Breaking News. This morning, the U.S. Court of Appeals for the D.C. Circuit, sitting en banc, issued its long-awaited decision in PHH Corp. v. CFPB, holding that the provision of the Dodd-Frank Act shielding the single director of the Consumer Financial Protection Bureau (CFPB) from removal without cause is constitutional. In all, the court published seven separate opinions (the majority, three concurrences and three dissents) that totaled 250 pages. Significantly, although the en banc court reversed the three-judge panel on the constitutional question before the court, it reinstated that panel’s prior opinion with respect to the proper interpretation of Section 8 of the Real Estate Settlement Procedures Act (RESPA). Goodwin will provide additional information in the coming days. Other developments from this past week are covered below.

Regulatory Developments

CFPB Finalizes Changes to Prepaid Rule

On January 25, the CFPB finalized amendments to its final rule on prepaid products, including an overall delay of the rule’s effective date until April 1, 2019. The amendments revised the error resolution and limited liability provisions to ensure that “financial institutions are not required to resolve errors or limit consumers’ liability on unverified prepaid accounts.” The CFPB also made other adjustments and clarifications that will reduce regulatory burden, including ones related to compulsory use for certain cards such as jury cards, foreign language disclosures and submission of prepaid account agreements to the CFPB. In connection with the amendments, the CFPB also released an executive summary of the amendments and an unofficial redline to assist industry and other stakeholders in reviewing the amendments.

CFPB Solicits Comments Regarding Civil Investigative Demands and Processes

On January 24, the CFPB released a request for information regarding the CFPB’s civil investigative demands (CIDs) and associated processes. The public’s input, including that of entities who have received CIDs and of attorneys representing such entities, would be used to assist the CFPB in determining whether any changes are appropriate to update, streamline, or revise the CFPB’s processes to minimize regulatory burdens, as well as what aspects should not be changed. Comments must be received by March 27, 2018. 

Client Alert: Brokerage Industry Enhances Measures to Fight Elder Financial Exploitation

On February 5, new FINRA Rule 2165 (Financial Exploitation of Specified Adults) becomes effective, as does an amendment to existing FINRA Rule 4512 (Customer Account Information). Together, these rules will implement FINRA’s new “Trusted Contact Person” framework and will permit broker-dealers to place a temporary hold on disbursement requests upon reasonable belief of financial exploitation of seniors and other “Specified Adults.” While this new framework will impose certain requirements on broker-dealers, it will also enable them to intervene, when necessary, to combat financial exploitation of elderly clients and others who may be suffering from diminished cognitive capacity. For more information, read the client alert issued by Goodwin’s Financial Industry practice.

Client Alert: Brokerage Industry Enhances Measures to Fight Elder Financial Exploitation

On February 5, new FINRA Rule 2165 (Financial Exploitation of Specified Adults) becomes effective, as does an amendment to existing FINRA Rule 4512 (Customer Account Information). Together, these rules will implement FINRA’s new “Trusted Contact Person” framework and will permit broker-dealers to place a temporary hold on disbursement requests upon reasonable belief of financial exploitation of seniors and other “Specified Adults.” While this new framework will impose certain requirements on broker-dealers, it will also enable them to intervene, when necessary, to combat financial exploitation of elderly clients and others who may be suffering from diminished cognitive capacity. For more information, read the client alert issued by Goodwin’s Financial Industry practice.

Client Alert: FTC Announces New Thresholds for 2018

As required by the HSR Act, on January 26, the FTC released its annual adjustments to the reporting thresholds. The key number to remember is now $84.4 million. Generally, transactions valued at $84.4 million or more must be reported and cleared by the federal antitrust authorities before the transaction may close. The adjustments will become effective 30 days after imminent publication in the Federal Register. The anticipated effective date is therefore on or about February 25, 2018. The revised thresholds will apply to all transactions that close on or after the effective date. For more information, read the client alert issued by Goodwin’s Antitrust and Competition practice. 

Client Alert: Deadline Approaching for Reporting 2017 ISO Exercises and ESPP Transfers

Section 6039 of the Internal Revenue Code requires corporations to provide information statements to employees (including former employees) and information filings to the IRS regarding exercises of incentive stock options (ISOs) by employees and former employees. Similar information statements and filings are required to report transfers of shares of stock by employees and former employees that were purchased under an employee stock purchase plan (ESPP) designed to meet the requirements of Section 423 of the Internal Revenue Code. To satisfy the information return and statement requirements, companies will need to complete and file Form 3921 with respect to ISO exercises and Form 3922 with respect to ESPP transfers, as applicable. For more information, read the client alert issued by Goodwin’s practice. 

Enforcement & Litigation

Court Awards $10 Million Penalty Against Payday Lender, Rejecting CFPB’s Request for $280 Million in Restitution and Penalties

In August 2016, the U.S. District Court for the Central District of California granted partial summary judgment to the CFPB in a federal lawsuit against a California-based online payday lender, its individual owner, its subsidiary and a servicer of its loans (Defendants), where the CFPB alleged that Defendants used a “rent-a-tribe” scheme to avoid state usury and licensing laws in violation of the Consumer Financial Protection Act (CFPA). But that ruling only established liability; on January 19, the court issued Findings of Fact and Conclusion of Law, ultimately awarding a statutory penalty of only $10 million — much lower than CFPB’s proposed $52 million. View the Enforcement Watch blog post.