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Banking & Finance Law Report

Category Archives: Consumer Law

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Disclosure Requirements for Consumer and Business Deposit Accounts, as recently republished by the Consumer Financial Protection Bureau

Posted in Consumer Law

A variety of federal laws and regulations require banks and financial institutions to make certain disclosures to holders of deposit accounts. Many of these disclosures are designed for consumer protection and accordingly, are only required to be made to those "consumer" deposit accountholders who hold deposit accounts primarily for personal, family, or household purposes.

Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") transferred the rulemaking authority for some of these consumer regulations from other federal regulators to the Consumer Financial Protection Bureau ("CFPB") on July 21, 2011. To reflect this change in authority, the CFPB has republished certain previously existing regulations to Title 12, Chapter X of the Code of Federal Regulations ("C.F.R."), effective December 30, 2011. (It is unclear when the older versions of these regulations will be removed from the CFPB’s predecessors’ sections of the C.F.R.) This recent republication included regulations requiring financial institutions to provide account disclosures, thus providing an excellent opportunity to review the newly republished regulations and take note of how disclosures required to be made to consumer deposit accountholders differ from those required to be made to business deposit accountholders.…


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CFPB Releases Examination Manual

Posted in Bank Regulation, Consumer Law, Consumer Law and Litigation, Regulation and Compliance

In October, the Consumer Financial Protection Bureau published its first supervision examination manual which will be of interest to bankers and other financial service executives.

On one level, the manual is fairly pedestrian and may contain little surprising in that most bankers have a fairly extensive appreciation of (and experience with) an examination process. And, of course, the Bureau has direct supervisory authority only over the roughly 100 large banks, thrifts, and credit unions that have assets more than $10 billion.

What should be interesting to many bankers, however, is the insight the Manual provides into the examination approach of the Bureau, an approach that will doubtlessly influence and inform the practices and procedures of all other financial institution regulators, large and small. Essentially, the Manual describes the Bureau’s process for risk assessment: first there will be the establishment of the inherent risk of a particular "product" line for consumers and then there will be an assessment of an entity’s set of quality controls to manage and mitigate the risks.…


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SUPREME COURT UPHOLDS ARBITRATION CLAUSES THAT DO NOT PERMIT CLASS ARBITRATION

Posted in Consumer Law

The United States Supreme Court held yesterday that the Federal Arbitration Act preempted California state contract law which courts had applied to find arbitration agreements invalid if they did not permit class arbitration. The Supreme Court’s decision appears to clear the way for consumer contracts to require the individual arbitration of disputes and prohibit consumers’ use of class action in litigation or arbitration. Some commentators are even saying the decision “could spell the death-knell of consumer class actions.” 

In AT&T Mobility LLC v. Concepcion, the Concepcions brought an action in federal court alleging that AT&T had engaged in false advertising and fraud by charging sales tax on mobile phones it advertised as free. Their action was later consolidated with a putative class action. AT&T tried to compel arbitration because the Concepcions had entered into a contract that contained an arbitration clause. Both the District Court and the Ninth Circuit Court of Appeals denied AT&T’s motion to compel arbitration. The lower courts relied on the California Supreme Court’s decision in Discover Bank v. Superior Court to invalidate the arbitration clause in the contract as “unconscionable” under state law because the provision did not allow for class action arbitration. The Ninth Circuit rejected the argument that “class proceedings will reduce the efficiency and expeditiousness of arbitration.”…


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Consumer Privacy After Dodd-Frank: What Bankers Need to Know

Posted in Consumer Law

Bankers and other financial product and service providers should expect to provide their consumer customers with far greater access to information than ever before.

The financial reform law adopted last year, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, established a new financial regulatory agency known as the Consumer Financial Protection Bureau. Under Dodd-Frank, the CFPB has the authority to promulgate regulations governing the credit agency reporting practices of financial institutions, including community banks. Also, under Dodd-Frank, banks must make available to each consumer all information regarding a financial product or service such consumer has purchased, including transaction history, cost, and usage information. All of this must be made available in an electronic, usable format, which will be prescribed and overseen by the CFPB.

The CFPB will now have authority to promulgate rules related to privacy and data security under the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Right to Financial Privacy Act and the Financial Privacy Act. Under Dodd-Frank, the CFPB is authorized to promulgate rules “identifying as unlawful, unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service.” The portion of CFPB authority focusing on abusive acts or practices is new in the consumer protection world—giving the CFPB broad authority to regulate in a completely undeveloped area of the law.

All these privacy and data security regulatory changes, some of them known and others forthcoming, will potentially mean large changes in the …


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