On January 11, 2024, the House Financial Services Committee announced the formation of a bipartisan Working Group on Artificial Intelligence (“AI”). The working group is to be led by the Chairman of the Digital Assets Financial Technology and Inclusion Subcommittee, French Hill, along with the Subcommittee ranking member Stephen Lynch. This group is designed to address a number of the directives contained in President Biden’s Executive Order on AI issued in October 2023.

The Group will focus on AI’s impact on the financial services and housing industries. A core purpose will be to educate Committee members as to both the potential risks and benefits of AI. Also, it will strive to help the Committee find ways to “leverage AI to foster a more inclusive financial system.” Specifically, the group will explore “the development of new products and services, fraud prevention, compliance efficiency, and the enhancement of supervisory and regulatory tools, as well as how AI may impact the financial services workforce.”

The creation of this group coincides with similar AI efforts by federal agencies, including the FTC and FCC, as well as state agencies such as the California Privacy Protection Agency. It also immediately follows the European Union’s passage of its comprehensive AI legislation, the EU AI Act. Entities seeking to develop or implement AI tools will have to remain vigilant to stay on top of the rapid regulatory developments in this field.

The Consumer Financial Protection Bureau (“CFPB”) and Attorneys General from seven states recently obtained a temporary restraining order (“TRO”) against a debt-settlement enterprise and forced it into receivership.

Highlights:

• The complaint alleges that an enterprise of connected companies (the “Company”) collected illegal advance fees from consumers and falsely guaranteed legal services to provide debt relief.

• The complaint aims to halt the alleged illicit activities of the Company and compel the Company to pay redress to affected consumers and a civil money penalty.

• A federal district court granted a temporary restraining order against the Company and forced it into receivership on January 11, 2024.

Case Summary: 

On January 10, 2024, the CFPB and Attorneys General from seven states filed a complaint against the Company and the individuals in charge for allegedly operating a debt-relief scheme that has been harming consumers since January 2016. The complaint alleges violations of the Telemarketing Sale Rule (“TSR”), the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), and the Consumer Financial Protection Act of 2010 (“CFPA”).

The complaint noted two particular instances of harm towards consumers: (1) charging illegal advance fees and (2) falsely claiming that lawyers will provide debt relief on their behalf. The CFPB alleges that the Company charges and collects pre-determined fees prior to any debts being settled and without any connection to the settlements or debt-relief savings. To date, over $100 million has been allegedly collected by the Company prior to any of it going towards debt-relief payments.

The other instance of ongoing harm alleged is the Company’s claim to consumers that lawyers will aid in their debt-relief. According to the complaint, the Company allegedly leads consumers to believe that lawyers are hired to negotiate their debt-relief payoff amounts; however, it is the Company and its employees, who are not licensed attorneys, conducting these negotiations, not lawyers.

The CFPB, by its authority under the Consumer Financial Protection Act, sought a temporary restraining order, which was granted by the U.S. District Court for the Western District of New York. The complaint seeks further redress including restitution to affected consumers and a civil money penalty. The court’s TRO also placed the Company into receivership. The Company filed a motion to dissolve the TRO on January 18; the case is ongoing.

Resources:

You can review all of the relevant court filings and press releases at the CFPB’s Enforcement Page.

• Complaint
• CFPB Press Release

Enforcement Alerts by Hudson Cook, LLP, written by the attorneys in the firm’s Government Investigations, Examinations and Enforcement and Litigation practice groups, are provided to keep you informed of federal and state government enforcement actions and related actions that may affect your business. Please contact our attorneys if you have any questions regarding this Alert. You may also view articles, register for an upcoming CFPB Bites monthly webinar or request a past webinar recording on our website.

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Hudson Cook, LLP provides articles, webinars and other content on its website from time to time provided both by attorneys with Hudson Cook, LLP, and by other outside authors, for information purposes only. Hudson Cook, LLP does not warrant the accuracy or completeness of the content, and has no duty to correct or update information contained on its website. The views and opinions contained in the content provided on the Hudson Cook, LLP website do not constitute the views and opinion of the firm. Such content does not constitute legal advice from such authors or from Hudson Cook, LLP. For legal advice on a matter, one should seek the advice of counsel.

CLEVELAND, OH — McGlinchey Stafford is pleased to announce the addition of Tom Henderson to the firm’s Creditors’ Rights, Financial Restructuring, and Bankruptcy team within the Financial Services Litigation practice. With over 35 years of experience in bankruptcy law in private practice and with PNC Bank, Tom brings a wealth of knowledge and a distinct, holistic approach to solving bankruptcy problems for the firm’s clients. Tom is one of the 50 new attorneys McGlinchey welcomed in 2023, as part of its focused recruitment initiative aimed at expanding its nationally recognized team.

“Every conversation I had with McGlinchey attorneys confirmed this was the best next stop in the journey of my evolving practice,” Tom said. “I am glad to join such a powerhouse of nationally recognized attorneys counseling the financial services industry.”

Tom joins McGlinchey with significant in-house legal counsel experience, having worked most recently at PNC Bank. He primarily focuses on consumer bankruptcy, serving the sophisticated legal and compliance needs of banks, servicers, investors, and secured creditors. His private practice experience involved the financial services industry, where he handled consumer bankruptcies, foreclosures, consumer finance litigation, and appeals. This diverse background enables him to adeptly navigate complex cases and deliver comprehensive solutions. Licensed in Ohio, Tom is affiliated with McGlinchey’s Cleveland office.

“Adding Tom to our team enhances the top-tier legal services our team provides,” said Shaun Ramey, Chair of McGlinchey’s Financial Services Litigation Group. “His unique perspective, shaped by representing creditors, debtors, and trustees as both in-house and outside counsel, aligns well with our mission to offer clients practical, forward-thinking solutions.”

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In his role at PNC Bank, Tom worked closely with leadership to steer significant enhancements in consumer bankruptcy practices and adeptly navigating complex regulatory landscapes. His skill in leveraging value from difficult situations sets him apart and underscores his commitment to advancing institutional operations with a strong understanding of the client’s needs.

“We are excited to have Tom join our team,” said Kelly Lipinski, Managing Member of McGlinchey’s Cleveland office. “His extensive, varied experience in bankruptcy and consumer finance law, coupled with his ability to turn challenging situations into opportunities, makes him an invaluable asset not only to our team in Ohio but also to our clients nationwide.”

Tom Henderson’s arrival marks a significant addition to McGlinchey’s growing team, further strengthening the firm’s national reputation for excellence in financial services litigation.

About McGlinchey

McGlinchey Stafford is a premier midsized business law firm offering services in more than 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 levels. With 170 attorneys licensed in 34 states, McGlinchey operates from 17 offices nationwide. The firm currently has 24 attorneys and 12 practice areas recognized in Chambers U.S.A. and Chambers FinTech 2024, and 65 attorneys recognized by Best Lawyers, 40 attorneys recognized in various Super Lawyers rankings, 47 practice areas recognized by Best Law Firms. In 2023, McGlinchey became Mansfield Certified and was ranked in the top 30 firms nationally in 3 categories of the Best Law Firms for Diversity by Vault. To learn more, visit www.mcglinchey.com.

HOUSTON, TX — InteLogix is pleased to welcome John Watson as the Senior Vice President of Financial Shared Services (“FSS”). With 20 years of comprehensive experience in the ARM industry, John’s arrival is a significant step toward enhancing and fortifying the growth of several strategic elements of our business. John will be responsible for building a best-in-class, digital-first ARM business to complement the company’s leading CX business, providing seamless experiences for our clients’ customer journey. 

John’s leadership in financial services commenced at Ernst & Young, where he specialized in accounting, strategy consulting, and M&A advisory. His most recent role before joining InteLogix was at InDebted, a global, digital-first accounts receivable management organization. Over nearly three years, John served first as  US CEO and then as global Chief Commercial Officer. Prior to InDebted, John spent over a decade at ARS National Services, building the company into one of the largest, highest performing, and most respected third-party recoveries firms in the US. Driving substantial growth and spearheading innovation has been the hallmark of John’s career. 

Mario Baddour, President and CEO, stated, “Guided by John’s visionary leadership, we are rapidly achieving significant milestones in actualizing our progressive strategy. Our focus on optimizing revenue recovery and safeguarding the customer experience is now propelled by smart solutions driven by our team of consultative advisors. This marks a decisive step forward in our commitment to excellence and innovation as we forge a path toward unparalleled success.”

About InteLogix

InteLogix is an established industry leader with over 65 years of service delivery excellence, specializing in providing tailor-made strategies to solve clients’ underlying needs to maximize results. Their smart solutions are trusted daily by clients in diverse industries, delivering a unique advantage of bringing business expertise, innovative ideas, and best practices to their clients’ programs of varying complexity and scope.

On January 18, a court in the Eastern District of Wisconsin denied class certification in a Telephone Consumer Protection Act (TCPA) case concluding that the factual issue of whether the proposed class members had suffered an injury-in-fact sufficient to confer Article III standing based on the receipt of a ringless voicemail was an individualized issue that would predominate over common issues.

The plaintiff, an insurance agent from Wisconsin, alleged that Advisors Ignite USA LLC violated the TCPA by using ringless voicemail technology to leave prerecorded messages on his cell phone advertising marketing events hosted by the defendant touting ways to “substantially increase his income.” The plaintiff’s name and phone number were included on a list of insurance agents that the defendant had purchased from an industry data provider, which led to the plaintiff — and thousands of other insurance agents — receiving a ringless voicemail message.

The plaintiff moved to certify a class of “[a]ll persons in the United States who (1) were called one or more times by Advisors Ignite (2) from March 17, 2022 to June 30, 2022 (3) with a ringless voicemail from SlyBroadcast (4) on their cellular telephone number with an area code starting with 7, 8, or 9 that had not been ported in the 15 days prior to either call.”

The court analyzed each of the Rule 23 factors in deciding whether to certify the class and found that the plaintiff established numerosity (which was not disputed) and adequacy of representation (which was disputed). However, “at least as to the issue of standing, common issues of fact do not predominate.” The failure to establish commonality and predominance on the issue of standing also led the court to find that the typicality and superiority requirements had not been met.

Specifically, the court found that while the plaintiff may have sufficiently alleged that he suffered an injury-in-fact to confer Article III standing by pleading that he experienced “annoyance, nuisance, and invasion of privacy” among other alleged injuries, his assumption that every insurance agent who received the ringless voicemail suffered the same harm he claimed was untenable. Indeed, the court opined that:

“[P]resumably some of the recipients of the messages [Advisors Ignite] sent were happy to receive them. They may have even followed up by calling Advisors Ignite. Some may in fact have benefitted from receiving the information Advisors Ignite provided. Even those that did not call may have felt unharmed by learning of what was offered and were not annoyed or harmed. They may well have found the information worth the little effort it takes to delete a message after it is received.”

The court concluded that the factual issue of whether the class members had suffered an injury-in-fact sufficient to confer Article III standing was an individualized issue that would predominate over common issues, thus undermining his efforts to establish commonality and predominance.

Having found a lack of commonality and predominance as it related to standing, the court went on to conclude that the plaintiff was similarly unable to satisfy the typicality requirement because “[t]he question of whether each member of the proposed class suffered an injury in fact is so particularized as to make resolving it on a class wide basis difficult, if not impossible.”

Finally, these shortcomings in the plaintiff’s certification arguments ultimately led the court to find that a class action lawsuit was not superior to other available methods for the fair and efficient adjudication of the controversy.

Troutman Peppers’ Take:

This decision highlights that the injury-in-fact necessary to confer Article III standing is not a one-size-fits-all proposition and provides another helpful decision to use in opposing class certification in TCPA cases. What annoys one person may intrigue another. For the plaintiff in this case, the court’s denial of class certification sent another message he was unlikely to appreciate: speak for yourself.

After nearly a decade of litigation, Judge Beryl A. Howell of the U.S. District Court for the District of Columbia has approved the Consumer Financial Protection Bureau’s $6.0 million settlement of class claims of alleged discrimination by the CFPB against 85 Black and Hispanic employees. The class consists of all “minority employees and women who work or worked as Consumer Response Specialists and have been subjected to and harmed by the Bureau’s agency-wide pattern or practice of discrimination and retaliation and discriminatory policies and practices,” according to the complaint. The settlement fund will be distributed to the 85 class members. In addition to the $6.0 million settlement fund, the settlement provides for an award of $1.5 million in attorney’s fees for class counsel.

The class action lawsuit was filed in 2018 against the CFPB’s former Acting Director Mick Mulvaney. Class representatives alleged that they were consistently paid less than their White male colleagues, unfairly denied promotions since 2011, and faced retaliation for making discrimination complaints.

The CFPB does not admit wrongdoing as part of the settlement. In a statement, the CFPB said it remains committed to ensuring all employees are treated fairly. The CFPB recently updated its pay structures, but advised that the compensation reform is independent of the discrimination allegations.

We view as ironic that the CFPB, which has been vigorously, and sometimes zealously enforcing fair lending laws, would be sued for employee discrimination and pay out $6.0 million in damages and 1.5 million in attorney’s fees. The optics are not very pleasant.

New Jersey Gov. Phil Murphy on Jan. 16 signed into law Senate Bill 332, making New Jersey the 13th state to enact a comprehensive consumer data privacy law, following California, Virginia, Colorado, Utah, Connecticut, Iowa, Indiana, Tennessee, Montana, Texas, Oregon, and Delaware.  The law will go into effect Jan. 16, 2025.

Applicability

The Act applies to controllers that conduct business in New Jersey or produce products or services that are targeted to New Jersey residents, and that during a calendar year either:

1. control or process the personal data of at least 100,000 consumers, excluding personal data processed solely for the purpose of completing a payment transaction; or
2. control or process the personal data of at least 25,000 consumers and the controller derives revenue or receives a discount on the price of any goods or services, from the sale of personal data.

Exemptions 

Exemptions include, but are not limited to:

1. A financial institution, data, or affiliate of a financial institution that is subject to Gramm-Leach-Bliley Act and implementing rules;
2. Protected health information collected under the Health Insurance Portability and Accountability Act of 1996;
3. Personal data collected, processed, sold, or disclosed by a consumer reporting agency as authorized by the Fair Credit Reporting Act.

Consumer Rights 

Consumers have the right to:

1. Confirm a controller’s processing of their personal data;
2. Correct inaccuracies in their personal data;
3. Delete their personal data;
4. Obtain a copy of their personal data held by the controller;
5. Opt out of the processing of their personal data if the processing is for the purpose of targeted advertising, sale of their personal data, or certain profiling.

Sensitive Data 

A controller may not process sensitive data concerning a consumer without first obtaining the consumer’s consent, or, in the case of the processing of personal data concerning a known child, without processing such data in accordance with the Children’s Online Privacy and Protection Act.

“Sensitive data” means personal data revealing:

1. Racial or ethnic origin;
2. Religious beliefs;
3. Mental or physical health condition, treatment, or diagnosis;
4. Financial information, which shall include a consumer’s account number, account log-in, financial account, or credit or debit card number, in combination with any required security code, access code, or password that would permit access to a consumer’s financial account;
5. Sex life or sexual orientation;
6. Citizenship or immigration status;
7. Status as transgender or non-binary;
8. Genetic or biometric data that may be processed for the purpose of uniquely identifying an individual;
9. Personal data collected from a known child; or
10. Precise geolocation data.

Contract Requirements 

A contract between a controller and processor must clearly set forth:

1. The processing instructions to which the processor is bound, including the nature and purpose of the processing;
2. The type of personal data subject to the processing, and the duration of the processing;
3. That the processor ensures each person processing the personal data is subject to a duty of confidentiality;
4. That any subcontractor engaged by the processor is subject to the same contractual obligations as between the controller and the processor;
5. That the controller and processor implement appropriate technical and organizational measures to ensure a level of security appropriate to the risk;
6. That the processor deletes or returns all personal data to the controller as requested at the end of the provision of services;
7. That the processor makes available to the controller all information necessary to demonstrate compliance; and
8. That the processor allows for, and contributes to, reasonable assessments and inspections by the controller.

Data Protection Assessments 

A controller must conduct a data protection assessment for processing that presents a heightened risk of harm to a consumer, including:

1. Processing personal data for the purposes of targeted advertising or certain profiling;
2. Selling personal data;
3. Processing sensitive data.

Enforcement

The Act does not create a private right of action. A violation that is not cured within 30 days of notice is an unlawful practice under N.J. Stat. § 56:8-1, et seq., and the Attorney General may seek injunctive relief, costs, and penalties of not more than $10,000 for the first offense and not more than $20,000 for the second and each subsequent offense.

Rulemaking

The Attorney General, through the Division of Consumer Affairs, is charged with promulgating rules and regulations.

Impression

This legislation, which was introduced in 2022, is a good example of legislators listening to stakeholders and making appropriate changes in response. The bill was amended six times, with the next to the last gutting the bill and replacing it with provisions akin to those in laws adopted by most other states, which will be a relief to those incorporating the requirements into a compliance program. For a chart comparing the state comprehensive data privacy acts, and more information and insight from Maurice Wutscher on data privacy and security laws and legislation, click here.

WASHINGTON, D.C. — The National Creditors Bar Association (NCBA) today announced that Barron & Newburger, P.C. will sponsor an annual Scholarship, pledging $50,000 over five years to the NCBA Foundation. Funds will support a $10,000 per year college scholarship. Application forms can be found at creditorsbar.org/scholarship.  

Established in 2022, the NCBA Foundation was created to guide and complement the charitable initiatives of the National Creditors Bar Association. It is the mission of the Foundation to support financial, civic, and judicial literacy programs and programs dedicated to promoting equitable access to opportunity. As part of its mission, the Foundation continues the NCBA tradition of awarding annual scholarships. 

This scholarship, generously sponsored by the Barron & Newburger, P.C. Foundation, reflects NCBA’s commitment to investing in the education and future success of individuals within our legal community. 

“Barron & Newburger remains committed to providing equal opportunity to all students looking to further their education,” said Thomas Good, President and Chief Executive Officer of Barron & Newburger, P.C. “Partnering with NCBA, an association with a strong appreciation of community, allows us to give back by supporting educational and economic growth within our industry.”

Each year the scholarship application will include a timely industry relevant question. The 2024 industry essay question is: “Do restrictions on collection and credit reporting of medical debts affect the availability, cost, and quality of medical services and treatment?” NCBA encourages applicants to be creative and thoughtful in their submissions. A panel of judges, including the NCBA Foundation and Awards & Scholarship Committees, will evaluate the submissions based on originality, clarity, and insight of the subject matter. 

“NCBA is thrilled to be able to continue this great program and appreciates Barron & Newberger’s generosity to make it all possible,” said Liz Terry, NCBA Executive Director. “Their support not only alleviates the financial burden for students but encourages recipients to become independent thinkers.”

Scholarships will be awarded in May 2024. All applications are due no later than April 4, 2024. For more information visit: creditorsbar.org/scholarship.

About National Creditors Bar Association (NCBA)

NCBA is the premier bar association dedicated to serving law firms engaged in the practice of creditors rights law. Currently, our membership is comprised of over 350 law firms and individual members, totaling approximately 1,700 attorneys, in the areas of creditors rights law, defense and in-house counsel. Members practice in over 20 different practice areas in the 50 states, Puerto Rico, and Canada. Our attorney members are committed to being professional, responsible, and ethical in their practice and profession.

Media Inquiries:

Chip Bergstrom, Evergreen Communications, 617.784.6145, cbergstrom@evergreen-communications.com

January 2024 was another busy month for the CFPB. In this article, we’ll share some of our top CFPB “bites” of the month so you can stay on top of recent developments. 

Bite 10: CFPB Report on College-Sponsored Financial Products

On December 19, 2023, the CFPB issueda report on college sponsored financial products, which the CFPB warned could have higher fees and worse terms. The report addressed college sponsored credit cards and deposit accounts, noting that some of the college-sponsored deposit accounts include NSF and overdraft fees, two types of fees that many large banks have stopped charging. The CFPB claimed that as a result, organizations may be steering students into products that cost them more than they would pay on the open market. The report also found that the fees students paid varied by institution type; students at Historically Black Colleges and Universities, for-profit colleges, and Hispanic-servicing institutions all paid higher than average fees per account. Some students also faced unexpected fees upon graduation. The report found that some financial institutions imposed additional fees when a student graduates or reaches a certain age, relying on what the CFPB characterized as “sunset clauses” that change the terms of the account. The report noted that the CFPB will continue to examine these practices for potential violations of federal consumer protection law.

Bite 9: CFPB Reports on Challenges in Student Loan Repayment

On January 5, 2024, the CFPB published an issue spotlight on the CFPB’s oversight of student loan servicing practices. After a three-year pause of required payments due to the COVID-19 emergency, student loan repayments resumed in the fall of 2023. The report found that borrowers are experiencing long hold times of more than an hour and that average call wait times for a borrower to speak to a representative reached 70 minutes in October 2023. The CFPB claims that borrowers abandoned about half of all calls to servicers that month. Consumers submitted millions of applications for new income-driven repayment plans, and by October, 1.25 million applications were pending, with more than 450,000 pending for more than 30 days. The report also claimed that borrowers are receiving incorrect and confusing bills from their servicers. The errors include listing premature due dates before the end of the payment pause, inflating monthly payment amounts due to the servicer using outdated poverty guidelines, or using the incorrect income when calculating a borrower’s new income-driven repayment plan payment.

Bite 8: CFPB Issues Report on Neighborhoods and Mortgages

On December 21, 2023, the CFPB announced that staff have analyzed recent HMDA data to explore how the numbers of mortgage originators per capita varied on the neighborhood level. They also analyzed how that variation could impact lending outcomes. According to the CFPB, the data suggests that there is wide variation across neighborhoods in originators per capita, and that this measure was correlated with neighborhood-level characteristics like poverty, income, internet access, and racial and ethnic composition. Different financial institution types responded to these variations differently; credit unions originated a similar number of loans across all percentiles of originators per capita, bank originations fell with originators per capita, and originations by non-depository institutions increased with originators per capita. The report showed that even with groups of transactions that posed a similar credit risk, loan applications in neighborhoods with a larger number of originators per capita were less likely to be rejected. Additionally, consumers that took out mortgages in neighborhoods with more originators paid lower origination charges and lower total loan costs.

Bite 7: CFPB Report on Consumer Experience with Overdraft and NSF Fees

On December 19, 2023 the CFPB issued a new report that found many consumers are still experiencing unexpected overdraft and NSF fees, despite recent changes by many banks and credit unions to eliminate some of these fees. According to the report, more than 25% of consumers stated that financial institutions charged their household an overdraft or NSF fee in the past year, and that only 22% of those households expected the most recent overdraft. Many of these consumers appeared to have access to cheaper alternatives – like available balance on a credit card – when the overdraft occurred. The report also found that some of the consumers who experienced overdraft fees appear to use overdrafts intentionally and frequently; in households that experienced more than 10 overdrafts in a year, more than half said they expected the fees. The CFPB says that low-income households were the most likely to experience an overdraft or NSF fee. Financial institutions only charged 10% of households with over $175,000 in income with an overdraft fee in the past year, compared with 34% of households with an income below $65,000. Finally, the CFPB also noted that most account overdrafts are exempt from Regulation Z, which is designed to promote informed use of credit and allow consumers to compare the cost of credit products.

Bite 6: CFPB Issues Guidance on Credit Reporting Issues

On January 11, 2024, the CFPB issued guidance to credit reporting companies through two advisory opinions. The opinions address inaccurate background check reports and credit file sharing practices. The CFPB’s advisory opinion on background check reports highlighted that credit reporting companies must maintain reasonable procedures to avoid producing reports with false or misleading information. These procedures should prevent the publication of expunged, sealed, or other legally restricted information. They should also report disposition information for arrests, criminal charges, and evictions, and prevent the reporting of duplicative information. The advisory opinion on credit file sharing explained that individuals who are requesting their credit files only need to make a request and provide identification, and they do not need to use specific language or jargon to obtain their report. The CFPB says the organization providing the report must provide the complete file with information sources, with clear and accurate information presented in an understandable way, in a format that will help the recipient address inaccuracies.

Bite 5: FDIC Finalizes New Rule on Use of Name and Logo

On December 20, 2023, Director Rohit Chopra issued a statement on the FDIC’s new rule concerning use of its name and logo by nonbanks, saying that this rule is necessary to conform the FDIC framework with the modern banking experience. Chopra said that nonbanks are increasingly offering deposit-style products in partnership with banks, and that these nonbanks then state that the consumer funds benefit from FDIC insurance on a pass-through basis. According to the CFPB director, however, this pass-through protection is not automatic or guaranteed and it does not protect the public from risks associated with the possible failure of the nonbank, such as the potential for frozen funds. The new FDIC rule establishes a new official digital sign that banks will need to display near the name of the bank on all bank websites and mobile applications, and requires the signs to differentiate insured deposits from non-deposit products across banking channels and to indicate that certain financial products “are not insured by the FDIC, are not deposits, and may lose value.” The rule also clarifies that marketers may not use FDIC-associated terms or images to inaccurately imply or represent that any uninsured financial product or non-bank entity is insured or guaranteed by the FDIC.

Bite 4: New Proposed Rule on Overdraft Fees

On January 17, 2024, the CFPB proposed a new rule that it says is aimed at changing the way overdraft fees are disclosed. The CFPB indicated that the Truth in Lending Act has long exempted overdraft services from many of its provisions, which the CFPB now calls a “loophole” that financial institutions take advantage of. The CFPB says that this proposed rule is part of a continued effort by the CFPB to rein in “junk fees” and spur competition in the consumer financial product marketplace. Under the current Truth in Lending Act rules, the CFPB noted that banks do not need to disclose the cost of credit when they extend a loan to cover the difference on an overdrawn account. The proposed rule would require large financial institutions with more than $10 billion in assets to treat overdrafts like credit cards or lines of credit and provide clear disclosures to consumers about the cost of these credit products, including an interest rate. Alternatively, the institutions would be able to charge a flat fee at a cost that calculated based on demonstrated data. Comments on this proposed rule are due by April 1, 2024.

Bite 3: CFPB Files Amicus Brief in Debt Collection Case

On January 2, 2024, the CFPB filed a friend-of-the-court brief in a debt collection case, responding to a debt collector’s FDCPA argument. In that case a consumer filing for bankruptcy had received a letter from a debt collector during the bankruptcy process demanding payment and threatening a lawsuit. The individual sued the debt collector for this alleged misrepresentation. The debt collector argued that it was only responsible for intentional false statements, and that at the time it sent the letter, it was unaware that the consumer had filed for bankruptcy. According to the CFPB’s brief, that argument is incorrect and a debt collector can be liable under the FDCPA even if they claim that they did not know that their statement was false; however, a debt collector will not be held responsible in a lawsuit brought by an individual if they can show that they didn’t intend to make the false representation and that they had effective procedures in place designed to prevent the mistake.

Bite 2: CFPB Sues Lender-Developer

On December 20, 2023, the CFPB sued a lender-developer in Texas for alleged predatory lending. The CFPB announced that it joined the Department of Justice to sue the Texas-based lender-developer, alleging that the company operated an illegal land sales scheme that targeted Hispanic borrowers with false statements and predatory loans. The lawsuit alleges that the company sold flood-prone land without water, sewer, or electrical infrastructure, despite advertising claims that the homes came with all city services and that the lots have never flooded. The CFPB also alleged that the company advertised in Spanish, but only made important sale documents available in English. The CFPB further alleged that the company was “churning” borrowers through cycles of foreclosure and then re-selling the foreclosed properties at a profit. According to the CFPB, deed records show that the lender-developer repurchased at least 40% of the properties and resold them between two and four times over three years. The CFPB alleged that the company violated the ECOA, the Interstate Land Sales Full Disclosure Act, and implementing regulations. The DOJ joined the CFPB in its ECOA claims and separately alleged violations of the Fair Housing Act. The lawsuit seeks an injunction, consumer redress, and a civil penalty.

Bite 1: CFPB To Distribute Relief to Veterans

On January 2, 2024, the CFPB announcedthat it has distributed $6 million in financial relief to consumers that were harmed by alleged illegal lending practices that targeted veterans. According to the CFPB, five connected companies misled consumers, including veterans, into selling their pension and disability payments, which is illegal under federal and state law. The CFPB alleged that these transactions were not sales, but illegal, high-interest loans. These payments stem from years-old enforcement actions. In 2019, the CFPB and the state of Arkansas reached an agreement with one of the companies, and three others faced a lawsuit filed by the CFPB and the state of South Carolina. The 5th named defendant worked along with the others named in these actions. He settled with the CFPB in 2019 in response to allegations that he violated the CFPA by misleading consumers about interest rates and the validity of the contracts, as well as when the consumers would receive their funds from the transactions. The harmed consumers received a distribution in December 2023 that totaled $6 million, partially funded from the CFPB’s civil penalty fund.

Still hungry? Please join Hudson Cook for our next CFPB Bites of the Month. If you missed any of our prior Bites, including the webinar that covered the above topics, request a replay on the Hudson Cook website here. 

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This article is provided for informational purposes and is not intended nor should it be taken as legal advice.  The views and opinions expressed in this article are those of the authors in their individual capacity and do not reflect the official policy or position of the partners of Hudson Cook, LLP or clients they represent.

COPLEY, OH — DebtNext Software, a Recovery Management and Operations Solution Provider, today announced that it has completed its SOC 2 Type II audit, performed by KirkpatrickPrice. This attestation provides evidence that DebtNext Software has a strong commitment to security and to delivering high-quality services to its clients by demonstrating that they have the necessary internal controls and processes in place.

A SOC 2 audit provides an independent, third-party validation that a service organization’s information security practices meet industry standards stipulated by the AICPA. During the audit, a service organization’s non-financial reporting controls as they relate to security, availability, processing integrity, confidentiality, and privacy of a system are tested. The SOC 2 report delivered by KirkpatrickPrice verifies the suitability of the design and operating effectiveness of DebtNext Software controls to meet the standards for these criteria.

“Our team is extremely proud of the effort that has gone into attaining the SOC 2 Type II attestation and appreciates the partnership with Kirkpatrick Price and their efforts in the audit.  The protection of our clients’ data is a critical element of our success, and the policies and procedures we have put in place that are validated through this annual audit aid in our continual improvement in that area”, said Paul Goske, President of DebtNext Software.

“The SOC 2 audit is based on the Trust Services Criteria,” said Joseph Kirkpatrick, President of KirkpatrickPrice. “DebtNext Software delivers trust-based services to their clients, and by communicating the results of this audit, their clients can be assured of their reliance on DebtNext Software controls.”

About DebtNext Software 

DebtNext Software has been utilizing advanced technology combined with a breadth of industry knowledge to build function-rich solutions to drive recovery optimization and the management of third-party collection vendors since 2003. At DebtNext, we view our clients as the driving force behind what we do every day. We currently partner with many of the nation’s largest utility companies, telecommunications providers, financial services, and accounts receivables management firms, to fully illuminate their recovery management processes and help drive billions of dollars to our client’s bottom line.

About KirkpatrickPrice

KirkpatrickPrice is a licensed CPA firm, PCI QSA, and a HITRUST CSF Assessor, registered with the PCAOB, providing assurance services to over a thousand clients in North America, South America, Asia, Europe, and Australia. The firm has more than a decade of experience in information security by performing assessments, audits, and tests that strengthen information security practices and internal controls. KirkpatrickPrice most commonly performs assessments on SOC 1, SOC 2, PCI DSS, HIPAA, HITRUST CSF, GDPR, ISO 27001, FISMA, and FERPA frameworks, as well as advanced-level penetration testing. For more information, visit www.kirkpatrickprice.com, follow KirkpatrickPrice on LinkedIn, or subscribe to ourYouTube channel.