February 01, 2021

Consumer Financial Services Practice Digest

5 min

Consumer Financial Services Outlook 2021: Post-Inauguration Day Insights

Members of Venable's Consumer Financial Services Practice reviewed the current state of federal and state consumer financial protection law and policy and outlined what you and your company need to know about what's ahead. The speakers shared their experiences from the front lines and offered strategies to help you navigate the evolving legal and regulatory landscape.

Budget Reconciliation in 2021: How to Avoid the Filibuster and Enact Policy

The Senate filibuster's 60-vote threshold is likely to preclude passage of a sweeping COVID-19 deal along the lines of the $1.9 trillion package proposed by the Biden administration. Congressional Democrats, in the coming weeks, are likely to advance a sizable but more targeted COVID-19-related relief package using the budget reconciliation process. That process provides the Senate the ability to fast-track certain types of legislation with only 51 votes (Democrats hold 50 seats in the Senate and Vice President Harris would be the tie breaker).

President Biden Selects Rohit Chopra to Lead CFPB and Appoints Acting Director

President Joseph Biden has nominated Rohit Chopra to serve as the director of the CFPB. Mr. Chopra has served as an FTC commissioner since his appointment in 2018. The nomination marks a return to the CFPB for Mr. Chopra, who previously served as assistant director of the CFPB from the Bureau's founding in 2010 through 2015. While serving as assistant director, he was appointed by the Treasury secretary to serve as the CFPB's first Private Education Loan Ombudsman. We expect that Mr. Chopra's tenure as Bureau director will usher in a more aggressive consumer protection agenda.

Potential Use of the Congressional Review Act in President Biden's First 100 Days

The Congressional Review Act (CRA) is a 1996 law that grants Congress the ability to void federal agency rulemakings. Prior to 2017, the CRA had been used only once to overturn a regulation, but it was used 16 times by the Republican-controlled Congress under President Trump to overturn Obama-era regulations. Given this, it is being eyed more carefully than in the past by the incoming Democratic-controlled Congress under Presiden Biden as a tool to reverse certain of the Trump-era rules.

So…What If the FTC Loses AMG Capital Management v. FTC?

The Supreme Court recently heard oral argument in AMG Capital Management v. FTC. As we’ve previously discussed, the Supreme Court is set to decide whether Section 13(b) of the FTC Act, which expressly grants the FTC the right to obtain “a permanent injunction,” also grants the FTC the authority to obtain “equitable monetary relief.” During oral argument, certain justices expressed doubt that the plain language of Section 13(b), when viewed in the context of the entirety of the FTC Act, authorized the FTC to obtain “equitable monetary relief” when proceeding under Section 13(b). While none of us can predict the future, after last Wednesday’s oral argument, we can’t help but wonder: What will happen if the FTC loses? We have outlined the potential avenues for the FTC if the decision doesn’t go its way.

Beyond the Patch: CFPB Finalizes Ability to Repay/Qualified Mortgage

The Consumer Financial Protection Bureau (CFPB or the Bureau) finalized amendments to the Ability-to-Repay/Qualified Mortgage (ATR/QM) rules that alter the criteria for a loan to be considered a QM and move past the so-called GSE Patch. The final rules were published in the Federal Register on December 29, 2020. Starting July 1, 2021, creditors will be required to comply with the new general QM rules and criteria established by the Bureau.

Court Vacates Two Provisions of the Prepaid Rule

In a case brought by Paypal, Inc. under the Administrative Procedure Act (APA) and the First Amendment, a D.C. district court has sided with PayPal and vacated two provisions of the CFPB's final rule regulating prepaid accounts under the Electronic Fund Transfer Act (EFTA/Regulation E) and the Truth In Lending Act (TILA/Regulation Z) (the "Prepaid Rule") – the final rule's short-form disclosure requirement and the 30-day credit linking provision.

Advanced Sweepstakes and Promotions

Melissa Steinman, a partner whose practice focuses on advertising, sweepstakes, loyalty, and other types of promotional programs, explained the ins and outs of this constantly evolving area of law, so that when your company considers its promotion plans and strategic relationships, you will be well equipped to navigate this highly regulated space. Learn what it takes to run a promotion that achieves your marketing goals while staying legally compliant.

COVID-19 Recent News

SBA Releases Applications and Issues New Guidance for First Draw and Second Draw PPP Loans

On Wednesday, January 6, the Small Business Administration (SBA) released two interim final rules (IFRs) incorporating changes to the Paycheck Protection Program as directed by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act ("Economic Aid Act") and addressing the new Second Draw loan program. (Our release summarizing the Economic Aid Act can be reviewed here.) In addition, on January 8, 2021, the SBA released a revised First Draw borrower application form and a Second Draw borrower application form, as well as lender application forms (here and here).

Congress Updates and Expands the Paycheck Protection Program

Title III of Division N of the Consolidated Appropriations Act of 2021 (the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act or the "Act") adds a new subsection (a)(37) to the Small Business Act 7(a) loan program, describing new parameters for borrowers seeking to receive a second PPP loan (a "second draw" loan). The Act appropriates $284.45 billion for both new Paycheck Protection Program (PPP) loans under existing subsection (a)(36) and "second draw" PPP loans under new subsection (a)(37), with $35 billion explicitly set aside for first-time PPP borrowers. In addition, the Act appropriates $20 billion for "targeted EIDL advance[s]," $15 billion for "shuttered venue operators" (read our alert on the Shuttered Venue program here), $3.5 billion for loans made under Section 325 (extension of debt relief program), and $2.05 billion for certain other programs.

Congress Provides $15 Billion in Grants to Shuttered Venue Operators

Title III of Division N of the Consolidated Appropriations Act (the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, or "the Act") appropriates $15 billion in grants for "Shuttered Venue Operators," which reflects certain provisions of the Save Our Stages Act and is designed to help keep afloat performance art organizations and museums that have been significantly impacted by COVID-19 restrictions.