HUD Publishes New Affirmatively Furthering Fair Housing Rule

By: Damon Y. Smith

Housing1Ever since the US Department of Housing and Urban Development (HUD) suspended certain reporting requirements of the Affirmatively Furthering Fair Housing (AFFH) rule for local governments in 2018, cities and affordable housing developers and lenders have awaited their proposed replacement.  After a year of review and revisions, HUD recently released a newly proposed AFFH rule.  The proposed regulation re-defines AFFH and makes substantial changes to the metrics for compliance.

The Department’s new definition of AFFH is “advancing fair housing choice within the program participant’s control or influence.”  However, the headline change for most program participants (state and local government and public housing agencies) is that they will no longer have to use a HUD-prescribed computer assessment tool to determine their compliance with AFFH.  That tool required program participants to answer questions about segregation levels and patterns in their communities and impediments to changing those patterns in the future.  Instead, the proposed rule has adopted three metrics to determine if a participating jurisdiction is (1) free of fair housing claims; (2) has adequate supply of affordable housing and (3) has adequate quality in that supply of affordable housing.  These metrics dovetail with the Department’s new definition of AFFH because “fair housing choice” is further defined to include choice that is (1) free of fair housing discrimination, (2) actual in fact, due to existence of informed affordable housing options and (3) capable of providing access to quality affordable housing that is decent, safe and sanitary.

Comments on this new rule are due on March 16, 2020.


Are E-Signed Arbitration Agreements Enforceable?

By: Amy M. Gallegos

LaptopAs more and more businesses conduct transactions electronically, courts and practitioners are increasingly faced with questions about the validity and enforceability of electronically signed documents.  In consumer law, this issue often arises when a company seeks to enforce an arbitration agreement contained in a document that was electronically signed by the consumer.  California courts are well known for their skepticism of arbitration provisions in consumer contracts.  Additionally, consumers may be more likely to challenge electronic agreements, perhaps because they believe electronic signatures are not legally binding, or because without a handwritten signature to prove up the contract, they think it makes sense to play the odds that the defendant will not be able to satisfy the court that an agreement was actually made.  Understanding how to prove up an agreement to arbitrate when the consumer’s signature is electronic is critical for consumer lawyers practicing in California.

In California, general principles of contract law determine whether the parties have entered a binding agreement to arbitrate.  California has enacted the Uniform Electronic Transaction Act, which recognizes the validity of electronic signatures. (Cal. Civ. Code Section 1633.1.)  Under that act, an electronic signature has the same legal effect as a handwritten signature, and “[a] … signature may not be denied legal effect or enforceability solely because it is in electronic form.” (Cal. Civ. Code, Section 1633.7, subd. (a).)  That said, any writing must be authenticated before the writing, or secondary evidence of its content, may be received in evidence. (Evid. Code Section 1401.)  “Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.”

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Top 10 of 2019: The Year’s Most Popular Consumer Law Round-Up Posts

2019 was another busy year for the Consumer Law Round-Up.  Launched by the firm’s Consumer Law Practice, the blog updates readers on key developments within consumer law and provides insights that are relevant to companies and individuals that may be affected by the ever-increasing patchwork of federal and state consumer protection statutes.  In 2019, the Consumer Law Round-Up published 44 posts on a wide array of topics. 

Below is a list of the 10 most popular posts of the year. 

#1 Regulators Continue to Focus on the Use of Alternative Data
In a July article published by Law360 (and reprinted in our Consumer Finance Observer periodical), our lawyers highlighted the increasing focus of government enforcement authorities on how companies are using “alternative data” in making consumer credit decisions.  For example, the article highlighted that – as stated in a June 2019 fair lending report from the CFPB – “[t]he use of alternative data and modeling techniques may expand access to credit or lower credit cost and, at the same time, present fair lending risks.”  Regulators have continued to focus on this area...Read more

#2 Eleventh Circuit Rules: Receiving Text Message Was Not Injury Under the TCPA
The Eleventh Circuit recently decided a case that raised the bar for pleading injury under the Telephone Consumer Privacy Act (TCPA), 47 U.S.C. § 227, noting its disagreement with an earlier decision from the Ninth Circuit on the same issue and creating a possible roadblock for future plaintiff classes seeking to assert claims under the TCPA.  In Salcedo v. Hanna, the Eleventh Circuit held that “receiving a single unsolicited text message” in violation of the TCPA was not a “concrete injury” sufficient to confer standing...Read more

#3 New York SHIELD Act Expands Data Security and Breach Notification Requirements
On July 25, 2019, New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), which significantly amended the state’s data breach notification law to impose additional data security and data breach notification requirements on covered entities.  Under the new law, the definitions of “private information” and “breach of the security system” have been revised in ways that broaden the circumstances that qualify as a data “breach” and could trigger the notification requirements...Read more

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Zero Calories, Zero Plausibility: Ninth Circuit Affirms Dismissal of “Diet” Soda Class Action

By: Alexander M. Smith

SodaIn 2017, several plaintiffs began bringing lawsuits in California and New York premised on the theory that “diet” sodas — i.e., sodas sweetened with zero-calorie artificial sweeteners rather than sugar — were mislabeled because the sodas falsely suggested they would help consumers lose weight, even though aspartame and other artificial sweeteners are supposedly associated with weight gain.  Courts have routinely dismissed these lawsuits on one of two grounds:

  • Some courts have concluded that this theory of deception is implausible because reasonable consumers understand the term “diet” to mean that the soda has zero calories, not that it will help them lose weight.  See, e.g., Geffner v. Coca-Cola Co., 928 F.3d 198, 200 (2d Cir. 2019) (“[T]he “diet” label refers specifically to the drink’s low caloric content; it does not convey a more general weight loss promise.”); Becerra v. Coca-Cola Co., No. 17-5916, 2018 WL 1070823, at *3 (N.D. Cal. Feb. 27, 2018) (“Reasonable consumers would understand that Diet Coke merely deletes the calories usually present in regular Coke, and that the caloric reduction will lead to weight loss only as part of an overall sensible diet and exercise regimen dependent on individual metabolism.”). 
  • Other courts have dismissed these lawsuits on the basis that the scientific literature cited by the plaintiffs does not support a causal relationship between zero-calorie sweeteners and weight gain.  See, e.g., Excevarria v. Dr. Pepper Snapple Grp., Inc., 764 F. App’x 108, 110 (2d Cir. 2019) (affirming dismissal of lawsuit challenging labeling of Diet Dr. Pepper, as “[n]one of the studies cited . . . establish a causal relationship between aspartame and weight gain”).

The Ninth Circuit recently joined the chorus of courts that have rejected this theory of deception.  In Becerra v. Dr. Pepper/Seven Up, Inc., the district court dismissed a lawsuit alleging that Diet Dr. Pepper was mislabeled as a “diet” soda, both because the plaintiff had not alleged that consumers construed the term “diet” as a representation about weight loss and because the plaintiff had not sufficiently alleged that aspartame is associated with weight gain.  On December 30, 2019, the Ninth Circuit issued a published decision affirming the dismissal of this lawsuit.  Becerra v. Dr. Pepper/Seven Up, Inc. --- F.3d ----, 2019 WL 7287554 (9th Cir. 2019).

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OCC and FDIC Propose “Madden Fix” Rules to Codify “Valid-When-Made” Principle

By: William S. C. Goldstein

New-Development-IconThe long-running saga of Madden v. Midland Funding is entering a new phase.  Last week, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) proposed rules that would codify the concept that the validity of the interest rate on national and state-chartered bank loans is not affected by the subsequent “sale, assignment, or other transfer of the loan.” See Permissible Interest on Loans That Are Sold, Assigned, or Otherwise Transferred, 84 Fed. Reg. 64229, (proposed Nov. 18, 2019); FDIC Notice of Proposed Rulemaking, Federal Interest Rate Authority, FDIC (proposed Nov. 19, 2019).  Under these rules, an interest rate that is validly within any usury limit for such a bank when it is made would not become usurious if the loan is later transferred to a non-bank party that could not have charged that rate in the first instance.

The proposed rules are a long-awaited response to the Second Circuit’s decision in Madden, which held that a non-bank purchaser of bank-originated credit card debt was subject to New York State’s usury laws.  786 F.3d 246, 250-51 (2d Cir. 2015).  In so holding, the Second Circuit cast doubt on the scope of National Bank Act (NBA) preemption, which exempts national banks from most state and local regulation, allowing them to “export” their home state interest rates without running afoul of less favorable usury caps in other states (FDIC-insured state banks are afforded similar protections).  Before Madden, it was widely assumed that “a bank’s well-established authority [under the NBA] to assign a loan” included the power to transfer that loan’s interest rate.  See Permissible Interest on Loans That Are Sold, 84 Fed. Reg. at 64231. The Madden decision also did not analyze the “valid-when-made” rule, a common law principle providing that a loan that is non-usurious at inception cannot become usurious when it is sold or transferred to a third party. See, e.g., Nichols v. Fearson, 32 U.S. (7 Pet.) 103, 109 (1833) (“[A] contract, which, in its inception, is unaffected by usury, can never be invalidated by any subsequent usurious transaction.”).  Madden has been widely criticized by a host of commentators, including the Office of the Solicitor General.

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Final Version of the Big Data Interoperability Framework Released by NIST

By: Alexander N. Ghantous

Data  platformsThe National Institute of Standards and Technology (NIST) announced on October 29, 2019, that the final, nine-volume version of the “NIST Big Data Interoperability Framework” (Framework) has been published.[1]  The Framework, which was developed by NIST in collaboration with hundreds of experts from an array of industries, provides ways developers can utilize the same data-analyzing software tools on any computing platform.[2]  Under the Framework, analysts can transfer their work to different platforms and use more sophisticated algorithms without revamping their environment.[3]  This interoperability provides a solution to data scientists who are tasked with analyzing increasingly diverse data sets from a multitude of platforms.[4]  Consequently, it could also play a role in solving modern day difficulties that include, but are not limited to, detecting health-care fraud and issues that arise during weather forecasting.[5]

 

[1]Nat’l Inst. of Standards and Tech., https://www.nist.gov/news-events/news/2019/10/nist-final-big-data-framework-will-help-make-sense-our-data-drenched-age (Oct. 29, 2019).

[2] Id

[3] Id

[4] Id.

[5] Id


Big Data, Hedge Funds, Securities Regulation, and Privacy: Mitigating Liability in a Changing Legal Landscape

Abstract2-ATBi_600x285In an article published by Westlaw Journal Securities Litigation & Regulation, Partners Charles D. Riely and Keisha N. Stanford and Associate Logan J. Gowdey explain that the use of big data to analyze market activity is on the rise.  But with the opportunities that big data presents comes a complex regulatory landscape.  The authors introduce these issues and offer a starting point for general counsel and chief compliance officers to mitigate risks.

To read the full article, please click here.

 
 

Consumer Finance Observer – Fall 2019

CFOJenner & Block has published its second issue of Consumer Finance Observer or CFO, a newsletter providing analysis of key consumer finance issues and updates on important developments to watch.  As thought leaders, our lawyers write about the consumer finance sector on topics ranging from artificial intelligence, compliance, data security, FinTech, lending and securities litigation.

In the Fall 2019 issue of the CFO, our consumer finance lawyers discuss the use of alternative data; best practices to avoid TCPA wrong-number claims; the OCC’s FinTech Charter; the FTC monitoring of class action settlements; an Eleventh Circuit ruling in a TCPA case; a quick look at HUD’s FHA Lender Annual Certification Statements; FinCen's report on business email scams; and a brief history of the CFPB payday lending rule.  Contributors are Amy M. GallegosJoseph L. NogaMichael W. RossDavid P. Saunders and Damon Y. Smith; Associates Gabriel K. GillettWilliam S.C. GoldsteinOlivia Hoffman and Katherine Rosoff; and Staff Attorney Alexander N. Ghantous.

To read the full issue, please click here.


FTC Releases Guidance for Social Media Influencers

 

By: David D. Heckman and Kristen M. Iglesias

Social-media-influencerOn November 5, 2019 the Federal Trade Commission (FTC) released Disclosures 101 for Social Media Influencers, to provide guidance to social media users that recommend or endorse products in their posts, videos or other content (often called ‘influencers’).  Influencers have become big business, with millions of followers and payments of tens or even hundreds of thousands of dollars per post.  The FTC took action in 2017, sending educational warning letters to influencers and settling charges with two influencers popular in the online gaming community for failing to disclose that they jointly owned a gambling service they endorsed.  While the new guidance does not carry the force of law, it provides helpful insight into how the FTC views the issue and will approach enforcement. 

The FTC cites the need for disclosure of any “material connections” between the influencer and the brand or product being endorsed.  A material connection includes any financial, employment, personal, or family relationship with a brand or product.  The guidance specifies that a material connection should be disclosed by an influencer if they are being provided with any free or discounted products or other perks, even if the influencer is reviewing or endorsing a different product made by the same brand.  Additionally, the FTC guidance clarifies that influencers should disclose a material connection even if they believe their review of the product is unbiased.  Endorsement is similarly broadly defined, to include “tags, likes, pins, and similar ways of showing [the influencer likes] a brand or product.”

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NY Action Against UnitedHealth Algorithm

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By: Isabel F. Farhi

HealthcareOn  October 25, 2019, the New York State Department of Financial Services (DFS) and Department of Health (DOH) jointly sent a letter to UnitedHealth Group, Inc. (UnitedHealth) calling for the company to address its use of an algorithm it uses to make health care decisions, which a recent study had shown may have a racially discriminatory impact.

Specifically, researchers Ziad Obermeyer, Brian Powers, Christine Vogeli and Sendhil Mullainathan published an article in the periodical Science concerning “Impact Pro,” an algorithm UnitedHealth has used to identify patients who should receive the benefit of “high risk care management,” a service for patients with complex health care needs.[1]  According to one source, UnitedHealth licenses this algorithm to hospitals.[2]  The Science article describes how one metric the algorithm uses to determine eligibility for the program is the cost of patients’ previous health care.  Yet, as the article explains, black patients typically spend less money on health care, in part because of historic barriers to access due to poverty and in part because of historic distrust of doctors.  The article concludes that because of these systemic problems with the reliance on historic cost expenditures as an eligibility metric, two patients, one white and one black, with the same illness and complexity of care, could be treated differently when being considered for enrollment in the high risk care management program.[3]

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