K&L Gates – Page 2 – Consumer Financial Services Watch

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

Apr 27 2017

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.

U.S. Supreme Court Sides with Merchants in Credit Card Surcharge Case, But the Fight Isn’t Over Yet

Apr 05 2017

By Andrew C. Glass, Gregory N. Blase, Soyong Cho, and Jeremy M. McLaughlin

On March 29, 2017, the U.S. Supreme Court ruled that a New York statute restricting credit card surcharges regulated commercial speech. Yet, Expressions Hair Design v. Schneiderman (No. 15-1391) did not decide whether such restrictions violated the First Amendment. Rather, the Court remanded the matter to the Second Circuit to decide that question. Nine other states and Puerto Rico have similar statutes, some of which are also being challenged in court.

To read the full alert, click here.

Delaware’s No-Usury-Cap Rule Deemed Unenforceable as Contrary to New York Public Policy in FDCPA Class Action

Apr 03 2017

By Andrew C. Glass, Roger L. Smerage, and Brandon R. Dillman

The Southern District of New York recently refused to enforce Delaware’s no-usury-cap rule in a long-running Fair Debt Collection Practices Act (“FDCPA”) class action, concluding that the rule violates New York public policy. See Madden v. Midland Funding, LLC, 2017 WL 758518 (S.D.N.Y. Feb. 27, 2017). In Madden, the plaintiff claimed that the defendants charged her an interest rate in excess of the limit imposed by New York law, triggering a violation of the FDCPA. The case has a long history. We first addressed the case in a client alert after the Second Circuit determined that National Bank Act preemption does not apply to debt purchased by independent, third parties. The United States Supreme Court declined to review the Second Circuit’s decision, a ruling about which we blogged.

FCC Begins Rulemaking Process to Allow Blocking of “Spoofed” Number Calls

Mar 27 2017

By Pamela J. Garvie, Andrew C. Glass, Joseph Wylie II, Gregory N. Blase, and Matthew T. Houston

The Federal Communications Commission unanimously voted at its March 23, 2017, “open meeting” to begin the process for adopting rules allowing carriers to block “spoofed” number calls. These are calls that use a reputable or commonly-known telephone number to mask the actual originating number. The proposed rules would allow carriers to block calls purporting to originate from telephone numbers that (1) are not assigned to a subscriber, (2) are invalid, or (3) are assigned to a subscriber expressly requesting that its number not be spoofed. In his remarks, Chairman Ajit Pai indicated that the proposed rules are needed to target scammers impersonating federal agencies, such as the Internal Revenue Service, and to protect consumers from unwanted solicitations. Commissioner Michael O’Rielly indicated that the proposed rules aim to address illegal “robocalls” in a manner that does not affect legitimate businesses, as opposed to prior efforts to regulate such calls under the Telephone Consumer Protection Act, 47 U.S.C. § 227. The proposed rules and accompanying comments suggest an effort by the now Republican-controlled FCC to issue rules specifically intended to block unwanted robocalls, often from overseas, intended to defraud consumers.

The FCC approved both a Notice of Proposed Rulemaking and a Notice of Inquiry to solicit feedback from consumers and other parties with an interest in the proposed rules. Comments on the proposed rules will be due within forty-five (45) days after publication in the Federal Register. Final rules are unlikely to take effect earlier than late 2017.

Federal Government Not Successful in Moving to Dismiss First Amendment Challenge to TCPA

Mar 24 2017

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

A North Carolina federal district court recently denied a motion by the federal government to dismiss claims raising a First Amendment challenge to a portion of the Telephone Consumer Protection Act (“TCPA”). See American Ass’n of Political Consultants v. Lynch, Case No. 5:16-00252-D (E.D.N.C.). At this early stage of the case, the government did not address the substance of the constitutional challenge. Rather, the government asserted that the court did not have jurisdiction over the case and that the political organizations which filed the suit did not have standing to maintain suit. The court, however, rejected the government’s arguments and allowed the case to proceed.

Financial Inclusion and Robust Regulation Are on the Table as OCC Pushes Ahead With Fintech Charter

Mar 21 2017

By Anthony Nolan, Judith Rinearson, Jeremy McLaughlin, and Eric Love

Last week the United States Office of the Comptroller of the Currency (“OCC”) issued a Draft Supplement to its Licensing Manual (“Supplement”) in furtherance of its proposal to rolling out a special purpose national bank (“SPNB”) charter for financial technology (“fintech”) companies. The Supplement outlines the process by which a fintech company may apply for a SPNB charter, and the considerations the OCC will take into account when evaluating such applications. A link to the Supplement appears here.

The Supplement reiterates OCC determination that the SPNB charter would be “in the public interest” because it would provide “uniform standards and supervision,” “support[] the dual banking system,” promote “growth, modernization, and competition” in the financial system, and encourage fintech companies to “promote financial inclusion.” It also makes clear the OCC’s determination to promote financial inclusion and to rebut criticisms that the SPNB charter would represent a light touch regulatory regime.

Proposed Fairness in Class Action Litigation Act of 2017 Seeks to Curb Attorney Abuses of Class Action Device and Expand Class Action Defendant Protections

Mar 01 2017

By Brian M. Forbes, Joseph C. Wylie II, Molly K. McGinley, Jennifer Janeira Nagle, and Matthew N. Lowe

On February 9, 2017, Rep. Robert Goodlatte (R-Va.), the Chairman of the House Judiciary Committee, introduced the Fairness in Class Action Litigation Act of 2017 (the “Act” or “H.R. 985”). [1] The Act significantly expands the class action reforms proposed in an earlier version of the bill that stalled after passage in the U.S. House of Representatives [2] and imposes significant new restrictions on class action lawyers and plaintiffs seeking to proceed under Rule 23 of the Federal Rules of Civil Procedure, as well as implementing new rules applicable to cases consolidated through the multidistrict litigation process. The stated purposes of the Act are to: (1) “assure fair and prompt recoveries for class members and multidistrict litigation plaintiffs with legitimate claims;” (2) “diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system;” and (3) “restore the intent of the framers of the United States Constitution by ensuring Federal court consideration of interstate controversies of national importance consistent with diversity jurisdiction principles.” [3] In a press release, Rep. Goodlatte announced that the objective of the proposed legislation is to “keep baseless class action suits away from innocent parties, while still keeping the doors to justice open for parties with real and legitimate claims, and maximizing their recoveries.”

To read the full alert, click here.

Eighth Circuit Requires Further Review of Data Breach Settlement Involving Class Members Who Have No Loss

Feb 20 2017

By Andrew C. Glass, Matthew N. Lowe, and Brandon R. Dillman

In a decision that could affect the resolution of future data breach class actions, the Eighth Circuit recently set aside the settlement in the Target Corp. data breach litigation. See In re Target Corp. Customer Data Security Breach Litig., No. 15-3909, — F.3d —, 2017 WL 429261 (8th Cir. Feb. 1, 2017). The litigation arose from claims that in 2013, hackers compromised credit and debit card data of up to 110 million Target customers. The parties ultimately agreed to a settle on a class basis. According to the settlement agreement, Target agreed to establish a $10 million settlement fund, which would be allocated first to class members with documented losses and then to members with asserted, but undocumented, losses. Members who had “suffered no loss from the security breach [would] receive nothing from the settlement fund,” but would still be “bound under the settlement to release Target from liability for any claims” that may someday arise in the future. Id. at *1.

Trump has opportunity to restore balance in fair lending cases

Feb 14 2017

From the February 7, 2017 article in American Banker

By Paul F. Hancock

With good cause, anxiety has been expressed regarding the direction of the Department of Justice’s civil rights division under the Trump administration.

Unfortunately, the past 16 years have seen the pendulum fly first to lax civil rights enforcement and improper politicization of the division under the Bush administration, and then to overreaching under the Obama administration. Trump administration officials would be wise to seek a balance. To get there, guidance is available from the division’s longer-range history — including during years that might not seem obvious, like under the Reagan administration. Balance would benefit both the nation and the future of the division.

To read the full article, click here.

New Special Purpose National Bank Charter for FinTech Companies

Jan 31 2017

New York partners Anthony Nolan and Judith Rinearson will be speaking in a Strafford live webinar on “New Special Purpose National Bank Charter for FinTech Companies: Evaluating the Benefits and Regulatory Pitfalls on Thursday, March 16 2017 at 1:00pm-2:30pm EDT. This will focus on a recent proposal by the United States Office of the Comptroller of the Currency (OCC) to consider granting special purpose national bank charters to FinTech companies that are engaged in fiduciary activities or in activities that include receiving deposits, paying checks, or lending money. The special purpose charter offers the benefits of federal preemption and some state licensing requirements. However, there are regulatory and supervisory burdens that must be carefully considered such as activity limitations, BSA/AML requirements and minimum capital and liquidity requirements.

The panel will provide an overview of the OCC’s proposal for special purpose national bank charters for FinTech companies and the potential regulatory pitfalls that FinTech companies must consider. The program will address the OCC’s chartering process and the supervisory, financial and operational conditions that would apply. It will review these and other key issues:

Benefits of special purpose national bank charters for FinTech companies;
Regulatory pitfalls of special purpose national bank charters for FinTech companies;
The OCC’s chartering process and the supervisory, financial and operational conditions that would apply;
Positions of other relevant US bank regulatory agencies;
Implications for the future development of the Fintech industry in the United States.

For more information or to register click here.

Author - K&L Gates