Consumer Financial Services Watch

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

 

1
Cryptocurrency 2018: When The Law Catches Up With Game-Changing Technology
2
Ninth Circuit Clarifies Amount in Controversy Standard Where Borrower Seeks Only “Temporary” Foreclosure Stay Pending Loan Modification Review
3
Payday Loan Rule To Be Officially Reconsidered
4
Payday Loan Rule Is Officially A Go—Or Is It?
5
Standing to Sue under the Fair and Accurate Credit Transactions Act after Spokeo
6
Dodd-Frank Reform Efforts Intensify
7
Supreme Court Again Declines to Review Ruling That Courts Determine Availability of Classwide Arbitration
8
President Signs Congressional Resolution Overturning CFPB Arbitration Rule
9
“True Lender” Litigation Heats Up: Small Business Sues Marketplace Lender and Partner Bank, Alleging Conspiracy to Evade Usury Laws
10
Treasury Reports Continue to Inform Dodd-Frank Reform Efforts

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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Payday Loan Rule Is Officially A Go—Or Is It?

By Jennifer Janeira Nagle and  Robert W. Sparkes III

Today, January 16, 2018, officially marks the effective date of the Consumer Financial Protection Bureau’s final rule targeting what it refers to as “payday debt traps” (the “Rule”).  As outlined in our previous publications (found here and here), the Rule marks a significant change in the landscape for lenders offering short-term loans or longer-term loans with balloon payments, including payday and vehicle title loans.  Looming large is the new requirement that lenders determine a borrower’s ability to repay prior to originating covered loans.

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Standing to Sue under the Fair and Accurate Credit Transactions Act after Spokeo

By: Andrew C. Glass, Gregory N. Blase, and Roger L. Smerage

After paying for groceries with a credit card or debit card, the clerk hands the receipt to the customer. In addition to the last four digits of the card number, it contains the first digit.  Or perhaps it contains the first six digits.  Or maybe the expiration date.  Is this a concrete injury that provides the customer standing to sue the grocery store?

That is the question federal courts have grappled with since the Supreme Court decided Spokeo, Inc. v. Robins[1] in May 2016.  The Fair and Accurate Credit Transactions Act (“FACTA”)[2] regulates retailers’ conduct in printing card number information on customers’ receipts and provides a private right of action for alleged violations.  But, as discussed below, a customer may not have standing to sue in federal court or even in certain state courts just because a violation may have occurred.

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Dodd-Frank Reform Efforts Intensify

By Daniel F. C. Crowley, Bruce J. Heiman, William A. Kirk, Karishma Shah Page, Eric A. Love, Dean A. Brazier

On November 16, Senate Banking Committee (“SBC”) Chairman Mike Crapo (R-ID) introduced S. 2155, the “Economic Growth, Regulatory Relief and Consumer Protection Act,” long-awaited Senate legislation designed to foster economic growth and reduce regulatory burdens for small- and medium-sized financial institutions. A SBC section-by-section summary of the bill is available here. Earlier this year, the House passed on a party-line vote H.R. 10, the “Financial CHOICE Act of 2017” (the “FCA”), House Financial Services Committee Chairman Jeb Hensarling’s (R-TX) bill to comprehensively reform the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). S. 2155 is narrower in scope than the House bill and has to date garnered the support of nine Democratic Senators.

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Supreme Court Again Declines to Review Ruling That Courts Determine Availability of Classwide Arbitration

By Andrew C. Glass, Robert W. Sparkes III, Roger L. Smerage, Elma Delic

The United States Supreme Court recently declined to review a ruling that courts, not arbitrators, determine the availability of classwide arbitration. Previous attempts by putative collective or class representatives to obtain certiorari on the issue were unsuccessful. See, e.g., Opalinski v. Robert Half International Inc., 61 F.3d 326, 330-35 (3d Cir. 2014) (“Opalinski I”) (For K&L Gates’ coverage on the denials of the prior petitions see here and here). The Court’s most recent decision in Opalinski v. Robert Half International Inc. suggests that the Court still does not perceive sufficient disagreement, if any, among the federal courts of appeals on the issue. 677 F. App’x 738, 740 (3d Cir. 2017) (“Opalinski II”). As a result, the trend continues that the availability of classwide arbitration is a gateway issue for the courts.

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President Signs Congressional Resolution Overturning CFPB Arbitration Rule

By Andrew C. Glass, Robert W. Sparkes III, Roger L. Smerage, Elma Delic

The President signed this week the congressional joint resolution nullifying the Consumer Financial Protection Bureau (“CFPB”) arbitration agreements rule. Following adoption by the House, the Senate, in a 50-50 split with the Vice President breaking the tie, voted last week to approve the resolution (noted in a previous post here). The CFPB can only reinstate the rule, or one that is similar, if Congress expressly authorizes it to do so in subsequent legislation.

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“True Lender” Litigation Heats Up: Small Business Sues Marketplace Lender and Partner Bank, Alleging Conspiracy to Evade Usury Laws

By David D. Christensen and Jennifer Janeira Nagle

Over the last several years, a number of U.S. state and federal government enforcement actions have challenged the viability of the bank partnership model that many marketplace lenders have used to fund consumer and small business loans. Specifically, regulators have argued that, in partnerships where the non-bank entity controls much of the funding process or the bank has little-to-no risk of loss, the non-bank entity is the “true lender.”

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Treasury Reports Continue to Inform Dodd-Frank Reform Efforts

By Daniel F. C. Crowley, Bruce J. Heiman, William A. Kirk, Karishma Shah Page, Eric A. Love, Dean A. Brazier

On October 26, 2017, the U.S. Department of the Treasury (the “Treasury”) released a report entitled “A Financial System That Creates Economic Opportunities: Asset Management and Insurance,” the third in a series of reports that President Trump’s Executive Order 13772 on Core Principles for Regulating the U.S. Financial System (the “Core Principles”) requires Treasury to issue about potential ways to legislatively and administratively reform the U.S. financial system, consistent with the Core Principles. Earlier this month, Treasury released its second such report, which outlined recommendations concerning the capital markets. Treasury’s first report on banks and credit unions was released in June 2017 (See K&L Gates Alert: Dodd-Frank Reform; What Comes Next?), and one additional report is expected to be released in the near future. Treasury’s recommendations are likely to inform the efforts currently underway in Congress to advance financial regulatory reform legislation. This alert highlights a number of notable recommendations contained in the asset management and insurance report, as well as the capital markets report.

To read the full alert, click here.

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