Archives for September 2023

LENEXA, Kan. — TrueML Products, a fintech company developing products that enable intelligent, digital communication, today announced that clients have used Retain, the company’s flagship product, to drive engagement since January with more than 1 million delinquent customers that enabled recovery of $375 million in past-due balances. Total dollars collected on the Retain product exceed $1 billion. Retain is a scalable, client-branded digital engagement tool powered by an optimization engine to automate clients’ digital communications and help boost customer engagement.

Retain uses a patented decision engine and engagement data from individual interactions to optimize communication delivery and support clients’ communication efforts. The product offers best-in-class email and SMS deliverability that enables businesses to improve communications at scale, preserve customer relationships, and maintain compliance with built-in technology that ensures the client-specified regulatory requirements are met no matter where customers are located.

“In today’s challenging economic landscape, more businesses are experiencing difficulty engaging with delinquent customers, and Retain helps them improve their connection rates with those customers in order to maintain relationships and get them back on track,” said Naama Bloom, General Manager at TrueML Products. “Managing customer communications at scale can be challenging and expensive, but using Retain allows our clients to automate delinquency communications on digital channels, leading to increased customer engagement and subsequent repayment while reducing operational costs.”

Retain prioritizes customer engagement and preference with digital communications and intelligent, optimized timing and channel selection that is critical to preserving customer relationships, like the lender-borrower relationship. Companies use Retain to engage users more effectively and efficiently with a digital-first approach and can reduce the need for expensive headcount to contact customers or scale operations, freeing up resources for productive inbound operations as needed. 

Clients have reported four times increased agent efficiency, up to a 75 percent reduction in full-time employees needed for customer communications, and a 13 percent overall decrease in cost to recover while using Retain for digital delivery. For more product information or to schedule a consultation to find out how Retain can help your business leverage digital for your customer communications, please visit the new website at www.getretain.com. 

About Retain:

Retain by TrueML Products is an intelligent delivery platform that leverages a patented optimization engine to determine the optimal time and channel to deliver the client’s communications within the confines of the compliance requirements outlined by the client. 

TrueML Products is a fintech software company developing products that enable intelligent, digital communication and prioritize customer experience for consumers seeking financial health.

ROCKVILLE, Md. — Greenberg Advisors (GA) announces the release of its M&A Updates for Accounts Receivable Management (ARM), Revenue Cycle Management (RCM), and Healthcare Information Technology (HCIT), analyzing the M&A and investment activity in the first half of 2023.

The M&A Updates are available at Greenberg-Advisors.com/ma-update.

About Greenberg Advisors 

Greenberg Advisors, LLC is an independent investment bank providing world-class M&A and strategic advisory solutions to Business Services and Technology companies in the Revenue Cycle Management (RCM), Healthcare Information Technology (HCIT), Accounts Receivable Management (ARM), and Business Process Outsourcing (BPO) sectors.

Focused on these sectors for over 25 years, the firm’s professionals offer a comprehensive, yet highly specialized perspective from which to advise clients, resulting in the completion of over 150 M&A, capital raising, valuation, and strategic advisory engagements. Since 2020, the firm has facilitated over $450 million in transaction value. These client successes reflect Greenberg’s distinct client-first approach, deep sector expertise, objective point of view, and work ethic.

In response to steady attacks from legislators, rule makers, and others, the ARM industry is getting increasingly vocal about its positive effects on consumers and the economy. Recently, Oregon considered legislation that would have made it more challenging to collect post-judgment.  In response, ACA International (ACA) crunched the numbers; it demonstrated to Oregon lawmakers that the data showed the unintended negative economic consequences Oregonians would suffer should the proposed legislation become law. 

Oregon law permits garnishment with specific exemptions, including an exemption for disposable earnings. The proposed legislation would have increased Oregon’s weekly disposable earnings exemption from $254.00 to $1,000.00. ACA cautioned that before moving forward with the legislation, Oregon lawmakers should look at the long-term effects of the proposal on Oregon residents.

The ACA noted the following general points:

• The Federal Reserve Bank of New York found that restricting debt collection practices leads to a decline in the overall credit supply since creditors will be less willing to lend. 

• The Consumer Financial Protection Bureau’s (CFPB)research suggests a $1.00 change in garnishment exemption causes a $7.69 decrease in available credit for every consumer. 

Next, by applying data from the Federal Reserve Board’s Economic Well-Being of U.S. Households in 2022 to the proposed Oregon legislation, the ACA was able to establish the following:

• Should the proposal become law, over 2 million Oregonians would be negatively impacted by having the credit limits reduced by an average of $5,375.00 or eliminated altogether. 

• All demographics would see a reduction in available credit. Reductions would total into the billions. 

The proposed legislation did not pass through legislative committee and thus did not become law. 

Regarding the Oregon legislature’s decision to refrain from increasing the exemption, Scott Purcell, CEO of ACA, said, “As part of ACA’s Advocacy we connected the dots from several sources including the New York Federal Reserve to now provide insights to the magnitude of harm to consumers’ access to credit when returns to the creditors are reduced, and ACA can do this analysis for any state.  As part of ACA’s relationships with over 70 Members of Congress, and our national network of state unit lobbyists with significant state house relationships, we can now educate lawmakers on how many people, by race and by credit score band, are impacted in our communities by some of these well-intended but harmful ideas.” 

The complete communication from ACA to Oregonian lawmakers can be found here.

insideARM Perspective:

Actions have consequences, and it’s essential for lawmakers to look at all sides of an issue before creating or modifying existing rules or laws.  Despite making excellent headlines, consumers ultimately suffer when lawmakers and regulators fail to consider the effects of their actions.  

The process worked correctly and to the benefit of consumers here: by considering all sides of the issue, Oregon lawmakers avoided making a legal modification that would harm the people they were trying to protect. For the legislative process to keep working and to change the narrative surrounding debt collcetion, those in the ARM industry must be active participants. They need to speak loudly of the good the ARM industry does for consumers; they need to keep an eye on their state and local legislatures and bring troubling legislation up to their various industry groups. 

NEW YORK, NY — Skit.ai,
the leading provider of conversational Voice AI solutions, announced today its
partnership with Collection Bureau of America, Ltd., a California-based debt
collection agency with a 60-year history in the accounts receivable management
industry.  The deployment of Skit.ai’s
solution enables the company to boost its account penetration, improve customer
experience, and execute a scalable collection strategy.

Skit.ai’s
Augmented Voice Intelligence platform, strategically integrated to automate
collection calls, is the latest addition to the agency’s tech stack. In recent
years, Collection Bureau of America has undertaken a deliberate journey to
adopt the latest and most innovative technology to modernize and optimize its
debt recovery operations. The adoption of conversational Voice AI reflects the
company’s commitment to effectively serve its diverse clientele and accounts.

“Since
adopting Skit.ai’s solution, we’ve experienced a 27% increase in call volume.
We’ve received remarkably positive feedback from our agents, who are able to
quickly resolve the consumers’ queries thanks to the context and insights
provided by the platform; additionally, the consumers are satisfied with this
self-service, secure solution to resolve their debt,” said Shawn DeLuna, President & CEO of Collection Bureau of America.
“We’re often exploring new technological solutions to bolster our collection
strategy, and Skit.ai perfectly suits our needs, as it enables us to maximize
our account outreach and ultimately increase the scale of our business.” 

Skit.ai’s
conversational Voice AI solution initiates outbound calls to thousands of
accounts within minutes; it then verifies right-party contact, and negotiates
payments from consumers, all in compliance with the industry’s regulations. The
solution is capable of handling disputes and, when needed, transfers the calls
to one of Collection Bureau of America’s live agents, providing them with the
relevant context. The solution was easy to integrate and configure to the
company’s needs.

“Our
innovative solution has led to a remarkable upswing in call volume and enhanced
account penetration for Collection Bureau of America. In alignment with the
agency’s unwavering dedication to elevating the customer experience, we have
steadfastly delivered seamless, intelligent interactions with consumers on a
grand scale,” said Sourabh Gupta,
Founder and CEO of Skit.ai.

Schedule a meeting to learn more about how
Skit.ai can help you accelerate revenue recovery with higher efficiency and at
an infinite scale.

About Collection Bureau of
America:

Founded in 1959, Collection Bureau of America, Ltd. is a
privately-held, diverse, minority-owned, and SOC 2 Type II-certified accounts
receivable management firm specializing in collecting consumer and commercial
debts, both locally in California and nationally. Headquartered in Hayward,
California, CBA provides professional, compliant, and effective debt recovery
solutions for businesses; backed by a team of experts and advanced technology,
the company helps clients regain control of outstanding accounts while
maintaining transparent communication and exceptional customer service. CBA is
licensed to collect in all 50 states. Visit https://www.collectionbureauofamerica.com

About Skit.ai:

Skit.ai
is the accounts and receivables industry’s leading conversational Voice AI
company, enabling collection agencies to streamline and accelerate revenue
recovery. Skit.ai’s compliant, configurable, and easy-to-deploy solution
enables enterprises to automate nearly one million weekly consumer
conversations. Skit.ai has been awarded several awards and recognitions,
including Stevie Gold Winner 2023 for Most Innovative Company by The
International Business Awards, Disruptive Technology of the Year 2022 by CCW,
and Gold Globee CEO Awards 2022. Skit.ai is headquartered in New York City, NY.
Visit https://skit.ai/

CHESAPEAKE, Va. — Spring Oaks Capital, LLC is pleased to announce the hiring of John McNeill as Chief Financial Officer. John will be based in Atlanta, Georgia and report directly to President & CEO Tim Stapleford.

As a proven CFO, John brings the level of executive experience that aligns ideally given the Company’s significant growth over the past few years and exponential opportunities ahead. John joins

Spring Oaks Capital with broad FinTech and Financial Services experience, most recently serving as CFO for CAN Capital.

At Spring Oaks Capital, the CFO role goes well beyond traditional corporate finance functions. In addition to leading all finance and accounting operations, John will play a key role in helping the team develop and execute our strategic plans to build enterprise value for all stakeholders.

Spring Oaks Capital’s President and CEO, Tim Stapleford, stated, “John is precisely the kind of experienced leader the company needs as a CFO going forward. We recently completed our fourth and largest round of capital in the company’s history. His experience and financial expertise will help us grow significantly through the upcoming expansion cycle in our industry.”

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John added, “I am thrilled to be joining Spring Oaks Capital during such an exciting time and I am inspired by the company’s focus on developing a data-driven and technology-focused approach that enhances the experience for both employees and customers. I look forward to working with the highly experienced management team at Spring Oaks Capital and contributing to its increasing success.”

About Spring Oaks Capital, LLC

Spring Oaks Capital is a national financial technology company, focused on the acquisition of credit portfolios. The Company subscribes to an employee and consumer-centric operating philosophy that creates high-value jobs, a significant performance lift, and the highest standards of compliance. Spring Oaks’ business strategy is rooted in innovative data-driven technology to maximize collection results and a contact platform that offers multi-channel options to meet each consumer’s communication preference. Spring Oaks has the management vision and experience to nurture a culture and DNA that is unique in the space. To learn more about Spring Oaks, please visit www.springoakscapital.com.

In Gebreseralse v. Columbia Debt Recovery, LLC, the plaintiff, a tenant under a residential lease agreement, vacated the premises early due to concerns over the property’s condition. In response, the property management company engaged a collection agency to recover the remaining amounts claimed as due and owing under the lease.

Over the course of several months, the collection agency sent the plaintiff multiple emails and letters containing errors. The initial letter contained an itemization of amounts due, which misstated the amount of rent and the security deposit. In a subsequent letter, the agency stated that the principal was accruing interest at the rate of 12%, which was followed by an email stating that the rate was 8%, which was followed by another letter stating that the rate was again 12%. A number of communications also included conflicting interest calculations. Finally, while several of the communications stated that the account qualified for a 50% reduction if paid by a certain date, one email provided a discounted payoff deadline that had passed three weeks before the email was sent.

The plaintiff filed suit against the collection agency in Washington state court, alleging that the inaccurate information in the defendant’s letters and emails amounted to “false, deceptive, or misleading” representations and “unfair and unconscionable means” in connection with the collection of a debt, in violation of §§ 1692e and 1692f of the Fair Debt Collection Practices Act (FDCPA).

After removal to the U.S. District Court for the Western District of Washington, the plaintiff moved for partial summary judgment. The defendant conceded that the stated interest calculations and rates were incorrect, but argued that the communications were not materially misleading, and invoked the bona fide error defense.

The court rejected the defendant’s bona fide error defense because, even if the errors were unintentional, the defendant failed to show it maintained procedures reasonably adapted to avoid the violations. As the court explained, the bona fide error defense is an affirmative defense, for which the debt collector has the burden of proof. Thus, to qualify for the defense, a defendant must prove that: (1) it violated the FDCPA unintentionally; (2) the violation resulted from a bona fide error; and (3) it maintained procedures reasonably adapted to avoid the violation.

In support of its defense, the defendant submitted a declaration stating that it “maintains ongoing training and testing to ensure compliance with the FDCPA,” and that “interest is calculated on a daily basis by the operating system based on the assigned amount or principal, the delinquency date, and the current date.” The court held that this “conclusory” declaration was “vague and uncorroborated by any evidence in the record regarding procedures.” Further, the defendant could “only surmise as to whether procedures were followed and how the violations occurred. Citing relevant case law, the court explained that “if the bona fide error defense is to have any meaning in the context of a strict liability statute, then a showing of procedures reasonably adapted to avoid any such error must require more than a mere assertion to that effect… The procedures themselves must be explained, along with the manner in which they were adapted to avoid the error.”

In addition, the court rejected the defendant’s argument that the communications were not materially misleading, finding that the misstatements concerning the amount of rent, security deposit, interest rate, and interest calculations were material because they affected the total amount of debt demanded, thus frustrating the plaintiff’s ability to intelligently choose her response to each communication. The court also rejected the defendant’s argument that, had the plaintiff contacted the defendant in response to the discounted payoff offer, she would have paid less than the amounts stated in the letter, explaining that “consumers are under no obligation to seek explanation of confusing or misleading language in debt collection letters.”

Troutman Pepper’s Take:

This case is a good reminder that in order for a defendant to avail itself of the bona fide error defense, it must do more than just assert that it has policies and procedures designed to avoid such errors. It must produce documentation evidencing the same and detailing the exact policies and procedures.

A copy of the order is available here.

WILMINGTON, Del. — After three years of investment and incubation, Phillips & Cohen Associates (PCA), the global leader in compassionate estate management and resolution, is spinning off The Estate Registry LLC.  As part of this organizational launch, The Estate Registry, designed to help people and their loved ones navigate their way through the estate planning and probate process via its LegacyNOW, NotifyALL and InheritNOW platforms, announces the following executive appointments with immediate effect:

Amy Perkins, former Chief Strategy Officer at PCA, has been appointed Chief Executive Officer (CEO) of The Estate Registry.   Amy has held several senior leadership positions within Bank of America, Citizens Financial Group and InsideARM, where she co-founded and chaired the Women in Consumer Finance Group.  This vast industry experience, as well as her immeasurable impact over the last 2+ years at PCA, makes Amy the ideal leader to help The Estate Registry achieve its ambitious, global aspirations.

Alongside Amy, Casey Cohen has been appointed Chief Operating Officer (COO). Serving as Senior Vice President (SVP) of PCA’s Alternative Investments business, Casey successfully built and ran the InheritNOW service for almost three years.  Casey has a particular expertise in marketing and operations, including a four-year run as Chief Marketing Officer in the UK for the Hippodrome Casino. He has more than 30 years’ experience in senior leadership positions, including 16 years with Caesars Entertainment Corporation.  

Joining Amy and Casey is Paul Fiumano as Chief Products Officer (CPO).  Serving as PCA’s SVP, Global Data Services in the US, Paul was the architect behind the creation of LegacyNOW and NotifyALL.  He now takes on the CPO role globally for The Estate Registry and will lead current and future development of the group’s products and services with the goal of bringing them to market to help make the lives of the bereaved easier.  Paul is a former CEO and President of Streamline Consulting and co-founder of Intelligent Net Yield, the business advisory firm.

Adam Cohen, Executive Chairman of The Estate Registry, said “these are truly exciting times as The Estate Registry is on a significant global growth trajectory.  With this incredible leadership team in place, we are uniquely situated to help estate planners, executors, and beneficiaries with services they truly need precisely when they need them most.”

About The Estate Registry LLC.

The Estate Registry LLC provides Equal Employment Opportunity for all individuals regardless of race, color, religion, gender, age, national origin, disability, marital status, sexual orientation, veteran status, genetic information, and any other basis protected by federal, state, or local laws.

As we predicted long ago, on Friday, September 8, 2023, the Federal District Court for the Eastern District of Texas vacated the changes made in March 2022 to the CFPB’s Exam Manual. On that date, the CFPB purported to use its authority to prohibit unfair, deceptive, or abusive acts or practices (UDAAPs) to target discriminatory conduct, even where fair lending laws may not apply. 

Specifically, the CFPB directed its examiners to apply the “unfairness” standard under the Consumer Financial Protection Act (CFPA) to conduct considered to be discriminatory, whether or not it is covered by the Equal Credit Opportunity Act (ECOA)(such as in connection with denying access to a checking account). Under the CFPA, an act or practice is “unfair” if (1) it causes or is likely to cause substantial injury to consumers, (2) the injury is not reasonably avoidable by consumers, and (3) the injury is not outweighed by countervailing benefits to consumers or competition. In its press release, the CFPB stated:

“The CFPB will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits. CFPB examiners will require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups. CFPB examiners will look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA.”

The CFPB’s blog post about the manual update provided an indication of some of the practices the CFPB would scrutinize using an “unfairness” analysis. As an example of a discriminatory practice that “fall[s] squarely within our mandate to address and eliminate unfair practices,” the blog post identifies “the widespread and growing reliance on machine learning models throughout the financial industry and their potential for perpetuating biased outcomes,” and specifically mentions “certain targeted advertising and marketing, based on machine learning models, [that] can harm consumers and undermine competition.” Observing that “[c]onsumer advocates, investigative journalists, and scholars have shown how data harvesting and consumer surveillance fuel complex algorithms that can target highly specific demographics of consumers to exploit perceived vulnerabilities and strengthen structural inequities,” the CFPB indicated that it would “be closely examining companies’ reliance on automated decision-making models and any potential discriminatory outcomes.”

After an unsuccessful attempt to convince the CFPB to withdraw its changes to the Exam Manual, the United States Chamber of Commerce and other trade associations filed a lawsuit against the CFPB in Federal District Court for the Eastern District of Texas seeking, among other things, a declaration that the Exam Manual changes are unlawful. The plaintiffs claimed that the manual update should be set aside because it violates the Administrative Procedure Act (APA) for the following reasons:

1. The update exceeds the CFPB’s statutory authority in the Dodd-Frank Act. The CFPB cannot regulate discrimination under its UDAAP authority because Congress did not give the CFPB authority to enforce anti-discrimination principles except in specific circumstances. The CFPB’s statutory authorities consistently treat “unfairness” and “discrimination” as distinct concepts. (To demonstrate the compliance burdens resulting from the update, the plaintiffs allege that the CFPB has provided no guidance for regulated entities on what might constitute unfair discrimination or actionable disparate impacts for purposes of UDAAP. As examples of issues creating confusion, the plaintiffs allege that the CFPB has not identified what are protected classes or characteristics or what activities are not discrimination (such as those identified in the ECOA), and has not explained how regulated entities should conduct the sorts of assessments that the CFPB appears to be contemplating given existing prohibitions on the collection of customer demographic information.)

2. The update is “arbitrary and capricious” because the CFPB’s interpretation of “unfairness” contradicts the historical use and understanding of the term. The plaintiffs allege that the FTC’s unfairness authority does not extend to discrimination and that Congress borrowed the FTC Act’s unfairness definition for purposes of defining the CFPB’s UDAAP authority. They also allege that the CFPB’s contemplated use of disparate impact liability when pursuing UDAAP claims flouts congressional intent and U.S. Supreme Court authority.

3. The update violates the APA’s notice-and-comment requirement because it is a legislative rule that imposes new substantive obligations on regulated entities.

In addition to claiming that the Exam Manual update should be set aside due to the alleged APA violations, the plaintiffs allege that the update should be set aside because the CFPB’s funding structure violates the Appropriations Clause of the U.S. Constitution. (Pursuant to Dodd-Frank, the CFPB receives its funding through requests made by the CFPB Director to the Federal Reserve, subject to a cap equal to 12% of the Federal Reserve’s budget, rather than through the Congressional appropriations process.) As support for their unconstitutionality claim, the plaintiffs cite the concurring opinion of Judge Edith Jones in the Fifth Circuit’s en banc May 2022 decision in All American Check Cashing in which Judge Jones concluded that the CFPB’s funding mechanism is unconstitutional. (While the case was pending, the Fifth Circuit issued a unanimous opinion in a case entitled CFSA et al v. CFPB in which it agreed with Judge Jones’s concurring opinion mentioned above and held that the CFPB’s funding mechanism is unconstitutional and that its payday lending rule is invalid.)

The plaintiffs in the Chamber case subsequently filed a motion for summary judgmentwhich was met with a dispositive motion by the CFPB. Initially, the Court rejected all of the CFPB’s arguments, including that the plaintiffs lacked standing to bring the lawsuit, that the CFPB was immune from the lawsuit as a sovereign and that venue was improper in the Eastern District of Texas. While the CFPB conceded that the plaintiffs motion based on the CFSA case should be granted, it argued that the Court should not reach or decide any of the other arguments made by the plaintiffs in support of invalidating the Exam Manual changes. The Court disagreed and, instead, in a well-written opinion, explained why the Exam Manual changes were contrary to the UDAAP statutory authority. The Court had no need to, and did not, reach or decide the other two APA issues raised by the plaintiffs

The Court first dealt with two preliminary interpretive issues. First, it concluded that no Chevron deference should be given to the CFPB’s revisions to its Exam Manual. Because the CFPB did not request judicial deference, the Court concluded that the CFPB waived this potential argument. Second, the Court observed that “‘the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’ That inquiry is ‘shaped, at least in some measure, by the nature of the question presented’—here, whether Congress meant to confer the power the agency asserts. Even if an agency’s ‘regulatory assertions had a colorable textual basis,’ a court must consider ‘common sense as to the manner’ in which Congress would likely delegate the power claimed in light of the law’s history, the breadth of the regulatory assertion, and the economic and political significance of the assertion.” [Footnotes omitted]

Based on these principles, the District Court relied upon the “major questions doctrine.” The major questions doctrine is a principle which states that courts will presume that Congress does not delegate to executive agencies issues of major political or economic significance. The “major questions doctrine” is derived from the Supreme Court opinion in FDA v. Brown & Williamson Tobacco Corp. (2000): “[W]e must be guided to a degree by common sense as to the manner in which Congress is likely to delegate a policy decision of such economic and political magnitude to an administrative agency.” It was relied upon in a recent Supreme Court opinion in State of West VA v. Environmental Protection Agency where the Court “recognize[d] that sweeping grants of regulatory authority are rarely accomplished through ‘vague terms’ or ‘subtle device[s].’ Courts must ‘presume that Congress intends to make major policy decisions itself, not leave those decisions to agencies.’ If that major questions canon applies, ‘something more than a merely plausible textual basis for the agency action is necessary. The agency instead must point to clear congressional authorization for the power it claims.” The doctrine was also relied upon in Biden v. Nebraska where the Court likewise recognized that “the economic and political significance [of the agency’s forgiveness of federal student loans] is staggering by any measure” and that “the basic and consequential tradeoffs” that are necessarily part of the action “are ones that Congress likely would have intended for itself.”

The Court had no difficulty identifying the “major question” here. “The choice whether the CFPB has authority to police the financial-services industry for discrimination against any group that the agency deems protected, of for lack of introspection about statistical disparities concerning any such group, is a question of major economic and political significance.” The economic impact was demonstrated by the substantial sums of money (“millions of dollars per year”) spent by companies on compliance. The political implications included the impact on state and federal powers, since the CFPB would be overriding state decisions on discrimination issues, as well as the “profound” implications regarding the scope of federal power with regard to protected classes, prohibited outcomes, and defenses to claims of misconduct.

Against that backdrop, the Court found nothing in the Dodd-Frank Act to support the CFPB’s position. The Court agreed with the plaintiffs that discrimination and unfairness are treated as distinct concepts in the Act, noting, for example, the creation of a CFPB office devoted to “fair, equitable and nondiscriminatory access to credit” which references the Equal Credit Opportunity Act but makes no mention of unfairness and the statutory definition of unfairness which fails to mention discrimination. Looking to the text, structure of the Dodd-Frank Act, and the historical gloss on unfairness, the Court held that “the Dodd-Frank Act’s language authorizing the CFPB to regulate unfair acts or practices is not the sort of ‘exceedingly clear language’ that the major questions doctrine demands ….”

After concluding that the Exam Manual changes exceeded the CFPB’s UDAAP statutory authority, the Court vacated the changes to the Exam Manual. Curiously, the Court also granted an injunction against the CFPB preventing it from enforcing the changes in the Exam Manual against only members of the plaintiff trade associations.

Here are our observations and takeaways: 

1. We were surprised that the CFPB didn’t appear to argue that the case ought to be just stayed pending the outcome of the Supreme Court opinion in CFPB v. CFSA since many courts had done precisely that with respect to pending enforcement actions by the CFPB. While we expect that the trade associations would have opposed a stay since they were very anxious to obtain a ruling on the merits, the Court might very well have “kicked the can down the road.”

2. The Court may have created some unnecessary confusion by issuing an injunction precluding the CFPB from enforcing the Exam Manual changes only against the plaintiffs and their members after it had previously vacated the Exam Manual changes in their entirety as to everyone effected by those changes. Once it vacated the Exam Manual changes, why did the Court decide to even bother with issuing injunctive relief? Once it decided to grant this additional and seemingly superfluous remedy, why did it confer the benefits only on the plaintiffs and their members? We assume that it did so to insure that the CFPB does not seek to bring any supervisory action or enforcement action against the plaintiffs under the now discredited theory that it can assert that allegedly discriminatory practices are unfair. However, by sowing this confusion, trade associations other than the plaintiffs may feel it necessary to seek to intervene in the lawsuit and seek their own injunctive relief to benefit their own members or they may feel it necessary to bring a separate suit seeking the same injunctive relief. That is, of course, precisely what has recently happened in the lawsuit brought by the American Bankers Association and Texas Bankers Association challenging the legality of the final rule recently promulgated under Section 1071 of Dodd-Frank dealing with mandatory data collection with respect to small business loans. See here, here, here, here, here, here, here, here, & here for our blogs about the multiple interventions and preliminary injunction motions that the 1071 case has spawned. We don’t expect that to happen in this case since we very much doubt that the CFPB would investigate or bring an enforcement action against a company that is not covered by the injunction unless the CFPB is hoping to create a split in authority by suing in another Circuit, like the Second Circuit which has held that the CFPB’s funding is constitutional.

3. We were surprised that the CFPB waived its argument that the Court should give judicial deference to the changes to the Exam Manual based on the Chevron case even thougha case is pending before the Supreme Court which might overrule Chevron. Under the Chevron judicial deference doctrine, a court must validate an agency’s interpretation of a regulation if the statutory authority is ambiguous and the regulation is reasonable. (Perhaps the CFPB took this approach because it did not want to concede that the changes to the Exam Manual constituted a “rule” under the APA. However, the Court found against the CFPB on this issue.)

4. While the Court did not directly rule on whether Section 5 of the FTC Act (which, like the CFPA, proscribes unfair and deceptive acts and practices) also encompasses discrimination claims, the Court certainly cast aspersions on the FTC’s conclusion that it does. Perhaps, the FTC will keep its powder dry for the time being in pursuing this theory.

5. The big question is whether the CFPB will appeal to the Fifth Circuit. If the District Court had not vacated the changes to the Exam Manual, we don’t think the CFPB would appeal since its odds of prevailing in the Fifth Circuit (the home of CFSA v. CFPB and the most conservative Circuit Court in the country) would be very slim. An appeal could result in a Fifth Circuit opinion affirming the District Court on the merits and that, of course, would be much worse for them than this District Court opinion.

6. The District Court opinion will have some impact on the anticipated lawsuit in the District Court in Texas against the CFPB challenging a final credit card late fee regulation based on the binding Fifth Circuit opinion in CFSA v. CFPB, but the more significant aspect of the opinion predicated on the “major questions doctrine” will not apply. That’s because the credit card late fee regulation is contemplated by the CARD Act and is not a creature of UDAAP.

7. The highly anticipated “open banking” regulation is also not a creature of UDAAP but instead is authorized by a separate express provision in Dodd-Frank.

8. This opinion will naturally result in the industry scrutinizing other pronouncements by the CFPB based on UDAAP as statutory authority. One obvious target is likely to be a Circular published in 2022 by the CFPB where it concluded that data security breaches resulting from a company’s negligence or malfeasance could be a UDAAP violation.

9. We do not think that there is any reasonable possibility of Congress enacting legislation which would define UDAAP to encompass discrimination.

10. While this case dealt with the “unfairness” prong of UDAAP and not the “abusive” prong of UDAAP, we would expect the industry to scrutinize any past or future explications of what the CFPB deems to be abusive to ensure that it passes muster under the “major questions doctrine.”

TAMPA, Fla. — McGlinchey Stafford is pleased to announce that Chantel Wonder has joined the firm’s Financial Services Litigation practice group in Florida as Of Counsel. Resident in Tampa, Chantel is one of 33 attorneys McGlinchey has brought on in 2023 as part of a focused hiring effort to expand its highly integrated team of best-in-class attorneys.

“We are pleased to welcome Chantel to our dynamic legal team here in Florida,” said Will Grimsley, Co-Managing Member of McGlinchey’s Fort Lauderdale and Jacksonville offices. “Her knowledge of the local legal and business climates and commitment to providing practical advice align well with our firm’s approach.”

As an experienced litigator, Chantel is well-regarded in the financial services and insurance industries. She focuses her practice on debt buyer and mortgage work, with experience in credit cards, debt collection, bankruptcy, and the wide spectrum of financial services litigation. Many of her cases surround consumer protection litigation.

“Clients trust Chantel’s years of experience and tenacious approach to litigation,” said Shaun Ramey, Co-chair of McGlinchey’s national Financial Services Litigation group. “Whether representing clients in federal and state litigation, class actions, trials, or appeals, Chantel has a proven track record of skillfully helping clients navigate complex legal matters.” 

Chantel’s practice also includes insurance defense and employment litigation, with experience in first-party property matters and third-party claims. She represents residential and commercial property managers (including homeowners association boards) as well as human resources managers and employers.

“Chantel’s broad experience matches well with McGlinchey’s client base,” said Dan Plunkett, chair of the firm’s Enterprise Litigation and Investigations team. “We look forward to bringing her perspective and skillset to solving our clients’ problems.”

Joining McGlinchey from Gordon and Rees, Chantel worked for almost a decade in-house with a national debt buyer. In this role, she gained exposure to the wide variety of matters that cross the general counsel’s desk. She handled many highly contested cases and shepherded hundreds of bench trials on behalf of the company.

Chantel received her J.D. from Stetson University College of Law in 2010 and is licensed in the state of Florida. She earned her bachelor’s degree in philosophy from Stetson University in 2007.

About McGlinchey

McGlinchey Stafford is a premier midsized business law firm offering services in nearly 30 practice areas through a highly integrated national platform. McGlinchey attorneys leverage bold innovation, diverse talent, and leading-edge technology across our powerful network to serve clients at the local, regional, and national level. With nearly 160 attorneys licensed in 33 states, McGlinchey operates from 17 offices nationwide. The firm currently has 23 attorneys and 12 practice areas recognized in Chambers U.S.A. and Chambers FinTech 2023, and 65 attorneys recognized by Best Lawyers, 40 attorneys recognized in various Super Lawyers rankings, 44 practice areas recognized by Best Law Firms, and was named a “Top Performer” by the Leadership Council for Legal Diversity (LCLD) since 2018. To learn more, visit www.mcglinchey.com.