In May 2019, the Consumer Financial Protection Bureau (CFPB) proposed new rules to amend and expand Regulation F, to further regulate the debt collection industry and those connected to it. It was meant to supplement the federal Fair Debt Collection Practices Act (FDCPA).
These rules are now final and scheduled to go into effect on November 30, 2021.
On August 11, 2021, the Federal Financial Institutions Examination Council (the “FFIEC”) issued new guidance on risk management principles for access to and authentication of electronic funds transfers for the first time in over a decade, titled Authentication and Access to Financial Institution Services and Systems (the “New Guidance”).[1] The New Guidance effectively replaces the FFIEC’s prior guidance on this topic, including its original guidance issued in 2005, Authentication in an Internet Banking Environment (the “Original Guidance”), and the supplement issued in 2011 in response to increased fraud in Internet-based financial transactions (the “Supplement,”[2] and together with the Original Guidance, the “Guidance”). The Guidance was intended to set regulatory expectations for financial institutions offering Internet-based financial services to both commercial and consumer customers. Continue Reading An Enhanced Standard of Commercial Reasonableness for Security Procedures? The FFIEC Updates Its Authentication Guidance for Internet-Based Financial Services
2020 was a bad year… okay, it was a really, really bad year. CMBS borrowers, in particular, found themselves in default and often-times upside down on their CMBS loans. While 2021 has started to show signs of life, even showing a gentle decline in special servicing and delinquency rates, a closer look reveals that certain sectors remain in distress.
As forbearance periods expire, state moratoriums on commercial evictions and foreclosures end, and businesses exhaust federal PPP and other stimulus aid, more foreclosures and other loan enforcement solutions are inevitable. (The status of moratoriums on commercial foreclosures/eviction are as follows: Illinois—expired; Michigan—expired; Texas—expired; New York—expired May 1, 2021; California—county-specific; Ohio—expired; and Indiana—expired.) While the world remains hopeful for a more “normal” 2021, the impacts on CMBS borrowers will likely continue in a state of flux for some time.
In a much anticipated decision, the U.S. Supreme Court yesterday provided clarity on the definition of an automatic telephone dialing system (“ATDS”) under the Telephone Consumer Protection Act (“TCPA”) of 1991, 47 U.S.C. § 227. Those in the Financial Services industry have been eagerly awaiting the guidance that the Court’s ruling would provide. And provide guidance it did.
In a rare unanimous opinion, the Court rejected a broad definition of an ATDS previously applied by the Second, Sixth and Ninth Circuits in favor of a much more narrow one. Indeed, the Court found that, in order to qualify as an ATDS under the TCPA, a device must “have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a random or sequential number generator.” Facebook, Inc. v. Duguid, No. 19-511, April 1, 2021, slip op. at 1. Continue Reading Phonelines Are Buzzing: The Supreme Court Has Finally Provided Clarity Regarding the TCPA’s Definition of Automatic Telephone Dialing Systems
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. Continue Reading CFPB Enforcement Expected to Increase Under the Biden Administration
On December 27, 2020, the Consolidated Appropriation Act of 2021 (the “CAA“) was enacted to provide additional coronavirus stimulus relief for businesses challenged by the ongoing Covid-19 Pandemic. In doing so, the CAA includes several targeted, but temporary, changes to the Bankruptcy Code (the “Code”) which will have implications for lenders, landlords, vendors and other creditors. Absent further legislation, these changes will sunset on December 27, 2022, but will continue thereafter to affect cases filed prior to that date.
The CARES Act, passed at the outset of the Covid-19 pandemic, did not make clear whether bankrupt debtors were eligible for the Paycheck Protection Program (“PPP“) loans it provided. The Small Business Administration (“SBA”), the agency charged with implementing the PPP loan program, previously promulgated regulations disqualifying all bankrupt debtors from the program, and it sought to enforce that regulation in the Bankruptcy Courts. Litigation ensued over debtor eligibility for PPP loans, but no clear consensus emerged. Continue Reading Bankruptcy’s New Normal – The Consolidated Appropriations Act Distances from the Bankruptcy Code to Provide Further Covid Relief
Cannabis companies nationwide are facing yet another statutory obstacle that can have serious (and potential ruinous) consequences for the emerging industry if not appropriately addressed—the Telephone Consumer Protection Act (“TCPA”). There is a recent uptick in class-action lawsuits filed against cannabis companies across the country premised on alleged violations of the TCPA including lawsuits in Michigan and California. These complaints allege cannabis companies sent unsolicited marketing text messages or placed automated phone calls to individuals without their consent. Cannabis dispensaries and other cannabis-related businesses should add TCPA compliance protocols to their checklist of regulatory requirements to be satisfied in this quickly emerging industry.
The TCPA
Enacted in 1991, the TCPA heavily regulates the ability to send phone, text, or facsimile messages through automatic telephone dialing systems. Non-compliance with the statute can be costly, as companies found to have violated the TCPA can be liable for $500 per call or text sent in violation of the Act, and up to $1,500 for willful or knowing violations. Damages are also not capped under the TCPA, so even a small number of texts or calls sent to a large number of recipients can lead to hefty damage awards. The ability to recover significant damages results in most TCPA claims being brought as class-actions. As a result, it is imperative that cannabis businesses that communicate with customers via text or by phone understand the rules governing the TCPA to avoid or at least minimize their liability exposure. Continue Reading Why Cannabis Companies Need to Care About the TCPA
On June 22, 2020, the Consumer Financial Protection Bureau (“CFPB”) launched its advisory opinion pilot program and its proposed final advisory opinion program. The pilot program is effective immediately, and the CFPB is accepting comments on the final program until August 21, 2020. Dykema is submitting comments on the proposed permanent advisory opinion program on behalf of clients.
Under both the pilot and permanent advisory opinion programs, institutions may request an advisory opinion from the CFPB in order to clarify compliance with regulations and address areas of uncertainty. These advisory opinions will be published in the Federal Register and will be considered binding interpretive rules upon which institutions may rely, offering a safe harbor from regulatory scrutiny. Continue Reading Consumer Financial Protection Bureau Requests Comment on Imminent Advisory Opinion Program
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. Continue Reading TCPA Protection Against Robocalls Upheld. Did the Supreme Court Sacrifice the Right of Free Speech For the Sake of Rescuing a Bad Statute?
From the inception of the Consumer Financial Protection Bureau (“CFPB”), opponents have argued that its single-director structure is unconstitutional. The arguments focused on the executive power that the Constitution vests in the President, positing that limiting the President’s power to remove the CFPB director only for cause infringes upon the President’s executive power and therefore violates the Constitution’s separation of powers.
As Dykema previously blogged, the constitutionality of the CFPB has been litigated in the lower courts, with lower courts siding with CFPB opponents. Notably, Justice Brett Kavanaugh, a D.C. Circuit Court judge at the time, delivered an opinion finding the CFPB unconstitutional, explaining “[t]he CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decision making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency.” Justice Kavanaugh was confirmed to the Supreme Court on October 6, 2018 and has proved favorable for those opposing the CFPB. Continue Reading The Battle Over the Constitutionality of the CFPB Is Finally Settled… So What Now?