FTC Enters Into $104 Million Settlement With Company for Impermissible Lead Generation

On July 5, 2017, the Federal Trade Commission (FTC) entered into a stipulated order to memorialize a settlement with a lead-generation business, Blue Global LLC, and its CEO (Blue Global), in the U.S. District Court for the District of Arizona. The settlement entails both injunctive relief and an award of more than $104 million in damages, all arising from allegations that Blue Global’s “ping tree” lead-generation tool ran afoul of the FTC’s prohibition on unfair or deceptive acts or practices. The settlement comes as the result of the FTC’s complaint filed only days earlier (on July 3).

Blue Global operated a lead-generation business. In its complaint, the FTC alleged that Blue Global operated at least 38 internet domains that offered services to consumers looking for loans. The complaint also alleged that consumers were encouraged to fill out online applications, then “sit back while we do the dirty work” of matching those applications with a “network of more than 100 lending partners.”[1] These applications allegedly required consumers to provide personal information – including their name, address and contact information – as well as sensitive personal information such as Social Security numbers, financial account numbers, and credit and debit card information. Continue Reading

H.R. 2148 Introduced to Clarify HVCRE Rules

In 2013, the Federal Reserve Board adopted rules to implement Basel III, a regulatory framework of reform measures for the banking industry issued by the Basel Committee on Banking Supervision (BCBS). These measures include a set of recommendations on banking regulations which, in general, aim to ensure banks are sufficiently capitalized to withstand volatile market conditions such as those that marked the financial crisis of 2008. Effective Jan. 1, 2015, as part of the Basel III regulations, banking organizations are required to set aside more capital in reserve when making commercial real estate loans considered “high-volatility commercial real estate (HVCRE) exposures” than what had been historically required for typical commercial real estate loans. Under the HVCRE rules, a non-HVCRE commercial real estate loan carries a risk weight of 100 percent, whereas an HVCRE loan has a risk weight of 150 percent; in other words, a lender is required to maintain 50 percent more capital on reserve against an HVCRE loan – a significant increase. Continue Reading

Commercial Tenant Debtors in Chapter 11: Fundamentals of Landlord Creditor Protection in Bankruptcy

Commercial landlords have unique protections in bankruptcy, but can lose these rights if they do not assert them. When a commercial tenant files bankruptcy under Chapter 11, the landlord must carefully monitor filings and proceedings from the first day to be sure that the debtor properly budgets for payment of rent, and does not otherwise seek to modify the landlord’s rights and remedies. The fundamental rule of bankruptcy is that creditors have certain rights unless they give them away. The Bankruptcy Code (i.e., Title 11 of the U.S. Code) won’t protect a sleepy creditor who fails to object to motions, sale orders, a plan, or a confirmation order that strikes a creditor’s claim, modifies the lease or otherwise eliminates the landlord’s protections. Consequently, commercial landlord creditors must carefully monitor bankruptcy proceedings to enforce their rights and maximize their recovery.

  • 365 – Assumption, rejection and the obligation to pay rent commencing 60 days after the petition date

Section 365 of the Bankruptcy Code is the primary statute addressing unexpired leases. The same Code section also deals with “executory contracts.” Among its virtues, § 365 is long and confusing; has different rules for different chapters and for different types of leases; is replete with terms defined elsewhere and cross-references to multiple other statutes; and is subject to alteration by a number of other statutes that aren’t referenced. It’s a challenging statute.  Continue Reading

Supreme Court to Determine Whether Internal Whistleblowers Are Protected From Retaliation

On June 26, 2017, the Supreme Court granted certiorari on an issue that has long divided the federal courts: whether a whistleblower is entitled to protection from retaliation for blowing the whistle internally even if he or she doesn’t report to the Securities and Exchange Commission (SEC).

The Supreme Court granted certiorari of the Ninth Circuit Court of Appeals’ decision in Somers v. Digital Realty Trust Inc. et al. which upheld the ability to bring anti-retaliation claims by a whistleblower who did not make a report to the SEC. The Ninth Circuit’s decision held that the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank) “anti-retaliation provision unambiguously and expressly protects from retaliation all those who report to the SEC and who report internally” (emphasis added).

However, many courts have found that these provisions are anything but “unambiguous.” In his dissent in the Somers case, the Ninth Circuit’s Judge John B. Owens recognized (and came out on the opposite side of) the ongoing circuit split regarding this interpretation of Dodd-Frank. Continue Reading

Policymakers Increasing Their Scrutiny of Virtual Currencies

Virtual currencies are attracting unprecedented worldwide attention from not only businesses and investors but also U.S. policymakers.

The increasingly intense interest in virtual currencies is fueled by all-time highs in the price of bitcoin and other virtual currencies, excitement generated by the flood of POCs (proofs of concept) using the underlying technology, the frenzy of fundraising stoked by initial coin offerings (ICOs), and the additional demand created by unfortunate ransomware attacks.

At the recent Consensus 2017 conference, which is one of the most significant events in the fledgling blockchain world, the predominant topics of discussion were the new virtual currencies and blockchain technologies being unveiled almost daily, the legality of ICOs, and how much and how fast the next ICO would raise money. Continue Reading

Supreme Court Holds That Filing of Time-Barred Bankruptcy Claim Does Not Violate FDCPA

On May 15, 2017, the United States Supreme Court issued its decision in Midland Funding, LLC v. Johnson, 581 U.S. ___ (2017) in which it held that filing an “obviously time-barred” proof of claim in a bankruptcy proceeding does not violate the Fair Debt Collection Practices Act (FDCPA).

The facts of Midland Funding are fairly straightforward. The respondent filed for personal bankruptcy under Chapter 13 of the Bankruptcy Code (Code). Midland, the petitioner, filed a proof of claim in the respondent’s bankruptcy on account of a credit card debt. The proof of claim, however, demonstrated that the debt was barred by the applicable Alabama statute of limitations. The respondent’s counsel objected to the claim, Midland did not respond, and the Bankruptcy Court disallowed the claim. Continue Reading

Supreme Court Holds That Cities Have Standing to Sue for Fair Housing Act Violations

On Monday, in Bank of America Corp. et al. v. City of Miami, Florida, the Supreme Court held in a 5-3 decision that the City of Miami had standing to challenge alleged violations of the Fair Housing Act by lenders. 581 U.S. ____ (2017). The Supreme Court left open whether there was a “sufficiently close connection” between the alleged misconduct and the injuries claimed by Miami (including reduced property tax revenue and increased police and fire expenses) to allow Miami to recover.  Continue Reading

Supreme Court Hears Oral Argument In Significant FDCPA Case

This month, the Supreme Court heard oral argument in a case with potential to affect companies that purchase consumer debt and then collect it for their own account. The case — Henson v. Santander Consumer USA, Inc., Supreme Court Docket No. 16-349 — centers on the Fair Debt Collection Practices Act’s distinction between “debt collectors,” which are subject to the FDCPA, and “creditors,” which are not. The specific question before the Court is whether a company that regularly attempts to collect debts it purchased after the debts fell into default is a debt collector subject to the FDCPA. Continue Reading

Banks’ Boards of Directors Face New Cybersecurity Challenges

Banks’ boards of directors must, among other things, understand the risks associated with existing and planned IT operations, monitor risk management, and work with senior bank managers on strategic technology planning. See the Federal Financial Institutions Examination Council (FFIEC) IT Examination Handbook InfoBase. Recent changes in the types of attacks perpetrated by cyber criminal groups and attackers’ increased skill levels have changed how board members should approach these cybersecurity responsibilities.

The number of ransomware attacks against businesses in the U.S. quadrupled in 2016, according to Beazley, a leading cyber insurance carrier. The FBI estimates that U.S. businesses paid more than a billion dollars to ransomware attackers in 2016. The number of such attacks is projected to increase again in 2017. Continue Reading

Recent Eleventh Circuit Decision Garners Attention for Post-Spokeo Treatment of FDCPA Claims

Last year, the Supreme Court decided Spokeo, Inc. v. Robins, 578 U.S.—, 136 S. Ct. 1540 (2016), which addressed whether the plaintiff adequately pleaded Article III standing by alleging bare violations of the Fair Credit Reporting Act, based on the publication of allegedly inaccurate consumer information. The Court held that the lower court, the Ninth Circuit, failed to address the “concreteness” component of the injury-in-fact element of standing and vacated and remanded for consideration. In its opinion, the Court offered guidance to the Ninth Circuit, noting that the injury-in-fact element comprises both particularity and concreteness components. The latter requires that the injury be “de facto”; “that is, it must actually exist.” While allegations of “a bare procedural violation, divorced from any concrete harm,” will not suffice, “the violation of a procedural right granted by statute can be sufficient,” so long as the right is tied to some “concrete interest.” Continue Reading