Consumer Compliance Outlook: Second Issue 2019

On the Docket: Recent Federal Court Opinions


A New York federal court ruling on a legal challenge to the Office of the Comptroller of the Currency’s fintech charter interprets the National Bank Act (NBA) to limit national bank charters to depository institutions.

Vullo v. OCC PDF, 378 F. Supp. 3d 271 (S.D.N.Y. 2019). In July 2018, the Office of the Comptroller of Currency (OCC) began External Link accepting Special Purpose National Bank charter applications from nondepository fintech companies. In response, the New York State Department of Financial Services (DFS) filed a lawsuit alleging that the charter was impermissible because the NBA only permits the OCC to charter depository institutions. The DFS expressed concern in its complaint that a Special Purpose National Bank charter would upset the balance of the dual banking system by preempting DFS’s supervision of OCC-chartered companies and undermine its ability to regulate and protect its financial markets and consumers. The OCC filed a motion to dismiss for lack of jurisdiction or, in the alternative, failure to state a claim, challenging the DFS’s legal argument that the NBA limits the OCC’s chartering authority to depository institutions. The OCC argued that this statutory phrase authorizing the OCC to charter institutions engaged in the “business of banking” is ambiguous, and therefore, the OCC is entitled to deference in interpreting it under the Supreme Court’s opinion in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. External Link, 467 U.S. 837 (1984). The OCC interpreted this phrase broadly to include nondepository institutions because receiving deposits is not explicitly required in the NBA text.

In denying OCC’s motion to dismiss the case, the district court rejected this argument, finding that Chevron’s deference to the OCC’s interpretation of the “business of banking” under the NBA was unwarranted. According to the court, as used in the NBA, the “business of banking” “unambiguously requires receiving deposits as an aspect of the business.” Thus, the court held, in light of the plain language, the broader context of the statute, and the legislative history, “only depository institutions are eligible to receive national bank charters from OCC.”


The Ninth Circuit holds that a payday lender’s Truth in Lending Act (TILA) disclosures were deceptive under §5 of the Federal Trade Commission Act (FTC Act) because, while technically correct, they were misleading.

FTC v. AMG Capital Mgmt. PDF External Link, LLC, 910 F.3d 417 (9th Cir. 2018). Section 5 of the FTC Act (15 U.S.C. §45) prohibits “unfair or deceptive acts or practices.” The defendant offered payday loans to consumers online. Under the loans’ terms and conditions — disclosed in fine print below the TILA disclosures — the Loan Note would automatically renew, and the borrower would accrue new finance charges, unless the borrower followed complex steps to “decline” the renewal within a brief deadline before the next scheduled payment. At the end of the application process, the defendant provided the “Loan Note and Disclosure,” which contained the TILA disclosures. The TILA disclosures were made based on the assumption that the consumer would make only one payment to satisfy the loan by taking steps to decline automatic renewal.

The FTC alleged that the Loan Note violated §5 of the FTC Act because the TILA disclosures contained terms that did not reflect what was actually enforced. On appeal, the Ninth Circuit noted that §5 prohibits representations whose “net impression” would be likely to mislead — even if such impression “also contains truthful disclosures.” Applying this standard, the court found that the Loan Note was deceptive. The court explained that the TILA disclosures suggested the loan would have a single term, when the default option actually was for the loan to renew automatically, and the fine print contained additional misleading statements that did not cure the “net impression” of the TILA disclosures. The court also rejected the lender’s argument that the FTC didn’t establish actual deception, noting that “[p]roof of actual deception is unnecessary to establish a violation” and a violation occurs if the act or practice “possess[es] a tendency to deceive.”


The Eleventh Circuit allows the City of Miami to pursue a claim that it suffered a loss of tax revenue as a result of two lenders’ discriminatory lending practices.

City of Miami v. Wells Fargo PDF External Link, 923 F.3d 1260 (11th Cir. 2019). This appeal was on remand from the U.S. Supreme Court’s decision in Bank of America Corp. v. City of Miami PDF External Link, 137 S. Ct. 1296 (2017). The City of Miami’s underlying lawsuit alleged two lenders “carried on discriminatory lending practices that intentionally targeted black and Latino Miami residents for predatory loans” and that these practices increased foreclosures, diminished property values, reduced tax revenue, and increased municipal expenditures, for which the city was seeking compensatory damages.

The Supreme Court held that the city had legal standing to pursue the lawsuit under the FHA if it could establish “some direct relation between the injury asserted and the injurious conduct alleged.” The city alleged the violations caused two types of damages: loss of tax revenue and increased cost of providing municipal services. The Eleventh Circuit found “some direct relation” between the city’s tax-revenue injuries and the banks’ alleged violations of the FHA, and therefore, the city could proceed with those claims. However, the court agreed with the district court that the city failed to adequately plead that the alleged conduct bore a direct relationship to its increased municipal expenditure injury and that it had not presented any way to ascertain which expenditures could be directly tied to the actions of the banks. The case was remanded to the district court.


The Third and Eleventh Circuits issue differing opinions on whether consumers have suffered a “concrete” injury from certain technical violations of the Fair and Accurate Credit Transactions Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA) sufficient to give them standing to sue.

Kamal v. J. Crew Group, Inc. PDF External Link, 918 F. 3d 102 (3d Cir. 2019) and Muransky v. Godiva Chocolatier, Inc. PDF External Link918 F. 3d 102 (11th Cir. 2019), vacating Muransky v. Godiva Chocolatier, Inc., 905 F. 3d 1200 (11th Cir. 2018). Congress enacted FACTA as an amendment to the FCRA to help prevent credit card and identity theft by prohibiting merchants that accept electronic payment from printing more than the last five digits of card numbers or the expiration date on receipts. 15 U.S.C. §1681c(g). Responding to a rise in litigation against merchants who printed either too many card digits or card expiration dates on their receipts, Congress enacted the Credit and Debit Card Receipt Clarification Act (Clarification Act), which provides that merchants who printed the expiration dates without printing too many digits, did not violate FACTA amendments. Recent FACTA litigation concerns whether plaintiffs who have received printed receipts displaying more than the last five credit card digits but have not had their identities compromised have Article III standing to sue under the Supreme Court’s decision in Spokeo, Inc., v. Robins External Link, 136 S. Ct. 1540 (2016), which requires that plaintiffs must have suffered a “concrete” and particularized injury-in-fact.

In Kamal, the plaintiff alleged that the retailer J. Crew willfully violated the FCRA’s FACTA amendments by printing three separate receipts displaying both the first six and last four digits of his credit card number. The plaintiff argued in district court that, while no one beside himself and the cashier saw the receipts nor was his identity stolen or his credit card number misappropriated, the printing of prohibited information and the increased risk of identity theft are concrete harms. The Third Circuit disagreed, holding that, absent disclosure of the card information to a third party, J. Crew’s technical and procedural violation of FACTA did not amount to an actual injury having a “close relationship” to common law torts such as breach-of-confidence. The Third Circuit also found that, absent third- party disclosure or the disclosure of additional data that would make risk of identity theft less speculative, the technical violation did not materially increase the risk of an actual injury as necessary to satisfy the concreteness requirement of Spokeo. The Third Circuit further considered the Clarification Act to support the conclusion that not all procedural violations of FACTA amount to a “concrete” injury. The Third Circuit also indicated that the majority of circuits have reached similar conclusions about standing and disagreed with the Eleventh Circuit’s since-vacated 2018 holding (discussed next) that printing the first six digits itself was a concrete injury because it is closely related to a breach of confidence under common law. The Third Circuit found otherwise since no third party accessed Kamal’s confidential information. Accordingly, the court affirmed the district court’s judgment that Kamal lacked standing but remanded the case to be dismissed without prejudice.

In contrast, the Eleventh Circuit’s 2019 Muransky opinion, which vacated its 2018 opinion, held that the plaintiff had established the same FACTA violation and was a “concrete” injury for standing purposes because it both increased the risk of identity theft and itself created the actual injury of a breach-of-confidence. The Eleventh Circuit rejected the Third Circuit’s analysis of the Clarification Act, finding that, instead of undermining the argument that the truncation requirement is a nonconcrete procedural requirement, the act reflects Congress’s judgment that the truncation requirement is “necessary to prevent the risk of identity theft.” The court found suffering a heightened risk of identity theft as a result of a FACTA violation is a concrete injury. The Eleventh Circuit reasoned that Congress adapted FACTA in part to minimize the risk of harm to a concrete interest and thus any violation of a FACTA procedure, even if the risk of actual injury is only marginally increased, confers standing. Accordingly, the court affirmed the district court’s approval of the class- action settlement. The Eleventh Circuit also found that printing the additional credit card information was an actual injury that closely resembles the common law breach-of-confidence tort, even if there was no actual disclosure to a third party.

The Ninth Circuit holds that when employers provide the FCRA job application disclosure, they cannot include any other disclosures and must use clear language.

Gilberg v. Cal. Check Cashing Stores, LLC PDF External Link, 913 F.3d 1169 (9th Cir. 2019). Section 604(b) (2)(A) of the FCRA generally provides that a consumer report may not be obtained for employment purposes unless a “clear and conspicuous disclosure,” in a document that consists “solely of the disclosure,” has been provided to the consumer and the consumer has provided written authorization to obtain the report. 15 U.S.C. 1681b(b)(2)(A). In a prior case, Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), the Ninth Circuit held that a disclosure document containing a liability waiver in the same document as the required FCRA disclosure violated the FCRA’s standalone disclosure requirement. In Gilberg, the court held that “extraneous information relating to various state disclosure requirements” included with the FCRA disclosure also violates the standalone disclosure requirement. The court also found that the employer violated the FCRA’s requirement to provide a clear and conspicuous disclosure because it was not “reasonably understandable.” The court found that the disclosure used language that a reasonable person would not understand and combined federal and state disclosures in a confusing manner.