Target’s recent $19 million settlement with MasterCard underscores very significant sources of potential exposure that often follow a data breach incident. In the wake of any significant breach involving payment cards, such as the Target breach, retailers and other organizations that accept those cards are likely to face — in addition to a slew of claims from consumers and investors — claims from financial institutions seeking to recover their losses associated with issuing replacement credit and debit cards, among other losses.
The capital markets should look closely at the proposed rule of the Consumer Financial Protection Bureau (the “CFPB”) to supervise certain larger non-bank automobile finance companies because of the CFPB’s assertion of broad authority over large purchasers of auto loans and auto leases. The CFPB’s interest in indirect auto lending is not new. The proposed rule, however, purports to give the CFPB jurisdiction over any large purchaser of auto loans and auto leases, regardless of whether the purchaser had any direct involvement with the lender or reasonably could be construed to be the indirect originator. In its defense, the CFPB would stop its jurisdiction at the door of securitization, but any purchases up to that point may be fair game. The logic underlying this position could be extended by the CFPB to mortgages, credit cards, and virtually any other type of consumer product or service. Interested parties may want to comment by the December 8, 2014 due date.
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By: Andrew L. Caplan*
*Mr. Caplan is admitted to practice in NY (not admitted in DC); supervised by Nanci Weissgold, a member of the DC bar
On March 5, 2012, the FDIC issued A Quick Guide for Consumers on Credit, Debit, and Prepaid Cards (“the Guide”) to help consumers appreciate the differences among credit cards, debit cards, and prepaid cards. As indicated in a recent FDIC press release, “[t]he guide is intended to help consumers who routinely use cards to pay for goods and services but who don’t always understand the differences in how these cards work or the applicable consumer protections.”