February 2023 UDAAP Bulletin

The following document provides a monthly round-up summarizing enforcement actions, guidance, rulemakings, and other public statements from the Consumer Financial Protection Bureau and the Federal Trade Commission regarding the prohibition on unfair, deceptive, or abusive acts or practices (UDAAP) in the marketplace for consumer financial services.

Enforcement and Litigation

• Consumer Financial Protection Bureau. Auto Lenders & Military Lending Act. CFPB issued a consent order and stipulation against the parent company of a title lending business, to resolve allegations that the company violated 12 U.S.C. §§ 5531 and 5536; the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601, et seq.; and the Military Lending Act, 10 U.S.C. § 987. The company is accused of extending prohibited title loans to military families, charging fees for products that did not provide any benefit, and trying to hide activities by altering the personal information of military borrowers to circumvent their protected status. (UDAAP violations: unfair).
• Consumer Financial Protection Bureau. Mortgage Lenders. CFPB issued a consent order and stipulation against a mortgage lender, permanently banning it from the industry by prohibiting it from engaging in any mortgage lending activities or receiving remuneration from mortgage lending. The agency alleges violations including, but not limited to: a 2015 consent order and 12 U.S.C. §§ 5531 and 5536 the company misrepresenting material facts about its mortgage credit products and that it was, or was affiliated with, with the Veterans Administration or the Federal Housing Administration. (UDAAP violations: deceptive).
• Federal Trade Commission. Telemarketing & Debt Collection. FTC & DOJ filed a complaint against an interconnected web of operations allegedly responsible for delivering tens of millions of unwanted Voice over Internet Protocol and ringless voicemail pitching a "variety of goods and services, including homebuying services, credit card and student debt relief services, and health insurance," as well as "fake lawsuit scams, fraudulent sweepstakes, or cable television discount offers." to consumers nationwide. The complaint alleges violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC’s Telemarketing Sales Rule, as amended, 16 C.F.R. Part 310 stemming from a plan, program, or campaign to induce the purchase of goods or services involving the use of more than one interstate telephone call without consumer consent. (UDAAP violations: abusive, deceptive).
• Federal Trade Commission. Home Services. FTC issued a request for public comment on a proposed consent agreement to resolve alleged violations of Section 5 of the FTC Act prohibiting unfair or deceptive acts or practices by a digital marketplace company. The company, which denied liability, was accused of using deceptive and misleading tactics in selling home improvement project leads to service providers. The deadline for comments is March 8, 2023. (UDAAP violations: deceptive).
• Federal Trade Commission. Marketing. FTC finalized a consent order against a mass media corporation to resolve allegations that the company violated 15 U.S.C. § 45(a) company by producing and airing nearly 29,000 deceptive first-person endorsements by radio personalities promoting the personalities’ use of and experience with a smartphone in 2019 and 2020. (UDAAP violations: deceptive).
  
  

Rulemakings and Guidance

• Consumer Financial Protection Bureau. Real Estate Settlement Procedures Act (RESPA) / Reg X. CFPB issued an advisory opinion to provide guidance to consumers on digital mortgage comparison-shopping platforms under Section 8 of RESPA. The agency states that by non-neutrally using or presenting information on the platform and receiving payment under such conditions constitutes a referral and therefore could potentially implicate the Dodd-Frank Act's prohibition on unfair, deceptive, or abusive acts or practices. They go further to say that even the use of an algorithm is no defense where elements of a RESPA Section 8 violation are otherwise specified and cites to a June 2022 Consumer Financial Protection Circular on adverse action in connection with credit decisions based on complex algorithms in reference to this guidance. The advisory opinion is effective as of February 13, 2023. Separately, Dir. Chopra provided remarks on the publication. (UDAAP regulatory focus: deceptive, unfair).[1]
• Consumer Financial Protection Bureau. Proposed Rule: Registry of Supervised Nonbanks that Use Form Contracts to Impose Terms and Conditions that Seek to Waive or Limit Consumer Legal Protections. The rule would require that nonbanks subject to the agency's supervisory authority, with limited exceptions, register each year in a nonbank registration system established by the agency information about their use of certain terms and conditions in form contracts for consumer financial products and services that pose risks to consumers. Deadline for comments: April 3, 2023. (UDAAP regulatory focus: deceptive, unfair).
  
  

Public Statements, Reports & Other Items of Note

• Federal Trade Commission. Equal Credit Opportunity Act (ECOA). FTC staff provided the CFPB with an annual summary of its activities enforcing the ECOA in 2022. The FTC highlighted a case against two auto dealership groups (group 1 and group 2) in which the FTC alleged that discrimination constitutes an unfair practice under Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). (UDAAP regulatory focus: unfair).
• Supreme Court of the United States. CFPB Agency Structure. SCOTUS granted a petition for a writ of certiorari, agreeing to hear an appeal of a Fifth Circuit decision which held that the CFPB’s funding structure was unconstitutional. (UDAAP Regulatory Focus: Enforcement).

Michael Buckalew is a regulatory analyst with Davis Wright Tremaine LLP.

[1] For a deeper dive on this topic, please see a prior blog post we published here: https://www.dwt.com/blogs/financial-services-law-advisor/2023/02/cfpb-respa-section-8-digital-mortgage-kickback.