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Every week, AccountsRecovery.net brings you the most important news in the industry. But, with compliance-related articles, context is king. That’s why the brightest and most knowledgable compliance experts are sought to offer their perspectives and insights into the most important news of the day. Read on to hear what the experts have to say this week.
CFPB Issues Final Rule Capping Overdraft Fees
The Consumer Financial Protection Bureau yesterday issued a final rule to cap overdraft fees, which was quickly followed by a lawsuit seeking to block the rule from going into effect. The regulation, effective October 1, 2025, aims to save consumers $5 billion annually and eliminate a regulatory loophole from the 1960s that allowed overdraft services to operate outside of lending laws. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: On December 12, 2024, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule to cap overdraft fees, set to take effect on October 1, 2025. The rule targets a regulatory loophole from that allowed overdraft services to operate outside of lending laws. To comply with the rule, financial institutions with total assets of $10 billion or more must either (1) cap fees at $5, (2) set fees to cover costs and losses only, or (3) treat overdrafts as loans, including clear interest rate disclosures. After the CFPB proposed this rule in January 2024, a number of banks announced changes to their overdraft fee programs.
But, following publication of the final rule, industry groups and banks immediately filed lawsuits claiming the new rule exceeds the CFPB’s authority. The American Bankers Association, Consumer Bankers Association, America’s Credit Unions, Mississippi Bankers Association, and banks directly affected jointly filed a complaint in the Southern District of Mississippi seeking declaratory and injunctive relief. The plaintiffs argue that discretionary overdraft services provide a significant benefit to consumers who overdraw their accounts. Moreover, they argue that overdraft programs are not “credit” under the Truth in Lending Act (“TILA”) because customers have no right to overdraw their accounts and financial institutions have the right, under their respective account agreements, to immediately recoup the amount paid and accompanying fee by deducting funds from the account balance once it is replenished. The CFPB, plaintiffs argue, has exceeded its rulemaking authority because it extends no further than what is “necessary and proper to effectuate the purposes” of the TILA. The complaint alleges that the CFPB has exceeded its statutory authority under the TILA by unlawfully interpreting “credit” and “finance charge” and by imposing substantive credit restrictions, that it has exceeded its statutory authority under the Consumer Financial Protection Act (“CFPA”), and has violated the Administrative Procedure Act (“APA”) by publishing an arbitrary and capricious rule. The plaintiffs ask the court to enter an order (1) declaring the final rule violates the APA, TILA, and CFPA, and (2) holding unlawful, enjoining, and setting aside the final rule.
Financial institutions subject to this rule promote the idea that consumers in need will be hit the hardest by this rule by reducing the availability of overdraft services, while the CFPB reasons this rule will save the average household $225 a year, and save consumers $5 billion annually.
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Judge Grants MTD in FCRA Case Over Not-Disputed Debt
In order to accuse someone of violating the Fair Credit Reporting Act for reporting inaccurate information to a credit reporting agency, there is one important step that has to happen before filing the lawsuit: the consumer has to dispute the debt. A District Court judge in Louisiana has granted a defendant’s motion to dismiss an amended complaint in an FCRA case because the plaintiff failed to meet this crucial requirement. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: It’s often said that an oral agreement is worth the paper its written on and that’s what happened here. The debtor claimed that Capital One Auto Finance (“COAF”) agreed to modify her loan contract during a phone conversation. After initially dismissing the Complaint on several other grounds, the Court granted permission for Plaintiff to amend and produce a writing to support her breach of contract claim reasoning that “had there been an oral modification to the parties’ original contract, defendant would have provided plaintiff with “written confirmation” to that effect.” Plaintiff subsequently failed to produce anything and that claim was dismissed.
The key takeaway establishes a “best practice.” When you agree to something with another party, follow up with an email or letter confirming that agreement. If there is no objection, you have established a strong position should the issue come up at later time. Obviously, a written agreement signed by both parties is preferable, in but circumstances where that might seem like overkill, say an agreement for an extension, a written confirmation should provide protection, especially with a party you’re unfamiliar with or don’t trust.
The other seminal issue related to an FCRA claim, where she failed to dispute the debt to the credit reporting agency, a predicate necessary to proceed on a claim regarding false reporting. Once again, written confirmation of an action comes into play.
CFPB Targets Coerced Debt in FCRA Overhaul
The Consumer Financial Protection Bureau has initiated a rulemaking process related to the Fair Credit Reporting Act aimed at protecting survivors of domestic violence, elder abuse, and financial coercion from the long-lasting financial harm of coerced debt. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The CFPB recently announced it intends to propose amendments to Regulation V, which implements the Fair Credit Reporting Act. The amendments would expand the FCRA’s definition of identity theft to include coerced debt – i.e., debt stemming from transactions that occurred without the consumer’s effective consent. This would allow victims of coerced debt (which includes “people in a range of abusive relationships, including children and survivors of elder abuse”) to utilize existing identify theft protections and processes to block credit report information arising from coerced debt. The goal is to “enable survivors to regain control of their financial lives and further their physical safety and independence from abusers.” The CFPB’s proposal was prompted by a petition for rulemaking submitted by the National Consumer Law Center and the Center for Survivor Agency and Justice.
To assist in the preparation of the proposed amendment, the CFPB has posted a list of questions, including:
- What documentation should a person be required to produce to show that their debt was coerced?
- What self-attestation mechanisms could be considered for meeting the standard for an identity theft report?
- Are there circumstances that should give rise to a presumption of coercion?
Hopefully, these process/operations questions receive thoughtful comment submissions from our industry. It remains to be seen if this rulemaking effort will survive the upcoming change in administration. If it does, then the eventual final rules may require changes to operations, policies and procedures addressing disputes, identify theft, and credit reporting.
Judge Grants MJOP in FDCPA Case Over Text Message Sent After Cease Request
A District Court Judge in Ohio has granted a defendant’s motion for judgment on the pleadings — albeit on a technicality — in a Fair Debt Collection Practices Act (FDCPA) case that accused the defendant of sending a text message attempting to collect on a debt after the plaintiff had responded to an earlier text message declining to pay the debt. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: If you’ve ever had the pleasure of getting wrangled into a lawsuit with a pro se plaintiff you know how much of a good time it can be. While our first instinct may be to assume that these cases should be “easier” to deal with because there is no attorney on the other side, oftentimes dealing with pro se plaintiffs comes with its own set of unique headaches. The time and expense necessary to deal with these cases can easily exceed what is necessary to deal with a “normal” case with an attorney you are familiar with. With that in mind, this opinion serves as a good reminder of how pro se cases can/should be handled differently in some instances. Arguing “technicalities” can be an exercise in futility in many instances as the attorney in the other side will fix the problem. However, a pro se plaintiff may be less inclined to do so as was the case here. Great work all around.
French Hill Tapped as Next Chair of House Financial Services Committee
The House Financial Services Committee, one of the most influential committees in Congress, will soon have a new leader. Rep. French Hill [R-Ark.], a former banker with a strong background in financial technology and regulatory reform, has been selected by the House Republican Steering Committee to chair the committee in the upcoming Congress. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: The selection of Rep. French Hill [R-Ark.] to chair the House Financial Services Committee marks a continuing commitment by the Republican Congress to hold the CFPB’s (and other financial agencies) feet to the fire. Congressman Hill is well-known for his distaste of excessive regulation and is expected to be aggressive with attempts to enact regulations outside the scope of congressional authority. With Republican control of the Senate, and the expectation of a new CFPB Director, French Hill will surely be an ally of the ARM Industry over the next two years.
Appeals Court Affirms Ruling for Defendant in FCRA Case
The Court of Appeals for the Second Circuit has affirmed a ruling in favor of the defendant in a Fair Credit Reporting Act case, ruling that the plaintiff failed to demonstrate a concrete injury as required to establish standing in federal court. More details here.
WHAT THIS MEANS, FROM JUSTIN PENN OF HINSHAW CULBERTSON: Our industry has obviously seen an increase in FCRA litigation in federal courts as a result of the need to establish standing. That was in large part due to some early cases holding there was standing for some FCRA violations (like those narrow claims examined in TransUnion v. Ramirez. Analyzing standing is inherently a tedious and sometimes fact intensive process, but this case is a worthy of note for a few reasons.
First, the case continues the helpful trend that merely alleging a damage in the FCRA context is insufficient to establish standing. Simply put – not every inaccuracy on a credit report results in damage sufficient to establish standing. Instead, as the Second Circuit explained, the injury must have a causal connection to the inaccuracy. This set of facts – with the alleged inaccuracies for the consumer’s birth year or slight address discrepancies – did not cause any injury. Second, the case underscores that the burden to prove the causal connection rests with the plaintiff. Too often courts get lulled into an assumption that because these consumers present little to no evidence, it is the defendants’ burden to show there was no violation or no injury. This case is a good reminder that the plaintiff must plead and then prove the causal connection between the inaccurate information and the injury. Finally, the fact that the case is a Circuit Court case is welcome guidance. Hopefully District Courts will apply its sound reasoning and continue to correctly require consumer plaintiffs to plead and then prove the causal connection between the alleged violation and the injury giving rise to standing.
I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics. And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
