Financial Services/CFPB

The staff of the Federal Trade Commission’s (FTC) Bureau of Consumer Protection released a much-anticipated paper on small business financing that highlights enforcement dangers on February 26, 2020. The staff are sounding the alarm on FTC enforcement and its investigations of small business financing providers and their marketers, servicers, and collectors.


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Originally posted on Venable.com

Household and credit card debt is at an all-time high. So it should come as no surprise that debt-relief legal and regulatory issues are back in the spotlight. The Consumer Financial Protection Bureau (“CFPB”) will host “Evolutions in Consumer Debt Relief” on March 10, 2020. The CFPB says the event will explore options for consumers facing unmanageable unsecured debt and limited credit options.

Generally speaking, debt relief services are any program or service that offers to change the terms of a debt between a person and one or more creditors or debt collectors, including a reduction of the loan balance, interest rate, or fees owed. Different kinds of companies may promote or offer to assist consumers in obtaining relief from different kinds of debt, including credit card debts, home mortgages (referred to by the CFPB and Federal Trade Commission (“FTC”) as Mortgage Assistance Relief Services or “MARS”), student loans, payday loans, car loans, or tax debts. There are also different kinds of debt relief services, including credit counseling, debt management plans, debt settlement, debt negotiation, foreclosure prevention, or loan modification.

Debt relief services have long been one of the most highly regulated sectors in the United States, based on the role that the providers play in assisting consumers who by definition are in financial distress. Debt relief services are also provided against a backdrop of contractual obligations of consumers to their creditors to repay amounts owed, and laws and regulations that govern creditors and their collection activities.


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Last week, the FTC entered into a settlement with LendEDU, a lead generation website that compares and ranks student loan and other financial products, and three of its officers. According to the FTC, LendEDU heavily promoted its website to consumers as offering “objective,” “accurate,” and “unbiased” product information, when, instead, it offered higher rankings and ratings to companies that paid for placement — a practice known as “pay-to-play.” The FTC uncovered multiple emails between LendEDU’s employees and advertisers demonstrating the advertiser’s ranking was clearly based on the amount it paid LendEDU per click.

The FTC also alleged that company employees, family members, friends, associates or others affiliated with LendEDU posted fake positive reviews of the company’s website on third-party platforms. The FTC described the extent of the fake reviews, noting that 90% of the company’s reviews on the website, trustpilot.com, were created by a person affiliated with the company.


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Last week, companies engaged in debt collection were not-so-gently reminded that making calls using an automated dialer to any number other than the one provided by the consumer is incredibly risky—and in Rash Curtis & Associates’ case, a $267 million risk.

Calls made to phone numbers with the consumer’s prior express consent are not prohibited

On April 22, the Maryland Court of Special Appeals told us that a class action settlement can’t buy you peace from the CFPB. That court ruled that a class settlement that purports to interfere with a state agency’s or the CFPB’s enforcement authority was unenforceable. The underlying dispute stems from two cases. The first is a class action brought by lead poisoning victims with cognitive impairments. And the second is a suit bought by government agencies for mishandling the rewards of the first case.

According to the CFPB’s Amended Complaint, class members in the first case were provided a structured settlement where they had the opportunity to transfer a portion of their future payment streams in exchange for a discounted immediate lump sum. Under Maryland’s Structured Settlement Protection Act (SSPA), structured settlement companies, such as the Access Funding Defendant, have to obtain the court’s approval before purchasing a payment stream. And most importantly, the SSPA requires that class settlement members consult with an independent professional advisor.


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The Federal Trade Commission’s settlement with an online consumer lending platform, Avant LLC, highlights the importance of legal and regulatory compliance in the fintech space, including—perhaps most importantly—what happens after a loan is made.

According to the Commission’s complaint, Avant offered personal consumer loans through its website. The complaint notes that although the loans were formally issued through a bank partner, Avant handled all stages of the process, and all consumer interactions, including advertising, application processing, and all aspects of loan servicing and collection of payments.

The Commission’s allegations stem primarily from Avant’s collection activities, and Avant’s representations about the payment process, under the Federal Trade Commission Act, the Telemarking Sales Rule (TSR); and the Electronic Fund Transfer Act (EFTA) and Regulation E. The allegations include that Avant:


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Signed into law on December 20, 2018, the 2018 Farm Bill may present a tremendous opportunity for banks and payments companies to provide banking, processing, and other services to the hemp industry. We expect a variety of companies to move swiftly in developing, marketing, and selling products (including CBD oil) that, until yesterday, were controlled substances. This means that banks and payment processors should be prepared for a flood of inquiries from the industry about opening bank, merchant processing, and other financial accounts.

While the Farm Bill “legalizes” hemp, there remain a number of open questions that financial institutions should consider before they start serving the industry. This article provides a brief overview of the Farm Bill’s impact on the legal status of hemp, highlights some of the open questions, and provides suggested best practices for banks and processors seeking to work with the hemp industry.


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The Federal Trade Commission (FTC) plays a significant role in regulating consumer financial services providers and vendors, including advertisers and marketers. A recent webinar from the Consumer Financial Services Committee of the American Bar Association featured an interview with Andrew Smith, director of the FTC’s Bureau of Consumer Protection (BCP). Mr. Smith, who was confirmed in May 2018, shared his personal views of his role at the FTC, the FTC’s development, and enforcement trends and focus in the consumer financial services sector. Below we highlight the main areas of focus that Mr. Smith touched upon that in our view are relevant to the consumer financial services sector.

Because of the nature of the webinar, this summary is not intended to be a complete transcript, does not reflect the views of the FTC, and does not necessarily reflect the views of Mr. Smith or any individual at the FTC.


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virtual currencyIt is perhaps not surprising that companies are already trying to make money (allegedly the unlawful way) from cryptocurrencies. Last week the FTC demonstrated that it can keep up with any marketplace trend when it succeeded in obtaining a federal court order to shut down a cryptocurrency-related pyramid scheme. This is the first action brought by the FTC involving cryptocurrencies since 2016, which, along with its 2015 action, is only the third ever FTC action in the space.

The complaint, filed on February 20, 2018 in Florida and made public late last week, pursues UDAP (unfair and deceptive practices in or affecting commerce) violations against individuals who allegedly coordinated and promoted multiple “chain referral schemes” under the business names Bitcoin Funding Team, My7Network, and Jetcoin. Specifically, the claims allege defendants deceptively advertised, marketed, and promoted their purported money-making schemes.


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request for informationCFPB Expands Call for Evidence with Additional RFIs

The CFPB has now issued six RFIs as part of Acting Director Mulvaney’s Call for Evidence Regarding Consumer Financial Protection Bureau Functions, which we have previously covered. The RFIs provide industry participants a chance to comment on the CFPB’s rules, policies, and practices regarding investigations, examinations, enforcement