Happy (early) Valentine’s Day. While I always love a good theme myself, Valentine’s Day is not my cup of tea. However, I am still accepting presents (PotBelly’s, peppermint tea, and new orange highlighters come to mind). As the holiday comes and goes, so does another issue of On Miriah’s Mind, so thanks for tuning in. [I should note that I will be spending all Valentine’s Day with credit union folks so I’m sure everyone will be a jovial blast-looking forward to it!]

Miriah’s Take

One Month into 2019 and the Consumer Financial Protection Bureau is Busy

With new Director Kathy Kraninger at the helm of the Consumer Financial Protection Bureau (CFPB), it is business as usual. As you are likely aware, the agency has often relied upon data from its consumer complaint system to guide its rulemaking agenda. At the end of January, the agency released its snapshot of mortgage complaints received from consumers. Between Nov. 1, 2016, and Oct. 31, 2018, roughly 11 percent of complaints were about mortgage products, averaging 2,957 consumer complaints per month, with the majority being related to “trouble during the payment process.” In the last portion of 2018, mortgage complaints decreased, which is a good sign. So, when the agency releases its Spring 2019 rulemaking agenda, we don’t expect to see much on the mortgage front.

What we do expect to see more of, though, is the Military Lending Act (MLA). Kraninger wrote Congress in January to request that it grant the agency clear, explicit authority to examine credit unions and other financial entities for compliance with the MLA. The letter comes after the introduction of bi-partisan-supported legislation, H.R. 442, that would provide the CFPB with examination authority of the MLA.

In addition to the MLA, the agency has stated its interest in exploring the Unfair, Deceptive or Abusive Acts or Practices (UDAAP), which we can expect to see in the Spring 2019 rulemaking agenda. The agency previously noted that it is considering the meaning of “abusiveness” under section 1031 of the Dodd-Frank Act. Just this month, the CFPB filed a proposed settlement with a Canadian Financial Group that offers payday loans, which the agency alleged were deceptively and unfairly marketed. Note that here, the abusive prong of UDAAP receives less attention. If and when the agency formally issues a rule on abusiveness, expect to see more emphasis on that prong in enforcement action. While there is no love lost between payday lenders and credit unions, we continue to keep our eye on how the agency enforces UDAAP and whether expands its reach by broadening the abusiveness term, as we know the agency’s enforcement is not limited to non-depository institutions.

And speaking of payday lending, the agency has already issued a few Notices of Proposed Rule Making already this year, proposing to rescind certain provisions of its 2017 Payday and Small Dollar Loan Rule and to postpone the compliance date for mandatory underwriting provisions. [Check out the agency’s full press release and notice in the Federal Register.] As you are likely aware, credit unions remain largely unaffected by the 2017 Final Rule with exceptions, and under the CFPB’s final rule NCUA’s Payday Alternative Loans (PALs) are exempt from the small-dollar loan rule. You may remember that NCUA recently began exploring the feasibility of (PALs II and III), which would not be exempt from the 2017 CFPB rule. We know it can be confusing as there is a lot to keep straight.  Best case scenario: NCUA finalizes PAL IIs so credit unions can better serve their members and steer them away from predatory lenders while remaining exempt from the 2017 small-dollar loan rule. The CFPB stated that it will “evaluate the comments, weigh the evidence, and then make its decision,” which means that the League will be busy this month articulating our evidence in the form of a comment letter to the CFPB. We will continue to advocate for a small-dollar loan rule that is appropriately tailored to address predatory payday lenders and other unscrupulous actors.

Miriah’s Hot Topic: Navigating the Telephone Consumer Protection Act

On Jan. 3, 2019, the 116th Congress of the United States was sworn into office. And while much of our attention was rightly focused on the partial government shutdown, the work of Congress continued in other ways like committee assignments (by the way, credit unions really stepped up to help their members during the shutdown…way to go!). U.S. Senator Roger Wicker (R-Miss.) will now serve as Chairman of the Senate Committee on Commerce, Science, and Transportation, which has jurisdictional oversight of the Telephone Consumer Protection Act (TCPA). Former chairman U.S. Senator John Thune (R-SD) will now serve as chairman for the Subcommittee on Communications, Technology, Innovation, and the Internet, making him an influential person to help set policy and the future of the TCPA.

Chairman Wicker’s committee is not the only committee with jurisdiction over TCPA. Expect TCPA to be a discussion point for the House Committee on Energy and Commerce. For a more detailed article on key players and committees, check out this article by the National Law Review.

Sidenote: As a refresher, TCPA makes any information or marketing call to a cell phone using an automatic telephone dialing system (ATDS) unlawful unless there is prior express consent, generally. Since the controversial 2015 Omnibus Declaratory Ruling and Order, litigation has focused on prior express consent, the definition of an ATDS, and the constitutionality of the 2015 order.

The maze of TCPA caselaw is the least fun brain exercise there is, because who can actually figure out what is considered an ATDS? The unclear landscape, in part, is what spurs massive amount of litigation surrounding the TCPA. In 2018, 74 new class-action lawsuits related to TCPA were filed throughout the nation. After the long-awaited D.C. Circuit Court of Appeals decision in ACA Int’l v. Federal Communication Commission in March 2018, more confusion emerged from the 9th and 2nd Circuits.

At the end of September 2018, the 9th Circuit looked at whether a text-messaging system utilized by a gym could be considered an ATDS in Marks v. Crunch San Diego. The Court rejected the argument that a “device cannot qualify as an ATDS unless it is fully automatic, meaning that it must operate without any human intervention whatsoever.” Rather, the Court said an ATDS can be a device that 1.) simply has the capacity to store numbers to be called or 2.) to produce numbers to be called using a random or sequential number generator and dial such numbers automatically. Read more about Marks here. 

The Marks decision created even more uncertainty in the industry, which caused the Federal Communications Commission to issue a public comment asking for input on how the FCC should interpret the Marks’ decision in light of ACA International. The FCC may not be the only party looking at the Marks case, though. The defendant, Crunch San Diego, just asked the U.S. Supreme Court to review the case at the end of January. As you may know, the U.S. Supreme Court has discretion over which cases it decides to hear (and subsequently rule on). We await the Supreme Court’s decision on whether it will review Marks v. Crunch, San Diego.

Interestingly enough, the U.S. Supreme Court did decide to review another case involving the TCPA this term, PDR Network v. Carlton & Harris Chiropractic, which is about fax (yes, FAX)! The lower court determined that the fax was an unsolicited advertisement under the TCPA because a 2006 FCC Order interpreted the term to include faxes that offer goods and services at no cost to the recipient. (Refresher on administrative law: Agencies have broad power to create rules and interpretation on what the statute means and how it operates in real life.)The U.S. Supreme Court will consider whether the Hobbs Act (aka the Administrative Orders Review Act) required the lower court to adopt the FCC’s legal interpretation of the TCPA (full legal nerd overview at SCOTUSblog). Essentially, the Supreme Court will analyze whether the FCC’s legal interpretation will be subject to any formal oversight.

As you know, rule creation takes a significant amount of time. But what we are learning is that it takes even longer to reform or deconstruct a rule. Stay tuned for future updates on the TCPA case law. 

Miriah’s Tip:

Keep your eye on the U.S. Department of Labor (DOL) in 2019. The 2018 regulatory agenda indicated that the Wage and Hour section plans to release Notices of Proposed Rulemaking on several impactful regulations to employers of all sizes.

Bonus Tip: Make sure you register for the League’s interactive member webinar on Feb 28th at 2 p.m. to make sure your credit union is equipped with the most up-to-date information on vulnerabilities in Regulation E that are being exploited by plaintiffs’ attorneys and resources to help protect you.

Miriah’s Mailbox

Send your funny regulatory stories, reader feedback, and future topics ideas to at mlee@ohiocul.org.

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