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  • CFPB Requests Comments on Overdraft Disclosures; CFPB Announces Final Language Access Plan; Holds Ceiling at $12.00 for Allowable FCRA Charges

    Agency Rule-Making & Guidance

    On November 15, the CFPB published a request for comment on a proposal to the Office of Management and Budget (OMB) to conduct online testing of point of sale/ATM (POS/ATM) overdraft disclosure forms. In the request, the Bureau invited comments on, (i) “[w]hether the collection of information is necessary for the proper performance of the functions of the Bureau, including whether the information will have practical utility”; (ii) “[t]he accuracy of the Bureau’s estimate of the burden of the collection of information, including the validity of the methods and the assumptions used”; (iii) “[w]ays to enhance the quality, utility, and clarity of the information to be collected”; and (iv) “[w]ays to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.” Comments must be received by January 16, 2018.

    On November 16, the CFPB released the final version of its Language Access Plan (Plan) to provide non-English speaking persons access to its programs and services. The Plan highlights two key language access functions of the Bureau: offering translated consumer-facing brochures and handling complaints from consumers in multiple languages. The Bureau originally proposed the Plan in 2014 (covered previously by InfoBytes). The final Plan is current as of November 13, 2017.

    CFPB also announced on November 16 that the maximum allowable charges for certain disclosures under the Fair Credit Reporting Act (FCRA) will remain at the current level. Each year the original amount referenced in the FCRA must be readjusted (and rounded to the nearest fifty cents) based on the annual percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U). The amount for 2018, based on the annual percentage increase in the CPI-U, remains unchanged at $12.00.

    Agency Rule-Making & Guidance FCRA CFPB Consumer Finance Federal Register Consumer Education

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  • District Court Upholds $60 Million Jury Verdict for Credit Reporting Agency’s Use of OFAC Alert

    Courts

    On November 7, the Northern District Court of California upheld a $60 million jury verdict against a credit reporting agency regarding the use of its OFAC Alert (previously covered by InfoBytes). The verdict stems from a 2012 class action lawsuit in which the plaintiffs allege the defendant had failed to distinguish law-abiding citizens from drug traffickers, terrorists, and other criminals with similar names found on the Treasury Department’s OFAC database. Following the defendants motion for judgment as a matter of law or a new trial, the district court agreed with the jury’s findings that the defendants (i) “willfully fail[ed] to follow reasonable procedures to assure the maximum possible accuracy of the OFAC information it associated with members of the class’’; (ii) “willfully failed to clearly and accurately disclose OFAC information in the written disclosures it sent to members of the class”; and (iii) “failed to provide class members a summary of their FCRA rights with each written disclosure made to them.”

    Courts FCRA OFAC Credit Reporting Agency Consumer Finance

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  • Eleventh Circuit Rules Credit Reporting Agency Did Not Willfully Violate FCRA

    Courts

    In an August 24 opinion, the U.S. Court of Appeals for the Eleventh Circuit held that a credit reporting agency had not interpreted the Fair Credit Reporting Act (FCRA) in an “objectively unreasonable” manner when it included in a plaintiff’s credit report that the plaintiff was an authorized user of her parents’ delinquent credit card account. In doing so, the appellate court upheld the Georgia district court’s decision to dismiss the class action lawsuit over allegations that two credit reporting agencies failed to take reasonable precautions to ensure the accuracy of the plaintiff’s credit score. The appellate court concluded that including the information was a reasonable interpretation of the FCRA obligation to “follow reasonable procedures to assure the maximum possible accuracy” of the reported information—meaning the report must be technically accurate. Because this interpretation was not objectively unreasonable, the plaintiff could not plead that the violations were willful.

    The case concerned a plaintiff who was designated as an authorized user of her parents’ credit card when they became ill. After the plaintiff’s parents died, the account went into default, and the credit card company reported the default to consumer reporting agencies listing the consumer as an authorized user, which caused her credit score to drop by 100 points. The credit card company—responding to the plaintiff’s complaint over the inaccurate information—interceded in the matter with the credit reporting agencies. The information was expunged from the plaintiff’s report and her credit score returned to its prior level. The plaintiff then filed a consumer class action complaint in 2015, contending that the consumer reporting agencies had violated their duty under the FCRA when they failed to take reasonable precautions to ensure the accuracy of her credit score.

    At issue, the appellate court opined, was which interpretation should be applied when determining “maximum possible accuracy,” which, depending on differing court opinions, might mean (i) making certain that any included information is “technically accurate,” or (ii) ensuring the information is not only technically accurate but also not misleading or incomplete. The appellate court asserted that while the first interpretation was a less exacting reading of the FCRA, the plaintiff failed to cite any judicial precedents or agency interpretive guidance advising that reporting authorized user information was a violation. Further, the plaintiff failed to show that the credit reporting agency reported false information.

    Of note, the appellate court determined the plaintiff had shown an “injury in fact” and had standing to sue based on the following reasons: (i) reporting inaccurate credit information “has a close relationship to the harm caused by the publication of defamatory information,” which has a long provided basis as a cause of action; (ii) a concrete injury was allegedly sustained due to time spent resolving the problems resulting from the credit inaccuracies; and (iii) the plaintiff was affected personally because her credit score fell due to the reported information.

    Courts Credit Reporting Agency Appellate Eleventh Circuit FCRA

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  • Ninth Circuit Rules FCRA Plaintiff Has Article III Standing

    Courts

    On August 15, the U.S. Court of Appeals for the Ninth Circuit issued an opinion, on remand from the U.S. Supreme Court, ruling that a consumer plaintiff could proceed with his Fair Credit Reporting Act (FCRA) claims because he had sufficiently alleged a “concrete” injury and therefore had standing to sue under Article III of the Constitution. Robins v. Spokeo, Inc., No. 11-56843, 2017 WL 3480695 (9th Cir. Aug. 15, 2017). By way of background, the plaintiff had alleged that the defendant consumer reporting agency “willfully violated various procedural requirements under FCRA,” and consequently published an inaccurate consumer report on its website that “falsely stated his age, marital status, wealth, education level, and profession” and “included a photo of a different person.” In May 2016, the Supreme Court vacated an earlier Ninth Circuit decision, finding that the court failed to consider an essential element of Article III standing: whether the plaintiff alleged a “concrete” injury. (See previous Special Alert here.) After providing some guidance—including that the plaintiff’s injury must be “real” and not “abstract” or merely “procedural”—the high court remanded to the Ninth Circuit for further consideration. 

    On remand, the court first asked “whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights).” The court answered affirmatively, finding that “the FCRA procedures at issue in this case were crafted to protect consumers’ . . . concrete interest in accurate credit reporting about themselves.” Next, the court asked “whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm to, such interests.” The court again answered affirmatively, finding that the plaintiff sufficiently alleged that he suffered a “real harm” to his “concrete interests in truthful credit reporting.” That is, the plaintiff sufficiently alleged that the defendant “prepared . . . an [inaccurate] report,” “that it then published the report on the Internet,” and that “the nature of the specific alleged reporting inaccuracies” was not “trivial or meaningless,” but instead covered “a broad range of material facts” about the plaintiff’s life “that may be important to employers or others making use of a consumer report.” Finally, the court found that the plaintiff’s allegations were not too speculative, because “both the challenged conduct and the attendant injury have already occurred.” After reaffirming that the plaintiff had adequately alleged the other essential elements of standing, the court remanded to the Central District of California for further proceedings.

    Courts FCRA Appellate Litigation Ninth Circuit U.S. Supreme Court

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  • CFPB Fines National Bank $4.6 Million for FCRA Violations

    Consumer Finance

    On August 2, the CFPB ordered a national bank to pay $4.6 million for allegedly failing to establish adequate policies and procedures for providing consumer deposit account information to nationwide specialty consumer reporting agencies (NSCRAs). The consent order alleges that the bank violated the Fair Credit Reporting Act and Regulation V by failing to provide consumers the results of investigations into their disputes and by withholding the contact information for the consumer reporting company supplying the information used to deny a checking account application. Pursuant to the consent order, in addition to the civil money penalty, the bank must (i) implement policies and procedures to ensure NSCRAs receive accurate consumer deposit account information; (ii) provide consumers with the results of its dispute investigations concerning information furnished to NSCRAs; and (ii) give consumers NSCRA contact information in situations of adverse action.

    Consumer Finance CFPB Enforcement Regulation V FCRA

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  • Fourth Circuit States Violation of FCRA that Fails to Demonstrate a Concrete Injury Not Enough for Standing

    Courts

    On May 11, the U.S. Court of Appeals for the Fourth Circuit issued an opinion vacating a nearly $12 million judgment in a class action brought on behalf of a 69,000 member class, concluding that a credit reporting agency’s decision to list a defunct credit card company—rather than the name of its current servicer—on an individual’s credit report does not, without more, create a sufficient injury under the Fair Credit Reporting Act (FCRA)for purposes of Article III standing. Furthermore, although the lead plaintiff alleged that he suffered a cognizable “informational injury,” in that he was denied the source of the adverse information on the report, the appeals court found that he failed to “demonstrate a concrete injury” as a result of the allegedly incorrect information listed on the credit report. (See Dreher v. Experian Info. Sols., Inc., No. 15-2119, 2017 WL 1948916 (4th Cir. May 11, 2017).)

    The 2014 class action complaint against the credit reporting agency was filed by an individual who—when undergoing a background check for a security clearance—received a credit report that listed a delinquent credit card account with a creditor that had transferred the debt to a new servicer that was not listed as a source of information. When servicing the defunct company’s accounts, the new servicer had decided to do business using the creditor’s name, and directed the credit reporting agency to continue to reflect that name on the tradeline appearing for those specific accounts on its credit reports. The plaintiffs asserted that the credit reporting agency “deliberately [withheld] and inaccurately [stated] the identity of the source of reported credit information,” in violation of the FCRA. The credit reporting company sought summary judgment on the claims, arguing that the individual and the class lacked standing under the FCRA. However, the district court ruled in favor of the member class finding that the credit reporting company “committed a willful violation of . . . the [FCRA].”

    In vacating the district court’s ruling, the Fourth Circuit opined that under the FCRA, a plaintiff “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” The Fourth Circuit concluded that the individual could not clear the first hurdle. To establish “injury in fact,” the plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized. While the plaintiff alleged that the credit reporting agency had violated the FCRA by failing to “clearly and accurately disclose to the consumer . . . [t]he sources of the information [in the consumer’s file at the time of the request],” the Fourth Circuit concluded that the statutory violation alone did not create a concrete informational injury sufficient to support standing. “Rather, a constitutionally cognizable informational injury requires that a person lack access to information to which he is legally entitled and that the denial of that information creates a ‘real’ harm with an adverse effect.” In this instance, “the account had no legitimate effect on the [plaintiff’s] background check process, and [t]hus receiving a creditor’s name rather than a servicer’s name—without hindering the accuracy of the report of efficiency of the credit report resolution process—worked no real world harm.” Instead, the Fourth Circuit categorized the plaintiff’s allegations as chiefly “customer service complaints”—a type of harm unrelated to those Congress sought to prevent when enacting the FCRA.

    Courts FCRA Appellate Class Action

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  • Proposed FCRA Liability Harmonization Act Seeks to Limit Consumer Remedies in Class Action Suits and Bring Consistency to Consumer Laws

    Federal Issues

    On May 4, Rep. Barry Loudermilk (R-Ga.) introduced legislation that would limit the damages consumers could be awarded in class actions under the Fair Credit Reporting Act (FCRA) and eliminate the availability of punitive damages in such cases. As set forth in a May 8 press release issued by Rep. Loudermilk’s office, the FCRA Liability Harmonization Act (H.R. 2359) would “protect the right of consumers to pursue statutory damages and the right to just compensation for actual harm.”  Rep. Loudermilk, a member of the Financial Services Committee, has argued that eliminating the availability of punitive damages and capping class action damages would enable FCRA to be consistent with other consumer protection laws such as TILA, FDCPA, ECOA, and EFTA,  all of which have caps on punitive damages. A comment letter from 12 organizations in the consumer financial services industry expressed support for the proposed measure on similar grounds. Among other things, the letter notes that the absence of a cap on class action recoveries under FCRA—which allows plaintiffs to pursue unlimited damages, including punitive damages and attorneys’ fees—forces businesses to settle suits over “technical” or “speculative” violations in order to avoid the danger of excessive damage awards. The proposed legislation is co-sponsored by Rep. Edward Royce (R-Cal.), Rep. Ted Budd (R-N.C.), Rep. Peter King (R-N.Y.), and Rep. Ann Wagner (R-Mo.).

    Federal Issues FCRA Class Action Congress

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  • CFPB Denies Data Provider’s Petition to Set Aside CID

    Consumer Finance

    In a Decision and Order released last month, the CFPB denied a Petition to set aside or modify a civil investigative demand (CID) directed to a data provider (“Petitioner”). The order also directed Petitioner to produce responsive information within 10 calendar days. 

    The CFPB originally issued the CID on January 5 in connection with its efforts to gather information about Petitioner’s business, products, services, and operations. According to Petitioner, the stated purpose of the CID “purport[ed] to exercise jurisdiction over [Petitioner] under the Fair Credit and Reporting Act (‘FCRA’) or under ‘any other federal consumer financial law.’” On January 25, Petitioner moved to set aside or modify the CID arguing, among other things, that: (i) the Bureau lacks jurisdiction over Petitioner because Petitioner is neither a consumer reporting agency (“CRA”), nor a “covered person” or “service provider” under a “federal consumer financial law”; (ii) the CID’s Notification of Purpose is impermissibly vague in that it fails to adequately state the “nature of the conduct constituting the alleged violation” and/or “the provision of law applicable to such violation”; and (iii) the CID is “impermissibly overbroad and seeks information which cannot possibly be related to or reasonably relevant to the inquiry at hand (which itself remains unclear and undefined).”

    Ultimately, the CFPB determined that none of three objections raised by Petitioner “warrant[ed] setting aside or modifying the CID.” In response to the argument that the CFPB lacks jurisdiction, the Bureau interpreted its authority under the Consumer Financial Protection Act to include investigative authority to issue CIDs to “any person” who may have information “relevant to a violation” of any federal consumer financial law, regardless of whether that person or entity is subject to CFPB authority. In response to Petitioner’s argument regarding the vagueness of the CID’s Notification of Purpose, the Bureau stated that the argument fails because “it is well settled that the boundaries of an agency investigation may be drawn ‘quite generally.’” Finally, as to Petitioner’s objection that the CID was overbroad and/or sought irrelevant information, the Bureau concluded that this was merely a restatement of the jurisdictional argument and fails for the same reasons.  The CFPB explained that the question of whether Petitioner is properly subject to CFPB authority need not be answered at the outset of an investigation, because it is the type of question “the investigation is designed and authorized to illuminate.”

    Consumer Finance CFPB CIDs FCRA Consumer Reporting Agency

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  • CFPB Fines Mortgage Lender $3.5 Million for Paying Illegal Kickbacks

    Courts

    On January 31, the CFPB issued consent orders against four entities—a mortgage lender, two real estate brokers, and a mortgage servicer—alleged to have participated in an illegal mortgage business referral scheme. According to the first order (2017-CFPB-0006), the mortgage lender violated RESPA when it, among other things, (i) paid for referrals pursuant to various agreements with real estate brokers and other counterparties; (ii) encouraged brokers to require consumers to “prequalify” with the lender; and (iii) split fees with a mortgage servicer to obtain consumer referrals. Based on these and other allegations, the CFPB ordered the lender to pay a $3.5 million civil money penalty. In addition, the Bureau issued consent orders against the two real estate brokers and the mortgage servicer that allegedly participated in the kickback scheme (see 2017-CFPB-0008, 2017-CFPB-0009, and 2017-CFPB-0007).  Notably, the Bureau alleges that the servicer also violated FCRA by ordering “trigger leads” from credit bureaus so that it could market the lender to consumers. The real estate brokers and servicer were ordered to pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties. Read the special alert issued February 1 on InfoBytes.

    Courts Mortgages Consumer Finance CFPB FCRA RESPA

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  • CFPB Fines Mortgage Servicers $28 Million, Claims Failure to Provide Foreclosure Relief

    Courts

    On January 23, the CFPB announced that it had entered consent orders (2017-CFPB-0004 , 2017-CFPB-0005), against two affiliated mortgage servicers, claiming the companies had misled homeowners seeking foreclosure relief. One of the respondent companies is alleged to have, among other things, burdened consumers with excessive and unnecessary paperwork demands in response to foreclosure relief applications thereby violating both RESPA and the Dodd-Frank Act’s prohibition on deceptive acts or practices. The Bureau is therefore requiring the company to pay an estimated $17 million to compensate affected consumers and to pay a civil penalty of $3 million.

    As for the second respondent, the CFPB alleged that it failed to consider payment deferment applicants for foreclosure relief options, misled consumers about the impact of deferring payments, charged certain borrowers for credit insurance that should have been cancelled, prematurely cancelled credit insurance for other borrowers, provided inaccurate information to credit reporting agencies, and failed to investigate consumer disputes. Finding violations under RESPA,  FCRA, and various “deceptive acts or practices,” the Bureau is requiring the second company to refund approximately $4.4 million to consumers and to pay a civil penalty of $4.4 million.

    Courts Mortgages Consumer Finance CFPB Dodd-Frank FCRA RESPA

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