By: Amina Stone-Taylor

In recent years, the Consumer Financial Protection Bureau (CFPB) has focused its Bureau resources on companies offering credit repair and debt relief services.[1] In a 2019 consumer advisory, the CFPB reported that more than half the individuals who submitted a complaint to the Bureau about credit repair categorized it as “fraud/scam.”[2] The CFPB has also undertaken a number of enforcement actions focused on the credit repair industry.[3]

On June 28, 2021, the CFPB announced the proposed resolution of another enforcement matter arising from credit repair services—this time against Burlington Financial Group, LLC.  The CFPB and the Attorney General of the State of Georgia filed a joint complaint against Burlington Financial and its owners/executives, along with a proposed joint stipulation of final judgment and order. The complaint alleges that Burlington Financial misled consumers into believing the company could lower or eliminate credit-card debts and improve their credit score, and violated the Telemarketing Sale Rule (TSR) and the Consumer Financial Protection Act (CFPA) through their deceptive marketing tactics.[4] The CFPB stated, “Burlington Financial used telemarketing to solicit people with false promises that the company’s services would eliminate credit-card debts.”[5] The stipulated proposed order permanently bans Burlington Financial and its owners from providing any financial-advisory, debt relief, or credit repair services.[6] The company also will be responsible for paying a civil money penalty of $151,001.[7]

If you would like to read more about the CFPB’s claims against and resolution with Burlington Financial, please click here for access to the CFPB’s press release and filings.

By: Felicitas L. Reyes

The Consumer Financial Protection Bureau (CFPB) recently released the latest version of its Supervisory Highlights report, which summarizes the findings of the Bureau’s supervisory examinations in 2020. The CFPB identified four findings from the report as “particularly concerning”:

1. Consumer Reporting Companies’ Use of Data From “Unreliable” Furnishers: The CFPB reported that its examiners found that consumer reporting companies have accepted and reported consumer data received from third-party furnishers, while ignoring signs that the data furnishers were unreliable. The CFPB warned that it “will remain diligent and consumer reporting companies are on notice with respect to risks posed by accepting data from furnishers where there are indications of unreliability.”
   
   
2. Redlining: The report states that CFPB examiners found evidence of redlining, including direct mail marketing materials showcasing pictures of only white people and locating credit loan offices “almost exclusively” in majority-white neighborhoods. CFPB examiners found that these actions “lowered the number of applications from minority neighborhoods relative to other comparable lenders.”
   
   
3. Regulation X Foreclosure Issues: The report states CFPB examinations identified “several violations” by mortgage servicers of the servicing rules in Regulation X, including filing for a foreclosure before evaluating borrower’s appeals or initiating a foreclosure prior to the date that they told consumers they would.  On June 28, 2021, the CFPB issued a final rule that it contends will help consumers avoid foreclosures as the emergency federal foreclosure protections expire.
   
   
4. Student Loan Servicing for the PSLF Program: CFPB examiners found violations in the type of information that student loan servicers gave consumers about the Public Service Loan Forgiveness (PSLF) program. Examiners found that student loan servicers were giving consumers incorrect information that could potentially bar access to the program and could result in thousands of dollars lost for these consumers.

If you would like to read more about the areas mentioned above and other consumer law violations that the CFPB report discusses, please click here for access to the full supervisory highlights report and press release. 

By: Paul Feldberg, Lucy Blake, and Karam Jardaneh

Introduction

Earlier this week, the European Commission published its Guidance “On Due Diligence For EU Businesses To Address The Risk Of Forced Labour In Their Operations And Supply Chains”. 

The document, which is not legally binding, provides practical guidance on how to use existing international, voluntary, due diligence guidelines and principles when dealing with the risk of forced labour in supply chains.

The European Commission made clear in its press release, that the Guidance forms part of the EU’s wider strategy to defend human rights and strengthen the resilience and sustainability of the EU supply chain. The European Commission sees the Guidance as encouragement for EU businesses to take appropriate measures regarding their supply chains ahead of the EU’s introduction of a mandatory due diligence duty for businesses operating in the EU. As set out in our previous Client Alert, the due diligence duty will require certain businesses operating in the EU to identify, prevent, mitigate and account for adverse human rights and environmental impacts in their operations and supply chains. We will also cover this in more detail as well as other developments in Europe in a separate Client Alert. 

Who should consider the Guidance? 

Although the Guidance is directed at EU companies, it is based on international instruments aimed at companies globally. This includes the OECD Due Diligence Guidance For Responsible Business Conduct (the OECD Guidelines) and the UN Guiding Principles on Business and Human Rights (UNGPs). While the UNGPs are not “legally binding” and are often referred to as “soft-law”, there are growing expectations for companies worldwide to adhere to them. This “soft law” has been evolving into “hard law” in multiple jurisdictions (the anticipated EU mandatory due diligence laws being a prime example). Therefore, we believe that this Guidance will be a helpful resource for companies globally.

By: Alexander M. Smith

On July 15, 2021, the Ninth Circuit issued a published decision in Moore v. Trader Joe’s Company in which it affirmed the dismissal of a lawsuit alleging that Trader Joe’s mislabeled its Manuka honey as “100% New Zealand Manuka Honey.” While the plaintiffs alleged that this statement was misleading because the honey was derived from floral honey sources other than Manuka flower nectar, the Ninth Circuit found that the labeling was not likely to mislead a reasonable consumer because it satisfied the FDA’s regulations governing the labeling of honey. Because “Trader Joe’s Manuka Honey is chiefly derived from Manuka flower nectar,” the Ninth Circuit concluded that “Manuka is therefore the chief flower source for all of the product’s honey under the FDA’s definition, even if some of it is derived from nectar from other floral sources.” Thus, “there is no dispute that all of the honey involved is technically manuka honey, albeit with varying pollen counts.”

The Ninth Circuit also rejected the plaintiffs’ argument “that ‘100% New Zealand Manuka Honey’ could nonetheless mislead consumers into thinking that the honey was ‘100%’ derived from Manuka flower nectar.” Although it acknowledged that “there is some ambiguity as to what ‘100%’ means in the phrase, ‘100% New Zealand Manuka Honey,’” the court nonetheless found that this ambiguity was unlikely to mislead a reasonable consumer, as “other available information about Trader Joe’s Manuka Honey would quickly dissuade a reasonable consumer from the belief that Trader Joe’s Manuka Honey was derived from 100% Manuka flower nectar.” 

This decision builds upon other recent decisions in which the Ninth Circuit has rejected product mislabeling claims based on decontextualized and therefore implausible interpretations of product labels. See, e.g., Becerra v. Dr Pepper/Seven Up, Inc., 945 F.3d 1225 (9th Cir. 2019) (holding that a reasonable consumer would understand the word “diet” on a soda label in context to make a comparative claim only about the product’s caloric content, not to make a claim that the soda promotes weight loss generally). Although the Ninth Circuit has historically been viewed as friendly to plaintiffs in food-labeling litigation, Becerra and Moore signal that courts in the Ninth Circuit are becoming increasingly skeptical of these claims.

By: Clifford W. Berlow, Alexander E. Cottingham, and Lindsay C. Harrison

Introduction

On June 25, 2021, the US Supreme Court in TransUnion LLC v. Ramirez[1] narrowed the scope of Article III standing for plaintiffs who allege the violation of a statute but cannot show they otherwise suffered harm. Though decided in the context of a Fair Credit Reporting Act (FCRA) class action, the decision has major implications for parties litigating state and federal statutory claims of all varieties in federal courts. In particular, TransUnion seems poised to limit the viability of class actions arising from data breaches. The decision likely means, for example, that plaintiffs lack Article III standing when their information may have been accessed but was not misused in a manner causing concrete harm—a subject on which the courts of appeals previously had split. The decision also will limit plaintiffs’ ability to assert Article III standing merely based on the violation of privacy statutes alone without any resulting harm. 

Defendants litigating data breach class actions can take advantage of this new precedent in federal court to seek dismissal of data breach class actions for lack of Article III standing. But doing so is not without consequence. If federal courts are not available to adjudicate these claims, plaintiffs likely will pursue them in state courts, where standing precedent may be more lenient for plaintiffs. Defendants thus will need to be strategic about how aggressively they pursue TransUnion-based dismissals.