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May courts look beyond the face of a loan transaction to identify the “true lender”?  In a lawsuit filed by California’s financial regulator, a California state court recently answered yes, finding that a fact-intensive inquiry into the “substance” of a loan transaction was necessary to determine who the “true lender” is and declining to dismiss a lawsuit. See Opportunity Fin., LLC v. Hewlett, No. 22STCV08163 (Cal. Super. Ct. Sept. 30, 2022).…

Continue Reading California Court Applies “Substance Over Form,” Allows True Lender Claim to Proceed

In the wake of rulings upholding federal regulators’ “valid when made” rules, a new lawsuit serves as a reminder that state regulators and class-action plaintiffs’ lawyers may continue to challenge the bank partnership lending model under the “true lender” doctrine.
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Continue Reading Fintech Lawsuit Highlights True Lender Risk for Bank Partnership Lending Model

On June 30, President Biden signed into law a joint resolution to repeal the Office of the Comptroller of the Currency’s (OCC) so-called true lender rule.  The rule was repealed under the Congressional Review Act (CRA), which allows Congress to repeal new federal regulations by passing a joint resolution of disapproval that must be later signed by the president.  Federal regulations repealed under the CRA are treated as if they had never gone into effect.
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Continue Reading Congress Repeals the OCC’s True Lender Rule

On March 31, 2021, the Consumer Financial Protection Bureau (“CFPB”) rescinded a range of policy statements issued under the leadership of former Director Kathleen L. Kraninger.  These rescissions concerned one policy statement governing communications between institutions subject to CFPB supervision and their examiners, and seven policy statements issued during the COVID-19 pandemic to provide regulatory…

On April 22, the Supreme Court unanimously ruled in AMG Capital Management v. Federal Trade Commission that § 13(b) of the Federal Trade Commission (“FTC”) Act does not authorize the FTC to obtain equitable monetary relief, such as restitution for consumer harm.  This development will make it more complicated for the FTC to obtain consumer redress.  While the FTC will still be able to seek consumer redress through other legal avenues, especially § 19 of the FTC Act, these avenues generally impose additional legal requirements beyond what § 13(b) required.  This decision may prompt Congress to consider amending the FTC Act to increase the availability of consumer redress.  It may also encourage the CFPB to be more assertive in areas where the agencies share jurisdiction.
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Continue Reading Supreme Court Ruling Complicates FTC’s Ability to Obtain Consumer Redress

On April 19, 2021, the CFPB issued an interim final rule (“rule”) aimed at preventing illegal evictions.  This measure is intended to support an eviction moratorium issued by the Centers for Disease Control and Prevention (“CDC”), which prevents landlords from evicting tenants for failing to pay rent when the tenant is unable to afford full payments and would likely be driven into homelessness or a shared living setting by the eviction.  The rule applies to debt collectors—as defined in the Fair Debt Collection Practices Act (“FDCPA”)—who are collecting debts for landlords.  Under the rule’s terms, such collectors must disclose the existence of the CDC moratorium and may not misrepresent tenants’ eligibility for protection under the moratorium.
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Continue Reading CFPB Issues Rule Targeted at Preventing Illegal Evictions

On March 11, 2021, the Consumer Financial Protection Bureau (the “CFPB” or “Bureau”) announced it was rescinding its “Statement of Policy Regarding Prohibition on Abusive Acts or Practices” (the “2020 Policy Statement”).  The rescission is the latest in a series of actions under Acting Director David Uejio that demonstrate a recalibration in the Bureau’s regulatory…

On March 9, 2021, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued an interpretive rule clarifying that the Equal Opportunity Credit Act (“ECOA”) and its implementing regulation, Regulation B, prohibit discrimination based on sexual orientation and gender identity.  The CFPB made clear that this prohibition also extends to “actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other association.”  Specifically, the Bureau found that, under ECOA and Regulation B:

On January 5, 2021, the CFPB’s (the “Bureau”) Taskforce on Federal Consumer Financial Law (the “Taskforce”) released a report (the “Report”) recommending how consumer protection in the financial marketplace may be improved.  Chartered by the Bureau in January of 2020, the Taskforce was charged with “examin[ing] the existing legal and regulatory environment facing consumers and financial services providers,” and “report[ing] its recommendations for ways to improve and strengthen consumer financial laws and regulations.”…
Continue Reading CFPB’s Taskforce on Federal Consumer Financial Law Releases Report

Introduction  

On August 21, 2020, the California legislature enacted the California Consumer Financial Protection Law (CCFPL), which is to take effect on January 1, 2021.[1]  The law renames the “Department of Business Oversight” (DBO) the “California Department of Financial Protection and Innovation (DFPI)” and, among other things, empowers the department to regulate the offering and provision of consumer financial products or services under California consumer financial laws.[2]  The California legislature noted that the CCFPL strengthens “consumer protections by expanding the ability of the department to improve accountability and transparency in the California financial system and promote nondiscriminatory access to responsible, affordable credit, among other purposes.”[3]  In this blog post, we examine the DFPI’s possible authority over California’s principal privacy laws.  Covington will monitor how active the DFPI is in promulgating and enforcing privacy rules as the contours of the DFPI’s authority become apparent over time.…

Continue Reading Privacy Oversight and the California Department of Financial Protection and Innovation