Ninth Circuit: Domino’s Website Required to Comply with ADA
Litigation surrounding the accessibility of online services continues to evolve. On January 15, 2019, the U.S. Court of Appeals for the Ninth Circuit ruled that the website and mobile app of Domino’s Pizza must comply with the Americans with Disabilities Act (ADA) to make these online services fully accessible to the visually impaired.
In Robles v. Domino’s LLC, Guillermo Robles—who is visually impaired—brought suit in 2016 claiming the pizza chain’s website not only precluded him from ordering a customized pizza, but also made online coupons inaccessible. Mr. Robles sought an order requiring compliance with the Web Content Accessibility Guidelines 2.0 (WCAG 2.0), an international voluntary standard for making online content accessible.
His case initially was dismissed in 2017 by a district court judge who held that while the ADA covered the company’s website, imposing liability on Domino’s would violate the company’s 14th Amendment right to due process because the Department of Justice (DOJ) had not yet promulgated regulatory standards for online accessibility. In doing so, the court invoked the doctrine of primary jurisdiction, which allows courts to stay proceedings or dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.
The Ninth Circuit’s three-judge panel reversed, writing that Domino’s had “been on notice that its online offerings must effectively communicate with its disabled customers and facilitate ‘full and equal enjoyment’ of Domino’s goods and services.” The Court added that a lack of specific regulations did not eliminate the company’s clear statutory duty, and the Constitution does not require the DOJ to “spell out exactly how Domino’s should fulfill [its] obligation.” The court also held that the district court had erred in invoking primary jurisdiction because the DOJ’s withdrawal of its Advanced Notice of Proposed Rulemaking meant that undue delay in a resolution was inevitable, and such a delay was unnecessary because the application of the ADA was within the district court’s competence.
The court additionally found that the ADA applied to Domino’s website and mobile app because their inaccessibility “impedes access to goods and services of its physical pizza franchises—which are places of public accommodation.” The court added that the statute applies to services of a place of public accommodation, not services in a place of public accommodation.
As a result, the Ninth Circuit remanded the case to the district court to determine, after discovery, if the “Domino’s website and app provide the blind with effective communication and full and equal enjoyment of its products and services as the ADA mandates.”
While the Ninth Circuit has indicated its position, the legal landscape regarding online accessibility remains uncertain. The 11th Circuit heard oral arguments in the noteworthy Winn-Dixie case on October 4, 2018, but has yet to issue a ruling. In that case, a plaintiff similarly claims that a grocery store’s website is inaccessible to blind individuals.
As some courts have required companies’ websites to be ADA compliant—and in light of DOJ’s indefinite inaction—businesses are encouraged to review their policies to ensure online accessibility is being addressed.
Attorneys in Ballard Spahr’s Accessibility Group regularly advise clients on accessibility matters under the ADA and have experience drafting ADA and digital accessibility policies and procedures.National Flood Insurance Program Update
As previously reported, in early December 2018 Congress passed another short-term extension of the National Flood Insurance Program, which was scheduled to expire on December 21, 2018. On December 21, the U.S. House of Representatives agreed to a bill adopted by the U.S. Senate in November 2018 to extend the program until May 31, 2019, and President Trump signed the extension on December 21. Earlier that day, an effort in the House to both extend the program until May 31, 2018, and make additional changes failed.
But the drama was not over. Based on the partial government shutdown, the Federal Emergency Management Agency (FEMA) announced on December 27 that it had sent a message to its industry partners providing guidance to suspend flood insurance sales operations as a result of the lapse of funding. The announcement drew criticism from various parties, and on December 28 FEMA announced it was rescinding the prior guidance and was resuming the sale of new flood insurance policies and the renewal of expiring policies.
- Richard J. Andreano, Jr.CFPB Announces Opening of HMDA Data Filing Period
As previously reported, late in 2018 the CFPB announced the availability of a beta version of a Home Mortgage Disclosure Act (HMDA) data platform for companies to test the filing of 2018 data. The CFPB has now announced that the beta testing period is closed and the HMDA data platform is open for the filing of 2018 data. The HMDA data platform can be accessed here.
All test data that companies uploaded during the beta testing period has been removed from the data platform. However, all user accounts created during the 2018 beta testing period, and also for the filing of 2017 data, will be maintained for the 2018 filing period. The reporting deadline for 2018 HMDA data is March 1, 2019.
- Richard J. Andreano, Jr.CFPB Finalizes Off-Balanced Approach to Public Disclosure of HMDA Data
As previously reported, in September 2017 the CFPB proposed policy guidance regarding what application-level HMDA data would be disclosed to the public based on the significant expansion to the HMDA data reporting items that the CFPB adopted in October 2015. Calendar year 2018 was the first year that reporting institutions collected data under the expanded requirements, and that data must be reported to the government by March 1, 2019. Not long after Kathy Kraninger became the new CFPB Director, the CFPB announced the final policy guidance regarding the application-level HMDA data that will be made available to the public. Unfortunately, by adopting final guidance that is very similar to the proposed guidance, the CFPB is emphasizing public disclosure over consumer privacy concerns.
HMDA requires the modification of data released to the public "for the purpose of protecting the privacy interests of mortgage applicants." Under the prior HMDA requirements, the application or loan number, the date the application was received, and the date the institution took final action on the application were removed from the application-level data that was released to the public. However, even under the prior HMDA requirements, there were concerns that by combining the publicly available HMDA data with other data sources, the identity of each applicant can be determined. With the significant expansion of the HMDA data items, as well as the overall increase in data on consumers that is available in the marketplace, the privacy concerns are even greater. For example, the revised HMDA data items include, among other items, the applicant's age, income (which is currently reported), credit score, and debt-to-income ratio; the automated underwriting results; the property address; loan cost information; and, for denied applications, the principal denial reasons.
When the CFPB adopted the October 2015 revisions, it deferred making a decision on which elements of the expanded HMDA data would be reported on an application-level basis. However, the CFPB indicated that it would use a balancing test to decide what information to disclose publicly, and would allow public input on the information that it proposed to disclose. At that time the CFPB advised that "[c]onsidering the public disclosure of HMDA data as a whole, applicant and borrower privacy interests arise under the balancing test only where the disclosure of HMDA data may both substantially facilitate the identification of an applicant or borrower in the data and disclose information about the applicant or borrower that is not otherwise public and may be harmful or sensitive." The CFPB echoed the balancing test approach in adopting the final guidance. However, the approach is off-balance, as it sides too much on the side of public disclosure, ignoring valid consumer privacy concerns.
Under the final policy guidance, the CFPB will make all of the HMDA data available to the public on an application-level basis, except as follows:
The following information would not be disclosed to the public (the nondisclosure of the first three items is consistent with prior public disclosure practices):- The universal loan identifier.
- The date the application was received or the date shown on the application form (whichever was reported).
- The date of the action taken on the application.
- The property address.
- The credit score(s) relied on.
- The NMLS identifier for the mortgage loan originator.
- The automated underwriting system result.
- The free form text fields for the following (the standard fields reported would be disclosed):
- The applicant’s race and ethnicity.
- The name and version of the credit scoring model.
- The principal reason(s) for denial.
- The automated underwriting system name.
- For the loan amount, the CFPB will disclose:
- The midpoint for the $10,000 interval into which the reported value falls, such as $115,000 for amounts of $110,000 to less than $120,000. (Under prior requirements the loan amount was reported to the nearest $1,000, and the reported amount was disclosed to the public.)
- Whether the reported loan amount exceeds the Fannie Mae and Freddie Mac conforming loan limit.
- For the age of the applicant, the CFPB will disclose:
- Ages of applicants in the following ranges: Under 25, 25 to 34, 35 to 44, 45 to 54, 55 to 64, 65 to 74, and over 74.
- Whether the reported age is 62 or over. For purposes of the Equal Credit Opportunity Act, a person is considered elderly if they are age 62 or over.
- For the debt-to-income ratio, the CFPB will disclose:
- The reported debt-to-income ratio for reported values of 36% to less than 50%, and other debt-to-income ratios in the following ranges: under 20%, 20% to less than 30%, 30% to less than 36%, 50% to less than 60% and 60% or higher. As proposed, the reported debt-to-income level would have been disclosed for reported values of 40% to less than 50%.
- The reported debt-to-income ratio for reported values of 36% to less than 50%, and other debt-to-income ratios in the following ranges: under 20%, 20% to less than 30%, 30% to less than 36%, 50% to less than 60% and 60% or higher. As proposed, the reported debt-to-income level would have been disclosed for reported values of 40% to less than 50%.
- For the property value, the CFPB will disclose the midpoint for the $10,000 interval into which the reported value falls, such as $115,000 for amounts of $110,000 to less than $120,000.
- For the total individual dwelling units in the property, the CFPB will disclose:
- The reported number of units for reported values below 5, and other unit numbers in the following ranges: 5 to 24, 25 to 49, 50 to 99, 100 to 149 and over 149. The CFPB had proposed to disclose the actual number of units reported.
- The reported number of units for reported values below 5, and other unit numbers in the following ranges: 5 to 24, 25 to 49, 50 to 99, 100 to 149 and over 149. The CFPB had proposed to disclose the actual number of units reported.
- For the individual dwelling units in a multifamily property that are income-restricted, the CFPB will disclose the reported value as a percentage, rounded to the nearest whole number, of the value reported for the total individual dwelling units. The CFPB had proposed to disclose the actual number of units reported.
Although the loan amount will now be reported in the applicable $10,000 interval and not to the nearest $1,000, the concern is that the totality of the information that is publicly available will make it easier than it is today to determine the identity of the applicant. Thus, based on the final policy guidance, there is a risk that a significant amount of information that consumers view as being confidential will become publicly available. The CFPB essentially dismissed most privacy concerns raised by parties commenting on the proposed policy guidance.
While the final policy guidance favors public disclosure over consumer privacy concerns, the final policy guidance may have a limited life. As previously reported, the CFPB has indicated that it plans to reopen HMDA rulemaking to reconsider various aspects of the revised HMDA rule, including the discretionary data points that were added by the CFPB. We noted previously that the CFPB's Fall Rulemaking Agenda has a target of May 2019 for the issuance of a notice of proposed rulemaking. Potentially, the CFPB may eliminate entirely, or modify, one or more data categories that are included in the information disclosed publicly. The CFPB states as follows in the supplementary information to the final policy guidance: "The Bureau intends to commence a rulemaking in the spring of 2019 that will enable it to identify more definitively modifications to the data that the Bureau determines to be appropriate under the balancing test and incorporate these modifications into a legislative rule. The rulemaking will reconsider the determinations reflected in this final policy guidance based upon the Bureau’s experience administering the final policy guidance in 2019 and on a new rulemaking record, including data concerning the privacy risks posed by the disclosure of the HMDA data and the benefits of such disclosure in light of HMDA’s purposes." Thus, in addition to reconsidering the HMDA rule itself, the CFPB already plans to reconsider the approach to public disclosure taken in the final policy guidance.
The adoption of policy guidance that favors public disclosure over consumer privacy appears contrary to the approach of former Acting Director Mulvaney. Perhaps the action reflects that Director Kraninger will take a different approach. Or perhaps Director Kraninger simply decided to initially punt on the issue. The guidance needed to be adopted in view the impending March 1 filing deadline for HMDA data. But as noted above, the CFPB intends to revisit both the HMDA rule itself and the policy guidance. Perhaps Director Kraninger will reassess the approach during the upcoming rulemaking.
Note that while the approach to the public disclosure of HMDA data is adopted in the form of public guidance and not a formal rule, the CFPB advises in the supplementary information to the guidance that pursuant to the Congressional Review Act it will file the guidance with Congress. As we previously reported, the Government Accountability Office determined that the CFPB bulletin on "Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act" was a rule subject to the Congressional Review Act, and subsequently under the Act, Congress passed, and President Trump signed, legislation disapproving the bulletin. Presumably, this result influenced the decision of the CFPB to file the policy guidance with Congress under the Act.
- Richard J. Andreano, Jr.CFPB Assesses Ability-to-Repay/Qualified Mortgage Rule
On January 10, the CFPB published a report containing the results of its assessment of the Ability-to-Repay and Qualified Mortgage Rule (ATR/QM Rule) issued in 2013. The assessment was conducted pursuant to the Dodd-Frank Act, which requires the CFPB to review each significant rule it issues and evaluate whether the rule is effective in achieving its intended objectives, and the purposes and objectives of Title X of the Dodd-Frank Act, or whether it is having unintended consequences.
The CFPB based the report on information gathered from a variety of sources, including:
- Loan origination and performance data from the National Mortgage Database (NMDB), Black Knight, CoreLogic, and HMDA
- Desktop Underwriter and Loan Prospector submissions and acquisitions data provided by Fannie Mae and Freddie Mac
- Application-level data from nine lenders covering over 9 million applicants
- Survey results from 190 lenders
- Supervision Data
- Residential mortgage backed securities (RMBS) data from IMF, Bloomberg, L.P., and SEC
- Cost data from the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Reports between 2009 and 2018
- Conference of State Bank Supervisors’ (CSBS) 2015 Public Survey data
- Evidence from comments received in response to the 2017 RFI concerning the ATR/QM assessment. The ATR/QM Rule, which came into effect in January 2014, prohibits a lender from making a closed-end residential mortgage loan unless before closing the lender makes a reasonable and good faith determination, based on verified and documented information, that the consumer has a reasonable ability to repay (ATR). Qualified Mortgage (QM) loans are presumed to comply with the ATR requirement, except in the case of “higher priced” mortgage loans, where this presumption is rebuttable. Based on its survey of lenders, the Bureau found that a majority of respondents changed their business model due to the ATR/QM Rule in the form of increased income documentation, increased staffing, or adopting of a policy of not originating non-QM loans. The Bureau concluded that among the nine lenders that provided data, the changes resulted in lost profits of between $20 and 26 million per year. The Bureau also found that over the period of 2014 to 2016 the ATR/QM Rule eliminated between 63-70% of non-GSE eligible home purchase loans with debt-to-income (DTI) ratios above 43%. This impact did not carry over to refinance transactions, where lenders are more likely to extend credit due to a demonstrated ability to repay. The Bureau admits that because credit standards were already tight when the ATR/QM Rule took effect, “it is possible that the impacts would be different during times when credit is more abundant.” We note that the mortgage industry did not believe that a robust non-QM market would develop, and that the temporary GSE QM would be relied on heavily by lenders. And this is no surprise. The potential liability for violating the rule is significant, and based on the general standards for a non-QM loan there is no way for a lender, a due diligence firm or other party to conclusively determine if a given non-QM loan complies with the rule. As a result, a robust QM market did not develop, and it will never develop based on the current statute and rule. Based on the presumption of compliance with the rule, which is conclusive for non-higher priced loans, mortgage lenders mainly will originate a QM loan when possible. And based on the familiarity of the industry with Fannie Mae and Freddie Mac underwriting requirements, and the relative inflexibility of the standard QM based on the strict 43% DTI ratio limit and Appendix Q, the temporary GSE QM is favored by the industry. While the Bureau noted that the temporary GSE QM will expire no later than January 10, 2021, it did not address the fact that should the QM expire, mortgage lending would be severely constrained. Congress and/or the Bureau must act to prevent another mortgage crisis. The Bureau further concludes that the ATR/QM Rule does not appear to be constraining the activities of smaller lenders, who may originate QM loans that have DTI ratios above 43% without following Appendix Q, and may also originate QM loans that have balloon payments if various conditions are met, as long as such loans are held in portfolio for at least two years after the origination. In March 2016, the definition of a small creditor was amended to increase the loan threshold from 500 to 2,000 loans per year. According to the Bureau, this amendment had ameliorative effects – (1) the geographic market coverage of small creditors increased substantially with the new threshold, increasing access to credit for borrowers in rural and underserved areas who have DTIs above 43%; and (2) the share of loans made by depository institutions that were small creditors almost doubled.
- We note that in May 2018, Senate Bill 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, was signed into law, creating a new QM category for insured depository institutions and insured credit unions that have, together with their affiliates, less than $10 billion in total consolidated assets. The Act provides that the new QM loan is deemed to comply with the ATR requirements if the loan: (1) is originated by and retained by the institution, (2) complies with requirements regarding prepayment penalties and points and fees, and (3) does not have negative amortization or interest-only terms. Furthermore, the institution must consider and verify the debt, income, and financial resources of the consumer. Beyond a minor footnote, the Bureau does not address this amendment in its report, likely because it still needs to implement the law.
- The Bureau also notes that innovation is occurring in the Temporary GSE QM space in the area of income verification and calculation, because compliance with Appendix Q is not required (loans made under the standard QM that is based on the strict 43% DTI ratio limit must follow Appendix Q). While the innovation is positive, it does not address the underlying need to continue, or find a suitable alternative, for the Temporary GSE QM.
- Although the rule includes a standard QM that is based on a strict DTI ratio limit of 43%, the Bureau created a temporary QM for loans eligible for sale to Fannie Mae or Freddie Mac “to preserve access to credit for consumers with debt-to-income ratios above 43 percent during a transition period in which the market was fragile and the mortgage industry was adjusting to the final rule.” The Bureau notes that it “expected that there would be a robust and sizable market for non-QM loans beyond the 43 percent threshold and structured the Rule to try to ensure that this market would develop.”
- In its assessment, the Bureau found that the introduction of the ATR/QM Rule was generally not correlated with an improvement in loan performance (as measured by the percentage of loans becoming 60 or more days delinquent within two years of origination). Rather, the Bureau concludes that delinquency rates on mortgages originated in the years immediately prior to the effective date of the ATR/QM Rule were historically low, “as credit was already tight at that time.” Moreover, although the performance of non-QM loans did not improve in absolute terms under the ATR/QM Rule, it has improved relative to the performance of comparable QM loans.
- The CFPB states that the report does not include a cost-benefit analysis of the ATR/QM Rule or its provisions, but that “each report does address matters relating to the costs and benefits.” The CFPB indicated that going forward, it will reconsider whether to include such an analysis in its assessment.
The Bureau did not announce any further action relative to the ATR/QM Rule but did indicate that reactions from stakeholders to the reports’ findings and conclusions would help inform future policy decisions. The Bureau concurrently released a report assessing the RESPA Mortgage Servicing Rule, which we will analyze separately.
- Richard J. Andreano, Jr. & Pavitra BaconFed Reported to Have Reservations About Fintech Charter
Last July, the OCC announced its decision to accept applications for special purpose national bank (SPNB) charters from Fintech companies. At that time we observed that, while not discussed in the materials released by the OCC, it appeared that a Fintech company holding an SPNB charter would be required to be a member of the Federal Reserve System and be subject to oversight as a member bank. As a Federal Reserve member, an SPNB would have access to the Federal Reserve discount window and other Federal Reserve services.
According to a recent Reuters article, Federal Reserve officials have expressed reservations about allowing such access to Fintech companies. Reuters reports that “many Fed officials fear that these firms lack robust risk-management controls and consumer protections that banks have in place.” The article quotes the President of the St. Louis Fed as having expressed concern that “Fintech will be the source of the next crisis.” The Atlanta Fed President is quoted as having said that “almost none of [the Fintech entrepreneurs he has talked to] has risk at the top of what they’re thinking about, and that makes me nervous.”
Despite its reported reservations about the SPNB charter, the Federal Reserve has acknowledged the increasing role played by Fintech in shaping financial and banking landscapes and indicated that it is interested in developing policy solutions that would result in greater efficiencies and benefits to all parties. To that end, the Philadelphia Fed sponsored a conference last November on Fintech and the New Financial Landscape. At the conference, Ballard Spahr Partner Scott Pearson was a member of a panel that discussed “The Roles of Alternative Data in Expanding Credit Access and Bank/Fintech Partnership.”
- Barbara S. MishkinDid You Know?
NMLS Reinstatement Period Ends February 28
For those agencies that permit license reinstatement, the reinstatement period will run until midnight Eastern Time on February 28, 2019. Details are available on the Annual Renewal page on the NMLS Resource Center website State Licensing.
- John D. SocknatCopyright © 2019 by Ballard Spahr LLP.
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