December 19, 2018

Consumer Financial Services Practice Digest

3 min

Kathy Kraninger Takes Over Consumer Financial Protection Bureau

Kathy Kraninger has been sworn in as the new Director of the Consumer Financial Protection Bureau. Kraninger replaces Mick Mulvaney who has served as Acting Director since the end of 2017 when the last permanent Director, Richard Cordray resigned. Kraninger will serve a five-year term.

FTC Requests Comment on Identity Theft Detection Rules

The FTC published a Notice in the Federal Register on December 4, 2018 seeking public comment on whether any changes should be made to the FTC's identity theft detection rules. According to the Notice, the FTC is soliciting commentary on the benefits and costs of the identity theft prevention rules implementing Section 615 of the FCRA, as well as their regulatory and economic impacts on consumers and the industry. The request for comment comes as part of the FTC's systematic review of all of its guides and regulations, and focuses on the Red Flags Rule and the Card Issuers Rule.

By Any Other Name: Even if Legal, a Surcharge Is Still a Surcharge

If you're active in the payments space, whether as an acquiring bank, processor, ISO, or a merchant that accepts credit or debit cards, you've probably encountered the concept of "Discount Programs." Such programs purport to allow merchants to recoup the cost of accepting payment cards without violating state laws prohibiting surcharges. But look carefully: Is that Discount Program actually a surcharge that violates surcharge restrictions?

SEC's first crypto-exchange enforcement action dodges a key question

On November 8, 2018, the SEC entered into a consent order with Zachary Coburn, the founder of EtherDelta, in its first-ever enforcement action against a cryptocurrency platform for operating as an unregistered securities exchange ("Order"). EtherDelta is an online platform for secondary market trading of Ether and ERC20 tokens, which are cryptocurrencies based on the Ethereum blockchain protocol. Many of the tokens traded on EtherDelta were launched during the 2017 rush of ICOs, but the SEC avoided identifying which tokens on the exchange are securities.

Hanging Out to Dry: FTC’s Ongoing Pursuit of Credit Card Laundering has Reached an Apex

The FTC continues to crack down on companies engaged in credit card laundering. Credit card laundering is the practice of processing credit card transactions for one company through the merchant processing account of another company. Credit card laundering can be used to bypass the monitoring practices and volume thresholds of credit card associations and payment processors. A new complaint and a settlement of a prior case highlight the effort that the FTC is devoting to this area.

Un-Belize-Able! Real Estate Scam Sparks New Standards

Last month the FTC encountered the largest alleged real estate scam to date: the Sanctuary Belize Enterprise took in more than $100 million through its sale of property in what was supposed to become a luxury resort. This post discusses several interesting issues that could potentially delineate where the enforcement action is heading in a variety of contexts.