Nicholas Smyth, Assistant Director of the Pennsylvania Attorney General’s Bureau of Consumer Protection, was our guest speaker for a webinar yesterday.  Formerly a CFPB enforcement attorney, Nick was appointed by PA Attorney General Josh Shapiro about two years ago to lead the new unit.  Chris Willis, Practice Leader of Ballard Spahr’s Consumer Financial Services Litigation Group, joined Nick as a speaker.  Alan Kaplinsky, who leads the firm’s Consumer Financial Services Group, moderated the webinar.

As Nick explained during the webinar, his appointment reflected AG Shapiro’s designation of consumer financial protection as a priority area and desire to expand the AG Office’s capacity to bring complex cases against financial companies.  Nick reported that his unit currently has 20 attorneys and 32 investigators.  Among the investigators’ responsibilities is the handling of the approximately 23,000 to 25,000 consumer complaints received each year by the AG’s Office.  Nick also reported that since joining the unit, it has entered into nine Assurances of Voluntary Compliance, Pennsylvania consumers have received approximately $34 million in restitution, and companies have paid approximately $24 million in civil money penalties and payments to the PA Treasury.  

Nick discussed the unit’s cooperation with federal regulators and other state regulators and its handling of various enforcement matters.  He made clear that despite policy disagreements with the CFPB, there is ongoing, close cooperation between his unit and the CFPB on enforcement matters.  He identified mortgage redlining, student loan servicing, and data security as priority areas for his unit.

Nick also discussed his unit’s position on the application of PA usury law when a PA resident travels to another state to obtain an auto title loan.  He indicated that his unit is currently working on several matters involving claims that the interest rates charged on title loans made to PA residents who had traveled to Delaware to obtain the loans violated PA usury law.  Nick explained that the grounds on which his unit is relying for its claim that PA usury law applies to such loans is that the loans are secured by liens on vehicles located in PA and the lenders repossess and resell such vehicles in PA.  (Alan observed that this position is inconsistent with the Seventh Circuit’s 2010 decision in Midwest Title Loans, Inc. v. Mills, in which the court handed a major victory to Ballard’s client by holding that the Commerce Clause of the U.S. Constitution precluded Indiana from applying its usury law to auto title loans made in person in Illinois to Indiana residents.  Ballard’s client also obtained a $440,000 payment from the State of Indiana to resolve its claim for attorneys’ fees as a “prevailing party” in a federal Civil Rights Act lawsuit that it brought.)