Download Wiley Consumer Protection (June 7, 2021) | Wiley Rein LLP
Welcome to Wiley’s update on recent developments and next steps in consumer protection in the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC). In this newsletter, we analyze recent regulatory announcements, recap key enforcement actions, and preview upcoming deadlines and events. We also include links to our articles, blogs and webinars with more analysis in these areas. We understand that staying on top of the rapidly changing regulatory landscape is more important than ever for companies looking to deliver new and breakthrough technologies.
The second circuit rules against the challenge to the OCC’s proposed issuance of federal charters to non-depository financial institutions. At June 3, United States Court of Appeals for the Second Circuit released the decision of the lower court in Lacewell v. Office of the Comptroller of the Currency. The case centers on whether the Office of the Comptroller of the Currency (OCC) can issue federal banking charters to non-depository financial institutions, such as fintech companies. The opinion concludes that the plaintiff New York Department of Financial Services (DFS) does not have standing under Article III because he did not allege that the OCC decision caused him a actual or imminent harm, and that DFS ‘claims are not constitutionally mature for much of the same reason. Court ruling overturns a 2019 ruling by the U.S. District Court for the Southern District of New York, ruling that the OCC overstepped its authority under the National Bank Act by accepting applications for banking charters federal financial technology companies and directing that the DFS complaint be dismissed without prejudice.
FTC submits 2020 Financial Law Enforcement Report to CFPB. At June 1, FTC staff submitted the 2020 Finance Law Application Report to CFPB on its enforcement and related activities regarding the Loan Truth Act, Consumer Leasing Act and Electronic Funds Transfer Act. Among other things, the report highlights the FTC’s enforcement actions related to auto purchases and financing, payday loans, credit repair and debt relief, and credit transfers. electronic funds. The report also discusses the agency’s relief and policy efforts regarding truth in lending, including the release of two staff reports on a study of car buyers and the process of buying and financing cars. One of these reports, published by staff at the Consumer Protection Bureau, found that consumers sometimes ignore key terms of sales and financing practices in the car buying process.
The FTC submits a budget request for fiscal year 2022, a performance plan and a report to Congress. At May 28, the FTC submitted its annual report budget request, and performance plan and report in Congress for fiscal year (FY) 2022. In support of President Biden’s budget plan for the agency, the FTC is asking for $ 389,800,000, which would represent an increase of $ 38,800,000 over fiscal year 2021. The FTC’s vote to submit the documents to Congress was 40.
The CFPB report reveals that borrowers of manufactured home loans have higher interest rates, risks and barriers to credit. At May 27, the CFPB published a report finding that manufactured home borrowers face higher interest rates and limited refinancing options. Manufactured homes represent a small segment – about 13% – of the entire US housing market. However, it is one of the most affordable types of housing options available to low-income and rural consumers. The report also found that consumers who don’t own the underlying land for manufactured homes are more likely to see their homes depreciate and have fewer options if they fall behind on their loan repayments. The CFPB report uses new information collected under the Home Mortgage Disclosure Act in 2018.
Important enforcement measures
FTC approves final administrative consent orders against three companies allegedly making misleading claims about fish oil supplements. At June 1, the FTC approved final administrative consent orders against BASF SE, its subsidiary, BASF Corp., and DIEM Laboratories, which the agency said deceptively marketed two fish oil dietary supplements as clinically proven to reduce liver fat in adults and children with nonalcoholic fatty liver disease. As we noted in our April 12 Bulletin, the companies settled the charges with the FTC on April 1. The FTC alleges that the companies marketed the two drugs – Hepaxa and Hepaxa PD – until mid-2020. The final administrative consent orders, which were approved 4-0, note that the companies collectively agreed to pay $ 416,000.
CFPB proposes a settlement with the company for allegedly misleading deposit and loan products. At May 27, the CFPB filed a regulation proposal v Driver Loan, LLC (Driver Loan) in US District Court for the Southern District of Florida. If taken to court, the proposed settlement would require Driver Loan to reimburse approximately $ 1 million in consumer deposits and pay a civil fine of $ 100,000. As we noted in our Newsletter of November 9, 2020, the CFPB filed a complaint v Driver Loan, alleging that the company misrepresented the risks associated with its short-term, high-interest loan product that it was offering to consumers and the annual percentage rate for consumer violating credit extensions Financial Protection Act of 2010 (CFPA).
The FDA and FTC are sending warning letters to five companies allegedly selling dietary supplements claiming to treat infertility. At May 26, the Food and Drug Administration (FDA) and the FTC have sent warning letters to LeRoche Benicoeur / ConceiveEasy; EU Natural Inc .; Fertility Nutraceuticals LLC; SAL NATURE LLC / FertilHerb; and NS Products, Inc. The warning letters allege that the companies were making false or unproven claims that their products can cure, treat, mitigate or prevent infertility, potentially in violation of FTC law. In addition, the letters from the FDA deal with the Food, Drug, & Cosmetic Act (FD&C Act), under which products intended to “cure, treat, alleviate or prevent disease are drugs and are subject to requirements that apply to drugs, even if they are labeled as dietary supplements. The letters indicate that, unlike drugs approved by the FDA, the agency has not evaluated whether the products subject to the warning letters are effective for their advertised use.
Deadlines and upcoming events for comments
The FTC is hosting a virtual public workshop on green lights and red flags. At June 24, the FTC will organize a public workshop “Green Lights and Red Flags: Rules of the Road for Business”. This workshop focuses on truth in advertising law and basic data security practices. The public workshop will provide ideas from Texas business leaders and experts in consumer protection law. FTC Acting President Rebecca Kelly Slaughter will deliver remarks to open the workshop. An agenda of the event is available here. Interested parties can register here.
The CFPB is seeking comments on the use of AI by financial institutions. Comments are due 1st of July (expanded from June 1 on a Information request published by the CFPB; the Board of Governors of the Office of Consumer Financial Protection of the Federal Reserve System; the Federal Deposit Insurance Corporation; the National Administration of Credit Unions; and the Office of the Comptroller of the Currency. The five agencies are collecting information on financial institutions’ use of artificial intelligence (AI) for fraud prevention, service personalization, credit underwriting and a number of other operations. Among other things, the information request solicits feedback to understand the use of AI; appropriate AI governance and risk management controls; and the challenges of developing and managing AI.