Oct 23

By Joseph Lawler – Washington Examiner

No achievement of President Obama’s faces more risk from a Republican Senate than the Consumer Financial Protection Bureau.

The bureau, created by the 2010 Dodd-Frank financial reform law, has never faced a GOP-led Senate, but it now faces that scenario, with polls favoring Republicans to win in several swing states in the November election. The Republican Party needs to pick up six Senate seats to take control of the chamber.

And although Obama still would have his veto power, which he would use to kill any attempt to dismantle the CFPB, analysts expect that a GOP-majority Senate Banking Committee, likely to be led by Sen. Richard Shelby of Alabama, would have several means of making business tougher for the consumer watchdog, which regulates financial products such as mortgages, credit cards and payday loans.

“Sen. Shelby, since the beginning of discussion of whether to form the CFPB or not, has taken a hard line,” said Brandon Barford, a partner at the policy research firm Beacon Policy Advisors who worked for the senator during the 80-year-old Alabaman’s previous stint as chairman.

The financial services industry fought hard to prevent the creation of the CFPB, which was the brainchild of prominent Wall Street critic Elizabeth Warren, now a U.S. senator for Massachusetts. Republicans also opposed its inclusion in the financial reform overhaul, saying it represented an intrusion of government into the market. [read more]

Oct 22

By Patrick Lunsford – insideARM

The U.S. financial watchdog Consumer Financial Protection Bureau (CFPB) Thursday released a new set of tools student loan borrowers can use if they run into trouble making payments on their accounts.

The federal agency’s goal in the release is to help distressed borrowers avoid defaulting on their student loans and going into collections.

The CFPB released a sample letter that consumers can edit and send to their student loan servicer to request lower monthly payments and information on available repayment plans. Borrowers can download the sample letter to send by mail, or simply cut and paste the text into their servicer’s website. The letter specifically requests monthly payments that would allow borrowers to meet their other living expenses.

The CFPB has also developed a sample financial worksheet to assist borrowers in determining maximum funds available to pay their student loans. Figuring out how much one can reasonably afford each month is often difficult for young adults that have not had to set a household budget previously. The Bureau is hoping that the budgeting help can keep loans current. [read more]

Oct 22

By John L. Culhane, Jr., Mark J. Furletti, Alan S. Kaplinsky, and Joel Tasca – JD Supra

Yesterday, the Second Circuit held that a plaintiff did not provide his “prior express consent” under the federal Telephone Consumer Protection Act (TCPA) to automated calls to his cell phone when he gave his cell phone number to a power company while seeking to discontinue service at his recently deceased mother-in-law’s apartment. The court adopted the position of the Federal Communications Commission (FCC), which at the court’s invitation submitted an amicus brief in the case. Our prior e-alert on the FCC’s amicus brief is available here.

In Nigro v. Mercantile Adjustment Bureau, LLC, the plaintiff called his mother-in-law’s power company after she died, asked for the discontinuance of service, and provided his mobile phone number because the power company told him that a phone number was required for this request. Unbeknownst to the plaintiff, there was a balance on the account, the account then was referred to a collection agency, and the plaintiff proceeded to receive numerous automated calls to his cell phone from the debt collector. The plaintiff never received any bill for the account.

Following receipt of the automated calls, the plaintiff sued the debt collector under the TCPA, which prohibits automated telephone calls to a cellular phone number except when the call is made for emergency purposes, or was “made with the prior express consent of the called party.” The district court granted summary judgment in favor of the debt collector, reasoning that the plaintiff consented to the calls when he provided his cell phone number to the power company.

The Second Circuit reversed and remanded. The court explained that the crux of the issue was whether the plaintiff provided his “prior express consent” under the particular facts of the case. The court noted that FCC rulings arguably supported each side’s position. The court observed that the FCC has ruled that the existence of an “established business relationship” between the consumer and the creditor—which the debt collector claimed was formed when the plaintiff gave his cell phone number to the power company—obviates the need for the consumer’s specific consent to the automated calls. [read more]

Oct 21

By Edward Chang, Francis Crowley, Kevin Rakowski, and Wayne Streibich – JD Supra

The Third Circuit Court of Appeals recently held that an envelope revealing a consumer’s account number through a clear plastic window constitutes a violation of the Fair Debt Collection Practices Act (“FDCPA”). In doing so, the Third Circuit reversed the District Court of the Eastern District of Pennsylvania’s holding that the disclosure of a consumer’s account number is not a “benign” disclosure and thus constitutes a violation of § 1692f(8) of the FDCPA.

In Douglass v. Convergent Outsourcing, the Third Circuit addressed the issue of whether “the disclosure of a consumer’s account number on the face of a debt collector’s envelope violates § 1692f(8) of the Fair Debt Collection Practices Act.” Douglass v. Convergent Outsourcing, No. 13-3588, 2014 WL 4235570 (3d Cir. Aug. 28, 2014); 15 U.S.C. § 1692 et seq.

The FDCPA prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. Further, Section 1692f(8) specifically limits the language that debt collectors may place on envelopes sent to consumers:

Using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business. (Emphasis added).

On May 16, 2011, Plaintiff/Appellant Courtney Douglass (“Plaintiff” or “Douglass”) received a debt collection letter from Convergent Outsourcing (“Convergent”) regarding the collection of a debt that Douglass allegedly owed to T-Mobile USA. The name Convergent, followed by Convergent’s account number for the alleged debt, were visible on the letter and through the clear plastic window of the envelope. In addition, the “quick response” (“QR”) code, which, when scanned, reveals the name Convergent, the account number, and the monetary amount of Douglass’s alleged debt, was also visible through the envelope window. [read more]

Oct 21

By ACA International

CFPB staff would tell qualifying applicant-companies that the bureau is not planning to initiate supervisory or enforcement action over new financial products or services that will benefit consumers.

In an effort to reduce regulatory uncertainty that might hinder emerging financial products or services, the Consumer Financial Protection Bureau has proposed a limited No-Action Letter policy.

Under the proposal, bureau staff would send a No-Action Letter in response to a company’s request when there is substantial uncertainty over how specific statutes or regulations implemented by the bureau would apply to innovative financial products or services that promise substantial consumer benefit. The No-Action Letter would indicate that bureau staff has no present intention to recommend initiating supervisory or enforcement action over the described new financial products or services.

According to the proposed policy, there would be a formal application process in which a company would have to make a thorough and persuasive demonstration that it meets all of the policy’s criteria. [read more]

Oct 20

By Associated Press

A California businessman pleaded guilty Tuesday to mail and wire fraud involving more than $5 million that his company collected from consumers with pending loans by impersonating authorities in threatening phone calls, federal prosecutors said.

Kirit D. Patel of Tracy entered the plea to four counts of mail and wire fraud, the U.S Attorney’s office in Sacramento said.

The 71-year-old man was the owner and president of Broadway Global Master, which pretended to be a debt collection company, according to court documents.

From 2010 to 2012, Patel’s workers outside the U.S. called consumers with online payday loans and threatened to arrest them if they didn’t immediately pay their debts, which the callers claimed were delinquent, prosecutors said. [read more]