The following is a roundup of recent developments in consumer finance.

On January 24, 2022, the US Court of Appeals for the Third Circuit, in TitleMax of Delaware, Inc. v. Robin L. Weissman, as Secretary of the Pennsylvania Department of Banking and Securities, held that the application of Pennsylvania usury laws to an out-of-state auto title lender did not violate the dormant Commerce Clause (24 F.4th 230 (3rd Cir. Jan.24, 2022)).

The plaintiff, a lender, made auto loans from its brick and mortar locations in Delaware, Ohio, and Virginia to consumers, including residents of Pennsylvania, at interest rates as high as 180%. Under its authority under Pennsylvania usury laws, the state's Department of Banking and Securities (DOB) issued a subpoena seeking documents from the lender regarding its interactions with Pennsylvania borrowers. The lender filed an action seeking injunctive relief for Commerce Clause violations.

The US District Court for the District of Delaware found that because the loans were made and executed outside of Pennsylvania, the effect of the DOB subpoena was to apply Pennsylvania usury laws extraterritorially in violation of the Commerce Clause (505 F. Supp. 3d 353 (D. Del, Dec. 7, 2020)). The Third Circuit reversed, finding the lender's conduct was not "wholly outside" of Pennsylvania because it both received loan payments from within Pennsylvania and maintained a security interest in vehicles located in Pennsylvania on which it can act. Considering local benefits with respect to interstate commerce, the Third Circuit concluded the benefits weighed in favor of applying Pennsylvania usury laws to the lender because they protect the state’s residents from usurious lending rates.

On February 10, 2022, the US Court of Appeals for the First Circuit, in Consumer Data Industry Association v. Aaron M. Frey, as Attorney General of the State of Maine, and William M. Lund, as Superintendent of the Maine Bureau of Consumer Protection, held that the Fair Credit Reporting Act (FCRA) (15 U.S.C. §§ 1681 to 1681x) did not entirely preempt two amendments to Maine's Fair Credit Reporting Act (MFCRA) (10 M.RS.A. §§ 1306 to 1310-H) ( (1st Cir. Feb. 10, 2022)). The First Circuit reversed, vacated, and remanded a decision of the US District Court for the District of Maine that FCRA Section 625(b)(1)(E) (15 U.S.C. § 1681t(b)(1)(E)) preempted the MFCRA amendments (495 F. Supp. 3d 10 (D. Me. Oct. 8, 2020)).

The MFCRA amendments relate to medical expense debt (medical debt provisions) (10 M.R.S.A. § 1310-H(4)) and debt a consumer reports as resulting from economic abuse (economic abuse debt provisions) (10 M.R.S.A. § 1310-H(2-A)).

The First Circuit:

On February 2, 2022, the US Department of Veterans Affairs (VA) issued a final rule about when it would report medical debt to consumer reporting agencies.

The final rule is effective March 4, 2022 and amends 38 C.F.R. §1.916. It requires the VA to report to consumer reporting agencies only those debts:

The Consumer Financial Protection Bureau (CFPB) praised the VA's final rule as one that protects veterans and their families and separates medical bill collection from coercive credit reporting. This praise may indicate the CFPB's intention to increase scrutiny of persons (including health care providers and debt collectors) who use credit reporting to collect debt.

In a February 4, 2022 blog post, the CFPB warned about biased home appraisals and failures by The Appraisal Foundation (TAF) to include in its appraisal standard setting and trainings clear warnings of the requirements of federal law prohibiting racial, religious, and other discrimination. The CFPB:

In a February 22, 2022 letter to federal regulators and appraisal industry leaders, Chairwoman Maxine Waters of the House Financial Services Committee called for industry accountability and legislation to address systemic appraisal discrimination.

On February 11, 2022, the US District Court for the District of Delaware, in Consumer Financial Protection Bureau v. National Collegiate Master Student Loan Trust, granted the defendant's motion for an interlocutory appeal to the US Court of Appeals for the Third Circuit on two issues, including whether securitization trusts are "covered persons" under the Consumer Financial Protection Act (CFPA) (No. 1:17-cv-1323-SB (D. Del. Feb. 11, 2022)). On December 13, 2021, the Delaware district court had held that the defendant, who securitized student loans and used third parties to collect and service these loans, was subject to the CFPB's enforcement authority ( (D. Del. Dec. 13, 2021)). The CFPB had sued the defendant because sub-servicers retained by the third parties engaged in prohibited debt collection and litigation practices.

The December 2021 decision determined that a person engages in an activity if it retains another person to do the activity on its behalf and the activity is central to its business. Specifically, the defendant engaged in debt collection and loan servicing when it entered into contracts with servicers to collect and service its loans. In addition, sub-servicers commenced litigation to collect student loans in the defendant's name, which meant that the defendant was involved and approved the litigation.

The Delaware district court granted the defendant's motion for an interlocutory appeal because:

The Third Circuit must now decide whether to accept the appeal. If it does not, the CFPB's enforcement action would continue in the Delaware district court. Pending the Third Circuit's decision whether to accept the appeal, the Delaware district court stayed its December 2021 decision.

On December 22, 2021, the US Court of Appeals for the Seventh Circuit, in Brooke Persinger v. Southwest Credit Systems, L.P., held that although a consumer had standing to sue under, and a debt collector violated, the FCRA when it accessed the consumer's credit information to collect a debt that had been discharged in bankruptcy, albeit before the debt collector learned of the discharge through bankruptcy scrubs it ordered, the consumer was not entitled to damages (20 F.4th 1184 (7th Cir. Dec. 22, 2021)). The Seventh Circuit affirmed a grant of summary judgment for the debt collector by the US District Court for the Southern District of Indiana ( (S.D. Ind. Dec. 8, 2020)).

The Seventh Circuit found a concrete injury sufficient to confer standing based on the tort of invasion of privacy because:

The Seventh Circuit also held that the debt collector's accessing the consumer's credit information violated Section FCRA 604(f) (15 U.S.C. § 1681b(f)) because the debt collector lacked a permissible purpose. Although its purpose in accessing the credit information, debt collection, is permissible under FCRA Section 604(a)(3)(A) (15 U.S.C. § 1681b(a)(3)(A)), that purpose is not permissible when collecting a discharged debt.

Despite the consumer's standing and the debt collector's violation, the consumer was not entitled to either actual damages for a negligent violation under FCRA Section 617 (15 U.S.C. § 1681o) or actual, statutory, and possibly punitive damages for a willful violation under FCRA Section 616 (15 U.S.C. § 1681n) because:

On February 2, 2022, the US Court of Appeals for the Seventh Circuit, in Laura Ewing v. Med-1 Solutions, LLC and September Webster v. Receivables Performance Management, LLC, held that to qualify for the bona fide error defense in Section 813(c) of the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692k(c)) to avoid liability under FDCPA Section 807(8) (15 U.S.C. § 1692e(8)) for failing to communicate that a debt is disputed, a debt collector must have reasonable procedures to prevent non-reporting of the debt dispute, rather than policies to avoid reporting disputed debts ( (7th Cir. Feb. 2, 2022)).

The Seventh Circuit consolidated two cases in which:

The Seventh Circuit determined that:

On February 7, 2022, the US District for the Eastern District of Pennsylvania, in Alina Khimmat v. Weltman, Weinberg and Reis Co., LPA, held that a debt collector's transmission of a consumer's debt information to a mail vendor (mail vendor communication) is a communication to a third party in connection with the collection of a debt that FDCPA Section 805(b) (15 U.S.C. § 1692c(b)) prohibits ( (E.D. Pa. Feb. 7, 2022).

The Pennsylvania district court:

Except regarding standing, the Pennsylvania district court's decision is similar to the April 2021 and October 2021 decisions of the US Court of Appeals for the Eleventh Circuit in Richard Hunstein v. Preferred Collection and Management Services, Inc. (see Legal Updates, Eleventh Circuit Court of Appeals Holds Debt Collector Disclosure of Debt Information to a Vendor is a Communication to a Third Party Prohibited by the Fair Debt Collection Practices Act (FDCPA) and Consumer Finance Roundup for October 2021). However, the Eleventh Circuit vacated these decisions and agreed in November 2021 to a rehearing by the full Eleventh Circuit (see Legal Update, Consumer Finance Roundup for November 2021: Developments Regarding the Eleventh Circuit Court of Appeals' Hunstein Decision). The rehearing is pending.