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  • Texas Passes Law Repealing Vehicle Protection Product Regulatory Act

    State Issues

    On June 15, Texas Governor Greg Abbott signed SB 2065. The law modifies a number of motor vehicle-related regulations and licensing requirements. Specifically, the law:

    • eliminates the Vehicle Protection Product Act;
    • abolishes the Vehicle Protection Product Warrantor Advisory Board;
    • requires the warrantor of a vehicle protection product to pay expenses to the person who purchases the product or system if loss or damage occurs due to failure of the product or system;
    • prohibits a retail seller from requiring a vehicle buyer—“as a condition of a retail installment transaction or the cash sale of a commercial vehicle”—to buy a vehicle protection product that is not installed on the vehicle at the time of the transaction, classifying this violation as a “false, misleading, or deceptive act or practice” actionable under the Deceptive Trade Practices-Consumer Protection Act; and
    • eliminates the licensing requirements for boot operators and boot companies, but requires a booting company to remove a boot within an hour of being contacted by the owner or forfeit all removal fees.

    The law takes effect September 1.

    State Issues Auto Financing State Legislation Consumer Finance Lending Consumer Lending Licensing

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  • Florida Adds Virtual Currency to Anti-Money Laundering Law

    State Issues

    On June 23, Florida Governor Rick Scott signed H.B. 1379, which will incorporate virtual currency into the Florida Money Laundering Act. Specifically, the Bill adds virtual currency to the list of currency and negotiable instruments classified as “monetary instruments” under the Act. In addition, virtual currency will be included in the definitions section as a “medium of exchange in electronic or digital format that is not a coin or currency of the United States or any other country.” The law goes into effect on July 1.

    State Issues State Legislation Bitcoin Anti-Money Laundering Virtual Currency

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  • CFPB Sues Credit Repair Companies for $2 Million

    Courts

    On June 27, the CFPB filed two complaints in the District Court for the Central District of California against several credit repair companies and affiliated individuals. The CFPB alleged that these defendants violated the Consumer Financial Protect Act and the Telemarketing Sales Rule by charging consumers illegal fees and misleading consumers about services (see complaints here and here).

    According to a CFPB press release, the defendants allegedly “[c]harged illegal advance fees” such as initial consultation fees, and set-up fees prior to providing certain services. Defendants also allegedly “[f]ailed to disclose limits on ‘money-back guarantees’” and “[m]isled consumers about the benefits of their services” by suggesting they could remove negative information from credit reports and “substantial[ly] increase” credit scores.

    The CFPB submitted a proposed final judgment for each suit. In the first suit, the CFPB proposed a civil money penalty of over $1.5 million, and restrained defendants from working in credit repair services or maintaining an ownership interest in any company that provides credit repair services for a period of five years. In the second suit, the CFPB sought similar injunctive relief, and also proposed “equitable monetary relief in the form of disgorgement . . . in the amount of $500,000.”

    Courts Consumer Finance Enforcement CFPB Litigation Credit Scores CFPA Telemarketing Sales Rule

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  • Ohio Enacts Consumer Installment Loan Act

    Consumer Finance

    On June 13, Ohio Governor John R. Kasich signed into law S.B. 24, the Ohio Consumer Installment Loan Act (CILA). According to a blog post on the Ohio senate majority caucus’ website, CILA aims to “clarify Ohio's installment lending laws to help eliminate confusion for consumers and lenders as well as simplify the role of industry regulators.” CILA applies to loans that, among other requirements, exceed a term of six months, generally require equal monthly payments, are not secured by real property, are not covered by any other Ohio loan laws, and have a maximum interest rate of 25 percent (or 28 percent for an open-end loan). CILA also provides for regulation and lender licensing by the state’s Division of Financial Institutions in the Department of Commerce. The law goes into effect on July 1.

    Consumer Finance State Issues Installment Loans Lending NMLS State AG State Legislation

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  • Credit Reporting Agency Assessed Damages of $60 Million for FCRA Violations

    Courts

    On June 20, a federal jury found that a major international credit reporting agency had violated the Fair Credit Reporting Act (FCRA), awarding damages of $60 million. When performing credit checks, the agency allegedly had failed to distinguish law-abiding citizens from drug traffickers, terrorists, and other criminals with similar names found on the Treasury Department’s Office of Foreign Assets Control database, sometimes confusing plaintiffs with individuals on the watch list. The jury determined that the company (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.” The class members were awarded just under the maximum for statutory damages, in addition to punitive damages of more than six times the statutory amount.

    Courts Fair Credit Reporting Act Treasury Department OFAC

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  • CFPB Issues Semi-Annual Report to Congress

    Federal Issues

    On June 26, the CFPB issued its eleventh semi-annual report to Congress, covering the period October 1, 2016 through March 31, 2017. The report highlights various supervisory and enforcement actions, regulations, and other guidance. The report focuses on Regulations E and Z, which “create a comprehensive set of consumer protections for prepaid products.” In addition, the report notes ongoing efforts to develop rules with respect to payday loans, auto title loans, installment loans, arbitration agreements, and overdraft programs.

    Federal Issues Agency Rule-Making & Guidance Consumer Finance Enforcement Congress

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  • Data Breach Lawsuit Settled for $115 Million

    Privacy, Cyber Risk & Data Security

    On June 23, one of the nation’s largest health insurers agreed to pay $115 million to settle a data breach class action suit pending in the U.S. District Court for the Northern District of California. In 2015, the insurer announced that it had been hacked and that customer information had been compromised. On June 23, Plaintiffs submitted to the court a memorandum in support of the settlement. The settlement, if approved by the court, will provide almost 80,000 proposed class members with extended credit monitoring for at least two years. Additionally, the settlement will require the insurer to “implement or maintain meaningful, specific changes to its data security practices that directly address the security elements that Plaintiffs believe contributed to the breach,” including hiring independent consultants to perform annual IT risk assessments and compliance reviews, and providing the results of those audits to Plaintiffs’ counsel.

    Privacy/Cyber Risk & Data Security Fintech Data Breach Consumer Finance

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  • House Committee Okays Five Additional Flood Insurance Bills

    Federal Issues

    On June 21, the House Financial Services Committee (Committee) approved changes to the National Flood Insurance Program (NFIP), passing five additional bills. As previously reported in InfoBytes, the committee passed two flood insurance measures on June 15. The approval of these latest bills completes a seven-bill package to reauthorize the NFIP.

    According to the committee’s press release, the five newly passed bills include:

    H.R. 2875 ,the “National Flood Insurance Program Administrative Reform Act of 2017”— introduced by Rep. Nydia Velazquez (D-N.Y.)— is intended to help NFIP policyholders when challenging claim denials and to also cut down on claim fraud. The bill passed in a 58-0 vote.

    H.R. 1558, the “Repeatedly Flooded Communities Preparation Act” —introduced by Rep. Ed Royce (R-Cal.)—was approved by the committee in a voice vote. The bill will “ensure community accountability for areas repetitively damaged by floods” by requiring these flood-prone areas to design mitigation plans.

    H.R. 1422, the “Flood Insurance Market Parity and Modernization Act”— introduced by Rep. Dennis Ross (R-Fla.)—allows homeowners to use private flood insurance to satisfy the flood insurance mandate, if the private policies are sufficiently similar to NFIP insurance policies. This bill passed by a vote of 58-0.

    H.R. 2246, the “Taxpayer Exposure Mitigation Act of 2017”—introduced by Rep. Blaine Luetkemeyer (R-Mo.)—eliminates the requirement that commercial properties located in flood hazard areas must maintain flood insurance coverage.  Additionally, the measure will “provide for greater transfer of risk . . . to private capital and reinsurance markets,” and will allow state and local governments to develop their own flood maps. The committee approved the bill in a 36-24 vote.

    H.R. 2565, also introduced by Rep. Luetkemeyer, will “require the use of replacement cost value in determining the premium rates for flood insurance coverage.” The committee approved it in a 34-25 vote.

    Federal Issues House Financial Services Committee National Flood Insurance Program Federal Legislation Flood Insurance

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  • Second Circuit Affirms No Unilateral Revocation Under TCPA

    Courts

    On June 22, the Second Circuit held in Reyes v. Lincoln Automotive Financial Services, No. 16-2014-cv, 2017 WL 2675363 (2nd Cir. June 22, 2017), that the Telephone Consumer Protection Act (TCPA) does not permit a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent was given as a “bargained-for consideration in a bilateral contract.” The defendant had leased an automobile from the plaintiff. As a condition of that lease agreement, the plaintiff consented to receive automated or manual telephone calls from the defendant. After the plaintiff defaulted, the defendant regularly called the plaintiff and continued to do so even after the plaintiff allegedly revoked his consent. To support his argument that the TCPA permits him to revoke his consent, the plaintiff relied on prior case law and a recent ruling from the FCC that stated that under the TCPA, “prior express consent” can be revoked. The Second Circuit, however, distinguished this case from those relied on by the plaintiff on the grounds that the prior cases and the FCC’s ruling support the proposition that consent not given in exchange for consideration, and which is not part of a binding legal agreement, can be revoked. The Court further stated that where the consent is not provided gratuitously but is instead an express provision of a contract, the TCPA does not allow such consent to be unilaterally revoked.

    Courts Litigation TCPA FCC Federal Issues Second Circuit

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  • CFPB Director Challenges House Financial Services’ Report on Bureau’s Role in Fraudulent Accounts Scandal Investigation

    Consumer Finance

    On June 14, CFPB Director Richard Cordray issued a letter to Rep. Jeb Hensarling (R-Tex.) in response to the House Financial Services Committee’s (Committee) June 6 interim majority staff report on the investigation of the role federal financial regulators played in detecting and remedying a major national bank’s practice of opening unauthorized bank accounts. As previously covered in InfoBytes, the Bureau issued a consent order to the bank last September over allegations that the bank employees’ improper sales practice of opening unauthorized accounts as part of an incentive compensation program was unfair and abusive. In his letter, Director Cordray defended the CFPB’s role in the investigation and detailed inaccuracies and errors in the Committee’s report.

    The Committee’s report notes that immediately after the September 8 CFPB announcement, the House Financial Services Committee began a “comprehensive investigation” to answer two questions: (i) “how and why [the bank] allowed these fraudulent activities to occur at a disturbing scale across the [b]ank for well over a decade”; and (ii) “whether or not federal financial regulators were effective in detecting and remedying [the bank’s] fraudulent branch sale practices.” According to the report, “[o]ver the course of six months, the CFPB only produced 1,010 pages of records comprised almost entirely of records easily obtainable from [the bank] or the OCC”—both of which, the report contends, have cooperated fully with the investigation. In April 2017, the CFPB received a subpoena but allegedly provided records previously produced by the bank. Due to a lack of cooperation, the Committee staff recommended the possibility of issuing deposition subpoenas to CFPB employees to investigate Director Cordray’s alleged failure to respond, as well as the suggestion of bringing contempt proceedings against Director Cordray to enforce compliance with the subpoena.

    Director Cordray responded that, among others things, the majority staff of the Committee refused to receive a September 2016 follow-up briefing from Bureau staff and failed to respond to his offer to publicly testify at a Committee hearing. Furthermore, Director Cordray states that the CFPB has submitted over 57,000 pages of records “in an effort to comply with the Committee’s broadly worded requests.” He notes the complaint about the documents in the CFPB’s production being “redundant of documents received from either [the bank] or the OCC, though the same point could be made in reverse,” and that his staff has repeatedly sought guidance from the Committee to narrow the scope but has yet to receive a response.

    In response to the Committee’s query as to why it took more than a decade to uncover the bank’s practice of opening unauthorized accounts, Director Cordray responded that the Bureau opened its doors in 2011—more than 10 years after the bank’s activities commenced according to the Committee’s report—and wasn't fully operational until 2014.

    Consumer Finance Litigation Mortgages CFPB House Financial Services Committee

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