Consumer Finance Monitor

The CFPB and state regulators and legislators have medical debt in their crosshairs. In this episode, we’re joined by Chris Eastman, CEO of the Pendrick Group, a Cerberus portfolio company that specializes in financial services solutions for healthcare companies. We discuss the differences between medical debt and other types of debt, as well as how states have been regulating medical debt including the collection of medical debt. Mr. Eastman discusses his company’s efforts to provide cash flows into hospitals and other healthcare providers that are operating at razor-thin margins. We also discuss the CFPB’s assertion that medical debt is less predictive than other sources of debt in determining the creditworthiness of a consumer. Mr. Eastman discusses how medical debt may be a valuable indicator when assessing the financial stress of a consumer. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, leads the conversation, and is joined by Joseph Schuster, a Partner in the group.

Rewards programs drive consumer choice and activity in connection with credit cards and other financial services. The CFPB has reported the most important element by far that influences a consumer’s decision to apply for a specific credit card is the rewards program associated with the card. Further, rewards can affect the consumer's choice at the point of sale as to which card to use. In this podcast episode, which repurposes a recent webinar, we explore recent trends in scrutiny of credit card rewards programs and other rewards programs by state and federal regulators and lawmakers. We also address laws and regulations, enforcement, emerging pitfalls, and best practices applicable to rewards programs. We open with a review of how rewards have been treated in the CFPB's reports on the credit card market since 2013, and the significance of and learnings from these reports. We then focus on complaints and federal regulators’ enforcement activity relating to rewards programs. Next, we turn to state law developments affecting rewards programs, including laws that specifically apply to rewards programs as well as contract, interchange, and UDAP / UDAAP laws. We then delve into other topics including the current focus on airline – credit card rewards programs by the Department of Transportation and the CFPB; the CFPB’s May 2024 report about credit card rewards; and important elements card issuers should keep in mind in the context of co-brand credit card rewards programs. We then conclude with a discussion on best practices to consider in mitigating risks and maximizing the benefits of rewards programs. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, moderates today’s episode, and is joined by Michael Guerrero and Joseph Schuster, Partners in the Group, and Kristen Larson, Of Counsel in the Group.

Special guest Professor Alan Trammell of Washington and Lee University School of Law joins us today for a deep dive into universal injunctions and the related topics of associational standing and judicial forum shopping, and how these elements come into play in litigation challenging regulations and other government policies and actions. Recent developments in litigation critical to the consumer financial services industry have brought universal injunctions into the spotlight. We begin today’s episode by providing a working definition of a universal injunction, some historical background, and examples that illustrate the benefits, effects and power of this sweeping remedy. We then turn to an in-depth discussion of objections raised by detractors; real-world concerns that may flow from universal injunctions, including a “one and done problem” cited by Professor Trammell; and various circumstances where Professor Trammell argues universal injunctions are and are not appropriate. We also cover associational standing and its interaction with universal injunction: whether and when a trade association should have standing to bring an action seeking relief for its members, and how and when the outcome of the action might expand into a universal injunction that also would benefit non-members. Our next areas of focus are forum shopping and judge shopping, particularly in the context of such litigation brought by an association. We then turn to speculation as to whether and how the U.S. Supreme Court may proceed to bring some uniformity to how the courts are dealing with these issues. Our episode concludes with comments on recent input on these topics from sources such as Congress and the Judicial Conference of the United States. Alan Kaplinsky, former practice leader and current Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts this week’s episode.

“Buy Now, Pay Later” (BNPL) products emerged relatively recently as a new approach enabling consumers to enjoy the ability to make a purchase and then pay for it over time. Today’s episode, during which we explore the evolution of BNPL products and important recent developments in BNPL regulation, is hosted by Alan Kaplinsky, former practice leader and current Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, and features Ballard Spahr Partners Michael Guerrero and Joseph Schuster. We first discuss the structure and mechanics of BNPL products, and the benefits they afford to consumers, merchants, and creditors. Next, we turn to a discussion of regulators’ reactions to BNPL, specifically the activities of the CFPB leading up to its new interpretive rule, effective July 30th, which equates BNPL products with credit cards and characterizes BNPL providers as card issuers or creditors, thus subjecting them to the constraints and requirements of the Truth in Lending Act (TILA) and Regulation Z. We then explore the CFPB’s BNPL interpretive rule in detail, including an analysis of the concerns raised by the CFPB in connection with BNPL offerings; the CFPB’s introduction of the “digital user account” concept and other theories to bring BNPL into the purview of TILA and Regulation Z; and the complexities and uncertainties now faced by BNPL providers as they struggle to comply. We conclude with a look at the possibilities of a legal challenge to the CFPB’s BNPL interpretive rule, given recent Supreme Court decisions, and state law considerations for BNPL providers.

The 1978 landmark opinion in Marquette National Bank v. First of Omaha Service Corp held that under the National Bank Act, a national bank has the right to export the interest rate authorized by the state where the bank is located to borrowers located elsewhere. Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDMCA") conferred equivalent rate exportation powers on state-chartered, FDIC-insured banks. These interest rate exportation powers (which also extend to certain fees), coupled with technological advances in recent years and the advent of “bank-model” and “banking as a service” (BaaS) programs, have created a robust, competitive smorgasbord of credit products for consumers. However, rate exportation, and the programs it enables, increasingly are subject to challenges from a variety of sources. In this two-part episode, which repurposes portions of a recent webinar, we describe the nature of these attacks, the defenses being deployed by the industry, and who is winning these contests so far, and address what the future may hold for rate exportation. We start Part II with a discussion of states that have adopted, or are considering, “true lender” statutes that aim to recharacterize fintechs and other bank service providers as lenders, thus defeating the originating bank’s ability to export rates and fees. We then discuss “true lender” enforcement actions and efforts by state attorneys general, and “true lender” litigation developments including cases where arbitration clauses have been upheld, causing arbitration to be ordered in putative class actions. Next, we talk about attacks on the “valid when made” doctrine (which provides that a loan that was non-usurious when it was made doesn't become usurious after it is transferred to a third party), and “valid when made” regulations adopted by both the OCC and FDIC. We proceed with some tips on how prevailing industry plaintiffs who seek to overturn statutes inimical to rate exportation might recover attorney’s fees. We then conclude with a review of recent and pending Supreme Court cases whose outcomes have the potential to affect rate exportation powers and related regulations.   Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, moderates episode, joined by John Culhane, Joseph Schuster, and Ronald Vaske, Partners in the Group, and Mindy Harris and Kristen Larson, Of Counsel in the Group.

The 1978 landmark opinion in Marquette National Bank v. First of Omaha Service Corp held that under the National Bank Act, a national bank has the right to export the interest rate authorized by the state where the bank is located to borrowers located elsewhere. Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDMCA") conferred equivalent rate exportation powers on state-chartered, FDIC-insured banks. These interest rate exportation powers (which also extend to certain fees), coupled with technological advances in recent years and the advent of “bank-model” and “banking as a service” (BaaS) programs, have created a robust, competitive smorgasbord of credit products for consumers. However, rate exportation, and the programs it enables, increasingly are subject to challenges from a variety of sources. In this two-part episode, which repurposes portions of a recent webinar, we describe the nature of these attacks, the defenses being deployed by the industry, and who is winning these contests so far, and address what the future may hold for rate exportation. In Part I, we first review a brief history of rate exportation, and explore the three primary theories used to attack rate exportation. We then focus on current and pending state laws and bills seeking to “opt out” of DIDMCA’s rate exportation authority. Next, we turn to the current court battle being waged in Colorado, where three trade groups recently won a preliminary injunction against enforcement of Colorado’s recently adopted opt-out legislation, and discuss the decision and its ramifications, including potential impacts on existing and pending opt-out legislation in other states, implications for nonmembers of the three trade group plaintiffs, and the prospects for enforcement in Colorado and other opt-out states by the FDIC based on the position (contrary to the preliminary injunction) advocated in its amicus brief. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, moderates episode, joined by Ronald Vaske, a Partner in the Group, and Mindy Harris, Of Counsel in the Group.

California frequently is in the vanguard of consumer financial issues and legislation, foreshadowing trends that may spread to other states. Today’s episode, during which we explore important hot topics and recent developments in California consumer finance law, is hosted by Ballard Spahr partner Melanie Vartabedian, and features Partners Michael Guerrero and Joel Tasca, and Of Counsel John Kimble. We first discuss what the future likely holds for proposed rules issued under the California Consumer Financial Protection Law (CCFPL) by the California Department of Financial Protection and Innovation (DFPI). The proposed rules include complex registration and reporting requirements for certain consumer products, and are under revision after rejection by the California Office of Administrative Law for lack of clarity. We then explore the DFPI's most recent annual report on activity under the CCFPL, which recaps the DFPI's rulemaking, enforcement efforts, complaints received, and efforts in connection with education outreach and the Office of Financial Innovation. Highlights include a rule that applies consumer-type “unlawful, unfair, deceptive, or abusive acts and practices” (referred to in the report as “UUDAAP”) prohibitions to financial products and services provided to small businesses; ramped-up enforcement efforts; and high-dollar settlements as well as litigation in progress. Next, we turn to a comparison of California’s Rosenthal Fair Debt Collection Practices with the federal Fair Debt Collection Practices Act, and discuss their similarities, differences, and litigation trends under both laws. We then focus on the California Consumer Credit Reporting Agencies Act, which poses challenges for companies that report consumer data to consumer reporting agencies over and above the requirements of federal law. We conclude with a look at unique issues arising in California with respect to the FTC “holder rule”.

Special guest Alex J. Pollock, Senior Fellow with the Mises Institute and former Principal Deputy Director of the Office of Financial Research in the U.S. Treasury Department, joins us to discuss his recent blog post published on The Federalist Society website in which he urges Congress to look into the question of whether the Federal Reserve can lawfully continue to fund the CFPB if (as now) the Fed has no earnings. We begin with a review of the Supreme Court’s recent decision in CFSA v. CFPB which held that the CFPB’s funding mechanism does not violate the Appropriations Clause of the U.S. Constitution. Alex follows with an explanation of the CFPB’s statutory funding mechanism as established by the Dodd-Frank Act, which provides that the CFPB is to be funded from the Federal Reserve System’s earnings. Then Alex discusses the Fed’s recent financial statements and their use of non-standard accounting, the source of the Fed’s losses, whether Congress when writing Dodd-Frank considered the impact of Fed losses on the CFPB’s funding, and how the Fed can return to profitability. We conclude the episode by responding to arguments made by observers as to why the Fed’s current losses do not prevent its continued funding of the CFPB, potential remedies if the CFPB has been unlawfully funded by the Fed, and the bill introduced in Congress to clarify the statutory language regarding the CFPB’s funding. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation.

On May 16, 2024, the U.S. Supreme Court ruled that the CFPB’s funding mechanism does not violate the Appropriations Clause of the U.S. Constitution. This two-part episode repurposes a recent webinar. In Part II, we first discuss the CFPB’s launch of Fair Credit Reporting Act rulemaking, proposed rule to supervise larger payment providers, proposed rule on personal financial data rights, and interpretive rule on buy-now-pay-later.  We next discuss the operation of the Congressional Review Act and its potential impact on final CFPB rules if the November 2024 election results in a change in Administrations. We then discuss the impact of the SCOTUS decision on pending CFPB enforcement actions, the expected proliferation of new CFPB investigations and enforcement actions, and the CFPB’s announced hiring binge. We conclude by sharing our thoughts on what companies can do to prepare for an uptick in CFPB activity and how the CFPB’s increased staffing is likely to impact which companies will be targeted. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, moderates the discussion joined by John Culhane and Joseph Schuster, Partners in the Group, and Kristen Larson, Of Counsel in the Group.

On May 16, 2024, the U.S. Supreme Court ruled that the CFPB’s funding mechanism does not violate the Appropriations Clause of the U.S. Constitution. This two-part episode repurposes a recent webinar. In Part I, we first discuss the SCOTUS decision, the status of the CFPB’s payday lending rule that was at issue in the underlying case, and a potential new challenge to the CFPB’s funding that has been the focus of recent attention. We then discuss four cases still pending before SCOTUS in which the decisions could impact the CFPB. Next, we discuss the pending lawsuits challenging the CFPB’s final rules on credit card late fees and small business data collection and the changes to the CFPB’s UDAAP exam manual defining “unfairness” to include discrimination, including the background of those cases, their current status, and the non-constitutional legal challenges made by the plaintiffs in those cases. We conclude with a discussion of final and proposed CFPB rules expected to be issued soon and potential non-constitutional legal challenges to those rules. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, moderates the discussion joined by John Culhane, Richard Andreano, and Joseph Schuster, Partners in the Group, and Kristen Larson, Of Counsel in the Group.