Financial Services/CFPB

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One of the questions that remains uncertain among looming federal and state “junk fee” and “drip pricing” bans in 2024 concerns the impact these rules will have on credit card surcharges. Surcharges are added to sale transactions by some retailers when the buyer uses a credit card to make a purchase. Is this a mandatory fee that must be incorporated in the total price under the new laws? Or does the consumer’s choice to use a credit card to pay make the convenience of paying by credit card an optional service or feature that need not be included in the advertised price?

We may need to wait for further clarification from regulators or a lawsuit to know how junk fee bans impact surcharging, but understanding the possible arguments and pitfalls may help you decide how you will address this question in the short-term. Contact us if you need guidance or advice on these junk fee bans or surcharge rules.Continue Reading Drip Pricing, Surcharging, and the Push for “Total Price” Disclosures

If you’ve been focused on only the high-level statements from the CFPB, you might already expect Rohit Chopra to fashion himself and the agency as “pro-consumer.” Consistent with that approach, the agency just signaled its distaste for, and desire to severely restrict, the common and useful advertising practices of comparison-shopping platforms and lead generation.

Using its bully pulpit (and not notice and comment regulation or waiting for explicit legal authority), the CFPB released a Consumer Financial Protection Circular, stating that operators of digital comparison-shopping tools (“Operators”) and lead generators can violate the Consumer Financial Protection Act’s (CFPA) prohibition on abusive acts or practices if they steer consumers to certain products or services—or certain providers—based on compensation received by the lead generator or Operator. This might feel like standard consumer protection-speak, except that equating compensation models to abusive conduct means that the CFPB has performance advertising in its crosshairs.

In its press release announcing the circular, the CFPB explains, “[T]he guidance discusses how regulators and law enforcement agencies can evaluate operators of comparison-shopping tools that accept payments from financial firms to manipulate results or suppress options that may better fit the consumer’s stated preferences.” In the same release, the CFPB also announced that it would be “developing a consumer-facing tool that, once finished, will bring more transparency to credit card comparison-shopping.”Continue Reading Why the CFPB’s Preferencing and Steering Practices Circular Should Scare Lead Generators and Consumer Financial Services Providers

If your business offers a loyalty program in conjunction with a gift card, you likely already know that Section 520-e of New York’s General Business Law took effect December 10, 2023. This new law gives consumers a set grace period to use their credit card reward points when certain changes (e.g., modification, cancellation, closure, or termination) are made to a “reward, loyalty, or other incentive program.”

Specifically, under the new law, “[i]f any credit card account or rewards program is modified, cancelled, closed or terminated,” the issuer must provide notice to the card holder as soon as possible, but no later than 45 days of the action. Then, unless the customer has engaged in fraud or misuse of the account, starting with the date on which the notice is sent, the holder shall have 90 days to redeem, exchange, or otherwise use any accumulated credit card points, subject to the availability of rewards.

The new provision defines “modification,” as one that has the effect of “eliminating points, reducing the value of points, affecting the ability of a holder to accumulate points, limiting or reducing rewards availability, limiting a holder’s use of points or the credit card account, otherwise diminishing the value of the rewards program or the credit card account to the holder or changing the obligations of the holder with respect to the rewards program or credit card account.”Continue Reading Reminder: New York’s Credit Card Reward and Loyalty Program Law Is Now in Effect

On October 3, the Supreme Court heard oral argument in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited, where the Court is reviewing the Fifth Circuit’s opinion that struck down the Payday Lending Rule because the Fifth Circuit found that the Consumer Financial Protection Bureau’s (the “Bureau”) funding structure is unconstitutional. While the Fifth Circuit decision was limited to the Payday Lending Rule, a ruling upholding the Fifth Circuit’s decision would have severe ramifications for the Bureau and could potentially lead to the demise of the agency without congressional action.

As a refresher, the Fifth Circuit held that the Bureau’s “unique” funding structure violates Article I of the Constitution—vesting Congress with appropriation power—because the agency is not funded through congressional appropriations. Rather, the Bureau receives its funding from the Federal Reserve, which is funded through bank assessments. In short, the Fifth Circuit found that Congress had abdicated its “power of the purse” and had run afoul of the nondelegation doctrine where it has no involvement in the CFPB’s ongoing funding.Continue Reading C[FPB] You Later? Agency’s Future Hangs in the Balance After Oral Argument

Marketers and lead generators have new guidance in the form of enforcement orders on what the Federal Trade Commission (FTC) appears to consider required practice when obtaining consumer consent prior to the sale, transfer, or disclosure of consumer information that will be used in marketing.

The upshot is that the FTC provided several affirmative requirements…

With the end of the Supreme Court’s term in June, most eyes have been on the release of the last remaining merits decisions. In the midst of issuing the final opinions of the term, the Court also granted certiorari on a number of cases, one of which—Securities and Exchange Commission v. Jarkesy—might have implications for the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

In Jarkesy, the SEC sued talk radio host George Jarkesy and his two hedge funds (collectively, “the Jarkesy Parties”) through an administrative action before an SEC administrative law judge (ALJ). After an evidentiary hearing, the ALJ determined that the Jarkesy Parties committed securities fraud, and the Commission affirmed the ALJ’s decision, imposing a civil penalty, disgorgement of ill-gotten gains, and enjoining Jarkesy from various securities industry activities. The Jarkesy Parties proceeded to appeal the Commission’s decision to the U.S. Court of Appeals for the Fifth Circuit. The Jarkesy Parties appealed on several constitutional grounds previously raised and denied during the ALJ and Commission proceedings:Continue Reading Supreme Court Case Watch: Securities and Exchange Commission v. Jarkesy and Its Impact on Independent Agencies

On June 16, 2023, the Federal Deposit Insurance Corporation (FDIC) released an update to its Supervisory Guidance on Multiple Re-Presentment NSF Fees (FIL-40-2022) (the “Guidance”), to provide additional guidance for supervised institutions on the consumer compliance risks associated with assessing multiple non-sufficient funds (NSF) fees for the re-presentment of unpaid transactions. This alert discusses the potential risks the FDIC identified and outlines the risk mitigation practices that supervised institutions can implement to mitigate risks when processing multiple re-presentment NSF fees.

Although the Guidance’s applicability is limited to FDIC supervised institutions, the information provided on potential risks and mitigation practices should be taken into consideration by any financial institutions or merchants that assess multiple re-presentment NSF fees in connection with billing consumers.Continue Reading FDIC Releases Revised Supervisory Guidance on Multiple Re-Presentment NSF Fees

On February 27, 2023, the Supreme Court granted the certiorari petition of the Consumer Financial Protection Bureau (CFPB) to hear a case that could cast doubt on all of the regulations that have been promulgated by the bureau to date, as well as all pending investigations and litigation brought by the agency.

The Court will consider in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA) whether the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution, which says, “no money shall be drawn from the Treasury, but in consequence of appropriations made by the law.”Continue Reading Supreme Court Agrees to Hear Case Involving CFPB Funding

The Consumer Financial Protection Bureau (CFPB) has moved to curb digital mortgage comparison-shopping platforms from receiving referral fees, issuing an advisory opinion that outlines how companies violate the Real Estate Settlement Procedures Act (RESPA) when “they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.” The advisory is a warning to digital marketing platforms of the potential consequences of business relationships with mortgage lenders. The CFPB has a direct sightline into the marketing activities of mortgage lenders though supervision and routine examinations, and has already put a target on digital marketing providers.

The CFPB’s advisory opinion describes how platform operations can violate Section 8 of RESPA by enhancing the placement of lenders or related service providers on the digital platforms, or by otherwise steering consumers to those lenders or service providers. in addition, the opinion provides illustrative examples.Continue Reading CFPB Warns Digital Mortgage Comparison-Shopping Platforms About Referral Fees and Pay-to-Play Advertising

When it comes to negative options, the CFPB has strong opinions. As demonstrated in its new circular, these opinions generally align with those of the Federal Trade Commission (FTC), which has repeatedly targeted trial offers, subscription sales, and other programs involving recurring charges for enforcement. The circular reaffirms the CFPB’s focus—shared with the FTC—on combating digital dark patterns used to engage in unfair, deceptive, or abusive acts or practices, especially when those techniques are combined with negative option marketing.

In an upcoming webinar on March 1, 2023 (RSVP here), Venable will be presenting an in-depth analysis of the CFPB’s circular, as well as CFPB and FTC enforcement actions and private litigation based on purportedly unlawful negative option marketing. For those who can’t wait, we’ve summarized the highlights of the circular below.Continue Reading The CFPB Joins the FTC on Negative Option Marketing and Dark Patterns in New Circular