K&L Gates – Page 5 – Consumer Financial Services Watch

Who Bears the Risk? Federal Court Holds That a Purchaser of Unsecured Consumer Loans Is the “True Lender,” Voiding Enforceability of the Loans

Sep 07 2016

By Irene C. Freidel and David D. Christensen

A California federal court has held that the purchaser of small-dollar consumer loans is the “true lender” and thus subject to state usury laws, even though a separate tribal entity funded and closed the loans in its own name. See Consumer Financial Protection Bureau v. CashCall, Inc*. The court’s holding, which adopts the arguments of the Consumer Financial Protection Bureau (“CFPB”) and renders the loans serviced by CashCall unenforceable, challenges the business model that many marketplace lending platforms use to offer alternative, unsecured loans to consumers. Generally speaking, partnerships between marketplace platforms and tribal entities, state-chartered (and federally insured) banks, or national banks are intended to protect the platforms from the substantial licensing and compliance burden of state lending and licensing laws, and also to permit loans that might otherwise exceed the borrower’s home state usury limit. The recent CashCall decision, however, is another reminder that state and federal regulators, as well as plaintiffs’ attorneys, may be able to pierce these partnerships where a court finds that the financial institution funding and closing the loan does not bear substantial risk on those loans.

Webinar: Developments in Student Loan Servicing with Lessons Learned from Mortgage Servicing

Aug 31 2016

Please join us for a webinar on student loan servicing covering a wide range of developments in regulatory, enforcement and litigation as well as the practical application of lessons learned in parallel servicing industries.

Panelists:
David E. Fialkow, Partner, K&L Gates
Hollee M. Watson, Associate, K&L Gates

To register, click here. Log-in instructions will be sent via email the day before the webinar. You must register to receive the log-in instructions.

Change Order: The CFPB Previews Its Proposed FDCPA Regulations

Aug 10 2016

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

The Consumer Financial Protection Bureau (“CFPB”) recently took the next step toward promulgating regulations under the Fair Debt Collection Practices Act (“FDCPA”) by releasing its “Outline of Proposals under Consideration and Alternatives Considered” (the “Outline”). The Outline sheds light on the approach the CFPB may take in regulating the debt-collection industry. As detailed in this alert, the proposed approach would implement comprehensive and substantial changes.

To read the full alert, click here.

Hold On, You Didn’t Overpay for That: Courts Address New “Overpayment” Theory from Plaintiffs in Data Breach Cases

Aug 10 2016

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

With the ever-increasing amount of personal information stored online, it is unsurprising that data breach litigation has become increasingly common. A critical issue in nearly all data breach litigation is whether a plaintiff has standing to pursue claims—especially where there is no evidence of actual fraud or identity theft resulting from the purported data breach. The plaintiffs’ bar has pursued a litany of legal theories in the attempt to clear the standing hurdle, including the recent theory of “overpayment” (a/k/a “benefit of the bargain” theory). Under this theory, the plaintiff alleges that the price for the purchased product or service—whether sneakers, restaurant meals, or health insurance—included some indeterminate amount allocated to data security. Depending on how the theory is framed, the purported “injury” is either that the plaintiff “overpaid” for the product or service, or that the plaintiff did not receive the “benefit of the bargain,” because the defendant did not appropriately use the indeterminate amount to provide adequate data security. Despite plaintiffs’ attempts to establish standing through this novel theory, courts have limited its applicability in a variety of ways discussed in this alert.

To read the full alert, click here.

LIGHT READING FOR THE DOG DAYS OF SUMMER: CFPB FINALIZES AMENDMENTS TO MORTGAGE SERVICING REGULATIONS

Aug 08 2016

By Brian M. Forbes, Andrew C. Glass, Gregory N. Blase, Robert W. Sparkes III and Matthew N. Lowe

On August 4, 2016, the Consumer Financial Protection Bureau (“CFPB”) issued its final rule setting forth amendments and clarifications to mortgage servicing regulations. These changes follow a prior round of revisions to mortgage servicing regulations that went into effect in January 2014. Since proposing the amendments to the regulations in November 2014, the CFPB received and reviewed hundreds of comments. At just over 900 pages in length, the final rule addresses numerous areas of mortgage servicing, including the following:

HUD’s Approach to Disparate Impact Remains Under Fire—Lending Trade Associations Weigh In

Aug 04 2016

By Paul F. Hancock, Andrew C. Glass, John L. Longstreth, Olivia Kelman and Joshua Butera

K&L Gates LLP recently presented the views of the major banking and lending trade associations, as amici curiae, in a federal challenge to HUD’s Fair Housing Act disparate-impact rule. The views expressed are those of the American Bankers Association, the American Financial Services Association, the Consumer Bankers Association, the Consumer Mortgage Coalition, the Financial Services Roundtable, the Independent Community Bankers of America®, and the Mortgage Bankers Association. The HUD rule challenge is likely to have a far-reaching effect on the housing industry and affiliated sectors of the economy. The lending industry argued that the HUD rule fails to comply with binding Supreme Court precedent governing disparate-impact claims. Moreover, HUD—which lacks the power to legislate—impermissibly adopted a legal standard that Congress enacted for a different civil rights law. And compounding its error, HUD cherry-picked only the plaintiff-friendly portions of that standard while ignoring substantial limitations Congress had imposed. Amici filed their brief to assist the trial court in understanding the full potential effect of the HUD disparate-impact rule, urging the court to overturn the rule.

To read the full alert, click here.

CFPB Issues Notice of Proposed Rulemaking to Clarify “Know Before You Owe”; Some Welcome Guidance on TRID but Cure and Liability Issues Not Addressed

Aug 01 2016

By Jennifer J. Nagle and Hollee M. Watson

On July 29, 2016, the Consumer Financial Protection Bureau (“CFPB”) issued a much anticipated Notice of Proposed Rulemaking (“NPRM”) on the TILA-RESPA Integrated Disclosure rule (“TRID” or “Know Before You Owe”), which went into effect on October 3, 2015, and has posed significant implementation challenges. The CFPB previously announced that it would issue proposed rulemaking in an April 28, 2016 letter to mortgage industry trade groups, in which it acknowledged the “many operational challenges” presented by TRID and noted that “there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”

CFPB Director Richard Cordray expects that the “proposed updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process.” See Consumer Financial Protection Bureau Proposes Updates to “Know Before You Owe” Mortgage Disclosure Rule. While the NPRM does contain some helpful guidance, there are also some notable omissions that may disappoint industry participants.

K&L Gates Adds Leading FinTech Partners

Aug 01 2016

Global law firm K&L Gates welcomes Judith Rinearson and Linda C. Odom as partners in the firm’s FinTech and Consumer Financial Services practices. Rinearson joins K&L Gates’ New York and London offices, and Odom, joins the Washington, D.C. office. “Judie Rinearson and Linda Odom are highly respected authorities in numerous key regulatory and commercial areas within the FinTech ecosystem,” stated Robert Zinn, co-leader of K&L Gates’ global corporate and transactional practice area as well as of the firm’s market-leading global FinTech practice.

To read our full press release please click here.

Massachusetts issues guidelines for using third-party robo-advisers

Jul 21 2016

By Susan P. Altman and C. Todd Gibson

In April 2016, the Massachusetts Securities Division issued a policy statement with respect to the fiduciary obligations of state-registered advisers providing robo-advice. The MSD has now issued further regulatory guidance in a new Policy Statement with respect to the use of third-party robo-advisers by state-registered investment advisers. The MSD noted the significant growth in popularity of third-party robo-advisers and the increasing number of state-registered investment advisers working with third-party robo-advisers.

Bank of England Launches FinTech Accelerator

Jul 21 2016

By Jonathan Lawrence

On 17 June 2016 the Governor of the Bank of England announced that the Bank is launching a FinTech Accelerator to work in partnership with FinTech firms to harness innovations for its own requirements as a central bank. In return, it will offer firms the chance to demonstrate their solutions for issues facing policymakers. The Accelerator will deploy innovative technologies on issues that matter to the Bank’s mission and operations. The Accelerator will appoint FinTech firms to run short Proof of Concept (POC) projects in a number of priority areas.

Author - K&L Gates