Page 38 - GIADA Jan-Feb 2020

THE CARLAWYER ©

The CARLAWYER ©

By Nicole F. Munro and Thomas B. Hudson

Happy new year! We hope that you had a cusing on its examinations of consumer tions of TILA and the CLA generally will
great holiday, and that the upcoming year reporting companies and furnishers of apply to consumer auto finance and lease
is good to you. As is the case in most years information to consumer reporting com- transactions of $58,300 or less in 2020.
during the holidays, the federal regulators panies to determine compliance with the
were taking time off for shopping and fam- Fair Credit Reporting Act and Regulation Case of the Month
ily, so our docket isn’t crowded this month. V. Furnishers covered in the report include This month we feature a case that illustrates
banks, mortgage servicers, auto financing
Here’s our monthly article on selected le- servicers, student loan servicers, and debt a problem we’ve described in earlier articles
– dueling arbitration clauses.
gal developments we think might interest collectors.
the auto sales, finance, and leasing world. A car owner traded in his old car and
This month, the action involves the Feder- On December 3, the FRB, CFPB, FDIC, leased a new one from a dealership. The
al Reserve Board, the Consumer Financial NCUA and the OCC issued an interagen- car owner sued the dealership, alleging
Protection Bureau, the Federal Trade Com- cy statement on the use of alternative data various state law claims arising from an
mission, the Federal Deposit Insurance Cor- in credit underwriting by banks, credit undisclosed fee he was charged in connec-
poration, the National Credit Union Admin- unions, and non-bank financial firms. The tion with paying off the lien on the car he
istration, the Office of the Comptroller of the statement highlights potential benefits and traded in.
Currency and the Department of Justice. As risks of using alternative data in underwrit- The dealership moved to compel arbitra-
usual, our article features the “Case of the ing. For purposes of the statement, alterna- tion under an arbitration provision in the
Month” and our “Compliance Tip”. tive data means information not typically parties' lease agreement. The trial court
found in consumers' credit files with the
Note that this column does not offer legal nationwide consumer reporting agencies granted the motion, but the Superior
Court of New Jersey, Appellate Division,
advice. Always check with your lawyer to or customarily provided by consumers as reversed, finding that the arbitration pro-
learn how what we report might apply to part of credit applications. The statement vision was vague and unenforceable.
you, or if you have questions. explains that a well-designed compliance
management program provides for a thor- The dealership then moved to compel ar-
Federal Developments ough analysis of relevant consumer protec- bitration under an arbitration provision
tion laws and regulations to ensure firms in the parties' motor vehicle retail order.
The CFPB and the FTC have extended the understand the opportunities, risks, and The trial court denied the motion, finding
deadline to submit comments on issues af- compliance requirements before using al- that the arbitration provisions in the lease
fecting the accuracy of traditional consum- ternative data. agreement and the retail order conflicted
er credit reports as well as employment and with one another and were, therefore, un-
tenant background screening reports. The On November 20, the CFPB published its enforceable. The trial court added that the
new deadline is January 31, 2020. Fall 2019 rulemaking agenda. The agenda dealership waived its right to arbitration
lists regulatory matters the Bureau reason- under the arbitration provision in the re-
On December 18, the CFPB issued a report ably anticipates having under consideration tail order because it did not rely on that
to Congress describing the Bureau's and from October 1, 2019, to September 30, provision when it filed its first motion to
other agencies' enforcement actions and 2020. compel arbitration.
required reimbursements to consumers by The appellate court affirmed. First, the ap-
supervised institutions related to the Truth On October 30, the CFPB and the FRB an- pellate court noted that it agreed with the
in Lending Act, the Electronic Fund Trans- nounced that they are increasing the dollar trial court that the dealership waived its
fer Act, and the Credit Card Accountabil- thresholds in Regulation Z (Truth in Lend- right to assert the retail order's arbitration
ity Responsibility and Disclosure Act and ing) and Regulation M (Consumer Leas- provision by failing to invoke that provi-
their respective implementing regulations. ing) for exempt consumer credit and lease sion in its first motion to compel arbitra-
The report also gives an assessment of the transactions. The Dodd-Frank Act provides tion and by waiting over a year to assert
extent to which compliance with TILA and that the dollar amount thresholds for TILA that provision, a delay that prejudiced the
EFTA, and their implementing regulations, and the CLA must be adjusted annually by car owner.
has been achieved. any annual percentage increase in the con-
sumer price index. Because there was an The appellate court also agreed with the
On December 9, the CFPB released a spe- annual percentage increase in the consum- trial court that the conflicting terms in
cial edition of Supervisory Highlights fo- er price index as of June 1, 2019, the protec- the two arbitration provisions, including

36 | GIADA Independent Auto Dealer JAN/FEB 2020