FTC Orders Fintech Company to Pay $17 Million for Allegedly Deceptive Subscription Practices
On March 27, the FTC announced that a fintech company offering cash advances through a mobile app has agreed to pay $17 million to resolve allegations that it violated the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA). The FTC alleged that the company misrepresented the availability and cost of its services and failed to obtain consumers’ express informed consent before charging recurring subscription fees.
According to the FTC’s complaint, the company marketed its services as free and interest-free, but required users to enroll in a paid subscription plan, often without their knowledge. Consumers allegedly encountered barriers to cancellation, including disabled links and unclear steps, which resulted in unauthorized recurring charges.
Specifically, the lawsuit outlines several alleged deceptive practices, including:
Misleading “no-fee” marketing. The company advertised cash advances as fee-free, but consumers were required to enroll in a paid subscription to access the service.
Delayed access to funds. Although the company promoted instant fund transfers, consumers allegedly had to pay an additional expedited delivery fee to receive funds quickly.
Recurring charges without consent. The company allegedly failed to obtain consumers’ express informed consent before initiating subscription charges.
Insufficient disclosure of trial terms. Consumers were automatically enrolled in a paid subscription following a free trial, without clear and conspicuous disclosures.
Obstructive cancellation process. Some users were allegedly unable to cancel within the app, and others encountered unnecessary and cumbersome hurdles when attempting to prevent further charges.
Retention of charges after cancellation. The FTC alleged that the company kept charging users even after they attempted to cancel their subscriptions.
Under the stipulated order, the company must pay $10 million in consumer redress and a $7 million civil penalty. The company is also expressly barred from misrepresenting product features, charging consumers without affirmative express consent, and using designs that impede cancellation.
Putting It Into Practice: While the CFPB and state regulators continue to recalibrate their supervisory priorities, the FTC has remained consistent in its focus on unfair or deceptive acts and practices. This enforcement underscores the FTC’s longstanding commitment to stamping out deceptive marketing practices (previously discussed here, here, and here). While the CFPB has taken a step back, the FTC has continued its aggressive enforcement posture. Companies should review this enforcement action with an eye towards their own marketing practices.
SEC Creates New Tech-Focused Enforcement Team
On February 20, the SEC announced the creation of its Cyber and Emerging Technologies Unit (CETU) to address misconduct involving new technologies and strengthen protections for retail investors. The CETU replaces the SEC’s former Crypto Assets and Cyber Unit and will be led by SEC enforcement veteran Laura D’Allaird.
According to the SEC, the CETU will focus on rooting out fraud that leverages emerging technologies, including artificial intelligence and blockchain, and will coordinate closely with the Crypto Task Force established earlier this year (previously discussed here). The unit is comprised of approximately 30 attorneys and specialists across multiple SEC offices and will target conduct that misuses technological innovation to harm investors and undermine market confidence.
The CETU will prioritize enforcement in the following areas:
Fraud involving the use of artificial intelligence or machine learning;
Use of social media, the dark web, or deceptive websites to commit fraud;
Hacking to access material nonpublic information for unlawful trading;
Takeovers of retail investor brokerage accounts;
Fraud involving blockchain technology and crypto assets;
Regulated entities’ noncompliance with cybersecurity rules and regulations; and
Misleading disclosures by public companies related to cybersecurity risks.
In announcing the CETU, Acting Chairman Mark Uyeda emphasized that the unit is designed to align investor protection with market innovation. The move signals a recalibration of the SEC’s enforcement strategy in the cyber and fintech space, with a stronger focus on misconduct that directly affects retail investors.
Putting It Into Practice: Formation of the CETU follows Commissioner Peirce’s statement on creating a regulatory environment that fosters innovation and “excludes liars, cheaters, and scammers” (previously discussed here). The CETU is intended to reflect that approach, redirecting enforcement resources toward clearly fraudulent conduct involving emerging technologies like AI and blockchain.
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CFPB Moves to Vacate ECOA Settlement Against Illinois-based Mortgage Lender
On March 26, the CFPB filed a motion to vacate its recent settlement against an Illinois-based mortgage lender accused of engaging in discriminatory marketing practices in violation of the Equal Credit Opportunity Act (ECOA) and the Consumer Financial Protection Act (CFPA). The lawsuit, initially filed in 2020, alleged that the lender’s public radio advertisements and commentary discouraged prospective applicants in majority- and minority- Black neighborhoods from applying for mortgage loans.
In its original complaint, the CFPB claimed the mortgage lender had violated fair lending laws by making repeated on-air statements that allegedly discouraged individuals in certain predominantly minority neighborhoods from seeking credit, and by failing to market its services in a manner that would affirmatively reach those communities. According to the CFPB, this conduct constituted unlawful discouragement under the ECOA and CFPA, even where no formal credit application had been submitted. That decision was challenged on appeal and later upheld by the 7th Circuit which found that ECOA also applies to prospective applicants. After losing on appeal, the lender settled the action for $105,000.
Acting Director Russel Vought explained in a March 26 press release that the CFPB “abused its power, unfairly tagged the lender as racist with “zero evidence”, and spent years persecuting and extorting the lender “all to further the goal of mandating DEI in lending via their regulations by enforcement tactics.”
Putting It Into Practice: The CFPB’s order is the latest example of the Bureau reversing course on enforcement actions initiated under the previous administration (previously discussed here and here). This is the rare instance of a federal regulator ripping up an action that was already settled. Perhaps even more noteworthy, the lawsuit against the mortgage lender was filed under the first Trump administration.
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Kryptofonds in Deutschland – Was Verwahrstellen und Kapitalverwaltungsgesellschaften (voraussichtlich) beachten müssen
Das Inkrafttreten des Zukunftsfinanzierungsgesetzes markierte bereits 2023 die Geburtsstunde der „Kryptofonds“ in Deutschland, indem die unmittelbare Anlage in Kryptowerte auch für Publikumsfonds (i.S.d. §§ 221 bzw. 261 KAGB) ermöglicht wurde. Mit dem Ende 2024 in Kraft getretenen Finanzmarktdigitalisierungsgesetz hat man diese Idee vor dem Hintergrund der MiCAR mit einem Verweis auf dessen Kryptowerte-Begriff nun vollendet.
Da ein Investment in Kryptowerte mit neuen, spezifischen Risiken einhergeht, hat die BaFin den ersten Entwurf eines Rundschreibens zu den Pflichten von Verwahrstelle und Kapitalverwaltungsgesellschaft bei in Kryptowerte investierenden Investmentvermögen zur Konsultation (06/25) gestellt. Es soll einen grundlegenden Rahmen an regulatorischen Mindestanforderungen für Direktinvestitionen in Kryptowerte durch Fonds setzen und ist damit höchst praxisrelevant. Als Rundschreiben hat es nicht die Qualität einer echten Rechtsnorm bildet aber die von der BaFin angewandte Verwaltungspraxis ab.
Pflichten der Verwahrstelle
Grundsätzlich gelten die Pflichten der Verwahrstelle, die sich bereits aus dem Gesetz und dem Verwahrstellenrundschreiben ergeben, weiterhin und sollen durch das Rundschreiben ggf. vorrangig ergänzt werden.
Zusätzlich verlangt die BaFin laut dem Rundschreiben außerdem:
• Pflichten bereits vor der Übernahme eines Mandats. Insofern seien – angesichts der hohen Volatilität von Kryptowerten – bereits im Vorfeld Prozesse zu schaffen, die der Verwahrstelle ermöglichen, informiert das Marktrisiko zu erfassen und kontinuierlich zu bewerten.• Ausreichende sachliche und personelle Ressourcen. Dies betreffe grundsätzlich alle Ebenen und in besonderem Maße die fachliche Eignung der Geschäftsleiter. Hier erkennt die BaFin an, dass insbesondere praktische Vorerfahrungen in Bezug auf eine solch junge Asset-Klasse regelmäßig nur eingeschränkt vorhanden seien. Sie ermöglicht daher einen auf theoretischem Wissen fundierten Aufbau über einen Zeitraum von 6 Monaten.• Geeignete organisatorische Vorkehrungen und zwingend technische Vorkehrungen. Dies schließe IT-Systeme und -Prozesse ein und gelte in besonderem Maße, wenn die Verwahrstelle private Schlüssel zu den Kryptowerten verwahrt. Dann bedürfe es eines darauf ausgerichteten speziellen „Kryptokonzepts“.
Außerdem sei, wie auch bei anderen Assets, zu unterscheiden, je nachdem ob die Kryptowerte verwahrfähig i.S.d. §§ 72 bzw. 81 KAGB sind. Maßgeblich wird es hier auf die Einzelfallprüfung ankommen. Insofern fällt auf, dass die BaFin in ihrem Rundschreiben einen weiten „Kryptowert“-Begriff anwendet und etwa MiFID-Finanzinstrumente i.S.d. Artikel 2 Abs. 4 MiCAR nicht bereits von vornherein aussteuert. Die MiCAR unterscheidet hier konsequent zwischen „Kryptowerten“ und (ggf. auch auf DLT-Basis emittierten MiFID-)„Finanzinstrumenten“, für die die MiCAR entsprechend nicht gilt. Die überwiegend aus 2022 stammenden und inzwischen längst überholten Ausführungen der BaFin zu ihrem Verständnis von „Kryptotoken“, auf die die BaFin im Rundschreiben verweist, sind entsprechend wenig hilfreich.
Gleiches gilt mit Blick auf die Ausführungen zur Verwahrung von (BaFin-)Kryptowerten, weil eine begrifflich klare Unterscheidung verdeutlichen würde, dass DLT-basierte MiFID-Finanzinstrumente gleichsam MiFID-Finanzinstrumente und eben keine MiCAR-Kryptowerte sind. Wo das KAGB und die AIFMD auf den Begriff der MiFID-Finanzinstrumente zur Annahme der Verwahrfähigkeit abstellen, hätte es hier keiner Erörterungen bedurft.
Schließlich weist die BaFin darauf hin, dass ggf. zusätzliche Erlaubnisse erforderlich sein können, insbesondere für eine etwaige Erbringung des Kryptoverwahrgeschäfts in Bezug auf MiCAR-Kryptowerte.
Lautet das Ergebnis der Einzelfallprüfung, dass es sich um nicht verwahrfähige (MiCAR-)Kryptowerte handele, träfen die Verwahrstelle entsprechend die Pflichten für nicht-verwahrfähige Assets aus § 81 Abs. 1 Nr. 2 KAGB (bzw. § 72 Abs. 1 Nr. 2 KAGB). Diese umfassen eine Feststellungspflicht bzgl. des Eigentums bzw. einer entsprechenden Rechtsposition, die Prüfung und Sicherstellung der Zuordnung und Zugriffsmöglichkeiten des Kryptowerts (einschließlich etwaiger Rechte Dritter), die Erfassung in einem kontinuierlich gepflegten Bestandsverzeichnis. Zudem sei ggf. vertraglich sicherzustellen, dass die Verwahrstelle Zugang zu den Systemen des Kryptoverwahrers erhält.
Daneben würden die allgemeinen Kontrollpflichten der Verwahrstelle (vgl. §§ 76 und 83 KAGB) gelten. So müsse sie insbesondere prüfen, ob ein Erwerb von Kryptowerten mit den Anlagebedingungen vereinbar und ob die Erwerbsgeschäfte marktgerecht sind.
Pflichten der Kapitalverwaltungsgesellschaft
Die Kapitalverwaltungsgesellschaft („KVG“) muss den gleichen Risiken Rechnung tragen wie die Verwahrstelle, sodass in Bezug auf einen Direkterwerb von Kryptowerten auch ähnliche Konsequenzen folgen.
Zunächst sei ggf. eine Erweiterung der Erlaubnis zu beantragen, die den direkten Erwerb von Kryptowerten umfasst, weil bisherige Erlaubnisse auf andere Vermögensgegenstände lauten dürften. Insofern stellt die BaFin hier klar, dass der Katalog nach ihrem Verständnis statisch sei und Änderungen nicht von einer bisherigen Erlaubnis gedeckt seien. Insofern sei auch zu beachten, dass eine Verwahrung durch die KVG selbst nicht möglich wäre.
Auch in der KVG seien entsprechend hinreichende Ressourcen und Kenntnisse und Erfahrungen des Personals, ggf. unter Einstellung fachkundiger, externer Experten, sicherzustellen. Auch müssten die Geschäftsleiter ausreichende fachliche Eignung haben, wobei die gleiche Frist von sechs Monaten gelte wie für Geschäftsleiter der Verwahrstelle.
Zudem seien die Prozesse der KVG entsprechend anzupassen und zwingend vor der erstmaligen Investition in Kryptowerte ein Neue-Produkte-Prozess durchzuführen. Dieser müsste vor allem die einhergehenden ggf. erhöhten Risiken und deren Management abbilden sowie Vorgaben zur Best Execution und der Marktgerechtigkeitskontrolle und Wertermittlung machen.
Rundschreiben als Leitplanke
Sowohl Verwahrstellen als auch Kapitalverwaltungsgesellschaften, vor allem wenn sie bereits etablierte Prozesse für andere Finanzinstrumente haben, sollten anhand der Vorgaben des Rundschreibens als Leitplanke und unter Berücksichtigung der spezifischen Risiken von Kryptowerten funktionierende und aufsichtsfeste Strukturen für Direktinvestments schaffen können.
Wer Kryptofonds in Deutschland anbieten will, sollte zunächst prüfen, ob die dahingehende Erlaubnis ausreicht. Besonderes Augenmerk ist dann auf die (technischen) Ressourcen und das Know-How der Mitarbeiter zu legen – und darauf, in welcher Form der Entwurf nach Abschluss der Konsultation veröffentlicht wird.
High Court Upholds Use of Omnibus Claims in Mass Motor Finance Litigation
A recent High Court decision in claims brought by thousands of claimants against motor finance providers has reaffirmed the validity of using omnibus claim forms in large-scale consumer litigation. The ruling has implications both for the many motor-finance mis-selling claims pending before the courts and also for mass claims in a variety of other contexts.
Background
The case involved eight omnibus claim forms issued on behalf of over 5,800 claimants against eight defendants. While the claims were at an early stage procedurally, the core allegations were that the defendants had paid undisclosed, variable commissions to motor finance brokers (car dealers), creating conflicts of interest which the claimants argued rendered the ensuing credit agreements unfair under Section 140A of the Consumer Credit Act 1974 (CCA).
Shortly after the claims were issued, and before filing any defence, the defendants objected to the use of omnibus claim forms and invited the court to sever the claims, such that the claimants’ solicitors would need to issue a separate claim form (and pay a court fee) for each claim.
Initially, a County Court judge ruled that the claims should be severed into individual cases, following Abbott v Ministry of Defence [2023] 1 WLR 4002. This would have required a separate claim form to be issued (and court fee paid) for each case. The claimants appealed, arguing that the claims could and should more appropriately be commenced under omnibus claim forms, as contemplated by CPR 7.3 and CPR 19.1.
Key Legal Considerations
CPR 7.3 allows a single claim form to be used for multiple claims if they can be “conveniently disposed of” in the same proceedings. CPR 19.1 provides that any number of claimants may be joined as parties to a claim.
In Morris v Williams & Co Solicitors [2024] EWCA Civ 376 the Court of Appeal clarified that no gloss should be put on the words of CPR 7.3 and 19.1, which should be given their ordinary meaning. The exclusionary “real progress,” “real significance,” and “must bind” tests proposed in Abbott were factors to consider but should not be viewed as exclusionary tests – the omnibus claim form jurisdiction was not as restrictive as the Group Litigation Order regime in CPR 19.21-28, and should not be treated as “GLO-light”. Abbott was overruled.
Factors Supporting Omnibus Claims
The High Court carried out a detailed analysis of the factors to be taken into account in deciding whether the claims could conveniently be disposed of together per CPR 7.3. Key points cited in favour of allowing omnibus claims to proceed included:
The large number of claimants and small number of defendants.
The claims arose from the same or similar transactions, with broadly common allegations and the same legal causes of action, raising a number of common legal and factual issues.
The likelihood that case managing the cases together by way of lead or test cases would likely facilitate the disposal of many or all of the following cases. Whereas if separate claims were issued it would be random chance which claims were heard first and whether they were appropriate test cases.
Managing the claims together would be more efficient and just, in line with the CPR 1.1 overriding objective. Costs would likely be saved overall, and court time would likely be reduced. The imbalance of financial power between individual claimants and defendants would be mitigated. There were advantages to omnibus claims management in terms of the timing and usefulness of disclosure, and the availability of expert evidence.
Practical Implications
For Defendants facing mass claims this ruling will be a concerning precedent for the use of omnibus claim forms by claimants as a strategy, with obvious advantages for claimant law firms in terms of cost, use of case management applications to gain early disclosure, and selection of common issues and test cases.
For Claimants and their advisers the decision will encourage the use of omnibus claims over the impracticality of litigating individual cases, and the relative restrictiveness of the GLO regime.
For the Courts omnibus claim forms could see large volumes of individual claims taken out of the County Courts and case managed collectively and in a less haphazard fashion than has so far been the case, with potential for many following cases to be settled out of court once lead claims have been determined. This may help with significant delays and backlogs often experienced in the County Courts.
Wider Significance
The significance of this decision in the context of motor finance claims may to some extent be rendered moot by the outcome of the Supreme Court appeal in Johnson v FirstRand and the FCA’s decision on a whether and to what extent to impose a consumer redress scheme. But in reaffirming the broad scope and flexibility of CPR 7.3 and 19.1, the ruling may pave the way for more mass claims in financial services and other contexts.
California Cryobank Hit with Lawsuit over Sperm Donor Databank Breach
California Cryobank, LLC, the largest sperm bank in the country, faces a lawsuit in the U.S. District Court for the Central District of California over an April 2024 data breach. Cryobank provides frozen donor sperm and specialized reproductive health care services, including egg and embryo storage.
Cryobank notified the affected individuals this month that it detected suspicious activity on its network and determined that an unauthorized party gained access to its IT environment and may have accessed files containing personal information.
While sperm is commonly donated anonymously, the information is associated with a donor-assigned ID number. That ID number can then be used by offspring at 18 if they want to learn more about their biological father. Nevertheless, the security incident affected information including, patient names, Social Security numbers, driver’s license numbers, financial account numbers, and health insurance information. The complaint alleges that Cryobank failed to sufficiently protect and secure its patients’ personal and health information. The plaintiff is seeking class certification to include others affected by the data breach.
The complaint states that the individual notifications did not include “the identity of the cybercriminals who perpetrated this Data Breach, the details of the root cause of the Data Breach, the vulnerabilities exploited, and the remedial measures undertaken to ensure such a breach does not occur again.”
The lawsuit asserts claims of negligence, breach of implied contract, and unjust enrichment, as well as violations of the California Unfair Competition Law and Confidentiality of Medical Information Act.
From Seizures to Strategy: The U.S. Government’s Move Toward a National Crypto Reserve
Following President Trump’s March 6 Executive Order establishing a Strategic Bitcoin Reserve, released alongside a White House Briefing, the U.S. government has taken its most formal step yet toward integrating digital assets into national economic and security policy. The order outlines a broader strategy to manage and expand the federal government’s holdings of Bitcoin and other designated cryptocurrencies through the creation of a Strategic Bitcoin Reserve and U.S. Digital Asset Stockpile.
While many details remain forthcoming, existing government practices around crypto asset custody, combined with reporting on the administration’s plans, offer a glimpse into how the reserve may operate in practice.
Bitcoin: The Foundation of the Reserve
The executive order calls for the formation of a Strategic Bitcoin Reserve, leveraging the U.S. government’s existing crypto holdings—estimated to exceed 200,000 BTC based on seizures of crypto in connection with illicit activities. These assets are already under federal control and provide a ready base for the reserve.
The Department of Justice (DOJ) has historically overseen management of some of the U.S. government’s crypto assets under its Digital Asset Forfeiture Program. The U.S. government has also contracted with third-party institutional crypto custodians to provide secure custody, wallet management, and liquidation services for seized crypto assets. The U.S. Marshals Service, a unit of the DOJ, has also periodically offered crypto for sale, just as it does with artwork, vehicles and other assets forfeited to the government in various criminal, civil and administrative cases.
However, the White House Briefing points out shortcomings in the U.S. government’s current crypto asset management protocols, including that assets are scattered across multiple Federal agencies, leading to a non-cohesive approach where options to maximize value and security of crypto holdings have been left unexplored. Additional measures could include multi-signature wallet storage, layered access controls, segregated storage (as opposed to pooling crypto assets in one omnibus wallet), strategic portfolio management, and specialized regulatory oversight via the Presidential Working Group on Digital Asset Markets.
Beyond Bitcoin: The Digital Asset Stockpile
In addition to Bitcoin, the executive order also calls for the creation of a U.S. Digital Asset Stockpile, which will include four cryptocurrencies, reportedly selected for their market relevance, technical resilience, and utility in decentralized finance (DeFi) and cross-border settlement use cases. The rationale, as outlined in a White House briefing, is to ensure the United States maintains influence and optionality in emerging blockchain ecosystems while encouraging domestic innovation.
To date, no details have surfaced regarding a formal acquisition program for these assets or how the crypto asset portfolio will be managed.
Putting It Into Practice: The launch of the Strategic Bitcoin Reserve and Digital Asset Stockpile marks a watershed moment in U.S. crypto policy. This policy signals a clear shift toward legitimizing digital assets as sovereign financial instruments and could prompt other nations to consider similar reserves (for our previous discussions on recent developments in the ongoing shift in U.S. crypto policy, see here, here, here, and here). This development also suggests the U.S. intends to play an active role in shaping global crypto governance—not only through regulation, but also through participation and ownership.
Zone of Natural Expansion Is a Shield, Not a Sword
The US Court of Appeals for the Federal Circuit upheld a Trademark Trial & Appeal Board decision to partially cancel trademarks, ruling that an opposition challenger could not use the zone of natural expansion doctrine to claim priority because the doctrine is strictly defensive. Dollar Financial Group, Inc. v. Brittex Financial, Inc., Case No. 23-1375 (Fed. Cir. Mar. 19, 2025) (Prost, Taranto, Hughes, JJ.)
Dollar Financial Group (DFG) is a loan financing and check cashing business that has used the mark MONEY MART since the 1980s. In 2012, DFG expanded and started using the mark in connection with pawn brokerage and pawn shop services. DFG registered MONEY MART for these new services in 2014. Brittex petitioned to cancel the registration on several grounds, including that the registrations were improperly issued in violation of the Lanham Act, which bars registration of a mark that “so resembles . . . a mark or trade name previously used in the United States by another and not abandoned, as to be likely, when used on or in connection with the goods of the applicant, to cause confusion, or to cause mistake, or to deceive.” 15 U.S.C. § 1052(d). Brittex has operated pawn shops under the names Money Mart Pawn and Money Mart Pawn & Jewelry since the 1990s and claimed prior common law rights to the MONEY MART mark for pawn services.
The Board ruled in favor of Brittex, finding that Brittex had priority over DFG for pawn services due to its earlier use of the mark. The Board also determined that DFG could not rely on the zone of natural expansion doctrine to establish priority because this doctrine is purely defensive and does not grant a proactive right to register a mark on an expanded line of goods or services. The Board also concluded that there was a likelihood of confusion between the marks, given their high similarity and the overlapping nature of the services provided by both parties. DFG appealed.
The Federal Circuit agreed that Brittex had established priority because it was the first to use the MONEY MART mark in connection with pawn services. The Court also rejected DFG’s zone of natural expansion argument, reiterating that the doctrine is defensive and cannot be used to establish priority offensively.
The doctrine of natural expansion, as explained in Orange Bang v. Ole Mexican Foods (TTAB 2015), states that:
[T]he first user of a mark in connection with particular goods or services possesses superior rights in the mark as against subsequent users of the same or similar mark for any goods or services which purchasers might reasonably expect to emanate from it in the normal expansion of its business under the mark.
However, the doctrine does not give the senior mark user an offensive or proactive use.
The Federal Circuit also addressed DFG’s argument regarding the doctrine of tacking, which allows trademark holders to make minor modifications to their own mark while retaining the priority position of the older mark. Tacking is generally permitted to allow trademark holders to make minor adjustments to their marks to reflect changing consumer preferences, aesthetics, and marketing styles. However, the Federal Circuit determined that DFG had forfeited this argument by failing to present it during the initial cancellation proceeding before the Board. Consequently, the Court declined to consider the tacking argument on appeal.
Demystifying the Swamp: Executory Process in Louisiana
Some commentators are predicting that the declining foreclosure rates witnessed in 2024 could begin to trend upward this year. This potential upward trend underscores the importance of banking institutions and other mortgage holders understanding the foreclosure process and the costs associated therewith. This understanding is essential to making sound lending decisions.
While the foreclosure process varies state to state, Louisiana is (likely to nobody’s surprise) an outlier in this area of the law. While Louisiana requires foreclosure be accomplished through judicial means, it provides a unique and expedited procedure for doing so, known as executory process. While this unique procedure may seem intimidating to the unfamiliar, when examined and understood, it reveals itself to be a useful and cost-effective procedural tool for banks and other mortgage holders to exercise their foreclosure rights.
Executory Process vs. Ordinary Process
Unlike some other states, Louisiana does not allow nonjudicial foreclosure. As an alternative, Louisiana has the mechanism of executory process. Executory process is an accelerated summary procedure authorized under the Louisiana Code of Civil Procedure. It allows the holder of a mortgage or privilege, evidenced by an authentic act importing a confession of judgment, to effect an ex parte seizure and sale of the subject property without previous citation, contradictory hearing, or judgment.[1] This process is designed to be simple, expeditious, and inexpensive, enabling creditors to seize and sell property upon which they have a mortgage or privilege. This is in contrast to foreclosure by ordinary process, in which the general rules applicable to ordinary lawsuits are followed.
Executory process is considered a harsh remedy, requiring strict compliance with the letter of the law. Each step must be carried out precisely as outlined in the Louisiana Code of Civil Procedure and applicable jurisprudence. The Louisiana Code of Civil Procedure outlines specific requirements and protections to ensure due process for the debtor. The procedure is in rem, meaning it is directed against the property itself rather than the person, and no personal judgment is rendered against the debtor.
How It Works
The process begins with the filing of a petition supported by certain self-proving documents that are accurate and explicit in nature. The creditor must provide authentic evidence of the debt, the act of mortgage or privilege importing a confession of judgment, and any other necessary instruments to prove the right to use executory process. The trial judge must be convinced that these requirements are met before issuing an order for executory process. Following amendments in 1989, not every document submitted in support of the petition needs to be in authentic form. Under current law, certain signatures are presumed to be genuine and certain documents may be submitted in the form of a private writing.
Once the court grants the order, the property is seized and sold, with the proceeds credited against the indebtedness secured by the property. If the property was appraised prior to sale, then the creditor retains the right to pursue the debtor for any deficiency remaining after the sale. The creditor is entitled to bid at the judicial sale of the property, and if the creditor’s bid is the winning bid and is the same or lower than the indebtedness of the creditor, the creditor will only be obligated to pay the sheriff’s costs of sale. If the creditor has the winning bid on the property, the creditor obtains the property free and clear of all inferior encumbrances, but the property will remain subject to any superior encumbrances.
After the recordation of the sheriff’s sale or process verbal, a sale through executory process may only thereafter be attacked by direct action alleging procedural defects in the process of such substance that they strike at the foundation of the executory proceeding.[2]
Debtors have protections under this process. They can arrest the seizure and sale of their property by seeking an injunction if (i) the debt is extinguished, (ii) the debt is legally unenforceable, or (iii) the procedural requirements for executory process have not been followed. This petition for injunction must be filed in the court where the executory proceeding is pending. Additionally, the law provides for certain delays in the process to benefit the debtor, although these delays have normally been waived by the debtor in the act of establishing the security interest.
Executory process is designed to be a swift and cost-effective method for creditors to enforce their rights, but it is surrounded by safeguards to protect the debtor’s interests, ensuring that the process is not misapplied and that due process is maintained.
Conclusion
While executory process is a unique creature of Louisiana law, it is not as alien as it may first appear. The Louisiana executory process essentially combines elements of ordinary and summary process to create a streamlined judicial foreclosure process. While not as expedient as the nonjudicial foreclosure available in some other states, it is not as onerous as seeking foreclosure through ordinary judicial process. Banks and other mortgage holders should be comfortable in understanding that, while unique, executory process in Louisiana is not something to be feared.
[1] Louisiana Code of Civil Procedure art. 2631; see also Liberty Bank & Tr. Co. v. Dapremont, 803 So. 2d 387, 389 (La. Ct. App. 2001).
[2] Louisiana Revised Statute 13:4112; Deutsche Bank Nat’l Tr. Co. ex rel. Morgan Stanley ABS Capital I, Inc. v. Carter, 59 So.3d 1282, 1286 (La. Ct. App. 2011).
Mississippi Foreclosure Basics
Lenders facing loan defaults on residential or commercial properties in Mississippi are often forced to pursue foreclosure measures if the default is not cured. Compared with other states, Mississippi has a relatively easy and streamlined foreclosure process for situations involving routine defaults with few complications. In more complex cases, Mississippi also affords lenders the right to pursue formal legal action through the filing of a complaint for judicial foreclosure. This article will provide a basic overview of each process, including some of the pros and cons of each.
Nonjudicial Foreclosure
The vast majority of foreclosures in Mississippi are conducted through the process of nonjudicial foreclosure, also known as “straight foreclosure.” Nonjudicial foreclosure is a relatively quick and easy process whereby a lender declares a default, accelerates the loan balance, and gives the borrower an opportunity to cure, typically 30 days. At the end of the 30-day period, if the borrower has not cured the default, the lender can move forward by transmitting, posting, and publishing a notice of foreclosure sale.
Prior to doing so, the lender will need to have title work performed on the property in question to determine if there are any uncured tax sales, encroachments, unauthorized conveyances, or other issues that need to be addressed. In most cases, the lender will also need to file a “Substitution of Trustee,” to designate a new trustee of the deed of trust to perform the foreclosure. Consequently, most foreclosure notices are captioned as “Substitute Trustee’s Notice of Sale.” Notice must be sent to the borrower, posted at the courthouse in the place commonly used for posting legal notices, and published in an authorized legal publication for the county where the property is located. Publication must be made once a week for three consecutive weeks, which has been defined as 21 continuous and uninterrupted days. For that reason, in practice, most foreclosure attorneys will run their notices in the local paper once a week for four weeks to ensure continuous presence of the notice for the statutory period.
On the date set for the sale, the foreclosing attorney and a lender representative should appear at the courthouse. Sales must be conducted between 11:00 a.m. and 4:00 p.m. on days the courthouse is open. In other words, a sale should not be set on a weekend or a recognized holiday. Most sales are conducted a few minutes after 11:00 a.m. Upon arriving at the courthouse, the attorney or the lender’s representative should pull the foreclosure notice from the posting board. The attorney or lender’s representative will also need to get the proof of publication from the local newspaper before or after the sale. The proof of publication must be attached to the substitute trustee’s deed in order to effectuate proper filing of the deed and conveyance of the property. Filing fees will vary, based on the number of notations that must be made in the margins to reflect proper recordation. Payment methods can also vary, so it is always advisable to have cash on hand if recording the deed in person.
After the sale, the lender has one year to file suit against the borrower for any remaining deficiency. The deficiency is calculated as the balance of principal, interest, attorneys’ fees, and costs of sale minus the foreclosure sale price. Entitlement to a deficiency is not automatic. Borrowers have certain defenses based on the commercial reasonableness of the sale, which involves examination of the sale price based on the appraised value and other factors. Under the case law, these types of defenses are not available to guarantors, at least in theory. Nevertheless, such issues are typically raised by guarantor defendants in post-foreclosure actions seeking to collect the balance. The one-year limitation on suing the borrower is also inapplicable to guarantors — again, at least in theory.
Judicial Foreclosure
Although Mississippi does not require judicial foreclosure, Mississippi law allows lenders to proceed by court action. A property conveyance made in conjunction with a judgment of judicial foreclosure should be accorded the highest level of insurability, because of the court decree associated with a finding that the lender has the right to foreclose, the resulting judgment granting the lender permission to do so, and the subsequent deed recorded. An extra level of assurance is also provided by the requirement of a post-sale report and approval by the court. The drawback to judicial foreclosures is that they are much more expensive and time-consuming than straight foreclosures. Thus, when the facts are straightforward, a straight foreclosure is preferable.
Judicial foreclosure comes into play when title work reveals an encroachment, an uncured interest, a matured tax sale, or some other cloud or issue that cannot be remedied through nonjudicial foreclosure. In addition, the judicial foreclosure process is valuable if there are problems with a property description, or problems with the documentation surrounding a loan. For example, if there is an error in the name of a party, a discrepancy in a maturity date, or a misdescription of the property in the deed of trust, a lender is well advised to file a complaint for judicial foreclosure coupled with a count for a declaratory judgment in order to cure such problems.
Judicial foreclosure complaints must be filed in the chancery court in the county where the property is located. The borrower and anyone else appearing in the chain of title whose interest will be affected must also be named. Borrowers have a right to defend against a judicial foreclosure action just as any defendant has a right to defend any sort of lawsuit filed against it. In most cases where the lender can show that money was loaned and that the property in question was intended to be taken as security for the loan, the lender can prevail. Problems arise when there is a fundamental disagreement over the scope of collateral, the particulars of a tract of property, whether payment was made, and those types of disputes. In addition, certain problems with deeds of trust are simply not curable (e.g., the omission of the beneficiary of the deed of trust) and must be dealt with in other ways.
Even if a borrower does not aggressively defend a judicial foreclosure action, the process can still be lengthy, even where the borrower defaults and the petitioning lender is entitled to seek a default judgment. In such cases, most chancery courts still require counsel and a lender’s representative to set the matter for hearing and to appear in court to make a record of the entitlement to relief in order to get the judgment of judicial foreclosure.
Obtaining that judgment is not the final part of the process, though. The judgment simply allows the lender to publish notice and conduct a sale in the same way as it would conduct a nonjudicial foreclosure sale. The judicial foreclosure process also requires the “special commissioner” (as opposed to the substitute trustee in nonjudicial foreclosures) to file a post-sale report with the court, to seek approval of the sale. Once that final order is entered, the special commissioner can prepare a deed to transfer the property and can apply the funds received at the sale.
Summary and Conclusion
The overview of each process set forth above is not a comprehensive guide to Mississippi foreclosure practice. It is merely intended to acquaint readers with the basics of each method and the issues that will be faced. As with any legal issue presented, it will be necessary to consult with counsel to ensure proper handling.
Massachusetts: Expansion of Oversight Authority — New Notice of Material Change Form for Health Care Transactions
The Massachusetts Health Policy Commission (the HPC), an independent state agency that works to improve affordability of health care for residents of the Commonwealth, released Advance Guidance (before finalization of new regulations) for “Providers” and “Provider Organizations” considering transactions subject to the HPC’s updated Notice of Material Change (MCN) process. This Advance Guidance was issued on March 20, 2025, in anticipation of the April 8, 2025 effective date of amendments to M.G.L. c. 6D, § 13 pursuant to Chapter 343 of the Acts of 2024. The Advance Guidance alerts providers to upcoming changes in requirements for certain types of transactions, including an expanded regulatory definition of “Material Change”, an increased authority to issue requests for information, and certain logistics to the form required when filing an MCN.
Background
As discussed in our prior blog, “Massachusetts: New Year, New Law — Governor Signs “An Act enhancing the market review process” (House Bill No. 5159),” Governor Maura Healey signed into law Chapter 343 of the Acts of 2024 on January 8, 2025. The legislation aims to increase oversight and regulation over a variety of health care transactions taking place in the Commonwealth. This includes enhancing scrutiny by entities such as the HPC, the Center for Health Information and Analysis (CHIA), the Office of the Attorney General, and the Division of Insurance, specifically regarding private equity investors and management service organizations (MSOs). Additionally, the new law mandates licensing for Urgent Care Centers and introduces licensing requirements for a newly established category known as Office-Based Surgical Centers.
To that end, the law strengthens the HPC’s market oversight authority to review “Material Changes” to “Providers” or “Provider Organizations” as required by Mass. Gen. Laws ch. 6D, § 13, which include companies:
in the business of health care delivery or management, […] that represents one or more health care Providers in contracting with Carriers or third-party administrators for the payments of Health Care Services; provided, that a Provider Organization shall include, but not be limited to, physician organizations, physician-hospital organizations, independent practice associations, Provider networks, accountable care organizations and any other organization that contracts with Carriers for payment for Health Care Services.
The Advance Guidance issued by the HPC provides requirements for the new triggering events and MCN process in advance of regulatory amendments to the current regulations, found at 958 CMR 7.02. “Providers” or “Provider Organizations” are still required to submit an MCN to the HPC 60 days in advance of the effective date of a “Material Change.” Information on these additional triggering events will allow the HPC to monitor the health care market and the ability of the Commonwealth’s health care system to deliver high quality, cost-effective care for all residents.
Advance Guidance
Beginning April 8, 2025, the definition of a “Material Change” that triggers the filing requirement for an MCN will be expanded to include:
Significant expansions in a “Provider or “Provider Organization’s” capacity, which includes any increase to a “Provider” or “Provider Organization’s” capacity that requires an Application for Substantial Capital Expenditure (defined at 105 CMR 100 as generally being in excess of the then-current Expenditure Minimum) to be submitted to the Massachusetts Department of Public Health’s Determination of Need Program;
Transactions involving a significant equity investor which result in a change of ownership or control of a “Provider” or “Provider Organization,” which includes any investment by an equity investor that will change the ownership of a “Provider” or “Provider Organization” or any investment in excess of US$10M that results in an equity investor having significant control over a “Provider” or “Provider Organization,” e.g., the potential to appoint a board member(s), make key business decisions (e.g., hiring or terminating staff);
Significant acquisitions, sales, or transfer of assets including, but not limited to, real estate sale lease-back arrangements as well as the sale of any licensed facility or the sale of real property assets where Health Care Services are delivered for the purposes of a real estate lease-back arrangement; and
Conversion of a “Provider” or “Provider Organization” from a nonprofit entity to a for-profit entity.
Additionally, the Advance Guidance describes the expansion of authority to request information from other “Providers,” “Provider Organizations,” or “Payors” to be provided within 21 days of such request from the HPC. Effective April 8, 2025, the HPC will have expanded authority to request information from significant equity investors and other parties involved in a given transaction.
Under Mass. Gen. L. ch. 6D, § 13(c)(2), as updated by Section 24 of Chapter 343 of the Acts of 2024, when a Material Change involves a “significant equity investor,” the HPC can identify specific information required to accompany the MCN submission. This may include details such as the significant equity investor’s capital structure, overall financial condition, ownership, and management structures, and audited financial statements, among other relevant items. Currently, the HPC does not mandate that such information be publicly disclosed as part of the MCN form; however, it reserves the right to request this information confidentially during its review process. The HPC will maintain the confidentiality of all nonpublic information and documentation received in connection with an MCN or cost and market impact review, as requested by the involved parties.
Finally, as previewed by the HPC Advance Guidance, the HPC has posted a revised MCN Form that “Providers” and “Provider Organizations” should use beginning on April 8, 2025.
Conclusion
The Advance Guidance issued by the HPC provides insights for “Providers” and “Provider Organizations” preparing for organizational changes subject to the MCN process. Released ahead of amendments to M.G.L. c. 6D, § 13 pursuant to Chapter 343 of the Acts of 2024 — which take effect on April 8, 2025 — this guidance outlines important updates including an expanded definition of “Material Change,” associated clarifying terms, broader authority for the HPC to request information related to such changes, and specific logistical adjustments in the required MCN Form. As this Advance Guidance has not gone through the proper rulemaking process, affected individuals should provide comments to the HPC about areas of disagreement or concern via email ([email protected]).
For more information, please join us at our upcoming webinar with the Healthcare Financial Management Association on April 30, “Private Equity and Health Care – A Policy Discussion.” The registration link is available here.
Blockchain+ Bi-Weekly; Highlights of the Last Two Weeks in Web3 Law: March 27, 2025
The past two weeks brought some notable progress for the industry, though it still often feels like “regulation by lack of enforcement” rather than a truly proactive approach. The SEC clarified that most proof-of-work mining activities do not amount to securities transactions—a welcomed statement for miners but limited in scope. Meanwhile, Ripple announced a potential settlement that would end the SEC’s appeal, continuing a trend of non-fraud crypto cases winding down without generating long-term clarity. On Capitol Hill, the Senate’s markup of its own stablecoin act signals a significant step forward yet also highlights a lack of consensus necessary for any final bill. Finally, in a notable display of bipartisan alignment, both chambers of Congress overwhelmingly passed legislation overturning the IRS’s crypto broker reporting rules, demonstrating the possibility of constructive actions in areas where consensus can be reached.
These developments and a few other brief notes are discussed below.
SEC Clarifies That Most Proof-of-Work Mining Activities Are Not Securities Transactions: March 20, 2025
Background: The SEC’s Division of Corporation Finance released a statement clarifying its view that most proof-of-work (“PoW”) mining activities do not qualify as securities transactions under federal securities laws. The statement applies specifically to “Protocol Mining” activities involving “Covered Crypto Assets”, which are defined as crypto assets tied to the functioning of a public, permissionless PoW network. According to the release, whether through self-mining or pooled mining, miners perform the essential “work” themselves. Under the Howey test, one crucial element for a transaction to be deemed a security is that profits must flow primarily from the “managerial or entrepreneurial efforts of others.” Because PoW miners generate rewards by contributing their own computational power, the SEC concluded that these returns are not derived from someone else’s management. Thus, PoW mining generally fails this aspect of the Howey test, placing it outside the scope of federal securities laws.
Analysis: It’s important to note that releases like these do not create binding law and each set of facts can differ and may yield different legal results, which may make certain PoW mining fall outside of this safe-harbor-like guidance. Still, the statement signals that, under typical PoW mining arrangements, participants who merely contribute computational power to validate transactions and receive rewards likely do not cross into securities territory, including through pooling arrangements. This may allow more risk-averse entities to contribute compute to mining or provide services to mining pools, which only serves to strengthen network resilience and efficiency.
Ripple CEO Announces Pending Settlement With SEC: March 19, 2025
Background: Ripple has announced that the SEC will drop its appeal of the portion of the ruling against it in Ripple. This will bring an end to at least part of the case originally brought in 2020 during Jay Clayton’s term as Chairman of the SEC. This will still need to be approved at the next meeting of the commissioners, and it is unclear what this dismissal will entail. Representatives of Ripple have stated that they are evaluating what to do with their own cross-appeal relating to institutional investor sales. Still, there wouldn’t be an announcement like this if a deal was not in place, so now it is just a waiting game to see the details.
Analysis: Ripple was one of the few digital asset issuers from the ICO boom that had the resources to fully litigate against the SEC, and it has been doing so for half a decade. And litigate they did, with over 25 filings related to the “Hinman Speech” documents alone. Combined with the dismissal of the Coinbase matter and its pending appeal, there is still no binding precedent from higher courts on the applicability of the Howey test to digital assets.
Stablecoin Senate Markup Developments: March 13, 2025
Background: The Senate Banking Committee had a markup of the GENIUS Act, which is the Senate’s version of a stablecoin bill. Even before the markup and vote, there were some changes made due to bipartisan efforts to reach an agreement on how stablecoins should be registered and monitored in the U.S. The bill passed through committee on an 18-6 vote, with five Democrats (Warner-VA, Kim-NJ, Gallego-AZ, Rochester-DE and Alsobrooks-MD) voting in favor, meaning the 4 most junior Democrats on the committee (along with Warner) crossed party lines to vote in favor of the GENIUS Act.
Analysis: Senator Warren predictably tried to propose amendments that would have killed the viability of the bill (to the delight of traditional banks), but all those proposals failed. It can be expected there will be closed door work on the bill to address the concerns of Democrats who want some changes to the bill to help it receive as much bipartisan support as possible. The House is also working on its own bill, holding a hearing on stablecoins and CBDCs this week, and the Senate Banking Committee also passed a bill regarding debanking that went along party lines.
House Votes to Overturn IRS Crypto Broker Reporting Rules: March 11, 2025
Background: The House voted overwhelmingly in favor of repealing the IRS broker rule change, which was adopted in the final months of President Biden’s term, which would have made all self-custodial wallet providers, DeFi protocols and even arguably internet service providers themselves reporting entities for any digital asset transaction. The vote was 292-132 in the House and 70-28 in the Senate. It will go to the Senate again before being signed by President Trump, who has stated he intends to sign as soon as it hits his desk.
Analysis: The IRS broker rule, as finalized, was overly broad and aggressive, potentially capturing industry participants like self-hosted wallet providers, automated market makers, validators and possibly even ISPs. This might be a “played yourself” moment because some classes of entities in the digital asset space could logically be included as reporting entities under broker reporting rules. If the bill goes into law as expected, any such rule will need to come from Congress now.
Briefly Noted:
SEC Likely to Abandon Reg ATS Rule Changes for Crypto: Acting Sec Chair Mark Uyeda gave a speech saying he directed staff to kick the tires on (i.e., abandon) a proposed rule change that would expand the definition of an “exchange” in a way that might have looped in certain DeFi protocols and service providers.
Geofenced Airdrop Costs to Americans: Dragonfly released its State of Airdrops report for 2025, which shows that Americans missed out on as much as $2.6 billion in potential revenue (and the U.S. missed out on taxing that revenue) by policies that resulted in Americans being disqualified from those airdrops.
Leadership Changes at Crypto Policy Leaders: Amanda Tuminelli is taking over as CEO of industry advocacy group DeFi Education Fund. Meanwhile, Cody Carbone deserves congratulations on his recent promotion to CEO of the Digital Chamber. Those organizations are in great hands under their leadership.
Come in and Register: Now that crypto firms can actually have a dialog with the SEC without fear that opening the dialog will lead to investigations and hostile actions, a record number are filing for various approvals at the agency. Crazy how that works.
CFTC Withdraws Swap Exchange Letter: The CFTC withdrew its prior Staff Advisory Swap Execution Facility Registration Requirement which arguably required DeFi participants to register with the agency and which 3 DeFi platforms were charged with disobeying in 2023. This may signal an intent to ease the prosecution of decentralized platforms for failing to register as swap execution facilities.
OFAC Removes Tornado Cash Designations: In another huge industry development, OFAC has finally removed protocol addresses from its sanctions list, which is a huge win for software developers and privacy advocates everywhere.
SEC Hosts First Crypto Roundtable: The SEC’s first crypto roundtable is available to view. Not many major takeaways, but it’s good to see these conversations occurring in public forums. This is ahead of the expected SEC Chair Atkins’ hearing before the Senate.
Stablecoin Legislation Update: Ro Khanna (D-CA) said he believes stablecoin and market structure legislation gets done this year at the Digital Assets Summit on March 18, 2025, stating there are 70 to 80 Democrats in the House who view this as an important issue to maintain American dollar dominance and influence. Bo Hines also stated stablecoin legislation will get done in the next few months.
SEC Permits Some Rule 506(c) Self-Certification: Rule 506(c), which allows for sales of securities to accredited investors while using general advertising and solicitation, historically has required independent verification of accredited investor status, such as through getting broker letters or tax returns. In a new no-action letter, the SEC clarified that issuers can rely on self-certifications of accredited investor status as long as the minimum purchase price is high enough and certain other qualifications are met.
Conclusion:
Although not legally binding, the SEC’s acknowledgment that most proof-of-work mining activities are not securities transactions remains a welcomed development for the industry. Meanwhile, the potential conclusion of the SEC’s appeal against Ripple carries both positive and negative implications. On one hand, it suggests that the SEC may follow through on ending non-fraud crypto litigations; on the other, it underscores the ongoing uncertainty in crypto rulemaking absent further regulatory clarity. As the Senate and House each work through their own crypto bills and rules, legislative activity around digital assets is likely to remain robust in the near future.