CFSC MEETING – August 17, 2022

FSC Committee Members and Friends,

This is a reminder that our next meeting is Wednesday, August 17, 2022 at 11:00 am by Zoom (link: Launch Meeting – Zoom).

CFSC Upcoming Meeting Agenda

We plan to discuss some of the recent developments listed below during this month’s meeting. We hope you can join us for a timely and engaging discussion! If there are any topics you would like to see added to the agenda, please contact one of our two Co-Chairs, Michael R. Guerrero (guerrerom@ballardspahr.com) or John A. Kimble (johnkimble@paulhastings.com).

• DFPI Consent Order with Buy-Now Pay-Later company
• CFPB Settlement against a California FinTech company, for issues with its “proprietary algorithm”
• CFPB issued warning that digital marketing providers must also comply with consumer financial protection laws
• CFPB/DOJ redlining settlement with non-bank mortgage company
• New CFPB Debt Collection Rule FAQs

Also, shortly we’ll circulate a calendar invite to a special meeting on September 13th where we will have Kevin Gould from the California Bankers Association discuss this year’s legislative developments. To learn more about Kevin, please visit Kevin Gould – California Bankers Association (calbankers.com).

Recap of Prior Meeting

The Consumer Financial Services Committee met on July 20, by Zoom, and discussed the consumer financial services developments outlined below. If you would like to attend our next CFSC Zoom meeting, see the “Get Involved” section below to sign up or contact a Co-Chair directly (see below). 

                 Report on Past Activities

• Co-Chair Michael Guerrero started the meeting with introductions and a brief recap of our prior meeting, in which we discussed updates on a federal and state level and how updates may impact practices.  If anyone has questions or suggestions, please reach out to Michael or John.
  
  Committee Business

• CFSC realizes that the third Wednesday time may not be ideal for all who wish to attend, and plans to send out a survey to identify the best time.
• Mark Moore reminded everyone that the CLA Business Law Section will be having their annual meeting September 15-17, 2022 in San Diego.  There will be full-day CLE programs as well as a BLS luncheon on September 16th where Jim Hill will receive the BLS Lifetime Achievement Award.  More on this to follow, including how members of CFSC may attend the luncheon without charge.
• CFSC will have a guest speaker at our September meeting, Kevin Gould from the California Bankers Association.  Kevin will speak on 2022 legislative updates.  NOTE that our September meeting with Kevin will be on Tuesday September 13th.
• Jeanette Quick, a former CFSC Co-Chair, was recently appointed as the General Counsel of the Department of Financial Protection and Innovation.  Jeanette led several initiatives that increased CFSC’s membership and accomplishments. The Committee congratulates Jeanette and wishes her the best in her new role.
• Rita Lin, also a former CFSC Chair, was recently nominated by President Biden for the position of Judge of the US District Court for the Northern District of California. Judge Lin was a very accomplished consumer financial services litigator who worked hard in the trenches on the Committee as one of its most active, creative and effective members and Chairs.
• We encourage all to reach out to prospective new Committee members.  We have 7 open seats.
  
  Recent Developments – Committee members reported on the following legal developments and topics:
  
• CFPB Administrative and Structural Issues.  The CFPB announced it would begin using authority that had been largely unused to examine non-bank entities that pose risks to consumers.  We discussed the general procedure the Bureau would use to determine whether an entity poses risk and note that companies may want to consider reviewing consumer complaints to identify issues that might factor into the supervision determination.  Additionally, Rohit Chopra issued guidance indicating that the CFPB seeks to move away from highly complicated rules and toward simpler and clearer rules, while issuing additional guidance to the marketplace.  Some rules identified for review include the CARD Act, FCRA, and Qualified Mortgage Rule.  Additional information on the dormant authority topic available at the Mayer Brown website here, and Chopra’s statement on rulemaking available here.
• CFPB Advance Notice of Proposed Rulemaking on Credit Card Late Fees.  The CFPB released an ANPR on credit card late fees and is particularly interested in a provision that late fees be “reasonable and proportional.”  The Bureau would consider four categories of information for late fees:  the costs incurred by a creditor, deterrence, cardholder’s conduct, and “other conduct as deemed necessary.” This may open a door for broader changes in connection with the CFPB’s review of the CARD Act.  Additional information on the topic available at the Ballard Spahr website here.
• State “Work From Home” Developments.  Sectors of the financial industry have strict licensing rules regarding locations that are deemed branches where an employee conducts licensable activity.  In response to COVID-19, states have issued emergency orders that shifted business approaches to employees working from home.  While some states continue to allow working from home without requiring branch licenses, others have enacted statutes that change the definition of a branch or issued guidance allowing flexibility.  However, not all states have taken such steps, and some have indicated that no pandemic-related extensions would be granted.
• FTC Proposed Rule on Auto Dealer Disclosures and Practices.  The FTC proposed a Motor Vehicle Dealers Trade Regulation Rule that would prohibit certain misrepresentations in automobile sales, as well as impose disclosure requirements related to vehicle costs, add-on products, monthly payments, and recordkeeping.  If finalized, the rule would provide for a penalty of up to $46,000 per violation.  Additional information on the topic available at the Mayer Brown website here.
• CFPB Interpretative Rule Regarding the FCRA’s Limited Preemption of State Laws.  The CFPB issued an interpretative rule on the scope of FCRA’s preemption provisions.  State laws inconsistent with FCRA are preempted, but only to the extent of the inconsistency.  The Bureau outlined a narrow approach, indicating that state law must be inconsistent “with respect to” the subject matter regulated by the FCRA provision and “related to” the specified topics.  Additional information on the topic available at the Ballard Spahr website here.
• CFPB Advisory Opinion on Pay-to-Pay Fees.  The CFPB previously issued a compliance bulletin in 2017 on telephone payment fees, and had been focused on collecting amounts contemplated in a credit agreement or not prohibited by applicable law.  Its new guidance indicated that the fees must be “permitted by applicable law.” According to the bulletin, this means the fee must be expressly authorized by applicable law. Additional information on the topic available at the Ballard Spahr website here.