The Director of the Consumer Financial Protection Bureau (“CFPB”), Rohit Chopra, while attending an event organized by the Public Citizen (a group that opposes mandatory arbitration clauses in consumer agreements), indicated that the CFPB is unlikely to issue a new rule regulating such clauses because the Congressional Review Act prevents it from issuing “a
CFPB Enforcement Expected to Increase Under the Biden Administration
Enforcement and litigation directed at the consumer financial services industry is expected to increase under the Biden administration. While increased enforcement is likely to occur with respect to all federal agencies, the most significant increases are being forecast in the areas of fair lending enforcement, which was relatively subdued under the Trump administration.
On Jan. 20, 2021, his first day in office, President Biden announced CFPB veteran David Uejio as the Acting Director of the Bureau, who made it clear that he intended to immediately ramp up enforcement activity. Shortly after being appointed, Acting Director Uejio spoke in a blog post of intensifying the efforts to protect the “economically vulnerable”, promised more aggressive supervision, and indicated he intends to focus on fair lending and COVID-19 relief.
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TCPA Protection Against Robocalls Upheld. Did the Supreme Court Sacrifice the Right of Free Speech For the Sake of Rescuing a Bad Statute?
In a closely monitored case, the U.S. Supreme Court today upheld the restriction on robocalls under the Telephone Consumer Protection Act (“TCPA”) of 1991 but struck the Act’s government debt-collection exclusion. Many followed this case, anticipating it would result in a fatal blow to the TCPA. But today’s opinion extinguished these hopes.
In response to consumer complaints, Congress passed the TCPA to prohibit robocalls to cell phones, among other things. 47 U.S.C. 227(b)(1)(A)(iii). In 2015, Congress amended the robocall restriction, carving out a new government-debt exception that allows robocalls made solely to collect a debt owed to or guaranteed by the United States. 129 Stat. 588.
In 2016, the plaintiffs, political and nonprofit organizations, filed a declaratory judgment action in the United States District Court for the Eastern District of North Carolina, claiming that the TCPA (§227(b)(1)(A)(iii)) violated the First Amendment. Plaintiffs sought the ability to make political robocalls to cell phones. Invoking the First Amendment, plaintiffs argued that the 2015 government-debt exception unconstitutionally favored debt-collection speech over political and other speech, and asked the Court to invalidate the TCPA’s entire restriction on robocalls. The District Court held that the government-debt carve-out was content-based but withstood strict scrutiny. The Fourth Circuit disagreed, invalidating the 2015 exception and holding that the content-based restriction did not survive strict scrutiny.
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HEROES Act Includes Potentially Disastrous FCRA Amendments
On May 15, 2020, the House passed the Health and Economic Recovery Omnibus Emergency Solutions Act, or “HEROES Act”, which is a 1,815-page bill that affords $3 trillion in relief to consumers and businesses impacted by COVID-19. The bill includes a number of provisions, including another round of $1,200 payments to most Americans, hazard pay for frontline workers, and funding for local and state governments. The bill also includes proposed amendments to the Fair Credit Reporting Act (“FCRA”). Unfortunately, these well-intentioned amendments to FCRA do not appear to have been thought through well and, practically speaking, would have dire consequences if implemented.
First, the bill prohibits both consumer reporting agencies (“CRAs”) or data furnishers from reporting of any adverse information that occurred during a “major disaster” declared by the President. With respect to CRAs, the bill states:
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Credit Reporting Agencies Are Not Required to Determine What Is a “Legally” Valid Debt
In a consumer class action, the United States Court of Appeals for the Seventh Circuit was called on to decide whether “consumer reporting agencies to determine the legal validity of disputed debts.” Denan v. Trans Union LLC, No. 19-1519, 2020 U.S. App. LEXIS 14930, at *1-2 (7th Cir. May 11, 2020). Joining the First, Ninth, and Tenth Circuits, the Seventh Circuit found that “a consumer’s defense to a debt is a question for a court to resolve in a suit against the [creditor,] not a job imposed upon consumer reporting agencies by the FCRA.” Id. at *12 (internal quotations omitted).
In Denan, the plaintiffs obtained loans from tribal payday lenders. Those loans charged interest rates in excess of 300% and, according to the loan agreements, were governed by tribal law, not state law. The plaintiffs claimed that because the loans violated state usury laws, they were “legally invalid.” Id. at *4. But instead of bringing suit against the tribal lenders, who may have been protected by sovereign immunity, the plaintiffs brought a putative class action against consumer reporting agency (or CRA) Trans Union, alleging it violated 15 U.S.C. § 1681e(b) for failing to assure the “maximum possible accuracy” of reported information.
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Credit Reporting During the COVID-19 Pandemic: What You Need to Know
In response to the COVID-19 pandemic, many lenders are being flexible when it comes to consumers’ making payments. The Consumer Financial Protection Bureau (“CFPB”) added some structure to those efforts by releasing a policy statement that outlines the responsibility of credit-reporting companies and furnishers during the COVID-19 pandemic.
The CFPB seeks to encourage lenders to continue to work with consumers affected by COVID-19 with various forms of payment flexibility, including allowing consumers to defer or skip payments, whether as required by the CARES Act or voluntarily. And the CFPB’s statement recognizes that many furnishers and credit reporting agencies are also experiencing hardships due to the pandemic, including staffing and resource constraints.
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Supreme Court Holds That Debt-Collecting Law Firms Delegated as Special Counsel Do Not Violate FDCPA by Using Attorney General’s Letterhead
In an important ruling for debt-collection law firms, the United States Supreme Court held in Sheriff et. al v. Fillie et. al, Docket No. 15-338 (2016), that when a debt-collection firm is hired by the Attorney General to collect debts on behalf of the State, use of the Attorney General’s letter head does not violate the Fair Debt Collection Practices Act (“FDCPA”). In doing so, the Court reasoned that the letters did not contain false information or misleading representations.
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