We are pleased to announce that Troutman Sanders partner Ashley Taylor will participate in a webinar hosted by the American Bar Association on “Abusive Car Loan and Sale Practices: Scope and Potential Remedies to Strengthen Consumer Protections” The event will take place on March 22, 2018 from 1 p.m. – 2:30 p.m. ET.

Today, there are almost 100 million auto loans outstanding totaling more than $1 trillion. In a society where more than 90% of American households have a vehicle, it represents the third largest type of consumer debt, trailing behind only mortgage and student debt. The purpose of the program is to provide an overview of the trending legal issues relating to auto loan and sale practices that heavily impact low- and moderate income consumers, the magnitude of its impact, and how regulators view these trends. We will discuss the pros and cons of certain proposed legal remedies and practices purportedly designed to strengthen consumer protections, especially in the sub-prime marketplace.


John W. Van Alst
Director of Working Cars for Working Families Project
National Consumer Law Center

Delvin Davis
Senior Research Analyst, Lead Researcher on Auto/Car Title Lending
Center for Responsible Lending

Ashley L. Taylor, Jr.
Partner, Consumer Financial Services Practice
Troutman Sanders

Shennan Kavanagh
Deputy Chief, Consumer Protection Division
Office of the MA Attorney General


James J. Pierson
Assistant Professor & Coordinator of Accounting
Chatham University

For additional information, or to register, click here.

BMW Financial Services N.A. has agreed to settle claims brought by the U.S. Department of Justice that the company violated federal law by failing to refund portions of up-front lease payments made by servicemembers who terminated their leases early due to military obligations.  Under the agreement, BMW will pay more than $2 million to affected servicemembers.

The Department of Justice filed a complaint in the District of New Jersey, contending that BMW’s auto finance division violated the Servicemembers Civil Relief Act (“SCRA”), which includes a number of protections to servicemembers.  Under the SCRA, servicemembers may terminate motor vehicle leases early without penalty after entering military service or receiving qualifying military orders for a permanent change of station or for deployment.  If a servicemember terminates a motor vehicle lease, the SCRA requires a refund of all lease amounts paid in advance.

The government alleged that BMW violated the SCRA by failing to refund portions of advance lease payments made in cash or vehicle trade-in credit when servicemembers had to end their leases early due to deployment or relocation.  According to the Department of Justice, servicemembers were denied refunds of their remaining capitalized cost reduction amounts, a portion of their up-front payments that was intended to reduce monthly payments over the term of a lease.

The agreement covers all leases terminated by servicemembers since August 24, 2011, and requires BMW to refund portions of the capitalized cost reduction amounts to each affected servicemember based on the number of days remaining on their leases, plus additional damages consisting of $500 or triple the refund, whichever is higher.  The agreement also requires BMW to revise its policies and procedures to ensure SCRA compliance moving forward.

The case is United States v. BMW Financial Services N.A., LLC (D.N.J.).

On February 6, the Conference of State Bank Supervisors (“CSBS”) announced that seven states have entered into a compact that should streamline the process of applying for state money transmitter licenses.

Moving forward, the participating states– Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas, and Washington – will accept each other’s findings regarding certain “key elements of state licensing.”  The “key elements” include IT, cybersecurity, business plan, background check, and compliance with the federal Bank Secrecy Act.

If the compact works as planned, a company that has obtained a money transmitter license from one of the compact states will be able to obtain a license from any other compact state without the delay and expense of duplicative review and approval requirements, at least as to the “key elements” outlined above.

“This MSB licensing agreement will minimize the burden of regulatory licensing, use state resources more efficiently, and allow for broader participation by other states across the country,” said John Ryan, CSBS president and chief executive officer.

The CSBS’s announcement also noted that more states are expected to join the compact, which is only the “first step among state regulators in moving towards an integrated, 50-state system of licensing and supervision for fintechs.”

A copy of the CSBS’s announcement is available here.

A Roanoke City Circuit Court judge recently ordered a defendant to pay nearly $160,000 to two plaintiffs for violations of the Virginia Consumer Protection Act (“VCPA”) in a dispute over a wrecked car worth no more than $9,300.

In Hughes v. Robert Young Auto & Truck, Inc., No. CL16-1364, the plaintiffs, a married North Carolina couple, sued for compensatory and punitive damages for conversion, violation of the VCPA, and fraud. The case began when the plaintiffs’ son, driving his parents’ car, was chased by the Virginia State Police. After ultimately crashing the vehicle, the police directed the defendant, Robert Young’s Auto & Truck, Inc. (“RYAT”), to tow the vehicle from the scene and store it. Pursuant to Virginia’s garage-keeper’s lien statute, RYAT elected to satisfy the unpaid lien arising from the towing and storage fees by selling the car via public auction, a remedy established by public statute.

The Virginia Department of Motor Vehicles wrongfully advised RYAT that American Honda Finance Corporation owned the vehicle, prompting RYAT to mail that company a notice of lien and public auction. That mailing was returned as undeliverable. RYAT employees also posted auction notices and then held the auction at RYAT’s Roanoke office on March 30, 2017. When no one attended, RYAT itself purchased the vehicle for $100.

Meanwhile, the parents, who were the actual owners of the vehicle, had approached the Virginia State Police and requested permission to retrieve the vehicle. The police informed them that it could not be retrieved because it remained evidence in an ongoing criminal investigation. Consequently, the vehicle’s owners did not approach RYAT about paying any applicable fees or having the vehicle returned, and they never received notices from RYAT of the public auction.

When the owners finally did approach RYAT following the auction, RYAT informed them the vehicle had been sold to an out-of-state buyer. In a later phone call, RYAT informed the owners that the out-of-state buyer was willing to walk away from the deal and that the owners could procure the vehicle if they paid $4,794.81, which purportedly represented the towing, storage, and auction fees. The owners refused and instead filed suit in Roanoke City Circuit Court.

Following trial, the Court granted relief based on the VCPA claim. It noted that the VCPA “outline[s] ethical standards between suppliers and consumers in order to protect the public, and it is to be construed in favor of the injured party.” It also explained that the VCPA covers “suppliers” involved in transactions with consumers and defines a “supplier” as “a seller, lessor or licensor who advertises, solicits or engages in consumer transactions, or a manufacturer, distributor or licensor who advertises and sells, leases, or licenses goods or services to be resold . . . by others in consumer transactions.” Through its offer to sell the vehicle back to its owners, RYAT became a “seller” and consequently a VCPA “supplier,” the Court reasoned.

The plaintiffs established four VCPA violations, based on: (1) RYAT’s false statement that an out-of-state buyer purchased the vehicle, where RYAT itself actually made the purchase; (2) RYAT’s failure to post proper auction notices; (3) RYAT’s separate false statement that the out-of-state buyer was willing to walk away from the transaction; and (4) that the $4,794.81 represented the total cost of towing, storage, and auction fees, where the actual costs and fees were actually $2,844.81.

Accordingly, the Court awarded $27,900, plus interest. Actual damages were calculated at $9,300, which represented the approximate trade-in value of the vehicle. However, the Court multiplied that figure by three pursuant to the treble damages provision in Virginia Code § 59.1-204. It also awarded attorneys’ fees of $129,295 and costs of $2,787.75. In total, the judgment amounted to $159,982.

RYAT has filed a Notice of Appeal with the Supreme Court of Virginia.  However, the parties dispute whether that notice was timely filed and await further direction from the justices.

The case illustrates how the Virginia Consumer Protection Act can be a powerful tool in the arsenal of plaintiffs’ attorneys, even when the amounts at issue are seemingly small.

The deadline for motor vehicle dealer compliance with the Federal Trade Commission’s revised Used Car Rule is rapidly approaching.  The January 28, 2018 compliance date imposed by the FTC requires dealers, as of that date, to use the agency’s revised window sticker, known as the “Buyers Guide,” on all used vehicles offered for public sale. 

In November 2016, the FTC announced its final amendments to the Used Car Rule, and specifically revised the federally-required form of the Buyers Guide that must be displayed on a used motor vehicle offered for sale to the public. 

As we covered here, the FTC issued additional guidance on the Used Car Rule in September 2017, in response to a number of questions raised by dealers regarding compliance.  The guidance was in the form of frequently asked questions (FAQs) and addressed topics such as:  whether and what type of changes can be made to the language; the format and font of the Buyers Guide; disclosure requirements regarding manufacturer and third-party warranties; and guidance for completing the “systems covered” portion of the revised Buyers Guide.   

The amendments to the Rule included a grace period that permitted dealers to use their remaining stock of Buyers Guides for up to one year after the January 28, 2017 effective date.  Time is running short, however, and all used vehicles must display the new Buyers Guide by January 28, 2018.

2017 was a transformative year for the consumer financial services world. As we navigate an unprecedented volume of industry regulation and forthcoming changes from the Trump Administration, Troutman Sanders is uniquely positioned to help its clients find successful resolutions and stay ahead of the compliance curve.

In this report, we share developments on consumer class actions, background screening, bankruptcy, credit reporting and consumer reporting, debt collection, payment processing and cards, mortgage, auto finance, the consumer finance regulatory landscape, cybersecurity and privacy, and the Telephone Consumer Protection Act (“TCPA”).

We hope you find this helpful as you navigate the evolving consumer financial services landscape.


The Moore v. Rite Aid Headquarters Corp. case has a long history of addressing significant questions regarding an employer’s adverse action responsibilities under the Fair Credit Reporting Act.  That history recently ended in the District Court for the Eastern District of Pennsylvania, with a dismissal of Moore’s claims and a denial of her motion for class certification.  In its December 21 opinion, the court found that Moore could not show that she had suffered an injury-in-fact stemming from her claim that Rite Aid failed to provide her with adequate notice before declining her employment.

Moore had applied for employment with Rite Aid and, as part of the application process, Rite Aid obtained a background check on her.  Based on this background check, Moore was initially determined to be “ineligible for hire,” which triggered the mailing of a pre-adverse action letter to her.  In this letter, Rite Aid informed Moore that she would not be offered employment if Rite Aid did not hear from her within five business days from the date of receipt of the letter.  After receiving the pre-adverse action letter, Moore contacted Rite Aid to discuss her background.  Despite this conversation, Moore was mailed an adverse action letter exactly five business days after the date of the pre-adverse action letter.  This adverse action letter informed Moore that she would not be hired.

In her lawsuit, Moore alleged that Rite Aid violated the pre-adverse action provision of the FCRA (15 U.S.C. § 1681b(b)(3)) by taking adverse action against her without waiting the “full five day period” set forth in the pre-adverse action letter.  The court dismissed her claim, finding that Moore had not suffered any injury-in-fact based on Rite Aid’s conduct.

According to the court, the FCRA’s pre-adverse action requirements are designed to “afford employees time to discuss reports with employers or otherwise respond before adverse action is taken.”  That is exactly what happened here.  In the court’s view, Moore was able to discuss her background report with Rite Aid after she received the pre-adverse action letter and before Rite Aid made the final decision not to hire her.  According to the court, even if Rite Aid had failed to wait the full five-business-day period referenced in the pre-adverse action letter, the retailer did not violate Moore’s rights under the FCRA.  She exercised her right to dispute her background report, Rite Aid heard her version of events, and it did not act unreasonably “in making a final employment decision prior to the expiration of the five days referenced in the Pre-Adverse Action Notice.”

Based on its analysis, the court concluded that Moore had “not suffered a concrete harm to her procedural rights under the FCRA.”  As a result, it dismissed her claim for lack of standing.  In doing so, the court advanced a reasonable reading of the FCRA.  Its dismissal stands for the proposition that a defendant should not be held liable in federal court for a technical FCRA violation where the plaintiff experienced no actual negative consequences as a result.

On December 12, a federal judge dismissed a challenge to the Office of the Comptroller of the Currency’s proposal to issue special purpose national bank charters to financial technology firms, finding that the plaintiff – the New York State Department of Financial Services – lacks standing and that the claims asserted are not ripe because the OCC’s proposal is not yet final.

The OCC’s proposal emerged from an initiative to promote innovation in the financial services industry. In August 2015, the OCC announced its intent to develop a “framework to evaluate new and innovative financial products and services.”[1] According to the OCC, that effort was necessary because of the perception, shared by many fintech firms, that it is “too difficult to get new ideas through the regulatory approval process.”[2]

In September 2016, the OCC announced that, as part of its innovation initiative, it was “considering how best to implement a regulatory framework that is receptive to responsible innovation, such as advances in financial technology,” and “whether a special purpose charter could be an appropriate entity for the delivery of banking services in new ways.”[3] And in December 2016, the OCC requested public comments on “whether it would be appropriate for the OCC to consider granting a special purpose national bank charter to a fintech company.”[4]

The OCC’s announcement and request for public comment kicked off a vigorous debate. State regulators, including the New York State Department of Financial Services, submitted comments to the OCC opposing its proposal. But many fintech firms welcomed the proposal and submitted comments to the OCC supporting it.

Then, in response to signals that the OCC was moving forward with its proposal, the New York State Department of Financial Services filed a lawsuit challenging the OCC’s authority to do so.

The Department alleged that the OCC’s proposal exceeds its statutory authority and violates the Tenth Amendment of the U.S. Constitution. Those causes of action were grounded in perceived harms. Specifically, the Department alleged that the OCC’s proposal would be “destructive” and would cause “concrete harm to New York’s financial market stability and consumer protection controls.”[5]

Without addressing the merits of those allegations, however, U.S. District Court Judge Naomi Reice Buchwald found that the Department lacks standing and that its claims are not ripe because, according to the Court, the OCC “has not reached a final ‘Fintech Charter Decision.’”[6]

According to Judge Buchwald, the Department’s “alleged injuries will only become sufficiently imminent to confer standing once the OCC makes a final determination that it will issue [special purpose national bank] charters to fintech companies.”[7]

Because Judge Buchwald dismissed the Department’s complaint without prejudice, we expect the Department to promptly refile its complaint if the OCC finalizes its proposal to issue national bank charters to fintech firms.


[1] See Remarks of Thomas J. Curry, Comptroller of the Currency, Before the Federal Home Loan Bank of Chicago. August 7, 2015 (https://www.occ.gov/news-issuances/speeches/2015/pub-speech-2015-111.pdf) (hereinafter, “Remarks”).

[2] Id.

[3] See Proposed Rulemaking, Receiverships for Uninsured National Banks, 81 Fed. Reg. 62,835 (Sept. 13, 2016).

[4] Office of the Comptroller of the Currency, “Exploring Special Purpose National Bank Charters for Fintech Companies,” December 2016 (https://www.occ.gov/topics/responsible-innovation/comments/special-purpose-national-bank-charters-for-fintech.pdf).

[5] Complaint, Vullo v. Office of the Comptroller of the Currency, No. 1:17-cv-03574 (S.D.N.Y. filed May 12, 2017), ECF No. 1.

[6] Order, Vullo v. Office of the Comptroller of the Currency, No. 1:17-cv-03574 (S.D.N.Y. entered Dec. 12, 2017), ECF No. 30.

[7] Id.

On December 8, the United States Supreme Court agreed to decide whether the tolling rule adopted in American Pipe & Construction Co. v. Utah i.e., that the filing of a class action tolls the limitations period for a purported class member’s individual claims – permits a previously absent class member to bring a subsequent and otherwise untimely class action.

The federal appellate courts have split on that question.  The First, Second, Third, Fifth, Eighth, and Eleventh circuits have held that American Pipe tolling only permits subsequent individual actions.  However, the Sixth, Seventh, and Ninth circuits have held that American Pipe tolling also permits subsequent class actions.

In the case before the Supreme Court, China Agritech Inc. v. Resh, shareholders of China Agritech filed a putative class action alleging that the company committed securities fraud.  China Agritech moved to dismiss, arguing that the putative class action was filed after the applicable two-year limitations period had lapsed and was thus untimely.  In response, the plaintiffs argued that, under American Pipe, the action was timely because the limitations period was tolled during the pendency of two earlier-filed but defective class actions against the same defendants based on the same underlying events.

The district court granted China Agritech’s motion to dismiss, finding that the putative class action was untimely, but the Ninth Circuit reversed the district court’s decision.

The Ninth Circuit noted that the American Pipe tolling rule was adopted to “promote economy in litigation” and that, absent tolling, “[p]otential class members would be induced to file protective motions to intervene or to join in the event that a class was later found unsuitable.”  Relying in large part on that rationale, the Ninth Circuit then held that “once the statute of limitations has been tolled, it remains tolled for all members of the putative class until class certification is denied,” and that, at that point, members of the putative class are entitled to bring individual suits “either separately or jointly.”

In urging the Court to grant certiorari, China Agritech argued that the Ninth Circuit’s decision would lead to forum shopping.  The U.S. Chamber of Commerce agreed, arguing that the Ninth Circuit’s decision “erroneously extends a judicially created tolling doctrine to effectively eliminate Congressionally mandated statutes of limitations.”

The Court is expected to issue a decision in the case before the end of its term in June 2018.

On Tuesday, December 5, 2017, the Government Accountability Office (“GAO”) levelled a heavy blow on a major regulatory initiative of the Consumer Financial Protection Bureau (“CFPB”): its highly controversial “disparate impact” discrimination theories as applied to pricing in the indirect automobile financing industry. The specific GAO ruling finds that a 2013 “Bulletin” stating the CFPB’s interpretation of the Equal Credit Opportunity Act (“ECOA”) as applied to indirect automobile lending should have been issued as a rule and hence be subject to Congressional review. Under the ruling, the CFPB should have transmitted the Bulletin to Congress for evaluation, but failed to do so.

The GAO’s conclusion that the guidance qualifies as a rule means that the Bulletin must be re-submitted to Congress for review in order for it to become effective. As a result, the Bulletin can no longer be used by government examiners. Given the shift in control of the CFPB to a Trump appointee, chances seem slim that the CFPB would reissue the guidance. Hence, by its narrow finding, the GAO appears to have dealt the Bulletin a death blow.

In March 2013, the Bureau issued CFPB Bulletin 2013-02 to target dealer markups, a practice where an automobile dealer charges a consumer a higher interest rate than the rate by which an indirect lender is willing to purchase the consumer’s retail installment sales contract. The CFPB expressed concern that dealers were being allowed by the indirect lenders to exercise too much pricing discretion, opening the door to discrimination. In the Bulletin, the CFPB contended that it was “likely” to consider an indirect auto lender a “creditor” within the meaning of ECOA, if an indirect lender purchased a contract at an interest rate lower than the rate on the consumer’s contract. The Bureau also announced that it intended to use a disparate treatment or disparate impact theory to examine an indirect auto lender’s ECOA liability for prohibited pricing differences created by the dealer’s pricing activities. Under this view, indirect lenders would have liability for disparate pricing – even though they did not set the pricing and even without evidence that either the lender or the dealer intended to discriminate against anyone. The Bureau’s guidance has had considerable implications for financial institutions, as banks and lenders have seen significant increase in the cost of compliance, not to mention numerous and expensive investigations and settlements with the CFPB, banking regulators, and the U.S. Department of Justice.

The Bulletin has long been the subject of controversy, as many indirect lenders contended that they should not be penalized for unintentional discrimination by dealers. Many also attacked the methodology used to prove disparate impact. In March 2017, Senator Pat Toomey (R-PA) asked the GAO, Congress’ investigative wing, to determine whether the financial guidance issued by the Bureau in 2013 qualified as a “rule.” The GAO concluded that the guidance did qualify as a rule, even though Bulletin 2013-02 is not legally binding. Specifically, the GAO found that:

The Bulletin provides information on the manner in which the CFPB plans to exercise its discretionary enforcement power. It expresses the agency’s views that certain indirect auto lending activities may trigger liability under ECOA. For example, it states that an indirect auto lender’s own markup and compensation policies may trigger liability under ECOA if they result in credit pricing disparities on a prohibited basis, such as race or national origin. It also informs indirect auto lenders that they may be liable under ECOA if a dealer’s practices result in unexplained pricing disparities on prohibited bases where the lender may have known or had reasonable notice of a dealer’s discriminatory conduct. In sum, the Bulletin advised the public prospectively of the manner in which the CFPB proposes to exercise its discretionary enforcement power and fits squarely within the Supreme Court’s definition of a statement of policy.

In conclusion, the GAO found that the Bulletin was subject to the requirements of the Congressional Review Act because it served as “a general statement of policy designed to assist indirect auto lenders to ensure that they are operating in compliance with ECOA and Regulation B, as applied to dealer markup and compensation policies.”

The GAO’s decision renders the Bulletin a nullity until the CFPB properly submits the measure to Congress. Bank examiners, and CFPB examination and enforcement personnel, cannot rely on the Bulletin to guide their supervisory and enforcement activity. Once the CFPB submits the rule – if ever – then Congress is free to challenge the rule under the Congressional Review Act.

“GAO’s decision makes clear that the CFPB’s back-door effort to regulate auto loans, which was based on a dubious legal justification, did not comply with the Congressional Review Act,” said Senator Toomey in a statement. “GAO’s decision is an important reminder that agencies have a responsibility to live up to their obligations under the law. When they don’t, Congress should hold them accountable. I intend to do everything in my power to repeal this ill-conceived rule using the Congressional Review Act.”

However, it is doubtful that the measure will ever make its way to Congress. Under the leadership of Acting Director Mick Mulvaney, it is highly unlikely that the CFPB will work to revive the rule. The Bulletin has long been vilified by many Republicans, as well as some Democrats. In 2015, the House of Representatives passed a bill that would have eliminated the Bulletin, though the measure was not taken up by the Senate.

Troutman Sanders routinely advises clients on the compliance risks posed by direct and indirect auto lending. We will continue to monitor these regulatory developments.