THIS ISSUE'S HEADLINES

Regulatory Agency Removes Roadblocks to Consumer Lawsuits Against Financial Institutions

Return to Sender: No Donation Allowed at Post Office

Regulating Virtual Currencies

Podcast Essentials: Turning Content Into Opportunity


REGULATORY AGENCY REMOVES ROADBLOCKS TO CONSUMER LAWSUITS AGAINST FINANCIAL INSTITUTIONS

The Consumer Financial Protection Bureau (“CFPB”) has recently banned most types of mandatory arbitration clauses that require credit card and bank customers to use an arbitrator when they have a dispute with a financial institution.  The new rule is intended, in part, to deter wrongdoing by financial institutions by allowing customers to file class action lawsuits against them. 

Mandatory arbitration clauses are found in the fine print of agreements related to an enormous number of financial products, including credit cards and checking accounts.  Opponents of such clauses argue that they are a way for companies to avoid the court system.  This is because, for example, a consumer who wishes to dispute a relatively small overdraft charge is not likely to hire a lawyer to sue its bank.  However, a group of consumers who were all individually impacted by the same charge are more likely to dispute it collectively in the form of a class action lawsuit.

The CFPB’s new rules are not, however, a total ban on arbitration clauses and will not apply retroactively to existing contracts.  Financial companies will still be able to force individuals to address some disputes through arbitration. Financial institutions have opposed banning arbitration clauses, arguing that arbitration is a more efficient way of handling small disputes.  Certainly, these companies are also concerned about exposure to large lawsuits.

The CFPB is an independent agency which was created under the Obama Administration.  Opponents of the agency view the CFPB as having too much power and too little oversight.  Its new rules are likely to face opposition from not only the banking industry, but also Republicans in the House and Senate, and the White House.  However, the new rules have the potential to be popular with consumers.  Moreover, Congress has previously passed laws that ban arbitration clauses in other contracts for financial products – notably, mortgages. If you would like more information on this topic, contact Attorney Sally P. McDonald or call PLDO’s business law team at 401-824-5100.

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RETURN TO SENDER: NO DONATION ALLOWED AT POST OFFICE

A local landscapist’s efforts to beautify a Martha’s Vineyard post office were abruptly halted after it was discovered that his efforts ran afoul of the law. The landscaper originally obtained approval from the local postmaster to donate time, material, and labor to spruce up the area around the Vineyard Haven Post Office. After about two weeks, the project was ordered to stop because the Postal Service is prohibited from accepting gifts valued over $20. According to Postal Bulletin 22349, “All postal employees, including carriers, must comply with the Standards of Ethical Conduct for Employees of the Executive Branch. Under these federal regulations, carriers are permitted to accept a gift worth $20 or less from a customer per occasion, such as Christmas. However, cash and cash equivalents, such as checks or gift cards that can be exchanged for cash, must never be accepted in any amount. Furthermore, no employee may accept more than $50 worth of gifts from any one customer in any one calendar year period.” The GoFundMe page that was created to support the project had raised close to $2,000.00 by the time the project was halted (nearly 100x the allowable limit of donations).

Before the project was ordered to cease work, many locals had joined in the effort and volunteered their own time and material. Unsurprisingly, the decision to order a stop to the work was not popular, leading many to criticize the bureaucratic nature of the decision. While the intent behind Postal Bulletin 22349 may have been right at the time, the enforcement of it in this instance leads many to question when too much red tape is present. Regardless, this is one gift that the post office literally wished it could “return to sender.”

For more information on this matter or other business issues, contact attorney Patrick J. McBurney at 401-824-5100 or email pmcburney@pldolaw.com.

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REGULATING VIRTUAL CURRENCIES

On July 18, 2017, a U.S. Magistrate Judge ruled that an anonymous bitcoin owner had the right to intervene in a case involving an IRS summons for certain customer records from San Francisco-based Coinbase, Inc. (United States vs. Coinbase, Inc. U.S. District Court Northern District Of California Case 3:17-cv-01431-JSC) Coinbase claims to have approximately 8,800,000 users and defines itself as a digital currency wallet and platform where merchants and consumers can transact with new digital currencies like bitcoin, ethereum and litecoin. The IRS’s rationale in requesting the records in 2016 was its suspicion that some Coinbase customers may not have paid back taxes when the value of bitcoins exploded during a two-year period preceding the IRS demand. (For information on the price of bitcoins, visit www.cryptocoinsnews.com/bitcoin-price/)

In the ruling on the motion to intervene, Judge Jacqueline Corley reasoned that the scope of the IRS request was “unprecedented.” She determined that “under that reasoning the IRS could request bank records for every United States customer from every bank branch in the United States because it is well known that tax liabilities in general are under reported and such records might turn up tax liabilities. It is thus no surprise that the IRS cannot cite a single case that supports such broad discretion to obtain the records of every bank-account holding American.”

The government’s action against Coinbase was closely watched by many involved in the new virtual currency industry. For many consumers, one of the primary appeals of bitcoin is that a bitcoin “wallet” may be opened and used with relative anonymity. For regulators, however, this anonymity is thought to foster illegal and fraudulent activity. The Coinbase case is just one of a number of actions directed at the virtual currency industry.  However, in order for regulatory bodies to quickly and uniformly address virtual currency, the best approach to remedying government concerns in the industry would likely be through a legislative enactment, as opposed to depending upon on traditional centralized bank ideologies, or lengthy court actions, which may lead to inconsistent results throughout the country.   

For more information on this topic or other business matters, contact PLDO at 401-824-5100. (We would like to thank our former interns, Daria Capaldi and Andrew Torrico, for contributing to this article.)

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PODCAST ESSENTIALS: TURNING CONTENT INTO OPPORTUNITY

Podcasts offer all the benefits of audiobooks—entertainment while driving, cooking, cleaning, and more—while providing fresh, relevant content to listeners on a weekly or even daily basis. What’s a podcast? They’re best described as “radio-style audio content that is recorded, not streamed, so you can download podcasts and listen to them whenever you want.” ¹

Perhaps you’re a business owner who sees the benefit of creating a podcast that potential customers could enjoy. For example, a bakery might offer tips for home bakers or insight on the latest pastry trends. A landscaper could give updates on the best plants to buy each season. With an engaging and informative podcast to rely on, listeners may like what they hear enough to become customers. So what do you need to know before starting one?

First, podcasts aren’t like radio shows. They are not regulated by the Federal Communications Commission (FCC), which, among other things, regulates the broadcast of indecent, profane, and obscene material. Podcasts don’t have to worry about things like expletives before 10:00 p.m., because after all, that’s the glory of a podcast: listeners can tune in whenever they like. But before dropping profanity, remember that the absence of FCC regulation does not mean listeners will automatically approve of graphic language. Know your audience!

Second, podcasters in certain fields, such as medicine or law, may be concerned about their professional obligations as they relate to podcasting. Take heart! There are plenty of legal and medical podcasts by practicing professionals. The key is to follow existing ethical guidance in conducting your podcast. For instance, lawyers must honor ethical rules that prohibit the dissemination of false or misleading information. Doctors, too, must take care not to violate Federal Trade Commission rules on physician advertising if they discuss or promote products on their podcasts.

Third, avoid a common pitfall for podcasters, and make sure you obtain the rights to play any copyrighted material. If you want to play a clip of music to kick off each episode, or play a recording from a news report, contact the source. Just because your business is a nonprofit, or the podcast itself is educational, does not mean that you can use a song or a recording in your podcast for free.

Finally, remember that even though a podcast may seem private and intimate in the recording phase, working with only a few people and a microphone, what you are putting out there on your podcast is accessible worldwide. Take care not to make statements that you know to be false about others, or disclose private information about clients or customers. A good rule to abide by: if you wouldn’t put it on a billboard under your company’s name, don’t say it on your podcast!

Podcasts offer an invaluable marketing tool for companies willing to take the initiative to create something new. Even starting small by advertising your company with existing podcasts opens up a whole new audience for your business. Take hold of this opportunity to share your knowledge and experience—and to turn listeners into customers. If you have questions about this topic or other business matters, contact Attorney Samantha Clarke at 401-824-5100 or email sclarke@pldolaw.com.