Edited by
Jeffrey D. Knowles 
and
Gary D. Hailey
Analysis
CFPB Solicits Public Comment on Pre-paid Cards
On May 23, the Consumer Financial Protection Bureau (CFPB) published an Advance Notice of Proposed Rulemaking indicating that it plans to study the creation of federal regulations for the pre-paid card industry.
The CFPB's press release cites a recent study by the Mercator Advisory Group reporting that the pre-paid market totals $57 billion and will likely grow at a rate of 42 percent per year from 2010-2014. The release also states that the total dollar amount loaded onto pre-paid cards is projected to hit $167 billion by 2014.
The CFPB's chief concerns center on the following issues, which will be examined during the rulemaking:
- Fees and Terms Disclosure: The CFPB will evaluate the best way to balance the need for disclosure with the fact that many cards are purchased at retail locations, where space for disclosures is limited;
- Unauthorized Transactions: The CFPB will evaluate the costs and benefits of card issuers providing limited liability protection from unauthorized transactions; and
- Product Features: The CFPB seeks public input about the costs, benefits, and consumer protection issues related to certain product features, such as loans and savings accounts, attached to pre-paid cards.
Over the next 60 days, the CFPB will accept public comments about the pre-paid card industry and issues related to the areas called out in the notice of proposed rulemaking.
Click here to read a client alert written by Venable of Counsel Jonathan L. Pompan, which discusses the CFPB's notice.
Click here to read the CFPB's press release and view the full text of the Advance Notice of Proposed Rulemaking.
FTC Judge Rules on Forbidden Claims for the Forbidden Fruit
The pomegranate has played a prominent role in myth and legend for millennia. A May 21 decision by a Federal Trade Commission (FTC) Administrative Law Judge (ALJ) has, once again, placed the tasty fruit at the center of an epic tale, write Venable partners Leonard L. Gordon and Randal M. Shaheen in a recent post on Venable's advertising law blog, www.allaboutadvertisinglaw.com .
The FTC alleged that pomegranate marketer POM Wonderful ran numerous ads making deceptive claims that its products reduced the risk of, prevented or treated a number of maladies, including heart disease, prostate cancer and erectile dysfunction. The FTC also alleged that POM deceptively claimed that it had clinical studies, research and trials to substantiate its advertising claims.
While the ALJ found for the FTC on all counts, he rejected both of the FTC's proffered substantiation requirements. After surveying recent federal court decisions, he found no support for the FTC's position that these health claims need be substantiated by double-blind, randomized, placebo-controlled trials. Instead, he fell back upon the FTC's traditional definition that "competent and reliable scientific evidence" should be determined "by what the evidence shows that experts in the relevant field would deem adequate." In addition, the judge rejected the FTC's proposal that POM be required to seek prior approval from the Food and Drug Administration (FDA) before making disease claims. He found such relief unnecessary and unprecedented. Instead, the judge ordered only that POM have competent and reliable scientific evidence to support such claims.
Although the battle between POM and the FTC is far from over, the ALJ's decision may, for the time being, heighten resistance to the FTC's recent attempts to alter its standard substantiation requirements in many of its orders.
Click here to read the full post on Venable's advertising law blog, www.allaboutadvertisinglaw.com.
New Insurance Helps Small Companies Defend IP
There is a new type of intellectual property insurance, writes Venable partner Gregory J. Sater in a May 22 piece for Inside Counsel, which may level the playing field by enabling smaller companies to defend their intellectual property from infringement by larger competitors.
Smaller companies, Sater writes, are typically at a disadvantage when a larger competitor infringes on a successful piece of intellectual property. Although the smaller company may have a strong case, the harsh reality is that litigation is time-consuming and exceedingly expensive. The larger company usually knows the smaller company will simply not be able to go the distance.
This new insurance, called "intellectual property abatement/enforcement" insurance, provides sufficient resources to enable smaller companies to enforce their IP rights. These policies have the potential to materially change the calculus when the larger alleged infringer analyzes its litigation versus settlement options.
Click here to read Sater's Inside Counsel article.
Appellate Court Ruling Changes Game for Email Campaigns
Balsom v. Trancos, a recent California appellate court decision, has serious implications for companies – and their service providers – using commercial email to market products and services, write Venable attorneys Jeffrey D. Knowles and Ari N. Rothman in the May edition of Response magazine.
The ruling requires that commercial emails sent from or received in California must contain, in the "from" line, a domain name that is registered to the sender which can be determined by performing a WHOIS look-up, or the name of the sender or marketer on whose behalf the email was sent. According to Knowles and Rothman, the ruling and the size of the California market essentially dictates that direct marketers and the companies they hire – including affiliate networks – can no longer send commercial emails that contain both a generic "from" line and are sent from a proxy/privately registered domain name.
Click here to read the article, which is on page 78 of the publication.
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