April 05, 2021

Consumer Financial Services Practice Digest

6 min

Past Is Prologue? The CFPB Reiterates Its Commitment to Consumers' Ability to Repay Small Dollar Loans

The CFPB has signaled that it is back to business as usual when it comes to certain high-cost consumer loans and "sustained use." As you may recall, in 2017 the Consumer Financial Protection Bureau, then led by Director Richard Cordray, issued its rule on small dollar loans that included, among other things, an "ability to repay" provisions that would have required covered lenders to determine whether borrowers had the financial ability to repay a loan before providing one and which placed limits on consumer reborrowing in the absence of strict underwriting controls. The rule was premised on the notion that failure to consider a borrower's ability to repay these loans constituted an unfair, deceptive, or abusive practice (UDAAP), in violation of the Consumer Financial Protection Act.

Message Received: Supreme Court Narrowly Construes Autodialer Definition

The Supreme Court issued a 9-0 unanimous decision authored by Justice Sotomayor (with Justice Alito writing a concurring opinion) in Facebook, Inc. v. Duguid, resolving the circuit split on what constitutes a prohibited "automatic telephone dialing system" (more often referred to as an "autodialer" or "ATDS") and adopting a narrow definition of ATDS under the Telephone Consumer Protection Act (TCPA). Yesterday's ruling likely provides welcome relief to those subject to the TCPA—at least for the time being.

CFPB Clarifies that the ECOA Protects Sexual Orientation and Gender Identity

A newly effective CFPB Interpretive Rule expands the scope of the Equal Credit Opportunity Act (ECOA) and Regulation B to encompass sexual orientation discrimination and gender identity discrimination. Creditors and others are prohibited from discriminating against consumers based on these characteristics. The prohibition applies to discrimination based on actual or perceived nonconformity with sex-based or gender-based stereotypes and discrimination based on an applicant's associations.

Senate Banking Committee Considers Rohit Chopra's Nomination to CFPB Director

On March 11, 2021, the Senate Committee on Banking, Housing, and Urban Affairs, in a tied vote (12-12), advanced to the Senate floor the nomination of Rohit Chopra to the position of CFPB Director. The committee vote was held after a hearing to consider the nomination, featuring a wide range of topics, largely broken down into key issue areas: disclosures and materiality; market structure; military family and consumer finance protections; housing; student loans; and CFPB authorities.

CFPB Rescinds 2020 Policy Statement on "Abusive" Acts or Practices

The CFPB has rescinded its January 2020 Policy Statement regarding the Bureau's approach to "abusive" acts or practices under the Consumer Financial Protection Act's ("CFPA") prohibition of unfair, deceptive, or abusive acts or practices ("UDAAP"). The "abusive" prong of UDAAP was an addition to the unfairness and deceptive standards that the CFPA imported from the Federal Trade Commission Act. As a new principle without a history of interpretation and guidance, the "abusive" prong of UDAAP has created a level of uncertainty with regard to the scope of the prohibition and the Bureau's enforcement authority.

Navigating CFPB Examinations: Best Practices for Success

With the 2020 election in the books, and the Biden administration moving quickly to implement its priorities, banks, credit unions, and non-bank financial services providers should prepare for increased scrutiny. Throughout the election, the Biden team emphasized the need to reinvigorate federal enforcement of consumer financial protection laws. Now, with the pending nomination of Rohit Chopra to replace Kathleen Kraninger as director of the Consumer Financial Protection Bureau (CFPB), industry should expect a more aggressive CFPB. Mr. Chopra was most recently a Democratic commissioner of the Federal Trade Commission (FTC), where he lobbied for more aggressive efforts to seek consumer redress or injunctive relief from larger, more established businesses.

Mastercard to Directly Support Cryptocurrencies on Its Payment Network – But Not Bitcoin

Mastercard has announced that it will begin supporting select cryptocurrencies directly on its payment network this year. Mastercard made the announcement in February, touting that the change would create "more possibilities for shoppers and merchants," enabling them to move digital value – traditional or crypto – in a new form of payment.

U.S. Anti-Money Laundering Laws Get an Upgrade: Enhanced Authorities, New Regulations, Impact on Correspondent Accounts, Whistleblower Changes, and New Transparency Requirements

The Anti-Money Laundering Act of 2020 (AML Act), enacted as Division F of the National Defense Authorization Act (NDAA) of 2021, substantially modifies the U.S. anti-money laundering (AML) laws. The most comprehensive reform of the Bank Secrecy Act (BSA) since the USA PATRIOT Act in 2001, the AML Act seeks to modernize the U.S. approach to AML and will impact more than just U.S. financial institutions. Here we highlight several of the most significant provisions of the AML Act—corporate transparency/beneficial ownership requirements, subpoena power over foreign banks with U.S. correspondent accounts, enhanced incentives for whistleblowers, and AML modernization.

Fintech Guide to Bank Partnerships: A Practical and Legal Roadmap

Over the past decade, financial technology has revolutionized how financial services are provided to consumers and businesses. Every day, new fintech companies ("fintechs") are launched, offering a range of innovative financial services, including in areas such as banking, payments, lending, and personal finance. While the competitive landscape is diverse and evolving, the regulatory framework remains a challenge for any startup looking to offer financial services. In the United States, financial services are subject to federal and state regulation, and determining compliance requirements on a state-by-state basis, together with obtaining state and territorial licenses to provide such services, presents a significant hurdle in getting to market.

Consumer Financial Services Outlook 2021: Post-Inauguration Day Insights

Consumer financial services providers face an evolving legal and regulatory landscape in 2021. In this webinar, members of Venable's Consumer Financial Services team examined the current state of federal and state consumer financial protection law and policy and outlined what companies need to know about what's ahead. The speakers shared their experiences from the front lines and offered strategies to help navigate the evolving legal and regulatory landscape.

2021 United States Senate Power-Sharing Agreement

The United States Senate is equally divided between 50 Democratic and 50 Republican Senators, with Vice President Harris breaking the tie to give Democrats majority control. Only three other times has an evenly divided Senate occurred, most recently in 2001.

Unlike the House of Representatives, the Senate's organization and governance do not terminate with the adjournment of the previous Congress. As a "continuing body," the leadership of the previous Senate remains in power until the Senate adopts a new organizing resolution. That resolution, however, must secure 60 votes to avoid being filibustered.

Ninth Circuit Rejects Challenge to FTC Administrative Proceedings

While we anxiously await the Supreme Court's decision on whether the FTC can obtain equitable monetary relief pursuant to Section 13(b) of the FTC Act in the AMG case, a defendant's challenge to the FTC administrative litigation process appears to be struggling. As administrative litigation may be used more frequently by the FTC if it loses the AMG case, the case is worth following.

The Return of Earmarks

House Appropriations Committee Chairwoman DeLauro announced that the House will include member requests for community project funding in FY22 appropriations bills as long as they meet certain requirements. New rules governing the House earmark process will expand beyond existing House rules, which they expect will provide for greater transparency and member accountability. We do anticipate that Chairwoman DeLauro will offer additional guidance in the coming weeks beyond what has been provided.