September 13, 2019

Consumer Financial Services Practice Digest

4 min

Loan Company Financer Enforcement Action Highlights Consumer Financial Services Law Compliance and Due Diligence

The New York Attorney General (NY AG) and Superintendent of Financial Services have entered into a settlement with an investor over financing and assistance to a rent-to-own home company alleged to have engaged in illegal, unlicensed mortgage-lending activity.

Under the settlement, the investor will pay $2.4 million in consumer restitution ($20,000 for each identified property), a civil penalty of $250,000, and additional relief of about $123,800, and will cooperate with DFS and the NY AG's Office in their litigation against the rent-to-own company, its affiliates, and its CEO.

Robert Cameron Appointed as CFPB Private Education Loan Ombudsman

The CFPB has announced the appointment of Robert G. Cameron to serve as the Bureau's Private Education Loan Ombudsman. Cameron replaces Seth Frotman, who previously served as CFPB Student Loan Ombudsman and resigned in August 2018.

Cameron joins the CFPB from the Pennsylvania Higher Education Assistance Agency (PHEAA), a student loan servicer, where he oversaw litigation, compliance, and risk mitigation efforts as deputy chief counsel. The Bureau's press release notes that Cameron has also served in Pennsylvania's Treasury Department and in the Governor's Office of General Counsel, and is a colonel and staff judge advocate for the Pennsylvania Army National Guard.

California DBO Proposed Regulations Implementing Commercial Financing Disclosures

California's SB 1235 (Chapter 1011, Statutes of 2018) requires lenders, brokers, and other "providers" to make certain disclosures in connection with offers for commercial financing. SB 1235 requires the California Department of Business Oversight (DBO) to adopt regulations disclosing certain information to businesses seeking financing. The DBO had requested public comment on draft regulations and sample disclosure forms to implement SB 1235. Comments were due on September 9, 2019.

Website Accessibility Claims on the Rise

According to some estimates, the number of website accessibility lawsuits filed in federal court nearly tripled from 2017 to 2018, with no indication of slowing down in 2019. We have personally seen a growing number of lawsuits and demand letters threatening lawsuits over accessibility for persons with disabilities over the past few months. Businesses from a wide variety of industries have been affected, and as the number of plaintiff-friendly opinions stack up, many businesses are asking: Does our company website comply with the Americans With Disabilities Act?

Fintech Charter Round 2: OCC Again Dodges CSBS Challenge

For the second time, the District Court for the District of Columbia dismissed the Conference of State Bank Supervisors' (CSBS) challenge to the Office of the Comptroller of the Currency (OCC) proposal to issue special-purpose national bank charters tailored to fintech companies (fintech charter). In an effort to cure "the original jurisdictional deficiency" of its first challenge, the CSBS sought to rely on two new developments: (1) Joseph Otting's confirmation as the Comptroller of the Currency, and (2) the OCC's July 31, 2019 finalization of its fintech charter licensing manual supplement and procedures. However, the Court held that CSBS "still fails to plead an injury in fact that is either actual or imminent" and fails to "identify which particular member of the organization faces imminent injury."

Forum Selection and Class Action Waivers in Loan Agreements Found Unenforceable by the Eleventh Circuit Pursuant to Georgia Law

Lenders to Georgia consumers may no longer be able to rely on out-of-state forum selection clauses and class action waivers in payday and consumer loan agreements. The Eleventh Circuit has affirmed that Georgia’s Payday Lending Act (PLA) and the Georgia Industrial Loan Act (GILA) supersede contrary provisions in loan agreements. The PLA prohibits lenders from using out-of-state forum selection clauses, and both the PLA and GILA expressly permit class actions.

No Restitution for the Weary: Seventh Circuit Limits FTC’s Ability to Seek Restitution

The Seventh Circuit issued a decision in August that guts a key part of the FTC's enforcement arsenal – the ability to obtain equitable monetary relief from defendants when the FTC challenges conduct in federal court under Section 13(b) of the FTC Act. Courts have increasingly placed limits on the FTC's ability to invoke Section 13(b) to obtain monetary relief; and this case brings those issues to a head. The case, FTC v. Credit Bureau Center, breaks with precedent and gives rise to a circuit split.