Earlier this week, by a party-line 34-26 vote, the House Financial Services Committee passed H.R. 4861, a bill seemingly intended to ease restrictions on short-term, small-dollar loans made by depository institutions.  The bill is part of the efforts of House Republicans to provide greater regulatory relief to banks than would be provided by S. 2155, the banking bill passed by the Senate last week.  We expect that Jeb Hensarling, who chairs the House Committee, will attempt to make the bill part of a final banking bill.

H.R. 4861 would nullify the FDIC’s November 2013 guidance on deposit advance products, which effectively precludes FDIC-supervised depository institutions from offering deposit advance products.  (The FDIC supervises state-chartered banks and savings institutions that are not Federal Reserve members.)  We had been sharply critical of that guidance, as well as the OCC’s substantially identical guidance as to national banks.  However, in October 2017,  just hours after the CFPB released its final rule on payday, vehicle title, and certain high-cost installment  loans (CFPB Rule), the OCC rescinded its guidance on deposit advance products.  Because the FDIC has not yet followed suit, H.R. 4861 would remove a regulatory impediment to state-chartered banks and savings institutions offering one form of small-dollar lending to their customers.

H.R. 4861 would require the federal banking agencies to promulgate regulations within two years “to establish standards for short-term, small-dollar loans or lines of credit made available by insured depository institutions.”  The standards must “encourage products that are consistent with safe and sound banking, provide fair access to financial services, and treat customers fairly.”  The regulations would preempt any state laws “that set standards for [such loans or lines of credit]” and would override the CFPB Rule for insured depository institutions that become subject to H.B. 4861 regulations.  (Insured and uninsured credit unions would gain relief from the CFPB Rule even before regulations are adopted.)

Presumably, the “standards” under H.B. 4861 regulations could include interest rate standards.  Thus, federal banking agencies supportive of short-term, small-dollar loans could authorize interest rates higher than the insured depository institutions could otherwise charge under applicable federal law.  Unfortunately, as it is currently drafted, H.R. 4861 could be interpreted to allow the banking agencies to establish rate limits that are more restrictive than the limits that currently apply under federal law.  Accordingly, we would hope that the final bill will clarify that it does allow the federal banking agencies to impair existing rate authority under applicable federal law, including Section 85 of the National Bank Act, Section 27 of the Federal Deposit Insurance Act, and Section 4(g) of the Home Owners’ Loan Act.



As we previously reported, on March 23, 2018 in Washington, D.C., the FTC and FCC will co-host a joint policy forum that will cover recent policy changes and enforcement actions as well as the agencies’ efforts to encourage private sector technological solutions.  We believe the event will be of interest to clients who launch legitimate account management or marketing campaigns from autodialers as well as those whose names have been misappropriated by fraudulent telemarketers.

Because it comes on the heels of the D.C. Circuit’s March 16 decision addressing a number of critical issues involving the Telephone Consumer Protection Act’s restrictions on the use of autodialers, the forum is likely to include a discussion of the decision.  Ballard has issued a legal alert summarizing the decision and will hold a webinar on April 3, 2018 in which the participants will address the decision’s implications and its potential impact on pending and future TCPA litigation.  (Our legal alert includes a link to register for the webinar.)

The tentative agenda and other information about the event, including how to access a live video feed, can be found here.


The decision last week by the U.S. Court of Appeals for the D.C. Circuit on petitions seeking review of the Federal Communications Commission’s 2015 Declaratory Ruling and Order implementing the Telephone Consumer Protection Act (TCPA) represents a partial victory for the industry.

In the decision, the D.C. Circuit reversed the FCC’s guidance on the definition of an automatic telephone dialing system going back to 2003, leaving only the TCPA’s statutory definition.  That definition does not, on its face, include predictive dialers.

The decision creates some uncertainty about TCPA liability for calls to reassigned numbers.  In addition, callers continue to face the challenge of capturing revocations sent by consumers using methods other than those prescribed by the caller.

On April 3, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar—The D.C. Circuit’s TCPA Decision: What It Means to Your Business.  The webinar registration form is available here.

Click here for the full alert.

The U.S. Senate on March 14 passed S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), by a vote of 67 to 31.  Although the Act would not make the sweeping changes to the Dodd-Frank Act found in the Financial CHOICE Act of 2017 (CHOICE Act), it, nevertheless, would provide financial institutions welcome relief from a number of specific Dodd-Frank provisions.

Representative Jeb Hensarling, Chairman of the House Financial Services Committee, has indicated that further negotiations between the House and Senate must take place before the House votes on the Act.  House Speaker Paul Ryan has taken a more conciliatory tone, commenting on the need for common sense bipartisan solutions in the final bill.  As a result, while a final bill can be expected to include changes to the Act, it is unclear how substantial those changes will be.  Assuming a final bill signed by President Donald J. Trump retains many, if not most, of the Act’s provisions, the Act should positively impact both smaller and larger financial institutions.  The Act would make a number of changes to provisions of Dodd-Frank and other federal laws regarding consumer mortgages, credit reporting, and loans to veterans and students.

On May 10, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar: Economic Growth, Regulatory Relief, and Consumer Protection Act: Anatomy of the New Banking Statute.  The webinar registration form is available here.

The Act would also reduce the regulatory burdens on financial institutions—particularly financial institutions with total assets of less than $10 billion.  Bank holding companies with up to $3 billion in total assets would be permitted to comply with less restrictive debt-to-equity limitations instead of consolidated capital requirements.  This change should promote growth by smaller bank holding companies, organically or by acquisition.  Larger institutions should benefit from the higher asset thresholds that would apply to systemically important banks subject to enhanced prudential standards.  The higher thresholds may lead to increased merger activity between and among regional and super regional banks.

Although the banking industry can be expected to view the Act positively should it become law, it falls short of the CHOICE Act in several important respects. The CHOICE Act would:

  • reduce regulatory burdens on institutions based on capital levels irrespective of asset size
  • reduce the Financial Stability Oversight Council’s powers
  • repeal Dodd–Frank’s orderly liquidation authority, and
  • scale back the CFPB’s powers.

For a summary of some of the Act’s key provisions applicable to financial institutions, click here for our full alert.

In a blog post yesterday, Professor Sovern referenced Politico’s report that at the Consumer Bankers Association’s annual conference this week, unlike from 2012-2016, the “regulatory environment” was not identified as a “top worry” by bankers.  According to Professor Sovern, this “raises a question about why Congress is working on a bill to reduce the regulatory burden banks face.”  S. 2155, one of the bills to which Professor Sovern presumably was referring, passed the Senate yesterday by a vote of 67-31.

In our view, Professor Sovern’s suggestion that bankers do not view the reduction of regulatory burden as a priority is misguided for several reasons.  First of all, what attendees at the CBA conference were actually asked was “what will be the top issue facing our industry over the next three years.”  Although described in the Politico report as “regulatory environment,” the issue presented to attendees was actually worded “navigating through a new regulatory environment.”  Concerns about “navigating through a new regulatory environment” are hardly synonymous with concerns about regulatory burden.  In all likelihood, the CBA conference attendees’ reduced concern about navigating a new regulatory environment reflects their perception that the regulatory environment has become more favorable to industry under the Trump Administration.

More specifically, the attendees at CBA conferences (as the CBA’s name suggests) are primarily focused on consumer banking.  “Navigating through a new regulatory environment” for consumer finance would have obviously been a primary concern under former CFPB Director Cordray.  It is not surprising, however, that because of the change in CFPB leadership under the Trump Administration and the improvement in the regulatory environment for industry, navigating the regulatory environment would no longer be viewed by attendees as a top concern.

Second, the CBA’s membership is not composed principally of the community banks and credit unions who are most burdened by the regulatory requirements that would be eased by the banking bill.  As a result, an audience composed principally of attendees from such community banks and credit unions would likely express greater concern about the regulatory environment than the attendees at the CBA conference.

Despite Professor Sovern’s suggestion that there is a question why Congress is working on a bill to reduce the regulatory burden that banks face, the reason is clear.  The reason is that the bipartisan group of Senators that voted for the bill recognized that regulatory relief is necessary to relieve small banks and credit unions from burdensome regulatory costs and paperwork and to increase access to credit for individuals and small businesses.

It bears noting that the issue identified by the CBA conference’s attendees as the top issue facing their industry over the next three years was “innovating and creating new products and solutions.”  The fact that attendees now feel they can focus their efforts on innovation and the creation of new products and solutions rather than on navigating a challenging regulatory environment is a positive development for industry, consumers, and the overall economy.


The 23rd Annual Consumer Financial Services Institute, sponsored by the Practising Law Institute, will take place on March 26-27, 2018, in New York City (and by live webcast and groupcast in Atlanta, Cleveland, and New Brunswick, New Jersey); and on May 7-8, 2018, in Chicago.  For the first time in many years, on June 25-26, 2018, the Institute will also be presented in San Francisco (and by live webcast).

This year’s Institute will explore in detail a number of important developments in consumer financial services regulation and litigation. I am again co-chairing the event, as I have for the past 22 years.

With the resignation of former CFPB Director Cordray and President Trump’s appointment of Mick Mulvaney as CFPB Acting Director, the agenda and activity of the CFPB is already undergoing significant change.  Further significant change can be expected under the new permanent Director who is eventually appointed and confirmed.  At the same time, state attorneys general and regulators are threatening to fill any void created by a less aggressive CFPB.

As was the case last year, the lead-off morning session on the first day will feature a panel discussion devoted to CFPB developments. During that almost two-hour program, I will moderate a discussion among experienced industry lawyers (one of whom will be my partner Chris Willis at the New York and Chicago programs) and consumer lawyers who closely follow the CFPB’s regulatory, supervisory, and enforcement activities.  If your practice involves the CFPB, you will not want to miss this panel discussion.

The first day will also include a one-hour panel titled “Federal Regulators Speak: Priorities & Coordination” that will feature representatives of the FTC and DOJ who will be joined in New York and Chicago by former Acting Comptroller of the Currency, Keith Noreika.  In San Francisco, the FTC and DOJ representatives will be joined by a FDIC representative.

New to the Institute this year will be a panel on the second day that will discuss the rapidly changing landscape for marketplace lending and fintech.  My partner Scott Pearson will be part of the San Francisco panel.

The Institute will also focus on a variety of other cutting-edge issues and developments, including:

  • Privacy and data security issues
  • FCRA/debt collection issues
  • Class action and litigation developments
  • State regulatory and enforcement developments
  • Plaintiff lawyers’ perspective of regulatory and litigation issues under Trump Administration

We hope you can join us for this informative and valuable program.  PLI has made a special 25 percent discounted registration fee available to those who register using the link that follows.  To register and view a complete description of PLI’s 23rd Annual Consumer Financial Services Institute, click here.

For more information, contact Danielle Cohen at 212.824.5857 or dcohen@pli.edu.



On Tuesday the Federal Reserve published proposed amendments to Regulation J (Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire) which are intended to clarify and simplify certain provisions of Regulation J that no longer aligned with Regulation CC (Availability of Funds and Collections of Checks) following its amendments, after it was amended in 2017.

The proposed Regulation J amendments align the regulation with the distinction made in the Regulation CC amendments, and established in Article 3 of the UCC, between checks (which by definition must be reduced to writing) and electronically-created items, or ECIs.  Under the proposed amendments, the Reserve Banks would require senders of ECIs to provide certain warranties and indemnities, in an effort to shift liability to the sending parties who are in a position to know whether they are sending an electronic check (which enjoys standard check warranties) or an electronically created item (which does not).

The proposed amendments additionally smooth out some bumpiness financial institutions may have experienced in moving Fedwire payments to the ISO 20022 financial messaging standard.  ISO 20022 is the global financial messaging standard for SWIFT (the Society for Worldwide Interbank Financial Telecommunication), and its adoption for Fedwires is necessary for “straight through processing” of a payer instruction from a non-US bank to a US bank. Put another way, unified financial messaging standards don’t require translation, and are therefore faster.  Concerns were raised that certain terms used in the ISO 20022 standards (such as “agent”, “creditor”, and “debtor”) would create certain legal obligations. The proposed amendments clarify that usage of any term in the financial messaging standard does not confer or connote any specific legal status, or responsibilities.

The Federal Trade Commission (“FTC”) and Federal Communications Commission (“FCC”) have announced they will host a joint policy forum (“Forum”) in Washington, D.C. on March 23 titled, “Fighting the Scourge of Illegal Robocalls.” The Forum will cover recent policy changes and enforcement actions as well as the agencies’ efforts to encourage private sector technological solutions. We believe the event will be of interest to clients who launch legitimate account management or marketing campaigns from autodialers as well as those whose names have been misappropriated by fraudulent telemarketers.

The agenda will be posted on the event page when it becomes available. The FCC will likely use the venue to announce a “Second Further Notice of Proposed Rulemaking” on reducing unwanted calls to reassigned phone numbers, which is scheduled for a vote during the agency’s March 22 meeting.  According to the FCC, the notice would:

  • Propose to ensure that one or more databases are available to provide callers with the comprehensive and timely information they need to avoid calling reassigned numbers.
  • Seek comment on the information that callers who choose to use a reassigned numbers database need from such a database.
  • Seek comment on the best way for service providers to report that information and for callers to access that information, including the following three alternatives:
    • requiring service providers to report reassigned number information to a single, FCC-designated database;
    • requiring service providers to report that information to one or more commercial data aggregators; or
    • allowing service providers to report that information to commercial data aggregators on a voluntary basis.
  • Seek comment on whether, and if so how, the FCC should adopt a safe harbor from liability under the Telephone Consumer Protection Act for those callers that choose to use a reassigned numbers database.

This follows rules that became effective last month permitting voice service providers to proactively block calls from certain numbers that are suspected to be fraudulent. (You can read our summary of the FCC’s Report and Order adopting these rules here.)

A central theme of the Forum is likely to be collaboration between the FTC and FCC as well as between the agencies and the private sector. Such collaboration helps the agencies prevent and target illegal robocall scams, such as the spoofing scheme that made nearly 100 million robocalls and illegitimately invoked the names of major hotel and travel brands to sell vacation packages, resulting in a $120 million forfeiture order by the FCC in June 2017. Spoofing, which is a common tool used in robocall scam campaigns, involves altering or manipulating caller ID information to hide or falsify the identity or number of the calling party.

On April 23 (one month after the Forum), the agencies will host a “Stop Illegal Robocalls Expo” for consumers. Companies that offer technologies, devices and applications to minimize or eliminate illegal robocalls may request to exhibit at the Expo by contacting the FCC staff listed here by midnight on March 23.

According to its newly-released Consumer Sentinel Network Data Book, the FTC received complaints from 2.68 million consumers in 2017, a decrease from 2016 when 2.98 million consumers submitted complaints.  The annual report, which does not include do-not-call complaints, provides national and state-by-state data on consumer complaints received by the FTC.  While the number of complaints declined, consumers reported losing a total of $905 million to fraud in 2017, which was $63 million more than in 2016.

Despite the use of the term “complaints” in the FTC’s press release and numerous references to “complaints” in the new annual report, the new report states that it refers to “consumer reports” rather than “complaints” because “[o]ften, people make these reports after they have experienced something problematic in the marketplace, avoided a loss, and decided to alert others.”

Debt collection was the most-reported category in 2017.  Identity theft was the second-most reported category in 2017, with credit card fraud the most common type of identity theft reported and tax fraud the second most common type.  Imposter scam reports, which the FTC describes as reports about someone pretending to be a trusted person to get consumers to send money or give personal information, was the third-most reported category in 2017.

The other two “top-five” report categories in 2017 were telephone and mobile services (fourth) and banks and lenders (fifth).  For military consumers, identity theft was the top report category in 2017.

The Consumer Sentinel Network is an online database of consumer complaints maintained by the FTC.  Other federal and state law enforcement agencies contribute to the database, including the CFPB and the offices of 20 state attorneys general (who are listed on page 86 of the report).  Private-sector organizations contributing data include the Council of Better Business Bureaus, which consists of all North American Better Business Bureaus.

Any federal, state, or local law enforcement agency can obtain access to the database by entering into a confidentiality and data security agreement with the FTC. Certain international law enforcement authorities are also allowed access.

While the data only reflect ”unverified reports filed by consumers,” regardless of merit, the report nevertheless could significantly affect the industries targeted by the complaints. The FTC and state attorneys general have long used consumer complaints to identify victims and potential targets for investigations, and Mick Mulvaney, President Trump’s appointee as CFPB Acting Director has indicated that the CFPB will continue to use complaints in setting its priorities.

Because industries receiving a large number of complaints are more likely to draw a regulator’s attention, minimizing the number of consumers who complain to the FTC, CFPB, or other consumer watchdogs is an essential first step to reducing potential exposure.  To accomplish this, it is important for companies to establish their own systems to track and resolve complaints. CFPB examination procedures specifically instruct examiners to assess the quality of a company’s complaints system.

The National Fair Housing Alliance (NFHA) has announced a settlement in its lawsuit against Travelers Indemnity Company in which it alleged that Travelers engaged in discriminatory conduct in violation of the Fair Housing Act (FHA).

In its lawsuit, which was filed in federal district court in Washington, D.C., NFHA alleged that Travelers had a policy of refusing to provide habitational insurance policies to landlords that rent to tenants who use Housing Choice Vouchers, also known as Section 8 vouchers.  NFHA claimed that this policy had a disparate impact on African-Americans and women and served no legitimate business purpose.  NFHA also alleged that Travelers’ policy violated the D.C. Human Rights Act’s (DCHRA) prohibition of discrimination based on race, sex, or source of income.

Travelers filed a motion to dismiss in which it contended that NHFA did not have Article III standing and that NHFA had failed to plead sufficient facts to show a causal connection between its policy and any disparate impact under the heightened pleading standards established by the U.S. Supreme Court in Inclusive Communities.  The district court denied Travelers’ motion, concluding that NFHA did have Article III standing because it had suffered an injury in fact as a result of the substantial expenditures it incurred in attempting to combat Travelers’ policy through measures such as educational materials and advertisements.

The court also found that NHFA had pleaded facts that, if true, “would show that Travelers’ policy will exacerbate racial and sex-based disparities by having a disproportionate impact on African-Americans and members of women-headed households in the District.”  As a result, NFHA had stated a prima facie FHA claim under the “robust causality requirement of Inclusive Communities.”  Because the court assumed without deciding that a similar requirement applied to DCHRA claims, it found that NFHA had stated a claim under the DCHRA as well.

According to NFHA’s press release about the settlement, Travelers has agreed to pay $450,000 to NFHA for damages, costs, and fees and not to ask about the source of income of residents at D.C. properties that it considers insuring.  This includes not inquiring about the Housing Choice Voucher program and other government housing subsidy programs in connection with the underwriting, pricing, or eligibility for new and existing insurance policies for private rental housing properties in D.C.  Additionally, Travelers has agreed to provide training to employees involved in the sale or underwriting of insurance for rental properties.