Supreme Court Vacancy Leaves Spokeo Outcome Even More Uncertain


The consumer financial services industry is wondering how the sudden passing of United States Supreme Court Justice Antonin Scalia will affect the pending Spokeo, Inc. v. Thomas Robins case. Spokeo is a key case dealing with whether a class action lawsuit may be brought by a consumer who suffered no actual injury, based solely on a claimed technical statutory violation.

This issue affects providers operating under the Fair Credit Reporting Act (FCRA), the Real Estate Settlement Procedures Act (RESPA), the Telephone Consumer Protection Act (TCPA), and other similar statutes. Because many such laws provide for monetary penalties recoverable by affected consumers, the claims are often brought as class action lawsuits, exposing businesses to the threat of overwhelming liability—even if no one can point to any harm caused by the supposed violation. Continue reading this entry

Student Aid Enforcement Unit Formed To Protect Students, Borrowers, And Taxpayers


Today the Obama Administration’s Department of Education announced the creation of a Student Aid Enforcement Unit to respond more quickly and efficiently to allegations of illegal actions by institutes of higher education. Acting Secretary of Education, John B. King, stated, “When Americans invest their time, money, and effort to gain new skills, they have a right to expect they will actually get an education that leads to a better life for them and their families. When that doesn’t happen, we all pay the price. So let me be clear: schools looking to cheat students and taxpayers will be held accountable.” Continue reading this entry

CFPB Director’s Divisive View of RESPA Limitations Period Central to Ongoing UDAAP Action


In the ongoing Integrity Advance enforcement action by the Consumer Financial Protection Bureau (“CFPB” or “Bureau”), the Office of Enforcement this January filed a brief arguing that its claims for alleged unfair, deceptive, or abusive acts or practices (“UDAAP”) in a payday lending case are not subject to the three-year statute of limitations (“SoL”) set forth in the Consumer Financial Protection Act (“CFPA”), because the Bureau is proceeding administratively rather than in federal court. Enforcement relies on a ruling issued by CFPB Director Richard Cordray last year in his controversial PHH decision, which is currently on appeal before a U.S. Court of Appeals.

This view–that the Bureau is subject to a maximum time limit in which to bring an enforcement action in court, but virtually no time limit in which to bring the same action administratively—has major ramifications for the consumer financial services industry and future CFPB Enforcement actions. Enforcement has complete discretion when deciding whether to pursue claimed violations in an administrative forum or as a complaint in federal court, and it has access to the same remedies, including civil money penalties, in either forum. But under the Bureau’s approach, an administrative action would give the Bureau a longer look-back period and increase a defendant’s exposure to penalties for claimed violations.

Continue reading this entry

Significant Exception to TCPA Likely to Pass

Congress is about to pass the Bipartisan Budget Agreement of 2015. The budget agreement includes significant amendments to the Telephone Consumer Protection Act. As proposed, the TCPA will soon permit autodialed calls to cell phones, without the called party’s prior express consent, if the call is made solely to collect a debt owed to or guaranteed by the United States. This would seem to cover Federal Direct Student loans, Perkins loans, Federal Housing Administration (“FHA”) loans and Veterans Administration loans. The budget agreement also would authorize the Federal Communications Commission, in conjunction with the Department of the Treasury, to issue rules and regulations to protect consumers from being harassed or contacted unreasonably, such as restricting or limiting the number and duration of calls.

If passed these amendments could have a serious impact on borrower default. Many lenders believe (and data support the view) that defaults will decline if lenders have reasonable, cost effective ways to contact borrowers. Once a borrower is reached, options to default can be explained and default often avoided. Following the FCC’s disappointing order this summer, this is welcome news for covered lenders.

A Response to the CFPB’S Recent Compliance Bulletin on MSAs


On October 8, 2015, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a Compliance Bulletin on RESPA Compliance and Marketing Services Agreements (“MSAs”)(“Compliance Bulletin”).  The Compliance Bulletin’s message that MSA participants face “substantial risks” under RESPA has reverberated and caused buzz since it was issued.

This response discusses some of the more puzzling and illogical aspects of the Compliance Bulletin.  In doing so, we address questions left unanswered by the Bureau and suggest a framework for properly structuring MSAs to minimize risk. Continue reading this entry