Transcript FTC Update - Online Lenders Alliance

April 8, 2015
Andrew Smith
Morrison & Foerster LLP
©2013 Morrison & Foerster LLP | All Rights Reserved | mofo.com
FTC Update
Personnel Changes at FTC
• New Chairman
• FTC Commissioner Edith Ramirez
• New Commissioners
• Prof. Joshua Wright
• taught law & economics at GMU Law School
• Terrell McSweeny (nominated)
• Longtime aide to VP Biden
• New Senior Staff
• Jessica Rich, Director, Bureau of Consumer Protection
• Reilly Dolan, Associate Director for Financial Practices
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Small-Dollar Lending Cases
• PLS Financial Services
• Storefront lender
• Data security: allegedly tossed sensitive consumer financial
information in a dumpster
• Privacy notices: required that annual GLBA notices be signed by
customers and kept in files
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Small-Dollar Lending Cases
• Vantage Funding
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falsely promised “cash in an hour” and 80% approval rate
Charged $30 fee via a remotely-created check
Allegedly purchased information as well
“According to the trade group that represents online lenders,
legitimate participants in this industry do not charge an application
or processing fee.“
• Ideal Financial Solutions
• Billed w/o authorization (said it was fee for payday loan)
• May have purchased consumer information
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Internet Lending Litigation
• Western Sky
• MTD denied:
• Limited to fairness of the contract’s forum selection clause
• Favorable language re: a non-resident internet borrower
• “The proper focus is on the Borrower's ‘activities’ or ‘conduct,’ not
solely the Borrower's physical location.”
• AMG Services
• MTD Ruling
• Tribally owned and chartered companies can be subject to the
FTC’s jurisdiction under the FTC Act
• Defendant tribal corporations may not be subject to the FTC’s
jurisdiction, if not operated for private profit.
• Partial settlement
• Debt collection claims
• Reg E claims
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Payment Processor Enforcement
• Pro Credit Group LLC & Sanders Legal Group (9/13)
• Alleged “phantom debt collection” scam
• Used processing relationship to collect payments for phantom
collectors
• Alleged interest rate reduction scam
• Robocalls from “Rachel” at “cardholder services”
• Automated Electronic Checking, Inc. (3/13)
• First Bank of Delaware follow-on
• Telemarketers, RCPOs, and return rates as high as 80%
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Payment Processor Enforcement
• Independent Resources Network Corp. (6/13)
• debt relief, TSR, credit cards (10% to 40%)
• Newtek Merchant Solutions (6/13)
• Treasure your Success (interest rate reduction)
• Credit cards, MC watch list
• CFPB payment processor case
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Meracord LLC (10/13)
Debt settlement
TSR “assisting and facilitating”
“Covered person” liability for UDAAP
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FTC Payments Rulemaking
• Proposed TSR Amendment
• would prohibit telemarketers and sellers
• in both inbound and outbound telemarketing calls
• from accepting or requesting
• remotely created checks,
• remotely created payment orders,
• cash-to-cash transfers, or
• cash reload mechanisms.
• ABA Response
• The FTC should focus on addressing deceptive and abusive
actions by telemarketers, rather than “blame this payment
mechanism for creating the harm.”
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