May 04, 2021

Consumer Financial Services Practice Digest

4 min

Now, It's Personal: Individual Liability in Recent CFPB Enforcement Actions

New Consumer Financial Protection Bureau leadership is showing that it means business, and financial services companies are going to take it personally. Former Bureau Director Kathy Kraninger resigned on January 20, 2021, at the behest of the Biden administration, thereby paving the way for the appointment of Acting Director Dave Uejio. Although President Biden nominated FTC Commissioner Rohit Chopra as bureau director on January 18, 2021, it is widely expected that Chopra will not receive a Senate confirmation vote until President Biden nominates and the Senate confirms a replacement for departed FTC Chairman Joseph Simons. Until then, Acting Director Uejio has pledged to ensure a smooth transition for Commissioner Chopra.

The Impact of AMG Capital Management on Consumer Financial Services Enforcement

In a unanimous opinion on April 22, 2021, the United States Supreme Court held in AMG Capital Management, LLC v. Federal Trade Commission that Congress did not authorize the Federal Trade Commission (FTC) to obtain equitable monetary relief pursuant to its authority under Section 13(b) of the Federal Trade Commission Act (FTCA) to obtain an injunction. While much of the reaction has understandably focused on the decision's impact on the FTC, AMG Capital also will have a substantial impact on the Consumer Financial Protection Bureau (CFPB or the Bureau). The CFPB and the FTC have co-extensive enforcement jurisdiction as to nonbanks and many of the consumer finance laws. The FTC and the CFPB also are similarly authorized to investigate and enforce their respective prohibitions against unfair or deceptive acts and practices.

CFPB Seeks Delay in Effective Date of the Debt Collection Final Rule

The Debt Collection Final Rules, which have an effective date of November 30, 2021, may be postponed by 60 days until January 29, 2022, the Consumer Financial Protection Bureau (CFPB) announced on April 7, 2021.

The CFPB said it proposed extending the effective date of the Debt Collection Final Rules issued under the Fair Debt Collection Practices Act (FDCPA) "to afford stakeholders additional time to review and, if applicable, to implement" the rules.

CFPB's Annual Report Highlights the Pandemic's Impact on Consumer Complaints

As the CFPB and other regulators continue COVID-19-related look-back reviews and ramp up enforcement actions dealing with pandemic issues, consumer complaints from this period will be an important indicator of where the Bureau and others may focus. The CFPB's 2020 Annual Report highlights the agency's consumer complaint activities in 2020, focusing on the impact of the COVID-19 pandemic on consumers. Acting Director David Uejio described the last year as "unprecedented," as reflected in the uptick in consumer complaints. Indeed, the Bureau received more than 540,000 consumer complaints in 2020, nearly twice as many as the 300,000 complaints that the Bureau typically handles in a year.

CFPB Enforcement and the Biden Administration

Enforcement and litigation directed at the consumer financial services industry are expected to increase under the Biden administration. In this webinar, our Financial Services attorneys discussed which changes to expect and how this mandate to increase enforcement from the Biden administration will affect businesses.

Illinois Joins States Capping Consumer Loan Interest Rates at 36%

Through the recent Predatory Loan Prevention Act (PLPA), which imposes a 36% APR cap on interest rates for consumer loans under $40,000, Illinois joins 18 other states and the District of Columbia in capping interest rates on consumer loans at 36% or less. The PLPA covers payday loans, auto title loans, and installment loans, and encompasses open-end lines of credit and closed-end loans. The PLPA is modeled on the federal Military Lending Act (MLA) and relies upon definitions established by the MLA. Like the MLA, the PLPA takes an "all in" approach to calculating APR. Thus, the calculation includes periodic interest, finance charges, credit insurance premiums, fees for participating in any credit plan, fees for ancillary products sold in connection with the loan, fees for debt cancellation or suspension, and, under some circumstances, application fees.

AI in Financial Services: Federal Banking Agencies Request Input from the Industry Regarding Their Use of Artificial Intelligence

On March 29, 2021, the federal banking agencies issued a Request for Information (RFI) from the industry and the public regarding the use of artificial intelligence (AI), including machine learning, as part of financial services activities, such as for fraud prevention, personalization of customer services, and credit underwriting.

The SBA's New Restaurant Revitalization Fund Guidance: A Tantalizing Appetizer

Restaurants and other dining establishments may soon feast on grant funds designed for that industry, according to the Small Business Administration (SBA). As we have noted previously, section 5003 of the American Rescue Plan Act of 2021 established the Restaurant Revitalization Fund (RFF), a $28.6 billion grant program for qualifying dining establishments, referred to as "eligible entities." This alert highlights new information about this grant program based on fresh guidance from the SBA.