In a recent decision, a federal judge granted summary judgment for the Securities and Exchange Commission (SEC) finding that the LBC cryptocurrency token qualifies as a security.  While the ruling is confined to this specific token, it represents a victory for the SEC’s assertions that many cryptocurrencies, including so called “utility tokens,” represent securities that need to be registered with the agency.  The Court also held that the makers of the LBC token, LBRY, Inc., had fair notice that the token was subject to the securities laws.  Considering the ongoing class actions and enforcement proceedings litigating this issue across several cases, companies operating in the cryptocurrency space, including cryptocurrency exchanges, should follow this development to assess any possible impact on their businesses.

Continue Reading S.E.C. Wins Summary Judgment Determination That Cryptocurrency Token Qualifies as a Security

May courts look beyond the face of a loan transaction to identify the “true lender”?  In a lawsuit filed by California’s financial regulator, a California state court recently answered yes, finding that a fact-intensive inquiry into the “substance” of a loan transaction was necessary to determine who the “true lender” is and declining to dismiss a lawsuit. See Opportunity Fin., LLC v. Hewlett, No. 22STCV08163 (Cal. Super. Ct. Sept. 30, 2022).

Continue Reading California Court Applies “Substance Over Form,” Allows True Lender Claim to Proceed

The Eleventh Circuit, sitting en banc, recently applied TransUnion to hold that a plaintiff lacked Article III standing to bring claims under the Fair Debt Collection Practices Act.  Hunstein v. Preferred Collection & Mgmt. Servs., Inc., No. 19-14434, 2022 WL 4102824 (11th Cir. Sept. 8, 2022)(en banc).  The en banc decision reversed a controversial panel decision allowing a plaintiff to sue a collection agency for disclosing information about his debt to the agency’s mail vendor.

Continue Reading Eleventh Circuit, Sitting En Banc, Reverses Panel Decision And Holds FDCPA Plaintiff Lacks Standing

Banks, lenders, and other financial institutions who submit information to credit reporting agencies should take note of a recent Third Circuit decision adopting a “reasonable reader” standard for evaluating whether a credit report was inaccurate or misleading under Fair Credit Reporting Act (“FCRA”).

Continue Reading Third Circuit Adopts “Reasonable Reader” Standard to Evaluate FCRA Claims.

The Fifth Circuit reversed a class certification order for claims under the Fair Debt Collection Practices Act (“FDCPA”) because the plaintiff lacked Article III standing.  Perez v. McCreary, Veselka, Bragg & Allen, P.C., No. 21-50958, 2022 WL 3355249 (5th Cir. Aug. 15, 2022).  The Court held that merely sending a letter to collect a time-barred debt, although a violation of the FDCPA, does not satisfy Article III’s injury-in-fact requirement.

Continue Reading Fifth Circuit Applies TransUnion To Conclude Plaintiff Lacked Standing To Assert FDCPA Claims.

Last September, we reported on a 2-1 Ninth Circuit decision holding that even if an arbitration clause appears to be unenforceable under the prospective waiver doctrine, a delegation provision requiring the arbitrator to decide that issue in the first instance is still enforceable.  Brice v. Haynes Invs., LLC, 13 F.4th 823 (9th Cir. 2021).  This decision reversed the district court’s order denying defendants’ motion to compel arbitration.  Because the district court action was not stayed pending the appeal, it proceeded through class certification and pretrial motions.  The Ninth Circuit now has vacated the panel decision and decided to rehear the case en banc.

Continue Reading Update: Ninth Circuit Might Backtrack on When an Arbitrability-Related Question May be Delegated to an Arbitrator

This past week, co-defendants in a class action related to the theft of cryptocurrency engaged in their own lawsuit over alleged security failures.  IRA Financial Trust, a retirement account provider offering crypto-assets, sued class action co-defendant Gemini Trust Company, LLC, a crypto-asset exchange owned by the Winklevoss twins, following a breach of IRA customer accounts.  IRA claims that Gemini failed to secure a “master key” to IRA’s accounts, and that hackers were able to exploit this alleged security flaw to steal tens of millions of dollars of cryptocurrency.  This lawsuit demonstrates the growing trend of cryptocurrency thefts resulting from cyber breaches, and ensuing litigation activity.

Continue Reading Litigation Between FinTech Companies Follows Class Action Over Cryptocurrency Theft

            The Supreme Court recently declined to review the Sixth Circuit’s decision in Sevier County Schools Federal Credit Union v. Branch Banking & Trust Co., 990 F.3d 470 (6th Cir. 2021), which presents a potential challenge to enforcing arbitration clauses added to standard account agreements.  The cert denial serves as a reminder that companies introducing arbitration agreements should take care to follow all contractual change-of-term requirements and create a record of affirmative customer assent whenever possible.

Continue Reading A Closer Look: Arbitration Clauses Added to Account Agreements Face Risks After Supreme Court Declines Review of Sixth Circuit’s BB&T Decision

A bank partnership is the target of yet another “true lender” attack in a new class action filed last week. Michael v. Opportunity Fin., LLC, No. 1:22-cv-00529 (W.D. Tex. June 1, 2022).  The lawsuit is aimed at the lending partnership between OppFi (a fintech) and FinWise Bank (its bank partner), which was also the target of a recent investigation by California’s banking regulator and another class action earlier this year.  This latest development cements a growing trend of true lender attacks after Congress repealed a regulation on the topic last year, dashing hopes of a uniform and predictable standard to identify the “true lender” in bank partnerships.

Continue Reading Bank Partnership Attacked (Again) Under True Lender Theory

A recent lawsuit seeks to hold a fintech company liable for failing to adequately service loans made as part of the Paycheck Protection Program (PPP), marking what may be the first putative class action lawsuit challenging the manner in which PPP lenders process loan forgiveness applications.

Continue Reading Lawsuit Takes Aim At Fintech’s Handling Of PPP Loan Forgiveness Applications