Consumer Financial Protection Bureau

CFPB Seeks to Enhance Public Disclosure With Consumer Narratives

  • The Consumer Financial Protection Bureau (CFPB) has finalized a policy that will allow consumers to publish narratives in addition to filing complaints with the CFPB regarding their experiences with various financial products and services. These narratives, which constitute an additional element to the complaint process where the consumer can more specifically describe her experience, will be available in searchable format in the CFPB's Consumer Complaint Database.
  • Three elements will anchor this new public narrative option: 1) consumers must "opt in" to publish their narratives; 2) personal information surrounding the narratives will be removed to reduce the risk of re-identification; and 3) companies named in a published narrative will have 180 days to issue a response. Consumers can withdraw consent to publish their narrative at any time.
  • The CFPB's final policy statement identifies the dual purposes behind publishing consumer narratives: increasing consumer awareness and improving the efficiencies of related markets through increased transparency. The statement also addresses multiple concerns, including:
    • verifying that narratives come from actual consumers;
    • avoiding misuse of narratives as a tool to threaten financial companies involved in debt negotiation;
    • balancing asymmetries where one company must respond to multiple consumer narratives; and
    • minimizing potential second-order effects, such as attempts by financial products and service providers to force consumers to sign nondisclosure agreements.

Consumer Protection

FTC Creates New Office to Regulate Fairness and Deception Across New Technologies

  • The Federal Trade Commission (FTC) announced that it has created the Office of Technology Research and Investigation (OTRI) to develop policies to protect consumers from unfair and deceptive practices involving new technologies.
  • The OTRI will replace the Mobile Technology Unit and will be housed in the Bureau of Consumer Protection. The OTRI will focus on protecting consumer privacy and data security, as well as ensuring algorithmic fairness and transparency in new products and services including connected cars, smart homes, emerging payment methods, and the "Internet of Things."

Florida Attorney General Sues Dating Company for Alleged Deception

  • Florida AG Pam Bondi filed a lawsuit against SinglesPlus, its owner Kenneth Pogue, and related entities, alleging violations of the Florida Unfair and Deceptive Trade Practices Act in connection to "matchmaking" services.
  • AG Bondi alleges that SinglesPlus falsely claimed to screen prospective members and to match members through analysis by trained psychologists. She also alleges that SinglesPlus exaggerated its success rates, engaged in high-pressure sales techniques, and failed to disclose that consumers' initial interviews were being recorded.
  • The complaint also alleges a violation of an assurance of voluntary compliance entered in 1999 between the Florida AG and Singles Plus Relationship Company, Inc., a defunct company previously operated by Pogue. AG Bondi is seeking a permanent injunction, restitution for consumers, civil penalties, and attorneys' fees.

Data Privacy

Washington Attorney General Looks Into New Data Breach at Regional Health Insurer

  • Washington AG Bob Ferguson announced that his office is looking into a data breach at health insurer Premera Blue Cross, Premera Blue Cross Blue Shield of Alaska, and its affiliated companies, Vivacity and Connexion Insurance Solutions, Inc.
  • The breach was discovered in January, and after an initial investigation, Premera determined that the breach was the result of a cyberattack in May 2014. AG Ferguson is working with Premera to determine what information was compromised, but has indicated that individuals from Washington, Oregon, and Alaska are potentially affected. The Washington Senate is currently considering a bill, already passed in the House, that would create additional obligations for data-breached entities and would enhance AG enforcement authority.
  • Premera is offering two years of credit monitoring, as well as identity theft restoration services and insurance through Experian to all customers.

Massachusetts Attorney General Speaks to Congress on Deficiencies in Data Security Bill

  • Massachusetts AG Maura Healey sent a letter to the U.S. House Subcommittee on Commerce, Manufacturing, and Trade, to express concern that a current bill under consideration, the Data Security and Breach Notification Act of 2015, would "drastically undercut" state law efforts to protect consumer data privacy.
  • AG Healey highlighted the fact that the bill would broadly preempt and replace strong state law protections, like those of Massachusetts, with weaker and potentially ambiguous federal standards. Although AG Healey supported greater involvement by the FTC in data breach investigations, as called for in the bill, she stressed that State AGs play an important role, and any effective federal law should incorporate a dual federal/state enforcement model that continues to empower rigorous state policy goals.
  • Finally, AG Healey argued that penalties may not provide proper deterrence, and that the bill does not create appropriate incentives regarding post-breach notification. She suggested that any federal legislation should reflect clearly defined notification policies like those expressed in Mass Gen Law 93H Sec. 3.

Federal Legislation to Protect Student Data Remains Elusive

  • The Student Digital Privacy and Parental Rights Act, a draft bill designed to protect children's privacy by limiting the use of data generated through educational software, was delayed from its proposed introduction in the U.S. House of Representatives.
  • The bill would prohibit education technology companies from knowingly using or disclosing students' personal information to create customized advertisements or to shape student consumer profiles. It also gives the FTC enforcement and regulatory authority over the burgeoning ed-tech industry.
  • However, many privacy groups have criticized the bill as not going far enough to address all of the potential threats inherent in collecting data, including securing the data from hacking, allowing data to be erased over time so as to not let childhood mistakes follow into adulthood, and preventing colleges from using behavioral data to make admissions decisions. In addition, passage of a federal law on this issue would likely preempt many efforts at the state level that might provide greater protection.

Financial Industry

New York Attorney General Settles Litigation With Custody Bank Over FX Rates

  • New York AG Eric Schneiderman, together with U.S. Attorney Preet Bharara, announced a settlement with the Bank of New York Mellon Corporation (BNY Mellon) resolving multiple lawsuits and investigations that alleged that BNY Mellon deceptively and fraudulently profited by charging its clients higher-than-market foreign exchange rates.
  • The various lawsuits and investigations alleged that BNY Mellon—which holds equities and other financial assets as a custodian for institutional investors—manipulated foreign exchange transactions that accompanied share purchases, or dividend payments, so that the bank was able to charge clients the higher intra-day exchange rate while paying a lower rate and keeping the difference.
  • Under the settlement, BNY Mellon agreed to pay $714 million, with $167 million going to AG Schneiderman's office to be used to compensate the victims, $167 million to the U.S. Attorney's office, $30 million to the Securities and Exchange Commission, $14 million to the Department of Labor, and $335 million to private class action plaintiffs.
  • In addition, BNY Mellon admitted the factual details of the alleged fraud, agreed to terminate the employment of certain executives who were centrally involved in the underlying actions, and will waive the deductibility of the settlement under New York State and local taxes.

States v. Federal Government

Tennessee Attorney General Petitions Sixth Circuit to Overturn FCC Order

  • Tennessee AG Herbert Slatery filed a petition with the U.S. Court of Appeals for the Sixth Circuit, asking the court to overturn an order issued by the Federal Communications Commission (FCC) preempting certain state laws that regulate the manner in which municipalities can offer broadband services.
  • Because Tennessee law prevents publicly owned broadband Internet service providers—in this case, the Electric Power Board, a public utility operating out of Chattanooga—from offering services to customers outside of the municipal boundaries, the FCC found the law to be in conflict with Section 706 of the Telecommunications Act of 1996, which requires the FCC to remove barriers to broadband investment and competition.
  • AG Slatery's petition alleges that the FCC "unlawfully inserted itself between the State of Tennessee and the State's own political subdivisions," and claims the Order violates the United States Constitution; exceeds the FCC's authority; and is arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act.

Nine States File Amici Brief in Petition to Decide States' Role Under CERCLA

  • Colorado AG Cynthia Coffman along with seven other AGs filed an amici brief in support of Arizona in its petition to appeal the Ninth Circuit en banc decision in Arizona v. Ashton Company Incorporated Contractors and Engineers to the Supreme Court. There is also a separate petition in which Arizona is a respondent.
  • At the root of Arizona's petition is the question of the level of deference to which states are entitled when they enter into consent decrees with defendants to resolve liability under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Ninth Circuit ruled that district courts must closely scrutinize CERCLA settlements proposed by states as opposed to those entered into by the U.S. Environmental Protection Agency (EPA).
  • The amici AGs argued that Congress did not create a different standard of review for settlements proposed by states, and intended to put states on equal footing with the EPA when resolving liability under CERCLA through entering consent decrees. The AGs further argued that states play an important role in efficiently implementing CERCLA, and that the Ninth Circuit's ruling will make defendants less willing to enter into early-stage state-proposed settlement agreements.

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