Consumer Financial Services Watch

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

 

1
Risky Business: Whether an Increased Risk of Harm Supports Legal Standing in Data Breach Class Actions Continues to Divide Federal Courts of Appeals
2
Ninth Circuit Doubles Down on Lack of Standing under Spokeo in FACTA Cases
3
Dismissing FDCPA Lawsuit, Sixth Circuit Calls Out Congress for Creating Statutory Remedies Where No Harm Has Occurred
4
Ninth Circuit Ruling Rejects FACTA Suit under Spokeo, Avoiding Circuit Split
5
SAVED BY THE EN BANC: CFPB Appears Here To Stay
6
No Rubber Stamp: Ninth Circuit Reverses Certification of Nationwide Class Settlement Due to Failure to Account for Variations in State Law
7
Back from the Dead: The D.C. Circuit Breaths Life Into RESPA Section 8 Safe Harbor
8
A First in the Second (Circuit): On Remand, District Court Breaks New Ground by Vacating Arbitrator’s Class Certification Award
9
Cryptocurrency 2018: When The Law Catches Up With Game-Changing Technology
10
Ninth Circuit Clarifies Amount in Controversy Standard Where Borrower Seeks Only “Temporary” Foreclosure Stay Pending Loan Modification Review

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.

Back from the Dead: The D.C. Circuit Breaths Life Into RESPA Section 8 Safe Harbor

By Brian M. ForbesDavid D. Christensen and Matthew N. Lowe

Through its recent en banc decision in PHH Corp. v. Consumer Financial Protection Bureau, the D.C. Circuit reinstated the holding of the three-judge panel regarding the safe harbor provision in Section 8(c) of the Real Estate Settlement Procedures Act (RESPA). Specifically, the court reaffirmed that under Section 8(c), payments made by one settlement service provider to another do not violate Section 8(a), even if made in connection with a captive relationship or a referral, when the payments are reasonably related to the market value of the goods, services, or facilities provided. Although potentially overshadowed by the portion of the en banc court’s holding that the leadership structure of the Consumer Financial Protection Bureau (CFPB) is constitutional, the panel court’s reinstated holding regarding RESPA’s Section 8(c) safe harbor is notable and important for the simple confirmation that the safe harbor “is what it is.”

To read the full alert, click here.

A First in the Second (Circuit): On Remand, District Court Breaks New Ground by Vacating Arbitrator’s Class Certification Award

By Andrew C. GlassRobert W. Sparkes, IIIRoger L. Smerage, and  Elma Delic

In what appears to be a first-of-its-kind ruling, the District Court for the Southern District of New York recently concluded that a federal district court has the authority to vacate an arbitrator’s class certification award based on the due process rights of absent class members. That this potentially ground-breaking decision arose from the long-standing litigation in Jock v. Sterling Jewelers, Inc. is no surprise. Over the course of a decade in Jock, the district court and the Second Circuit Court of Appeals have rendered multiple decisions addressing the proper role of a court in reviewing an arbitrator’s authority to determine whether parties have agreed to class arbitration. In the latest decision, the district court became the first court to apply Justice Alito’s concurrence in Oxford Health Plans LLC v. Sutter to strike down an arbitrator’s ruling. The Jock court determined that, absent an express class arbitration provision in each putative class member’s arbitration agreement, an arbitrator does not have the authority to bind absent class members to a class judgment—even if they signed the same form of arbitration agreement as the named plaintiffs. As discussed below, this novel decision could have significant implications.

To read the full alert, click here.

Cryptocurrency 2018: When The Law Catches Up With Game-Changing Technology

By: David E. Fialkow, Edward J. Mikolinski, Jack S. Brodsky                     

Blockchain technology and the virtual currency, or cryptocurrency, that uses this technology are revolutionizing the way businesses function and deliver goods and services. Even as cryptocurrency becomes a widely debated topic, gaining the critical attention of regulators and policymakers, individuals and businesses are investing billions of dollars in cryptocurrency annually.

To understand how blockchain and cryptocurrency may impact you, your business, and your industry, it is important to understand what cryptocurrency is and how the underlying blockchain works. This article provides a brief introduction to these concepts as well as a primer on cryptocurrency legal issues.

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Ninth Circuit Clarifies Amount in Controversy Standard Where Borrower Seeks Only “Temporary” Foreclosure Stay Pending Loan Modification Review

By David D. Christensen and Matthew N. Lowe

The Ninth Circuit recently limited the availability of diversity jurisdiction for certain cases with claims involving mortgage loan modifications. Specifically, in Corral v. Select Portfolio Servicing, Inc., the Ninth Circuit held that, where the plaintiff-borrower “seeks only a temporary stay of foreclosure pending review of a loan modification application … the value of the property or amount of indebtedness are not the amounts in controversy.” — F.3d —-, 2017 WL 6601872, at *1 (9th Cir. Dec. 27, 2017). Rather, to satisfy the amount in controversy requirement in such cases, parties must demonstrate that the value of the temporary delay in foreclosure exceeds $75,000, “such as the transactional costs to the lender of delaying foreclosure or a fair rental value of the property during pendency of the injunction” (in addition to any compensatory damages plaintiffs may be seeking). Id. at *5.

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