BSCR Firm News/Blogs Feedhttps://www.bscr-law.com/?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10en-us21 Sep 2021 00:00:00 -0800firmwisehttps://blogs.law.harvard.edu/tech/rssUpdate: Supreme Court Holds No Concrete Injury in FCRA Class Action Casehttps://www.bscr-law.com/?t=40&an=117978&format=xml&p=5258&stylesheet=blog20 Jul 2021Financial Services Law Blog<p>In an impactful and split <a href="https://www.supremecourt.gov/opinions/20pdf/20-297_4g25.pdf">Opinion</a>, the United States Supreme Court has reversed a $40 million class action judgment award in light of its finding that thousands of class members had no standing for two of three Fair Credit Reporting Act (&ldquo;FCRA&rdquo;) claims, and that the majority of those class members lacked standing for the remaining claim.</p> <p>As we advised in our December 2020 Financial Services Law Blog <a href="https://www.bscr-law.com/?t=40&amp;an=114130&amp;format=xml&amp;stylesheet=blog&amp;p=5258">post</a>, the <i>Ramirez </i>case, filed in the Northern District of California, arose when Mr. Ramirez faced an alarming situation at a car dealership: he was denied financing for a car loan due to an erroneous credit report alert indicating that he was listed on an OFAC advisor &ldquo;terrorist list.&rdquo; Although Mr. Ramirez&rsquo; wife was able to obtain approval to purchase the car, Mr. Ramirez later received a letter from TransUnion indicating that he was listed as a &ldquo;prohibited Specially Designated National (SDN).&rdquo; TransUnion removed the alert after Mr. Ramirez disputed the designation.</p> <p>It was later learned that 8,185 other individuals had been falsely labeled as prohibited SDNs. Although only 1,853 of those individuals&rsquo; credit reports were furnished to potential creditors during the relevant time period, all 8,185 individuals were certified as class members and found by the lower courts to have Article III standing.</p> <p>Mr. Ramirez filed suit on behalf of himself and the 8,185 class members, asserting that TransUnion failed to follow reasonable procedures to ensure the accuracy of credit files, and that it failed to provide consumers with complete credit files and a summary of rights upon request of the consumer. At trial, the jury awarded approximately $1,000 in statutory damages and $6,300 in punitive damages per class member. The Ninth Circuit Court of Appeals held that the class members all had standing but reduced the punitive damages award by roughly 50% on the basis that it was excessive. Now, the Supreme Court has reversed the judgment altogether.</p> <p>The Supreme Court began its Opinion by citing the longstanding principle that, in order to have standing, claimants must have suffered a &ldquo;concrete harm&rdquo; that resulted from the defendant&rsquo;s conduct and that is capable of being redressed by the Court.</p> <p>Applying this standard to the &ldquo;reasonable procedures&rdquo; claim, the Court first found that the 1,853 plaintiffs whose credit reports were provided to third parties did suffer a concrete harm similar to the type of reputational harm that would be caused by a defamatory statement. The remaining 6,332 class members, on the other hand, suffered no such harm because the false information was not &ldquo;published,&rdquo; or furnished, to any third parties. The Court reasoned that the harm suffered from false information stored in a credit file would be similar to an insulting letter that sat in the author&rsquo;s desk drawer &ndash; nonexistent.</p> <p>The Court then considered whether any of the 8,185 unnamed class members had standing to assert their claims for failure to provide complete credit files and a summary of rights upon request. Plaintiffs did not demonstrate that TransUnion&rsquo;s potentially faulty mailings caused any harm at all to plaintiffs. Therefore, the Court found there was no standing under <i>Spokeo</i> because these mere technical violations were &ldquo;divorced from any concrete harm.&rdquo; The Court rejected any argument by plaintiffs that there was a threat of future harm for any of the asserted claims.</p> <p>The Opinion was bookended with this simple phrase, penned by Justice Kavanaugh: &ldquo;No concrete harm, no standing.&rdquo; And with that, the $40 million judgment out of the Ninth Circuit is reversed, and the case is remanded for proceedings consistent with the Supreme Court&rsquo;s findings concerning standing.</p> <p>The Court was split 5-4, and Justice Thomas authored the dissenting opinion.</p> <p>The <i>Ramirez </i>case will, no doubt, have a reach far beyond FCRA claims. Baker Sterchi will continue to monitor for subsequent litigation interpreting the <i>Ramirez </i>decision.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10FHFA Structure Declared Unconstitutional by SCOTUShttps://www.bscr-law.com/?t=40&an=117966&format=xml&p=5258&stylesheet=blog01 Jul 2021Financial Services Law Blog<p>In an action initiated by certain shareholders of Fannie Mae and Freddie Mac, the United States Supreme Court issued its <a href="https://www.supremecourt.gov/opinions/20pdf/19-422_new_8759.pdf">Opinion</a> holding that the single-director, terminable only-for-cause structure, violated the separation of powers clause of the United States Constitution.</p> <p>The Federal Housing Finance Agency (FHFA) was created in 2008 and instilled with authority to oversee Fannie Mae and Freddie Mac under the 2008 Housing and Economy Recovery Act. The underlying action relates to a Purchasing Agreement wherein the Treasury provided billions of dollars in capital in exchange for shares of Fannie and Freddie, following the 2008 housing and financial crisis. The lawsuit originated in the United States District Court for the District of Texas, where certain shareholders of Fannie and Freddie brought an action seeking relief following recent action by the FHFA Director that the shareholders alleged exceeded the Director&rsquo;s authority and caused them financial injury. Two of the shareholder claims were analyzed by the Supreme Court in its recent holding.</p> <p>First, the Supreme Court dismissed the shareholders&rsquo; statutory claim seeking to reverse the FHFA Director&rsquo;s third amendment to the Purchasing Agreement. The shareholders claimed the FHFA Director exceeded his authority in amending the Purchase Agreement, but the Supreme Court held this statutory claim must be dismissed, noting that the Recovery Act (12 U.S.C. &sect; 4617(f)) prohibited any court from restraining or affecting the powers or functions of the FHFA as a conservator or receiver.</p> <p>Second, with respect to the shareholders&rsquo; constitutional claim, the Supreme Court first addressed the issue of standing, finding that the Fannie and Freddie shareholders had standing because they had suffered an injury in fact where their property rights in Fannie and Freddie were transferred by the FHFA Director to the Treasury. Moving on to the merits, the Supreme Court cited to its year-old opinion in <i>Seila Law</i> concerning the unconstitutional structure of the CFPB in holding that the FHFA was likewise unconstitutional in its current form, particularly because the Recovery Act restricted the President&rsquo;s removal powers as to the Director. More information regarding the <i>Seila Law</i> holding may be found in our July 2020 blog <a href="https://www.bscr-law.com/?t=40&amp;an=109771&amp;format=xml&amp;stylesheet=blog&amp;p=5258">post</a>.</p> <p>In its Opinion, the Supreme Court rejected an argument that the CFPB was somehow distinguishable from the FHFA due to the relative breadth of each agency&rsquo;s authority. The Court also soundly rejected the argument that the &ldquo;for cause&rdquo; removal restriction gave the President more removal authority than some other provisions reviewed by the Court; for instance, the CFPB director had been removable only for &ldquo;inefficiency, neglect of duty, or malfeasance in office.&rdquo; This distinction did not matter to the Supreme Court, which noted that it had already held that even &ldquo;modest restrictions&rdquo; on the President&rsquo;s power to remove a single-director were unconstitutional. The case was affirmed in part, reversed in part, and remanded to the lower court to address whether the unconstitutional structure of the FHFA caused the shareholders&rsquo; alleged injury.</p> <p>Just hours after the ink was dry on the Supreme Court&rsquo;s Opinion, President Biden fired previous FHFA Director Calabria and named the new acting director, Sandra Thompson. Ms. Thompson has previously served as the FHFA deputy director of the Division of Housing and Mission Goals.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10Kansas Merchants May Soon Impose Surcharges on Credit Card Transactionshttps://www.bscr-law.com/?t=40&an=115782&format=xml&p=5258&stylesheet=blog22 Apr 2021Financial Services Law Blog<p>For the past 35 years, merchants in Kansas have been prohibited from charging a surcharge to customers on purchases made by credit card. With a recent court decision and pending legislation, that ban is almost surely to be lifted in the near future.</p> <p>Passed in 1986, the Kansas &ldquo;no-surcharge&rdquo; <a href="https://www.ksrevisor.org/statutes/chapters/ch16a/016a_002_0403.html">statute</a> provided that &ldquo;no seller or lessor in any sales or lease transaction or any credit or debit card issuer may impose a surcharge on a card holder who elects to use a credit or debit card in lieu of payment by cash, check or similar means.&rdquo; K.S.A. 16-a-2-403.</p> <p>In February 2021, the United States District Court for the District of Kansas granted summary judgment in favor of CardX, LLC against the State of Kansas, declaring the state&rsquo;s ban on credit card surcharges to be unconstitutional. In <a href="https://ecf.ksd.uscourts.gov/doc1/07915884487"><i>CardX, LLC v. Schmidt</i></a><i>, </i>the Court held that the no-surcharge statute was a violation of the plaintiff&rsquo;s First Amendment right to commercial speech. In so doing, the Court applied United States Supreme Court precedent from <i>Central Hudson Gas &amp; Elec. Corp. v. Pub. Serv. Comm&rsquo;n of New York, </i>447 U.S. 557, 561 (1980). In <i>Hudson, </i>the Supreme Court set forth a three-factor test to determine the constitutionality of a statute that restricts commercial speech: (1) Does the State have a substantial interest in restricting commercial speech? (2) Does the challenged statute advance those interests in a direct and material way, and (3) Is the restriction of reasonable proportion to the interests served? Applying the <i>Hudson </i>test, the Court for the District of Kansas found the Kansas no-surcharge statute failed on all three bases.</p> <p>The Court also cited to the need for surcharges to protect businesses with small profit margins from bearing the cost and burden of transaction fees imposed by credit card providers. The Court further reasoned that the restriction on surcharges placed an undue burden on merchants in light of the heightened demand for credit card transactions in the era of COVID, where consumers have insisted on contact-free transactions.</p> <p>The <i>CardX </i>decision was limited to the plaintiff and transactions at issue in that case. However, during the time the <i>CardX </i>opinion was written, <a href="http://kslegislature.org/li/b2021_22/measures/hb2316/">HB 2316</a> was introduced, which would statutorily lift the surcharge ban. The bill swiftly passed in the Kansas House of Representatives and has been referred to committee in the Senate. In the unlikely event that the bill does not pass, additional challenges to the existing no-surcharge statute can be expected.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10Illinois' Predatory Loan Prevention Act Takes Effecthttps://www.bscr-law.com/?t=40&an=115784&format=xml&p=5258&stylesheet=blog09 Apr 2021Financial Services Law Blog<p>On March 23, 2021, Illinois Governor J.B. Pritzker signed into effect the Predatory Loan Prevention Act (the &ldquo;PLPA&rdquo;), which caps interest on consumer loan transactions at a rate of 36 percent. The PLPA essentially expands the interest rate caps set forth in the Military Lending Act, which is a federal law that protects active service members from usurious interest rates, to apply to all consumer loan transactions taking place in Illinois. Illinois is now one of eighteen jurisdictions to implement such a cap.</p> <p>The PLPA is part of an omnibus economic equity reform <a href="https://www.consumerfinancemonitor.com/wp-content/uploads/sites/14/2021/03/IL-SB-1792_1.pdf">bill</a> introduced by the Illinois Legislative Black Caucus. Other aspects of the bill include cannabis and agriculture equity reforms, as well as changes in how criminal convictions may be used in housing and employment decisions.</p> <p>Prior to passage of the PLPA, the average APR for payday loans in Illinois was 297%, and 179% for car title loans. Illinois residents were estimated to have paid more than $500 million per year in payday and title loan fees, and advocates of the PLPA state that these high-interest loans targeted communities of color, as well as the elderly.</p> <p>Critics of the PLPA argue that the law will eliminate jobs and make credit less accessible to Illinois citizens. Proponents of the Act counter that increased consumer spending on goods and services will actually grow jobs. The true economic impact of the new law remains to be seen.</p> <p>Lenders and financial service providers who provide credit in Illinois must take caution under the PLPA. The new law has teeth. Failure to comply with the PLPA carries statutory penalties of up to $10,000, renders the loan null and void, and requires the return of payments made toward the principal, interest, fees, or charges related to the loan. Furthermore, a violation of the PLPA may also give rise to a private right of action under the <a href="https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2356&amp;ChapterID=67">Illinois Consumer Fraud and Deceptive Business Practices Act</a>, subjecting lenders to liability for actual damages, punitive damages, and attorney&rsquo;s fees.</p> <p>In passing the PLPA, Illinois joins seventeen other states and the District in Columbia that have passed similar interest rate caps on consumer transactions.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10U.S. Supreme Court to Review FCRA Class Action Jury Verdicthttps://www.bscr-law.com/?t=40&an=114130&format=xml&p=5258&stylesheet=blog28 Dec 2020Financial Services Law Blog<p>The United States Supreme Court recently granted certiorari to TransUnion on a multimillion-dollar jury verdict arising out of a class action in the Ninth Circuit.</p> <p>In <i>Ramirez v. TransUnion, </i>a case filed in the Northern District of California,the jury assessed $60 million in damages against TransUnion for three FCRA violations: (1) willful failure to follow reasonable procedures to assure accuracy of terrorist alerts in violation of 15 U.S.C. &sect; 1681e(b); (2) willful failure to disclose to class members their entire credit reports by excluding the alerts from the reports in violation of &sect; 1681g(a)(1); and (3) willful failure to provide a summary of rights in violation of &sect; 1681g(c)(2). The facts relating to the alleged injury suffered by the named class member are compelling. When applying for a car loan, Mr. Ramirez was denied financing by the dealership because he was incorrectly listed a match on an OFAC Advisor &ldquo;terrorist list&rdquo; alert that came up when his credit report was pulled, based on information obtained through a third party vendor. Notably, the dealership did not conduct any further independent investigation to determine whether Mr. Ramirez was in fact a match but instead sold the car to Mr. Ramirez&rsquo; wife.</p> <p>Mr. Ramirez thereafter requested and obtained his credit report from TransUnion, which did not contain the OFAC alert. However, a letter he received from TransUnion a day later notified him that he was listed as a &ldquo;prohibited SDN (Specially Designated National)&rdquo;. After speaking with an attorney, Mr. Ramirez learned of the procedure to dispute the OFAC data associated with his credit file and did so. The alert was removed. The record revealed that more than 8,000 other consumers&rsquo; credit files had also been falsely labeled as prohibited SDNs from January and July 2011 and that they received a letter similar to Mr. Ramirez&rsquo; when they requested their credit reports during that time. Mr. Ramirez subsequently brought the above class action on behalf of himself and those other consumers, who apparently did not suffer any actual injury for which damages could be awarded. The jury verdict amounted to roughly $1,000 in statutory damages per class member and $6,300 each in punitive damages.</p> <p>After the jury verdict, TransUnion appealed to the Ninth Circuit Court of Appeals. The Ninth Circuit <a href="https://cdn.ca9.uscourts.gov/datastore/opinions/2020/02/27/17-17244.pdf">held</a> that the class members had standing sufficient to be certified as a class under Rule 23, but found that the punitive damages award was excessive and cut the punitive damage award in half.</p> <p>On review, the U.S. Supreme Court must consider and rule upon two critical issues: (1) Whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, and (2) whether a punitive damages award violates a defendant&rsquo;s due process rights where it is exponentially larger than any class-wide actual damages and multiples greater than the statutory damages awarded for the defendant&rsquo;s violations.</p> <p>The <i>Ramirez </i>case comes before the High Court at the end of another record-setting year for FCRA claims. But its implications far exceed FCRA litigation. With a historically conservative Court hearing this case, there is at least a possibility that class actions may be more heavily scrutinized in the future.</p> <p>Baker Sterchi will continue to monitor the <i>Ramirez </i>case for important updates.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10You Better Watch Out… for Scammershttps://www.bscr-law.com/?t=40&an=113963&format=xml&p=5258&stylesheet=blog10 Dec 2020Financial Services Law Blog<p>As we approach the holidays, financial institutions, retailers, and consumers alike are all well-advised to be on the lookout for financial scams.</p> <p>Just days ago, the Kansas City Police Department stopped gift card scammers that had defrauded an elderly woman, inducing her to purchase and send them gift cards, and threatening to harm her and her family if she did not comply. But much damage was already done, as authorities believe the scammers had already made purchases in excess of $75,000. The police became involved after Target employees notified them of the suspicious transactions.</p> <p>Given the unique financial hardships presented by COVID-19, fraud is of particular concern this year. According to recent TransUnion financial hardship studies, 35% of consumers report they have been targeted by e-commerce fraud scams.</p> <p>The FTC reports there are several versions of the recently popular gift card scams, including false IRS threats; callers pretending to be utility companies; sellers of cars, motorcycles boats, and expensive electronic devices on online auction or e-commerce sites; and buyers promising to pay more than the purchase price but then seeking reimbursement for the difference. They all have one thing in common &ndash; they demand payment be made in the form of gift cards from various retailers, which is surely never a requested form of payment for a legitimate transaction. Typically, the scammer will ask the victim to provide the gift card number and its pin number located on the back of the card.</p> <p>So, what are consumers to do if they believe they are the victim of a gift card scam? The victim should tell trusted loved ones and report the incident to local authorities, the retailer, as well as to the FTC <a href="https://reportfraud.ftc.gov/#/">here</a>.</p> <p>There are steps retailers can take as well, including strengthening security by setting additional PIN numbers, limiting maximum gift card amounts, and educating employees to detect signs of gift card fraud, such as the purchaser requesting large amounts, or texting/talking on their phone through the transaction, since the scammers often demand the victim stay on the phone with them during the transaction. And it is key that retailers educate their consumers by including preventative tips near gift card racks and cash registers. Amazon, a frequent involuntary party to these scams, has published such guidance on its <a href="https://www.amazon.com/giftcardscams/b?ie=UTF8&amp;node=15435487011">website</a>.</p> <p>Gift card fraud pertains to not only retail gift cards, but also prepaid cards from financial institutions. Banks and other financial institutions are reminded of their obligation to report suspicious transactions to the Financial Crimes Enforcement Network (FinCEN) and also encouraged to educate their account holders about gift card scams as the holidays approach. These efforts could save the financial institution and the consumer from substantial loss, as well as heartache, during the season of giving.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10U.S. Supreme Court Rules CFPB Structure Unconstitutionalhttps://www.bscr-law.com/?t=40&an=109771&format=xml&p=5258&stylesheet=blog02 Jul 2020Financial Services Law Blog<p>The long-awaited Opinion from the United States Supreme Court has been rendered: The structure of the Consumer Financial Protection Bureau (the &ldquo;CFPB&rdquo;), and specifically its appointment of a single director, removable only for cause, is unconstitutional. The Court rendered its 5-4 <a href="https://d2qwohl8lx5mh1.cloudfront.net/uGcD5IBn1DO-ADScfdVHLw/content">Opinion</a>, authored by Chief Justice Roberts, earlier this week. The Supreme Court held that the CFPB&rsquo;s current structure violates the Separation of Powers clause of the U.S. Constitution. The Supreme Court reasoned that the CFPB &ldquo;lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential Control.&rdquo; The Opinion went on to provide for the longstanding history of the U.S. President&rsquo;s powers to remove executive officials, with very limited exception.</p> <p>Defenders of the CFPB&rsquo;s statutory structure cited to other agencies that have operated under a similar structure, including the Social Security Administration and the Federal Housing Finance Agency. But, the Court held, the former is distinguishable because it does not have the authority to conduct enforcement actions. And the latter is subject to ongoing criticism and constitutional challenges. The Court noted that the Fifth Circuit recently held the FHFA to be unconstitutional in <i>Collins</i> v. <i>Mnuchin</i>, <a href="https://casetext.com/case/collins-v-mnuchin-4#p587">938 F. 3d 553, 587-588</a> (2019).</p> <p>While the High Court was split over first issue, a more overwhelming 7-2 majority ruled on the second issue at hand that unconstitutional &ldquo;removal&rdquo; clause of the statutes creating the CFPB are severable from the other statutory provisions.&nbsp;Therefore, the Court held, the CFPB can continue to operate under the existing statutes.</p> <p>Justice Kagan authored a dissent to the majority opinion, arguing that the President had ample power under the existing structure to remove the CFPB Director when appropriate. She cautioned about why the CFPB was created in the first place and that by undermining its independence, the majority Opinion would send &ldquo;Congress back to the drawing board.&rdquo;</p> <p>Going forward, we now know that the CFPB is not going anywhere, but current and future Presidents will exercise more control over who will be in charge of the Bureau. What is not clear from the Opinion is the impact that it will have on enforcement actions ratified by &ldquo;unconstitutionally insulated&rdquo; directors. Because Mick Mulvaney was an acting director terminable-at-will, actions ratified by him are likely protected under the Opinion. But any actions ratified by the first-appointed director, Richard Cordray, or current director Kathleen Kraninger, may face legal challenges going forward.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10Tips for Small Businesses Considering PPP Loan Reliefhttps://www.bscr-law.com/?t=40&an=108546&format=xml&p=5258&stylesheet=blog30 Apr 2020Financial Services Law Blog<p>In just 2 short weeks, the first round of Paycheck Protection Program (&ldquo;PPP&rdquo;) funding under the CARES Act was exhausted. And it is not difficult to see why &ndash; after all, so long as the employer receiving those funds uses at least 75% of the loan proceeds for payroll costs during the eight-week covered period, the loan amount allocated toward each of the following expenses can be forgiven:</p> <ul> <li>Payroll costs</li> <li>Payment of interest on covered mortgage obligations</li> <li>Payment on any covered rent obligations, and</li> <li>Covered utility payments.</li> </ul> <p>But many small businesses have expressed frustrations about the loan process and lack of access to funding. Adding to those frustrations are the growing reports of not-so-small businesses, or companies with access to other financing, receiving loans and exhausting available funding.</p> <p>With many parts of the country either closed down or reopening in phases, now is still the time to take advantage of PPP loans. Some tips for small businesses considering applying for a PPP loan are provided below:</p> <ul> <li><b>Act swiftly and decisively. </b>The application period is open through June 30, 2020, but since these loans are given on a first-come, first-served basis, it is best to apply as quickly as possible.&nbsp;</li> <li><b>Even if you already submitted an application during the first round of PPP loans, be vigilant in communicating with your lender.</b>If you have not received an approval or denial, stay in frequent contact with your lender in order to ensure that your application packet is complete and that additional information is not needed. If your lender asks for additional documentation, make that a first priority and get it promptly submitted in order to ensure you have the best chance at receiving funds.&nbsp;</li> <li><b>Try working with smaller local banks and community lenders. </b>Most people have learned by now that working with a bank with whom you have an established relationship can give you priority in the PPP Loan application process. But if you have not had luck in this regard, consider working with a new community-based lender for a better chance at receiving funding &ndash;local business tends to sympathize and collaborate with other local business.&nbsp;</li> <li><b>What if my business is in a high-turnover industry? </b>While the PPP loan program seems like a &ldquo;no-brainer&rdquo; for many businesses, some high-turnover industries may worry about whether or not they can maintain the appropriate headcount in order for most or all of their loan to be forgiven. This can be especially concerning, given the short two-year maturity period on PPP loans for unforgiven portions. The Amount of forgiveness is determined by multiplying the base forgiveness amount by one of the following fractions, to be selected by the borrower:&nbsp;</li> </ul> <div> <p align="center"><u><b>(Average # of full-time employees per month employed during covered period)</b></u><br /> <b>(Ave. # of full-time employees per month employed from Feb. 15, 2019 &ndash; June 30, 2019)</b>&nbsp;</p> </div> <p align="center"><b>*or*</b>&nbsp;</p> <div> <p align="center"><u><b>(Average # of full-time employees per month employed during covered period)</b></u><br /> <b>(Ave. # of full-time employees per month employed during January and February of 2020)</b>&nbsp;</p> </div> <p>Small business owners who are not confident in employee retention are well-advised to use loan proceeds only for payroll costs and to keep any remaining funds on hand, where possible, in case some repayment is required. And since the CARES Act does not appear to make a distinction between employees who are let go versus those who leave voluntarily, job vacancies should be filled during the covered period to the extent possible. The PPP loan program does carry some risk for high-turnover industries but given that a personal guarantor or collateral is not required, the program is still less risky than traditional loans in most circumstances.</p> <p>The full text of the CARES Act is available <a href="https://assets.documentcloud.org/documents/20059055/final-final-cares-act.pdf">here</a>. Sections 1102 and 1106 provide specific guidance regarding the PPP Loan program and PPP loan forgiveness.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10CFPB Constitutionality Case Submitted to Supreme Court Todayhttps://www.bscr-law.com/?t=40&an=104597&format=xml&p=5258&stylesheet=blog03 Mar 2020Financial Services Law Blog<p>The movement to challenge the constitutionality of the Consumer Financial Protection Bureau (&ldquo;CFPB&rdquo;) was given life through the <i>PHH Mortgage </i>case, and then seemingly was left without a pulse after the <i>PHH Mortgage </i>en banc hearing. But in <i>Seila Law, LLC v. CFPB,</i> No. 19-7 (U.S.), the argument that the CFPB&rsquo;s structure is unconstitutional was resurrected, and it has survived all the way to the Supreme Court of the United States. Today, the High Court heard oral argument from the parties.</p> <p>It is not often that creditors and debt-relief agencies share the same legal argument in similar cases. However, the argument asserted by Seila Law (a consumer debt relief firm) in the case currently before the Supreme Court, PHH Mortgage, a mortgage servicer, are one and the same. Both entities were originally the subject of CFPB enforcement actions. And both argued in defense that the CFPB&rsquo;s structure violates the Separation of Powers Clause of the United States Constitution, due to its single-director, terminable-only-for-cause structure. More information about the original PHH Mortgage holding, which was reversed by the D.C. Circuit court en banc, is discussed in our previous <a href="https://www.bscr-law.com/?t=40&amp;an=61252&amp;format=xml&amp;stylesheet=blog&amp;p=5258">post.</a></p> <p>A second prong has been added to the unconstitutionality argument in <i>Seila: </i>The Supreme Court must first decide whether the structure of the CFPB is constitutional. If the Court finds it is not, then the Court must decide whether the relevant portions of the Dodd-Frank Act, creating its current structure, may be severed from the rest of the Dodd-Frank Act. In other words, is it necessary to abolish the CFPB altogether in the event its structure is unconstitutional, or may the agency itself be preserved with a more balanced model?</p> <p>Interestingly, one Supreme Court Justice has already rendered an opinion on the first argument. It so happens that Justice Brett Kavanaugh was sitting on the D.C. Circuit at the time of the original <i>PHH </i>holding, as well as when the en banc Court overturned the original <i>PHH </i>decision. In his dissent to the latter, Justice Kavanaugh stated that the CFPB&rsquo;s unchecked powers violate the constitution, where the director&rsquo;s power is &ldquo;massive in scope, concentrated in a single person, and unaccountable to the President.&rdquo; Justice Kavanaugh did not recuse himself from the current proceedings, despite critics&rsquo; insistence that he do so due to his history with the <i>PHH </i>case.</p> <p>Kavanaugh&rsquo;s comments during argument today have reportedly echoed his prior opinions. Chief Justice John Roberts is considered the potential swing vote in this case, and his questions during today&rsquo;s argument were directed toward both sides.</p> <p>It is highly unlikely that the Supreme Court will hold that the CFPB should be dismantled altogether. The Trump administration has even softened its position on this issue since President Trump was first campaigning. But for the first time since its creation, there is a real possibility that the structure of the agency will be put into check.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10Update: House Passes SAFE Banking Acthttps://www.bscr-law.com/?t=40&an=96960&format=xml&p=5258&stylesheet=blog28 Sep 2019Financial Services Law Blog<p>In August we <a href="https://www.bscr-law.com/?t=39&amp;anc=827&amp;format=xmldetail&amp;stylesheet=FirmNewsItems_blog&amp;p=5258">reported</a> on the challenges that financial institutions face in Missouri now that medical cannabis use is permitted, and we suggested that the SAFE Banking Act of 2019, <a href="https://www.congress.gov/bill/116th-congress/house-bill/1595?q=%7B%22search%22%3A%5B%22SAFE+Banking+Act%22%5D%7D">H.R. 1595</a>, would provide a much-needed safe harbor for banks handling cannabis money.</p> <p>Although there was doubt even a month ago that the SAFE Banking Act would pass, the bill was approved by 321-103, far more than the required 2/3 majority to pass through the House.</p> <p>The SAFE Banking Act is unique in that it draws both praise and objection from each side of the legislative aisle. While some Republicans support the bill due to its benefit to commerce and the financial services industry, other more socially conservative legislators refuse to support the bill because marijuana remains illegal under federal law, and some believe marijuana to be dangerous.</p> <p>Conversely, while the bill has garnered some Democratic support due to its progress toward future decriminalization of marijuana and scaling back the war on drugs, others simply do not want to give more power or leniency to financial institutions.</p> <p>This dichotomy of perspectives even within each party makes it difficult to predict how the SAFE Banking Act will fare in the Senate. But, there is no doubt that Missouri financial institutions would benefit from its passage, and proponents of the bill continue to push hard for it to be put into law.</p> <p>As a reminder, the SAFE Banking Act would not change the status of cannabis as a Schedule I controlled substance under federal law. But it would permit financial entities to provide checking and savings accounts, credit cards, loans, and other financial products to marijuana-related businesses, and it would also prohibit the feds from seizing assets or taking punitive action against those banking institutions.</p> <p>We will continue to monitor the status of this legislation.</p>https://www.bscr-law.com?t=39&anc=827&format=xml&directive=0&stylesheet=rss&records=10