Archives for November 2020

Editor’s note: This podcast episode is provided through an exclusive industry partnership between insideARM and Clark Hill, PLC. Podcast host Joann Needleman, a leading financial services attorney and member of the iA Legal Advisory Board, provides bite-sized hot topics in the consumer finance space. ClarkHIll content—and all insideARM articles—are protected by copyright. All rights are reserved.  

Show Notes: 

Data is driving the expansion of financial services. But how do you build data sets that are unique for each financial institution?

Scott Ferris, CEO of Attunely, Inc stops by Clark Hill’s Credit Eco to Go to dissect and demystify the world of big data. The goal is to achieve efficiency and effectiveness by giving machines access to the data so they can learn for themselves.

Scott reminds us that data cannot solve every problem but historical data is a good predictor of future consumer response. “The financial services industry is just going through the same evolution that other vertical industries have gone through” when it comes to the consumer experience. Ensuring that the data is used in the right way and for the benefit of the consumer will be the key. 

[article_ad]

DISCLAIMER – No information contained in this Podcast or on this Website shall constitute financial, investment, legal and/or other professional advice and that no professional relationship of any kind is created between you and podcast host, the guests or Clark Hill PLC. You are urged to speak with your financial, investment, or legal advisors before making any investment or legal decisions.

 Funk Game Loop by Kevin MacLeodLink: https://incompetech.filmmusic.io/song/3787-funk-game-loopLicense: http://creativecommons.org/licenses/by/4.0/

Editor’s Note: This article was originally published on the Maurice Wutscher blog and is republished here with permission.

—

The Consumer Financial Protection Bureau released its Advance Notice of Proposed Rulemaking (ANPR) on Oct. 22, seeking comment on 46 questions in nine categories surrounding consumer access to financial information under section 1033 of the 2010 Dodd-Frank Act (15 U.S.C. § 5533).

Section 1033 entitled “Consumer Rights To Access Information” provides that “a covered person shall make available to a consumer . . . information in the control or possession of the covered person concerning the consumer financial product or service that the consumer obtained from such covered person” and authorizes the Bureau to make rules concerning consumer access to such data.

The ANPR follows the CFPB’s symposium earlier this year on consumer access to financial information. In a report summarizing the symposium issued in July, the Bureau pointed out that consumers’ access to “their financial records in electronic form empowers them to better monitor their finances” and “their ability to permission a third party to access those records may enable consumer-friendly innovation in financial services.” Particularly, the growing use of consumer data aggregators can lead to “new products and services aimed at making it easier, cheaper, or more efficient for consumers to manage their financial lives.” But the report also emphasized that this expansion in access to and distribution of consumer financial data “raises a number of concerns, particularly with respect to data security, privacy, and unauthorized access.”

The ANPR’s 46 questions are grouped into nine categories: (1) costs and benefits to consumers and covered persons; (2) competitive incentives; (3) the development of standards; (4) the scope of access to consumer financial information; (5) consumer privacy and control; (6) existing law impacting the field; (7) data security; (8) accuracy; and (9) “other information.” The categories underscore the broad scope of section 1033 and the impact any rules could have on the consumer financial services industry.

[article_ad]

The release of the ANPR is just the first in the Bureau’s rulemaking process and, having participated in Bureau rulemaking activities over the past decade, it may be years before rules are released, if at all. But the impact of any rules would be significant. Aside from defining the nature and scope of consumer data, how that data is aggregated, disseminated, and protected are all on the table. While the subject matter appears to be concerned with developing technologies and services (like FinTech and RegTech), any rule would also impact how consumer data is collected and used by the mature consumer financial services industry.

That industry is broader than one may think. While it certainly includes traditional lenders like banks, credit unions and non-bank lenders, a “covered person” under the Dodd-Frank Act is much more and includes “any person that engages in offering or providing a consumer financial product or service” and affiliates who act as service providers to the covered person. The Bureau has an expansive interpretation of the types of persons that fall within this definition as well as what constitutes a consumer “financial product or service.” For example, the definition includes “collecting debt related to any consumer financial product or service.”

1. What Information Can a Consumer Access?

Several questions posed by the ANPR concern the scope of “access rights” to consumer financial information. Particularly whether certain data should not be subject to consumer access. Such consumer information can intersect with protected “confidential commercial information,” data required by law to be kept confidential or information collected to prevent fraud “or other illegal conduct.”

Section 1033(d) of the Dodd-Frank Act provides that “[t]he Bureau, by rule, shall prescribe standards applicable to covered persons to promote the development and use of standardized formats for information, including through the use of machine readable files, to be made available to consumers under this section.” The Bureau’s “standard-setting” questions request comments on the use and development of standards for access to and delivery of consumer financial information.

2. Intersection With Existing Law

In the context of privacy, the ANPR notes that the Gramm–Leach–Bliley Act, Fair Credit Reporting Act, Electronic Fund Transfer Act and the regulations promulgated under each all have privacy components, and “the Bureau might need to resolve potential stakeholder uncertainty with respect to application of the [] laws and their implementing regulations.” It adds in a footnote that the while the Bureau has “certain authorities” under the GLBA, it “has no supervisory, enforcement, or rulemaking authority with regard to the Act’s data security provision.”

3. Privacy Expectations and the Movement and Sharing of Information

The Bureau is also seeking comments on the extent to which consumers “understand the actual movement, use, storage, and persistence of authorized data,” and how this may “align with reasonable consumer expectations or preferences, including privacy expectations or preferences,” among other things.  This leads to the question whether the Bureau should “consider placing any restrictions on the movement, use, storage and persistence of authorized data, and if so, what restrictions and why?”

4. Data Security

In the area of data security, several questions seek comment on existing law and how these laws mitigate risk in the context of consumer financial information. Notably, the Bureau asks if it does issue a rule, “how should that rule take appropriate account of data security concerns?”

Comments are due 90 days after the date the ANPR is published in the Federal Register.

Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved.

Well, it’s official. Former Judge Amy Coney Barrett—previously of the Seventh Circuit Court of Appeals—is now Justice Amy Coney Barrett of the U.S. Supreme Court.

You already know the headline: in her previous role on the Seventh Circuit Court of Appeals, then-Judge Barrett wrote a critical opinion addressing the TCPA’s ATDS definition and determined that the TCPA only applies to random or sequential number dialers. This legalized the vast majority of so-called “robocalls” in the Seventh Circuit’s footprint and freed callers from the poorly-drafted statute.

Now, as a Supreme Court Justice, one of Barrett’s first challenges will be to decipher precisely the same portion of the statute as part of Facebook’s huge SCOTUS appeal of the TCPA’s ATDS definition.

At issue is whether the TCPA applies to any call made “automatically” from a list of stored numbers, or only those dialers that have the capacity to dial randomly or sequentially. As I recently explained, this is a classic “pathos vs logos” situation—the statute plainly seems to require random or sequential number generation, yet the near-universal disdain for robocalls might lead to a results-based analysis (like the one the Supreme Court recently engaged in to save the TCPA a mere three months ago when they reviewed the government debt exemption). 

[article_ad]

In our latest episode of the  Unprecedented [VIDEO] Podcast, I had the opportunity to ask Plaintiff’s lead counsel—Sergei Lemberg—how he felt about arguing this critical issue back to the same Judge who ruled on this very issue in Gadelhak.  You’ll get to hear his answer TOMORROW right here.

The ascension of Justice Barrett is the latest in a string of seesaw developments in the TCPA ATDS saga, with momentum swinging wildly in favor of one side or the other these last three months. The latest big development was the arrival of Bryan Garner—co-author with Justice Scalia (Justice Barrett’s mentor) of Reading Law, one of the most persuasive works on statutory interpretation— onto the consumer lawyer’s team urging an expansive read of the TCPA. And, of course, just last week nearly 40 state AGs likewise joined the fray in favor of an expansive TCPA read.

But with Justice Barrett arriving on the bench, is Facebook now playing with a stacked deck? Certainly Justice Barrett—having already spoken on this issue—has a clear and obvious lean. Yet the trendy Beltway mistrust for “Big Tech” coupled with the fact that the conservative wing of the Court (now its majority) previously split on whether to keep the TCPA on the books, suggests that this result might not yet be baked.

It all adds up to high drama in the high stakes TCPAWorld ATDS battle.

Yesterday, the U.S. Senate confirmed Amy Coney Barrett as a Supreme Court Justice to fill the seat left vacant by the passing of  Justice Ruth Bader Ginsburg. With Justice Barrett now sworn in, it’s worth taking a look at how she has previously ruled on industry-related cases. 

While seating on the Seventh Circuit Court of Appeals, Justice Barrett sat on panels for several FDCPA cases. Overall, Justice Barrett takes a common-sense and narrow approach to FDCPA cases and is not afraid to hold plaintiffs and their counsel to task when warranted. 

Editor’s Note: iA Case Law Tracker subscribers can view all of Justice Barrett’s court decision summaries here.

Not a subscriber? Try it for free!

Narrow Approach to Standing

Regarding standing for FDCPA claims, Justice Barrett has taken a no-harm, no-found approach (similar to the approach recently adopted by the Eleventh Circuit in Trichell). This is important to know since this issue seems to be the subject of a recent circuit split that may be headed to the Supreme Court in the future.

In a unanimous decision by the 7th Cir. panel, Justice Barrett authored the opinion in Casillas v. Madison Avenue Associates, Inc., where the court found that a bare procedural violation does not meet the standard for standing in an FDCPA claim. In Casillas, the issue was related to an incomplete letter received by the consumer. The letter informed the consumer that she may dispute the debt or request verification, but did not specify that this must be done in writing. The panel found that the consumer lacked standing because she failed to allege that the debt collector’s actions harmed her or posed any risk to her.

Strict Adherence to the Letter of the Law

While not the author of the decision, Justice Barrett sided with the majority opinion in Preston v. Midland Credit Management, Inc. While the Preston decision found no issue with a settlement offer on a letter marked as a “time sensitive document” (because it had the “we are not obligated to renew this offer” safe harbor disclosure), the panel took a strict reading of the FDCPA when it came to markings on an envelope.

In Preston, the debt collector sent a collection letter that was inside of an envelope, which itself was inside another envelope. The exterior envelope contained no issues, but the interior envelope contained the “time sensitive document” label referenced above. The panel found that this stamp went beyond what is permitted to appear on an envelope, and therefore dismissal of this claim was not appropriate. (The court did not address whether or not the problematic envelope being inside another envelope has any impact on its decision, but that’s likely because they were reviewing a decision on a motion to dismiss rather than a motion for summary judgment.)

Creditor ID Claims—A Mixed Bag

Justice Barrett sat on two different panels that reviewed the issue of whether the debt collector sufficiently identified the creditor to whom the debt is owed.

In one case—Steffek v. Client Servs.—the panel found that simply including “Re: Chase Bank USA, N.A.” with no other reference to the creditor in the collection letter, was insufficient to meet the FDCPA’s standard. 

On another panel, Justice Barrett reviewed Dennis v. Niagra Credit Sols., where the debt collector sent a letter on behalf of a debt buyer creditor. The letter listed the debt buyer as the current creditor and Washington Mutual as the original creditor. The consumer sued, arguing that including two entities on the letter confuses the consumer as to which creditor the debt is owed. The district court granted the debt collector’s motion for judgment on the pleadings, finding that the letter meets the FDCPA’s requirements by sufficiently listing LVNV as the current creditor. The 7th Circuit panel affirmed, calling this a “meritless claim,” and finding that a least sophisticated consumer would understand from the context of the letter that the debt was purchased by and is now owing to LVNV.

[article_ad]

Holding Plaintiffs’ Counsel To Task

In Paz v. Portfolio Recovery Associates, the 7th Circuit panel on which Justice Barrett sat showed no mercy to a plaintiff and his counsel who rejected several meaningful settlement offers. The result? A slashing of requested attorney fees by a whopping $170,000.

Paz arose out of a defendant-appellee credit reporting plaintiff’s account without noting it as disputed. Plaintiff accepted the defendant’s Rule 68 offer of judgment, which was not to be construed as an admission of liability. After this, the defendant continued to credit report without dispute, so the plaintiff filed another suit. Defendant again gave a Rule 68 offer of judgment for $3,501, but the plaintiff never responded. Prior to trial, the defendant offered to settle the suit for $25,000 plus attorney fees and costs, but the plaintiff rejected the offer. The jury found in favor of the plaintiff, but his sole recovery was $1000 statutory damages.

Plaintiff sought $187,410 in attorney fees, but the district court slashed this award to only $10,875 finding that plaintiff rejected meaningful settlement offers and that the fee was far too disproportionate to the plaintiff’s recovery. Since the Rule 68 settlement offer when the case was first filed was threefold the plaintiff’s actual recovery, the court only allowed fees worked prior to the Rule 68 offer.

The Seventh Circuit also called out the plaintiff’s attorney on two fronts. First, the plaintiff’s argument that he did not understand the terms of a Rule 68 offer of judgment was not unpersuasive considering the previously received and accepted identical offers. Second, the plaintiff’s argument that a judgment at trial is a better result than accepting a settlement offer overlooks the construction of a Rule 68 offer of judgment, which would similarly result in a judgment against defendant. A judgment is a judgment.