On February 13, the U.S. Chamber of Commerce released model data privacy legislation and urged Congress to pass a federal data privacy law.

“Technology has changed the way consumers and businesses share and use data, and voluntary standards are no longer enough,said Tim Day, senior vice president of the Chamber’s Technology Engagement Center, or “C TEC.” “New rules of the road are necessary and it is time for Congress to pass a federal privacy law. The Chamber’s model privacy legislation puts consumers in control and ensures businesses can innovate while operating with certainty and providing transparency.”

According to the Chamber, its model legislation would:

  • Eliminate a patchwork of regulations that are confusing for consumers and businesses;
  • Empower consumers through transparency, opt-out, and data deletion;
  • Support innovation through regulatory certainty; and
  • Provide the Federal Trade Commission with additional enforcement power.

As we’ve previously reported, all signs suggest that Congress may finally enact comprehensive data privacy legislation. The patchwork of existing state laws frustrates pro-business groups like the Chamber, the Internet Association, and the Business Roundtable. Moreover, leading tech companies have lobbied Congress for data privacy legislation.

Consistent with its concern about the patchwork of existing state laws, the U.S. Chamber’s model data privacy legislation, the “Federal Consumer Privacy Act,” would preempt state and local laws (including tort laws) “to the extent that such [laws] related to, or serve as the basis for enforcement action as it relates to, the privacy or security of personal information.”

According to the Chamber, this broad preemption would support innovation by creating regulatory certainty: “Businesses would comply with one nationwide privacy framework, as opposed to having to navigate 50 unique state laws.”

The Chamber’s model legislation also includes a number of consumer-friendly provisions. The model legislation would:

  • Require businesses to be transparent about how personal information is used;
  • Require businesses to comply with requests from consumers regarding how their personal information is used or shared; and
  • Provide consumers, subject to certain exceptions, with opt-out and data-deletion rights.

A copy of the Chamber’s one-pager on its model legislation is available here, and the full text of the model legislation is available here.

The United States District Court for the District of New Jersey ruled in favor of a debt collector in Martinez v. Diversified Consultants, Inc., granting a motion to dismiss the plaintiffs’ class claims regarding a collection letter that contained the collector’s phone number.

Plaintiff Waleska Martinez alleged violations of Section 1692g of the Fair Debt Collection Practices Act for containing the debt collectors’ phone number.  Martinez argued that the collection letter “would cause the least sophisticated consumer to become confused as to what she must do to effectively dispute [a] debt … .”  In short, she claimed that the phone number “overshadowed or contradicted” the validation notice that a consumer must notify the debt collector in writing within thirty days if she disputed the debt.

The Court disagreed, ruling that the collection letter contains the required validation notice under Section 1692g(a) and that the substance of form does not overshadow or contradict the validation notice. Specifically, the Court ruled several factors were not met to show that the phone numbers overshadowed the validation notice.  First, the letter did not instruct the consumer to call the number.  Second, the phone number was not in bold or large typeface which would gain more attention than other text.  Third, the mailing address was found on multiple locations of the letter to aid a consumer in mailing a written dispute.  Finally, the validation notice was not hidden or relegated to the back side of the collection letter.   For these reasons, the Court dismissed the complaint without prejudice.

The claims in this case appear to have less merit than most filed under the FDCPA.  However, it appears that consumer protection attorneys are trying new and creative ways to try to hold debt collectors liable for their collection letters.  Troutman Sanders will monitor this decision for appeal or for a new complaint filed by Martinez.

2018 was a busy year in the consumer financial services world. As we navigate the continuing heavy volume of regulatory change and forthcoming developments from the Trump Administration, members of Troutman’s Consumer Financial Services Practice will review the current state of federal and state consumer financial services law and policy and highlight what you and your company need to know about what lies ahead.

During this webinar, we will share developments on consumer class actions, background screening, the Fair Credit Reporting Act (“FCRA”), the Fair Debt Collection Practices Act (“FDCPA”), payment processing and cards, mortgage, auto finance, the consumer finance regulatory landscape, cybersecurity and privacy, and the Telephone Consumer Protection Act (“TCPA”).

Scheduling conflict? Register to receive the recording after the webinar.

One hour of CLE credit is pending.

To register, click here.

The Consumer Financial Services practice at Troutman Sanders LLP has been selected as one of Law360’s 2018 Practice Groups of the Year. The team was recognized in Law360’s Consumer Protection category for excellence in representing and advising clients with respect to high-stakes litigation and regulatory matters, as well as compliance issues.

The firm also received the award in 2016.

From Law360:

Troutman Sanders LLP landed a major appellate victory against the Consumer Financial Protection Bureau in 2018 that marked just the second time an appeals court has declined to enforce one of the consumer watchdog’s so-called civil investigative demands, landing the firm among Law360’s Consumer Protection Groups of the Year.

Read the full write-up in Law360 here.

ATLANTA – The Consumer Financial Services practice at Troutman Sanders LLP has been selected as one of Law360’s 2018 Practice Groups of the Year. The team was recognized in Law360’s Consumer Protection category for excellence in representing and advising clients with respect to high-stakes litigation and regulatory matters, as well as compliance issues. The firm also received the award in 2016.

“We are proud to be recognized as one of Law360’s Consumer Protection Practice Groups of the Year for the second time in three years. Our litigation, regulatory and compliance attorneys remain committed to providing the best service to our clients,” said Michael Lacy, a partner in Troutman Sanders’ Consumer Financial Services practice.

Troutman Sanders’ trial attorneys have litigated thousands of individual and class action lawsuits in the consumer protection area. The firm also provides national, regional and local banks with compliance advice in the areas of consumer credit and consumer protection.

“Clients appreciate our team’s geographic reach and our work and expertise spanning the full spectrum of industry verticals and legal scenarios,” said Ron Raether, a partner in Troutman Sanders’ Consumer Financial Services practice. “We appreciate Law360’s recognition of our team’s achievements.”

Law360 selects winners based on landmark matters and general excellence and this year received a total of 759 submissions. A profile of Troutman Sanders’ Consumer Financial Services practice will appear in Law360 later this month.

About Troutman Sanders
With a diverse practice mix, workforce and footprint, Troutman Sanders has cultivated its reputation for a higher commitment to client care for over 120 years. Ideally positioned to help clients across sectors realize their business goals, the firm’s 650 attorneys transact for growth, resolve mission-threatening disputes and navigate complex legal and regulatory challenges. See troutman.com for more information.

The federal government shutdown continues and, in the wake of the President Donald Trump’s Oval Office address in support of the border wall, it appears that it could continue for some time. Press reports say approximately 800,000 federal workers are furloughed or working without pay. Consumer-facing companies are asking: What is the impact of the shutdown on their regulatory and litigation docket, as well as anticipated regulatory matters?

At a high level, from a consumer protection point of view, the most notable emerging impacts are on the federal judiciary, the U.S. Department of Justice and the Federal Trade Commission; on the other hand, the banking regulators are fully operational and open for business. Here’s a summary of the state of the judiciary and the federal regulatory agencies under the shutdown.

Continue reading the article here.

 

 

A Fair Credit Reporting Act claim by any other name is still an FCRA claim. That’s the recent holding by the Northern District of New York in Arnold v. Navient Sols., LLC. Plaintiffs cannot avoid federal court jurisdiction through “artful pleading” when they assert claims relating to the responsibilities of information furnishers. 

Factual Background 

In 2013, plaintiff John Jay Arnold failed to make payments on three private and one federal student loan. The servicer of his loans, Navient Solutions, LLC, reported the delinquencies to the three major credit reporting agencies (“CRAs”). Arnold settled the private loans for less than the full balance and did not settle the federal loan. Navient then reported the private loans as “paid off but less than the full balance” and continued to report the federal loan as delinquent, noting that the “consumer disputes [the federal loan] account.”  

Due to the derogatory student loan account reporting, Arnold alleged his credit score was negatively affected and claimed that he was denied financing to purchase a home. When Navient refused to change the information reported to the CRAs, Arnold sued in New York’s state trial court, alleging deceptive acts in the conduct of business in violation of New York General Business Law § 349. Navient removed the case to federal court, and Arnold moved for remand back to state court. 

FCRA Preemption 

The Arnold Court held that it had federal question jurisdiction over the action because the FCRA preempted Arnold’s state-law claim. The Court acknowledged that plaintiffs are the masters of their complaint and that they can usually dodge federal court through “artful pleading.” However, Congress can completely preempt areas of state law, and, barring minor exceptions, it did so with respect to claims “relating to the responsibilities of persons who furnish information to [CRAs]” pursuant to 15 U.S.C. § 1681t(b)(1)(F). Because Arnold’s suit was based on Navient’s responsibilities as an information furnisher—namely, its duties to report accurate information and investigate disputed debts—his claims were preempted by the FCRA and, thus, arose under federal law. 

The Second, Fourth, and Seventh circuits have likewise held that the FCRA preempts similar state law claims against furnishers of information to CRAs, as demonstrated in Macpherson v. JPMorgan Chase Bank, N.A., 665 F.3d 45, 47 (2d Cir. 2011); Purcell v. Bank of Am., 659 F.3d 622, 625 (7th Cir. 2011); and Ross v. F.D.I.C., 625 F.3d 808, 813 (4th Cir. 2010). These cases serve as a reminder that, in the context of credit reporting disputes, a suit may be removable even though the plaintiff asserts only state law claims.

Effective January 1, Troutman Sanders promoted 13 attorneys to the partnership, including Virginia Flynn and Ethan Ostroff, two active contributors to the Consumer Financial Services Law Monitor blog. In addition, contributors Mohsin Reza and James Trefil were promoted to counsel, and Kyle Deak was named the managing partner of Troutman Sanders’ Raleigh office. 

Virginia Flynn represents clients in federal and state court, both at the trial and appellate levels in complex litigation and business disputes, healthcarerelated issues, financial services litigation, and consumer litigation. Virginia often counsels clients to ensure they comply with the myriad of growing laws in the consumer law and financial services fields, with an emphasis on the many “alphabet soup” federal consumer protection statutes. 

Ethan Ostroff focuses on financial services litigation and consumer law compliance counseling. He defends consumer-facing companies of all types in individual and class action claims across the country. Ethan’s litigation, compliance, and regulatory practice includes representing debt buyers, debt collectors, loan servicers, banks, auto finance companies, credit card issuers, consumer reporting agencies, and other related consumer finance entities, in particular with the “alphabet soup” of state and federal consumer protection statutes. 

Mohsin Reza focuses on representing financial institutions and other corporate clients in commercial, consumer, and lender liability disputes. Mohsin has significant experience litigating claims brought under federal consumer protection statutes.  

James Trefil represents clients in federal and state court, both at the trial and appellate levels, with a focus on areas of complex litigation, financial services litigation, and consumer litigation. Jim has represented clients within these areas in a wide variety of litigation matters involving class actions, contracts, torts, and federal and state consumer protection laws. 

Kyle Deak, an established partner within the Consumer Financial Services section, has been named managing partner of the Troutman Sanders’ Raleigh office. Kyle succeeds Walter Fisher, who has managed the Raleigh office since 2016 and most recently has overseen its strategic relocation to North Hills. Kyle has extensive experience both serving as the first chair in jury trials and handling appeals in state and federal courts throughout the United States. His practice primarily involves the representation of financial institutions, loan servicers, and mortgage investors in lender liability actions, real property financing disputes, foreclosures, and other commercial disputes.

More than two weeks have passed since the government shutdown began on December 22, 2018, and there is still no immediate end in sight. President Trump has resolved to continue the shutdown for as “long as it takes,” declining to sign spending legislation without the requested $5 billion for the border wall.  Federal governmental entities, including the judiciary, are now facing an uncertain future should the shutdown continue beyond this week.

According to the Administrative Office of the U.S. Courts, the court system has enough money to run through January 11, 2019, by using court fee balances and other funds not dependent on a new appropriation.  But if the shutdown continues past January 11, 2019 and exhausts the federal Judiciary’s resources, courts will have to develop plans for reduced operations, including forcing nonessential workers to stay home while skeleton crews (without pay) handle matters deemed essential under law.

Under such a scenario, criminal cases and other critical cases will likely be prioritized while civil cases may be delayed. Judges will have significant latitude to determine which cases move forward and which are deferred.

Some courts have already begun to issue their directions in anticipation of a prolonged shutdown.  Ruben Castillo, chief judge of the U.S. District Court for the Northern District of Illinois in Chicago, for example, said he is ready to operate a “triage system” if the shutdown extends beyond January 11. “I will have to have a meeting with our court personnel and tell them I won’t be able to pay them. Then we’ll have to shut down civil trials,’’ Judge Castillo said.

Other courts, such as the United States District Court for the Western District of Kentucky and United States District Court in the Southern District of West Virginia, have issued sua sponte general orders holding in abeyance any civil matters involving the government as a party to “avoid any default or prejudice to the United States or other civil litigants occasioned by the lapse in funding.”  But specific judges within those District Courts, including Joseph R. Goodwin in Western Virginia, issued orders exempting their cases from the first judge’s order. Judge Goodwin wrote: “It is my view that the government should not be given special influence or accommodation in cases where such special considerations are unavailable to other litigants.”

Still other courts are taking a “wait-and-see” approach.  The chief judge of the United States District Court for the Eastern District of California, for instance, is expected to issue an order detailing the scope of operations under lapsed appropriations if the shutdown continues past January 11.

In sum, the shutdown appears likely to create a complex, court-by-court or even judge-by-judge response. The shutdown could consequently cause confusion and a patchwork of differing and conflicting orders among the courts. The main general impact may be felt on civil matters, and those functions that require involvement by court staff, such as trials, hearings and some clerk’s office functions. However, absent intervening court orders, functions not requiring human attention, such as execution by parties of deadlines by non-filed discovery papers or filing papers through PACER, may not be impacted at all.

While we wait five more days to see if the government can resolve its differences, parties should take steps now to research any applicable orders and directions that may impact their pending litigation on a court-by-court or even judge-by-judge basis. Parties will then be best prepared to address the circumstances they may face should the shutdown continue after the federal judiciary runs out of money.

In December, Judge Robert D. Mariani denied Navient’s motion to dismiss a lawsuit filed by the Commonwealth of Pennsylvania, ruling that the suit is not pre-empted by a similar case filed against the company by the Consumer Financial Protection Bureau.  In the suit, the Commonwealth seeks to hold Navient liable for student loan collection activity that allegedly harmed borrowers both in Pennsylvania and nationwide.

Specifically, the Commonwealth alleges that Navient committed a variety of abusive practices in violation of the Consumer Financial Protection Act (“CFPA”) and Pennsylvania’s unfair trade practices and consumer protection law (“CPL”).  The Commonwealth’s case is similar to a parallel action pending in the same court involving the CFPB.  The motion to dismiss claimed that the Commonwealth’s complaint is “essentially cut and pasted from the CFPB’s long ago filed complaint.” But the judge, in denying the motion, rejected Navient’s argument that the Commonwealth’s action is merely a “copycat” of the CFPB suit that “unnecessarily burden[s] the courts and parties, and would risk generating inconsistent rulings across the country.”

“While Navient’s arguments are creative, they do not convince the Court that the CFPA prohibits concurrent state enforcement actions,” wrote Judge Mariani.  “Following Navient’s position would require the Court to accept an amalgam of tenuous postulates regarding several provisions of the CFPA and a strained reading of the plain text of the statute.”  Because concurrent enforcement actions are barred in other areas of the CFPA, but not in the section relevant to this particular case, “applying the canon of statutory interpretation [holding that where Congress includes language in one section but omits it in another, it is presumed Congress acts intentionally] is particularly appropriate.”  The Court also ruled that other federal statutes – the Truth in Lending Act and Higher Education Act – do not pre-empt the Commonwealth’s claims.

The opinion marks the latest development in a years-long battle among the federal government, states, and student loan companies over whether and how states can regulate the firms, which are also contractors of the Department of Education.  Navient, a Delaware-based student loan management company and formerly a part of Sallie Mae, is facing similar suits in other states, including Illinois, California, Mississippi, and Washington.  Navient’s motion to dismiss the Illinois Attorney General’s suit (based on the same preemption argument) was denied in July.

In early 2018, Secretary of Education Betsy DeVos issued a memo backing student loan servicers.  In the memo, the Department maintains that state rules and regulations aimed at greater consumer protection undermine the federal government’s goal of a single streamlined federal loan program.  State attorneys general have accused the Department of Education of rolling back protections for borrowers for some time now—a coalition of thirty attorneys general recently formed in opposition to portions of the Higher Education Act reauthorization, also known as the PROSPER Act.  States likely will continue to pursue similar claims against Navient in light of the recent rulings against preemption in this context.