The Federal Trade Commission recently announced that it has settled the lawsuit it filed against Yellowstone Capital LLC, a provider of merchant cash advances, and its chief executive officer and president for alleged unfair and deceptive conduct in violation of section 5 of the FTC Act, 15 U.S.C. § 45.

In its Complaint, the FTC alleged that the defendants engaged in deceptive acts or practices by (1) representing that they did not require collateral or personal guarantees from business owners when, in reality, they did require business owners to grant a purported security interest or lien on all business property they owned, and (2) representing that the defendants would provide the business owners a certain amount of funding when, in reality, the amount provided was substantially less as a result of withholding fees that were not clearly and conspicuously disclosed.  The FTC also alleged the defendants engaged in unfair acts or practices by taking money from business’ bank accounts without permission.

The settlement  requires the defendants to pay $9,837,000 to the FTC to be used in providing refunds to the impacted businesses.  Additionally, the defendants are permanently enjoined from making misrepresentations about (1) the requirements for obtaining the financing product or service; (2) any fees or charges and the total amount customers will repay; (3) the amount of funds that will be received; (4) and any other material fact related to the financing product or service.

Defendants are further required to clearly and conspicuously disclose any fees and charges, the amount the fees of charges will reduce the funds received, the specific amount of funds the customer will receive after paying the fees and charges, and the total amount the customer will repay. The settlement also enjoins the defendants from making unauthorized withdrawals from any consumer’s financial account.

The proposed Stipulated Order contains various compliance monitoring provisions as well, including requiring the defendants to create and maintain a system to monitor marketers and funders compliance with the terms of the settlement if they choose to work with such entities.

The settlement was filed in the United States District Court for the Southern District of New York just one day prior to the U.S. Supreme Court’s decision in AMG Capital Management, LLC v. FTC, in which the Court ruled that Section 13(b) of the FTC Act does not authorize the FTC to seek, and a court to award, monetary relief such as restitution or disgorgement.

In response to the Supreme Court’s decision, the FTC filed a Notice of Supplemental Authority informing the district court of the decision and stating its position that the decision does not affect the district court’s authority to enter the Stipulated Order because it is a contract between the consenting parties.



An article recently published by the Student Borrower Protection Center titled “Discrimination is ‘Unfair’,” argues that the CFPB, FTC, state attorneys general and regulators, and in some cases private individuals, should consider challenging discrimination as an “unfair” practice covered by federal and state laws prohibiting unfair, deceptive, or abusive acts and practices.  (The authors are two attorneys who are members of a law firm that frequently represents plaintiffs in discrimination cases.)

The article calls unfairness “an obvious fit for addressing common types of discriminatory conduct” because in the authors’ view, discriminatory conduct “fits neatly within” the Dodd-Frank Act and FTC definitions of an unfair act or practice.  Under those laws, an act or practice is unfair if (1) it is likely to cause substantial injury to consumers; (2) the injury is not reasonably avoidable; and (3) the injury is not outweighed by countervailing benefits to consumers or competition.  The article asserts that the use of an “unfairness-discrimination” theory would fill important gaps in the existing patchwork of antidiscrimination laws, most significantly practices not covered by the ECOA.  The article further argues that both disparate treatment and disparate impact would be actionable under this view of UDAAP statutes.

The article asserts that agencies and states could use the unfairness discrimination theory immediately through supervision or enforcement and private parties could do so immediately through private actions where allowed by state law.  According to the article, “[p]articularly in cases with strong evidence of intentional discrimination against traditionally protected classes, defenses that entities did not have sufficient notice of this application of unfairness statutes are unlikely to be persuasive.”

The article also calls upon “federal agencies with administrative authority over the unfairness laws [to] also pursue complementary regulatory actions,” such as first issuing “guidance and interpretive rules that do not require notice-and-comment rulemaking” and next engaging in formal rulemaking to adopt rules that apply the unfairness-discrimination theory.

According to the article, Rohit Chopra, President Biden’s nominee for CFPB Director, “has advocated this theory.”  The article quotes Mr. Chopra as having said that “discriminatory practices often are three for three, causing grievous harm that cannot be avoided.”  The “three for three” to which Mr. Chopra referred in the quoted language are the three elements of the definition of an unfair practice in the Dodd-Frank Act and the FTC Act.

Nevertheless, in our view, the idea that UDAP/UDAAP statutes could be used to bring discrimination claims in areas where Congress has not chosen to enact a specific statute seems like more of a wish than a real, practical possibility.  Congress has enacted anti-discrimination laws in carefully-chosen areas – employment, housing, credit, public accommodations – and has limited the reach of each of the statutes in those areas.  Interpreting the FTC Act (which has been around more than 100 years) to prohibit all discrimination would imply that Congress decided to “fill the gaps” in anti-discrimination legislation before the gaps even existed, which makes little sense.  And the gaps that this argument is designed to fill were created by Congress in the manner in which it enacted legislation.  We believe, and suspect a court would find, that it is Congress’ prerogative to address these “gaps,” and that it would be inappropriate for a court or administrative agency to do so.

The article’s assertion that disparate impact claims could be brought under UDAP/UDAAP statutes is even more lacking in support.  The U.S. Supreme Court held in Inclusive Communities and Smith v. City of Jackson that Congress must use language in a statute to show an intent to apply an “effects test.”  There is certainly no such language in the FTC Act or in the definition of “unfair” in Dodd-Frank.

It’s natural for consumer advocates to argue for expansive interpretations of consumer protection laws, but in this instance, we believe that interpreting UDAP/UDAAP statutes in the manner suggested by this article is a step well too far, that would be highly likely to be rejected by the federal courts.


The Mortgage Bankers Association (MBA) recently released templates, one in a notice form and one in letter form, to advise borrowers with existing adjustable rate mortgage (ARM) loans that use the London Interbank Offered Rate (LIBOR) as the index of the upcoming transition away from LIBOR. The templates are available on the MBA’s LIBOR Transition Resources webpage.

The templates are designed to advise borrowers that in the future the LIBOR index will be replaced with another index, and that more information on the replacement will be provided in the future. The templates also advise borrowers that in addition to the replacement of the LIBOR index, the margin also may change, but that no other aspects of the note will change. The templates specifically point out that there will be no change to the maximum interest rate that the consumer may pay, or to the timing of interest rate resets.

Parties considering the use of the templates should compare them to the existing ARM notes in their portfolio and make changes as appropriate to conform with the notes.

In 2019 the MBA released a template to advise consumers considering ARM loans that LIBOR would be replaced in the future. That template also is available on the MBA’s LIBOR Transition Resources webpage.


After discussing the pandemic’s impact on the DFPI’s activities, Commissioner Alvarez discusses the DFPI’s focus on diversity and inclusion, its creation of a new registration system for financial services companies, and its approach to enforcement priorities.  The Commissioner also spoke to the impact of a Biden Administration, including possible areas of collaboration with the CFPB, and the role of its new Office of Financial Technology Innovation.

Tony Kaye, a partner in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation, joined by Dan McKenna, Practice Group Leader of the firm’s Consumer Financial Services Litigation Group.

Click here to listen to the podcast.

On April 20, 2021, in anticipation of an adverse Supreme Court ruling, the Senate Committee on Commerce, Science, and Transportation held a hearing titled, “Strengthening the Federal Trade Commission’s Authority to Protect Consumers.”  Two days after the hearing, on April 22, 2021, the U.S. Supreme Court ruled that Section 13(b) of the Federal Trade Commission Act (the “Act”) does not authorize the FTC to seek, or a court to award, equitable monetary relief such as restitution or disgorgement. At the hearing, the four currently serving FTC Commissioners presented testimony urging Congress to amend the Act to expressly provide the authority that the Supreme Court found not to presently exist.

The four FTC Commissioners who testified at the hearing were: Rebecca Kelly Slaughter, who currently serves as Acting Chairwoman, Noah Phillips, Rohit Chopra, and Christine Wilson.

Redress to Consumers under §13(b) of the Act.  Although the Commissioners’ individual viewpoints varied with respect to the appropriate use of the FTC’s §13(b) authority, each Commissioner generally acknowledged that the FTC should be permitted to obtain monetary redress for consumers.

  • Acting Chairwoman Slaughter proposed that the FTC should have “independent litigation authority for civil penalty cases.” § 5(l) of the Act mandates that “any person, partnership, or corporation” who violates a final order issued by the FTC will be liable for a “civil penalty of not more than $10,000 for each violation” and such penalties may be recovered by the Attorney General of the United States.  This proposed authority would presumably enable the FTC to directly recover civil penalties rather than to recover civil penalties only for violations of final FTC orders.
  • Commissioner Phillips asserted that Congress’s focus should be on “helping consumers” and not “inappropriately punishing businesses.”  Commissioner Phillips’s stance on the FTC’s § 13(b) monetary disgorgement and restitution power was that it should be utilized in a manner that is commensurate with the consumer harm at issue.
  • Commissioner Chopra (President Biden’s nominee for CFPB Director) noted that a “§ 13(b) fix will not  fix many of the FTC’s challenges.”  He repeated his previously expressed view that the FTC does not meaningfully deter wrongdoing as the agency frequently enters into no-fault settlements with repeat wrongdoers. He proposed that victims and state attorney generals be allowed to file for injunctive relief in court to halt violations of final FTC orders.
  • Commissioner Wilson urged Congress to integrate a statute of limitations into the Act to limit the FTC’s §13(b) power and to amend §13(b) to allow disgorgement only under a specific set of factual circumstances (i.e., fraud cases but not deception cases).

Protecting Data Privacy in the Digital Era.  In addition to the Supreme Court’s potential rollback of the FTC’s § 13(b) authority, the other significant topic discussed was the protection of data privacy.  Commissioner Wilson noted that FTC Commissioners on a bipartisan basis have consistently pressed Congress to enact a data security and privacy law.  She suggested that if Congress decides not to act swiftly, the FTC may move forward on its own under §18 of the Act, which is widely referred to as Magnuson-Moss rulemaking.  This would enable the FTC to create a rule that specifies the standard by which data security is to be regulated in the absence of Congressional legislation.

The recorded live stream of the hearing can be found here.  The FTC’s prepared statement can be found here.

The CFPB recently issued a final rule delaying the mandatory compliance date for the new general qualified mortgage (QM) rule based on an annual percentage rate (APR) limit from July 1, 2021 to October 1, 2022. The final rule is effective on June 30, 2021. The CFPB also issued an executive summary of the final rule.

In December 2020, the CFPB issued the new general QM rule to replace the original general QM rule based on a strict 43% debt-to-income (DTI) ratio. At the same time the CFPB also issued a seasoned loan QM rule. Both rules became effective on March 1, 2021, although because of the 36 month seasoning period, the seasoned loan QM rule did not have any immediate impact.

Based on the new general QM rule’s original mandatory compliance date of July 1, 2021, for applications received on or before June 30, 2021, creditors could rely on the original general QM rule, the new general QM rule, or the temporary QM rule based on a loan being eligible for sale to Fannie Mae or Freddie Mac (often referred to as the “GSE Patch”), as long as Fannie Mae and Freddie Mac did not exit conservatorship. Among those three QM rules, for applications received on or after July 1, 2020, only the new general QM rule would be available.

The CFPB proposed to delay the mandatory compliance date from July 1, 2021 to October 1, 2022, so that the original general QM rule, new general QM rule, and GSE Patch QM rule would all be available for applications received on or before September 30, 2022 (although the GSE Patch QM rule would end if Fannie Mae and Freddie Mac exited conservatorship). The CFPB made the following statement regarding the rationale for the proposal:

The COVID-19 pandemic has left almost 3 million American homeowners behind on their mortgages. Black and Hispanic communities, in particular, have still not recovered from the impact of the Great Recession and bear the heaviest burden of job losses under COVID-19. Forbearance plans and foreclosure moratoriums have helped many homeowners stay in their homes, but those interventions may end before either the broader economy has recovered from the impact of the pandemic or the housing market has reached a new equilibrium. The CFPB believes that an extension of the mandatory compliance date may help ensure stability and access to affordable, responsible credit in the mortgage market.

Based on other actions, however, the goal of the CFPB may not be fully realized. In January 2021 the Preferred Stock Purchase Agreements (PSPAs) regarding Fannie Mae and Freddie Mac were amended. Pursuant to the amendments, with regard to the original general QM rule, the new general QM rule, and the GSE Patch QM rule, on or after July 1, 2021, Fannie Mae and Freddie Mac could only purchase new general QM rule loans. The proposal of the CFPB to delay the mandatory compliance date for the new general QM rule to October 1, 2022, raised the issue of whether the PSPAs would be further amended to continue to provide for the purchase of original general QM rule loans and GSE Patch QM rule loans after July 1, 2021, if the CFPB finalized the proposed delay.

As previously reported, on April 8, 2021, Fannie Mae and Freddie Mac announced that for loans with applications received on or after July 1, 2021, they will purchase new general QM rule loans, and not original general QM rule loans or GSE Patch QM rule loans. As a result, for applications received on or after July 1, 2021: (1) the original general QM rule loans may still be originated, but they will not be eligible for sale to Fannie Mae or Freddie Mac without further action to amend the PSPAs, and (2) because GSE Patch QM loans receive QM status based on the loans being eligible for sale to Fannie Mae or Freddie Mac, the GSE Patch QM rule will in effect no longer be available without further action to amend the PSPAs, or an amendment of the rule by the CFPB.

Various industry representatives submitted comments opposing the proposed delay of the mandatory compliance date, and even various consumer representatives submitted comments opposing the proposed delay or indicating that they did not believe that a delay was necessary. It appears many parties opposing the delay believe the actual, or a significant, reason for the proposed delay is to provide the CFPB with time to reassess and amend the new general QM rule. As previously reported, in February 2021 the CFPB issued a policy statement in which it advised that it intended to propose a rule to delay the mandatory compliance date of the new general QM rule, and that it will consider at a later date whether to initiate a rulemaking to reconsider other aspects of the new general QM rule. In the preamble to the final rule delaying the mandatory compliance date, the CFPB advises that it plans to evaluate the new general QM rule, and again states that it will consider at a later date whether to initiate another rulemaking to reconsider other aspects of the general QM loan definition.

On April 7, 2021, the Eleventh Circuit Court of Appeals ruled that Winn-Dixie Stores’ websites are not “public accommodations” and therefore are not subject to the accessibility requirements of Title III of the Americans with Disabilities Act (“ADA”).  The decision reversed a 2017 federal district court opinion – in what may be the only website accessibility case to ever go to trial – that required the grocery store chain to make its website accessible to individuals with visual disabilities.  The case now appears headed to the U.S. Supreme Court to resolve a long-standing circuit split.

Title III of the ADA prohibits discrimination against individuals with disabilities by private entities and requires that “places of public accommodation” provide individuals with disabilities with full and equal access to their goods, services, facilities, privileges and advantages.  The statute defines places of public accommodation to include certain brick-and-mortar businesses, including grocery stores.  Although Title III of the ADA does not reference websites, the U.S. Department of Justice (“DOJ”), which is responsible for administering the ADA, has interpreted Title III since 1996 to require websites to be made accessible to individuals with disabilities.  To date, however, the DOJ has not issued a uniform technical standard for accessibility, despite attempts to do so through two putative rulemakings during the period 2010-2016.

At the trial court level, the plaintiff, Juan Carlos Gil, alleged that the Winn-Dixie website was inaccessible to him and other blind individuals.  At the time he filed the complaint in 2016, the grocery store’s website did not sell goods.  Instead, it contained information and features such as digital coupons, a store locator tool, and the ability to refill existing pharmacy prescriptions online.  The plaintiff alleged that the inaccessibility of the website prevented him from accessing and enjoying these features.  Notably, for years he had used Winn-Dixie as his primary pharmacy by obtaining the assistance of store employees who could help locate what he needed.  Once he learned of the website, however, he wished to use it instead.  He alleged that, because the site was not compatible with screen-reader software he used to access the internet, he was unable to do so and, therefore, the resulting barrier to Winn-Dixie’s services violated the ADA.  Before the district court, he argued both that the website itself was an entity covered by Title III and, alternatively, that it had a direct nexus with the brick-and-mortar store sufficient to fall within the statute’s ambit.

The district court agreed.  It reasoned that Winn-Dixie’s sites were “heavily integrated” with its physical stores, and therefore covered by Title III of the ADA, despite the fact that the grocery chain did not sell its products online.  As a result, it held that the plaintiff was denied the full and equal enjoyment of Winn Dixie’s goods and services and ordered Winn-Dixie to remediate its website to comply with the voluntary, international Web Content Accessibility Guidelines 2.0 (known as the “WCAG 2.0”).  The decision opened the door to a flood of lawsuits against businesses alleging inaccessibility of their websites.

The Eleventh Circuit’s reversal of that decision has the potential to stem the tide.  According to the appeals court, analysis under Title III of the ADA is “straightforward,” owing to the clear and specific language of the statute and DOJ regulations.  Because websites are not among the twelve categories of entities listed in Title III, they cannot, on their own, be considered public accommodations.  The Eleventh Circuit also disagreed that inaccessible websites may be barriers to the services of associated entities listed in the statute.  In an earlier case, the court had reasoned that a contest conducted over the telephone, without any arrangement for those with auditory or mobile disabilities, violated the ADA.  Here, by contrast, Gil was not entirely prevented from accessing Winn-Dixie’s points of sale; in fact, he had accessed them for years without using the grocery chain’s website.

This caveat is an important point for the reach of the Eleventh Circuit’s decision and likely to be relevant to future cases.  Even if the Winn-Dixie website is not a place of public accommodation under Title III of the ADA, other intangible barriers, including web-based barriers, which prevent an individual with disabilities from enjoying goods and services provided by a store or another place of accommodation may still violate the ADA.  Thus, the court emphasized the “limited functionality” of the site, which did not prevent full and equal access to “the goods, services, facilities, privileges, advantages, or accommodations of” a Winn-Dixie store.

Although it only applies to cases arising in Alabama, Florida, and Georgia, the Eleventh Circuit’s reversal of the Winn-Dixie case furthers a split among the federal courts of appeal.  While it is consistent with website accessibility cases decided by the Third, Sixth, and Ninth Circuits, the First and Seventh Circuits, by contrast, have found that Title III of the ADA is not limited to physical locations.

Plaintiff Gil’s attorneys have publicly vowed to fight on and have already requested a rehearing en banc.  Should that route prove unsuccessful, Gil’s attorneys are expected to file a petition for certiorari with the U.S. Supreme Court.

Unless and until the U.S. Supreme Court resolves the circuit split, plaintiffs’ attorneys will continue to file these types of lawsuits against businesses.  In addition, we expect to see renewed interest from the DOJ in enforcing Title III of the ADA under the Biden administration, so regulatory risk will likely increase over the next four years.  Therefore, businesses that wish to mitigate both litigation and regulatory risk should make their websites and mobile applications fully accessible to individuals with disabilities.

Website and mobile application accessibility is likely to remain a highly evolving area of the law.  As we previously reported, federal legislative efforts to provide clarity in this area of the law and a potential safe harbor from liability for businesses continue, including the recent reintroduction of the Online Accessibility Act (H.R. 1100).

The Attorney Generals of the six states and District of Columbia who filed a lawsuit against the FDIC to set aside its “Madden-fix” rule have filed a motion for summary judgment in the case.

The lawsuit is pending before the same California federal district court judge (Judge Jeffrey S. White) who is hearing the lawsuit filed by three state AGs to set aside the OCC’s similar Madden-fix rule.  Cross-motions for summary judgment have been filed in that case and oral argument on the motions is scheduled for May 7, 2021.

In their summary judgment motion, the AGs argue that the FDIC rule violates the Administrative Procedure Act because it exceeds the FDIC’s authority and impermissibly preempts state law and is arbitrary and capricious.  Their central arguments in support of this position are:

  • The rule exceeds the FDIC’s authority because the plain language of the governing federal statute (12 U.S.C. 1831d) applies only to interest that an FDIC-insured state bank may charge.  There is no statutory ambiguity as to when the validity of a loan’s interest rate should be assessed because, contrary to the FDIC’s suggestion, Section 1831d does not apply to certain loans but instead applies to certain entities, namely FDIC-insured banks.  Section 1831d gives such banks the privilege of charging interest in excess of otherwise applicable state law.  Once such loans are no longer held by an FDIC-insured bank, that preemption ceases. The rule also exceeds the FDIC’s authority because the FDIC can only regulate FDIC-insured banks and the rule regulates non-banks by granting them the power to enforce interest rate terms that violate state law.
  • The rule impermissibly preempts state law by extending the preemption of state interest rate limits to buyers of loans originated by FDIC-insured banks.  Even if Section 1831d were ambiguous, the FDIC’s interpretation fails to overcome the presumption against preemption.
  • The rule is arbitrary and capricious because the FDIC failed to give sufficient consideration to evidence that the rule will likely facilitate rent-a-bank schemes and to meaningfully address the true lender doctrine’s applicability to loan sales potentially covered by the rule.  More specifically, the issues the FDIC failed to consider include how the rule’s encouragement of rent-a-bank schemes will increase the number and complexity of true lender disputes and how many purported loan sales would likely fall outside the rule’s scope due to true lender issues.  The FDIC’s basis for the rule lacks evidentiary support because the FDIC has not shown that Madden has caused any significant effects on credit availability or securitization markets.

Under the modified scheduling order entered by the court:

  • The FDIC must file its opposition to the AGs’ motion and any cross-motion for summary judgment by May 20, 2021.
  • The AGs must file their reply and opposition to a cross-motion for summary judgment filed by the FDIC by June 17, 2021.
  • The FDIC must file its reply by July 15, 2021.
  • Oral argument on summary judgment motions is scheduled for August 6, 2021.


The CFPB has issued an interim final rule that requires “debt collectors” as defined under the FDCPA who seek to evict tenants for non-payment of rent to provide written notice to tenants of their rights under the Centers for Disease Control and Prevention (CDC) Order that establishes an eviction moratorium.  The interim rule also prohibits FDCPA debt collectors from misrepresenting tenants’ eligibility for protection from eviction under the moratorium.  The rule becomes effective on May 3, 2021 and comments on the rule must be submitted by May 7, 2021.

In its discussion of the rule, the CFPB states that the rule is based on its interpretation of FDCPA sections 807 and 808.  Those sections, respectively, prohibit a debt collector from using false, deceptive, or misleading representations or means to collect a debt and from using unfair or unconscionable means to collect a debt.

Disclosure requirement.  The CDC Order generally prohibits a landlord, owner of a residential property, or other person with a legal right to pursue eviction (including an agent or attorney acting on behalf of a landlord or owner) from evicting tenants for non-payment of rent in any jurisdiction in which the Order applies during the effective period of the Order.  The CDC Order has been extended three times, most recently through June 30, 2021.  To be eligible for the moratorium, a tenant must submit a written declaration attesting to certain eligibility criteria generally establishing that, because of the tenant’s financial situation, the tenant is unable to afford full rental payments and would likely become homeless or have to move into a shared living setting if evicted.

The rule prohibits a FDCPA debt collector from filing an eviction action for non-payment of rent against a consumer to whom the CDC Order may reasonably apply without disclosing that the consumer may be eligible for temporary protection from eviction under the CDC Order.  The disclosure must be clear and conspicuous and in writing and must be provided on the date the FDCPA debt collector provides the consumer with an eviction notice or, if no eviction notice is required by law, on the date the eviction notice is filed.  A FDCPA debt collector can provide the notice even if the consumer might not be covered by the CDC Order.  The commentary to the rule includes sample disclosure language that a FDCPA debt collector can use to comply with the rule’s requirement.  A violation of the disclosure requirement is deemed a violation of FDCPA Section 808.

The CFPB notes in its discussion of the rule that a large number of states and localities have adopted their own eviction moratoria.  It states that in light of this, the Bureau has not made a finding in the interim rule that it is unfair or deceptive under the FDCPA for a debt collector in a jurisdiction in which such a moratorium applies to file an eviction action against a consumer without disclosing that moratorium to the consumer.  However, the Bureau also states that nevertheless, a FDCPA debt collector’s failure to disclose such information to a consumer could violate the FDCPA’s prohibition on deception or unfairness (or both), particularly if the state or local law offers greater protection than the CDC Order.  The CFPB indicates that providing a disclosure using the alternate sample language in the rule “likely cures any deception or unfairness under FDCPA sections 807 or 808 that would arise from the failure to disclose a more protective [state or local law].”  It also indicates that nothing in the rule’s disclosure requirement affects a debt collector’s obligation to provide any moratorium-related disclosure required by state r local law.

A landlord would generally not be directly subject to the rule because a landlord is typically not a “debt collector” covered by the FDCPA.  However, it is possible the rule could influence how a state regulator or court might apply a state debt collection law that applies more broadly to creditors and incorporates FDCPA prohibitions.  

False representations.  The rule prohibits a debt collector covered by the FDCPA from falsely representing or implying that a consumer is ineligible for  protection from eviction under the CDC Order.  A violation of this prohibition is deemed a violation of FDCPA Section 807.



On Wednesday, April 28, the Senate Banking Committee will hold a hearing, “The Reemergence of Rent-a-Bank?

In addition to Brian Brooks, the former Acting Comptroller of the Currency, the scheduled witnesses are Josh Stein, North Carolina Attorney General, Lisa Stifler, Director of State Policy, Center for Responsible Lending, Dr. Frederick D. Haynes, III, Senior Pastor, Friendship-West Baptist Church, Dallas, Texas, and Dr. Charles Calomiris, Henry Kaufman Professor of Financial Institutions, Columbia Business School.  Dr. Calomiris previously served as OCC Senior Deputy Comptroller for Economics under Mr. Brooks.

The topics discussed at the hearing are expected to include the resolution that has been introduced under the Congressional Review Act (CRA) to overturn the OCC’s “true lender” final rule (Rule).  The Rule addresses when a national bank or federal savings association should be considered the “true lender” in the context of a partnership with a third party.

A group of state Attorneys General that includes Josh Stein, the North Carolina AG who is a scheduled witness, recently sent a letter to Senate and House members expressing their “strong objections” to the Rule.  The AGs assert that the Rule would sanction the use of “rent-a-bank” schemes and call upon lawmakers to override the Rule under the CRA.

Blake Paulson, the Acting Comptroller of the Currency, recently sent a letter to Senators Brown and Toomey “to make them aware of the rule’s intended effect and the adverse impact of overturning the rule.”  In the letter, he discusses the Rule’s role in expanding access to affordable credit products from mainstream financial services providers and the OCC’s intention to use its supervisory and enforcement authorities if a bank making loans in partnership with a third party fails to meet its compliance obligations.  Mr. Paulson also warns that disapproval of the Rule under the CRA “will constrain future Comptrollers’ ability to address the true lender issue and may limit the OCC’s ability to take supervisory and enforcement action against banks that would have been deemed to have ‘made’ the loan under the true lender rule.”   Mr. Paulson asserts that because of this “unintended consequence” of a CRA override, instead of using the CRA, any changes to the Rule should be made through the OCC’s rulemaking process and in accordance with the Administrative Procedure Act.

According to a Politico report, a spokesperson for Senator Brown called Mr. Paulson’s letter “highly irregular” and “inappropriate.”  In our view, the comments attributed to Senator Brown’s spokesperson are off base.  We can’t think of anyone more qualified than the Acting Comptroller (who  held a senior position at the OCC for many years and was involved in the rulemaking process) to advocate for the Rule.