Consumer Finance Monitor

Switching from his usual role as frequent host of the Consumer Finance Monitor Podcast, Alan Kaplinsky, Senior Counsel in and former Practice Group Leader of Ballard Spahr’s Consumer Financial Services Group, was recently the special guest of Bloomberg Intelligence analysts Elliott Stein and Nathan Dean on their podcast, Votes and Verdicts. The episode begins with a discussion of (1) the CFPB’s impact on consumer financial services providers, (2) how, since the CFPB’s creation in 2010, its three Directors have used the CFPB’s supervisory, enforcement, and regulatory authorities, and (3) the differences in the three Directors’ approaches. This is followed by a discussion of the case pending before the U.S. Supreme Court involving a challenge to the constitutionality of the CFPB’s funding mechanism in which Alan shares his reactions to the oral argument in the Supreme Court and discusses potential remedies if the Court rules that the CFPB’s funding is unconstitutional. The episode concludes with a discussion of how the case has impacted ongoing CFPB activity, the potential impact of a Supreme Court ruling in favor of the CFPB on future CFPB activity, and potential future challenges the CFPB may face from industry.

Our special guest is David Sherwyn, Professor of Law at Cornell University's School of Hotel Administration. In Sept. 2023, a group of consumer advocate organizations filed a Petition for Rulemaking with the CFPB that would prohibit the use of pre-dispute arbitration clauses in consumer contracts in favor of arbitration clauses that would permit consumers to choose between arbitration and litigation only after a dispute has arisen. In response, the CFPB indicated it is carefully considering the petition, and will be opening a public docket and taking comment from the public on the petition. We first discuss the results of Prof. Sherwyn’s study which concluded, in the context of employment disputes, that while superficially appealing, post-dispute arbitration fails in reality and hurts both businesses and individuals, and explain why these study results are applicable in the context of consumer finance. We then offer compelling reasons why the CFPB should not engage in such a rulemaking, including why the petition is a clear attempt to make an end-run around the CFPB’s prior arbitration rulemaking that would have prohibited class action waivers in consumer arbitration agreements and was overridden by Congress and why the petition is premature. We conclude by responding to arguments made by opponents of pre-dispute arbitration agreements that consumers are uninformed about arbitration and are “forced” to enter into such agreements. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, leads the discussion, joined by Mark Levin, Senior Counsel in the Group.

The CFPB recently issued a policy statement in which it provided a framework for determining what constitutes abusive conduct under the CFPA. After reviewing the definition of abusive in the CFPA and the historical background of the adoption of an abusive standard in the CFPA, we examine how the policy statement addresses each element of the abusive standard and share our observations as to the policy statement’s implications. We then look at past CFPB enforcement actions and supervisory findings in which conduct was alleged to be abusive. We also look at the overlap between abusive conduct and unfair or deceptive conduct and the relationship between “dark patterns” and abusive conduct and identify conduct that the CFPB might consider to be abusive. We conclude with a discussion of best practices for companies to consider to avoid engaging in conduct that the CFPB might find to be abusive. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the discussion joined by Michael Guerrero, a partner in the Group, Michael Gordon, Of Counsel in the Group, and Brian Turetsky, Of Counsel in the Group.

On October 3, 2023, the U.S. Supreme Court held oral argument in CFSA v. CFPB, a case with profound potential implications for the future of the CFPB. The Court will rule on whether the CFPB’s funding mechanism violates the U.S. Constitution’s Appropriations Clause and, if so, what the appropriate remedy should be.  Our special guests are six renowned attorneys who filed amicus briefs in the case: Michael Williams, Principal Deputy Solicitor General, Office of the West Virginia Attorney General; Adam Levitin, Professor, Georgetown University of Law Center; Scott Nelson, Public Citizen Litigation Group; Jeffrey Naimon, Orrick, Herrington & Sutcliffe LLP; Joshua Katz, Research Fellow, Cato Institute; and John Masslon, Counsel, Washington Legal Foundation. This two-part episode repurposes our widely-attended and highly interactive webinar held on October 17. In Part II, each of our guests offers his predictions for how the Court is likely to rule in CFSA v. CFPB. We then discuss each party’s position regarding what remedy the Court should impose if it rules that that the CFPB’s funding mechanism  is unconstitutional, including whether the relevant provisions of the Dodd-Frank Act are severable and how a ruling against the CFPB should impact existing CFPB regulations. We conclude with a discussion of the kinds of non-constitutional legal challenges the CFPB is currently facing or is likely to face in the future, including the potential impact of a Supreme Court decision overruling its 1984 Chevron decision dealing with judicial deference to federal agency rules. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, moderates the discussion.

On October 3, 2023, the U.S. Supreme Court held oral argument in CFSA v. CFPB, a case with profound potential implications for the future of the CFPB. The Court will rule on whether the CFPB’s funding mechanism violates the U.S. Constitution’s Appropriations Clause and, if so, what the appropriate remedy should be. Our special guests are six renowned attorneys who filed amicus briefs in the case: Michael Williams, Principal Deputy Solicitor General, Office of the West Virginia Attorney General; Adam Levitin, Professor, Georgetown University of Law Center; Scott Nelson, Public Citizen Litigation Group; Jeffrey Naimon, Orrick, Herrington & Sutcliffe LLP; Joshua Katz, Research Fellow, Cato Institute; and John Masslon, Counsel, Washington Legal Foundation. This two-part episode repurposes our widely-attended and highly interactive webinar held on October 17. In Part I, we first discuss some of the key questions asked by each of the Justices that could be indicative of how he or she may vote on the case and summarize the positions of each of the parties. We then discuss the major arguments made by each of the parties in support of their positions and examine the strength of those arguments. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, moderates the discussion.

Our special guest is Zarik Khan, Founder and Managing Director of Finsolute Advisors. Congress is now considering whether to enact the CCCA, a bill that would require credit card issuers with assets over $100 billion to include at least two possible network processors on each card. We first look at the roles of the various parties involved in a typical transaction in which a consumer makes a purchase from a merchant using a credit card. We then discuss how the CCCA requirement for at least two networks would operate, its potential implications for smaller banks and credit unions, and its implications for each of the parties involved in a typical credit card transaction. After discussing the bill’s political prospects, we assess the principal arguments made in support of or opposition to the bill, including the arguments made by the bill’s opponents that the CCCA will reduce access to consumer benefits such as rewards programs and zero fraud liability protection. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation.

Our special guest is Mark Budnitz, Professor Emeritus, Georgia State University College of Law. In an article recently published in the Georgetown Journal on Poverty Law and Policy, Prof. Budnitz explores the impact on low-income consumers of the increasing use of digital technology for consumer payments. Prof. Budnitz first explains why, in his view, the current laws governing digital financial services, particularly the Electronic Funds Transfer Act and Reg. E, do not adequately protect low-income consumers. We then discuss the benefits of various methods he believes could provide protection for low-income consumers using payment systems, such as agency enforcement of existing laws, amendments to existing laws, and enactment of new laws, as well as the limitations of those methods. We also discuss the use of government-run consumer financial services to help low-income consumers, such as the recently-launched FedNow instant payments system, proposed legislation to allow the U.S. Postal Service to offer banking services, and a proposal for the Federal Reserve to issue a central bank digital currency. We conclude with a discussion of Prof. Budnitz’s recommendations for how agencies can better address the needs of low-income consumers when considering new initiatives. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation.

Our special guest is Michael Ostheimer, Senior Consumer Protection Attorney in the FTC’s Division of Advertising Practices. In June 2023, the FTC updated its guides that set forth the FTC’s position on how Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, applies to the use of endorsements and testimonials in advertising. The updates are intended to address the increasing use of digital and social media marketing. We begin with a detailed review of the most significant changes made by the updates, such as those concerning the definitions of “endorser” and “endorsement,” the definition of a “clear and conspicuous” disclosure, suppression or boosting of consumer reviews, the use of incentivized and employee reviews and fake negative reviews of competitors, and the potential liability of advertisers, endorsers, and third parties such as advertising agencies. We then discuss how the FTC identifies potential violations and the relief it may seek, including the use of notices of penalty offenses to obtain civil penalties, and look at examples of practices involving endorsements and testimonials challenged by the FTC. We also look at potential sources of legal risk arising from the use of influencer advertising other than the FTC Act and suggest steps companies can take to protect themselves from legal risk when using reviews and testimonials. We conclude with a discussion of the FTC’s proposed new trade regulation rule which would prohibit certain practices involving consumer reviews or testimonials, including many of the practices described as deceptive in the updated guides. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, leads the conversation, joined by Aliza Karetnick, a partner in the firm and Practice Leader of the firm’s Commercial Litigation and Dispute Resolution Group.

In March 2022, the Consumer Financial Protection Bureau announced that it had revised its examination manual to instruct its examiners to apply the “unfairness” standard under the Consumer Financial Protection Act to conduct considered to be discriminatory, whether or not it is covered by the Equal Credit Opportunity Act. We first review the changes that the CFPB made to the manual, its rationale for the changes, and how those changes would allow the CFPB to target discrimination more broadly than the circumstances covered by the ECOA. We also review the industry lawsuit challenging the changes, including the reasons asserted for invalidating the changes and the relief sought. We then look at the court decision vacating the changes, including the court’s application of the “major questions” doctrine and the relief granted. We conclude with a discussion of the CFPB’s possible next steps and the decision’s implications for pending CFPB rulemakings and other CFPB actions. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, leads the conversation, joined by Richard Andreano, a partner in the Group and Practice Leader of the firm’s Mortgage Banking Group.

Our special guest is Andrew Nigrinis, PhD, who formerly served as Enforcement Economist for the Consumer Financial Protection Bureau. We first discuss what is meant by “dark patterns” and the types of digital practices identified by the CFPB and Federal Trade Commission as “dark patterns.” We then look at the CFPB ‘s position regarding the use of “dark patterns” as an unfair, deceptive, or abusive act or practice under the Consumer Financial Protection Act, the FTC’s position regarding the use of “dark patterns” as anticompetitive and/or a violation of the FTC Act prohibition of unfair or deceptive acts or practices, and the relationship between “dark patterns” and behavioral economics. We also look at other federal laws that may be used to target “dark patterns,” CFPB and FTC enforcement actions involving “dark patterns,” and state regulation of “dark patterns.” We conclude with a discussion of best practices for companies to consider in avoiding legal challenges based on “dark patterns” claims. Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation, joined by Michael Gordon, Of Counsel in the Group, and Ed Rodgers, a partner in the firm’s Antitrust and Competition Group.