Consumer Financial Services Watch – Page 8 – News and developments related to consumer financial services, litigation, and enforcement.

Upcoming Amendments to Bankruptcy Rule 3002 to Impact Bankruptcy Filing Practices for Mortgagees

Aug 09 2017

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

Effective December 1, 2017, certain amendments to the Federal Rules of Bankruptcy Procedure (“the Bankruptcy Rules”) recently adopted by the Supreme Court will impact the allowance of secured claims in bankruptcy. Below, we focus on the amendments to Bankruptcy Rule 3002, which will serve to:

Clarify that Rule 3002 applies to secured claims in cases pending under chapters 7, 12, or 13 of the Bankruptcy Code.

Shorten the deadline for filing proofs of claim to seventy (70) days after the bankruptcy filing.

To read the full alert, click here.

CFPB Promulgates, House Seeks to Repeal, Final Arbitration Agreements Rule

Aug 02 2017

By Andrew Glass and Roger Smerage

Recently, the Consumer Financial Protection Bureau (CFPB) promulgated its final arbitration agreement rule. The rule comes more than 11,000 comments, 13 months, and one change in presidential administration after the CFPB issued its proposed rule in May 2016. (K&L Gates previously reported on the issuance of the proposed rule here.) Yet despite its long history, Congress began taking steps to repeal the rule almost immediately.

District Court Set to Rule on Cross Motions for Summary Judgment in First Amendment Challenge to TCPA

Jul 28 2017

By Andrew C. Glass, Gregory N. Blase, Christopher J. Valente, Michael R. Creta, and Natasha C. Pereira

Last week, a bi-partisan coalition of political groups and the federal government completed briefing cross motions for summary judgment in American Association of Political Consultants, Inc., et al. v. Sessions, Case No. 5:16-cv-00252-D (E.D.N.C.). The case challenges the constitutionality of a portion of the Telephone Consumer Protection Act (“TCPA”). The plaintiffs contend that the TCPA’s prohibition on making auto-dialed calls or texts to cell phones without the requisite consent, 47 U.S.C. § 227(b)(1)(A)(iii) (the “cell phone ban”), imposes a content-based restriction on speech that fails to pass strict scrutiny and is unconstitutionally under-inclusive (the plaintiffs’ complaint is discussed here). The government is defending the statute’s constitutionality (previously discussed here).

District Court Gives CFPB Rare Loss on the Merits by Granting Summary Judgment on Respa Section 8 Claims

Jul 20 2017

By David D. Christensen and Matthew N. Lowe

In a win for real estate settlement service providers, another federal court has rebuffed the Consumer Financial Protection Bureau’s (“CFPB”) aggressive interpretation and enforcement of Section 8 of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617 (“RESPA”). Specifically, in Consumer Financial Protection Bureau v. Borders & Borders, PLC, the District Court for the Western District of Kentucky recently granted the defendants’ summary judgment motion and dismissed the CFPB’s RESPA Section 8(a) claims. See 2017 WL 2989183 (W.D. Ky. July 13, 2017).

CFPB Director Informs Consumer Advisory Board That Bureau Will Not Shy Away from Issuing Debt Collection Proposed Rule

Jun 15 2017

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

In prepared remarks delivered to the Consumer Advisory Board on Thursday, June 8, 2017, Consumer Financial Protection Bureau Director Richard Cordray explained that the CFPB is moving forward with its long-anticipated debt collection rules. K&L Gates previously chronicled the CFPB’s efforts to promulgate debt collection rules here, here, and here.

The Director emphasized his view that new debt collection rules are necessary because of the age of the Fair Debt Collection Practices Act—enacted in 1977—and the statute’s inability to fit modern methods of communication. According to the Director, the forthcoming rules would benefit consumers and industry participants by clarifying what constitutes unfair collection practices. Substantively, the Director focused on the portion of the CFPB’s July 2016 outline aimed at ensuring that debt collectors possess correct information about debts they are seeking to collect and consumers who owe those debts. In a notable shift, the Director indicated that the CFPB is prepared to issue a single set of debt collection rules relating to the gathering of information by and transfer of information between first-party creditors and third-party debt collectors. Acknowledging that the shift will require the CFPB to take some additional time to iron out “intertwined issues,” the Director suggested that the CFPB will try to fast-track other aspects of its proposed rulemaking, including the information third-party debt collectors must disclose to consumers and the manner in which third-party debt collectors interact with consumers.

K&L Gates will continue to monitor and report on further developments.

Regulation CC Amendments Reallocate Risks of Remote Deposit

Jun 14 2017

By: John ReVeal

More than three years after proposing amendments to Regulation CC to add new indemnities for remotely deposited checks, new warranties for electronic checks and electronic returned checks, and new indemnities for electronically created items, the Federal Reserve has at last issued final rules. These new rules also modify the expeditious return rules, including by making electronic returned checks subject to those requirements. The final rules were issued on May 31, 2017, and will take effect on July 1, 2018.

To read the full alert, click here.

No Class Conflict in Data Breach Settlement Involving Class Members With and Without Economic Injury

Jun 01 2017

By Andrew Glass, Matthew Lowe, and Brandon Dillman

On remand from the Eighth Circuit,[1] the United States District Court for the District of Minnesota recently recertified a data breach settlement class over an objector’s assertion of an intraclass conflict. Specifically, the objector asserted that a conflict existed between class members who purportedly had suffered loss and were guaranteed a payout under the proposed settlement, and those who had not suffered loss and were not guaranteed a payout. See In re Target Customer Data Security Breach Litig., No. 14-2522 (PAM), 2017 WL 2178306 (D. Minn. May 17, 2017). In rejecting the objector’s alleged conflict, the Court emphasized that “the question is not whether there is any potential or theoretical conflict among class members, it is whether class members’ different interests are antagonistic to each other.” Id. at *3.

Financial Choice Act Moves to the House Floor

May 31 2017

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

On May 4, the House Financial Services Committee (“HFSC”) concluded its three-day markup of H.R.10, the Financial Choice Act (“FCA”), a bill to reform the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The HFSC reported the bill favorably to the full House by a vote of 34-26. All 19 Democratic amendments were rejected on party-line votes. Republicans did not offer any amendments but focused their efforts on raising concerns about the extent to which Dodd-Frank has stifled economic growth and put taxpayer money at risk. Committee members debated a number of the more controversial provisions of the FCA, including Title VII to restructure the Consumer Financial Protection Bureau (“CFPB”) and remove its unfair, deceptive, or abusive acts or practices (“UDAAP”) authority; Section 841 to repeal the Department of Labor’s conflict of interest-fiduciary duty rule; Section 111 to repeal the Federal Deposit Insurance Corporation’s (“FDIC”) Orderly Liquidation Authority; Title IX to repeal the Volcker Rule; and numerous reforms to the Securities and Exchange Commission’s (“SEC”) shareholder proxy voting rules.

To read the full alert, click here.

Balancing Act: Supreme Court Rules That Filing a Proof of Claim for Stale Debt Does Not Violate the Fair Debt Collection Practices Act

May 25 2017

By: Phoebe S. Winder, Andrew C. Glass, Gregory N. Blase, Sean R. Higgins, David A. Mawhinney, Theresa A. Roozen, and Brandon R. Dillman

The U.S. Supreme Court has held that the filing of a proof of claim in bankruptcy proceedings with respect to time-barred debt is not a “false, deceptive, misleading, unfair, or unconscionable” act within the meaning of the Fair Debt Collection Practices Act (“FDCPA”) when there continues to be a right to repayment after the expiration of the limitations period under applicable state law. The Court’s decision in Midland Funding, LLC v. Johnson [1] resolved a split among the federal courts of appeal about the application of the FDCPA to proofs of claim in bankruptcy proceedings. While the decision is favorable for creditors, applicable state law (Alabama, in this case) played a key role in the Court’s conclusion that the creditor held a “claim” under the Bankruptcy Code. Creditors must be aware of and review the relevant state law in the jurisdiction of collection to determine whether the filing of a proof of claim could be deemed false, deceptive, or misleading.

To read the full alert, click here.

FDIC Economic Inclusion Summit A Good Reminder of Fair and Responsible Banking Practices

Apr 27 2017

By Soyong Cho

Yesterday, the FDIC hosted a day-long Economic Inclusion Summit that brought together stakeholders in private industry, the government, and non-profit organizations to discuss strategies to expand credit to under-served communities. Speakers stressed the need to understand the personal and financial challenges facing low- and moderate-income (“LMI”) populations in order to more effectively design products and marketing channels to reach LMI communities. Leveraging big data and technology were identified as key factors to reducing costs and profitably serving LMI customers.

Banks are of course rated on their outreach initiatives to under-served communities under the Community Reinvestment Act (“CRA”), but profitably expanding their customer base is also good business. The FDIC’s Summit serves as a reminder of the established programs, partnerships, and networks that exist to assist banks to meet their CRA obligations. However, it is also a good reminder that banks must be sensitive to the regulatory compliance and other risks attendant with marketing to and servicing LMI communities in particular, as even the best intentions can be undermined by flawed implementation or unclear regulatory guidance. Among others, UDAAP, fair lending, and privacy issues should be considered in all phases of product development and delivery. In the coming months, K&L Gates will be hosting a series of webinars focused on the nuts and bolts of consumer protection compliance.