CFPB Week in Review
The Consumer Financial Protection Bureau (CFPB) had another busy week. Here is an overview of what the CFPB was up to recently:
Enforcement Actions and Litigation
Enforcement Action Against Santander Bank
On July 14, 2016, the CFPB announced an administrative consent order against Santander Bank, N.A., to resolve alleged illegal overdraft service practices.
In 2010, new federal rules took effect that prohibited banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless the consumers affirmatively opted in for that service. If consumers did not opt in then the banks and credit unions could decline the transaction due to insufficient funds, but the consumers in those situations would not be charged an overdraft fee.
The CFPB alleged that from 2010 to 2014, Santander marketed and enrolled consumers in its “Account Protector” overdraft service for ATM and one-time debit transactions, and charged those consumers $35 per overdraft, without the consumers’ consent. Specifically, the CFPB found that Santander’s illegal and improper practices included:
- Signing consumers up for overdraft service without their consent;
- Deceiving consumers into believing that the overdraft service was free;
- Deceiving consumers about the fees they would face if they did not opt in;
- Falsely claiming the call was not a sales pitch; and
- Failing to stop its telemarketer’s deceptive tactics.
Pursuant to the consent order, Santander must:
- Contact all consumers associated with Santander’s telemarketing program and verify that each consumer wants to “opt-in”;
- Not use a vendor to conduct outbound telemarketing of overdraft services to consumers;
- Increase oversight of all third-party telemarketers, including developing and implementing new or revised policies governing those relationships; and
- Pay a $10 million penalty to the CFPB’s Civil Penalty Fund.
Settlement with World Law Group
On July 19, 2016, the CFPB and three individuals related to World Law Group reached a stipulated $107 million settlement, concerning allegations that the defendants charged consumers advanced fees for debt relief services. The $107 million settlement is with three individuals, which payment will be suspended if those individuals turn over frozen assets in their personal bank accounts, commercial property, and approximately a dozen vehicles. The agreement also prohibits the defendants from telemarketing or assisting others in telemarketing any consumer financial product or service, and they cannot sell, advertise, or own debt relief products.
The case is CFPB v. Orion Processing LLC, et al., No. 1:15-cv-23070, in the U.S. District Court in the Southern District of Florida.
Summary Judgment Win Against Mortgage Legal Group LLP
On July 20, 2016, a Wisconsin federal judge partially granted the CFPB’s motion for summary judgment against Mortgage Legal Group LLP. The CFPB alleged that Mortgage Legal Group LLP scammed struggling homeowners in connection with foreclosure proceedings, including misrepresenting their services and collecting advance fees for their services. The judge’s ruling found that the retainer fee charged by Mortgage Legal Group LLP amounted to advance fees and the amount of restitution and disgorgement the entity should face should be decided by net revenues the entity received, which amounted to approximately $18.3 million. The parties have until August 2, 2016, to propose to the court possible trial dates for the remaining legal issues.
Amicus Brief in Spokeo Case
On July 13, 2016, the CFPB filed an amicus brief in Robins v. Spokeo, Inc., which is pending in the U.S. Court of Appeals for the Ninth Circuit. The issue in the case is essentially one of standing to bring a claim in federal court and whether a litigant has shown that they suffered “real” and “concrete” harm as a result of the defendant’s alleged actions. Specifically, the issue relates to the plaintiff’s claim that the defendant’s website operator willfully violated the Fair Credit Reporting Act (“FCRA”) by publishing inaccurate personal information about plaintiff at a time when he was seeking employment. The Ninth Circuit originally held that it was constitutional for Congress to treat FCRA violations as “concrete, de facto injuries” that satisfy, without more, the injury in fact requirement for Article III standing. In May, the U.S. Supreme Court issued an opinion holding that the Ninth Circuit’s analysis was incomplete, because although the Ninth Circuit had addressed the particularization of plaintiff’s alleged injuries to establish injury in fact, it failed to address the concreteness of the alleged injury. Thus, the U.S. Supreme Court vacated the Ninth Circuit’s judgment and remanded the case for the Ninth Circuit to consider whether “the particular procedural violations alleged in this case entail a degree of risk sufficient to meet the concreteness requirement” for Article III standing.
The CFPB’s amicus brief in support of the plaintiff, which addresses the issue remanded by the U.S. Supreme Court. In general, the CFPB’s brief argues that Congress’s decision to grant consumers a right of action for the dissemination of a false consumer report if it resulted from a consumer reporting agency’s willful failure to following reasonable procedures demonstrates Congress’s belief that such dissemination of inaccurate information presents an unacceptable risk of harm to consumers. As such, the CFPB’s brief urges the Ninth Circuit to find that the plaintiff has met the requirements for Article III standing.
On July 20, 2016, CFPB Director Richard Cordray participated in a press call related to student loan servicing (transcript here). Cordray’s discussion centered on efforts the CFPB is taking and plans to take related to regulating the student loan servicing industry. The CFPB has made clear in the past that student loan servicing is a top priority for the bureau. Among other things, Cordray emphasized that student loan borrowers should be able to expect high-quality service and clear, consistent, and personalized information about repayment plans. Further, Cordray mentioned The Joint Statement of Principles on Student Loan Servicing that the bureau released to help provide the framework for servicing reform. According to Cordray, “[w]hen implemented, these servicing standards will bring us closer to more consistency, transparency, actionability, and accountability in this important marketplace.” The takeaway from this discussion is that the CFPB continues to look at ways to regulate the student loan servicing industry and it will likely continue to take steps to do just that in the near term.
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Zane Gilmer is a member of the firm’s litigation practice group. His practice focuses on business litigation and compliance and he is a member of the firm’s CFPB taskforce. Zane works out of the firm’s Denver office and he can be reached at firstname.lastname@example.org or 303.376.8416.
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