Volume 3, Issue 10
Welcome to the tenth issue of All Consuming for 2022.

We are very pleased to welcome Charles W. “C. W.” Pace, Jr. to the firm as a partner in our Charleston office.

C. W.’s primary areas of practice are estate planning, probate, commercial transactions, corporate law, and tax. In addition, he regularly provides advice and assistance to clients on a wide array of matters including banking and finance issues.

C. W. worked as Vice President & Personal Trust Specialist in BB&T’s Wealth Management Department for several years prior to returning to private law practice.

Please join us in welcoming him to Spilman!

Thanks for reading.

Nicholas P. Mooney II, Editor of All Consuming

Cybersecurity is Everyone’s Responsibility
as published in West Virginia Banker magazine, Fall 2022

A recent survey by PricewaterhouseCoopers revealed that U.S. executives now consider cyberattacks the number one risk their companies face. Concerns about cybersecurity have moved beyond the Chief Information Security Office to the entire C-suite and corporate boards. Recent developments show executives are right to worry about those attacks because they can result in monetary loss, personal liability, and reputational risk.

Click here to read the entire article.
Buy Now, Pay Later
"Business model relies on data collection, and loans serve as close substitute for credit cards."

Why this is important: The Consumer Financial Protection Bureau issued a report on the “Buy Now, Pay Later” (“BNPL”) industry after issuing marketing monitoring orders in December 2021 to the following companies offering BNPL credit: Affirm, Afterpay, Klarna, PayPal, and Zip. BNPL is a form of credit that allows a consumer to split a retail transaction into smaller, interest-free installments and repay over time, and has diversified its range of products beyond apparel and beauty to education, groceries, insurance, and utilities. The BNPL industry has gained popularity during the COVID-19 pandemic amongst its borrower base, made up mostly of Millenials and Gen Z, due to the instantaneous credit decision, high credit approval rate, and straightforward repayment structure. However, the CFPB reports that certain BNPL product features evade federal consumer lending requirements and increase the risks of overextension due to loan stacking and sustained usage, dispute resolution challenges, aggressive approaches on late fees and consumer fees, and consumer data harvesting. As the BNPL industry continues to grow, borrowers should be aware of these risks and the impacts of BNPL usage on their financial health. --- Victoria L. Creta
“Historically, your ‘character’ was literally what people said about you, which left plenty of room for bias.”

Why this is important: Collateral, Capital, Capacity, Conditions, and Character are the “5 C’s of Credit” – the driving force behind every loan application, approval, or denial. They consist of both subjective and objective measures used to determine the risk associated with a credit facility or loan arrangement. Over the years, certain metrics have come to represent these elements. For example, capacity is largely estimated by debt-to-income ratio now. Character was historically a measure of standing in the community, but has largely been replaced by the credit report in the United States. Experts are calling for new reforms to this model, asserting that certain biases are inherent to the credit report system. Instances of this bias span a wide range from unconscious bias in lending and housing opportunities, to more explicit internal lending policies targeting (or excluding) certain ethnic groups and races. Legislatures are responding, and new reforms are coming. North Carolina has a measure pending in its Legislature aimed at “de-weaponizing” medical debt by limiting how it can be referred to collections (and thereby how it is reported in credit reports) when patients fall behind on payments for medical bills. That bill is currently in committee. Lenders, landlords, and other parties that rely on credit reporting as part of their approval processes should continue to pay close attention to these reforms, and periodically evaluate their policies and procedures to ensure best practices are in place. --- Brian H. Richardson
“The U.S. Chamber and co-plaintiffs are challenging the CFPB’s recent update to the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) section of its examination manual to include discrimination and in particular disparate impact.”

Why this is important: The U.S. Chamber of Commerce and several co-plaintiffs have filed suit against the CFPB, alleging that it exceeded its authority when it amended its examination manual to include disparate impact discrimination. The amendment would transform alleged disparate impact discrimination into an Unfair, Deceptive, or Abusive Act or Practice, which the CFPB is empowered to challenge. The plaintiffs argue that disparate impact discrimination and other forms of discrimination already are policed by other agencies through other statutes that Congress authorized. They argue that the CFPB isn’t allowed to essentially make itself into a second Congress that assumes whatever power it wants. This issue is the latest round in the tug-of-war that has been going on virtually since the creation of the CFPB in the wake of the 2008 financial crisis and that started with constitutional challenges to the CFPB’s existence. The plaintiffs’ arguments here seem sound and are supported by established law, but we’ll have to wait to see how the court rules. Regardless of how this lawsuit is resolved, this dispute won’t be the last time the CFPB seeks to expand its power and critics claim it isn’t permitted to do so. --- Nicholas P. Mooney II
Nursing Home Bills
“The publication makes official the bureau’s policy statements exploring third-party debt collectors’ role in collecting on behalf of nursing homes and the liability that could occur under laws enforced by the CFPB; however, it is not clear how prevalent the issue is.”

Why this is important: CFPB has published a Consumer Finance Protection Circular 2022-05 entitled “Debt collection and consumer reporting practices involving invalid nursing home debt.” This circular makes official the CFPB’s previous policy statements regarding third party debt collection of delinquent nursing home debt. Pursuant to the Nursing Home Act, nursing homes are barred from conditioning a resident’s admission and stay upon a guarantee by a third party, with such contractual provisions being illegal and unenforceable. While the CFPB has no authority to enforce the Nursing Home Act, that is the responsibility of CMS, HHS, and state authorities, it does have authority under the FDCPA and FCRA to enact rules regarding the collection of nursing home debts. However, there are times that nursing homes attempt to collect unpaid balances from a resident’s family members or other third parties. Any balance owed in relation to an unpaid nursing home balance constitutes a “debt” pursuant to the FDCPA. While the nursing home and its third party debt collectors may attempt to collect the unpaid balance from a third party, the debt collection must remain in compliance with the FDCPA and Regulation F when attempting to collect the resident's debt. This means that the debt collector is prohibited from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” This would include misleading third parties and informing them that they are liable for the resident’s unpaid debts when they are not. Additionally, the FCRA and Regulation V prohibits a debt collector from reporting that a consumer owes a debt for a resident’s unpaid nursing home balance because that debt is based on an illegal contract term that is not enforceable pursuant to the Nursing Home Act. While nursing homes and third party debt collectors may attempt to collect delinquent nursing home balances from third parties, they must remain in compliance with the FDCPA and FCRA and not say that the payment of that debt by a third party is anything but voluntary. --- Alexander L. Turner
Credit Cards
“Legislation around credit-card routing is floated as amendment to defense budget, but analyst notes the bill ‘has nothing to do with defense’.”

Why this is important: Recently, a bi-partisan group of lawmakers introduced the House companion of the Credit Card Competition Act of 2022 (“CCCA”), which Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) introduced last summer. The bill intends to expand interchange price controls by creating a new credit card routing mandate. The lawmakers, who are looking to attach the bill as an amendment to the National Defense Authorization Act (“NDAA”), say the legislation will create more competition in the credit card business and pressure industry fees by requiring that merchants have the choice between at least two credit networks when processing transactions.

The bill is similar in concept to rules for debit card routing, which capped interchange fees on debit card transactions. Though the bill targets Visa Inc. and Mastercard Inc., several analysts have suggested that any new rules would have a greater impact on banks, which receive interchange fees that are paid by the merchant to card issuing banks. Capital Alpha Partners managing director Ian Katz wrote recently that the NDAA “is considered must-pass legislation,” likely why Durbin and Marshall are trying to get their bill attached to it. “The effort feels like a desperation move because Durbin and Marshall don’t believe the bill could pass as a standalone.” Plus, he said that banks have been warning lawmakers that the card routing law could curtail credit card rewards for consumers, including military families. Other commentators have reported that “just a bare bones group of lawmakers” should have kicked off debate on the NDAA on October 11, but a final vote is not expected to take place until after November’s midterm elections. --- Bryce J. Hunter
Student Loans
“Six Republican-led states and a libertarian policy organization sued the Biden administration over its plan to cancel up to $20,000 in student loan debt.”

Why this is important: Two lawsuits pending in Missouri and Indiana challenge the Biden administration’s ability to cancel student loan debt. They argue that the plan to cancel debt violates federal law, the constitutional principle of separation of powers, and the Administrative Procedures Act, as well as improperly expands the scope of the HEROES Act (which gives the Education Secretary certain powers during national emergencies). At the heart of the challenge is the position that wiping out student loan debt really just transfers that debt from people who voluntarily assumed it to people who did not. The lawsuits further take advantage of House Speaker Nancy Pelosi’s statement, “People think the president of the United States has the power for debt forgiveness. He does not.” In addition to these arguments, another argument takes center stage in the Indiana lawsuit. The plaintiff in that lawsuit has been enrolled in the Public Service Loan Forgiveness plan, which cancels student loan debt when a borrower works in a public service career and makes 10 years of loan payments. The plaintiff in that lawsuit will be required to pay taxes on the amount of the debt forgiven if it is canceled through the new cancellation plan as opposed to the Public Service Loan Forgiveness plan. This article raises an issue that should be discussed more, that is, whether debt cancellation under the new proposed plan will result in a tax bill to the student loan borrower. If the new cancellation plan is aimed at student loan borrowers making below a certain income threshold, then those borrowers presumably do not have an excess amount of money lying around to pay an increased tax burden. The article lists a few states that tax debt forgiveness, but they aren’t the only ones. At bottom, the prospect of a tax bill for debt forgiveness needs to be a larger part of the discussion of the new plan. --- Nicholas P. Mooney II
"The case involved third party access to information about customer purchases and the types of devices they were using, a privacy violation under the state’s consumer law."

Why this is important: Sephora is being charged $1.2 million in penalties for violating the California Consumer Privacy Act (“CCPA”). An investigation by the Attorney General found that Sephora had not disclosed the fact that third parties were purchasing personal information about Sephora’s consumers. Information that has been sold includes the types of items that customers were buying and, in some instances, information about the locations and devices that the purchases were made from. Sephora had been given 30 days to cure the issues with its privacy policy, but failed to do so. Sephora was one out of 112 businesses that had been found and notified about privacy violations, although most of the businesses changed their policies during the 30-day notice period. In the future, Sephora will be required to update its privacy policy and consumer disclosures to comply with the CCPA until it is replaced by the California Privacy Rights Act (“CPRA”) in 2023. Businesses need to make sure that their privacy policies and consumer disclosures comply with the law prior to the CPRA becoming effective as the CPRA does not include the 30-day notice period for businesses whose policies do not comply with the law. --- Grace K. Dague
U.S. House of Representatives and U.S. Senate Committee Meetings
We have included a listing of pertinent U.S. House and Senate Committee meetings for your reference.

These are events scheduled at press time for the months of October and November 2022.

  • No October or November events are scheduled at this time.

  • No October or November events are scheduled at this time.

  • No pertinent October or November events are scheduled at this time.

  • No October or November events are scheduled at this time.

  • No October or November events are scheduled at this time.
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