February 21, 2020

Consumer Financial Services Practice Digest

3 min

CFPB Sets Guidelines for UDAAP "Abusive" Authority

As promised by Director Kathleen Kraninger, the CFPB has provided guidance as to how it will exercise its Enforcement and Supervisory authority relating to the "abusive" prong of its ability to prohibit unfair, deceptive, or abusive acts or practices (UDAAP). The recently released Statement of Policy Regarding Prohibition on Abusive Acts or Practices solidifies the CFPB's approach to making sure that all industry actors know the rules within which they can operate.

And the Rest(itution) Is History: Absence of Consumer Redress from Recent CFPB Settlements Criticized by Democrats

Congressional Democrats have criticized the CFPB for entering into settlements that contained no requirement that the respondent provide restitution to consumers and seek investigation by the agency's Inspector General. The CFPB's focus on civil money penalties and disgorgement may lead to more targeted relief imposed on parties to enforcement actions.

CFPB and Department of Education Reengage with New Memorandum of Understanding

The CFPB and the Department of Education have reengaged on consumer complaint sharing in a new Memorandum of Understanding (MOU). The MOU fills the gap left when the agencies' prior MOUs were rescinded by the Department of Education (ED) in 2017. The new MOU places the primary handling of consumer complaints regarding federal student loans with the ED.

CFPB Announces Selection of Enforcement Director

The CFPB has named Thomas Ward to lead the enforcement division as the Assistant Director for Enforcement. Mr. Ward will replace Cara Petersen, who has been serving in an acting capacity since May 2019.

Loan Comparison Lead Gen Site Settles with FTC over Deceptive Pay-to-Play Practices

Last week, the FTC entered into a settlement with LendEDU, a lead generation website that compares and ranks student loan and other financial products, and three of its officers. According to the FTC, LendEDU heavily promoted its website to consumers as offering "objective," "accurate," and "unbiased" product information, when, instead, it offered higher rankings and ratings to companies that paid for placement — a practice known as "pay-to-play." The FTC uncovered multiple emails between LendEDU's employees and advertisers demonstrating the advertiser's ranking was clearly based on the amount it paid LendEDU per click.

FTC Aims to Shake Up Endorsements, Seeks Public Comment on Its Endorsement Guides

The FTC has issued a Proposed Notice requesting public comment on whether to make changes to its Endorsement Guides as part of the agency's periodic retrospective review. This review will serve as a key opportunity for industry participants to shape what happens next by showing what they are seeing in the marketplace when it comes to endorsements and testimonials, consumers' understanding of them, and the effects of new technology and platforms.

The Current State of the TCPA's "Automatic Telephone Dialing System" Definition

With its relatively low pleading requirements and high statutory damages ($500 per violative call or text message, which can be trebled to $1,500 if the violation is deemed by the court to be "willful or knowing"), the Telephone Consumer Protection Act (TCPA) has quickly become a favorite statute amongst the plaintiffs' class action bar. In recent years, plaintiffs in TCPA class actions have extracted settlements that approach the $100 million mark, and just a few months ago, an Oregon jury returned a verdict against a multi-level marketing company that sells weight-loss products and other nutritional dietary supplements in the amount of $925 million, arising out of 1,850,436 unsolicited telemarketing calls the defendant placed to the class.