Mortgage Banking Update - October 19, 2023
In This Issue:
- CFPB and DOJ Issue Joint Statement on Consideration of Immigration Status Under ECOA But Omit Clear Guidance
- CFPB Planning Significant Staff Increases; Number of Full-Time Enforcement Attorneys to Increase by 50 Percent
- SCOTUS Agrees to Hear Second Case Challenging Chevron Deference
- FTC Issues Proposed Rule to Regulate “Junk Fees”
- White House, CFPB, FTC Continue Assault on “Junk Fees”
- CFPB Issues Advisory Opinion on Fees Charged by Large Banks and Credit Unions to Respond to Information Requests and Releases Data Showing Elimination of NSF Fees
- EEOC Proposes Guidance on Workplace Harassment Enforcement
- This Week’s Podcast Episode: A Close Look At The Federal Trade Commission’s Updates to Its Guides on the Use of Endorsements and Testimonials in Advertising and Proposed Rule on the Use of Consumer Reviews And Testimonials
- New FinCEN Director Addresses Key Topics in BSA/AML
- OCC Issues Bank Supervision Operating Plan for Fiscal Year 2024
- FTC and CFPB Submit Amicus Brief in Second Circuit on FCRA Requirement for Furnisher to Conduct Reasonable Investigation of Disputed Information
- NY Federal Court Denies Motion to Dismiss CFPB Lawsuit Against Debt Buyer Companies and Their Owners/Officers for Unlawful Debt Collection Practices Based on Third-Party Conduct
- New Jersey Appellate Division Affirms Dismissal of Consumer Fraud Class Action Against Debt Collector Under the New Jersey Consumer Fraud Act
- Did You Know?
The Consumer Financial Protection Bureau and Department of Justice have issued a joint statement regarding “the potential civil rights implications of a creditor’s consideration of an individual’s immigration status under the Equal Credit Opportunity Act (ECOA).”
The agencies begin the statement by observing that while ECOA and Regulation B do not expressly prohibit consideration of immigration status, they do prohibit creditors from using immigration status to discriminate on the basis of national origin, race, or any other protected characteristic. They cite the statement in Regulation B that a “creditor may consider [an] applicant’s immigration status or status as a permanent resident of the United States, and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment.” However, they caution that “Regulation B does not, however, provide a safe harbor for all consideration of immigration status.” Specifically, because “immigration status can broadly overlap with or, in certain circumstances, serve as a proxy for [protected characteristics such as race and national origin], [c]reditors should therefore be aware that if their consideration of immigration status is not ‘necessary to ascertain the creditor’s rights and remedies regarding repayment’ and it results in discrimination on a prohibited basis, it violates ECOA and Regulation B.”
The agencies state that, as a general matter, creditors should evaluate whether their reliance on immigration status, citizenship status, or “alienage” (i.e., an individual’s status as a non-citizen) is necessary or unnecessary to ascertain their rights or remedies regarding repayment. They warn that “[t]o the extent that a creditor is relying on immigration status for a reason other than determining its rights or remedies for repayment, and the creditor cannot show that such reliance is necessary to meet other binding legal obligations, such as restrictions on dealings with citizens of particular countries, the creditor may risk engaging in unlawful discrimination, including on the basis of race or national origin, in violation of ECOA and Regulation B.”
The agencies give the following examples of creditor practices that could risk violating ECOA and Regulation B:
- A blanket policy of refusing to consider applications from certain groups of noncitizens regardless of the credit qualifications of individual borrowers within that group. Compliance risk could arise because some individuals within those groups may have sufficient credit scores or other individual circumstances that may resolve concerns about the creditor’s rights and remedies regarding repayment.
- The overbroad consideration of certain criteria, such as how long a consumer has had a Social Security Number. This could implicate or serve as a proxy for citizenship or immigration status, which in turn, can implicate a protected characteristic under ECOA like national origin or race. Any claims that such policies are necessary to preserve the creditor’s rights and remedies regarding repayment or to meet other binding legal obligations should be supported by evidence and cannot be a pretext for discrimination.
- Requiring documentation, identification, or in-person applications only from certain groups of noncitizens, and this requirement is not necessary for assessing the creditor’s ability to obtain repayment or fulfilling the creditors’ legal obligations.
The agencies further caution that, in addition to potential violations of ECOA and Regulation B, creditors should be mindful of their obligations under 42 U.S.C. § 1981. Section 1981 provides that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens[.]” The agencies indicate that this provision “has long been construed to prohibit discrimination based on alienage” and that except to the extent consideration of immigration status is permissible under ECOA and Regulation B, creditors must comply with both statutes. As a result, according to the agencies, “discrimination that arises from overbroad restrictions on lending to noncitizens may violate either or both statutes. (The agencies note that neither of them has enforcement or regulatory authority under Section 1981. Section 1981 can be enforced in private actions.)
While we do not take issue with the agencies for reminding creditors about the ECOA and Regulation B rules regarding immigration status, we find it troubling that the agencies have done so without providing any clear guidance about how creditors may appropriately use immigration status in their credit decisions. Regulation B allows a creditor to consider the amount and probable continuance of any income in evaluating an applicant’s creditworthiness for credit. Most notably, the joint statement does not address how creditors can use immigration status in assessing the likelihood of continuation of income in the context of specific ability to repay determination requirements, particularly the requirements of the Regulation Z ability to repay (ATR) rule for mortgage loans. This omission is particularly glaring because of the significant liability that mortgage lenders can face for violating the ATR rule.
The first two general requirements under the ATR rule are that the creditor must consider the “consumer’s current or reasonably expected income or assets, other than the value of the dwelling, including any real property attached to the dwelling, that secures the loan” and “if the creditor relies on income from the consumer’s employment in determining repayment ability, [the creditor must consider] the consumer’s current employment status.” It would have been helpful for the joint statement to have addressed how a creditor, in deciding whether to make a long-term mortgage loan, should assess the likelihood of continuation of income if an individual is in the United States on a temporary work visa or has no legal basis to be in the United States.
In a related blog post, the CFPB discussed the statement as part of the initiative it has launched “to better understand the financial experiences of immigrants in the United States.” Among other things, the blog post highlights the financial experiences of immigrant borrowers protected under the Deferred Action for Childhood Arrivals (DACA) program.
By not providing clear guidance on when the consideration of immigration status can cross the line into improper discrimination based on race or national origin, the agencies make it difficult for us to avoid the conclusion that the agencies’ primary goal in issuing the statement is to scare creditors away from using immigration status in credit decisions.
American Banker recently reported that the CFPB is planning to substantially increase the size of its staff, particularly its Enforcement Division staff.
The American Banker article was based on an internal memo from Eric Halperin, CFPB Enforcement Director, which was sent to CFPB employees on September 21. As reported by American Banker, the memo indicates that Director Chopra has allocated about 75 new full-time employees to the Enforcement Division. As the CFPB currently has approximately 150 enforcement attorneys and support staff, the addition of the 75 new full-time employees would increase the number of full-time employees in the Enforcement Division by 50%. The memo also references CFPB plans to hire additional staff in its legal, operations and research, monitoring, and regulations divisions. American Banker reports that the CFPB will begin recruiting and hiring the new enforcement attorneys and staff this fall and into 2024.
The article includes the following quote from Mr. Halperin’s memo:
These additional resources will enable us to open more investigations, including matters with significant market impact and against large market actors, consistent with the Bureau’s priorities. We also will be in a better position to meet resource demands from our increasing number of matters in contested litigation.
American Banker reports that the memo also indicates that the expansion of the CFPB’s Enforcement Division includes plans to hire a litigation deputy, assistant litigation deputies, and other support staff and to create a fifth litigation team. Mr. Halperin is also quoted as having said in the memo that “[t]he office will benefit from standing up a fifth litigation team that is as strong as the existing four teams. It will take several months to build the fifth litigation team and will involve both internal moves as well as new hiring.”
This is truly an ominous development which will undoubtedly greatly increase the volume of investigations launched and lawsuits brought by the CFPB. This increases the risk that more banks and non-banks will be targeted by the CFPB, thus making it increasingly important for them to put their compliance houses in order.
Last Friday, the U.S. Supreme Court agreed to hear a second case, Relentless, Inc. v. U.S. Department of Commerce, in which the question presented is whether the Court should overrule its 1984 decision in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc. That decision produced what became known as the “Chevron framework”–the two-step analysis that courts typically invoke when reviewing a federal agency’s interpretation of a statute. In May 2023, the Supreme Court granted the certiorari petition filed in Loper Bright Enterprises v. Raimondo in which the petitioners are also urging the Court to overrule Chevron.
Both cases involve a regulation of the National Marine Fisheries Service (NMFS) that requires certain vessels to pay the salaries of the federal observers that they are required to carry. The regulation implements the Magnuson-Stevens Act which authorizes the NMFS to require fishing vessels to carry federal observers. In both cases, the petitioners are owners of fishing vessels who challenged the NMFS regulation as exceeding the agency’s authority under the MSA. The district court in each case, applying the Chevron framework, upheld the NMFS regulation. In Loper, a divided D.C. Circuit panel affirmed the district court and in Relentless, a unanimous First Circuit panel affirmed the district court.
It has been suggested that the Supreme Court granted the certiorari petition in Relentless to allow Justice Jackson to participate in the decision in that case. Justice Jackson recused herself from Loper because it arose out of the D.C. Circuit, on which she previously served before becoming a Supreme Court Justice.
In its order granting the certiorari petition in Relentless, the Court directed the Clerk “to establish a briefing schedule that will allow this case to be argued in tandem with [Loper] in the January 2024 argument session.” While a date for oral argument has not yet been set in Loper, this directive would indicate that the Court plans to hear oral argument in both cases in January 2024.
In June 2023, we released an episode of our Consumer Finance Monitor Podcast, “A Look at the current challenge to judicial deference to federal agencies and what it means for the consumer financial services industry.” Our special guest for the episode was Craig Green, Professor, Temple University School Of Law. To listen to the episode, click here.
On September 7, 2023, at the ABA Business Law Section Fall Meeting in Chicago, I moderated a program, “U.S. Supreme Court to Revisit Chevron Deference: What the SCOTUS Decision Could Mean for CFPB, FTC, and Federal Banking Agency Regulations.”
As part of the White House’s latest round of efforts targeting so-called “junk fees,” the Federal Trade Commission has issued a proposed rule, “Rule on Unfair or Deceptive Fees.” The proposal follows the FTC’s issuance in October 2022 of an Advance Notice of Proposed Rulemaking to address “junk fees,” a term that was used in the ANPR Notice to refer to “unfair or deceptive fees that are charged for goods and services that have little or no added value to the consumer.” It was issued on the same day that the CFPB issued three new items directed at “junk fees.” Comments on the FTC’s proposed rule must be received no later than 60 days after the date the proposal is published in the Federal Register.
The FTC’s proposed rule would declare that the following practices by “any Business” are unfair and deceptive practice and a violation of the rule:
- Offering, displaying, or advertising an amount a consumer may pay without Clearly and Conspicuously disclosing the Total Price. In any offer, display, or advertisement, a Business must display the Total Price more conspicuously than any other Pricing Information.
- Misrepresenting the nature and purpose of any amount a consumer may pay, including the refundability of such fees and the identity of any good or service for which fees are charged. Before a consumer consents to pay, a Business must Clearly and Conspicuously disclose the nature and purpose of any amount a consumer may pay that is excluded from the Total Price, including the refundability of such fees and the identity of any good or service for which fees are charged.
A “Business” would be defined as “an individual, corporation, partnership, association, or any other entity that offers good or services, including, but not limited to, online, in mobile applications, and in physical locations.” The definition contains a carve out for motor vehicle dealers who would be required to comply with the FTC’s proposed Motor Vehicle Dealers Trade Regulation Rule, which seeks to address unnecessary add-on fees, among other things, in the car buying process. However, if that rule is not finalized, motor vehicle dealers would not be exempt from the definition of “Business” and would be subject to the proposed rule on unfair and deceptive fees.
“Total Price” would be defined as “the maximum total of all fees or charges a consumer must pay for a good or service and any mandatory Ancillary Good or Service, except that Shipping Charges and Government Charges may be excluded.” “Ancillary Good or Service” means “any additional good(s) or service(s) offered to a consumer as part of the same transaction.” It would include goods or services that are not necessary to render the primary good or service fit for its intended use but are nevertheless offered as part of the same transaction. As examples of mandatory ancillary services, the FTC gives a fee for a trash valet service in a housing rental agreement that the consumer cannot reasonably avoid and a fee that a consumer cannot reasonably avoid to process the payment for a good or service.
The first prohibition, which would appear in a section of the rule entitled “Hidden Fees Prohibited,” is directed at bait-and-switch pricing. The prohibition applies to amounts “offered, displayed, or advertised” by a Business even if a different entity provides the good or service. As an example, the FTC indicates that if a Business advertises a price for a product that it provides to a consumer and requires an ancillary good or service provided by another entity, such as payment processing, the charge for the ancillary good or service must be included in the Total Price. The FTC states that it anticipates the possibility of providing certain exclusions for the proposed rule, including for some financial products where the Total Price cannot practically be determined.”
The second prohibition, which would appear in a section of the rule entitled “Misleading Fees Prohibited,” is intended to cover misrepresentations about a fee’s nature and purpose, including the refundability of such fees and the identify of any good or service for which fees are charged. The section mandates the disclosure of the nature and purpose of any amount a consumer may pay that is excluded from the Total Price. Such amounts include any Shipping Charges, Government Charges, optional fees, voluntary gratuities, and invitations to tip.
While the FTC’s proposed rule would only directly apply to a “Business” that is subject to the FTC’s jurisdiction, the federal banking agencies are likely to consider the FTC’s interpretation of what are unfair or deceptive fee practices in applying Section 5 of the FTC Act to the financial institutions they supervise.
The proposal also includes a series of questions on which the FTC seeks comment. Among those questions is whether a new definition of “Covered Business” should be added to narrow the Businesses covered by specific requirements of the rule and, if so, whether that definition should exclude Businesses to the extent they offer or advertise credit, lease, or savings products, or to the extent they extend credit or leases or provide savings products to consumers. In addition, although the proposed rule largely focuses on advertisements and misrepresentations, the FTC asks whether it should prohibit “excessive” fees, and, if so, how “excessive” fees should be defined in the final rule.
On November 28, 2023, from 1:00 p.m. to 2:30 p.m. ET, Ballard Spahr attorneys will hold a webinar on the most recent actions of the White House, CFPB, and FTC in the Biden Administration’s assault on so-called “junk fees.” To register, click here.
Last Wednesday, we published three blog posts about new actions taken by the CFPB and FTC related to the Biden Administration’s war on “junk fees”:
- FTC issues proposed rule to regulate “junk fees”
- CFPB Supervisory Highlights Update Special Edition looks at “junk fees” charged In connection with deposits, auto servicing, and remittances
- CFPB issues advisory opinion on fees charges by large banks and credit unions to respond to information requests and releases data showing elimination of NSF fees
Also last Wednesday, the White House held an event at which President Biden spoke about these new developments as well as developments at other federal agencies to curb “junk fees” charged by companies subject to the jurisdiction of such agencies. In addition, the White House issued a statement related to the Administration’s junk fee initiative that chronicles actions targeting junk fees taken earlier this year by the CFPB, FTC and other agencies such as the FCC and HUD whose actions often apply to consumer financial services providers. At least so far, none of these other agencies have taken any actions related to junk fees which affect consumer financial services providers.
However, the White House also directed all executive federal agencies to consider the impact on competition of any regulations they develop and issued related guidance. The White House considers charging junk fees to be an anticompetitive practice. Thus, it would not be surprising to see other agencies (e.g., OCC, FDIC, and FRB) issue regulations curbing junk fees.
While there was very little new information in President Biden’s remarks and the White House statement issued yesterday that is germane to consumer financial services providers, President Biden did mention that the CFPB will be issuing a notice of proposed rulemaking regarding Section 1033 of Dodd-Frank (the so-called “open banking” provision) before the end of October. The President also mentioned the CFPB’s proposed credit card late fee regulation which would reduce the safe harbor to $8. Unfortunately, the President still considers credit card late fees to be a type of junk fee.
We have been closely monitoring all activities of the White House, CFPB, and FTC related to junk fees since President Biden announced in his February 2023 State of the Union address that his Administration was “taking on junk fees.” Earlier this year, we held a webinar, “The CFPB’s Inquiry into “Junk Fees”: What It Means for Consumer Financial Services Providers,” which we later re-purposed into a two-part episode of our Consumer Finance Monitor Podcast. Part I is available here and Part II is available here.
As indicated above, on November 28, 2023, we will hold another webinar covering the most recent developments relating to junk fees. Click here to register.
As we have previously reported on this blog and discussed on our Consumer Finance Monitor Podcast, last year, the CFPB embarked on a campaign orchestrated by the Biden Administration to eliminate “junk fees.” Today, the CFPB issued three new items in connection with those efforts. First, the CFPB issued a new advisory opinion on fees charged by large banks and credit unions subject to CFPB supervision (i.e., those with more than $10 billion in assets) to consumers who request account information. Second, it issued a data spotlight showing that “the vast majority of NSF fees have been eliminated” by large banks. Third, it issued a new edition of Supervisory Highlights focused on “junk fees.” We will discuss the new edition of Supervisory Highlights in a separate blog post.
Advisory opinion. Apparently undaunted by the recent Texas federal court decision striking down the CFPB’s attempt to use its UDAAP authority to regulate discrimination, the CFPB has issued a new advisory opinion that interprets Section 1034(c) of the Consumer Financial Protection Act to prohibit large banks and credit unions from requiring a consumer a fee or charge to obtain account information.
Section 1034(c) provides that large banks and credit unions subject to CFPB supervision:
shall, in a timely manner, comply with a consumer request for information in the control or possession of such covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including supporting written documentation, concerning the account of the consumer.
In the advisory opinion, the CFPB states that Section 1034(c) grants consumers a right to request and receive account information that falls within the scope of the provision, and imposes a mandatory legal obligation on large banks and credit unions to respond to the consumer’s request and to provide such account information. While the CFPB does not read Section 1034(c) to require large banks and credit unions “to provide information in any particular manner, or using any particular means,” it reads Section 1034(c) to prohibit large institutions from “impos[ing] conditions or requirements on consumers’ information requests that unreasonably impede consumers’ ability to request and receive account information.” According to the CFPB:
Under the plain language of section 1034(c), if a consumer makes a “request for information in the control or possession of such covered person concerning the consumer product or service that the consumer obtained from such covered person” that does not fall within one of the covered exceptions, and a large bank or credit union refuses to provide that information unless the consumer satisfies an unreasonable condition, the bank or credit union has failed to “comply” with the request. Section 1034(c) does not contain any language stating or suggesting that a large bank or credit union may impose conditions that unreasonably impede consumers’ information requests. Such conditions, if permitted, would allow large banks and credit unions to frustrate and effectively nullify the right granted in section 1034(c). And there is no reason to believe that Congress intended for section 1034(c) to allow that result.
Based on the above, the CFPB advises that “[a]s a general matter, requiring a consumer to pay a fee or charge to request account information, through whichever channels the bank uses to provide information to consumers, is likely to unreasonably impede consumers’ ability to exercise the right granted by section 1034(c), and thus to violate the provision.” The CFPB interprets Section 1034(c), without regard to “how a large bank or credit union labels or characterizes a fee on its fee schedule or other documents, to “likely include charging fees (1) to respond to consumer inquiries regarding their deposit account balances; (2) to respond to consumer inquiries seeking the amount necessary to pay a loan balance; (3) to respond to a request for a specific type of supporting document, such as a check image or an original account agreement; and (4) for time spent on consumer inquiries seeking information and supporting documents regarding an account.” The CFPB notes that it would generally not violate Section 1034(c) for a large bank or credit union to impose fees in certain limited circumstances, such as charging a fee to a consumer who repeatedly requested the same account information.
However, the CFPB fails to explain how Section 1034(c) differs from other federal consumer financial services laws that have been interpreted to permit the assessment of charges or fees. For example, Section 161(b)(2) of the Truth in Lending Act gives consumers the right to request documentary evidence of an extension of credit appearing on their statements and the CFPB has interpreted it to permit creditors offering home equity lines of credit to charge a fee for such documentation as long as the fee is disclosed as an “other” charge. A fee for copies of documents requested for tax purposes is also permitted, by implication, and need not even be disclosed as an “other” charge in the Truth in Lending disclosures. Similarly, Section 264(b) of the Truth in Savings Act requires a depository institution to disclose all fees that may be charged against the account and the CFPB has interpreted it to permit institutions to charge a fee for providing copies of checks to the consumer, as long as the fee is disclosed. Photocopying fees for copies of other documents are also permitted, by implication, and need not be disclosed on the Truth in Savings disclosure form. For that matter, the CFPB also fails to address the impact of Section 101(c)(1)(B)(iv)(ii) of the ESIGN Act, which permits consumers to request paper copies of any electronic record and permits the assessment of a fee for such copies as long as the fee is disclosed.
Nonetheless, with no more textual support, the CFPB goes on to provide examples of other non-fee obstacles and conditions that could violate Section 1034(c) by unreasonably impeding consumers’ ability to make an information request. According to the CFPB, “depending on the facts and circumstances,” such examples could include “forcing consumers to endure excessively long wait times to make a request to a customer service representative, requiring consumers to submit the same request multiple times, requiring consumers to interact with a chatbot that does not understand or adequately respond to consumers’ requests, or directing consumers to obtain information that the institution possesses from a third party instead.”
The advisory opinion also addresses what constitutes “timely compliance” with consumer information requests under Section 1034(c) and the need for responses to information requests to be “accurate” and “complete” but unfortunately it does so in a way that is likely to encourage frivolous or irrelevant requests as a delaying tactic in collections and in litigation. With regard to timely compliance, the CFPB states that it “will consider the specific circumstances and nature of a particular request,” such as “the complexity of the request and/or the difficulty of response.” Here, at least, the CFPB states that what constitutes a timely response under Section 1034(c) “may also be informed by the timing requirements of other Federal laws and regulations with which large banks and credit unions must comply,” such as timing requirements for mortgage servicers in Regulation X.
With respect to accuracy and completeness, the CFPB states:
[S]ection 1034(c) contemplates that large banks and credit unions will in fact provide consumers with the information they request to the extent it is in their control or possession. A large bank or credit upon would violate section 1034(c) if it provided incomplete or inaccurate information in response to a consumer’s information request.
Thus, according to the CFPB, there are no limitations on such requests with the possible exception of ones that might result from record retention programs. The CFPB states that a large bank or credit union would not meet its obligation under Section 1034(c) to provide complete information if, for example, “the consumer asked for information about all of the consumer’s transactions with a given merchant since the account was opened, and the large bank or credit union possesses transaction information going back seven years, but its response provides only transaction information going back one year.” A large bank or credit union would not meet its obligation under Section 1034(c) to provide accurate information if, for example, “a consumer asked the large bank or credit union the amount of a particular fee it charges for the consumer’s account…[and] it provided the wrong amount for that fee.”
Continuing to express concerns about technological innovation, the CFPB also notes that large banks and credit unions may violate Section 1034(c) “if they employ technologies that do not properly recognize consumer information requests or that provide inaccurate or incomplete information in response to those requests.” The CFPB observes that “chatbots or other automated responses…in the absence of appropriate checks and quality assurance processes…can inadvertently misdirect inquiries or provide inadequate responses.”
In June 2022, the CFPB issued a request for information (RFI) seeking comments from the public “on what customer service obstacles consumers face in the banking market, and specifically what information would be helpful for consumers to obtain from depository institutions pursuant to Section 1034(c) of the [CFPA].” In its background discussion of the new advisory opinion, the CFPB states that commenters on the RFI “relayed consumers’ frustration and difficulty in obtaining current information about their accounts. The CFPB’s invocation of Section 1034(c) to prohibit fees and address what the CFPB has called the movement “away from a traditional relationship banking model with an emphasis on providing customized help to individuals,” appears to be yet another example of the agency’s willingness to ignore or stretch the statutory text and expansively interpret the CFPA to pursue its priorities.
Data spotlight. According to the CFPB, its new data shows:
- Nearly two-thirds of banks with over $10 billion in assets have eliminated NSF fees.
- Nearly three-fourths of the banks that earned the most in overdraft/NSF fee revenue in 2021, including 27 of the top 30 earners, have eliminated NSF fees.
- Among credit unions with over $10 billion in assets, 16 of 20 continue to charge NSF fees, including four of the five largest.
The CFPB estimates:
- Among banks with over $10 billion in assets, 97% of NSF fee revenue has been eliminated.
- Among the 75 banks earning the most overdraft/NSF fee revenue in 2021, 95% of NSF fee revenue has been eliminated.
- As a result of the elimination of NSF fees at these banks, consumers are saving almost $2 billion annually on a going forward basis.
The CFPB also finds that generally, larger banks have been more likely to eliminate NSF fees. All banks with over $75 billion in assets and all but seven of the 63 banks with over $25 billion in assets have eliminated NSF fees. The CFPB states that it will continue to monitor NSF fee practices in the market.
In its most recent rulemaking agenda, the CFPB indicated that it is continuing to consider new rules regarding NSF fees. We hope the CFPB will reassess the need for new rules on NSF fees in light of the new data.
On October 2, 2023, the U.S. Equal Employment Opportunity Commission (EEOC) published its proposed guidance on workplace harassment claims, Enforcement Guidance on Harassment in the Workplace. The proposal is open for comment through November 1, 2023, in the Federal Register.
Employers will want to prepare for the EEOC’s new standards for employer liability, and review its examples of workplace harassment. The Agency is focused on enforcement given changes to the law and the modern workplace:
- The #MeToo movement: The EEOC’s approach to hostile work environment claims includes findings from the 2016 report published by the EEOC’s Select Task Force on the Study of Harassment in the Workplace. The guidance provides a description of the minimally adequate features the EEOC looks for in employers’ anti-harassment policies, complaint procedures, and trainings, to assess whether an employer has taken reasonable care to prevent and correct harassment. The EEOC also notes employers’ responsibility to identify known or obvious risks of harassment, such as harassment against employees who are “vulnerable, young, do not conform to workplace norms based on societal stereotypes, or who are assigned to complete monotonous or low-intensity tasks.”
- The virtual working environment: The EEOC addresses conduct that takes place virtually, emphasizing that such conduct will be deemed to take place within the work environment if conveyed using work-related systems, accounts, or platforms, including employers’ email platforms, instant message systems, and videoconferencing technologies. Employers can also be held liable for virtual conduct that occurs using private phones, computers, or social media accounts, if the conduct impacts the workplace.
- The U.S. Supreme Court’s 2020 decision in Bostock v. Clayton County, Georgia: Applying the Supreme Court’s holding in Bostock, the EEOC advises that the scope of sex-based harassment claims includes harassment based on sexual orientation and gender identity. The EEOC provides examples of such harassment, including epithets, physical assault, “harassment because an individual does not present in a manner that would stereotypically be associated with that person’s gender,” intentional and repeated misgendering, and the “denial of access to a bathroom or other sex-segregated facility consistent with the individual’s gender identity.”
- The EEOC also includes as enforcement targets pregnancy-related medical conditions, and harassment arising from an individual’s decisions about contraception and abortion.
The proposed guidance, if finalized, will supersede several of the EEOC’s past advice documents on harassment, which are decades old. Many employers have already updated their policies, training, and investigation processes to prevent and address harassment, but this guidance is another strong signal that the EEOC intends to increase its enforcement efforts. Employers should review this proposed guidance and consider further updates and training.
Ballard Spahr’s Labor & Employment Group regularly assists employers with their policies, training, and investigation to prevent and address workplace harassment claims. The firm is actively working with clients to stay current with developments in employment laws and the environment of increased numbers of workplace harassment, retaliation, and other claims that the EEOC’s guidance reflects.
Mia Kim & Jay A. Zweig
This Week’s Podcast Episode: A Close Look At The Federal Trade Commission’s Updates to Its Guides on the Use of Endorsements and Testimonials in Advertising and Proposed Rule on the Use of Consumer Reviews And Testimonials
Our special guest is Michael Ostheimer, Senior Consumer Protection Attorney in the FTC’s Division of Advertising Practices. In June 2023, the FTC updated its guides that set forth the FTC’s position on how Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, applies to the use of endorsements and testimonials in advertising. The updates are intended to address the increasing use of digital and social media marketing. We begin with a detailed review of the most significant changes made by the updates, such as those concerning the definitions of “endorser” and “endorsement,” the definition of a “clear and conspicuous” disclosure, suppression or boosting of consumer reviews, the use of incentivized and employee reviews and fake negative reviews of competitors, and the potential liability of advertisers, endorsers, and third parties such as advertising agencies. We then discuss how the FTC identifies potential violations and the relief it may seek, including the use of notices of penalty offenses to obtain civil penalties, and look at examples of practices involving endorsements and testimonials challenged by the FTC. We also look at potential sources of legal risk arising from the use of influencer advertising other than the FTC Act and suggest steps companies can take to protect themselves from legal risk when using reviews and testimonials. We conclude with a discussion of the FTC’s proposed new trade regulation rule which would prohibit certain practices involving consumer reviews or testimonials, including many of the practices described as deceptive in the updated guides.
Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, leads the conversation, joined by Aliza Karetnick, a partner in the firm and Practice Leader of the firm’s Commercial Litigation and Dispute Resolution Group.
To listen to the episode, click here.
The new Director of FinCEN, Andrea Gacki, addressed several key topics on October 3, 2023 at the Association of Certified Anti-Money Laundering Specialists (ACAMS) conference in Las Vegas, Nevada. Specifically, Director Gacki addressed the issues of beneficial ownership under the Corporate Transparency Act (CTA); the real estate industry; investment advisers; fentanyl trafficking; and whistleblowers under the Bank Secrecy Act (BSA).
Director Gacki referenced various recent publications by FinCEN on the CTA, and stated that “we’ll be standing up a dedicated beneficial ownership information contact center. Based on the questions received through the Regulatory Helpline, we will issue additional FAQs on a rolling basis.” Further, Director Gacki stated that, “[t]o say there is a significant amount of work happening would be an understatement. But there is more work to be done.” This oblique statement does not indicate whether the CTA database in fact will be functional by its statutory effective date of January 1, 2024. As we have blogged, FinCEN has been criticized for being slow in rolling out regulations and information regarding the CTA.
Real Estate and Investment Advisers
Switching gears and referencing the White House’s 2021 U.S. Strategy on Countering Corruption, Director Gacki explained that FinCEN has been examining the money laundering risks and vulnerabilities with certain so-called “gatekeeper” industries such as real estate and investment advisers. In regards to real estate, Director Gacki stated that, “[f]or too long, the U.S. real estate market has been susceptible to manipulation and use as a haven for the laundered proceeds of illicit activity, including corruption.” Director Gacki noted that FinCEN issued on December 6, 2021 an Advanced Notice of Proposed Rulemaking (ANPRM) to solicit public comment on potential requirements under the Bank Secrecy Act for certain persons involved in real estate transactions to collect, report, and retain information. As we have blogged, the ANPRM envisions imposing nationwide recordkeeping and reporting requirements on specified participants in transactions involving non-financed real estate purchases, with no minimum dollar threshold. According to Director Gacki, FinCEN is “currently developing a Notice of Proposed Rulemaking, the contours of which are still being determined. FinCEN aims to issue this ANPRM later this year.”
Turning to investment advisers, Director Gacki observed that “investment advisers are not generally subject to comprehensive AML/CFT requirements under the [BSA]. Although certain categories of investment advisers may undertake some AML/CFT obligations in limited circumstances, the absence of comprehensive regulation under the BSA in this industry creates gaps in the U.S. AML/CFT regime.” Indeed, unlike broker-dealers, investment advisers are not currently required to maintain AML compliance programs under the BSA, or file Suspicious Activity Reports (SARs). In 2015, during President Obama’s second term, FinCEN proposed exactly such a rule for certain investment advisers, but never moved forward. According to Director Gacki, FinCEN is assessing the relevant AML risks “and identifying the best ways to mitigate those risks.” She did not, however, reference any potential rule making.
We previously blogged on an advisory issued by FinCEN alerting financial institutions to the various financial mechanisms used by traffickers of fentanyl and synthetic opioids to launder the burgeoning proceeds of their illicit activities. Noting that “[t]racing and tracking the flow of funds related to fentanyl and its precursors is critical to disrupting the illicit supply chain and holding accountable those responsible for bringing fentanyl into the United States,” Director Gacki stated that “financial institutions and law enforcement agencies need to work together—they each have a critical role to play—and FinCEN has a role to play in building the bridges for these two groups to collaborate.”
To that end, Director Gacki explained that FinCEN has been holding “public-private partnership information exchanges focused on fentanyl—domestically through FinCEN Exchange and internationally through a roundtable with Mexican authorities and financial institutions alongside their U.S. counterparts.” Further, FinCEN has been sharing law enforcement investigation information and money laundering typologies, tools and best practices through a Trilateral Illicit Finance Working Group involving Canada and Mexico.
Finally, Director Gacki stated that FinCEN also will issue a Notice of Proposed Rulemaking for FinCEN’s new AML and sanctions whistleblower program. “While we work on the rulemaking necessary to fully implement this program, FinCEN is already receiving tips, investigating information received through those tips and making referrals to its enforcement colleagues at OFAC and the Department of Justice.” As we have blogged, the former Acting Director of FinCEN previously emphasized the fact that FinCEN created an “Office of the Whistleblower,” hired “key personnel” to build and supervise the whistleblower program, and now accepts whistleblower tips while FinCEN develops a “more formal” system. Although FinCEN suggested in June 2023 that proposed whistleblower regulations would be forthcoming soon, there is currently no public schedule regarding the publication of such proposed rules.
The Office of the Comptroller of the Currency’s (OCC) Committee on Bank Supervision (CBS) recently issued its annual Bank Supervision Operating Plan for FY 2024, which sets forth the OCC’s supervision priorities and objectives across CBS operating units. The Plan also facilitates the execution of supervisory strategies for individual national banks, federal savings associations, and federal branches of agencies of foreign banking organizations (collectively, Banks). For FY 2024, OCC examiners plan to focus on the impacts of such volatile economic conditions as high inflation, rising interest rates, and continuing recession possibilities as well as consider geopolitical events that may have adverse financial, operational, and compliance implications on the economy.
OCC supervision will focus on the below areas, inter alia:
- Consumer compliance: The OCC will focus on a Bank’s compliance risk management systems for new or innovative products, expanded services, and delivery channels offered to consumers or that involve products or services offered through third-party relationships, including those with fintechs or through banking-as-a-service activities. Supervisory focus may include a Bank’s processes to ensure compliance with statutory requirements prohibiting unfair, deceptive, or abusive acts or practices, including review of risk management practices for overdraft protection programs with features that may present heightened risk such as “authorize positive, settle negative” (APSN) or multiple representment fees. (We find the OCC’s reference to “abusive acts or practices” puzzling since the OCC’s enforcement authority under Section 5 of the FTC Act is limited to unfair or deceptive acts or practices.) In April 2023, the OCC issued a bulletin on APSN overdraft and non-sufficient funds fee practices. In July 2023, the OCC entered into a consent order for alleged violations by a bank arising from its representment fee practices. OCC supervisory focus may further consider whether relevant aspects of products or services, including those offered through third-party relationships, are communicated to consumers in a clear and consistent manner, with a concentration on compliance challenges, including fraud and error resolution, in light of increasing use of person-to-person payments.
- Credit: The OCC will focus on the effectiveness of a Bank’s actions in identifying and managing credit risk given significant changes in market conditions, interest rates, and geopolitical events. OCC examiners may further evaluate a Bank’s stress testing of adverse economic scenarios and potential implications to capital, including increasing operating and borrowing costs for vulnerable retail and commercial borrowers, in addition to whether loss mitigation practices, including forbearance and modification programs, consider a borrowers’ ability to repay and offer meaningful, affordable, and sustainable payment assistance.
- Fair lending: The OCC will focus on an assessment of fair lending risk and whether banks are ensuring equal access to products and services, including consideration of all factors that could affect a Bank’s fair lending risk, such as the latest changes to strategy, personnel, products, services, underwriting systems, CRA assessment areas, and operating environments. Supervisory focus may include a review of the full life cycle of credit products, including the potential for mortgage lending discrimination resulting from appraisal bias or discriminatory property evaluations.
- Operations: The OCC will focus on the identification and assessment of products, services, and third-party relationships with unique, innovative, or complex structures, such as real-time payments, banking-as-a-service arrangements, distributed ledger-related activities, or use of artificial intelligence technologies. OCC examiners may further assess a Bank’s risk management processes and controls of third-party relationships, particularly those with financial technology (fintech) companies, to safeguard against operational, compliance, reputation, financial, or other risks.
- Payments: The OCC will focus on the identification and evaluation of a Bank’s payment systems and payments-related products and services being offered or planned, especially new or novel products, services, or delivery channels, such as person-to-person payments. OCC examiners may further consider potential operational, compliance, credit, liquidity, strategic, and reputation risks and how they are incorporated into bank-wide risk assessments.
The OCC will provide periodic updates about supervisory priorities, emerging risks, and horizontal risk assessments in its Semiannual Risk Perspective report.
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have filed a joint amicus brief in which they urge the U.S. Court of Appeals for the Second Circuit to reverse the decision of a New York federal court in Suluki v. Credit One Bank, NA. The agencies argue that the district court disregarded the Fair Credit Reporting Act’s (FCRA) requirement that a furnisher delete disputed information that it cannot verify.
In the underlying case, plaintiff Khalilah Suluki notified Equifax, TransUnion, and Experian that she was disputing a Credit One credit card account shown as her account on her credit report. According to the plaintiff, her mother had opened the account in her name without her permission. After receiving the dispute from the credit reporting agencies, Credit One investigated the dispute and concluded that the account belonged to the plaintiff. The plaintiff then filed a lawsuit against Credit One in which she alleged that Credit One had not conducted a reasonable investigation of her dispute as required by the FCRA.
In granting Credit One’s motion for summary judgment, the district court stated at the outset that the plaintiff “has not presented any facts showing that, had Credit One taken any of the additional steps [the plaintiff] urges, it would have come to a different conclusion.” The court observed that “[n]o reasonable jury could find on these facts that Credit One had information available to it that, had Credit One taken additional steps to obtain that information, would have led it to conclude that Suluki did not authorize her mother to open the account on her behalf.”
The district court also observed that the plaintiff “had pointed to no one who can corroborate her testimony that her mother did not give her permission to open the account, nor has she proffered any piece of evidence that would show she did not give that permission, if Credit One had only retained it or sought it out.” The court then concluded that because a furnisher is not required under the FCRA to “‘rely solely on a consumer’s allegations in the absence of other information that would cause a reasonable person to have substantial doubts about the accuracy of the consumer’s credit report…. [a]nd [a]s [plaintiff] cannot demonstrate that a reasonable investigation could have uncovered any such evidence,’” the plaintiff had failed to raise a material issue of fact as to whether the investigation was not reasonable.
In their amicus brief, the FTC and CFPB argue that the Second Circuit should reverse the district court’s grant of summary judgment in favor of Credit One because even if Credit One had no evidence of fraud other than the plaintiff’s allegations, the court could have found that Credit One had not established that the account did not result from fraud. Section 1681s-2(b)(1)(E) of the FCRA provides that when a furnisher’s investigation finds that disputed information is “inaccurate, incomplete, or cannot be verified,” the furnisher must, “as appropriate, based on the results of the reinvestigation” modify, delete, or permanently block reporting of the information. According to the FTC and CFPB, the district court “failed to consider the possibility that Credit One had not verified Suluki’s debt and thus should have removed if from her credit report. If Suluki had made that showing at trial, she well could have been entitled to damages. But the district court’ summary judgment ruling wrongly denied her that opportunity.”
We find the FTC’s and CFPB’s position troubling. The agencies appear to be urging the Second Circuit to find that when a consumer disputes an account as the result of fraud, a furnisher must conclude that the disputed information “cannot be verified” and delete the account unless the furnisher has evidence that definitively establishes the absence of fraud. In other words, according to the FTC and CFPB, a furnisher cannot properly consider disputed information to be accurate or verified even when there is no evidence available to the furnisher (other than the consumer’s allegation) that the account was the result of fraud. If the furnisher is unable to “confirm” that the account was not the result of fraud, the furnisher must consider the information to be unverified.
Absent an admission by the consumer that no fraud had occurred, or an admission of wrongdoing by a third party, a furnisher is unlikely to ever have definitive evidence that a disputed account was not the result of fraud. Thus, if the Second Circuit were to adopt the FTC’s and CFPB’s position on what a furnisher must do to conclude that an account is not the result of fraud and find the disputed information to be accurate, furnishers would routinely be required to delete any account alleged to be the result of fraud even if there is no evidence available to the furnisher to support that allegation other than the mere allegation itself.
Moreover, the FTC and CFPB seem to be attempting to do an end run around Section 605B of the FCRA and around Section 623(a)(6)(B) of the FCRA. The former section directs a consumer reporting agency, that receives an allegation of identity theft from a consumer, to block the reporting of the information, but only after it receives (1) appropriate proof of the identity of the consumer, (2) a copy of an identity theft report; (3) the identification of the information that resulted from the alleged identity theft, and (4) a statement by the consumer that the information is not information related to any transaction by the consumer. The latter section directs a furnisher receiving an identity theft report, at the address it specified for receiving such reports, to block the furnishing of the information unless it “subsequently knows or is informed by the consumer that the information is correct.” As the FTC and CFPB have recognized, the identify theft report, an “official valid report” filed with a law enforcement agency, which subjects the filer to criminal penalties for falsifying information, is a key component of these provisions. But here Suluki failed to submit any identity theft report.
A New York federal district court has denied a motion to dismiss the lawsuit filed in January 2022 by the CFPB against three companies that purchase portfolios of defaulted debts (Corporate Defendants) and three individuals who are owners and/or officers of the Corporate Defendants (Individual Defendants).
The lawsuit alleges that the Corporate Defendants contracted with debt collectors to collect consumer debts on their behalf either directly or through other debt collectors or sold consumer debts to debt collectors, some of whom were contractually required to make ongoing payments to the Corporate Defendants. The CFPB alleges that both debt collectors who collected debts on the Corporate Defendants’ behalf and debt collectors to whom the Corporate Defendants sold debts used deceptive collection tactics, including false threats of lawsuits, arrest, and jail, and false statements about credit reporting. The CFPB also alleges that the Corporate Defendants received complaints from consumers about the debt collectors’ unlawful practices but took no meaningful action to prevent or preclude it. The CFPB’s claims against the Corporate and Individual Defendants consist of claims for Consumer Financial Protection Act (CFPA) and Fair Debt Collection Practices Act (FDCPA) violations based on vicarious liability for the debt collectors’ CFPA and FDCPA violations and claims for substantially assisting CFPA and FDCPA violations by the debt collectors.
In denying the motion to dismiss filed by the Corporate and Individual Defendants, the rulings made by the court include the following:
- The defendants can be “covered persons” or “related persons” under the CFPA even if only the third-party debt collectors actually collected the debts. Under the CFPA, a “covered person” includes “any person that engages in offering or providing a consumer financial product or service.” A “consumer financial product or service” includes “collecting debt related to any consumer financial product or service.” A “related person” includes “any director, officer or employee charged with managerial responsibility” for a covered person.
- CFPA liability can be based on vicarious liability and is not precluded by the existence of “substantial assistance” liability in the CFPA. Therefore, the CFPB can proceed under both a vicarious liability and a substantial assistance liability theory. The Corporate Defendants can be vicariously liable for unlawful acts taken by the debt collectors with actual authority to act on their behalf.
- The Individual Defendants can be liable for the debt collectors’ unfair or deceptive acts or practices if they had actual knowledge of the unlawful conduct and the authority to control it.
- Federal Rule of Civil Procedure 9(b), which requires a party alleging fraud or mistake to state with particularity the circumstances constituting fraud or mistake, does not apply to the CFPB’s substantial assistance claims. A claim of deceptive acts or practices under the CFPA does not require proof of the same essential elements as common-law fraud and the knowledge or recklessness standard required for substantial assistance liability under the CFPA does not transform a substantial assistance claim into the sort of fraud-based claim that would trigger Rule 9(b).
- The CFPB’s allegations that the Corporate and Individual Defendants placed debts for collection with or sold debts to the debt collectors who engaged in CFPA violations, helped those debt collectors succeed in violating the CFPA by taking steps to conceal the violations, and profited from their business relationships with the debt collectors is sufficient to allege that the Corporate and Individual Defendants substantially assisted the underlying CFPA violations.
- FDCPA claims brought by the CFPB are governed by the CFPA’s three-year statute of limitations and not the FDCPA’s one–year statute of limitations.
- A company that is a “debt collector” under the FDCPA can be vicariously liable for FDCPA violations committed by other debt collectors in connection with collecting debts on the company’s behalf. A company that purchases portfolios of defaulted consumer debt and derives the majority of its revenues from debt collection can be a debt collector under the FDCPA because the principal purpose of its business is the collection of debts.
When it was filed, we observed that the CFPB’s claims in this enforcement action seemed particularly aggressive because rather than taking action against the debt collectors used by the Corporate Defendants or the debt buyers to whom they sold debts, the CFPB was seeking to hold the Corporate and Individual Defendants directly and separately responsible for the violations committed by these third parties. While the CFPB will ultimately have to produce evidence to support its theories of liability and prove its claims to win on the merits of its lawsuit, the denial of the motion to dismiss means that the Corporate and Individual Defendants will be required to invest additional time and resources to defend the lawsuit. As such, the takeaway for debt sellers (including first-party creditors) is that they should consider taking steps to reduce the risk of similar claims of vicarious liability or substantial assistance. Such steps include performing appropriate due diligence when selecting debt collectors or debt buyers, monitoring debt collectors and debt buyers for compliance with applicable consumer protection laws and regulations, and promptly taking appropriate action when compliance issues arise to ensure full remediation of any issues.
The Superior Court of New Jersey, Appellate Division in Jennifer Woo-Padva v. Midland Funding, LLC, recently affirmed the dismissal of consumer fraud claims brought against a debt collector pursuant to the New Jersey Consumer Finance Licensing Act (CFLA), holding that a debt purchaser is not liable under the New Jersey Consumer Fraud Act (NJCFA) for failing to obtain a state license under the CFLA.
After defaulting on two credit card accounts with HSBC Bank, Plaintiff’s accounts were charged off and sold to third-party debt purchaser Midland Funding, LLC, which then placed the accounts with a debt collection law firm for servicing. Plaintiff then paid off one of the accounts in full. As to the other account, however, the law firm commenced legal action against Plaintiff and the parties entered into a consent judgment pursuant to which Plaintiff made payments on the account, with her last payment made in 2013.
On May 24, 2017, Plaintiff filed a proposed class-action complaint alleging, among other things, that Midland was a “collection agency” that had “filed numerous lawsuits…to collect the consumer debts allegedly owed by New Jersey consumers on defaulted credit accounts at a time when [it] was not properly licensed” under the CFLA. Importantly, Midland did not obtain a consumer lending license in New Jersey before January 6, 2015.
Plaintiff based her complaint on: (1) allegations that “dunning letters” Midland sent her through its agents caused her to make payments on the debt, and (2) Midland’s purchase of an account on which Plaintiff had defaulted. Plaintiff also noted that Midland filed a lawsuit against Plaintiff based on her debt, causing her to make payments, which ultimately resulted in Plaintiff entering into a consent judgment. Plaintiff sought a declaratory judgment declaring that her consent judgment was “void” and that she was owed damages under the NJCFA based on Midland’s collection of her accounts without having a CFLA license.
The trial court previously found that res judicata and the entire controversy doctrine barred Plaintiff’s claims related to the consent judgment. However, given that the other account was settled without a judgment, the court allowed her claims as to the other to proceed forward. The trial court granted summary judgment for Midland on all of Plaintiff’s remaining claims because, as a debt buyer, the court found that Midland was not a “consumer lender” and thus did not require a CFLA license. The trial court also held that Plaintiff’s claims were not covered by the NJCFA because Midland did not offer to sell the Plaintiff any services or merchandise and because she suffered no “ascertainable loss.”
The New Jersey Appellate Division affirmed the CFLA dismissal but on other grounds. First, the Appellate Division held that the CFLA does not provide for a private right of action, and Plaintiff was precluded from using the Uniform Declaratory Judgments Act to circumvent that lack of a private right of action. Instead, the type of violations alleged under the CFLA are enforceable only by the New Jersey Commissioner of Banking and Insurance.
Second, to prevail on a NJCFA claim, the Appellate Division noted that a plaintiff must establish unlawful conduct, an ascertainable loss, and causal relationship between the two. Here, because Plaintiff did not demonstrate that Midland had engaged in unlawful conduct under the NJCFA or that she suffered an ascertainable loss, summary judgment was affirmed.
The Appellate Division explained that a plaintiff may establish the unlawful conduct element of a NJCFA claim by either an affirmative act, which requires no showing of intent, or by an omission, which requires a showing that “the defendant acted with knowledge, and intent is an essential element of the fraud.” Plaintiff alleged that Midland had engaged in unlawful conduct by misrepresenting “that it had the legal right to collect on the account when it lacked the proper license to do so.” The Appellate Division held that because Plaintiff did not base her NJCFA claim on a misrepresentation made to induce her to obtaining credit, but instead alleged a misrepresentation made after she had obtained her credit card account and after she had incurred the debt at issue, Plaintiff was not “lured into a purchase” by an action or misrepresentation by Midland. Since the alleged misrepresentation was not in connection with the origination of the debt, it could not constitute a violation of the NJCFA.
Finally, the Appellate Division found that Plaintiff had not sustained an “ascertainable loss,” which is required to establish a claim under the NJCFA. “An ascertainable loss under the [NJCFA] is one that is quantifiable or measurable, not hypothetical or illusory.” Here, Plaintiff paid a debt she admittedly owed and her payment of that valid debt to the debt purchaser did not constitute an ascertainable loss.
Did You Know?
The NMLS kicks off its license renewal period on November 1! Details regarding renewal fees and costs can be found on the NMLS’ annual renewal information page, with more specific information – such as surety bond requirements – available on the NMLS’ annual renewal checklist compiler.
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