By: Alexander N. Ghantous

New York Governor Andrew M. Cuomo recently introduced a number of new legislative proposals in his 2020 State of the State agenda, including proposals that would offer New York consumers increased protections.[1]  Additionally, California Governor Gavin C. Newsom also outlined how California will provide additional protections to its consumers in the Governor’s Budget Summary for 2020-2021.[2]  Below are some highlights from each state:

New York

I.  Regulating and Licensing Debt Collection Firms.

In Governor Cuomo’s 2020 New York State of the State agenda, legislation was proposed that would grant the Department of Financial Services (DFS) the power “to license debt collection entities, and empower DFS to examine and investigate suspected abuses, including by requiring the submission of information to DFS, and authorizing DFS investigators to enter a debt collector’s office at any time to review its books and records.”[3]  Consequently, DFS, with this new authority, would have the ability to initiate actions against debt collection organizations that could result in fines, or even the forfeiture of licenses that are required to conduct business in the state of New York.[4]   The proposed legislation would also protect individuals from fraudulent schemes in which they would pay non-existing debts.[5]  Governor Cuomo will also propose legislation that would authorize the state to “codify a Federal Trade Commission rule that prohibits confessions of judgement in consumer loans.”[6]                     

II.  Bolstering Consumer Protection Laws.

In Governor Cuomo’s 2020 State of the State Agenda, legislation was also proposed that would “mak[e] New York State consumer protection law consistent with federal law.”[7]  Currently, New York state authorities are unable to “bring the type of enforcement actions that federal authorities can bring for a broad range of unfair, deceptive, abusive acts and practices.”[8]  The proposed legislation would empower the state to oversee numerous consumer services and products by eradicating exemptions that are currently in play.[9]  Furthermore, the proposed legislation would eliminate loopholes and create an environment where regulated entities would all have the same chance to succeed.[10]

By: Damon Y. Smith

Ever 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.

By: Amy M. Gallegos

As 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.”

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

By: Alexander M. Smith

In 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).