In an article published by Bloomberg, Partners Reid J. Schar and Wade A. Thomson and Associate E.K. McWilliams highlight a recent speech by the director of the Financial Crimes Enforcement Network (FinCEN), an arm of the Treasury Department.  Speaking at an anti-money laundering conference in Las Vegas, FinCEN Director Kenneth A. Blanco affirmed the Department’s commitment to enforcing the Bank Secrecy Act on casinos and other businesses that deal in cryptocurrency.  The authors give context to the speech and discuss its implications for brick-and-mortar and online gaming establishments.

To read the full article, please click here.

By: Amy Egerton-Wiley

On September 18, 2019, Governor Gavin Newsom signed Assembly Bill 5 (AB 5) into law, which is intended to reclassify many of the state’s independent contractors as employees.  Proponents of the bill claim that the bill rectifies misclassification of employees as independent contractors.  Opponents, which include both workers and companies, note the importance of the flexibility of independent contractors and worry about the increased costs to consumers.

This bill largely codifies the “ABC” test established by the California Supreme Court in Dynamex v. Superior Court, 4. Cal. 5th 903 (2018).  Under the ABC test, a worker must be classified as an employee (versus an independent contractor) unless the hiring entity can establish:

(A) that the worker is “free from the control and direction of the hiring entity in connection with the performance of the work,”

(B) that the worker “performs work that is outside the usual course of the hiring entity's business,” and

(C) that the worker is “customarily engaged in an independently established trade, occupation, or business.”

Dynamex, 4 Cal. 5th at 964.

AB 5 expands the ABC test to certain areas not explicitly subject to Dynamex, such as reimbursements for expenses incurred in the course of employment.  Of course, companies that rely on independent contractors will be impacted by this legislation.

While AB 5 will not take effect until January 1, 2020, it may impact ongoing litigation, such as the San Diego City Attorney’s recent lawsuit against the grocery delivery service Instacart, which alleges that the company misclassified workers as independent contractors.  And it remains to be seen whether the law will be subject to a challenge via referendum or in the courts.

By: Alexander N. Ghantous

Between 2013 and 2016, the Consumer Financial Protection Bureau (CFPB) issued no fewer than six white papers or reports relating to payday loan protections.[1]  On the date of the last report, June 2, 2016, the CFPB issued a proposed rule[2], and on October 5, 2017, a final rule issued that addresses payday loans, auto title loans, and other loans that require the entire loan balance, or the majority of a loan balance, be repaid at once.[3]  The rule’s stated objective was to eliminate “payday debt traps” by, among other things, addressing underwriting through establishing “ability-to-repay” protections that vary by loan type.[4] 

Under the final rule, for payday loans, auto title loans, and other loans comprised of lengthier terms and balloon payments, the CFPB would require a “‘full-payment test” to establish that borrowers can afford to pay back the loan and also limits the quantity of loans taken “in quick succession” to only three.[5]  The rule also lays out two instances when the “full-payment test” is not required:  (1) borrowing up to $500 when the loan balance can be repaid at a more gradual pace; and (2) taking loans that are less risky, such as personal loans taken in smaller amounts.[6]  The rule would also establish a “debit attempt cutoff,” which requires lenders to obtain renewed authorization from a borrower after two consecutive unsuccessful debits on a borrower’s account.[7]  The rule was scheduled to become effective one year and 9 months after being published by the Federal Register, which was last month[8] (the rule was published on November 17, 2017[9]).     

By: Damon Y. Smith

September 13, 2019 is the deadline for comments on HUD’s proposed changes to FHA Lender Annual Certification Statements.  The most significant changes include elimination of, inter alia:

• Broad certification language stating that the operations of the lender conformed to all HUD regulations and requirements;
• Acknowledgements that lenders are responsible for the actions of their employees, including loan underwriters and originators;
• General certifications that the lender is not under indictment for or convicted of offenses that reflect adversely on its integrity, competence or fitness;
• Certifications involving criminal misconduct on the part of lender staff, including mortgage underwriters and originators; and
• Certifications regarding compliance with the SAFE Act.

These changes represent a dramatic departure from the prior administration, which brought False Claims Act claims against lenders for submitting the certifications to be eligible for FHA programs while underwriting loans that they allegedly knew were not in compliance with FHA’s regulatory requirements.   See, e.g., https://www.housingwire.com/articles/49337-quicken-loans-agrees-to-pay-325-million-to-resolve-fha-loan-allegations-with-doj.  Because the False Claims Act liability allows for treble damages, some considered the risk of substantial liability to be too high for further participation in FHA’s single family programs.  See https://www.wsj.com/articles/banks-fled-the-fha-loan-program-the-government-wants-them-back-11557417600.

If adopted, the new certification may lead to additional interest in FHA programs from lenders who curtailed or ended their participation because of the potential risks associated with the prior certification. 

The Federal Register Notice can be found here.

By: William S. C. Goldstein

On September 3, 2019, a federal district court in the District of Columbia dismissed, for the second time, a lawsuit brought by the Conference of State Bank Supervisors (CSBS) seeking to block the Office of the Comptroller of the Currency (OCC) from issuing national bank charters to certain non-bank financial technology (FinTech) companies.  Conference of State Bank Supervisors v. Office of the Comptroller of the Currency, No. 18-cv-2449, slip op. at 1-6 (D.D.C. Sept. 3, 2019) (CSBS II).  CSBS’s earlier suit, brought in 2017, was previously dismissed by Judge Dabney Friedrich as premature:  Because OCC had not yet finalized its procedure for accepting FinTech charter applications, let alone received any applications, Judge Friedrich found that CSBS’s claims were unripe and alleged no injury sufficient for standing.  CSBS v. OCC, 313 F. Supp. 3d 285, 296-301 (D.D.C. 2018).  In October 2018, CSBS brought suit again—this time after OCC had finalized its procedures for accepting FinTech charter applications, albeit before OCC had actually received any applications.  CSBS II, slip op. at 2.  Judge Friedrich held that neither this change nor the Senate’s confirmation of Joseph Otting as Comptroller of the Currency, another change in the facts highlighted by CSBS, “cure[s] the original jurisdictional deficiency.” Id. (alteration in original; citation omitted).  The court pointedly explained that “it will lack jurisdiction over CSBS’s claims at least until a Fintech applies for a charter.” Id. at 5.

By: Olivia Hoffman

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 on the plaintiff.[1]  The case arose out of a text message that plaintiff John Salcedo received from his former attorney, defendant Alex Hanna, offering Salcedo a discount on Hanna’s services.  According to Salcedo, receiving the text message “caused [him] to waste his time answering or otherwise addressing the message” and “resulted in an invasion of [his] privacy and right to enjoy the full utility of his cellular device.”[2]  Salcedo filed a class action complaint in the Southern District of Florida on behalf of a class of former clients of Hanna who had received similar unsolicited text messages.  Salcedo demanded statutory damages of $500 per text message and treble damages of $1,500 per text message for knowing or willful violations of the statute.