June 07, 2019

Consumer Financial Services Practice Digest

4 min

CFPB Director Appoints Deputy Director and Several Other Senior Leadership and Executive Positions

The CPFB's second-in-command post will now be officially held by Brian Johnson after his recent appointment as deputy director. CFPB Director Kathleen Kraninger announced his appointment on May 13, 2019, but Johnson has served in an acting capacity since last year, when he was appointed acting deputy director following the resignation of his predecessor, Leandra English. The CFPB also announced the addition of several senior leadership and executive positions.

Will the Real Merchant (of Record) Please Stand Up?

As we have previously discussed in our newsletter, there seems to be a great deal of confusion about card payments aggregation these days. As online re-sellers, independent software vendors, marketplaces, payment facilitators, and other formal and informal designations proliferate, it can be difficult to determine what model is being used and how to characterize a given transaction. Adding to the confusion is the spread of the term "Merchant of Record" or "MOR," which has traditionally been used to refer to the entity selling goods or services to the cardholder. In recent years, however, the term has been used by payment intermediaries to mean the exact opposite – a party other than the seller that will "act as the merchant" for other businesses.

Regulatory Flexibility Act Review Plan and Review of Overdraft Rule Announced by CFPB

The CFPB recently announced a regulatory review plan for regulations under Section 610 of the Regulatory Flexibility Act (RFA). Section 610 of the RFA directs agencies to review certain rules within 10 years after they are published, consider the rules' effect on small entities, and invite public comments on each rule under review. Under the RFA, the Bureau is required to consider multiple factors, including 1) the continued need for the rule; 2) the nature of public complaints or comments; 3) the complexity of the rule; 4) the extent the rule overlaps, duplicates, or conflicts with other federal and state laws; and 5) the effect of technology, economic conditions, and the passage of time on the relevant market. The RFA review is distinct from other CFPB regulatory review requirements, including Section 1022(d) of the Dodd-Frank Act.

fore·shad·ow (verb). Be a warning or indication of (a future event): FCC Commissioner O'Rielly Speech Suggests What’s in Store for the TCPA

On May 16, 2019, FCC Commissioner Michael O'Rielly gave a speech at the ACA International Washington Insights Conference in Washington, DC, which gave a potential preview of how the Commission may shape the TCPA landscape in the near future. Commissioner O'Rielly's full speech is available here. He gave his thoughts on a number of subjects and some of the highlights are below.

Key Takeaways for Internal Investigators from the Recent Deutsche Bank Libor-Rigging Ruling and DOJ and SEC Reactions

When a company hires outside counsel to conduct an internal investigation, there are limits to how much influence the government can have on the investigation before its outside counsel's questioning can become something akin to a police interrogation. Recently, a federal judge in the Southern District of New York came down hard on the government for crossing that line.

Consumer-Relief Funds

Michael Bresnick published a chapter, "Consumer-Relief Funds," in the first edition of Global Investigations Review's The Guide to Monitorships. The following is an excerpt:

Before the 2007–2008 financial crisis, federal and state authorities generally limited their appointment of monitors to cases that required the settling entity to establish ongoing compliance with a particular subject matter, such as issues with regard to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) laws, the FCPA, healthcare or the environment, among others. This changed dramatically on 9 February 2012, when, following a years-long coordinated investigation, the US DOJ, HUD, and 49 state attorneys general announced a $25-billion settlement with the United States' five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses committed during the housing crisis.