Welcome to Wiley’s update on recent developments and next steps in consumer protection in the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC). In this newsletter, we analyze recent regulatory announcements, recap key enforcement actions, and preview upcoming deadlines and events. We also include links to our articles, blogs and webinars with more analysis in these areas. We understand that staying on top of the rapidly changing regulatory landscape is more important than ever for companies looking to deliver new and breakthrough technologies.
Lina Khan was sworn in as president of the FTC. At June 15, Lina Khan was sworn in as president of the FTC, shortly after being confirmed as commissioner by the U.S. Senate by a vote of 69-28 and nominated as president by President Biden. President Khan has been confirmed for a term expiring September 25, 2024. Prior to her confirmation, President Khan was Associate Professor of Law at Columbia Law School and was Legal Counsel to the Antitrust, Commercial and Administrative Subcommittee of the Judicial Committee. of the United States House. Law. Previously, she was also legal counsel to FTC commissioner Rohit Chopra and legal director of the Open Markets Institute. With her confirmation, the FTC currently has a full roster of five commissioners, although Commissioner Chopra’s appointment as CFPB director remains pending.
The CFPB publishes the spring rule-making program with several planned actions. At June 11, the CFPB has published its spring 2021 regulatory program, which includes a number of proposed and final rules scheduled for the second half of this year, as well as early in 2022. Among other actions, the CFPB plans to publish a Notice of Proposed Regulation on Requiring Financial Institutions to Make Public Certain Data Related to Minority, Women and Small Business Loan Applications Pursuant to Section 1071 of the Dodd-Frank Reform Act Wall Street and Consumer Protection of 2010 (Dodd-Frank Act) in September 2021. The CFPB convened a panel of experts under the Small Business Regulatory Enforcement Fairness Act in October 2020 to examine the impacts of such regulation . The report was completed in December 2020. In addition, the CFPB plans to publish a final rule on the transition of the London Interbank Offered Rate (LIBOR) index in January 2022. The LIBOR index is expected to expire in June 2023. The L The LIBOR index is a standard financial index used by the US capital markets, and many financial instruments, including adjustable rate mortgages, credit cards, student loans, reverse mortgages and lines of credit on home equity are tied to it. The CFPB released a proposed transition rule in June 2020. The agency is also considering developing a rule to implement section 1033 of the Dodd-Frank Act to ensure the availability of the financial account data provided. in electronic form. The CFPB published a regulatory proposal notice in November 2020 regarding access to consumer data. The agency is currently reviewing the comments.
CFPB publishes interpretive rule on the authorization to retake financial institution practice reviews under the Military Loans Act. At June 16, the CFPB issued an interpretive rule explaining the basis for its authority to review supervised financial institutions for risks to active duty members and their dependents under the Military Loans Act (MLA). Congress passed the MLA to protect military borrowers and their dependents, among other things: by limiting the annual percentage rate on many loans to a maximum of 36%; prohibit lenders from requiring military borrowers to arbitrate disputes; prohibit lenders from requiring military borrowers to waive their rights under federal and state laws; and prohibit lenders from imposing a penalty on military borrowers if they prepay all or part of their loan. In 2018, the CFPB ended its MLA-related exams, but the current leadership of the CFPB concluded that the Consumer Financial Protection Act and the Truth in Lending Act give it the power to retake the exams.
The FTC plans to review the business opportunity rule. At June 14th, the FTC announced that it has scheduled its Business Opportunity Rule review. The rule requires that sellers of business opportunities give potential buyers the specific information they need to help them evaluate a business opportunity, such as a work-from-home program. The agency is currently reviewing 23 of the 62 rules and guides under its jurisdiction.
Important enforcement measures
The FTC and Arkansas are suing the operators of “Blessing Loom” for allegedly carrying out an illegal pyramid program. At June 17, the FTC announced that it had filed a joint lawsuit with the state of Arkansas in the U.S. District Court for the Eastern District of Arkansas, alleging that Blessing in No Time (BINT) operators had operated a illegal pyramid scheme – “Blessing Loom” – which defrauded thousands of consumers of tens of millions of dollars. Specifically, the complaint argues that BINT promised investors returns of up to 800% and demanded that members pay up to $ 62,700 to participate. The complaint alleges, however, that the vast majority of participants lost money. The FTC and the state of Arkansas are seeking an injunction, as well as civil penalties.
FTC files amended lawsuit against small business finance providers. At June 14th, the FTC announced that it has filed an amended lawsuit in the U.S. District Court for the Southern District of New York against merchant cash advance provider RCG Advances (RCG), as well as other defendants, for having allegedly carried out several unauthorized withdrawals in small business banks. The FTC’s amended complaint also alleges that RCG violated the Gramm-Leach-Bliley Act’s prohibition on using false or misleading information to obtain a consumer’s bank account information. The FTC is asking the court to assess civil penalties against defendants and to require defendants to return ill-gotten gains.
FTC bans COVID-19 treatment plan provider from making unsubstantiated health claims. At June 14th, the FTC has announced that the medical director of California-based Golden Sunrise Nutraceutical, Inc. (Golden Sunrise) has agreed to settle charges he was involved in a deceptive advertising campaign for a 23,000 COVID-19 treatment plan. $. According to the FTC complaint, Golden Sunrise advertised its ImunStem, Aktiffvate and AnterFeerons supplements on billboards, websites and social media platforms, claiming the products could eliminate symptoms of COVID-19 in two to four days. The proposed order settling the complaint would bar Golden Sunrise’s health director from making unfounded health claims in the future and would require him to pay a judgment of $ 103,420 to the FTC.
FTC approves final administrative consent order against Amazon for allegedly withholding tips from drivers. At June 10, the FTC announced that it had approved an administrative consent order against Amazon for allegedly withholding tips from its Amazon Flex drivers. As we noted in our February 16 newsletter, the FTC’s initial complaint alleged that Amazon’s affiliate, Amazon Logistics, ran ads that read, “You will receive 100% of the tips you earn by shipping with Amazon Flex. However, the complaint claimed that Amazon Logistics had stopped paying drivers their full wages plus tips in 2016. The administrative consent order requires Amazon to pay $ 61.7 million to settle the fees and prohibits the company from paying drivers. company to change the way driver tips are used as compensation. without first obtaining express informed consent.
Deadlines and upcoming events for comments
The CFPB is seeking comments on the use of AI by financial institutions. Comments are due 1st of July (extended from June 1) on a request for information published by the CFPB; the Board of Governors of the Office of Consumer Financial Protection of the Federal Reserve System; the Federal Deposit Insurance Corporation; the National Administration of Credit Unions; and the Office of the Comptroller of the Currency. The five agencies are collecting information on financial institutions’ use of artificial intelligence (AI) for fraud prevention, service personalization, credit underwriting and a number of other operations. Among other things, the information request solicits feedback to understand the use of AI; appropriate AI governance and risk management controls; and the challenges of developing and managing AI.