cash and credit cardsA circuit split regarding the SEC’s administrative law judges, an internal CFPB playbook and memo on their examination process, and a recent field hearing on small business lending are at the forefront of the May 18 edition of Venable’s Consumer Financial Services Digest.

In this issue, we highlight the circuit split between the Tenth Circuit and the D.C. Circuit regarding the status and appointment of the SEC’s administrative law judges.

We take a look at the CFPB’s Examination Playbook, revealing how key decisions are made throughout the examination process.

We provide an analysis on the CFPB’s field hearing on small business lending, including its goal to create a small businesses financing project.

We discuss how to minimize your risks following the recent ransomware cyberattacks.

Continue reading to review the Digest. You will also find a list of upcoming industry events you may be interested in attending.

Data SecurityOn Friday, an unprecedented cyberattack affected a large number of Microsoft Windows-based computers through a type of malware known as ransomware. Although ransomware has been increasingly prevalent over the last few years, this particular version, called “WannaCry,” spread quickly and widely around the world. Many believe that the cyberattack will continue.

Ransomware is generally spread via email messages that contain infected attachments. When a user opens the attachment, a program runs that encrypts the user’s computer and demands a ransom be paid, typically in bitcoin, for a key that will unencrypt the files. In this case, the attackers are asking for between $300 and $600 to unlock the files.

Continue Reading Ransomware Cyberattacks: How to Minimize Your Risks

Members of Venable’s Consumer Financial Services Practice, along with Paula-Rose Stark, a former attorney at the CFPB, now with Chain Bridge Partners, LLC, ‎recently discussed the current and evolving state of federal and state consumer financial protection law and policy. They outlined what you and your company need to know about what’s ahead and shared their experiences from the front lines, offering insights and strategies to help companies navigate the evolving legal and political landscape.

Topics included:

  • The impact of the current political climate on enforcement actions;
  • Interacting, negotiating, and litigating with the CFPB;
  • Tips for managing risk due to enforcement investigations and actions;
  • Crisis management strategies;
  • New administration: prospects for reform and leadership changes;
  • Examination: lessons learned and preparing for the future; and
  • CFPB, State Attorneys General, and other enforcement agency developments, and what’s next.

Continue Reading Consumer Finance Enforcement Activity in a New Administration

gavel-and-questionYou think judges are immune to lawsuits? Think again, especially if you are a retired judge seeking to resolve disputes in the private alternative dispute resolution (ADR) business.

A San Diego jury is being asked to decide whether former California Court of Appeal Justice Sheila Sonenshine and ADR powerhouse JAMS, Inc. are liable for false advertising based on representations touting Sonenshine’s experience on JAMS’s website.

Kevin Kinsella, the plaintiff in the case, hired JAMS and Sonenshine to serve as a privately compensated temporary judge in his divorce dispute. Kinsella is a venture capitalist who had a number of profitable business ventures prior to his marriage and claims that he agreed to his now ex-wife’s request to hire Sonenshine because he wanted a judge with expertise in dissolution actions and business matters. Kinsella says that he reviewed JAMS’s website to evaluate Sonenshine’s experience in business, including investment banking, financial markets, business ventures, and private equity funding, but learned too late that Sonenshine’s biography was misleading.

Continue Reading Even Former Judges Can Be Exposed to False Advertising Liability

telemarketing lawsOn March 31, 2017, All About the Message LLC (AATM), filed a petition for a declaratory ruling before the Federal Communications Commission (FCC), requesting that the FCC issue a rule that would declare that delivering a voice message directly into a consumer’s voicemail box does not constitute a “call” that is subject to the Telephone Consumer Protection Act’s (TCPA) general prohibition on the use of auto-dialers or pre-recorded voice messages (absent appropriate consent). AATM’s petition follows a similar FCC petition filed by VoAPPs, Inc. on July 31, 2014. There, VoAPPs argued that leaving a voice message directly into the consumer’s mailbox does not constitute a “call” subject to the TCPA because such a message does not cause the type of disruption that the TCPA was enacted to curtail. The FCC has not yet resolved VoAPPs’ 2014 petition.

If the FCC declares that ringless voicemail technology is not a “call” under the TCPA, it may open a new marketing avenue for creative telemarketers. The FCC has issued a public notice seeking comments by May 18, 2017.

We continue to monitor this subject closely and developments in TCPA litigation generally. Please see this list of recent TCPA actions.

For Medical Use OnlyAs of this last election, eight states and our very own District of Columbia have legalized or decriminalized recreational marijuana consumption. The rest of the states have either passed laws only legalizing medical marijuana consumption or marijuana consumption continues to be unlawful. Similarly, marijuana use continues to be illegal at the federal level (so. if you’re in DC. don’t light up on federal property.) However, it seems likely that the number of states decriminalizing marijuana will continue to grow. There are, of course, a whole host of legal issues surrounding the legalization of marijuana, many of which have probably not yet been fully fleshed and thought out. However, since this is an advertising blog, we were curious to see to what extent states have already begun to regulate the advertising of legal marijuana. Somewhat to our surprise, many of the states where marijuana is legal have fashioned some rules around its advertising. In many cases, these rules are similar to those that have been fashioned around the sale of other adult products such as alcohol and tobacco.

Continue Reading Marijuana Advertising Sparks Legal Questions

heartbeatAs we have written before, mobile apps geared toward health and fitness have become increasingly popular—and an increasingly popular target for regulators. This makes sense. Health and fitness apps can pose a serious risk if consumers rely on them for personal health information that turns out to be inaccurate or misleading. And the risk goes both ways—an app can provide false reassurance that you’re perfectly healthy when you should really be seeing a doctor, or it can prompt you to seek unnecessary medical attention for a medical issue that’s not an issue at all.

It perhaps comes as little surprise, then, that an app that claims to accurately measure your heart rate—a pretty important indicator of health, you could say—would draw the scrutiny of a State AG.

The New York Attorney General in late March announced settlements with three mobile health app developers that allegedly made misleading and deceptive claims about their apps’ ability to accurately measure heart rates and monitor and play fetal heartbeats. Notably, the settlements also included allegations that the developers maintained inadequate privacy policies that failed to inform consumers about the scope of the developers’ data collection and storage practices. These settlements brought to a close the New York AG’s yearlong investigation into the app developers.

Continue Reading NY AG Doesn’t Miss a Beat, Settles Three Cases with Mobile Health App Developers

CFPB Enforcement Policies and Procedures Manual 2.0Despite facing significant legal challenges and a shifting political landscape, the Consumer Financial Protection Bureau (CFPB) is virtually unrestrained in its ability to launch investigations and threaten enforcement actions. We’ve obtained through a Freedom of Information Act (FOIA) request the most recent official CFPB Enforcement Policies and Procedures Manual Version 2.0. The Enforcement Policies and Procedures Manual “is the source for policies governing the work of the Consumer Financial Protection Bureau Office of Enforcement.” As a result, it is the agency’s playbook for investigations and enforcement actions that continue to make headlines and reverberate through the consumer financial services legal and regulatory landscape.

The document, available for download here, represents the most concrete and definitive statement of the CFPB Office of Enforcement’s views on the agency’s jurisdiction, authority, and strategy and tactics for launching investigations and bringing enforcement actions. The manual is important reading for anyone responding to a CFPB Civil Investigative Demand (CID), preparing to respond to a Notice of Opportunity to Respond and Advise (NORA) letter, litigating with the CFPB, advocating for the close of an investigation, or even preparing for or responding to an examination or Potential Action and Request for Response (PARR) letter.

Click here to read a summary of the highlights.

Made in USAEarlier this month, Venable reported on the Trump administration’s intent to make the federal government’s procurement preference for domestic products (i.e., the body of “Buy American” laws that have been around in some form or another since 1933) even “more muscular” by moving forward with a “new policy” that is “based on the twin pillars of maximizing Made in America content and minimizing waivers and exceptions to Buy American laws.” To that end, on April 18, 2017, President Trump signed the “Buy American and Hire American” Executive Order. In his remarks on the executive order, President Trump said, “With this action, we are sending a powerful signal to the world: We’re going to defend our workers, protect our jobs, and finally put America first.” He further stated, “We’re using every tool at our disposal to restore the American Dream. In fact, when it comes to wasteful, destructive, job-killing regulations, we are going to use a tool you all know very well—it’s called the sledgehammer.” To learn more about the specifics, read more from our Government Contracts Group.

Of course the substantiation needed for “Made in USA” claims is different and heightened compared to the Buy America standard. In encouraging businesses to invest in American manufacturing, it is likely such businesses will want to advertise the investment to non-government purchasers. But given the FTC’s standard to support a “Made in USA” claim is that “all or virtually all” domestic sourcing be used, the bar is very high. Might a new FTC chair revisit this standard and provide some greater flexibility? This is something else that would be HUGE if it happened.

If you attended our successful advertising law symposium last week, you may recall that we talked through a series of mobile app designs – including dos and don’ts – for creating enforceable terms of use. Recall this slide in particular:

mobile app designs slide

Continue Reading California Court Confirms: Mobile App Design Can (Will) Affect Enforceability of Terms of Use