Last month, after more than three years of urging by the industry to provide written guidance, the CFPB issued four FAQs on its TILA/RESPA Integrated Disclosure (TRID) Rule.  In this week’s podcast, we take a close look at the FAQs and what they tell creditors, particularly its guidance on when a corrected Closing Disclosure and new three-day waiting period are required (with a caution for those selling to investors) and the safe harbor for using a model form.

Click here to listen to the podcast.

A new executive order signed by President Trump on February 11, 2019 is intended to maintain American leadership in artificial intelligence (AI) research and development (R &D).  The order directs certain federal agencies to pursue various strategic objectives to promote and protect American advancement in AI.  Those agencies are to be identified by the National Science and Technology Council Select Committee on Artificial Intelligence Select Committee.  In addition, any of such agencies that perform R&D are directed to make AI an R&D priority.

Among other things, the executive order also:

  • directs the heads of all federal agencies to “review their Federal data and models to identify opportunities to increase access and use by the greater non-Federal AI research community in a manner that benefits that community, while protecting safety, security, privacy, and confidentiality.”  More specifically, the agencies are directed to “improve data and model inventory documentation to enable discovery and usability, and [to] prioritize improvements to access and quality of AI data and models based on the AI research community’s user feedback.”
  • directs the OMB Director, in coordination with other officials, to issue a memorandum to the heads of all agencies that (1) informs the development of regulatory and non-regulatory approaches by such agencies regarding technologies and industrial sectors that are either empowered or enabled by AI and advance American innovation, and (2) considers ways to reduce barriers to the use of AI.  A draft of the memorandum is to be issued for public comment before it is finalized.
  • directs the Secretary of Commerce, through the Director of the National Institute of Standards and Technology, to issue a plan for federal engagement in the development of technical standard and related tools in support of reliable, robust, and trustworthy systems that use AI technologies.

Last summer, the U.S. Treasury Department issued a report that recommended sweeping regulatory changes intended to promote innovation in the consumer financial services market, reduce regulatory burdens on consumer financial services providers, and update regulations applicable to various types of consumer lending and related consumer financial products and services.  That report included a section focused on big data, machine learning, and AI in which the Treasury stated that it recognized the significant benefits that the increased application of AI and machine learning technologies can provide.  It urged regulators not to impose unnecessary burdens or obstacles to the use of AI and to provide greater regulatory clarity that would enable further testing and responsible deployment of such technology.

Members of Ballard Spahr’s Consumer Financial Services Group have counseled clients on issues arising from applications of AI in the consumer finance space.  In July 2018, the Group conducted a webinar, “Artificial Intelligence in the Consumer Financial Services Industry,” in which the topics included (1) applications of AI to marketing, underwriting, servicing, and collections, and (2) compliance issues arising from the use of AI, including managing fair lending and discrimination risks, delivering adverse action notices, handling of data sharing and data security risks.


I am pleased to announce that Judy Mok, an attorney with extensive experience negotiating complex payments transactions for some of the world’s largest retailers and financial institutions, has joined Ballard Spahr as Of Counsel in the firm’s Consumer Financial Services Group.  She will be based in the firm’s New York office.

Judy has a wealth of experience in negotiating and drafting commercial agreements, with a focus on strategic partnership arrangements.  Her substantial experience includes negotiating and drafting co-branded and private-label credit card agreements, payment network agreements, merchant agreements, servicing agreements, processing agreements, and portfolio purchase and sale agreements.

Judy’s arrival further bolsters Ballard’s offerings in the consumer payment systems space, as she reunites with two former colleagues who joined the firm last year: Chris Ford, a noted Fintech attorney who has led some of the country’s largest and most innovative payment systems transactions, and David Medlar, who has negotiated intricate deals involving payment systems, merchant acquisition, and gateway payment services.

To learn more about our new colleague, read our firm’s announcement.


The CFPB’s proposal to revise its final payday/auto title/high-rate installment loan rule to rescind the rule’s ability-to-repay (ATR) provisions in their entirety and its proposal to delay the compliance date for the ATR provisions until November 19, 2020 were published in today’s Federal Register.  The CFPB’s proposals would leave unchanged the rule’s troublesome payment provisions and continue to require compliance by August 19 with those provisions.

The publication of the proposals starts the clock running on the comment periods.  Comments on the proposal to rescind the ATR provisions are due on or before May 15, 2019.  Comments on the proposal to delay the compliance date for the ATR provisions are due on or before March 18, 2019.

On February 21, 2019, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar, “CFPB Payday Lending Rule: Status and Prospects.”  The webinar registration form is available here.



Federal financial institution regulators recently issued a joint final rule to implement provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (the “Act”) that require regulated financial institutions to accept private flood insurance policies. The regulators are the Farm Credit Administration, Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and Comptroller of the Currency. The final rule takes effect on July 1, 2019.

To qualify as private flood insurance under the final rule, a policy must be issued by an insurance company that meets certain conditions, and the policy must provide flood insurance coverage that is at least as broad as the coverage provided under a standard flood insurance policy (SFIP) issued under the National Flood Insurance Program (NFIP) for the same type of property, including when considering deductibles, exclusions, and conditions offered by the insurer. The final rule sets forth specific requirements that a policy must meet to be considered to provide coverage at least as broad as an SFIP.

The final rule requires that a regulated financial institution accept a private flood insurance policy that provides coverage at least as broad as an SFIP in satisfaction of the requirement for flood insurance under the applicable regulator’s flood insurance rules. The final rule allows a financial institution to determine that a private policy provides the necessary coverage if the following statement is included within the policy or as an endorsement to the policy: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.” A financial institution can simply rely on the statement, without independently assessing the policy. However, the final rule does not require insurance companies to include such a statement in a private policy, and a financial institution cannot reject a private policy simply because the statement is not provided.

The final rule also allows a financial institution to accept a private flood insurance policy that does not provide coverage at least as broad as an SFIP, if the private policy meets a more limited set of requirements, and the financial institution documents in writing its determination that the policy provides sufficient protection of the applicable loan, consistent with general safety and soundness principles.

Additionally, the final rule permits a financial institution to accept a plan issued by a mutual aid society in satisfaction of the requirement for flood insurance under the applicable regulator’s flood insurance rules, subject to conditions. The conditions are that the applicable regulator has determined that the plan qualifies as flood insurance for purposes of the Act, the plan provides specified coverage for the mortgagor and mortgagee as loss payees, and the financial institution documents in writing its determination that the plan provides sufficient protection of the applicable loan, consistent with general safety and soundness principles. For purposes of the final rule, a “mutual aid society” is defined as an organization (1) whose members share a common religious, charitable, educational, or fraternal bond, (2) that covers losses caused by damage to members’ property pursuant to an agreement, including damage caused by flooding, in accordance with this common bond, and (3) that has a demonstrated history of fulfilling the terms of agreements to cover losses to members’ property caused by flooding.

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.



Democratic Congressman Bill Foster, who represents the 11th District of Illinois, has sent a letter to Maxine Waters, Democratic Chairwoman of the House Financial Services Committee, to express his “strong interest in serving as the Chair of the Taskforce on Financial Technology and Innovation that will be convened in the coming weeks.”  Ms. Waters announced her plans to create the Taskforce upon becoming Chairwoman.

In his letter (obtained by Politico), Mr. Foster mentions various credentials he holds, including his “prior career as a scientist and small business owner” and his participation as co-chair in the Blockchain Caucus.  He describes the caucus as working “to understand and explore, among other things, how a new and emerging technology can improve government services, curb identity theft, and put consumers in charge of their own identity.”

Mr. Foster indicates that as Taskforce Chair, he would work closely with Ms. Waters and the subcommittee chairs to understand and examine developments in the Fintech industry, “including marketplace lending for consumers and small businesses, partnerships with traditional financial institutions, cryptocurrency, blockchain, alternative data utilized in credit underwriting, artificial intelligence, and machine learning.”

He references the CFPB’s proposal issued last week to rescind the ability-to-repay provisions of its payday loan rule [link to alert] and states that “[i]n the context of this new development, ensuring that the underserved and underbanked communities have options and access to credit beyond predatory lenders will be a concern at the forefront of our inquiry.”  He also states that “although many financial technology companies are not subject to the same regulatory regime as traditional banks, including compliance with the Community Reinvestment Act, the Taskforce would work to examine how such companies can shoulder their fair share of the obligation to help meet the needs of low- and moderate-income communities, and ensure a fair playing field with community banks and other financial institutions.”

Mr. Foster also indicates that the Taskforce would attempt “to better understand the methods by which financial technology companies use complex algorithms to underwrite loans,” and to also understand what steps such companies are taking “to ensure that they do not engage in discriminatory practices that violate fair lending laws.”


With the creation of a Consumer Financial Protection Unit as one of his early actions, Pennsylvania  Attorney General Josh Shapiro made clear his intention to pursue an aggressive pro-consumer agenda.  Mr. Shapiro named Nicholas Smyth, a former CFPB enforcement attorney, to serve as Assistant Director of the Attorney General’s Bureau of Consumer Protection.

In what may be confirmation of increased activity by the PA AG,  Mr. Smyth has posted a job listing stating that the Bureau of Consumer Protection is looking to hire two attorneys in Pittsburgh and two more in Philadelphia “to help out with our growing litigation caseload.”

The Widener Law Commonwealth Law and Government Institute and the Business Advising Program recently announced that Mr. Smyth will be giving a lecture on March 19, 2019 in Harrisburg, PA at a program titled “Consumer Financial Protection in Pennsylvania: Student Borrowers and Beyond.”  Mr. Smyth will be joined in the lecture by Seth Frotman, Executive Director of the Student Borrower Protection Center.  Mr. Frotman was formerly the CFPB’s Student Loan Ombudsman.  The Student Borrower Protection Center is a nonprofit organization created by Mr. Frotman to advocate for additional oversight of the student loan industry.


Comptroller of the Currency Joseph Otting issued a statement today in support of the CFPB’s proposal that would rescind in their entirety the ability-to-repay (ATR) provisions in its final payday/auto title/high-rate installment loan rule.  (The CFPB has also proposed to delay the mandatory compliance date for the ATR provisions until November 19, 2020 but took no action to change the rule’s payment provisions or the August 19, 2019 compliance date for the payment provisions.)

In his statement, Comptroller Otting calls the proposal “an important and courageous step that will allow banks and other responsible lenders to again help consumers meet their short-term small-dollar needs.”  With regard to bank small-dollar loans, he observes that “[b]anks may not be able to serve all of this large market, but they can reach a significant portion of it and bring additional options and more competition to the marketplace while delivering safe, fair, and affordable products that promote the long-term financial goals of their customers.”

In May 2018, the OCC issued a bulletin encouraging the banks it supervises “to offer responsible short-term, small-dollar installment loans, typically two to 12 months in duration with equal amortizing payments, to help meet the credit needs of consumers.”  The bulletin was intended “to remind banks of the core lending principles for prudently managing the risks associated with offering short-term, small-dollar installment lending programs.”

When the OCC withdrew its prior restrictive deposit advance product guidance in October 2017, we commented that the OCC appeared to be inviting banks to consider offering the product.  The bulletin appeared to confirm that the OCC intended to invite the financial institutions it supervises to offer similar products to credit-starved consumers.  However, it suggested that such  products should be even-payment amortizing loans with terms of at least two months.  We observed that it might or might not have been a coincidence that the products the OCC described in the bulletin would not have been subject to the ATR requirements of the CFPB’s payday loan rule (or potentially to any of the rule’s requirements).

Assuming the ATR requirements are rescinded as proposed, we hope the OCC will provide additional guidance encouraging the banks it supervises to offer a wider range of small-dollar loan products.  We are aware of at least one national bank and one state member bank that currently offer short-term deposit advances to their customers.