Firm News

The California Department of Financial Protection and Innovation 2021 Annual Report for licensees under the California Financing Law (CFL) is due March 15, 2022. Every CFL licensee as of December 31, 2021 must file the report, even if no business was conducted under the license in 2021. Failure to file the report may result in revocation of the CFL license and monetary penalties. Licensees must submit the form online at https://docqnet.dfpi.ca.gov.
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Michael Tomkies and Mercedes Ramsey

The FTC proposes to settle the charges against Dun &Bradstreet (D&B) for failing to fix small business credit reporting errors and deceiving small businesses regarding the benefit of D&B’s CreditBuilder product. In the Matter of Dun & Bradstreet, Inc., FTC Complaint File No. 172-3196, 2022 WL 190742. D&B stated that it has fully cooperated with the FTC and is committed to “operating with integrity, transparency, and in compliance with the laws that apply to our business.”

The FTC initially alleged that D&B failed to fix small business and consumer credit reporting errors. Other allegations involved D&B’s CreditBuilder product. D&B had alleged promised to “help” businesses by including certain payment history in their credit reports. The FTC alleged that D&B failed to accept numerous submissions and that D&B’s telemarketing agents falsely told customers that they were required to subscribe to the CreditBuilder product to obtain credit reports from D&B. Read More

Elevate, a fintech, entered into a settlement with the District of Columbia to resolve a suit brought by the District of Columbia in regard to the fintech’s activities related to two bank loan programs facilitated and advertised by the fintech. The banks were not parties to the suit or the settlement. The case and settlement follow a pattern of state regulator’s bypassing the banks and bringing actions against service providers and fintechs.

Under the settlement the fintech agreed not to (i) provide or advertise loans or lines of credit to District of Columbia consumers at an interest rate above 24% APR; (ii) act as a service provider to a lender that provides loans or lines of credit to District of Columbia consumers at an interest rate above 24% APR; or (iiii) represent that it is permitted to offer loans or lines of credit in the District of Columbia without possessing any required District of Columbia money lender license. Read More

Following its ruling upholding the OCC’s Madden-fix rule, the District Court for the Northern District of California has likewise ruled in favor of the Federal Deposit Insurance Corporation’s (“FDIC”) cross-motion for summary judgment, upholding the FDIC’s parallel Madden-fix rule. See Order Resolving Cross-Motions for Summary Judgment, California v. Federal Deposit Insurance Corporation, No. 20-cv-05860-JSW (N.D. Cal. filed Feb. 8, 2022); see also our ALERT of Feb. 10, 2022. In 2020, seven states and the District of Columbia (“Plaintiffs”) sued the FDIC challenging the validity of the FDIC’s rule, titled Federal Interest Rate Authority Rule (“Rule”), that was promulgated in the wake of the U.S. Court of Appeals for the Second Circuit’s ruling in Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015), cert. denied, 136 S. Ct. 2505 (2016). See our ALERTS of Sep. 26, 2019 and June 26, 2020. The FDIC’s Rule similarly provides that the determination regarding the permissibility of interest on a loan occurs as of the date the loan was made and will not be affected by the sale,assignment or other transfer of a loan. 12 C.F.R. § 331.4(e). Read More

The U.S. Department of Veterans Affairs (“VA”) has published a final rule amending the VA’s procedures for reporting debt to consumer reporting agencies. Under the final rule, the VA will only report a delinquent debt owed to the VA if it meets three criteria:
(i) the VA has exhausted all available collection efforts, including enforced collection;
(ii) the debt is not owed by an individual who is determined by VA to be catastrophically disabled or has reported to VA a gross household income below the threshold for cost-free health care; and
(iii) the outstanding debt is over $25. Through this new rule, the VA expects a 99% reduction in adversely reported debt. Read More

In 2019, Maine passed two laws amending the Main Fair Credit Reporting Act to regulate the reporting of overdue medical debt and debt resulting from economic abuse. Under those laws, credit bureaus cannot report medical debt until it is 180 days overdue, must report medical debt as ordinary consumer credit if the patient is making regular payments, and must remove medical debt from credit reports upon reasonable evidence the debt is fully paid. Credit bureaus must also reinvestigate debts if consumers provide documentation they incurred the debt because of economic abuse, i.e., domestic violence or spousal abuse. If the documentation is substantiated, credit bureaus must remove those debts. Read More

The District Court for the Northern District of California has ruled in favor of the Office of the Comptroller of the Currency’s (“OCC”) cross-motion for summary judgment, upholding the OCC’s “Maddenfix” rule and the so-called “valid-when-made” principle. See Order Resolving Cross-Motions for Summary Judgment, California v. Office of the Comptroller of the Currency, No. 20-cv-05200-JSW (N.D. Cal. filed 02/08/22). In 2020, California, Illinois and New York (“Plaintiffs”) sued the OCC challenging the validity of the OCC’s final rule titled Permissible Interest on Loans That Are Sold, Assigned or Otherwise Transferred (“Final Rule”), which was promulgated in response to uncertainty surrounding the valid-when-made doctrine in the wake of the ruling of the U.S. Court of Appeals for the Second Circuit in Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015), cert. denied, 136 S. Ct. 2505 (2016). See our Alerts of Sep. 26, 2019 and June 26, 2020. The Final Rule provides that interest on a loan that is permissible under 12 U.S.C § 85 (“Section 85”) shall not be affected by the sale, assignment or other transfer of the loan. 12 C.F.R. § 7.4001(e). Read More

The CFPB has announced that it will begin seeking public comments regarding “back-end fees” to help inform its future agenda. This initiative is part of the CFPB’s recently announced examination of credit card rates and fees with an eye toward ensuring “robust and fair competition” in the credit card market. See our ALERT of Jan. 25, 2022. The CFPB is targeting the so-called “fee economy” that “conceals the true price of products (including credit cards) from the competitive process,” citing internal research that found that credit card companies charged over $14 billion in late fees and over $15 billion in overdraft and NSF fees in 2019. In the CFPB’s view, “excessive” and “exploitative” fees charged by banks and non-bank financial institutions, whether predictable and transparent or not, have become “widespread,” “far exceeding” the marginal cost of the services they purport to cover. Read More

In a January 2021 blog post, the Consumer Financial Protection Bureau (CFPB) announced that it would begin examining credit card rates and fees to ensure there is “robust and fair competition” in the credit card market. To accomplish this goal, the CFPB will focus on three areas in particular: Industry-wide practices – The CFPB argues that the credit card market, while large, has a small number of major players whose parallel shifts in business can make it more difficult for issuers to offer competitive pricing to consumers. As an example, the Bureau points to the industry practice of withholding account performance information that issuers may previously have reported to the credit bureaus, making it difficult for other issuers to offer competitive pricing to consumers. The CFPB intends to examine such practices with an eye toward their effect on fair competition. Read More

In July 2021, the Federal Trade Commission (“FTC”) settled its lawsuit against an online marketplace loan provider. The FTC filed their initial complaint in 2018, alleging that the company engaged in unfair and deceptive acts or practices and violated the Gramm-Leach-Bliley Act (“GLBA”) in connection with its advertising, application process and automatic payment practices. FTC v. LendingClub Corporation, No. 18-02454 (N.D. filed Cal., Apr. 25, 2018); see our ALERT of May 21, 2018. The FTC complaint alleged that the company falsely promised consumers they would receive loans with “no hidden fees”, told applicants their loans were “on the way” when they knew those applicants would not receive a loan and initiated unauthorized withdrawals from consumers’ bank accounts. Read More