CURRENT MONTH (September 2021)
Consumer Finance
President Biden Nominates Privacy Advocate Alvaro Bedoya as FTC Commissioner
By Eric Mogilnicki & Lucy Bartholomew, Covington & Burling LLP
On September 13, 2021, President Biden announced the nomination of Alvaro Bedoya to serve as Federal Trade Commission (FTC) Commissioner. Bedoya is currently a professor at Georgetown University Law Center, where he leads the Center on Privacy & Technology. He has argued for a right to privacy, written extensively about government surveillance, and challenged large technology companies on their privacy practices. Bedoya spent significant time on the Hill, serving as chief counsel of the Judiciary Committee’s Subcommittee on Privacy, Technology and the Law and as an aide to Senator Al Franken (D-MN). On the same day President Biden announced the nomination, FTC Chair Lina Khan released a statement highlighting Bedoya’s ”expertise on surveillance and data security and his longstanding commitment to public service,” which she indicated “would be enormously valuable to the Commission as we work to meet this moment of tremendous need and opportunity.”
CFPB Issues Long-Awaited Small Business Data Collection Rule
By Eric Mogilnicki & Graves Lee, Covington & Burling LLP
On September 1, 2021, the Consumer Financial Protection Bureau promulgated a notice of proposed rulemaking that would require creditors to collect and report data about lending to small businesses, focusing on minority-owned and women-owned small businesses. The proposal would implement Section 1071 of the Dodd-Frank Act, which amended the Equal Credit Opportunity Act to create a mandatory data collection and reporting requirement for business lending to promote fair lending objectives. Section 1071 represents one of the Dodd-Frank Act’s last unfulfilled mandates. Consumer groups sued in 2019 to prompt the Bureau to issue rules under Section 1071, which the Bureau agreed to do in a recent settlement.
The proposal would establish a data collection and reporting regime for a wide range of financial institutions, including depository institutions, online lenders, platform lenders, and others. This regime would cover certain applications for credit made by small businesses, and would require covered institutions to collect, maintain, and report 21 distinct data points regarding such borrowers and their credit applications. In the proposal, the Bureau provides detailed instructions for the collection and reporting of such information.
Comments on the proposal will be due 90 days following its forthcoming publication in the Federal Register. The proposal calls for a mandatory compliance date of 18 months following the publication of any final rule in the Federal Register.
Acting Director Uejio Delivers Remarks Regarding Racial Home Ownership Gap and Special Purpose Credit Programs
By Eric Mogilnicki & Graves Lee, Covington & Burling LLP
On September 1, 2021, CFPB Acting Director Dave Uejio spoke before the National Fair Housing Alliance’s Virtual Forum on Special Purpose Credit Programs. In his remarks, he discussed the racial home ownership gap, the importance of access to home ownership in eliminating these disparities, and the effects of the COVID-19 pandemic in exacerbating the disparities. Acting Director Uejio pointed to the end of federal and state foreclosure protections as a potential risk for further widening of the racial home ownership and wealth gaps.
The Acting Director also spoke about Special Purpose Credit Programs (SPCPs), which are credit initiatives aimed at serving disadvantaged socioeconomic groups who may not be eligible for credit under typical underwriting standards. In December 2020, the Bureau issued an advisory opinion discussing how institutions may employ such SPCPs while maintaining compliance with the Equal Credit Opportunity Act and Regulation B. Acting Director Uejio promoted the advisory opinion and other Bureau publications on SPCPs, and stated that “[a]ll of us—regulators, policymakers, nonprofits, advocates, and mortgage lenders—must work together” to foster “an incentivized lending community of for-profit and not-for-profit institutions able to create programs meant to attract new customers and serve a social good.”
California Amends Provisions Governing Contracts of Adhesion and Arbitration Fees and Costs
By David Hicks, Hudson Cook, LLP
On September 22, 2021, California Governor Gavin Newsom signed Senate Bill 762, which amends certain statutory provisions related to contracts of adhesion and consumer arbitration agreements. Among other changes, the new law requires any time specified in a contract of adhesion for the performance of an act to be reasonable. It also requires consumer arbitration providers to provide invoices for the fees and costs required to proceed with an arbitration proceeding to all parties immediately after a consumer meets the filing requirements for initiating the arbitration. Such invoices must be due upon receipt unless the arbitration agreement expressly provides a different time for payment. For fees and costs due while the arbitration is pending, the new law requires any extension of the due date to be agreed upon by all parties to the arbitration proceeding. If the party who drafted the arbitration agreement is required to pay fees and costs, that party must pay such fees and costs within 30 days of receiving the invoice. Failure to timely pay required fees and costs constitutes a material breach of the arbitration agreement, default of the arbitration, and waiver of the party’s right to compel arbitration.
The new law is effective on January 1, 2022.
Sixth Circuit Finds Retroactive Application of Severance of Unconstitutional TCPA Exception
By Kevin Liu, Pilgrim Christakis LLP
Last year, the Supreme Court struck down and severed a 2015-enacted exception in the Telephone Consumer Protection Act (“TCPA”), which permitted “robocalls” related to government-backed debts. Barr v. American Association of Political Consultants, Inc. On September 9, 2021, in Lindenbaum v. Realgy, LLC, the Sixth Circuit weighed in on the application of that severance.
In Lindenbaum, the plaintiff filed a TCPA action concerning two government-backed debt collection robocalls that she received prior to the Supreme Court’s decision. The defendant moved to dismiss for lack of subject-matter jurisdiction, arguing that because severance of the exception was a remedy that operated prospectively, the unconstitutional exception was “void” for the period of time it was “on the books.” The district court agreed and found that it did not have federal-question jurisdiction based on a “void” law.
On appeal, the Sixth Circuit reversed and addressed two points. First, the appellate court made clear that “unconstitutional enactments”—such as the TCPA exception at issue here—“are not law at all.” It then naturally follows that the statute never had the unconstitutional provision to begin with—and so, any such severance applied retroactively, which the court characterized as a “fundamental rule . . . that has governed [j]udicial decisions . . . for near a thousand years.” The appellate court further disagreed with the defendant’s characterization of severance as a remedy, and noted that severance can only be prospective if it is due to a legislative act, rather than a judicial finding.
Second, the defendant argued that the First Amendment provided an exception to the general rule of retroactive application. It contended that government-backed debt collectors have a due process defense to liability because they did not have fair notice of their actions’ unlawfulness—i.e., they believed their actions were lawful from the exception’s enactment in 2015, up to until the Supreme Court’s decision in 2020. The Sixth Circuit sidestepped the argument, finding that the First Amendment had no application as there was no speech restriction at issue, even if the calls were related to government-backed debts.
Texas Legislators Recognize Need for Continued Remote Work Options for Texas Creditors
By Andrea S. Cottrell, Hudson Cook, LLP
The Texas Finance Code governs certain types of lending in Texas and generally requires licensees do business from licensed locations. The Office of the Consumer Credit Commissioner, recognizing the need to adjust those requirements during the pandemic, published emergency measures promising not to take enforcement action against licensees conducting activity from unlicensed locations if certain instructions were followed. The Texas Legislature followed the OCCC’s lead and passed legislation to allow remote work from home.
House Bill 3510, signed into law on June 14, 2021, and effective on September 1, 2021, creates a new section of the Texas Finance Code. The new section, Texas Finance Code § 341.503, allows employees of licensees to work from remote locations so long as the licensee:
- ensures that in-person consumer interactions will occur at the physical license location;
- maintains safeguards for consumer information;
- employs risk-based monitoring and oversight;
- ensures that consumer information and records are not maintained at a remote location;
- ensures that information and records remain accessible for regulatory oversight;
- provides employee training (1) to keep all conversations about and with consumers conducted from a remote location confidential as if conducted from a licensed location, and (2) to ensure that remote employees work in an environment conducive and appropriate to consumer privacy; and
- adopts, maintains, and follows written procedures to ensure that (1) the license holder and the license holder’s employees comply with this section and applicable law, and (2) the employees do not perform an activity that would be prohibited at a licensed location.
This new section applies to employees of regulated lenders licensed under Chapter 342. It also applies to employees of motor vehicle sales finance licensees under Chapter 348 and commercial motor vehicle sales finance licensees under Chapter 353, but only if the employee engages in making, servicing, holding, or collecting a retail installment transaction as defined in Chapter 348 and Chapter 353, as applicable.
This is the first bill in the county passed based on the American Financial Services Association’s (AFSA) work from home model act. AFSA and seven member companies sent a joint letter to the Texas House Pensions, Investments & Financial Services Committee in support of the bill on March 29, 2021.
The OCCC has issued a Regulated Lender Advisory Bulletin and a Motor Vehicle Advisory Bulletin regarding the HB 3510 requirements.
Employment Law
How can employers prepare for Biden’s vaccine/testing mandate?
By Camille Bryant, McGlinchey Stafford, PLLC
On Thursday, September 9, 2021, President Biden announced that the Department of Labor is preparing to mandate that all business with 100 or more workers require their employees to either get vaccinated against the coronavirus or face mandatory weekly testing.
This mandate is expected to affect approximately 80 million workers, and it is by far the government’s biggest push towards vaccination to curb the spread of COVID-19. The Biden administration also intends to require vaccination for federal contractors, as well as 17 million health care workers in hospitals and other institutions that receive Medicare and Medicaid funding.
The Occupational Safety and Health Administration (OSHA) is drafting an emergency temporary standard to implement the requirement, and formal issuance of the rule is expected in the coming weeks. Businesses that do not comply with the order could face “substantial fines” of up to nearly $14,000 per violation.
This is a significant development in the landscape of COVID-19 issues facing employers. Not only could this requirement pose a significant financial burden, but it could also contribute to the labor shortage and the influx of workers leaving the workplace. Even though the mandate will require employers to test unvaccinated employees, employers must still remain vigilant and be mindful of OSHA’s “general duty” clause to mandate a safe workplace. In that respect, testing should be accompanied by other measures, such as social distancing and requirements to wear face coverings.
This mandate also would not relieve an employer’s obligations under the Americans with Disabilities Act and Title VII of the Civil Rights Act of 1964, which may provide exemptions to employees with disabilities or sincerely held religious beliefs. Employers also must be mindful of potential wage and hour issues, as non-exempt employees may require compensation for travel time to receive the vaccine and reimbursement for associated out-of-pocket costs. Before implementing a mandatory vaccination policy, it is critical that employers develop a strategy to address several key areas of consideration. The strategy should include risk assessment, the development of clearly defined policies, protocols for collecting documentation, processes for reviewing exemption requests, and processes for employees who lie about their vaccination status.
