Rule (see here).

Payday Loan Rule Is Officially A Go—Or Is It?

Jan 16 2018

By Jennifer Janeira Nagle and Robert W. Sparkes III

Today, January 16, 2018, officially marks the effective date of the Consumer Financial Protection Bureau’s final rule targeting what it refers to as “payday debt traps” (the “Rule”). As outlined in our previous publications (found here and here), the Rule marks a significant change in the landscape for lenders offering short-term loans or longer-term loans with balloon payments, including payday and vehicle title loans. Looming large is the new requirement that lenders determine a borrower’s ability to repay prior to originating covered loans.

Standing to Sue under the Fair and Accurate Credit Transactions Act after Spokeo

Jan 12 2018

By: Andrew C. Glass, Gregory N. Blase, and Roger L. Smerage

After paying for groceries with a credit card or debit card, the clerk hands the receipt to the customer. In addition to the last four digits of the card number, it contains the first digit. Or perhaps it contains the first six digits. Or maybe the expiration date. Is this a concrete injury that provides the customer standing to sue the grocery store?

That is the question federal courts have grappled with since the Supreme Court decided Spokeo, Inc. v. Robins[1] in May 2016. The Fair and Accurate Credit Transactions Act (“FACTA”)[2] regulates retailers’ conduct in printing card number information on customers’ receipts and provides a private right of action for alleged violations. But, as discussed below, a customer may not have standing to sue in federal court or even in certain state courts just because a violation may have occurred.

Dodd-Frank Reform Efforts Intensify

Nov 22 2017

By Daniel F. C. Crowley, Bruce J. Heiman, William A. Kirk, Karishma Shah Page, Eric A. Love, Dean A. Brazier

On November 16, Senate Banking Committee (“SBC”) Chairman Mike Crapo (R-ID) introduced S. 2155, the “Economic Growth, Regulatory Relief and Consumer Protection Act,” long-awaited Senate legislation designed to foster economic growth and reduce regulatory burdens for small- and medium-sized financial institutions. A SBC section-by-section summary of the bill is available here. Earlier this year, the House passed on a party-line vote H.R. 10, the “Financial CHOICE Act of 2017” (the “FCA”), House Financial Services Committee Chairman Jeb Hensarling’s (R-TX) bill to comprehensively reform the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). S. 2155 is narrower in scope than the House bill and has to date garnered the support of nine Democratic Senators.

Supreme Court Again Declines to Review Ruling That Courts Determine Availability of Classwide Arbitration

Nov 13 2017

By Andrew C. Glass, Robert W. Sparkes III, Roger L. Smerage, Elma Delic

The United States Supreme Court recently declined to review a ruling that courts, not arbitrators, determine the availability of classwide arbitration. Previous attempts by putative collective or class representatives to obtain certiorari on the issue were unsuccessful. See, e.g., Opalinski v. Robert Half International Inc., 61 F.3d 326, 330-35 (3d Cir. 2014) (“Opalinski I”) (For K&L Gates’ coverage on the denials of the prior petitions see here and here). The Court’s most recent decision in Opalinski v. Robert Half International Inc. suggests that the Court still does not perceive sufficient disagreement, if any, among the federal courts of appeals on the issue. 677 F. App’x 738, 740 (3d Cir. 2017) (“Opalinski II”). As a result, the trend continues that the availability of classwide arbitration is a gateway issue for the courts.

President Signs Congressional Resolution Overturning CFPB Arbitration Rule

Nov 03 2017

By Andrew C. Glass, Robert W. Sparkes III, Roger L. Smerage, Elma Delic

The President signed this week the congressional joint resolution nullifying the Consumer Financial Protection Bureau (“CFPB”) arbitration agreements rule. Following adoption by the House, the Senate, in a 50-50 split with the Vice President breaking the tie, voted last week to approve the resolution (noted in a previous post here). The CFPB can only reinstate the rule, or one that is similar, if Congress expressly authorizes it to do so in subsequent legislation.