PLI’s 24th Annual Consumer Financial Services Institute will take place on March 25-26, 2019, in New York City (and by live webcast and groupcast in Philadelphia, Pittsburgh, and Mechanicsburg, Pennsylvania, and New Brunswick, New Jersey); on May 20-21, 2019, in Chicago; and on December 9-10, 2019, in San Francisco (and by live webcast).

The Institute is considered the country’s premier consumer financial services CLE program and this year’s Institute will once again explore in detail important developments in consumer financial services regulation and litigation.  I am again co-chairing the event, as I have for the past 23 years.

The leadership of the CFPB, OCC, FDIC and FTC is now firmly under Republican control.  While this has altered these agencies’ priorities, all continue to be very active in enforcing consumer financial laws and the CFPB’s supervisory activities remain substantially unchanged.  At the same time, state attorneys general and regulators are increasing their regulatory and enforcement activity to fill any void created at the federal level.  In addition, the improved economy, the deregulated federal environment, and the rapid increase in technological innovation has resulted in new entrants into the consumer financial services industry and the offering of new products and services by existing players.

The morning session on the first day will feature a panel discussion titled “Federal Regulators Speak,” that will be divided into two segments and focus on federal regulatory, enforcement, and supervisory developments.  I will moderate a discussion among CFPB, OCC, FTC and FDIC representatives.

My partner Chris Willis will participate as a panel member in two panel discussions featured in the afternoon session of the first day.  One of those panels is titled “Fair Credit Reporting Act/Debt Collection Issues” and will include a discussion of the CFPB’s debt collection rulemaking, FCRA litigation trends, and state activity. The other panel, which I will moderate, is titled “The Rapidly Evolving Landscape for FinTech” and will examine the intersection between new technologies and products and existing regulatory frameworks, such as the use of Artificial Intelligence (AI) and Blockchain (including virtual currency).

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

  • Privacy and data security issues
  • TCPA developments
  • Class action and litigation developments
  • State regulatory and enforcement developments
  • Consumer advocates’/plaintiff lawyers’ perspectives on current regulatory and litigation issues

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 24th Annual Consumer Financial Services Institute, click here.

For assistance with registration, contact PLI Customer Service at 800-260-4PLI

The Federal Trade Commission announced that a planned workshop in Washington, D.C. aimed at examining consumer protection issues related to the online event ticket marketplace has been rescheduled for June 11, 2019 due to the government shutdown.  (The workshop’s original date was March 27.)

The workshop will feature opening remarks by FTC Commissioner Rebecca Kelly Slaughter and will bring together a variety of stakeholders, including industry representatives, consumer advocates, trade associations, academics and government officials, to discuss certain practices in the online event ticket marketplace.  The FTC has indicated that the online event ticket industry has been a frequent topic of consumer and competitor complaints, with the issues arising in connection with online ticket sales frequently involving practices that prevent consumers from obtaining tickets, mislead consumers about price or availability, or mislead consumers about the entity from which they are purchasing.   (In April 2018, the U.S. Government Accountability Office issued a report titled “Event Ticket Sales: Market Characteristics and Consumer Protection Issues.”)

According to the FTC’s original announcement, the workshop will look at the current state of the online event ticket marketplace, shed light on industry-wide advertising and pricing issues, and explore ways to address deception beyond traditional law enforcement.  The topics that will be covered include:

  • Primary market ticketing: transparency and lack of ticket availability; ticket bots and the Better Online Ticket Sales Act (BOTS Act).
  • Resale ticket market: disclosures of pricing, fees, and speculative tickets; consumer confusion regarding search engine advertisements and websites of resellers versus official primary ticket sellers.

Ballard Spahr partner Scott Pearson will be participating in a panel addressing these and other ticketing issues at a Sports Lawyers Association event in Brooklyn, New York on February 25, 2019.  The panel will be followed by the Nets-Spurs game.  For information about the event, click here.

 

 

At the end of last week, the Federal Trade Commission (FTC) and the Department of Veterans Affairs (VA) announced that they have entered into a Memorandum of Agreement (MOA) “to provide mutual assistance in the oversight and enforcement of laws pertaining to the advertising, sales, and enrollment practices of institutions of higher learning and other establishments that offer training for military education benefits recipients.”

Pursuant to 38 U.S.C. section 3696, the Secretary of Veterans Affairs is prohibited from approving the enrollment of a veteran eligible for military education benefits “in any course offered by an institution which utilizes advertising, sales, or enrollment practices of any type which are erroneous, deceptive, or misleading either by actual statement, omission, or intimation.”  Section 3696 also requires the VA Secretary to enter into an agreement with the FTC “to utilize, where appropriate, its services and facilities, consistent with its available resources, in carrying out investigations and making the Secretary’s determinations [whether an institution has used erroneous, deceptive or misleading practices.]”  The agreement must provide for referrals to the FTC where the VA believes an institution is engaging in erroneous, deceptive or misleading advertising, sales, or enrollment practices and the FTC “in its discretion will conduct an investigation and make preliminary findings.”

The MOA is intended to implement the requirements of Section 3696.  It provides that the VA can request that the FTC investigate an institution approved for the enrollment of veterans eligible for military education benefits and that, when making a referral, the VA’s Director of Education Services must “provide a written explanation of the basis for his or her belief that the institution subject to the referral is utilizing or has utilized, advertising, sales, or enrollment practices of any type that are deceptive.  Upon receiving a referral, the FTC’s Director of the Bureau of Consumer Protection (Director) must evaluate the information provided by the VA and “in his or her discretion, determine whether acceptance of the referral is consistent with the Commission’s existing investigative, enforcement, and resource priorities.”  The MOA lists factors the Director can consider in determining whether to accept a referral, such as “whether the violations allegedly occurred on a regular and ongoing basis” and “the nature and amount of consumer injury at issue and the number of consumers affected.”

The MOA also provides that:

  • The FTC’s acceptance or rejection of a referral is not to be construed as a decision by the FTC on the merits of the referral and a rejection of a referral may not be the sole basis on which the VA determines whether an institution is engaging in erroneous, deceptive or misleading advertising, sales, or enrollment practices.
  • If the FTC accepts a referral, the Director must direct the FTC staff to conduct an investigation and prepare preliminary findings.  For purposes of the MOA, “preliminary findings” means “either a nonpublic analysis prepared by FTC staff or an administrative or federal district court complaint approved by the Commission and which contains the FTC’s allegations regarded the referred institution’s practices.”
  • The FTC’s preliminary findings are intended to be used by the VA in deciding whether or not to approve an eligible veteran’s enrollment in an institution because the institution is engaging in erroneous, deceptive or misleading advertising, sales, or enrollment practices.  However, the MOA provides that the FTC’s preliminary findings “are not a determination by the Commission as to whether the institution has been or is violating Section 5 of the FTC Act, an order finalized thereunder, or any other laws enforced by the FTC.”
  • The MOA does not require the FTC, or limit the FTC’s authority, to investigate whether educational institutions or others have violated [Section 5 of the FTC Act] by committing unfair or deceptive sales, advertising, or enrollment practices, or any other laws enforced by the FTC” and the FTC can use materials obtained pursuant to the MOA when carrying out investigations under the FTC Act and other laws.

Tomorrow, December 18, from 12 p.m. to 1 p.m. ET, Ballard attorneys will hold a webinar focusing on the FTC: “New Enforcement Actions by the Old Sheriff in Town: Recent Developments at the Federal Trade Commission.”  For more information and to register, click here.

 

The FTC recently issued a paper outlining key takeaways from its December 2017 workshop examining injuries consumers may suffer from privacy and data security incidents.  

The paper indicates that the FTC convened the workshop to better understand consumer injury for the following two purposes:

  • To allow the FTC to effectively weigh the benefits of governmental intervention against its costs when making policy determinations 
  • To identify acts or practices that “cause or are likely to cause substantial injury” for purposes of bringing an enforcement action under the FTC Act for an “unfair” act or practice 

The paper discusses the examples of informational injuries given by participants.  These examples involve injuries that may result from medical identity theft, doxing (i.e. the deliberate and targeted release of private information about an individual with the intent to harass or injure), exposure of personal information, and erosion of trust (i.e. consumers’ loss of trust in the ability of businesses to protect their data).  The paper also reports that “there was some discussion of whether the definition of injury should include risk of injury [from certain practices]” and shares opposing arguments made by participants.  

The issue of whether informational injuries that may result from alleged statutory violations are sufficient to provide a consumer in a private action with Article III standing under the U.S. Supreme Court’s Spokeo standard continues to be litigated.  In Spokeo, the Supreme Court indicated that, to satisfy the “injury-in-fact” requirement for Article III standing, a plaintiff must show that he or she suffered “an invasion of a legally protected interest” that is both “concrete” and “particularized.”  To be particularized, an injury must affect the plaintiff “in a personal and individual way.”  To be concrete, an injury must “actually exist;” it must be “real.”  However, the Supreme Court also acknowledged that intangible injuries can satisfy the concrete injury standard and that in some cases an injury-in-fact can exist by virtue of a statutory violation.  (The Spokeo standard does not apply to government enforcement actions.)

 

 

On July 26, 2018, the FTC testified before two subcommittees of the U.S. House Committee on Oversight and Government Reform regarding the FTC’s continued focus on payment processors. Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection testified before the House Subcommittees on National Security and Government Operations about the FTC’s anti-fraud program and the 25 actions taken by the FTC against payment processors since 1996. 15 of the 25 cases were filed in the last 10 years.

While lawsuits against payment processors represent a small number of the total cases filed by the FTC, the FTC testified that it views the payment processor’s role as “an integral part” of the agency’s anti-fraud program because their services may facilitate fraudulent schemes. Specifically, the FTC explained that on multiple occasions, the payment processor was identified as an enforcement target because it provided services for multiple entities that were parties to other FTC, SEC or state actions.

The FTC relies on two key legal theories in bringing claims against payment processors. The first theory is that the payment processor allegedly engages in unfair conduct under Section 15(n) of the FTC Act, 15 U.S.C. § 45(n), by allegedly facilitating fraud. The second theory is that the payment processor allegedly violates the FTC’s Telemarketing Sales Rule in two ways. First, the FTC may allege that the payment processor was “assisting and facilitating” a violation of the Rule by providing services to another entity that the processor knows or consciously avoids knowing is violating the Rule. Second, the FTC may allege that the payment processor has engaged in “credit card laundering” by submitting a credit card transaction to the credit card network when the transaction is not between the cardholder and the actual merchant, such as when a shell company is used to hide the identity of the true merchant.

The FTC is not alone in attempting to pursue payment processors for allegedly facilitating consumer fraud. In 2015, the CFPB filed suit against alleged “phantom debt” collectors and various companies alleged to have provided services to the debt collectors, including payment processors. The CFPB claimed that the payment processors facilitated the alleged scheme by enabling the debt collectors to accept credit and debit card payments by engaging in deficient underwriting and failing to appropriately monitor the debt collectors’ accounts, such as by ignoring signs of fraud, such as high chargeback volumes. Last year, the court dismissed the CFPB’s claims against the payment processors as a discovery sanction for failure to produce a knowledgeable witness for deposition, although the case remains pending against the other parties.

The FTC’s testimony indicates that payment processors will continue to remain a potential target in the FTC’s ongoing anti-fraud program. In particular, any payment processor that provides services to a merchant (or multiple merchants) alleged by the FTC, SEC, or other federal or state regulator to have engaged in consumer fraud could itself come under scrutiny by the FTC.

Politico has reported that on July 19, the Senate Banking Committee will hold a hearing on President Trump’s nomination of Kathy Kraninger to serve as CFPB Director.  While we find this surprising, we continue to believe that she will not be confirmed by the full Senate until after the mid-term elections.

Politico also reported that on July 12, the Senate Banking Committee will hold a hearing on credit reporting agencies at which the witnesses will include Peggy Twohig, CFPB Assistant Director for Nonbank Supervision, and Maneesha Mithal, an Associate Director in the FTC’s Bureau of Consumer Protection.

The FTC has announced that beginning in September 2018, it will hold a series of 15 to 20 public hearings “on whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection enforcement law, enforcement priorities, and policy.”

In advance of the start of the hearings, the FTC is seeking public comment on 11 topics that include:

  • The state of antitrust and consumer protection law and enforcement, and its development since the FTC’s 1995 “Global Competition and Innovation Hearings”
  • Competition and consumer protection issues in communication, information, and media technology networks
  • The  intersection between privacy, big data, and competition
  • The FTC’s remedial authority to deter unfair and deceptive conduct in privacy and data security matters
  • The consumer welfare implications associated with the use of algorithmic decision tools, artificial intelligence, and predictive analytics
  • The interpretation and harmonization of state and federal statutes and regulations that prohibit unfair and deceptive acts and practices
  • The FTC’s investigation, enforcement, and remedial processes

The FTC will accept comments on the 11 topics through August 20, 2018.  Comments can address one or more of the 11 topics generally, or can address them with respect to a specific industry.  The FTC will also invite comments on the topic of each hearing.  It plans to issue a news release before each hearing with information about the agenda, date, and location, and with instructions on submitting comments.  In addition, it plans to invite public comment after the entire series of hearings is completed.

Among the purposes of the hearings and public comment process is to “stimulate thoughtful internal and external evaluation of the FTC’s near- and long-term law enforcement and policy agenda.”  The FTC has indicated that the hearings “may identify areas for enforcement and policy guidance, including improvements to the agency’s investigation and law enforcement processes, as well as areas that warrant additional study.”

 

As readers of this blog already know, Professor Jeff Sovern and I come at most issues from different sides of the street.  Over the years, through our respective blogs and at various programs, we have engaged in spirited but respectful debate about many consumer finance issues.  For that reason, I was particularly disappointed to read Jeff’s blog post about Andrew Smith’s appointment as Director of the FTC’s Bureau of Consumer Protection.

Despite his comment that he does not “mean that Mr. Smith is a thief,” Jeff’s characterization of Andrew as a “Payday Lender Lawyer” in the title of his blog post coupled with his use of the quote “set a thief to catch a thief,” seems intended to raise questions about Andrew’s integrity based solely on his past representation of payday lenders.  Although we strongly disagree with Jeff’s support for the CFPB’s payday lending rule and his criticism of the payday lending industry, those matters are certainly fair game for debate.  However, Andrew has had an unblemished ethical record as an attorney in private practice and as a government attorney in his previous tenure with the FTC.  Indeed, Andrew is considered to be among the country’s most prominent consumer financial services lawyers, as evidenced by his position as Chair of the American Bar Association Consumer Financial Services Committee, his appointment long ago as a fellow of the American College of Consumer Financial Services Lawyers, and his ranking by Chambers USA which evaluates America’s leading lawyers for business.

We also strongly reject the inference that payday lending is a form of theft and observe that, regardless of how an attorney’s clients are viewed, it is bad policy for a lawyer’s qualifications for government appointment to depend on his or her clients’ reputations.  If that were the standard, white collar criminal lawyers would never qualify for government service.

I am confident that in his new leadership role at the FTC, Andrew will continue to adhere to the highest ethical standards.

I was pleased to see the announcement yesterday afternoon by FTC Chairman Joseph Simons that the FTC has approved the appointment of Andrew Smith to serve as Director of the agency’s Bureau of Consumer Protection, beginning next week.

As I indicated in my prior blog post, I have known Andrew for many years going back to his tenure at the FTC earlier in his career and have always felt that Andrew was a very fair-minded attorney who studiously called the shots as he saw them.  In addition to bringing his excellent lawyering skills to the FTC, I am confident that Andrew will continue to take an even-handed approach in his new leadership role.

Andrew’s appointment was approved by a 3-2 vote, with both Democratic commissioners, Rohit Chopra and Rebecca Slaughter, voting against his appointment.

 

According to media reports, the FTC is expected to appoint Andrew Smith, an attorney in private practice in Washington, D.C. who currently represents many industry clients, to lead the FTC’s Consumer Protection Bureau.  His expected appointment has reportedly met with criticism from two Democratic Senators.

Before entering private practice, Andrew was an attorney with the FTC.  He currently chairs the American Bar Association’s Consumer Financial Services Committee.

I have known Andrew for many years going back to his tenure at the FTC where he served in senior supervisory and policy-making positions.  I always felt that Andrew was a very fair-minded attorney who studiously called the shots as he saw them.  As a leader of the ABA Consumer Financial Services Committee, including in his current position as Committee Chair, he has been very even-handed, always ensuring that the voices of consumer advocates are heard.  The ABA represents all of it members, not just lawyers who work for or represent the consumer financial services industry.

The knee-jerk criticism of Andrew by two Democratic Senators based on his prior legal work for clients and his need to recuse himself from FTC investigations involving those clients is completely unfounded.  If anything, it demonstrates that Andrew is an excellent lawyer and that his services are in high demand.  Indeed, the BTI Consulting Group recently named Andrew to its 2018 “Client Service All-Stars” list, which recognizes “the leaders in superior client service.”  Andrew is one of only three consumer financial services lawyers in the country named to this list.  My partner, Scott Pearson, also received this rare honor.