Following an investigation by the Consumer Financial Protection Bureau (“CFPB”) and the Department of Justice (“DOJ”), a captive indirect auto lender agreed on February 2, 2016, to change its pricing policies and compensation systems to limit dealer discretion and financial incentives to mark up interest rates for auto purchases.
On May 9, 2014, the Department of Veterans Affairs (“VA”) issued an Interim Final Rule defining which VA-guaranteed loans would be “qualified mortgages” or “QMs” for the purposes of the Truth in Lending Act’s (“TILA”) ability-to-repay requirements. With its recent release of Circular 26-13-3, the VA has now clarified the application of that rule through FAQs focusing largely on Interest Rate Reduction Refinance Loans (“IRRRLs”). These loans are VA streamlined refinances, which generally allow for reduced income verification for eligible veterans’ loans. IRRRLs represent a small sliver of mortgage lending in the United States, but their treatment under VA’s Interim Final Rule has presented significant problems for some lenders.
On Thursday, January 21, 2016, the CFPB entered into a consent order with a small buy-here pay-here used car dealer. This is the third CFPB settlement against a buy-here pay-here dealer. The settlement resolves allegations that the dealer inaccurately disclosed finance charges to consumers in violation of the Truth in Lending Act (“TILA”) and the prohibition on deceptive acts or practices, and engaged in abusive sales practices.
The “Adam’s Rib” of assignee liability ̶ the “Holder Rule” issued by the Federal Trade Commission (“FTC”) in 1976 ̶ is up for review. Imposing liability on innocent purchasers of consumer credit loans for the legal violations of the originating creditors has long been a controversial issue in the capital markets. The FTC is seeking public input as it reviews the Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, commonly known as the Holder Rule. Although the Rule has not garnered significant attention over its 40-year existence, industry members should consider commenting by the February 12 deadline. Changes to the Holder Rule, including the scope and types of claims and defenses that can be asserted against a holder, could have a material impact on the market. The Consumer Financial Protection Bureau can also enforce the Holder Rule against covered institutions.
By: Andrew C. Glass, Gregory N. Blase, Jennifer J. Nagle, Jeremy M. McLaughlin, Matthew N. Lowe
On January 20, 2016, the United States Supreme Court issued its decision in Campbell-Ewald Co. v. Gomez regarding Rule 68 offers of judgment. The Court held that a defendant cannot moot a case by merely offering complete relief to a plaintiff but left unanswered whether a defendant may do so by actually providing complete relief. Nor did the Court reach the question of whether a plaintiff can continue to seek to represent a putative class when his or her individual claims are mooted before a class is certified.
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Last month, we wrote about how the Consumer Financial Protection Bureau’s (CFPB) administrative enforcement action against Integrity Advance might signal that the agency believes it can pursue claims of unfair and deceptive conduct without regard to either the statute of limitations or the effective date of the Dodd-Frank Act. In a brief made public yesterday, the CFPB revealed its hand when it filed its opposition to Integrity Advance’s motion to dismiss. In its brief, the CFPB indeed asserted that its administrative enforcement authority is not limited by any statute of limitations. But the CFPB did not seek to pursue its claims for conduct that occurred before the July 21, 2011 effective date of Dodd-Frank.
By: Brian M. Forbes, Jennifer J. Nagle
Just over 10 years after the passage of the federal Class Action Fairness Act (“CAFA”), Congress is again considering further legislative reform to class action litigation. Among other reforms, CAFA opened additional avenues for defendants to remove class action litigation to federal court (often viewed by the defense bar as a more favorable venue than state court) and placed additional limitations on class-wide settlements. Now, legislative attention is being paid to class actions that are certified absent a showing of common injury among all class members. On January 8, 2016, the U.S. House of Representatives passed the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2016 (“the Act” or “H.R. 1927”). If enacted into law, H.R. 1927 would represent a significant change to the standard that a class action plaintiff must satisfy for a court to certify his or her proposed class.
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Last August, we wrote about the Consumer Financial Protection Bureau’s (CFPB) complaint against NDG Financial Corp. and how it represented a continuing evolution of the CFPB’s theory that certain state law violations might be predicates for federal law claims of unfair, deceptive, and abusive conduct (UDAAP). We refer to this as the “CashCall theory,” because the CFPB first articulated this novel approach to UDAAP enforcement in its complaint against CashCall, Inc. In December, the CFPB took two more steps down this road.
On December 29, 2015, CFPB Director Richard Cordray responded to MBA President and CEO David Stevens’ desperate plea for clarity to address what the MBA claimed is a significant rejection by large aggregators and investors of correspondent lending channel loans for minor or technical TRID errors. In its December 21, 2015 letter to Director Cordray, Mr. Stevens noted that these minor and technical errors include “issues with the alignment or shading of forms, rounding errors, time stamps with the wrong time zone, or check boxes that are improperly completed on the LE.” The MBA feared that without some clarity from the CFPB disruption and liquidity issues would overwhelm the mortgage markets.
By: Andrew C. Glass, Robert W. Sparkes III, Roger L. Smerage
The U.S. Supreme Court has ruled that a California state court’s decision striking down a class action waiver in an arbitration agreement was an improper attempt to evade the Supreme Court’s 2011 landmark decision in AT&T Mobility LLC v. Concepcion. See DirecTV, Inc. v. Imburgia, 577 U.S. — (No. 14-462) (Dec. 14, 2015). Concepcion held that the Federal Arbitration Act (“FAA”) preempts state law to the extent it purports to bar the inclusion of class action waivers in arbitration agreements. Imburgia reiterates that holding and concludes that because the California court had interpreted the subject arbitration agreement in a manner “restricted to [the] field” of arbitration, as opposed to contracts generally, the interpretation could not withstand scrutiny under the FAA.
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