CURRENT MONTH (May 2018)
Supreme Court Opens the Door to Sports Betting in America
By Keith Miller, Drake University
In a much-anticipated ruling that will likely bring sports betting to millions of Americans, the United States Supreme Court ruled that the federal law limiting sports betting to the state of Nevada violated the United States Constitution and was invalid. Murphy v. NCAA, Docket No. 16-476
What Law Was Involved?
In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA). This law did not declare sports betting illegal; rather, it forbade states from authorizing or licensing sports betting operations. Nevada was the only state at the time that offered single game sports betting and it was “grandfathered,” thereby allowing the state to continue to offer sports betting. When New Jersey failed to take advantage of a provision in the law giving it one year from the law’s effective date to adopt sports betting, PASPA essentially codified Nevada’s monopoly on sports wagering.
New Jersey’s Assault on PASPA
In 2011, New Jersey sought to erase its earlier failure when voters passed a constitutional amendment allowing sports betting in the state. A framework for regulated sports betting in the state was quickly established. What followed was a six-year court battle between the state and the major sports leagues that culminated in the Supreme Court’s decision on May 14.
The Supreme Court’s Decision
The Court’s opinion, written by Justice Alito, was an emphatic repudiation of the federal statute. Notable points to the opinion included:
- The Court ruled that Congress did not have the constitutional authority to prohibit states from authorizing sports betting. The federal law that did that “unequivocally dictates what a state legislature may and may not do.” Such “commandeering” of state legislatures was a “direct affront to state sovereignty.”
- The statutory provision barring private persons from operating sports books was not severable from the proscription to state legislatures.
- Only two Justices dissented from the core ruling, with Justice Breyer dissenting only from the severability part of the Court’s opinion.
What Happens Now?
A number of states have considered legislative proposals authorizing sports betting contingent on the Supreme Court’s decision invalidating PASPA. New Jersey, of course, is at the head of this class. One can expect sports wagering to be offered there very soon.
The major sports leagues will continue their efforts to influence state legislation. At the top of their wish list is to receive compensation from the money wagered at the new sports books.
Finally, Congress could get involved and establish a national system for sports betting. Though the focus has been on the states, some contend that a uniform, national system of regulating sports betting would reduce regulatory compliance costs for operators and better protect the integrity of sporting events from manipulation.
The End of the Beginning
The Supreme Court decision helped to settle a long-simmering issue in the world of regulated gambling. But as important as the decision is, legalization is only the beginning of the journey of offering sports betting in the U.S. Policymakers, state and/or federal, will be taking up the daunting task of building regulatory structures for sports wagering. Their decisions on how to regulate sports betting will go a long way toward determining the success of this popular form of gambling.
Economic Growth, Regulatory Relief, and Consumer Protection Act Eases Regulatory Restrictions, Imposes Consumer Protections, and Proposes to Increase Access to Credit
By Nicole F. Munro and Nora R. Udell, Hudson Cook, LLP
Signed into law May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (S 2155) amends federal banking and consumer credit laws to enhance certain consumer protections and to provide regulatory relief for financial institutions. Among its consumer protection provisions, the EGRRCPA requires consumer reporting agencies to increase the amount of time a fraud alert is in a consumer’s file and to disclose a consumer’s ability to place a credit freeze on his consumer report. The EGRRCPA provides additional protections for veteran and student borrowers. To increase consumer access to mortgage credit, the new law allows certain creditors to forgo ability to repay requirements. And to promote economic growth, the EGRRCPA eases the regulatory burden on financial institutions by, among other things, exempting certain financial institutions from Home Mortgage Disclosure Act reporting requirements, easing capital requirements, and exempting small banks from the “Volcker Rule.” The legislation passed with bipartisan support and without the more sweeping amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that were included in the House’s Financial CHOICE Act of 2017.
DOJ Settles With Minnesota Community Bank to Resolve Fair Lending Violations
By Buckley Sandler LLP
On May 8, 2018 the Department of Justice announced a settlement with a Minnesota community bank to resolve allegations that the lender excluded predominantly minority neighborhoods from its mortgage lending service in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). According to the complaint filed in 2017, between 2010 and 2015, the bank engaged in unlawful redlining in and around Minneapolis-St. Paul by providing mortgage credit to individuals in majority-white census tracts, but avoided serving similar needs in majority-minority census tracts. The settlement requires the bank to expand its services in predominantly minority neighborhoods, including opening one full-service branch within the specified census tract. In addition to compliance monitoring and reporting requirements, the bank also is required to (i) employ a Community Development Officer and an Executive leader; (ii) spend a minimum of $300,000 on advertising, outreach, and education and credit-repair initiatives; (iii) invest a minimum of $300,000 in a program for special purpose loan subsidies; and (iv) continue to provide fair lending training to all employees.
Federal Regulators Try to Encourage Depository Institution Payday Loan Programs
By Elizabeth C. Yen, Hudson Cook, LLP
The primary regulators of federally chartered banks and credit unions support increased small dollar short-term consumer lending by their regulated entities. On May 23, 2018 the Office of the Comptroller of the Currency reiterated in Bulletin 2018-14 core lending principles federally chartered banks should follow when making such loans. On May 24, 2018, the National Credit Union Administration requested public comment on a proposal that would give federal credit unions additional options for so-called “payday alternative loan” programs. Forty percent of U.S. households do not have $400 set aside for unexpected emergency expenses. Federal financial services regulators want consumers to have more choices for managing cash flow shortfalls that arise between paydays.
FCC Seeks Comments on Defining ‘Autodialer’
By Buckley Sandler LLP
On May 14, 2018, the Federal Communications Commission’s Consumer and Governmental Affairs Bureau released a notice seeking comment on the interpretation of the Telephone Consumer Protection Act (TCPA) in light of the recent D.C. Circuit decision in ACA International v. FCC. The notice requests, among other things, comment on what constitutes an “automatic telephone dialing system” (autodialer) due to the court setting aside the FCC’s 2015 interpretation as “unreasonably expansive.” Specifically, the FCC requests comment on how to interpret the term “capacity” under the TCPA’s definition of an autodialer (“equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers”) and requests comment on the functions a device must be able to perform to qualify as an autodialer, including how “automatic” the dialing mechanism must be. Additionally, the notice seeks comment on (i) how to treat reassigned wireless numbers under the TCPA; (ii) how a party may revoke prior express consent to receive robocalls; and (iii) three pending petitions for reconsideration, including the 2016 Broadnet Declaratory Ruling and the 2016 Federal Debt Collection Rules. Comments are due by June 13, 2018 and reply comments are due by June 28, 2018.
HUD to Seek Public Comment on Disparate Impact
By Buckley Sandler LLP
On May 10, 2018 the Department of Housing and Urban Development announced its intention to seek public comment on whether the 2013 Disparate Impact Regulation (Regulation), which provides a framework for establishing legal liability for facially neutral practices that have a discriminatory effect under the Fair Housing Act (FHA), is consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The Supreme Court upheld the use of a disparate impact theory to establish liability under the Fair Housing Act, but according to HUD’s announcement, the Court only referenced the Regulation in its ruling but did not directly rule upon it. In October 2017, the Treasury Department called on HUD to reconsider the Regulation as it relates to the insurance industry – specifically, to homeowner’s insurance.
Consumer Finance Law
CFPB Finalizes KBYO Amendment to Address “Black Hole”
By Buckley Sandler LLP
On May 2, 2018 the Consumer Financial Protection Bureau published a final amendment to its “Know Before You Owe” mortgage disclosure rule to address when mortgage lenders are permitted to reset tolerances and pass on increased closing costs to consumers using the Closing Disclosure. Last summer, the Bureau published a proposal seeking public comment on whether to close the “black hole” that prohibited creditors from passing on cost increases (particularly rate lock extension fees) when closing was significantly delayed after the Closing Disclosure. The final amendment is effective on June 1, 2018.
Congress Kills Consumer Bureau Anti-Discrimination Guidance on Auto Finance
By Jean Noonan, Hudson Cook, LLP
On May 21, 2018, President Trump signed into law a bipartisan Congressional Review Act (“CRA”) resolution disapproving the Bureau of Consumer Financial Protection (“Bureau”) March 2013 bulletin on indirect auto creditor compliance with the Equal Credit Opportunity Act. Using a “disparate impact” theory, the bulletin said creditors buying retail installment contracts from dealers are liable for the dealers’ credit pricing decisions. Calling the difference between the creditor’s wholesale “buy” rate and the retail rate the consumer pays a “markup,” the Bureau said the creditor is responsible if, on average, minorities or women pay more in markups than non-minorities or men. The Bureau said it would hold assignee creditors liable if any dealer had higher average markups to one group than another or if there was a markup disparity when looking at contracts across the creditor’s entire portfolio. The bulletin stated the Bureau’s detailed expectations of how the creditor should monitor and remediate any pricing disparities it found. When asked, the General Accounting Office concluded that the bulletin was, in fact a rule, which opened the door for Congressional review. The enactment of this CRA resolution nullifies the Bureau’s guidance on indirect auto lending and prohibits the Bureau from ever reissuing a substantially similar rule unless specifically authorized to do so by Congress.
7th Circuit Holds RESPA’s QWR Provisions Require Actual Damages
By Ernest P. Wagner, Maurice Wutscher LLP
The U.S. Court of Appeals for the Seventh Circuit recently affirmed a trial court’s finding that a servicer did not violate the federal Real Estate Settlement Procedures Act (“RESPA”) because the borrower could not prove that the servicer’s alleged failure to respond to a “Qualified Written Request” (“QWR”) caused her actual damages, as required by 12 U.S.C. § 2605(f)(1)(A). A borrower claimed that the servicer’s failure to respond to her QWR caused her emotional distress and broke up her marriage. The Seventh Circuit found that the borrower could not demonstrate how earlier access to the servicer’s description of her account would have helped her or how the servicer’s failure to respond, as opposed to the ongoing foreclosure, could have caused her alleged emotional distress. The Seventh Circuit also determined that the alleged breakdown of the borrower’s marriage was “outside the scope of” RESPA. Thus, the Seventh Circuit affirmed the judgment because the trial court properly determined that the borrower’s sole claim that the servicer failed to properly respond to her QWR failed for lack of damages.
3rd Circuit Splits with 4th and 9th Circuits on FDCPA Statute of Limitations
By Buckley Sandler LLP
On May 15, the U.S. Court of Appeals for the 3rd Circuit issued an en banc ruling that the statute of limitations on the ability to sue for a violation of the Fair Debt Collection Practices Act (FDCPA) is one year from the date the Act is violated. The ruling is a departure from contrary decisions issued by the 4th and 9th Circuits, which both held that the statute of limitations is tied to the discovery of the violation, rather than its occurrence. The 3rd Circuit cited in its reasoning the FDCPA’s provision that claims must be filed “within one year from the date on which a violation occurs” and said the 4th and 9th Circuits’ decisions failed to analyze the “violation occurs” language of the statute. However, the court noted that its holding does not undermine the doctrine of equitable tolling, and “should not be read to foreclose the possibility that equitable tolling might apply to FDCPA violations that involve fraudulent, misleading, or self-concealing conduct.” This question was not addressed, the court noted, because the plaintiff-appellant failed to preserve the issue on appeal.