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Welcome to Wiley’s update on recent developments and what’s next in consumer protection at the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC). In this newsletter, we analyze recent regulatory announcements, recap key enforcement actions, and preview upcoming deadlines and events. We also include links to our articles, blogs, and webinars with more analysis in these areas. We understand that keeping on top of the rapidly evolving regulatory landscape is more important than ever for businesses seeking to offer new and ground-breaking technologies.
Regulatory Announcements
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The CFPB and the Arkansas Attorney General announced that they filed a proposed stipulated judgment and order settling their Fair Credit Reporting Act (FCRA) and Consumer Financial Protection Act of 2010 (CFPA) claims against Alder Holdings, LLC, a home-alarm company that extends closed-end credit to its customers by providing them the right to defer payment for Alder’s alarm and security-system equipment over the life of a long-term contract.
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Complaint, filed in an Arkansas federal district court, alleges that Alder charged higher activation-fees for customers who had lower credit scores, but failed to provide them with the required risk-based pricing notice in violation of the FCRA. 15 U.S.C. § 1681m(h)(1) requires that a company give consumers notice when it provides consumers with less favorable credit terms based on a review of their credit reports.
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On December 11, 2020, the Consumer Financial Protection Bureau (“CFPB”) and the Arkansas Attorney General reached a $600,000 settlement with Alder Holdings, LLC concerning alleged violations of the FCRA’s Risk-Based Pricing Rule. Alder sells home-security and alarm systems, primarily door-to-door, on a nationwide basis.
The Complaint alleged that Alder violated the FCRA’s Risk-Based Pricing Rule, 15 U.S.C. § 1681m(h), which requires companies to provide notice when they provide consumers less favorable terms based on their credit reports. As part of Alder’s usual business practices, the amount of the activation fee varies based on the results of the consumer’s credit score. The Complaint alleged consumers with lower credit scores were charged far higher activation fees as opposed to those with higher credit scores. Despite this allegedly clear instance of Risk-Based Pricing, Alder failed to prov