Consumer Financial Services Watch

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

 

1
Proposed Regulations Under the California Consumer Credit Privacy Act
2
The CFPB and the Fed Adjust Regulation CC for Inflation
3
Deepening the Divide: D.C. Circuit Continues Circuit Split Regarding Standing in Data Breach Class Action Based on Risk of Future Harm
4
DACA Recipients Are Ineligible for FHA Mortgage Insurance Officially, but Lending to DACA Recipients and Other Immigrant Communities Is Subject to Many Unresolved Compliance Challenges
5
“Any Defendant” Does Not Really Mean “Any Defendant”
6
Ninth Circuit U-Turns And Approves Nationwide Class Settlement In Automobile Class Action Involving Potential Variations In States’ Laws
7
HMDA Reality Check: What You Can and Cannot Conclude from New Mortgage Loan Data
8
What Is in a Name? The Third Circuit Holds That Debt Buyers Can Be Debt Collectors under the FDCPA
9
Trouble in Paradise: Florida Court Rules that Selling Bitcoin is Money Transmission
10
Revamped Relief: The CFPB’s Proposed Rule to Improve its No-Action Letter Program and to Establish a Regulatory Sandbox

Proposed Regulations Under the California Consumer Credit Privacy Act

By Linda C. Odom and John ReVeal

On October 10, 2019, the California Attorney General issued proposed regulations under the California Consumer Privacy Act (CCPA). The Attorney General will hold four public hearings, on December 2 through December 5, 2019, during which statements or comments may be presented, orally or in writing. Written comments in addition to those submitted at the public hearing also may be mailed or emailed to the Attorney General’s office until 5:00 p.m. on December 6, 2019.

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The CFPB and the Fed Adjust Regulation CC for Inflation

By John ReVeal and Daniel S. Cohen

On June 24, 2019, the Consumer Financial Protection Bureau (“CFPB”) and the Federal Reserve Board (“Fed”) (collectively, the “Agencies”) amended Regulation CC, which implements the Expedited Funds Availability Act (the “EFAA”), to adjust for inflation the amount of funds depository institutions must make available to their customers after funds have been deposited and the civil liabilities for failing to meet these obligations (the “Amendment”).  However, depository institutions will not need to adjust their compliance procedures right away.  To “help ensure that institutions have sufficient time to implement the adjustments,” the Agencies set July 1, 2020 as the compliance deadline. Below is a summary of the key funds availability rules and how they are changed (or not) by the Amendment. 

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Deepening the Divide: D.C. Circuit Continues Circuit Split Regarding Standing in Data Breach Class Action Based on Risk of Future Harm

Authors: Andrew C. Glass, Matthew N. Lowe

The D.C. Circuit Court of Appeals recently reaffirmed its position that a plaintiff can establish Article III standing (federal court subject matter jurisdiction) based solely on the risk of potential future harm following a data breach involving his or her personal information. The decision continues the split between the federal circuit courts of appeals regarding the issue.

In re Office of Personnel Management arose out of an alleged 2014 data breach of the eponymous office (the “OPM”).[1] The plaintiffs, current and former federal employees and their unions, sought to represent a putative class of individuals whose personal information, including social security numbers, addresses, and birth dates, was allegedly exposed in the breach.[2] The plaintiffs asserted that certain putative class members had experienced financial fraud or identity theft as a result of the breach and that other members faced the “ongoing risk that they … will become victims of financial fraud and identity theft in the future.”[3] The district court ruled that the plaintiffs lacked standing to sue, holding that the putative class members who had allegedly experienced financial fraud had not pleaded facts demonstrating that the fraud was traceable to the OPM, and that the members who had only pleaded risk of future injury did not plausibly allege that such injury was either substantial or clearly impending.[4]

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DACA Recipients Are Ineligible for FHA Mortgage Insurance Officially, but Lending to DACA Recipients and Other Immigrant Communities Is Subject to Many Unresolved Compliance Challenges

By Andrew C. Glass, Gregory N. Blase, and Daniel S. Cohen

For the past six months, the mortgage lending industry has reported receiving conflicting messages from the Department of Housing and Urban Development (“HUD”) and the Federal Housing Administration (“FHA”) regarding Deferred Action for Childhood Arrivals (“DACA”) recipients’ eligibility for FHA-insured mortgages. In December 2018, Senators Robert Menendez (D-NJ), Cory Booker (D-NJ), and Catherine Cortez Masto (D-NV) asked HUD to clarify whether it has “developed a policy regarding DACA recipients’ eligibility for FHA-insured mortgage loans.” If not, the senators requested HUD to “promptly provide clear and written guidance to FHA-approved lenders clarifying” that DACA recipients are not ineligible for FHA insurance simply because of their DACA status. [1] In response, HUD issued a letter explaining that is has “not implemented any policy changes” with respect to “FHA’s eligibility requirements” for non-U.S. citizens who are lawful residents. HUD reiterated that “non-U.S. citizens without lawful residency are ineligible for FHA financing.” [2] In early 2019, Fannie Mae issued a guide regarding “non-citizen borrower eligibility,” explaining that mortgages provided to DACA recipients are eligible to be purchased by Fannie Mae because DACA recipients are lawful nonpermanent residents because they have a valid Employment Authorization Document number. [3] During congressional testimony in April, HUD Secretary Ben Carson seemingly clarified that DACA recipients are eligible for FHA-insured mortgages. The secretary commented that “plenty of DACA recipients … have FHA mortgages,” and that he would be surprised if lenders received statements to the contrary from HUD staff.

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“Any Defendant” Does Not Really Mean “Any Defendant”

The U.S. Supreme Court Limits Parties Entitled to Seek Removal of Class Action Claims Under CAFA

Authors: Ryan M. TosiScott G. Ofrias

In a recent decision addressing federal court jurisdiction, the U.S. Supreme Court held that third-party counterclaim defendants cannot remove class action claims to federal court, holding that they are not “defendants” entitled to remove the action from state court to federal court under either the general removal statute, [1] or the federal Class Action Fairness Act (“CAFA”). [2] In a 5-4 decision in the matter of Home Depot U.S.A., Inc. v. Jackson, [3] the Court concluded that only a party sued by the original plaintiff is entitled to remove, and that CAFA’s expansion of removal authority to “any defendant” does not apply to third-party defendants that are not parties to the original action.

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Ninth Circuit U-Turns And Approves Nationwide Class Settlement In Automobile Class Action Involving Potential Variations In States’ Laws

Authors: Brian M. Forbes, Robert W. Sparkes, III, Matthew N. Lowe

In a recent 8-3 en banc decision, the Ninth Circuit affirmed the approval of an estimated $210 million class action settlement in In re Hyundai and Kia Fuel Economy Litigation. The Hyundai decision is significant because it reversed an earlier, controversial decision by a three-judge panel of the Ninth Circuit, which rejected the nationwide settlement because the district court failed to “rigorously analyze potential differences in state consumer protection laws” before certifying the class for settlement. The Ninth Circuit’s en banc decision offers some clarity for both plaintiffs and defendants attempting to settle class action litigation in the Ninth Circuit, especially those involving proposed nationwide classes.

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HMDA Reality Check: What You Can and Cannot Conclude from New Mortgage Loan Data

Authors: Paul F. Hancock, Olivia Kelman

Extensive data about mortgage lending activity collected pursuant to the Home Mortgage Disclosure Act (“HMDA”) was just made available to the public for the first time on March 29, 2019. More detail about borrowers, about underwriting, and about loan features is now available than ever before, and that information also is easier for the public to access than it ever has been. The mortgage lending industry should expect that the expanded HMDA data will receive significant attention and scrutiny from private organizations and individuals, and the data is certain to spark controversy about the racial, ethnic and gender fairness of mortgage lending.

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What Is in a Name? The Third Circuit Holds That Debt Buyers Can Be Debt Collectors under the FDCPA

Authors: Gregory N. BlaseAndrew C. GlassRoger L. Smerage

“Debt buyers”—entities that purchase debt from original creditors or other downstream assignees—often view themselves as being different from “debt collectors”—entities that act to collect debts from obligors. But in Barbato v. Greystone Alliance, LLC, [1] the U.S. Court of Appeals for the Third Circuit disagreed, holding that debt buyers can be debt collectors under the Fair Debt Collection Practices Act (“FDCPA”). Specifically, the Third Circuit ruled that part of the FDCPA’s definition of “debt collector” encompasses debt buyers, regardless of whether they outsource collection activities to third parties.

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Trouble in Paradise: Florida Court Rules that Selling Bitcoin is Money Transmission

Authors: Judith RinearsonDaniel S. CohenJeremy M. McLaughlin

The growing popularity of virtual currency over the last several years has raised a host of legislative and regulatory issues. A key question is whether and how a state’s money transmitter law applies to activities involving virtual currency. Many states have answered this – albeit in a non-uniform way – through legislation or regulation, including regulatory guidance documents. For instance, Georgia and Wyoming have amended their money transmitter statutes to include or exclude virtual currencies explicitly. In other states, such as Texas and Tennessee, the state’s primary financial regulator has issued formal guidance. In New York, the Department of Financial Services issued an entirely separate regulation for virtual currencies. Still, in others, neither the legislature nor the relevant regulator has provided any insight into how the state’s money transmitter law may apply.

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Revamped Relief: The CFPB’s Proposed Rule to Improve its No-Action Letter Program and to Establish a Regulatory Sandbox

By Andrew C. Glass, Gregory N. Blase, Daniel S. Cohen

INTRODUCTION
In December of 2018, the Senate confirmed Kathy Kraninger as the second Director of the Consumer Financial Protection Bureau (“CFPB”). The path Director Kraninger will chart is uncertain, but the CFPB has already begun initiating changes to which the financial services industry should pay attention. For instance, in mid-December 2018, the CFPB issued a proposed rule to modify its No-Action Letter Program (the “Program”) and to establish a regulatory “sandbox” (a formal process to temporarily exempt companies from certain statues and regulations so they can test new products with consumers). Below, we provide a brief history of the Program as well as a discussion of the key elements of the proposed rule.

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