Search auto data

In the last few years, the right to privacy debate in the United States has increased in pace and volume. One issue at the center of this long debate is how best to implement the right privacy tools in a manner that does not disrupt business and technological innovation. The current criticisms fail to appreciate that the next technological paradigm is completely dependent on both the quality and quantity of data.

As connected things (IoT) explode in popularity, they make things such as augmented reality (AR) and autonomous vehicles possible. And as interconnectivity grows, so too do the opportunities. The companies that fail to properly leverage new technologies and data opportunities may find themselves falling behind their competitors.

In venturing into these emerging paradigms, companies should stay informed of recent enforcement actions, cases, and laws to determine how their role within new ecosystems may be impacted.

This publication covers the ongoing evolution of the legal landscape for data-centric products, so that organizations can continue to succeed in their development of data-centric products.

Click here to download the report

On March 31, 2018 the United States crossed a milestone. As of that date, Americans’ student loan debt topped $1.5 trillion, exceeding the share of consumer debt held by auto loans ($1.1 trillion) and credit cards ($988 billion), and jumping by more than $521 billion in roughly six years.

A report released in May by the Board of Governors of the Federal Reserve System laid bare the grim details behind this headline:

  • 42% of people who have gone to college took out debt. While a majority of this percentage took out student loans, 30% had some other form of debt, like card credit debt or a home equity line of credit. Additionally, a larger percentage of recent graduates have taken on student debt.  Still, borrowing has declined since its peak during the 2010-11 school year.
  • Students who obtained a bachelor’s degree in 2016 owed an average of $28,400 – up from $22,100 in 2001.  This number does not include those students who attended or graduated from for-profit schools.
  • In 2017, 20% of borrowers fell behind on their payments, up slightly from 19% in 2016 and 18% in 2015. Notably, those who never completed their education or secured any kind of degree encountered the most persistent trouble. The delinquency rates stood at only 11% for borrowers with bachelor’s degrees and at a minuscule 5% for those with graduate degrees. This gap in delinquency rates explained the fact that those with more debt often encounter fewer repayment difficulties.
  • Meanwhile, a publication released by the American Association of University Women (“AAUW”) exposed the worrisome persistence of a large gender gap. According to the AAUW, as of May 2018, women hold nearly two-thirds of all student debt in the United States. In addition, the average woman with a bachelor’s degree owes $2,740 more than her male contemporary, while African-American women assume more student debt on average than do members of any population segment.

On Thursday, March 22nd, from 3-4 p.m. ET, Troutman Sanders will host a webinar that will cover the legal landscape surrounding data based products.

In the last few years, the right to privacy has been hotly debated in the United States. What critics do not understand or appreciate is that the next technological paradigm is completely dependent on improvements both to the quality and quantity of data.

As connected things (IoT) explode in popularity, they make things such as augmented reality (AR) and autonomous vehicles possible. And as interconnectivity grows, so do the opportunities. The companies that fail to leverage those opportunities may find themselves falling behind their competitors.

In venturing into these emerging paradigms, companies should stay informed of recent enforcement actions, cases, and laws to determine how their role within new ecosystems may be impacted.

During this webinar, speakers will cover the ongoing evolution of the legal landscape for data-based products, so that organizations can continue to succeed in their development of data-based products.

The FTC has just issued its annual report, the Consumer Sentinel Network Data Book, aggregating data on the 2.68 million consumer complaints that it received in 2017. This number is down from a peak in consumer complaints during 2015 – 3.04 million complaints – and last year’s total of 2.98 million.

According to the FTC’s report, the top ten categories are as follows:

Debt Collection

 22.74%

Identity Theft

  13.87

Imposter Scams

  13.00

Telephone/Mobile Services

   5.59

Banks and Lenders

   5.58

Prizes, Sweepstakes

   5.34

Shop-at-Home/Catalog Sales

   4.72

Credit Bureaus, Information Furnishers, Report Users

   4.02

Auto-related

   3.23

Television/Electronic Media

    1.77

The Consumer Sentinel Network is an online database of consumer complaints maintained by the FTC. Other federal and state law enforcement agencies contribute to the database, including the Consumer Financial Protection Bureau and the offices of 20 state attorneys general, including Alaska, Colorado, Hawaii, Idaho, Indiana, Iowa, Maine, Massachusetts, Michigan, Mississippi, Montana, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Washington, and Wisconsin. Private-sector organizations contributing data include all North American local offices of the Better Business Bureau.

Any federal, state, or local law enforcement agency can obtain access to the database by entering into a confidentiality and data security agreement with the FTC. Certain international law enforcement authorities are also allowed access.

A few points regarding the data in the report bear mentioning. First, “unverified reports filed by consumers,” regardless of merit and whether the complaint was remedied by the company, were counted as complaints. Second, even though debt collection topped the report in terms of the percentage of complaints received, the total number of debt collection complaints represents a very small portion (0.005%) of consumers who had contact with the debt collection industry during 2017. Finally, while the FTC uses the term “complaint” in its press release and makes numerous references to “complaints” in the new annual report, the report states that it refers to “consumer reports” rather than “complaints,” given that “[o]ften, people make these reports after they have experienced something problematic in the marketplace, avoided a loss, and decided to alert others.”

Nevertheless, the FTC and state attorneys general have long used consumer complaints to identify victims and potential targets for investigations. Importantly, Mick Mulvaney, President Trump’s appointee as CFPB Acting Director, has indicated that the CFPB will continue to use complaints in setting its priorities.

In the last few years, the right to privacy has been hotly debated in the United States. What critics do not understand or appreciate is that the next technological paradigm is completely dependent on improvements both to the quality and quantity of data.

As connected things (IoT) explode in popularity, they make things such as augmented reality (AR) and autonomous vehicles possible. And as interconnectivity grows, so do the opportunities. The companies that fail to leverage those opportunities may find themselves falling behind their competitors.

In venturing into these emerging paradigms, companies should stay informed of recent enforcement actions, cases, and laws to determine how their role within new ecosystems may be impacted.

This publication attempts to cover the ongoing evolution of the legal landscape for data-based products, so that organizations can continue to succeed in their development of data-based products.

Click here to download the report

A recent report released by the Center for Microeconomic Data at the Federal Reserve Bank of New York found that American household debt continues to increase, including debt resulting from automobile loan balances.  The third quarter of 2017 saw a $116 billion increase, continuing a march upward since mid-2013.

The report specifically addressed the growth of subprime auto debt, which the New York Fed classified as debt held by borrowers with origination credit scores falling below 620.  In total, there are currently 23 million consumers who hold subprime auto loans.  While banks tend to finance auto debt originated by borrowers with higher credit scores, auto finance companies have long dominated subprime auto lending, and their shares of this market have only increased in recent years.  The New York Fed’s report highlighted three specific areas related to the growth of subprime lending among auto finance companies:

Originations:  Auto finance companies historically have held more than 70 percent of subprime auto loans.  In 2017, lending to borrowers with lower credit scores has not increased as rapidly as in previous years, but lending to borrowers with higher credit scores has kept pace.

Outstanding Balances:  In the third quarter of 2017, auto loan balances increased by $23 billion, with outstanding balances on subprime auto debt currently totaling approximately $300 billion.  Auto finance companies, who own a disproportionate share of subprime auto debt, currently hold more than $200 billion, a share that has nearly doubled since 2011.

Delinquency:  The delinquency rate for auto finance companies has increased since 2014 by more than two percentage points.  The delinquency rate is considerably higher and rising for debt owed to auto finance companies, rather than banks, even when comparing consumers who have roughly the same credit scores.

Troutman Sanders’ Financial Services Litigation practice group has specific expertise in the automotive lending industry and the legal issues these companies face. We maintain a dedicated Auto Finance practice that offers broad industry experience and in-depth subject matter understanding in compliance, litigation, and regulatory matters affecting clients engaged in consumer retail automobile sales, as well as both direct and indirect automobile sales financing.  We will continue to monitor trends in the auto finance industry.

The Third Circuit recently clarified in important ways its ascertainability standard for class actions under Rule 23 in a case that arose from the efforts of an auto finance company to generate business by marketing efforts directed at automobile dealers.  The decision reflects two key findings:  (1) that defendants who argue a class is not ascertainable – i.e., that it is not administratively feasible to identify class members – must produce information in their possession regarding putative class members during discovery; and (2) that affidavits from class members, by themselves, do not satisfy the ascertainability standard, but can suffice when combined with other records.

The genesis of the dispute is a 2012 agreement between Creditsmarts, an internet-based “indirect business-to-business lending tree” that helps independent car dealers connect various lenders with potential customers, and BMW Bank of America, Inc. and BMW Financial Services, LLC.  BMW offers automotive financing to customers through its “up2drive” division, which provides borrowers with financing at independent car dealers, regardless of make or model.  The parties agreed that BMW would use the Creditsmarts system at participating independent dealers to offer up2drive loans to borrowers.  Creditsmarts agreed “to establish electronic systems to permit customers to communicate with up2drive through mutually agreed secure lines of communication” and to “process all application forms using the minimum credit parameters established by up2drive and the information obtained … from the application form including the customer’s credit history, that will provide sufficient data to determine whether the customer may qualify for any loan programs offered … by up2drive.”  In exchange, BMW would compensate Creditsmarts for customers referred through the up2drive system.

In late 2012, Creditsmarts used a fax broadcaster, WestFax, Inc., to fax advertisements to independent dealers, touting the up2drive program.  The advertisements included BMW’s up2drive logo and identified BMW Bank of North America as the sender.  Creditsmarts used WestFax to send 5,480 faxes in late November 2012, 5,107 faxes in early December, and another 10,402 faxes in late December, using a list created from Creditsmarts’s customer database.  City Select Auto Sales, a recipient of one of the faxes, brought a putative class action against the three parties, arguing that the unsolicited faxes represented a violation of the Telephone Consumer Protection Act.

The database formed the lynchpin of the parties’ arguments on class certification.  Class plaintiffs moved to compel production of the database, while Creditsmarts resisted, arguing that the database included more entries than the number of BMW faxes sent in 2012.  Plaintiff’s motion to compel production of the database was denied and the district court found that the plaintiff’s proposed class failed to meet the ascertainability standard of Rule 23, because there was no reliable and administratively feasible way to determine whether putative class members received faxes during the three 2012 fax blasts.

The Third Circuit vacated the district court’s decision and remanded for further findings after production of the database.  The court further found that none of its previous decisions foreclosed the possibility that the plaintiff could support a class with affidavits combined with information from the Creditsmarts database, and that the only factual determination necessary for class membership was whether a given dealership in the database received a fax from Creditsmarts on one of the three 2012 dates.

The case is City Select Auto Sales, Inc. v. BMW Bank of North America, Inc., et al., Civil Action No. 1-13-cv-04595 (D.N.J.).

Autonomous vehicles, or self-driving cars, will revolutionize the way people and products move. But the technologies that have made autonomous vehicles a reality raise novel safety, data privacy, and cybersecurity concerns for federal and state regulators. Addressing these issues will pave the road for other integrated technologies in the internet of everything.

Please join Troutman Sanders attorneys Timothy Butler and Jonathan Yee for a webinar addressing those regulatory concerns and recent and anticipated regulatory developments, including the federal SELF DRIVE Act, the NHTSA’s updated policy guidance for autonomous vehicles, and California’s recently finalized regulations for post-testing deployment of autonomous vehicles.

On Thursday, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued its first no-action letter to Upstart Network, Inc., an online lender. The no-action letter green-lights the lender’s use of alternative data in marketing and pricing decisions. In exchange, Upstart will report lending and compliance information to the CFPB.

UPSTART’S MODEL

California-based Upstart provides an online lending platform that enables people with limited credit or work history to obtain credit. Upstart touts its ability to identify differences in risk between “thin file” applicants by using signals beyond traditional credit scores. Primarily, Upstart compliments traditional underwriting signals with a borrower’s work history and education. Upstart may take into account the school attended, degree obtained, and current employment to analyze the borrower’s financial capacity and propensity to pay. Upstart claims in the no-action letter application that including this information provides borrowers who otherwise may not qualify for credit the opportunity to borrow on more favorable terms.

Since launching its lending platform in 2014, Upstart has originated over 80,000 loans totaling more than $1 billion. The loans range from $1,000 to $50,000 with an average loan of $12,000. The repayment term is either 36 months or 60 months. The typical borrower is 28 years old and uses the loan to pay down credit card debt. Others consolidate payday or other unsecured debt, reduce student loan debts, or pay for graduate school tuition. Interest rates range from 4% to 25.9%.

CFPB’S NO-ACTION LETTER POLICY

The CFPB’s letter marks the first of its kind since the Bureau announced the no-action letter policy in early 2016. Under the program, companies implementing a new product or service can apply for a statement from the Bureau that would reduce regulatory uncertainty. Applicants must submit responses to a series of questions, including detailed descriptions of the product or service and the benefits and risks to consumers. The Bureau implemented the policy to incentivize companies to develop safe and innovative products and approaches. Anticipating that it will issue no-action letters in only exceptional circumstances, the CFPB will publish a no-action letter that it grants, but will not publish the denial of a request for a no-action letter.

CFPB’S NO-ACTION LETTER TO UPSTART

The no-action letter to Upstart indicates that the Bureau has no present intent to recommend initiation of supervisory or enforcement action against Upstart with respect to the Equal Credit Opportunity Act. According to the terms of the letter, Upstart has agreed to provide the Bureau with certain information regarding loan applications, the criteria used to decide which loans to approve, how it will mitigate risk to consumers, and how its model expands access to credit for underserved populations. The Bureau will use this information as part of the inquiry into alternative data that it launched earlier this year.

The scope of the no-action letter is limited to Upstart’s automated model for underwriting applicants for unsecured non-revolving credit. The Bureau went to great lengths to limit the effect of the letter, claiming that the letter could not be viewed as an interpretation, waiver, safe harbor, or something similar.

IMPLICATIONS OF THE LETTER

Although the no-action letter reveals that the CFPB remains committed to completing its inquiry into the use of alternative data to expand credit, it offers little guidance outside of the contours of Upstart’s platform and Upstart may still have to deal with fair lending issues with the CFPB down the road. With respect to this first no-action letter, initial reactions from the industry reveal disappointment in light of the fact that the letter offers little industry guidance.

On November 21, the Director of the Bureau of Consumer Protection of the Federal Trade Commission commented on the National Highway Traffic Safety Administration’s Federal Automated Vehicles Policy.  The Director opened the comment with a brief review of the FTC’s focus on privacy and security efforts related to connected devices and the Internet of Things:  (1) enforcement actions against manufacturers of connected devices; (2) writing reports and holding workshops to discuss privacy issues with connected devices; and (3) consumer and business education on privacy and data security issues. 

The Director’s comments on the NHTSA’s Policy were positive in nature and focused on four key themes that are prevalent throughout the FTC’s privacy and data security activities.  First, the Director recognized the challenging privacy issue that data sharing can bring.  On the one hand, data sharing, particularly with respect to performance information of autonomous vehicles, could give industry participants a wealth of knowledge from which a variety of issues may be addressed that may not become as readily apparent if the information were not shared.  On the other hand, depending on the nature of the information that is shared, consumer privacy issues may arise.  Thus, the Director and the NHTSA acknowledged that stripping the personally identifiable information of consumers from the data collected through autonomous vehicles would help to protect consumer privacy while still allowing the manufacturers (and consumers) to realize the benefits of sharing this valuable information.  

Second, the Director noted the importance of requiring vehicle manufacturers to publish public-facing privacy policies focused on FTC guidance and the Consumer Privacy Bill of Rights.  Importantly, companies should accurately state their information collection and use practices in their privacy policies, or potentially face an enforcement action by the FTC.  

The Director’s third and fourth comments related to cybersecurity.  The Director commended the NHTSA Policy’s recognition of cybersecurity risks potentially posed by autonomous vehicles and its emphasis on the importance of product development in addressing threats and vulnerabilities.  In order to fully and completely address these threats and vulnerabilities, the Director agreed with the NHTSA that companies involved with autonomous vehicles should share their cybersecurity experiences throughout the industry.  As noted above, the more information that is shared, the greater the likelihood that the industry will be able to proactively identify threats and mitigate or prevent security incidents.  As long is the information is shared properly, antitrust issues are not likely to come into play, the Director noted. 

However, what standards the NHTSA and FTC will ultimately recommend remains to be seen.  Although both have clearly indicated that cybersecurity is important, government and industry are now locked in intense debates over whether “security and safety” also requires that companies share more user data with government than is typically required in other industries.  The outcome of such discussions will likely impact what technologies for cybersecurity are ultimately viable for automated vehicles.