Firm News

State and federal regulators continue to press on compliance and oversight issues affecting both fintechs and their bank partners. See, e.g., our ALERTS of Sept. 22, Nov. 10 and Dec. 27, 2022, and Apr. 28, June 12 and Aug. 8, 2023.
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Pursuant to authority under the Consumer Financial Protection Act (“CFPA”), the Consumer Financial Protection Bureau (“CFPB”) published a supervisory designation order establishing supervisory examination over World Acceptance Corporation (“World Acceptance”), a small dollar installment lender. This order comes in the wake of World Acceptance contesting the CFPB’s Notice of Reasonable Cause to supervise in April 2023 and marks the first time the CFPB has established supervisory authority over a nonbank lender following a determination that the risks surrounding the conduct of the consumer finance company are sufficient to justify CFPB supervision.

The CFPA authorizes the CFPB to supervise “covered persons” whose conduct poses risks to consumers with regard to the offering or provision of consumer financial products or services. The CFPA does not specify the character or magnitude of “risks to consumers” that is required to subject a covered person to supervision. Instead, Congress left such determination to the discretion of the CFPB, with the requirement that the CFPB (i) identify concrete risks to consumers, which it has reasonable cause to determine exist, (ii) notify the entity of those risks and (iii) give the entity a reasonable chance to respond.
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The U.S. Court of Appeals for the Third Circuit affirmed the district court holding that the Pennsylvania Consumer Discount Company Act (“CDCA”) was not implicated in the collection of
charged-off debt that related to a loan made by a CDCA licensee.

The debtor alleged violation of the Fair Debt Collection Practices Act (“FDCPA”) after the collector filed a proof of claim in the debtor’s bankruptcy proceeding to collect on the balance of the charged-off loan account. The debtor claimed the filing was unlawful because the debt originated with a CDCA-licensed lender who sold it to an unlicensed third party, allegedly in violation of the CDCA.
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The United States District Court for the Southern District of New York, in a case brought by the Federal Trade Commission (“FTC”), entered a Final Judgement against Merchant Cash Advance (“MCA”) operator Jonathan Braun for $3,421,067 for monetary relief to address harm caused to small businesses and $16,956,000 as a civil penalty. The Final Judgement followed a three day jury trial in January of 2024. Read More

On February 9, 2024, the California Court of Appeal reversed a trial court judgment that had stayed enforcement of the most recent California Consumer Privacy Act (CCPA) regulations. The decision makes the CCPA regulations that had previously been stayed by court order until March 29, 2024 become immediately effective. The regulations implement the California Privacy Rights Act of 2020 (“CPRA”), passed in 2020 and effective January 1, 2023. Read More

On January 17, 2024, the U.S. Supreme Court heard oral arguments in a pair of cases seeking to challenge the Chevron doctrine. The Chevron doctrine refers to the judicial deference given to administrative actions based on the 1984 case of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984). Under Chevron, the Court set forth a legal test as to when the court should defer to an agency’s interpretation, providing that judicial deference is appropriate where the agency’s interpretation was not unreasonable, so long as Congress had not spoken directly to the precise question. Read More

The Colorado Attorney General entered into an Order and Assurance of Discontinuance with TrueAccord, a licensed debt collector, in regard to the collection of loans made by unlicensed entities associated with Native American tribes with finance charges that exceeded the rate permitted for unlicensed entities under the Colorado Uniform Consumer Credit Code (“UCCC”). Read More

The Senate failed to override President Biden’s veto of the joint Congressional resolution of disapproval of the CFPB’s Section 1071 rule (“Rule”). The Rule, known as 1071 for its section in the DoddFrank Act, is currently on hold pending the outcome of a Supreme Court case challenging the constitutionality of the CFPB’s funding based on decisions in Texas and Kentucky. Read More

The Dodd-Frank Act amended The Truth in Lending Act (TILA) by requiring that the dollar threshold for exempt consumer credit transactions be adjusted annually by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the exemption threshold from the prior year is not adjusted. The Dodd-Frank Act requires similar adjustments in the Consumer Leasing Act’s threshold for exempt consumer leases. Read More

While traditional artificial intelligence (“AI”) has been used by the financial services industry for years, the use of generative AI has become a hot topic. Generative AI is a newer form of AI that has the ability to produce original content, including text, images or other media. Many companies utilize and implement AI, both traditional and generative, in their business practices, including financial services and payment services companies like Stripe, Block (formerly known as Square), Brex, Klarna and the Commonwealth Bank of Australia. Read More