Consumer Financial Services Watch

News and developments related to consumer financial services, litigation, and enforcement.

 

1
Shedding Some Light: SCOTUS Grants Cert. in Lamps Plus to Answer Question on State-Law Contract Interpretation and Class Arbitration
2
The Door May Be Open, but the Ride Isn’t Free: Seventh Circuit Allows Data Breach Class Action to Survive Pleading Stage but Signals Tough Road Ahead for Plaintiffs
3
Massachusetts Supreme Judicial Court Holds Passive Debt Buyers Are Not Debt Collectors Under Massachusetts Law
4
Another Shot at the Target: CFPB Payday Loan Rule Faces New Challenge from Trade Groups
5
Risky Business: Whether an Increased Risk of Harm Supports Legal Standing in Data Breach Class Actions Continues to Divide Federal Courts of Appeals
6
Ninth Circuit Doubles Down on Lack of Standing under Spokeo in FACTA Cases
7
Dismissing FDCPA Lawsuit, Sixth Circuit Calls Out Congress for Creating Statutory Remedies Where No Harm Has Occurred
8
Ninth Circuit Ruling Rejects FACTA Suit under Spokeo, Avoiding Circuit Split
9
SAVED BY THE EN BANC: CFPB Appears Here To Stay
10
No Rubber Stamp: Ninth Circuit Reverses Certification of Nationwide Class Settlement Due to Failure to Account for Variations in State Law

Shedding Some Light: SCOTUS Grants Cert. in Lamps Plus to Answer Question on State-Law Contract Interpretation and Class Arbitration

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

In Stolt-Nielsen S.A. v. AnimalFeeds International Corp., [1] the U.S. Supreme Court held that “a party may not be compelled” under the Federal Arbitration Act (“FAA”) “to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” [2] The Stolt-Nielsen Court found that an agreement that is silent on the availability of class arbitration does not provide sufficient evidence that the parties intended to submit to class, as opposed to individual, arbitration. [3] The Court, however, left open the question of what level of specificity an agreement must contain to demonstrate the parties’ consent to submit a dispute to class arbitration. [4]

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The Door May Be Open, but the Ride Isn’t Free: Seventh Circuit Allows Data Breach Class Action to Survive Pleading Stage but Signals Tough Road Ahead for Plaintiffs

By Andrew C. Glass, David D. Christensen, and Matthew N. Lowe

In Dieffenbach v. Barnes & Noble, Inc.,[1] the Seventh Circuit allowed a data breach class action to survive the pleadings stage, including a challenge to the plaintiffs’ standing.  At the same time, the Court indicated that the plaintiffs may have a tough time proving their claims on the merits or establishing that class certification is warranted.  That warning may put the brakes on this action as well as others brought on a similar theory of liability.

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Massachusetts Supreme Judicial Court Holds Passive Debt Buyers Are Not Debt Collectors Under Massachusetts Law

By: Sean R. Higgins and Matthew N. Lowe

The Massachusetts Supreme Judicial Court recently held in Dorrian v. LVNV Funding, LLC,[1] that “passive debt buyers” are not “debt collectors” required to be licensed under the Massachusetts Fair Debt Collection Practices Act[2] (“MDCPA”).

Dorrian is a class action lawsuit filed by borrowers in default who alleged that defendant LVNV Funding, LLC (“LVNV”) was operating as a debt collector without being licensed under the MDCPA.[3]  Notably, the plaintiffs did not sue the third-party LVNV contracted with to handle all collection and servicing, which was licensed as a debt collector under the MDCPA.  The trial court certified the class and granted summary judgment in the borrowers’ favor on their claims that LVNV violated the MDCPA by operating as an unlicensed debt collector.[4]

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Another Shot at the Target: CFPB Payday Loan Rule Faces New Challenge from Trade Groups

By Jennifer Janeira Nagle, Robert W. Sparkes, III, Hayley Trahan-Liptak

The Consumer Financial Protection Bureau’s Payday Loan Rule (the “Rule”), with a looming compliance deadline in August 2019, is facing yet another attack—this time from trade groups seeking relief directly from the courts. On April 9, 2018, two payday lending industry trade associations — the Community Financial Services Association of America, Ltd. and the Consumer Services Alliance of Texas — filed suit in the U.S. District Court for the Western District of Texas against the Consumer Financial Protection Bureau (“CFPB”) and its Acting Director, Mick Mulvaney, seeking an order enjoining and setting aside the Rule.

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Risky Business: Whether an Increased Risk of Harm Supports Legal Standing in Data Breach Class Actions Continues to Divide Federal Courts of Appeals

By: Andrew C. Glass, David D. Christensen, and Matthew N. Lowe

Every data breach class action in federal court must confront a threshold question: has the plaintiff alleged a sufficient “injury in fact” to establish Article III standing?  The inquiry frequently focuses on whether a plaintiff has standing simply by pleading an increased risk of future injury from the theft of personal identifying information (PII).  This is because many named plaintiffs do not––because they cannot––allege any present harm.  The federal courts of appeals continue to weigh in on the issue of whether allegations of possible future harm suffice for Article III purposes.  But far from providing clarity or consensus, recent appellate decisions have reached differing conclusions, which appear highly dependent on the nature of the facts alleged in each case.[1]

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Ninth Circuit Doubles Down on Lack of Standing under Spokeo in FACTA Cases

By  Gregory N. BlaseAndrew C. Glass, and Roger L. Smerage

Recently, the Ninth Circuit held in Bassett v. ABM Parking Services, Inc. that an allegation that a business violated the Fair and Accurate Credit Transactions Act (“FACTA”) by printing a credit card expiration date on a customer’s receipt is, by itself, insufficient to establish Article III standing under Spokeo, Inc. v. Robins. (For more information, read K&L Gates alerts on the Bassett decision and FACTA standing jurisprudence.) Now, in Noble v. Nevada Checker Cab Corp., No. 16-16573 (9th Cir. Mar. 9, 2018), the Ninth Circuit reached the same conclusion with respect to an alleged FACTA violation arising out of the printing of the first digit of the card number in addition to the last four digits. In doing so, the Ninth Circuit appears to be sending a strong signal to potential FACTA plaintiffs that something more than a technical violation is necessary to have standing to pursue statutory damages in federal court under FACTA.

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Dismissing FDCPA Lawsuit, Sixth Circuit Calls Out Congress for Creating Statutory Remedies Where No Harm Has Occurred

By Andrew C. Glass, Gregory N. Blase, Roger L. Smerage, and David A. Mawhinney

The Sixth Circuit Court of Appeals recently ended a Fair Debt Collection Practices Act (“FDCPA”) lawsuit because the plaintiffs could not show that the allegedly offending letter had caused them actual harm.  In Hagy v. Demers & Adams,[1] the Sixth Circuit held that the plaintiffs lacked standing to sue a law firm for its technical FDCPA violation, namely failing to identify itself as a debt collector in a letter to the plaintiffs.  Debt collectors will likely applaud the practical and sensible approach the Sixth Circuit applied in Hagy.  The decision is remarkable, however, for its constitutional rebuke of Congress.  Reminding the legislative branch that it lacks general police powers to create statutory remedies where no actual harm exists, the Sixth Circuit’s decision suggests — without specifically stating — that the statutory damage provision of the FDCPA may be unconstitutional. Read More

Ninth Circuit Ruling Rejects FACTA Suit under Spokeo, Avoiding Circuit Split

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

The Ninth Circuit recently held in Bassett v. ABM Parking Services, Inc. that a plaintiff cannot establish Article III standing to maintain a Fair and Accurate Credit Transactions Act (“FACTA”)[1] claim merely by pleading that a business printed a credit card expiration date on the plaintiff’s receipt.[2]  In so ruling, the Ninth Circuit followed similar rulings by the Second and Seventh Circuits, avoiding a potential circuit split.  As explained below, the Bassett decision is the latest in a growing majority of cases in the wake of Spokeo, Inc. v. Robins[3] that demand a plaintiff allege actual harm to maintain a FACTA damages claim—even one for statutory damages based on an alleged willful violation.

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SAVED BY THE EN BANC: CFPB Appears Here To Stay

By Andrew C. Glass, Daniel F. C. Crowley, Jennifer Janeira Nagle, Brandon R. Dillman   

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) has been an agency under fire. Acting Director Mick Mulvaney has begun to institute significant changes at the Bureau. And last year, a panel of the D.C. Circuit Court of Appeals held that the Bureau’s leadership structure – a single director who can be removed only for cause – violates the separation of powers requirement of Article II of the U.S. Constitution. But in a long awaited en banc decision, the D.C. Circuit reversed that panel’s decision. Rather, in PHH Corp. v. Consumer Financial Protection Bureau, the court held that the Bureau’s structure is consistent with separation of powers principles. As discussed below, businesses subject to the CFPB’s supervisory and enforcement authority will need to continue to remain vigilant.

To read the full alert, click here.       

No Rubber Stamp: Ninth Circuit Reverses Certification of Nationwide Class Settlement Due to Failure to Account for Variations in State Law

By David D. Christensen and Matthew N. Lowe

The Ninth Circuit recently clarified in In re Hyundai and Kia Fuel Economy Litigation that district courts must carefully scrutinize class settlements to ensure that they satisfy each of the prerequisites of Rule 23, especially for Rule 23(b)(3) classes, and that courts cannot substitute the fairness of a settlement for the proper certification analysis. Of particular note, the court emphasized the need to analyze whether potential material differences in the applicable states’ laws preclude certification of a nationwide settlement class.

To read the full alert, click here.

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