Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • NYDFS finalizes commercial financing disclosures

    State Issues

    On February 1, NYDFS adopted a final regulation (23 NYCRR 600) outlining disclosure requirements for commercial financing transactions in the state. Under the state’s Commercial Finance Disclosure Law (CFDL)—which was enacted at the end of December 2020—providers of commercial financing, which include persons and entities who solicit and present specific offers of commercial financing on behalf of a third party, are required to give consumer-style loan disclosures to potential recipients when a specific offering of finance is extended for certain commercial transactions of $2.5 million or less.

    The final regulation took into consideration comments received on revised proposed regulations published in 2021 and 2022 (covered by InfoBytes here and here), and provides specific instructions for providers on how to comply with the CFDL. Among other things, the final regulation:

    • Outlines detailed definitions for terms used within the CFDL and in the regulation;
    • Clarifies the definition of “finance charge” with respect to commercial financing transactions, and explains how the finance charge and annual percentage rate should be calculated; 
    • Describes allowed tolerances and specifies occurrences where providers or financers will not assume liability for disclosure errors or inadvertent disclosures;
    • Lays out formatting and content requirements for disclosures required by the CFDL for the following types of financing: (i) sales-based financing; (ii) closed-end financing; (iii) open-end financing; (iv) factoring transaction financing; (v) lease financing; (vi) general asset-based financing; and (vii) all other commercial financing transactions that do not fall within the aforementioned categories; 
    • Clarifies specific itemization disclosure requirements for when the amount financed is greater than the recipient funds;
    • Outlines signature requirements;
    • Describes how the CFDL’s disclosure threshold of $2,500,000 is calculated; 
    • Explains how providers should calculate required disclosures for commercial financing transactions with multiple payment options/balances payable on demand;
    • Details certain duties of financers and brokers involved in commercial financing; 
    • Prescribes a process under which certain providers that use the opt-in method of calculating an estimated annual percentage rates will report data to the superintendent; and
    • Specifies provisions related to the assignment of commercial financing agreements.

    23 NYCRR 600 will take effect upon publication of the Notice of Adoption in the State Register. The compliance date is six months after the Notice of Adoption is published.

    State Issues NYDFS State Regulators Commercial Finance Disclosures Bank Regulatory 23 NYCRR 600

  • D.C. Circuit says CFPB’s Prepaid Rule does not mandate model disclosures for payment companies

    Courts

    On February 3, the U.S. Court of Appeals for the D.C. Circuit reversed a district court’s decision that had previously granted summary judgment in favor of a payment company and had vacated two provisions of the CFPB’s Prepaid Rule: (i) the short-form disclosure requirement “to the extent it provides mandatory disclosure clauses”; and (ii) the 30-day credit linking restriction. As previously covered by InfoBytes, the company sued the Bureau alleging, among other things, that the Bureau’s Prepaid Rule exceeded the agency’s statutory authority “because Congress only authorized the Bureau to adopt model, optional disclosure clauses—not mandatory disclosure clauses like the short-form disclosure requirement.” The Bureau countered that it had authority to enforce the mandates under federal regulations, including the EFTA, TILA, and Dodd-Frank, and argued that the “EFTA and [Dodd-Frank] authorize the Bureau to issue—or at least do not foreclose it from issuing—rules mandating the form of a disclosure.”

    The district court concluded, among other things, that the Bureau acted outside of its statutory authority, and ruled that it could not presume that Congress delegated power to the agency to issue mandatory disclosure clauses just because Congress did not specifically prohibit it from doing so. Instead, the Bureau can only “‘issue model clauses for optional use by financial institutions’” since the EFTA’s plain text does not permit the Bureau to issue mandatory clauses, the district court said. The Bureau appealed, arguing that both the EFTA and Dodd-Frank authorize the Bureau to promulgate rules governing disclosures for prepaid accounts, and that the decision to adopt such rules is entitled to deference. (Covered by InfoBytes here.) However, the Bureau maintained that the Prepaid Rule “does not make any specific disclosure clauses mandatory,” and stressed that companies are permitted to use the provided sample disclosure wording or use their own “substantially similar” wording.

    In reversing and remanding the ruling, the appellate court unanimously determined that because the Bureau’s Prepaid Rule does not mandate “specific copiable language,” it is not mandating a “model clause,” which the court assumed for purposes of the opinion that the Bureau was prohibited from doing. While the Prepaid Rule imposes formatting requirements and requires the disclosure of certain enumerated fees, the D.C. Circuit stressed that the Bureau “has not mandated that financial providers use specific, copiable language to describe those fees.” Moreover, formatting is not part of a “model clause,” the appellate court added. And because companies are allowed to provide “substantially similar” disclosures, the appellate court held that the Bureau has not mandated a “model clause” in contravention of the EFTA. The appellate court, however, did not address any of the procedural or constitutional challenges to the Bureau’s short-form disclosures that the district court had not addressed in its opinion, but instead directed the district court to address those questions in the first instance.

    Courts CFPB Appellate D.C. Circuit Prepaid Rule Disclosures Prepaid Accounts Dodd-Frank EFTA TILA

  • California: TILA does not preempt state laws on commercial financial disclosure

    State Issues

    On January 20, California Attorney General Rob Bonta sent a comment letter to CFPB Director Rohit Chopra in response to a preliminary determination issued by the Bureau in December, which concluded that commercial financial disclosure laws in four states (New York, California, Utah, and Virginia) are not preempted by TILA. As previously covered by InfoBytes, the Bureau issued a Notice of Intent to Make Preemption Determination under the Truth in Lending Act seeking comments pursuant to Appendix A of Regulation Z on whether it should finalize its preliminary determination. The Bureau noted that a number of states have recently enacted laws requiring improved disclosures of information contained in commercial financing transactions, including loans to small businesses, to mitigate predatory small business lending and improve transparency. In making its preliminary determination, the Bureau concluded that the state and federal laws do not appear “contradictory” for preemption purposes, explaining, among other things, that the statutes govern different transactions (commercial finance rather than consumer credit).

    Under the California Commercial Financing Disclosures Law (CFDL), companies are required to disclose various financing terms, including the “total dollar cost of the financing” and the “total cost of the financing expressed as an annualized rate.” Bonta explained that the CFDL only applies to commercial financing arrangements (and not to consumer credit transactions) and “was enacted in 2018 to help small businesses navigate a complicated commercial financing market by mandating uniform disclosures of certain credit terms in a manner similar to TILA’s requirements, but for commercial transactions that are unregulated by TILA.” He pointed out that disclosures required under the CFDL do not conflict with those required by TILA, and emphasized that there is no material difference between the disclosures required by the two statutes, even if TILA were to apply to commercial financing. According to Bonta, should TILA preempt the CFDL’s disclosure requirements, there would be no required disclosures at all for commercial credit in the state, which would make it challenging for small businesses to make informed choices about commercial financing arrangements.

    While Bonta agreed with the Bureau’s determination that TILA does not preempt the CFDL, he urged the Bureau to “articulate a narrower standard that emphasizes that preemption should be limited to situations where it is impossible to comply with both TILA and the state law or where the state law stands as an obstacle to the full purposes [of] TILA, which is to provide consumers with full and meaningful disclosure of credit terms in consumer credit transactions.” He added that the Bureau “should also reemphasize certain principles from prior [Federal Reserve Board] decisions, including that state laws are preempted only to the extent of actual conflict and that state laws requiring additional disclosures—or disclosures in transactions not addressed by TILA—are not preempted.”

    State Issues Agency Rule-Making & Guidance Federal Issues State Attorney General California CFPB Small Business Lending Disclosures Commercial Finance CFDL TILA Regulation Z

  • CFPB says TILA does not preempt NY law on commercial disclosures

    Agency Rule-Making & Guidance

    On December 7, the CFPB issued a preliminary determination that New York’s commercial financing disclosure law is not preempted by TILA because the state’s statute regulates commercial financing transactions and not consumer-purpose transactions. The CFPB issued a Notice of Intent to Make Preemption Determination under the Truth in Lending Act seeking comments pursuant to Appendix A of Regulation Z on whether it should finalize its preliminary determination that New York’s law, as well as potentially similar laws in California, Utah, and Virginia, are not preempted by TILA. Comments are due January 20, 2023. Once the comment period closes, the Bureau will publish a notice of final determination in the Federal Register.

    Explaining that recently a number of states have enacted laws to require improved disclosures of information contained in commercial financing transactions, including loans to small businesses, in order to mitigate predatory small business lending and improve transparency, the Bureau said it received a written request to make a preemption determination involving certain disclosure provisions in TILA. While Congress expressly granted the Bureau authority to evaluate whether any inconsistencies exist between certain TILA provisions and state laws and to make a preemption determination, the statute’s implementing regulations require the agency to request public comments before making a final determination.

    While New York’s Commercial Financing Law “requires financial disclosures before consummation of covered transactions,” the Bureau pointed out that this applies to “commercial financing” rather than consumer credit. The request contended that TILA preempts New York’s law in relation to its use of the terms “finance charge” and “annual percentage rate”—“notwithstanding that the statutes govern different categories of transactions.” The request outlined material differences in how the two statutes use these terms and asserted “that these differences make the New York law inconsistent with Federal law for purposes of preemption.” As an example, the request noted that the state’s definition of “finance charge” is broader than the federal definition, and that the “estimated APR” disclosure required under state law “for certain transactions is less precise than the APR calculation under TILA and Regulation Z.” Moreover, “New York law requires certain assumptions about payment amounts and payment frequencies in order to calculate APR and estimated APR, whereas TILA does not require similar assumptions,” the request asserted, adding that inconsistencies between the two laws could lead to borrower confusion or misunderstanding.

    In making its preliminary determination, the Bureau concluded that the state and federal laws do not appear “contradictory” for preemption purposes based on the request’s assertions. The Bureau explained that the statutes govern different transactions and disagreed with the argument that New York’s law impedes the operation of TILA or interferes with its primary purpose. Specifically, the Bureau stated that the “differences between the New York and Federal disclosure requirements do not frustrate these purposes because lenders are not required to provide the New York disclosures to consumers seeking consumer credit.”

    Agency Rule-Making & Guidance Federal Issues CFPB State Issues New York Commercial Finance Disclosures TILA Regulation Z Preemption

  • FTC, CFPB weigh in on servicemembers’ right to sue under the MLA

    Courts

    On November 22, the FTC and CFPB (agencies) announced the filing of a joint amicus brief with the U.S. Court of Appeals for the Eleventh Circuit seeking the reversal of a district court’s decision that denied servicemembers the right to sue to invalidate a contract that allegedly violated the Military Lending Act (MLA). (See corresponding CFPB blog post here.) The agencies countered that the plain text of the MLA allows servicemembers to enforce their rights in court. Specifically, the agencies argued that Congress made it clear that when a lender extends a loan to a servicemember that fails to comply with the MLA, the loan is rendered void in its entirety. Moreover, Congress amended the MLA to unambiguously provide servicemembers certain legal rights, including an express private right of action and “the right to rescind and seek restitution on a contract void under the criteria of the statute.”

    The case involves an active-duty servicemember and his spouse who financed the purchase of a timeshare from the defendants. Plaintiffs entered into an agreement with the defendants, made a down payment, and agreed to pay the remaining balance in monthly installments carrying an interest rate of 16.99 percent, in addition to annual assessments and club dues. None of the loan documents provided to the plaintiffs discussed the military annual percentage rate, nor did the defendants make any supplemental oral disclosures. Additionally, the agreement contained a mandatory arbitration clause (the MLA prohibits creditors from requiring servicemembers to submit to arbitration) and purportedly waived plaintiffs’ right to pursue a class action and their right to a jury trial. Plaintiffs filed a putative class action lawsuit alleging the agreement violated the MLA on several grounds, and sought an order declaring the agreement void. Plaintiffs also sought recission of the agreement, restitution, statutory, actual, and punitive damages, and an injunction requiring defendants to comply with the MLA going forward.

    Defendants moved to dismiss, countering “that the plaintiffs lacked standing because they had not suffered any concrete injury and, even if they had, whatever injury they suffered was not traceable to the alleged MLA violations.” Defendants also argued that the loan was exempt under the MLA’s exemption for residential mortgages, and claimed that the MLA does not authorize statutory damages, nor did the plaintiffs state a claim for declaratory or injunctive relief. Further, defendants stated the court lacked jurisdiction to hear the case. The district court dismissed the lawsuit for lack of standing, agreeing with the magistrate judge that, among other things, plaintiffs “failed to allege ‘that the inclusion of the arbitration provision impacted [their] decision to accept the contract,’ and that they could not ‘seek[] relief based on a mere technicality that has not impacted them in any way.’”

    Disagreeing with the district court’s ruling, the agencies argued that plaintiffs have a legal right to challenge the contract in court because (i) they made a down payment on an illegal and void loan; (ii) the injuries are traceable to the challenged conduct since “their monetary losses are the product of the illegal and void loan"; and (iii) their injuries “are redressable by an order of the court awarding restitution for the amounts that plaintiffs have already paid on the loan, and by a declaration confirming that the loan is void and that the plaintiffs have no obligation to make additional payments going forward.” The agencies asserted that courts have recognized that economic injury is exactly the sort of injury that courts have the power to redress. 

    Moreover, the agencies pointed out that the district court’s ruling “risks substantially curtailing private enforcement of the MLA and limiting servicemembers’ ability to vindicate their rights under the statute. It does so by reading the MLA’s voiding provision out of the statute and reading into the statute an atextual materiality requirement. But it may be very difficult, if not impossible, for servicemembers to demonstrate that certain MLA violations had a direct effect on their decision to procure a financial product or caused them to pay money they would not otherwise have paid.”

    Courts FTC CFPB Servicemembers Military Lending Act Appellate Eleventh Circuit Consumer Finance Disclosures Arbitration

  • New NYDFS proposal to implement Commercial Finance Disclosure Law

    State Issues

    On September 14, NYDFS published a notice of proposed rulemaking under New York’s Commercial Financing Disclosure Law (CFDL) related to disclosure requirements for certain providers of commercial financing transactions in the state. As previously covered by InfoBytes, the CFDL was enacted at the end of December 2020, and amended in February to expand coverage and delay the effective date. (See S5470-B, as amended by S898.) Under the CFDL, providers of commercial financing, which include persons and entities who solicit and present specific offers of commercial financing on behalf of a third party, are required to give consumer-style loan disclosures to potential recipients when a specific offering of finance is extended for certain commercial transactions of $2.5 million or less. Last December, NYDFS announced that providers’ compliance obligations under the CFDL will not take effect until the necessary implementing regulations are issued and effective (covered by InfoBytes here).

    The newest proposed regulations (see Assessment of Public Comments for the Revised Proposed New Part 600 to 23 NYCRR) introduce several revisions and clarifications following the consideration of comments received on proposed regulations published last October (covered by InfoBytes here). Updates include:

    • A new section stating that a “transaction is subject to the CFDL if one of the parties is principally directed or managed from New York, or the provider negotiated the commercial financing from a location in New York.”
    • A new section requiring notice be sent to a recipient if a change is made to the servicing of a commercial financing agreement.
    • An revised definition of “recipient” to now “include entities subject to common control if all such recipients receive the single offer of commercial financing simultaneously.”
    • Clarifying language stating that the “requirements pertaining to the statement of a rate of finance charge or a financing amount, as that term appears in Section 810 of the CFDL, shall be in effect only upon the quotation of a specific commercial financing offer.”
    • Provisions allowing providers to perform calculations based upon either a 30-day month/360-day year or a 365-day year, with the acknowledgment that different methods of computation may lead to slightly different results.
    • An amendment stating that “a ‘provider is not required to provide the disclosures required by the CFDL when the finance charge of an existing financing is effectively increased due to the incurrence, by the recipient, of avoidable fees and charges.’”
    • An acknowledgement of comments asking that 23 NYCRR Part 600 be identical to California’s disclosure requirements (covered by InfoBytes here) “or as consistent as possible.” In response, NYDFS said that while it generally agrees, and has consulted with the California Department of Financial Protection and Innovation (DFPI), the regulations cannot be identical because the CFDL differs from the California Consumer Financial Protection Law and the Department cannot anticipate any future revisions DFPI may make to its proposed regulations.

    Comments on the proposed regulations are due October 31.

    State Issues Agency Rule-Making & Guidance Bank Regulatory State Regulators NYDFS Commercial Finance Disclosures New York CFDL California DFPI

  • California amends GAP disclosure legislation

    State Issues

    On September 13, the California governor signed AB 2311, which amends provisions regarding vehicle finance disclosures. The bill establishes provisions to govern the offer, sale, provision, or administration, in connection with a conditional sale contract, of a guaranteed asset protection waiver (GAP waiver). Specifically, the bill requires creditors to automatically refund the unearned portion of a GAP waiver if a consumer pays off or otherwise terminates their auto loan early. The bill prohibits: (i) conditioning the extension of credit, the term of credit, or the terms of a conditional sale contract upon the purchase of a GAP waiver; and (ii) the sale of a GAP waiver pursuant to certain provisions where the loan-to-value ratio exceeds the maximum loan-to-value ratio of the GAP waiver. The bill, among other things, authorizes the buyer to recover three times the amount of any GAP charges paid. The bill is effective January 1, 2023.

    State Issues State Legislation California Auto Finance Disclosures GAP Waivers GAP Fees Consumer Finance

  • 10th Circuit: Payday lender must pay $38.4 million restitution order

    Courts

    On September 15, the U.S. Court of Appeals for the Tenth Circuit affirmed the CFPB’s administrative ruling against a Delaware-based online payday lender and its founder and CEO (respondents/petitioners) regarding a 2015 administrative enforcement action that alleged violations of the Consumer Financial Protection Act (CFPA), TILA, and EFTA. As previously covered by InfoBytes, in 2015, the CFPB announced an action against the respondents for alleged violations of TILA and the EFTA, and for engaging in unfair or deceptive acts or practices. Specifically, the CFPB alleged that, from May 2008 through December 2012, the online lender (i) continued to debit borrowers’ accounts using remotely created checks after consumers revoked the lender’s authorization to do so; (ii) required consumers to repay loans via pre-authorized electronic fund transfers; and (iii) deceived consumers about the cost of short-term loans by providing them with contracts that contained disclosures based on repaying the loan in one payment, while the default terms called for multiple rollovers and additional finance charges. The order required the respondents to pay $38.4 million as both legal and equitable restitution, along with $8.1 million in penalties for the company and $5.4 million in penalties for the CEO.

    According to the opinion, between 2018 and 2021, the U.S. Supreme Court issued four decisions, Lucia v. SEC (covered by InfoBytes here), Seila Law v. CFPB (covered by a Buckley Special Alert here), Liu v. SEC (covered by InfoBytes here), and Collins v. Yellen (covered by InfoBytes here), which “bore on the Bureau’s enforcement activity in this case,” by “decid[ing] fundamental issues such as the Bureau’s constitutional authority to act and the appointment of its administrative law judges (‘ALJ’).” The decisions led to intermittent delays and restarts in the Bureau’s case against the petitioners. For instance, the opinion noted that two different ALJs decided the present case years apart, with their recommendations separately appealed to the Bureau’s director. The CFPB’s director upheld the decision by the second ALJ and ordered the lender and its owner to pay the restitution, and a district court issued a final order upholding the award. The petitioners appealed.

    On appeal, the petitioners made three substantive arguments for dismissing the director’s final order. The petitioners argued that under Seila, the CFPB’s structure was unconstitutional and therefore the agency did not have authority to issue the order. The appellate court disagreed, stating that it is “to use a ‘scalpel rather than a bulldozer’ in remedying a constitutional defect,” and that “because the Director’s actions weren’t unconstitutional, we reject Petitioners’ argument to set aside the Bureau’s enforcement action in its entirety.”

    The petitioners also argued that the enforcement action violated their due-process rights by denying the CEO additional discovery concerning the statute of limitations. The petitioners claimed that they were entitled to a “new hearing” under Lucia, and that the second administrative hearing did not rise to the level of due process prescribed in that case. The appellate court determined that there was “no support for a bright-line rule against de novo review of a previous administrative hearing," nor did it see a reason for a more extensive hearing. Moreover, the petitioners “had a full opportunity to present their case in the first proceeding,” the 10th Circuit wrote. The appellate court further rejected the company’s argument regarding various evidentiary rulings, including permitting evidence about the company’s operational expenses, among other things. The appellate court also concluded that the CFPA’s statute of limitations commences when the Bureau either knows of a violation or, through reasonable diligence, would have discovered the violation. Therefore, the appellate court rejected the argument “that the receipt of consumer complaints triggered the statute of limitations.”

    The petitioners also challenged the remedies order, claiming they were not allowed “to present evidence of their good-faith reliance on counsel (as to restitution and civil penalties) and evidence of their expenses (as to the Director’s residual disgorgement order).” The appellate court rejected that challenge, holding that the director properly considered all factors, including good faith, and rejected the petitioners’ challenge to the ALJ’s recommended civil penalties.

    The 10th Circuit affirmed the district court’s order of a $38.4 million restitution award, rejecting the petitioners’ various challenges and affirming the director’s order.

    Courts Appellate Tenth Circuit CFPB TILA EFTA Disclosures CFPA UDAAP Enforcement U.S. Supreme Court Payday Lending

  • CFPB studying BNPL growth

    Federal Issues

    On September 15, the CFPB announced plans to consider issuing interpretive guidance or regulations to ensure that buy now, pay later (BNPL) lenders follow many of the same consumer protection measures that exist for credit cards. “We will be working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a Buy Now, Pay Later loan,” CFPB Director Rohit Chopra said in the announcement. The Bureau described BNPL products as a form of interest-free credit that “serves as a close substitute for credit cards” and allows consumers to split a retail transaction into smaller, interest-free installments that are repaid over time. 

    Recognizing that BNPL products are a rapidly growing alternative form of credit for online retail purchases, the Bureau published a report providing key insights into the industry. According to the report, the number of BNPL loans originated from 2019 to 2021 in the US grew 970 percent, from 16.8 million to 180 million. The total dollar volume of these loans grew by 1,092 percent in that period, from $2 billion in 2019 to $24.2 billion in 2021, the report said, noting that 73 percent of applicants were approved for credit in 2021, up from 69 percent in 2020. Additionally, the report found that 89 percent of consumers using BNPL loans linked their accounts to their debit cards, and that late fee policies vary by issuer.

    The Bureau raised several concerns with BNPL products in the report, including (i) inconsistent standardized cost-of-credit disclosures, minimal dispute resolution rights, a forced opt-in to autopay, and occurrences where consumers are assessed multiple late fees on the same missed payment; (ii) risks related to data harvesting and monetization, as many BNPL lenders shift business models toward proprietary app usage, allowing lenders “to build a valuable digital profile of each user’s shopping preferences and behavior”; and (iii) concerns over consumers taking out several loans during a short period of time at multiple lenders. According to the Bureau, because most BNPL lenders currently do not furnish data to the major credit reporting companies, many lenders are unaware of a consumer’s current liabilities when deciding whether to originate new loans.

    The Bureau noted in its announcement that while BNPL lenders are currently subject to some federal and state oversight, compliance and licensing requirements vary. In addition to exploring potential new regulatory guidance, the Bureau said it plans to identify surveillance practices that BNPL lenders should seek to avoid, and it will continue to address the development of appropriate and accurate credit reporting practices for the industry. Chopra further announced that the Bureau is inviting BNPL lenders to self-identify if they wish to be examined for any potentially problematic business practices. The Bureau is also reviewing its authorities to conduct examinations on a compulsory basis and will work with state regulators that license nonbank finance companies on examinations of BNPL firms.

    Federal Issues Agency Rule-Making & Guidance CFPB Buy Now Pay Later Privacy, Cyber Risk & Data Security Consumer Protection Consumer Finance Disclosures Fraud

  • 11th Circuit says plaintiff lacks standing in collection letter case

    Courts

    On September 8, the U.S. Court of Appeals for the Eleventh Circuit issued an en banc decision in Hunstein v. Preferred Collection & Management Services, dismissing the case after determining the plaintiff lacked standing to sue. The majority determined that “[b]ecause Hunstein has alleged only a legal infraction—a ‘bare procedural violation’—and not a concrete harm, we lack jurisdiction to consider his claim.” In April 2021, the 11th Circuit held that transmitting a consumer’s private data to a commercial mail vendor to generate debt collection letters violates Section 1692c(b) of the FDCPA because it is considered transmitting a consumer’s private data “in connection with the collection of any debt.” The decision revived claims that the debt collector’s use of a third-party mail vendor to write, print, and send requests for medical debt repayment violated privacy rights established in the FDCPA. The 11th Circuit last November, however, voted sua sponte to rehear the case en banc and vacated its earlier opinion. (Covered by InfoBytes here.)

    The en banc decision relied heavily on the U.S. Supreme Court’s ruling in TransUnion v. Ramirez (covered by InfoBytes here), which clarified the type of concrete injury necessary to establish Article III standing and directed courts “to consider common-law torts as sources of information on whether a statutory violation had caused a concrete harm.” The majority pointed out that when making a common-law tort comparison, courts “do not look at tort elements in a vacuum” but rather “make the comparison between statutory causes of action and those arising under the common law with an eye toward evaluating commonalities between the harms.”

    “What harm did this alleged violation cause?” the majority questioned in its opinion, finding that no tangible injury or loss was identified in the complaint. Rather, the plaintiff analogized to the tort of public disclosure. The majority found that this comparison was inapposite, because “the disclosure alleged here lacks the fundamental element of publicity.” Because there was no public disclosure, there was no invasion of privacy and therefore no cognizable harm.   

    Four judges dissented, arguing that the plaintiff had standing to sue. They opined that the court’s job is not to determine whether the plaintiff stated a viable common-law tort claim, but rather to “compare the ‘harm’ that Congress targeted in the FDCPA and ‘harm’ that the common law sought to address” and to determine whether those harms bear a sufficiently “close relationship.” The dissenting judges found that the plaintiff’s allegations that the delivery of “intensely private information” to the vendor is the “same sort of harm that common-law invasion-of-privacy torts—and in particular, public disclosure of private facts—aim to remedy.” The dissent also stressed that even if the disclosure alleged by the plaintiff is less extensive than the type of disclosure of private information typically at issue in a common law invasion of privacy claim, that is a question of the degree of harm and not a question of the kind of harm, and therefore should not be the basis for dismissal. 

    Courts Appellate Privacy, Cyber Risk & Data Security Eleventh Circuit Debt Collection Hunstein FDCPA Disclosures U.S. Supreme Court

Pages

Upcoming Events