HomeStreet Bank recently agreed to the issuance of an order to settle an allegation by the FDIC that the bank’s discontinued Home Loan Center-based mortgage business line violated the Real Estate Settlement Procedures Act (RESPA) “by entering into co-marketing agreements using online platforms and desk rental agreements that resulted in the payment of fees to real estate brokers and home builders for their referrals of mortgage loan business.” The order reflects that all of the agreements were terminated. The bank, which does not admit or deny the allegation, agreed to pay a civil money penalty of $1.35 million dollars.

In the press release announcing the settlement, the FDIC states that “[w]hile co-marketing arrangements and desk rental agreements are permissible where the fees paid bear a reasonable relationship to the fair market value of marketing or rental costs, such arrangements and agreements violate RESPA when the amounts paid exceed fair market value and the excess is for referrals of mortgage business.” This is significant, as a federal banking regulator is confirming that both co-marketing and desk rental arrangements are permissible if the fees paid bear a reasonable relationship to the fair market value of marketing or rental costs. In contrast, CFPB Compliance Bulletin 2015-05, which was issued during the tenure of former CFPB Director Cordray, raises doubts as to whether marketing services agreements (MSAs) or similar arrangements are permissible under RESPA. In particular, the CFPB states in the Bulletin that its “experience in this area gives rise to grave concerns about the use of MSAs in ways that evade the requirements of RESPA. In consequence, the Bureau reiterates that a more careful consideration of legal and compliance risk arising from MSAs would be in order for mortgage industry participants generally.” It would be helpful if the CFPB revisited this area and issued guidance more in line with the FDIC guidance.

In CFPB and People of the State of New York v. RD Legal, the CFPB and NYAG appealed to the Second Circuit from the district court’s decision holding the CFPB’s structure is unconstitutional and striking all of Title 10 of Dodd-Frank.  Yesterday, the Second Circuit entered an order adjourning the oral argument that was set for November 21, 2019.  The order states that oral argument will be rescheduled at a later date.

The CFPB, which announced after it filed the appeal that it will no longer defend its constitutionality in the appellate courts or the Supreme Court, asked the Second Circuit to adjourn the oral argument until the Supreme Court decides Seila Law.  RD Legal opposed the motion, arguing that unless the Supreme Court finds that the Dodd-Frank for-cause removal provision is unconstitutional and cannot be severed, the Supreme Court’s decision will not resolve the issues in RD Legal, specifically whether RD Legal is a “covered person” under the Consumer Financial Protection Act.




The third location of PLI’s 24th Annual Consumer Financial Services Institute will take place in PLI’s San Francisco Conference facility and via concurrent live Webcast on December 9-10, 2019 in San Francisco (and by live webcast).  PLI has extended a 25 percent discount to clients and friends of Ballard Spahr who register through the link below.  I am co-chairing the event, as I have for the past 23 years.  Chris Willis, Practice Leader of Ballard Spahr’s Consumer Financial Services Litigation Group, will participate as a panel member in two panel discussions in the afternoon session of the first day.

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 co-moderate a discussion among CFPB, FTC and FDIC representatives.

One of the two afternoon panels in which Chris will participate as a panel member 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:

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

In addition, attendees can receive up to one full hour of Ethics credit exploring ethical issues unique to the consumer space.

Click here for a complete description of PLI’s 24th Annual Consumer Financial Services Institute and to reserve your place today.  A special discounted registration fee will only be available to persons who register using this link.


A purported class action filed last week in the U.S. District Court for the Northern District of California, accuses Facebook of discriminating against women and individuals over 40 who were denied advertisements and information about certain financial services opportunities, including those for bank accounts, insurance, and investing.

According to the complaint, Facebook encourages financial services advertisers to target specific populations in order to reach the most “relevant” group and the “kinds of people” the businesses consider to be their “best customers.”  The complaint further alleges that the general education and tools Facebook provides to advertisers encourages companies to restrict visibility of their ads based on age and gender, thereby “aiding and abetting” the companies to discriminate against certain groups.

The complaint seeks to certify a nationwide class of individuals and pursue a claim for millions of dollars in damages under California’s Unruh Civil Rights Act, which allows damages of $4,000 per violation.  The named plaintiff is a 54-year-old woman living in Washington D.C. who alleges that Facebook and associated financial services companies prevented her and other similarly situated individuals from viewing advertising and information about financial services opportunities by targeting advertisements to men and those under 40.

The lawsuit comes seven months after Facebook agreed to change its targeting advertising system in order to settle lawsuits involving allegations that employers, landlords and lenders were allowed to discriminate through advertisements targeted to certain age, gender, regional and ethnic groups.

While it is highly debatable whether the Equal Credit Opportunity Act or other fair lending laws apply to social media advertising of this nature, regulators take the position that they do, and they sometimes explore these issues in examinations.  For that reason, companies should be mindful of fair lending risk when formulating their social media and other advertising plans.

The CFPB, joined by the Minnesota Attorney General’s Office, North Carolina Department of Justice, and the Los Angeles City Attorney, filed a lawsuit in the U.S. District Court for the Central District of California against two companies involved in the marketing and sale of student-loan debt-relief services as well as individual owners and managers of the companies alleging violations of the CFPA, the Telemarketing Sales Rule (TSR), and various state laws.  The complaint also names three companies as “relief defendants” that are alleged to have served as conduits of funds between the two other company defendants and the individual defendants.

The complaint alleges that the defendants violated the CFPA and TSR by conduct that included: (1) charging and collecting advance fees before consumers had received any adjustment of their student loans or made any payments toward such adjusted loans, (2) misrepresenting the purpose and application of fees charged by the companies, their ability to obtain loan forgiveness, and their ability to lower consumers’ monthly payments, (3) failing to inform consumers that the companies automatically requested that student loans be placed in forbearance, and (4) submitting false information in applications for loan consolidation or income-driven repayment programs.  The individual defendants are alleged to have provided substantial assistance to the company defendants in connection with the TSR violations.

In addition to the counts alleging TSR violations that are brought jointly by the CFPB and state/city defendants, the complaint contains additional counts brought by each of the state/city plaintiffs alleging violations of their respective state UDAP and other laws by the defendants based on the conduct alleged in the complaint.

The complaint seeks injunctive relief as well as consumer redress and civil money penalties.  The court has entered a temporary restraining order freezing the defendants’ assets and has appointed a temporary receiver for two of the company defendants.  A hearing on the CFPB’s request for a preliminary injunction is scheduled for later this month.

On September 17, the CFPB announced that it would no longer defend its constitutionality in the appellate courts or before the Supreme Court.  The complaint in this action, which was filed on October 21, is the third enforcement action announced by the Bureau since announcing its change in position on its constitutionality and indicates that it is business as usual at the Bureau.  (The first enforcement action was filed on September 25 against a debt collector and its CEO and the second was filed on October 1 targeting pension advance products.)

The U.S. Supreme Court has set a briefing schedule in Seila Law, in which the questions before the court are whether the CFPB’s structure is constitutional and, if it is not, whether the court can sever the provision in the Dodd-Frank Act that only allows the President to remove the CFPB Director “for cause.”

Seila Law and the CFPB filed a joint motion to extend the time for filing merits briefs and suggested a briefing schedule that “would enable this case to be heard during the Court’s February 2020 sitting.”  The Supreme Court granted the motion and accepted the suggested schedule.

The joint appendix, Seila Law’s brief on the merits, and the CFPB’s brief on the merits must be filed by December 9, 2019.  Paul D. Clement, who was appointed amicus curiae by the Supreme Court to defend the Ninth Circuit’s judgment, must file his brief on the merits by January 15, 2020.  Court rules allow 30 days for the filing of reply briefs.

Other amicus curiae briefs, on both or either question before the court, must be filed within 7 days after the party supported files its merits brief.

A decision from the Supreme Court is expected by the end of its term in June 2020.



In this podcast, we are joined by Scott Ferris, CEO of Attunely, a provider of machine learning (ML) and artificial intelligence (AI) technology to the debt collection industry.  We look at how changes in consumer behavior have impacted collections, technology’s role in collections, state law’s/GDPR’s impact on ML/AI and compliance strategies, how ML/AI can improve profitability, and perceived impediments to adopting ML/AI.

Click here to listen to the podcast.

With the Fifth Circuit having already heard oral argument in March 2019 in All American Check Cashing’s interlocutory appeal from the district court’s ruling upholding the CFPB’s constitutionality, it is not surprising that All American and the CFPB submitted a joint letter to the court requesting “clarification regarding the scope of the issues to be addressed at the December 4 oral argument.”

Last month, after the en banc Fifth Circuit ruled in Collins v. Mnuchin that the FHFA’s structure is unconstitutional, the parties were directed to submit letter briefs regarding what action the Fifth Circuit panel should take in All American in light of Collins.  In their letter seeking clarification, the parties asked whether the oral argument would be limited to the issues addressed in their letter briefs regarding the impact of Collins or whether the panel was also interested in addressing the merits of the constitutionality of the CFPB’s structure.

In response to the parties’ letter, the Fifth Circuit has issued a directive that states:

The court is allowing 30 minutes per side so that all of the issues still remaining in light of (1) Collins v. Mnuchin (en banc) and (2) the CFPB’s change of position can be addressed.  Although the court has ready access to the oral arguments presented in March 2019, the attorneys should argue their entire case without reliance on the March presentation (but mindful that no issue that has been briefed or is jurisdictional is waived).  The attorneys should assume that the grant of certiorari in Seila Law has no effect on the scope of the matters to be presented on December 4, although either side is free to recommend that this case be postponed awaiting a decision in Seila Law.

As we reported, the CFPB has asked the Second Circuit to adjourn the oral argument in RD Legal that is currently scheduled for November 21, 2019 until the Supreme Court decides Seila Law.  (RD Legal has opposed that request.)  The Fifth Circuit’s directive appears to indicate that the panel intends to hold the December 4 oral argument despite the grant of certiorari in Seila Law but would entertain a request to postpone its ruling pending a decision in Seila Law.  (As we also reported, the Ninth Circuit has entered an order withdrawing the submission of CashCall’s appeal from the district court judgment in favor of the CFPB and staying all further proceedings until the Supreme Court’s decision in Seila Law.)

In the joint letter requesting clarification, All American noted that it has filed a Petition for a Writ of Certiorari Before Judgment with the U.S. Supreme Court.  Presumably, regardless of whether it decides to postpone its ruling pending a decision in Seila Law, the Fifth Circuit will wait to see if the Supreme Court grants All American’s Petition for a Writ of Certiorari Before Judgment before taking any further action.



Final regulations adopted by the New York Department of Financial Services (NYDFS) to implement the state’s new student loan servicing law became effective on October 16, 2019 upon the publication by the NYDFS of a Notice of Adoption in the State Register.  The new law, known as Article 14-A, was enacted on April 1, 2019.  In addition to imposing new licensing requirements, even servicers that are exempt from licensing or deemed licensed must provide notice of their loan servicing to the NYDFS and comply with certain provisions of the law, including those pertaining to nonconforming payments, credit reporting, prohibited practices, and recordkeeping.

The NYDFS rejected most of the suggestions for changes to its proposed regulations made by commentators.  That included rejecting a request for a delayed effective date, an entirely reasonable request, given that that the proposed regulations significantly expanded on various statutory requirements, given that further changes from the proposed regulations were made in the final regulations, as noted below, and given that the final regulations were ultimately issued a week after Article 14-A became effective.

Provisions that were changed in the final regulations include:

  • Definition of “servicing.”  The proposal provided that “servicing” did not include collecting, or attempting to collect, on a defaulted student loan for which no payment has been received for 270 days or more.  The final regulations provides that “servicing” does not include collecting, or attempting to collect, on “a Direct Loan or FFELP Loan for which no payment has been received for more than 270 days or more, a Perkins Loan in default, or on a private student loan in default according to the terms of the loan documents.”  (A corresponding change was made to the definition of a “debt collector” in the final regulations.)
  • Definition of “student loan.”  The proposal defined a “student loan” as “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education.”  The final regulations define a “student loan” as “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education. The term shall not include an extension of credit under an open-end consumer credit plan, a reverse mortgage transaction, or any other loan that is secured by real property or a dwelling.”
  • Handling of nonconforming payments.  The final regulations, unlike the proposal, require a servicer to give a borrower “not less than ten business days to provide instructions” as to how to apply a nonconforming payment.
  • Annual notice of information on repayment options and forgiveness.  The proposal required the annual notice to contain information or links to information regarding repayment and loan forgiveness options. The final regulations require the notice to also include information or links to information regarding discharge options.
  • Hard copies.  The final regulations include a requirement for a servicer to “adopt policies and procedures permitting borrowers to obtain hard copies of information required to be disclosed by the student loan servicer, with particular focus on meeting the needs of borrowers without access to the internet.”


All American Check Cashing’s interlocutory appeal from the district court’s ruling upholding the CFPB’s constitutionality has been calendared for oral argument before a Fifth Circuit panel on December 4, 2019.  Since the case was previously argued in March 2019, it is unclear why a second oral argument has been scheduled.  Last month, the parties were directed to submit letter briefs regarding what action the panel should take in light of the en banc Fifth Circuit’s decision in Collins v. Mnuchin that held the FHFA’s structure is unconstitutional.

Rather than wait for a decision from the Fifth Circuit, All American filed a Petition for a Writ of Certiorari Before Judgment with the U.S. Supreme Court.  All American argued in its petition that its case was a better vehicle for deciding the question of the CFPB’s constitutionality than Seila Law.  It made the alternative argument that the Supreme Court should grant its petition as a companion case to Seila Law in the event it granted Seila Law’s petition.  The CFPB has not yet responded to All American’s petition.  In my view, the Supreme Court is likely to either deny All American’s petition (based on the fact that the Fifth Circuit has not yet had an opportunity to review the case) or grant certiorari and hold All American pending the outcome in Seila Law.