InfoBytes, September 21, 2007
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Topics in this issue:
- Announcements
- Federal Issues
- Courts
- Firm News
- Miscellany
- Mortgages
- Banking
- Consumer Finance
- Litigation
- E-Financial Services
- Privacy/Data Security
- Credit Cards
Announcements
Web Seminar – Release of 2006 HMDA Data and Screening Procedures Used by Federal Regulators
Wednesday, October 3rd at 12 PM EST (9:00 AM PST)
The Federal Reserve Board has released the 2006 HMDA data. Buckley Kolar will present a free 45-minute web-based seminar that will address the current status of fair lending enforcement actions, including referrals to the Department of Justice by the federal regulatory agencies and private civil litigation such as the recent cases instigated by advocacy organizations. Particular emphasis will be placed on the evolving screening methodologies used by the federal agencies—including recommendations to monitor a lender’s fair lending performance to avoid being targeted for further inquiry and investigation. The webinar will be moderated by Joseph Lynyak, who is one of Buckley Kolar’s partners practicing in the fair lending area. The guest speaker will be Dr. Marsha Courchane¸ Vice-President of CRA International, Inc. specializing in fair lending analysis and litigation. To register for the webinar, please go to http://showvisuals.mshow.com/findshow.aspx?usertype=0&cobrand=128&shownumber=336863.
Federal Issues
House Passes FHA Modernization Bill. On September 18, the U.S. House of Representatives passed, by a vote of 348 – 72, the “Expanding American Home Ownership Act” (H.R. 1852) which would, if passed into law, take several major steps to “modernize” the Federal Housing Administration (FHA) (most recently reported in the May 4, 2007 issue of InfoBytes). Provisions of the bill include, among others, (i) establishing risk-basked pricing for FHA mortgage insurance, (ii) significantly increasing the permissible size of mortgages applying for FHA insurance, (iii) providing alternative mortgage insurance premiums for zero- and lower-down payment borrowers, and (iv) removing the limit on the number of Home Equity Conversion Mortgages the FHA may insure. The bill now awaits a hearing in the Senate Banking Committee. For more information on this bill and its status, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.01852:.
OFHEO Relaxes GSEs’ Portfolio Caps. On September 19, the Office of Federal Housing Enterprise Oversight (OFHEO) announced it was providing the government sponsored enterprises (“GSEs”, Fannie Mae and Freddie Mac) with “additional flexibility in managing their mortgage portfolios to comply with the portfolio caps agreed to last year.” Citing its opinion that major increases in the portfolio caps “would not be prudent at this time,” OFHEO’s changes to the caps focused primarily on accounting methods, though the quarterly grow limit for both enterprises was relaxed and Fannie Mae was permitted to adopt Freddie Mac’s swifter growth portfolio growth rate. OFHEO speculated that these changes would permit each enterprise to purchase “up to $20 billion or more” in additional mortgages. Following months of requests to relax the portfolio caps, Senate Banking Committee Chairman Chris Dodd (D – CT) in a press release called the steps “timid and inadequate.” For more details about changes in OFHEO’s guidelines, please see http://www.ofheo.gov/newsroom.aspx?ID=388&q1=1&q2=None.
House Committee Passes Bill Granting UDAP Rulemaking Power to Federal Banking Agencies. On September 18, the House Financial Services Committee (FSC) unanimously passed H.R. 3526 which would, if passed into law, grant unfair and deceptive acts and practices (UDAP) rulemaking authority under the Federal Trade Commission (FTC) Act to all “federal banking agencies” as defined in the Federal Deposit Insurance Act. Currently, such rulemaking authority, with respect to depository institutions, is held only by the Federal Reserve Board, the Office of Thrift Supervision, and the National Credit Union Administration with regard to institutions of which they are the primary regulators. (The OTS recently issued a request for comment regarding its FTC Act UDAP rulemaking power, which it has not yet exercised. This request was reported in the August 3, 2007 issue of InfoBytes.) The FSC press release notes that Committee Chairman Barney Frank (D – MA) “has been critical of the Federal Reserve for failing to implement regulations to protect consumers – despite having clear authority to do so since the 1970s.” For more information on this bill, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03526:.
House Committee Holds Hearings on Mortgage Market. On September 20, the House Financial Services Committee held a hearing entitled “Legislative and Regulatory Options for Minimizing and Mitigating Mortgage Foreclosures.” Panelists included the Secretary of the Treasury, the Secretary of Housing and Urban Development, the Chairman of the Federal Reserve Board (FRB), and the heads of Fannie Mae and Freddie Mac. Testimony covered a wide range of topics, including, among others, possible steps by the Government Sponsored Enterprises (GSEs) to reduce foreclosures, FRB rulemaking under the Home Ownership and Equity Protection Act, and Real Estate Settlement and Procedures Act reform. For text of the participants’ prepared statements, please see http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht092007.shtml.
FTC to Hold Workshop on Debt Collection. The FTC will hold a two-day workshop entitled “Collecting Consumer Debts: The Challenges of Change” in Washington, D.C. on October 10 and 11, 2007. The event is free and open to the public, and no pre-registration is required. The event will also be webcast through the FTC’s website. The conference will focus on several recent changes in the debt collection industry, including the changing roles of creditors and third-parties and methods for verifying a debtor’s identity and amount owed. For more information on the agenda and on viewing the webcast, see http://www.ftc.gov/debtcollectionworkshop.
Courts
FCRA Firm-Offer Violation Fails to Meet Safeco “Willfulness” Standard. A federal district court, ruling in a Fair Credit Reporting Act (FCRA) case in which it had previously found that the solicitation letter failed to meet the requirements of a firm offer of credit, granted summary judgment to the defendant, because the violation was not “willful” under FCRA under the Supreme Court’s recent precedent in Safeco v. Burr (reported in the June 4th InfoBytes Special Alert). Murray v. Indymac Bank, F.S.B., No. 04-7669 2007 U.S. Dist. LEXIS 67702 (N.D. Ill. September 13, 2007). The Federal District Court of Northern Illinois already ruled that the defendant in this case, Indymac Bank, had violated FCRA by failing to provide a firm offer of credit after accessing the plaintiff’s credit report (reported in the November 10, 2006 issue of InfoBytes). Following the Supreme Court’s ruling in Safeco, Indymac moved for summary judgment, arguing that the violations were not willful, as they were not “knowing violations” and did not “show a reckless disregard for statutory duty.” The district court, after reviewing stipulated facts of Indymac’s compliance process, found in favor of Indymac. In ruling on “knowing violations,” the court noted that the plaintiff had failed to discover “sufficient evidence” that Indymac’s employees had knowledge of the violation, and that the plaintiff “cannot simply ask a trier of fact to speculate that the Indymac employees knew they were violating FCRA.” In the court’s discussion of “recklessness,” it reviewed several aspects of the defendant’s compliance procedures and found undisputed evidence that the defendant “took steps to, at least in part, prescreen customers” and that it had a policy to check “to see if a [firm offer solicitation] letter complies with [FCRA].” The plaintiff argued that the defendant had shown recklessness by failing to seek attorney advice regarding various statutory standards. The court rejected this argument, citing evidence that the defendant had consulted attorneys. The court also noted that, even if attorneys had not been not consulted, this omission did not constitute a violation without “sufficient evidence that … the employees were not knowledgeable as to current law.” The court further said, “There is no reason why [non-attorney employees] necessarily had to be attorneys or consult with attorneys to properly understand the current law that they dealt with in the compliance process.” The plaintiff also argued that, in light of the law at the time of the violation, particularly under Seventh Circuit’s ruling in Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), the firm offer letter sent by the defendant was clearly a “gross violation” of FCRA. The court also rejected this argument, noting that the Cole decision was not handed down until after the October 2004 violation in question took place. The court also said that none of the case law at the time of the violation “would have alerted the [defendant’s] employees that the [firm offer] letter violated FCRA. Mere trends in the law in lower courts and in other Circuits were not sufficient to put the [defendant] on notice that the Seventh Circuit was going to rule as it did in Cole.” As the plaintiff’s complaint only alleged willful, and not negligent, violations of FCRA, the district court ruled the plaintiff’s FCRA claims “must fail in their entirety.” For a copy of this opinion, please contact .
District Court Grants Damages for ECOA and FCRA Adverse Action Case. A federal district court entered a default judgment and assessed damages against a mortgage brokerage company for violations of the Equal Credit Opportunity Act (ECOA), Fair Credit Reporting Act (FCRA), and Connecticut Unfair Trade Practices Act (CUPTA). DiNoto v. Rockland Financial Mortgage Co., LLC, No. 3:06cv1132, 2007 WL 2460674 (D. Conn. Aug. 2, 2007). In this case, the plaintiff alleged that defendant brokerage Rockland misled her in the loan application process, causing lost financial opportunities. Defining a “mortgage broker” as a “creditor” within the meaning of ECOA, the court found that the plaintiff was subject to an adverse action under ECOA. The court defined adverse action as denying credit on substantially the terms requested in the application. Therefore, Rockland was held liable for failing to provide notice to the plaintiff. Without considering the repeal of the FCRA private right of action for adverse action in the Fair and Accurate Credit Transactions Act of 2003, the court also held that Rockland violated FCRA each time it accessed the plaintiff’s credit report and took adverse action without notification. Additionally, the court held that Rockland violated CUPTA by failing to make the disclosures required by ECOA and FCRA. The court granted actual damages and attorney’s fees but denied punitive damages and emotional distress. For a copy of this decision, please contact .
Court Grants Partial Summary Judgment in FCRA “Willfulness” Case. In a case relying on the Supreme Court’s interpretation of “willfulness” under the Fair Credit Reporting Act (FCRA) in the Safeco case (reported in the June 4th InfoBytes Special Alert), a district court has granted partial summary judgment to a reporting agency on a consumer’s claims of willful and negligent violations of FCRA. Karmolinski v. Equifax Information Services LLC, Civ. No. 04-1448-AA, 2007 WL 2492383 (D. Or. Aug. 28, 2007). In this case, Karmolinski, the plaintiff, defaulted on payments to his Citibank credit card. The debt was referred to Enterprise Recovery Systems (ERS), a third-party collection agency. Karmolinski eventually obtained a loan on his truck and paid off the debt to ERS with a check issued by the truck’s creditor and payable jointly to the plaintiff and ERS. Several months later, the plaintiff checked his consumer credit report and discovered that a past due amount was still recorded under the Citibank account. The plaintiff asked for and received a letter from ERS stating that the account had been paid off, but he failed to forward that letter to Citibank or to a credit reporting agency. When his credit report remained unchanged, the plaintiff filed a dispute with the credit reporting agency and enclosed a copy of the check payable to ERS. The check, however, did not contain his Citibank account number. His credit report did not change. The plaintiff later contested the debt again, this time providing the letter from ERS to the reporting agency. However, the agency refused to amend his report, because the letter and the check were only from third parties, not Citibank, and were more than one year old. The reporting agency again contacted Citibank about the debt but did not tell Citibank about the plaintiff’s third-party documents. When the credit report still was not updated, the plaintiff filed suit, claiming willful and negligent violations of FCRA. The court granted partial summary judgment to the defendant reporting agency. Relying on the Supreme Court’s interpretation of the FCRA’s “willfulness” standard in Safeco, the court found “no evidence that Trans Union recklessly disregarded its duties” to implement reasonable procedures to ensure accuracy under FCRA. But the court declined to resolve on summary judgment the plaintiff’s claim that Trans Union recklessly disregarded its duty to reinvestigate the disputed item, based on its response to the plaintiff’s second notice of dispute. For a copy of the opinion, please contact .
Defendant’s Refusal to View Website Terms Irrelevant. A federal district court in Alabama ordered a company to pay for services pursuant to agreement terms located on its website, despite the company’s argument that it never visited the website, much less agreed to the terms. In Conference America, Inc. v. Conexant Systems, Inc., Case No. 2:05-cv-01088-WKW (M.D. Ala., Sept. 10, 2007), the plaintiff provided reduced-price conference call services to the defendant pursuant to a written agreement. That agreement did not mention fees associated with deactivation, among other terms. For “new accounts” outside the written agreement, the plaintiff’s website included terms and conditions that did includes such fees. Following unsuccessful contract renewal negotiations, the plaintiff terminated the agreement with defendant, noting that services performed after the effective date would be subject to normal pricing and all other terms and conditions available online. After the effective date, the defendant continued to use the service and asked plaintiff to cancel its accounts on a specific date. The plaintiff billed defendant for those services at normal pricing and charged defendant for deactivation fees. The defendant refused to pay and the plaintiff sued. The court found for the plaintiff. The defendant argued that it should not be bound by the website terms, which it never reviewed, and that the original written agreement was the only contract it ever agreed to. The court rejected this argument, holding that by requesting services after the termination date, the defendant made an offer to buy such services subject to the new terms, whether or not the defendant ever reviewed those terms on the website. According to the court, “[u]nder either unilateral contract or bilateral contract analysis, [defendant] was at risk of [plaintiff] accepting its offer, either through promise or performance.” In fact, the plaintiff both accepted by letter and performed by terminating the services on the agreed date. By doing so, a new contract that included new pricing and terms – including the assessment of termination fees – was created. For a copy of this opinion, please contact .
State Law Requiring License for Internet Lenders Not Unconstitutional. On September 7, a federal district court found that a Kansas law requiring licensure of Internet-based lenders did not violate the Dormant Commerce Clause or the Due Process Clause of the U.S. Constitution. Quik Payday Inc. v. Stork, No. 06-2203 (D. Kan. Sept. 7, 2007). The plaintiff, a Utah company offering short-term, “payday” loans over the Internet, was licensed as a consumer credit lender in Utah but made loans to Kansas consumers without being licensed in Kansas. It alleged that Kan. Stat. Ann. § 16a-1-201, regarding the territorial application of the Kansas Consumer Credit Code, was unconstitutional. This statute provides that a Kansas license is required for all “consumer credit transactions made in this state” and that a transaction is “made in this state” if “the creditor induces the consumer who is a resident of this state to enter the transaction by solicitation in this state by any means,” including by “electronic means.” The plaintiff claimed that § 16a-1-201 “violate[d] the Commerce Clause in three ways: (i) it constitutes an unreasonable and undue burden on interstate commerce under the Pike balancing test; (ii) it regulates conduct occurring wholly outside Kansas; and (iii) it subjects internet payday lending to inconsistent state regulation.” Finding that the statute did not constitute an unreasonable and undue burden on interstate commerce, the court noted that “plaintiff’s conduct is only subject to regulation in Kansas if it solicits in Kansas and then makes a loan to a Kansas consumer,” so “[r]egulation of that specific conduct would not have any significant chilling effect on plaintiff’s ability to conduct business in other places.” Finding that the plaintiff’s conduct did not occur wholly outside of Kansas, the court noted that “[o]nce plaintiff received a loan application with a Kansas address, plaintiff had notice that a loan to that consumer was subject to regulation in Kansas unless the loan was not in fact induced by solicitation in that state.” In addition, in finding that the statute did not subject Internet payday lending to inconsistent state regulation, the court explained that the “discrete nature of the regulated transactions make the internet payday loan industry similar to the insurance industry or any other industry in which a company must tailor its business to conform to the laws of its customer’s state of residence.” Please contact for a copy of this decision.
Court Holds that Lender’s Non-Response Does Not Trigger Equitable Tolling for TILA. The U.S. District Court for the Northern District of Ohio, in Gates v. the Ohio Savings Bank Ass’n, 2007 U.S. Dist. Lexis 68509 (Sept. 17, 2007), granted the lender’s motion for summary judgment regarding the plaintiff’s Truth in Lending Act (TILA) claim involving a 30-year variable-rate rollover mortgage loan with interest rate adjustments every six months made to the borrower in 1981. In 1982 the defendant stopped offering such mortgages and switched the plaintiff’s rate adjustment to that of the ARMs the defendant had begun offering. The plaintiff argued that the lender did not properly disclose the new interest rate calculation. The court applied TILA’s one-year statute of limitations and concluded that it started tolling at the time the loan was made, not when the new interest rate calculation occurred. The plaintiff also claimed that the defended fraudulently concealed its TILA violations, thereby warranting equitable tolling in lieu of the one-year statute of limitations. Even though the defendant did not respond to the plaintiff’s calls and written letters, the plaintiff did not begin conducting due diligence until 1993 (at the earliest), and therefore the plaintiff failed to show any due diligence that was frustrated by the defendant’s actions prior to the tolling of the one year statute of limitations. Consequently, the court determined that equitable tolling of the statute was not available to the plaintiff. For a copy of the decision, e-mail .
ECOA Statute of Limitations Does Not Include Discovery Rule. A U.S. District Court in Mississippi has ruled that the Equal Credit Opportunity Act (ECOA) does not include a general discovery rule that extends the statute of limitations specified in the law. Archer v. Nissan Motor Acceptance Corp., No. 03-cv-906, 2007 WL 2580321 (S.D. Miss. Sept. 4, 2007). In this case, a group of plaintiffs claimed that defendant Nissan Motor Acceptance Corporation (NMAC) violated ECOA and various state laws by charging higher interest rates for financing vehicles to African-American borrowers than they charged to white borrowers. Each of the borrowers financed their vehicle between 1993 and 1996 but brought the case in December 2002. ECOA specifies a statute of limitations period of two years, unless an administrative agency or the attorney general brings a proceeding against the defendant, in which case a victim of the discrimination can bring an action within one year after the commencement of the proceeding. The plaintiffs claimed that the statute of limitations should be tolled by the discovery rule; namely, that the statute of limitations clock does not begin until the plaintiff knew or should have known of the injury. The court rejected this argument and refused to read into the statute a general discovery rule. In reviewing (i) the plain text of the statute, (ii) the fact that even when ECOA was amended to increase the amount of time in which to bring claims, Congress did not include a discovery rule, and (iii) case law interpreting an analogous provision in the Fair Credit Reporting Act also rejects a discovery rule, the court concluded that ECOA includes a specific statute of limitations period without a discovery rule. The court also rejected arguments that the state law claims were timely because of the "fraudulent concealment" doctrine, finding that the plaintiffs failed to prove either element of that claim. Consequently, the court granted summary judgment to NMAC. For a copy of the opinion, please contact .
South Carolina U.S. District Court Dismisses FCRA “Firm Offer” Claim. On September 12, the U.S. District Court for the District of South Carolina granted JP Morgan Chase & Co.’s motion to dismiss a Fair Credit Reporting Act (FCRA) firm-offer claim. Crossman v. Chase Bank USA N.A. No. 07-116 2007, WL 2702699 (D.S.C. Sept. 12, 2007). In what appears to be the first firm-offer decision by a district court within the Fourth Circuit, the court upheld the mailings as “firm offers” because they met the requirements of the statute for a firm offer, even though the definition of the term in FCRA is different from the term’s “ordinary meaning.” The court cited two decisions of the U.S. District Court for the Southern District of New York that involved almost identical mailings by Chase, Nasca v. J.P. Morgan Chase Bank and Soroka v. J.P. Morgan Chase & Co. (see the March 16, 2007 and March 23, 2007 issues of InfoBytes for discussions of those cases), and noted that FCRA does not explicitly require disclosure of a price or estimated price range. The court rejected the “value” test of Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), but noted that, in any case, this case can be distinguished from Cole because (i) the mailings offered value–a mortgage of up to $417,000 in one case, and at least $15,000 in another; (ii) in contrast to Cole, the mailings were not attempting to sell a depreciating asset in connection with the offer of credit; and (iii) the mailings’ language “is not contradictory” and indicates credit would be extended in the plaintiff applied and met relevant criteria. For a copy of this opinion, please contact .
FCRA Found to Preempt State Tort Action. The Mississippi Supreme Court recently held that the Fair Credit Reporting Act (FCRA) preempts the common law torts of defamation and harassment. Harmon v. Regions Bank, 961 So.2d 693 (Miss. 2007). In this case, the plaintiff consumer alleged under state law that her credit report was “defamed” and that she received harassing phone calls from the defendant Regions Bank. The trial court granted summary judgment on the grounds that the FCRA preempted state tort law. On appeal, the Mississippi Supreme Court affirmed the decision, holding that 12 U.S.C. § 1681h(e) expressly preempts the tort of defamation. The court ruled that the harassment claim is closely related to an invasion of privacy claim, which is also explicitly preempted by the FCRA. Following the common law standard for malice, the court found that the plaintiff did not provide enough evidence that the defendant’s behavior qualified for the malice exception from FCRA. For a copy of this decision, please see http://www.mssc.state.ms.us/Images/Opinions/CO41564.pdf.
Law Firm Did Not Violate FDCPA and FCRA In Attempting to Collect Debt. A federal district court has found that a law firm did not violate the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) in its debt collection practices. Miller v. Wolpoff & Abramson, LLP, No. 1:06-CV-207-TS, 2007 WL 2694607 (N.D. Ind., Sept. 7, 2007). In this case, the plaintiff, Kevin D. Miller, claimed that the law firm Wolpoff & Abramson, LLP (W&A) violated the FDCPA when the firm sent Miller letters demanding payment of a debt that had been assigned to its client, Centurion Capital Corporation. Miller also claimed that W&A received credit reports without a permissible purpose, in violation of FCRA. The plaintiff based his claims on the allegation that Centurion did not own the debt at issue. W&A provided affidavits to the court showing an unbroken chain of assignments from the original creditor, Providian, to Centurion. However, Miller stated that Centurion could not own the debt because the same debt was the subject of a state court claim by another creditor. In granting W&A’s motion for summary judgment on these claims, the court determined that Miller had not provided sufficient evidence to refute the fact of Centurion’s ownership. Therefore, W&A did not make misleading statements of ownership of the debt in violation of FDCPA. Furthermore, W&A was entitled to request Miller’s credit reports in connection with the collection of debt under FCRA, and the court granted summary judgment in favor of W&A on the claim of violation of FCRA as well. For a copy of this opinion, please contact .
Firm News
Joseph Lynyak will be speaking at the Mortgage Banker’s Association’s Regulatory Compliance Conference in Washington, DC on September 23. Mr. Lynyak will be speaking on fair lending and HMDA compliance issues. To learn more or register, please go to http://events.mortgagebankers.org/regcomp2007/register.
Joseph Lynyak will also be speaking at the ACI’s Subprime Lending Litigation & Regulatory Enforcement Conference in Washington, DC on September 27. Mr. Lynyak will be speaking on a panel entitled “Redlining and Reverse Redlining: Proactive Defenses and Preventive Measures.” To learn more or register, please see https://www.americanconference.com/Finance/subprimelit.htm.
Robert Serino will be speaking at the American Bar Association’s National Institute on Banking Law II in Chicago on September 27and 28. Mr. Serino will be lecturing on the topics of anti-money laundering and bank secrecy. For more information or to register, please see http://www.abanet.org/cle/programs/n07bla1.html.
Margo Tank, Lane Macalester and Judy VanDusen will be speaking at the ARMA International Annual Conference being held from October 7 - 10 in Baltimore. They will appear on a panel entitled "Emerging Electronic Record Standards in Financial Services." The panel will review legal considerations and strategies for implementing effective electronic record management policies and procedures.
Jeffrey Naimon will be speaking at the ACI’s conference on Responsible Mortgage Lending in Las Vegas, November 14-16. Mr. Naimon will be presenting a workshop entitled “Mortgage Regulation Primer: Rules, Restrictions and Requirements for State Regulated and Federally Chartered Mortgage Lenders.” For more information about the conference, or to register, please see https://webserv.c5groupinc.com/www_secure/conf_details.php?conf=4850&view=ovrv.
Miscellany
ESRA to Hold Conference on E-Signatures. The Electronic Signatures & Records Association (ESRA) will hold a conference entitled “Getting E-Signatures Right: Key Business, Technology, and Legal Developments” on November 13-14, 2007 in Washington, DC. Some of the conference topics include (i) success of the ESIGN Act, (ii) long-term retention of electronically signed records, (iii) various industry sector case studies, and (iv) key e-sign trends. Congressman Jay Inslee (D – WA) will be among the speakers, as well as Jeremiah Buckley and Margo Tank of Buckley Kolar, LLP. To learn more about the conference go to http://www.esignrecords.org/events/ESRA-announcement081507.pdf.
Mortgages
House Passes FHA Modernization Bill. On September 18, the U.S. House of Representatives passed, by a vote of 348 – 72, the “Expanding American Home Ownership Act” (H.R. 1852) which would, if passed into law, take several major steps to “modernize” the Federal Housing Administration (FHA) (most recently reported in the May 4, 2007 issue of InfoBytes). Provisions of the bill include, among others, (i) establishing risk-basked pricing for FHA mortgage insurance, (ii) significantly increasing the permissible size of mortgages applying for FHA insurance, (iii) providing alternative mortgage insurance premiums for zero- and lower-down payment borrowers, and (iv) removing the limit on the number of Home Equity Conversion Mortgages the FHA may insure. The bill now awaits a hearing in the Senate Banking Committee. For more information on this bill and its status, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.01852:.
OFHEO Relaxes GSEs’ Portfolio Caps. On September 19, the Office of Federal Housing Enterprise Oversight (OFHEO) announced it was providing the government sponsored enterprises (“GSEs”, Fannie Mae and Freddie Mac) with “additional flexibility in managing their mortgage portfolios to comply with the portfolio caps agreed to last year.” Citing its opinion that major increases in the portfolio caps “would not be prudent at this time,” OFHEO’s changes to the caps focused primarily on accounting methods, though the quarterly grow limit for both enterprises was relaxed and Fannie Mae was permitted to adopt Freddie Mac’s swifter growth portfolio growth rate. OFHEO speculated that these changes would permit each enterprise to purchase “up to $20 billion or more” in additional mortgages. Following months of requests to relax the portfolio caps, Senate Banking Committee Chairman Chris Dodd (D – CT) in a press release called the steps “timid and inadequate.” For more details about changes in OFHEO’s guidelines, please see http://www.ofheo.gov/newsroom.aspx?ID=388&q1=1&q2=None.
FCRA Firm-Offer Violation Fails to Meet Safeco “Willfulness” Standard. A federal district court, ruling in a Fair Credit Reporting Act (FCRA) case in which it had previously found that the solicitation letter failed to meet the requirements of a firm offer of credit, granted summary judgment to the defendant, because the violation was not “willful” under FCRA under the Supreme Court’s recent precedent in Safeco v. Burr (reported in the June 4th InfoBytes Special Alert). Murray v. Indymac Bank, F.S.B., No. 04-7669 2007 U.S. Dist. LEXIS 67702 (N.D. Ill. September 13, 2007). The Federal District Court of Northern Illinois already ruled that the defendant in this case, Indymac Bank, had violated FCRA by failing to provide a firm offer of credit after accessing the plaintiff’s credit report (reported in the November 10, 2006 issue of InfoBytes). Following the Supreme Court’s ruling in Safeco, Indymac moved for summary judgment, arguing that the violations were not willful, as they were not “knowing violations” and did not “show a reckless disregard for statutory duty.” The district court, after reviewing stipulated facts of Indymac’s compliance process, found in favor of Indymac. In ruling on “knowing violations,” the court noted that the plaintiff had failed to discover “sufficient evidence” that Indymac’s employees had knowledge of the violation, and that the plaintiff “cannot simply ask a trier of fact to speculate that the Indymac employees knew they were violating FCRA.” In the court’s discussion of “recklessness,” it reviewed several aspects of the defendant’s compliance procedures and found undisputed evidence that the defendant “took steps to, at least in part, prescreen customers” and that it had a policy to check “to see if a [firm offer solicitation] letter complies with [FCRA].” The plaintiff argued that the defendant had shown recklessness by failing to seek attorney advice regarding various statutory standards. The court rejected this argument, citing evidence that the defendant had consulted attorneys. The court also noted that, even if attorneys had not been not consulted, this omission did not constitute a violation without “sufficient evidence that … the employees were not knowledgeable as to current law.” The court further said, “There is no reason why [non-attorney employees] necessarily had to be attorneys or consult with attorneys to properly understand the current law that they dealt with in the compliance process.” The plaintiff also argued that, in light of the law at the time of the violation, particularly under Seventh Circuit’s ruling in Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), the firm offer letter sent by the defendant was clearly a “gross violation” of FCRA. The court also rejected this argument, noting that the Cole decision was not handed down until after the October 2004 violation in question took place. The court also said that none of the case law at the time of the violation “would have alerted the [defendant’s] employees that the [firm offer] letter violated FCRA. Mere trends in the law in lower courts and in other Circuits were not sufficient to put the [defendant] on notice that the Seventh Circuit was going to rule as it did in Cole.” As the plaintiff’s complaint only alleged willful, and not negligent, violations of FCRA, the district court ruled the plaintiff’s FCRA claims “must fail in their entirety.” For a copy of this opinion, please contact .
District Court Grants Damages for ECOA and FCRA Adverse Action Case. A federal district court entered a default judgment and assessed damages against a mortgage brokerage company for violations of the Equal Credit Opportunity Act (ECOA), Fair Credit Reporting Act (FCRA), and Connecticut Unfair Trade Practices Act (CUPTA). DiNoto v. Rockland Financial Mortgage Co., LLC, No. 3:06cv1132, 2007 WL 2460674 (D. Conn. Aug. 2, 2007). In this case, the plaintiff alleged that defendant brokerage Rockland misled her in the loan application process, causing lost financial opportunities. Defining a “mortgage broker” as a “creditor” within the meaning of ECOA, the court found that the plaintiff was subject to an adverse action under ECOA. The court defined adverse action as denying credit on substantially the terms requested in the application. Therefore, Rockland was held liable for failing to provide notice to the plaintiff. Without considering the repeal of the FCRA private right of action for adverse action in the Fair and Accurate Credit Transactions Act of 2003, the court also held that Rockland violated FCRA each time it accessed the plaintiff’s credit report and took adverse action without notification. Additionally, the court held that Rockland violated CUPTA by failing to make the disclosures required by ECOA and FCRA. The court granted actual damages and attorney’s fees but denied punitive damages and emotional distress. For a copy of this decision, please contact .
Court Holds that Lender’s Non-Response Does Not Trigger Equitable Tolling for TILA. The U.S. District Court for the Northern District of Ohio, in Gates v. the Ohio Savings Bank Ass’n, 2007 U.S. Dist. Lexis 68509 (Sept. 17, 2007), granted the lender’s motion for summary judgment regarding the plaintiff’s Truth in Lending Act (TILA) claim involving a 30-year variable-rate rollover mortgage loan with interest rate adjustments every six months made to the borrower in 1981. In 1982 the defendant stopped offering such mortgages and switched the plaintiff’s rate adjustment to that of the ARMs the defendant had begun offering. The plaintiff argued that the lender did not properly disclose the new interest rate calculation. The court applied TILA’s one-year statute of limitations and concluded that it started tolling at the time the loan was made, not when the new interest rate calculation occurred. The plaintiff also claimed that the defended fraudulently concealed its TILA violations, thereby warranting equitable tolling in lieu of the one-year statute of limitations. Even though the defendant did not respond to the plaintiff’s calls and written letters, the plaintiff did not begin conducting due diligence until 1993 (at the earliest), and therefore the plaintiff failed to show any due diligence that was frustrated by the defendant’s actions prior to the tolling of the one year statute of limitations. Consequently, the court determined that equitable tolling of the statute was not available to the plaintiff. For a copy of the decision, e-mail .
South Carolina U.S. District Court Dismisses FCRA “Firm Offer” Claim. On September 12, the U.S. District Court for the District of South Carolina granted JP Morgan Chase & Co.’s motion to dismiss a Fair Credit Reporting Act (FCRA) firm-offer claim. Crossman v. Chase Bank USA N.A. No. 07-116 2007, WL 2702699 (D.S.C. Sept. 12, 2007). In what appears to be the first firm-offer decision by a district court within the Fourth Circuit, the court upheld the mailings as “firm offers” because they met the requirements of the statute for a firm offer, even though the definition of the term in FCRA is different from the term’s “ordinary meaning.” The court cited two decisions of the U.S. District Court for the Southern District of New York that involved almost identical mailings by Chase, Nasca v. J.P. Morgan Chase Bank and Soroka v. J.P. Morgan Chase & Co. (see the March 16, 2007 and March 23, 2007 issues of InfoBytes for discussions of those cases), and noted that FCRA does not explicitly require disclosure of a price or estimated price range. The court rejected the “value” test of Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), but noted that, in any case, this case can be distinguished from Cole because (i) the mailings offered value–a mortgage of up to $417,000 in one case, and at least $15,000 in another; (ii) in contrast to Cole, the mailings were not attempting to sell a depreciating asset in connection with the offer of credit; and (iii) the mailings’ language “is not contradictory” and indicates credit would be extended in the plaintiff applied and met relevant criteria. For a copy of this opinion, please contact .
ECOA Statute of Limitations Does Not Include Discovery Rule. A U.S. District Court in Mississippi has ruled that the Equal Credit Opportunity Act (ECOA) does not include a general discovery rule that extends the statute of limitations specified in the law. Archer v. Nissan Motor Acceptance Corp., No. 03-cv-906, 2007 WL 2580321 (S.D. Miss. Sept. 4, 2007). In this case, a group of plaintiffs claimed that defendant Nissan Motor Acceptance Corporation (NMAC) violated ECOA and various state laws by charging higher interest rates for financing vehicles to African-American borrowers than they charged to white borrowers. Each of the borrowers financed their vehicle between 1993 and 1996 but brought the case in December 2002. ECOA specifies a statute of limitations period of two years, unless an administrative agency or the attorney general brings a proceeding against the defendant, in which case a victim of the discrimination can bring an action within one year after the commencement of the proceeding. The plaintiffs claimed that the statute of limitations should be tolled by the discovery rule; namely, that the statute of limitations clock does not begin until the plaintiff knew or should have known of the injury. The court rejected this argument and refused to read into the statute a general discovery rule. In reviewing (i) the plain text of the statute, (ii) the fact that even when ECOA was amended to increase the amount of time in which to bring claims, Congress did not include a discovery rule, and (iii) case law interpreting an analogous provision in the Fair Credit Reporting Act also rejects a discovery rule, the court concluded that ECOA includes a specific statute of limitations period without a discovery rule. The court also rejected arguments that the state law claims were timely because of the "fraudulent concealment" doctrine, finding that the plaintiffs failed to prove either element of that claim. Consequently, the court granted summary judgment to NMAC. For a copy of the opinion, please contact .
House Committee Holds Hearings on Mortgage Market. On September 20, the House Financial Services Committee held a hearing entitled “Legislative and Regulatory Options for Minimizing and Mitigating Mortgage Foreclosures.” Panelists included the Secretary of the Treasury, the Secretary of Housing and Urban Development, the Chairman of the Federal Reserve Board (FRB), and the heads of Fannie Mae and Freddie Mac. Testimony covered a wide range of topics, including, among others, possible steps by the Government Sponsored Enterprises (GSEs) to reduce foreclosures, FRB rulemaking under the Home Ownership and Equity Protection Act, and Real Estate Settlement and Procedures Act reform. For text of the participants’ prepared statements, please see http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht092007.shtml.
Banking
House Committee Passes Bill Granting UDAP Rulemaking Power to Federal Banking Agencies. On September 18, the House Financial Services Committee (FSC) unanimously passed H.R. 3526 which would, if passed into law, grant unfair and deceptive acts and practices (UDAP) rulemaking authority under the Federal Trade Commission (FTC) Act to all “federal banking agencies” as defined in the Federal Deposit Insurance Act. Currently, such rulemaking authority, with respect to depository institutions, is held only by the Federal Reserve Board, the Office of Thrift Supervision, and the National Credit Union Administration with regard to institutions of which they are the primary regulators. (The OTS recently issued a request for comment regarding its FTC Act UDAP rulemaking power, which it has not yet exercised. This request was reported in the August 3, 2007 issue of InfoBytes.) The FSC press release notes that Committee Chairman Barney Frank (D – MA) “has been critical of the Federal Reserve for failing to implement regulations to protect consumers – despite having clear authority to do so since the 1970s.” For more information on this bill, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03526:.
OFHEO Relaxes GSEs’ Portfolio Caps. On September 19, the Office of Federal Housing Enterprise Oversight (OFHEO) announced it was providing the government sponsored enterprises (“GSEs”, Fannie Mae and Freddie Mac) with “additional flexibility in managing their mortgage portfolios to comply with the portfolio caps agreed to last year.” Citing its opinion that major increases in the portfolio caps “would not be prudent at this time,” OFHEO’s changes to the caps focused primarily on accounting methods, though the quarterly grow limit for both enterprises was relaxed and Fannie Mae was permitted to adopt Freddie Mac’s swifter growth portfolio growth rate. OFHEO speculated that these changes would permit each enterprise to purchase “up to $20 billion or more” in additional mortgages. Following months of requests to relax the portfolio caps, Senate Banking Committee Chairman Chris Dodd (D – CT) in a press release called the steps “timid and inadequate.” For more details about changes in OFHEO’s guidelines, please see http://www.ofheo.gov/newsroom.aspx?ID=388&q1=1&q2=None.
District Court Grants Damages for ECOA and FCRA Adverse Action Case. A federal district court entered a default judgment and assessed damages against a mortgage brokerage company for violations of the Equal Credit Opportunity Act (ECOA), Fair Credit Reporting Act (FCRA), and Connecticut Unfair Trade Practices Act (CUPTA). DiNoto v. Rockland Financial Mortgage Co., LLC, No. 3:06cv1132, 2007 WL 2460674 (D. Conn. Aug. 2, 2007). In this case, the plaintiff alleged that defendant brokerage Rockland misled her in the loan application process, causing lost financial opportunities. Defining a “mortgage broker” as a “creditor” within the meaning of ECOA, the court found that the plaintiff was subject to an adverse action under ECOA. The court defined adverse action as denying credit on substantially the terms requested in the application. Therefore, Rockland was held liable for failing to provide notice to the plaintiff. Without considering the repeal of the FCRA private right of action for adverse action in the Fair and Accurate Credit Transactions Act of 2003, the court also held that Rockland violated FCRA each time it accessed the plaintiff’s credit report and took adverse action without notification. Additionally, the court held that Rockland violated CUPTA by failing to make the disclosures required by ECOA and FCRA. The court granted actual damages and attorney’s fees but denied punitive damages and emotional distress. For a copy of this decision, please contact .
South Carolina U.S. District Court Dismisses FCRA “Firm Offer” Claim. On September 12, the U.S. District Court for the District of South Carolina granted JP Morgan Chase & Co.’s motion to dismiss a Fair Credit Reporting Act (FCRA) firm-offer claim. Crossman v. Chase Bank USA N.A. No. 07-116 2007, WL 2702699 (D.S.C. Sept. 12, 2007). In what appears to be the first firm-offer decision by a district court within the Fourth Circuit, the court upheld the mailings as “firm offers” because they met the requirements of the statute for a firm offer, even though the definition of the term in FCRA is different from the term’s “ordinary meaning.” The court cited two decisions of the U.S. District Court for the Southern District of New York that involved almost identical mailings by Chase, Nasca v. J.P. Morgan Chase Bank and Soroka v. J.P. Morgan Chase & Co. (see the March 16, 2007 and March 23, 2007 issues of InfoBytes for discussions of those cases), and noted that FCRA does not explicitly require disclosure of a price or estimated price range. The court rejected the “value” test of Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), but noted that, in any case, this case can be distinguished from Cole because (i) the mailings offered value–a mortgage of up to $417,000 in one case, and at least $15,000 in another; (ii) in contrast to Cole, the mailings were not attempting to sell a depreciating asset in connection with the offer of credit; and (iii) the mailings’ language “is not contradictory” and indicates credit would be extended in the plaintiff applied and met relevant criteria. For a copy of this opinion, please contact .
House Committee Holds Hearings on Mortgage Market. On September 20, the House Financial Services Committee held a hearing entitled “Legislative and Regulatory Options for Minimizing and Mitigating Mortgage Foreclosures.” Panelists included the Secretary of the Treasury, the Secretary of Housing and Urban Development, the Chairman of the Federal Reserve Board (FRB), and the heads of Fannie Mae and Freddie Mac. Testimony covered a wide range of topics, including, among others, possible steps by the Government Sponsored Enterprises (GSEs) to reduce foreclosures, FRB rulemaking under the Home Ownership and Equity Protection Act, and Real Estate Settlement and Procedures Act reform. For text of the participants’ prepared statements, please see http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht092007.shtml.
Consumer Finance
FCRA Firm-Offer Violation Fails to Meet Safeco “Willfulness” Standard. A federal district court, ruling in a Fair Credit Reporting Act (FCRA) case in which it had previously found that the solicitation letter failed to meet the requirements of a firm offer of credit, granted summary judgment to the defendant, because the violation was not “willful” under FCRA under the Supreme Court’s recent precedent in Safeco v. Burr (reported in the June 4th InfoBytes Special Alert). Murray v. Indymac Bank, F.S.B., No. 04-7669 2007 U.S. Dist. LEXIS 67702 (N.D. Ill. September 13, 2007). The Federal District Court of Northern Illinois already ruled that the defendant in this case, Indymac Bank, had violated FCRA by failing to provide a firm offer of credit after accessing the plaintiff’s credit report (reported in the November 10, 2006 issue of InfoBytes). Following the Supreme Court’s ruling in Safeco, Indymac moved for summary judgment, arguing that the violations were not willful, as they were not “knowing violations” and did not “show a reckless disregard for statutory duty.” The district court, after reviewing stipulated facts of Indymac’s compliance process, found in favor of Indymac. In ruling on “knowing violations,” the court noted that the plaintiff had failed to discover “sufficient evidence” that Indymac’s employees had knowledge of the violation, and that the plaintiff “cannot simply ask a trier of fact to speculate that the Indymac employees knew they were violating FCRA.” In the court’s discussion of “recklessness,” it reviewed several aspects of the defendant’s compliance procedures and found undisputed evidence that the defendant “took steps to, at least in part, prescreen customers” and that it had a policy to check “to see if a [firm offer solicitation] letter complies with [FCRA].” The plaintiff argued that the defendant had shown recklessness by failing to seek attorney advice regarding various statutory standards. The court rejected this argument, citing evidence that the defendant had consulted attorneys. The court also noted that, even if attorneys had not been not consulted, this omission did not constitute a violation without “sufficient evidence that … the employees were not knowledgeable as to current law.” The court further said, “There is no reason why [non-attorney employees] necessarily had to be attorneys or consult with attorneys to properly understand the current law that they dealt with in the compliance process.” The plaintiff also argued that, in light of the law at the time of the violation, particularly under Seventh Circuit’s ruling in Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), the firm offer letter sent by the defendant was clearly a “gross violation” of FCRA. The court also rejected this argument, noting that the Cole decision was not handed down until after the October 2004 violation in question took place. The court also said that none of the case law at the time of the violation “would have alerted the [defendant’s] employees that the [firm offer] letter violated FCRA. Mere trends in the law in lower courts and in other Circuits were not sufficient to put the [defendant] on notice that the Seventh Circuit was going to rule as it did in Cole.” As the plaintiff’s complaint only alleged willful, and not negligent, violations of FCRA, the district court ruled the plaintiff’s FCRA claims “must fail in their entirety.” For a copy of this opinion, please contact .
District Court Grants Damages for ECOA and FCRA Adverse Action Case. A federal district court entered a default judgment and assessed damages against a mortgage brokerage company for violations of the Equal Credit Opportunity Act (ECOA), Fair Credit Reporting Act (FCRA), and Connecticut Unfair Trade Practices Act (CUPTA). DiNoto v. Rockland Financial Mortgage Co., LLC, No. 3:06cv1132, 2007 WL 2460674 (D. Conn. Aug. 2, 2007). In this case, the plaintiff alleged that defendant brokerage Rockland misled her in the loan application process, causing lost financial opportunities. Defining a “mortgage broker” as a “creditor” within the meaning of ECOA, the court found that the plaintiff was subject to an adverse action under ECOA. The court defined adverse action as denying credit on substantially the terms requested in the application. Therefore, Rockland was held liable for failing to provide notice to the plaintiff. Without considering the repeal of the FCRA private right of action for adverse action in the Fair and Accurate Credit Transactions Act of 2003, the court also held that Rockland violated FCRA each time it accessed the plaintiff’s credit report and took adverse action without notification. Additionally, the court held that Rockland violated CUPTA by failing to make the disclosures required by ECOA and FCRA. The court granted actual damages and attorney’s fees but denied punitive damages and emotional distress. For a copy of this decision, please contact .
Court Grants Partial Summary Judgment in FCRA “Willfulness” Case. In a case relying on the Supreme Court’s interpretation of “willfulness” under the Fair Credit Reporting Act (FCRA) in the Safeco case (reported in the June 4th InfoBytes Special Alert), a district court has granted partial summary judgment to a reporting agency on a consumer’s claims of willful and negligent violations of FCRA. Karmolinski v. Equifax Information Services LLC, Civ. No. 04-1448-AA, 2007 WL 2492383 (D. Or. Aug. 28, 2007). In this case, Karmolinski, the plaintiff, defaulted on payments to his Citibank credit card. The debt was referred to Enterprise Recovery Systems (ERS), a third-party collection agency. Karmolinski eventually obtained a loan on his truck and paid off the debt to ERS with a check issued by the truck’s creditor and payable jointly to the plaintiff and ERS. Several months later, the plaintiff checked his consumer credit report and discovered that a past due amount was still recorded under the Citibank account. The plaintiff asked for and received a letter from ERS stating that the account had been paid off, but he failed to forward that letter to Citibank or to a credit reporting agency. When his credit report remained unchanged, the plaintiff filed a dispute with the credit reporting agency and enclosed a copy of the check payable to ERS. The check, however, did not contain his Citibank account number. His credit report did not change. The plaintiff later contested the debt again, this time providing the letter from ERS to the reporting agency. However, the agency refused to amend his report, because the letter and the check were only from third parties, not Citibank, and were more than one year old. The reporting agency again contacted Citibank about the debt but did not tell Citibank about the plaintiff’s third-party documents. When the credit report still was not updated, the plaintiff filed suit, claiming willful and negligent violations of FCRA. The court granted partial summary judgment to the defendant reporting agency. Relying on the Supreme Court’s interpretation of the FCRA’s “willfulness” standard in Safeco, the court found “no evidence that Trans Union recklessly disregarded its duties” to implement reasonable procedures to ensure accuracy under FCRA. But the court declined to resolve on summary judgment the plaintiff’s claim that Trans Union recklessly disregarded its duty to reinvestigate the disputed item, based on its response to the plaintiff’s second notice of dispute. For a copy of the opinion, please contact .
ECOA Statute of Limitations Does Not Include Discovery Rule. A U.S. District Court in Mississippi has ruled that the Equal Credit Opportunity Act (ECOA) does not include a general discovery rule that extends the statute of limitations specified in the law. Archer v. Nissan Motor Acceptance Corp., No. 03-cv-906, 2007 WL 2580321 (S.D. Miss. Sept. 4, 2007). In this case, a group of plaintiffs claimed that defendant Nissan Motor Acceptance Corporation (NMAC) violated ECOA and various state laws by charging higher interest rates for financing vehicles to African-American borrowers than they charged to white borrowers. Each of the borrowers financed their vehicle between 1993 and 1996 but brought the case in December 2002. ECOA specifies a statute of limitations period of two years, unless an administrative agency or the attorney general brings a proceeding against the defendant, in which case a victim of the discrimination can bring an action within one year after the commencement of the proceeding. The plaintiffs claimed that the statute of limitations should be tolled by the discovery rule; namely, that the statute of limitations clock does not begin until the plaintiff knew or should have known of the injury. The court rejected this argument and refused to read into the statute a general discovery rule. In reviewing (i) the plain text of the statute, (ii) the fact that even when ECOA was amended to increase the amount of time in which to bring claims, Congress did not include a discovery rule, and (iii) case law interpreting an analogous provision in the Fair Credit Reporting Act also rejects a discovery rule, the court concluded that ECOA includes a specific statute of limitations period without a discovery rule. The court also rejected arguments that the state law claims were timely because of the "fraudulent concealment" doctrine, finding that the plaintiffs failed to prove either element of that claim. Consequently, the court granted summary judgment to NMAC. For a copy of the opinion, please contact .
Law Firm Did Not Violate FDCPA and FCRA In Attempting to Collect Debt. A federal district court has found that a law firm did not violate the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) in its debt collection practices. Miller v. Wolpoff & Abramson, LLP, No. 1:06-CV-207-TS, 2007 WL 2694607 (N.D. Ind., Sept. 7, 2007). In this case, the plaintiff, Kevin D. Miller, claimed that the law firm Wolpoff & Abramson, LLP (W&A) violated the FDCPA when the firm sent Miller letters demanding payment of a debt that had been assigned to its client, Centurion Capital Corporation. Miller also claimed that W&A received credit reports without a permissible purpose, in violation of FCRA. The plaintiff based his claims on the allegation that Centurion did not own the debt at issue. W&A provided affidavits to the court showing an unbroken chain of assignments from the original creditor, Providian, to Centurion. However, Miller stated that Centurion could not own the debt because the same debt was the subject of a state court claim by another creditor. In granting W&A’s motion for summary judgment on these claims, the court determined that Miller had not provided sufficient evidence to refute the fact of Centurion’s ownership. Therefore, W&A did not make misleading statements of ownership of the debt in violation of FDCPA. Furthermore, W&A was entitled to request Miller’s credit reports in connection with the collection of debt under FCRA, and the court granted summary judgment in favor of W&A on the claim of violation of FCRA as well. For a copy of this opinion, please contact .
FTC to Hold Workshop on Debt Collection. The FTC will hold a two-day workshop entitled “Collecting Consumer Debts: The Challenges of Change” in Washington, D.C. on October 10 and 11, 2007. The event is free and open to the public, and no pre-registration is required. The event will also be webcast through the FTC’s website. The conference will focus on several recent changes in the debt collection industry, including the changing roles of creditors and third-parties and methods for verifying a debtor’s identity and amount owed. For more information on the agenda and on viewing the webcast, see http://www.ftc.gov/debtcollectionworkshop.
Litigation
FCRA Firm-Offer Violation Fails to Meet Safeco “Willfulness” Standard. A federal district court, ruling in a Fair Credit Reporting Act (FCRA) case in which it had previously found that the solicitation letter failed to meet the requirements of a firm offer of credit, granted summary judgment to the defendant, because the violation was not “willful” under FCRA under the Supreme Court’s recent precedent in Safeco v. Burr (reported in the June 4th InfoBytes Special Alert). Murray v. Indymac Bank, F.S.B., No. 04-7669 2007 U.S. Dist. LEXIS 67702 (N.D. Ill. September 13, 2007). The Federal District Court of Northern Illinois already ruled that the defendant in this case, Indymac Bank, had violated FCRA by failing to provide a firm offer of credit after accessing the plaintiff’s credit report (reported in the November 10, 2006 issue of InfoBytes). Following the Supreme Court’s ruling in Safeco, Indymac moved for summary judgment, arguing that the violations were not willful, as they were not “knowing violations” and did not “show a reckless disregard for statutory duty.” The district court, after reviewing stipulated facts of Indymac’s compliance process, found in favor of Indymac. In ruling on “knowing violations,” the court noted that the plaintiff had failed to discover “sufficient evidence” that Indymac’s employees had knowledge of the violation, and that the plaintiff “cannot simply ask a trier of fact to speculate that the Indymac employees knew they were violating FCRA.” In the court’s discussion of “recklessness,” it reviewed several aspects of the defendant’s compliance procedures and found undisputed evidence that the defendant “took steps to, at least in part, prescreen customers” and that it had a policy to check “to see if a [firm offer solicitation] letter complies with [FCRA].” The plaintiff argued that the defendant had shown recklessness by failing to seek attorney advice regarding various statutory standards. The court rejected this argument, citing evidence that the defendant had consulted attorneys. The court also noted that, even if attorneys had not been not consulted, this omission did not constitute a violation without “sufficient evidence that … the employees were not knowledgeable as to current law.” The court further said, “There is no reason why [non-attorney employees] necessarily had to be attorneys or consult with attorneys to properly understand the current law that they dealt with in the compliance process.” The plaintiff also argued that, in light of the law at the time of the violation, particularly under Seventh Circuit’s ruling in Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), the firm offer letter sent by the defendant was clearly a “gross violation” of FCRA. The court also rejected this argument, noting that the Cole decision was not handed down until after the October 2004 violation in question took place. The court also said that none of the case law at the time of the violation “would have alerted the [defendant’s] employees that the [firm offer] letter violated FCRA. Mere trends in the law in lower courts and in other Circuits were not sufficient to put the [defendant] on notice that the Seventh Circuit was going to rule as it did in Cole.” As the plaintiff’s complaint only alleged willful, and not negligent, violations of FCRA, the district court ruled the plaintiff’s FCRA claims “must fail in their entirety.” For a copy of this opinion, please contact .
District Court Grants Damages for ECOA and FCRA Adverse Action Case. A federal district court entered a default judgment and assessed damages against a mortgage brokerage company for violations of the Equal Credit Opportunity Act (ECOA), Fair Credit Reporting Act (FCRA), and Connecticut Unfair Trade Practices Act (CUPTA). DiNoto v. Rockland Financial Mortgage Co., LLC, No. 3:06cv1132, 2007 WL 2460674 (D. Conn. Aug. 2, 2007). In this case, the plaintiff alleged that defendant brokerage Rockland misled her in the loan application process, causing lost financial opportunities. Defining a “mortgage broker” as a “creditor” within the meaning of ECOA, the court found that the plaintiff was subject to an adverse action under ECOA. The court defined adverse action as denying credit on substantially the terms requested in the application. Therefore, Rockland was held liable for failing to provide notice to the plaintiff. Without considering the repeal of the FCRA private right of action for adverse action in the Fair and Accurate Credit Transactions Act of 2003, the court also held that Rockland violated FCRA each time it accessed the plaintiff’s credit report and took adverse action without notification. Additionally, the court held that Rockland violated CUPTA by failing to make the disclosures required by ECOA and FCRA. The court granted actual damages and attorney’s fees but denied punitive damages and emotional distress. For a copy of this decision, please contact .
Court Grants Partial Summary Judgment in FCRA “Willfulness” Case. In a case relying on the Supreme Court’s interpretation of “willfulness” under the Fair Credit Reporting Act (FCRA) in the Safeco case (reported in the June 4th InfoBytes Special Alert), a district court has granted partial summary judgment to a reporting agency on a consumer’s claims of willful and negligent violations of FCRA. Karmolinski v. Equifax Information Services LLC, Civ. No. 04-1448-AA, 2007 WL 2492383 (D. Or. Aug. 28, 2007). In this case, Karmolinski, the plaintiff, defaulted on payments to his Citibank credit card. The debt was referred to Enterprise Recovery Systems (ERS), a third-party collection agency. Karmolinski eventually obtained a loan on his truck and paid off the debt to ERS with a check issued by the truck’s creditor and payable jointly to the plaintiff and ERS. Several months later, the plaintiff checked his consumer credit report and discovered that a past due amount was still recorded under the Citibank account. The plaintiff asked for and received a letter from ERS stating that the account had been paid off, but he failed to forward that letter to Citibank or to a credit reporting agency. When his credit report remained unchanged, the plaintiff filed a dispute with the credit reporting agency and enclosed a copy of the check payable to ERS. The check, however, did not contain his Citibank account number. His credit report did not change. The plaintiff later contested the debt again, this time providing the letter from ERS to the reporting agency. However, the agency refused to amend his report, because the letter and the check were only from third parties, not Citibank, and were more than one year old. The reporting agency again contacted Citibank about the debt but did not tell Citibank about the plaintiff’s third-party documents. When the credit report still was not updated, the plaintiff filed suit, claiming willful and negligent violations of FCRA. The court granted partial summary judgment to the defendant reporting agency. Relying on the Supreme Court’s interpretation of the FCRA’s “willfulness” standard in Safeco, the court found “no evidence that Trans Union recklessly disregarded its duties” to implement reasonable procedures to ensure accuracy under FCRA. But the court declined to resolve on summary judgment the plaintiff’s claim that Trans Union recklessly disregarded its duty to reinvestigate the disputed item, based on its response to the plaintiff’s second notice of dispute. For a copy of the opinion, please contact .
Defendant’s Refusal to View Website Terms Irrelevant. A federal district court in Alabama ordered a company to pay for services pursuant to agreement terms located on its website, despite the company’s argument that it never visited the website, much less agreed to the terms. In Conference America, Inc. v. Conexant Systems, Inc., Case No. 2:05-cv-01088-WKW (M.D. Ala., Sept. 10, 2007), the plaintiff provided reduced-price conference call services to the defendant pursuant to a written agreement. That agreement did not mention fees associated with deactivation, among other terms. For “new accounts” outside the written agreement, the plaintiff’s website included terms and conditions that did includes such fees. Following unsuccessful contract renewal negotiations, the plaintiff terminated the agreement with defendant, noting that services performed after the effective date would be subject to normal pricing and all other terms and conditions available online. After the effective date, the defendant continued to use the service and asked plaintiff to cancel its accounts on a specific date. The plaintiff billed defendant for those services at normal pricing and charged defendant for deactivation fees. The defendant refused to pay and the plaintiff sued. The court found for the plaintiff. The defendant argued that it should not be bound by the website terms, which it never reviewed, and that the original written agreement was the only contract it ever agreed to. The court rejected this argument, holding that by requesting services after the termination date, the defendant made an offer to buy such services subject to the new terms, whether or not the defendant ever reviewed those terms on the website. According to the court, “[u]nder either unilateral contract or bilateral contract analysis, [defendant] was at risk of [plaintiff] accepting its offer, either through promise or performance.” In fact, the plaintiff both accepted by letter and performed by terminating the services on the agreed date. By doing so, a new contract that included new pricing and terms – including the assessment of termination fees – was created. For a copy of this opinion, please contact .
State Law Requiring License for Internet Lenders Not Unconstitutional. On September 7, a federal district court found that a Kansas law requiring licensure of Internet-based lenders did not violate the Dormant Commerce Clause or the Due Process Clause of the U.S. Constitution. Quik Payday Inc. v. Stork, No. 06-2203 (D. Kan. Sept. 7, 2007). The plaintiff, a Utah company offering short-term, “payday” loans over the Internet, was licensed as a consumer credit lender in Utah but made loans to Kansas consumers without being licensed in Kansas. It alleged that Kan. Stat. Ann. § 16a-1-201, regarding the territorial application of the Kansas Consumer Credit Code, was unconstitutional. This statute provides that a Kansas license is required for all “consumer credit transactions made in this state” and that a transaction is “made in this state” if “the creditor induces the consumer who is a resident of this state to enter the transaction by solicitation in this state by any means,” including by “electronic means.” The plaintiff claimed that § 16a-1-201 “violate[d] the Commerce Clause in three ways: (i) it constitutes an unreasonable and undue burden on interstate commerce under the Pike balancing test; (ii) it regulates conduct occurring wholly outside Kansas; and (iii) it subjects internet payday lending to inconsistent state regulation.” Finding that the statute did not constitute an unreasonable and undue burden on interstate commerce, the court noted that “plaintiff’s conduct is only subject to regulation in Kansas if it solicits in Kansas and then makes a loan to a Kansas consumer,” so “[r]egulation of that specific conduct would not have any significant chilling effect on plaintiff’s ability to conduct business in other places.” Finding that the plaintiff’s conduct did not occur wholly outside of Kansas, the court noted that “[o]nce plaintiff received a loan application with a Kansas address, plaintiff had notice that a loan to that consumer was subject to regulation in Kansas unless the loan was not in fact induced by solicitation in that state.” In addition, in finding that the statute did not subject Internet payday lending to inconsistent state regulation, the court explained that the “discrete nature of the regulated transactions make the internet payday loan industry similar to the insurance industry or any other industry in which a company must tailor its business to conform to the laws of its customer’s state of residence.” Please contact for a copy of this decision.
Court Holds that Lender’s Non-Response Does Not Trigger Equitable Tolling for TILA. The U.S. District Court for the Northern District of Ohio, in Gates v. the Ohio Savings Bank Ass’n, 2007 U.S. Dist. Lexis 68509 (Sept. 17, 2007), granted the lender’s motion for summary judgment regarding the plaintiff’s Truth in Lending Act (TILA) claim involving a 30-year variable-rate rollover mortgage loan with interest rate adjustments every six months made to the borrower in 1981. In 1982 the defendant stopped offering such mortgages and switched the plaintiff’s rate adjustment to that of the ARMs the defendant had begun offering. The plaintiff argued that the lender did not properly disclose the new interest rate calculation. The court applied TILA’s one-year statute of limitations and concluded that it started tolling at the time the loan was made, not when the new interest rate calculation occurred. The plaintiff also claimed that the defended fraudulently concealed its TILA violations, thereby warranting equitable tolling in lieu of the one-year statute of limitations. Even though the defendant did not respond to the plaintiff’s calls and written letters, the plaintiff did not begin conducting due diligence until 1993 (at the earliest), and therefore the plaintiff failed to show any due diligence that was frustrated by the defendant’s actions prior to the tolling of the one year statute of limitations. Consequently, the court determined that equitable tolling of the statute was not available to the plaintiff. For a copy of the decision, e-mail .
ECOA Statute of Limitations Does Not Include Discovery Rule. A U.S. District Court in Mississippi has ruled that the Equal Credit Opportunity Act (ECOA) does not include a general discovery rule that extends the statute of limitations specified in the law. Archer v. Nissan Motor Acceptance Corp., No. 03-cv-906, 2007 WL 2580321 (S.D. Miss. Sept. 4, 2007). In this case, a group of plaintiffs claimed that defendant Nissan Motor Acceptance Corporation (NMAC) violated ECOA and various state laws by charging higher interest rates for financing vehicles to African-American borrowers than they charged to white borrowers. Each of the borrowers financed their vehicle between 1993 and 1996 but brought the case in December 2002. ECOA specifies a statute of limitations period of two years, unless an administrative agency or the attorney general brings a proceeding against the defendant, in which case a victim of the discrimination can bring an action within one year after the commencement of the proceeding. The plaintiffs claimed that the statute of limitations should be tolled by the discovery rule; namely, that the statute of limitations clock does not begin until the plaintiff knew or should have known of the injury. The court rejected this argument and refused to read into the statute a general discovery rule. In reviewing (i) the plain text of the statute, (ii) the fact that even when ECOA was amended to increase the amount of time in which to bring claims, Congress did not include a discovery rule, and (iii) case law interpreting an analogous provision in the Fair Credit Reporting Act also rejects a discovery rule, the court concluded that ECOA includes a specific statute of limitations period without a discovery rule. The court also rejected arguments that the state law claims were timely because of the "fraudulent concealment" doctrine, finding that the plaintiffs failed to prove either element of that claim. Consequently, the court granted summary judgment to NMAC. For a copy of the opinion, please contact .
South Carolina U.S. District Court Dismisses FCRA “Firm Offer” Claim. On September 12, the U.S. District Court for the District of South Carolina granted JP Morgan Chase & Co.’s motion to dismiss a Fair Credit Reporting Act (FCRA) firm-offer claim. Crossman v. Chase Bank USA N.A. No. 07-116 2007, WL 2702699 (D.S.C. Sept. 12, 2007). In what appears to be the first firm-offer decision by a district court within the Fourth Circuit, the court upheld the mailings as “firm offers” because they met the requirements of the statute for a firm offer, even though the definition of the term in FCRA is different from the term’s “ordinary meaning.” The court cited two decisions of the U.S. District Court for the Southern District of New York that involved almost identical mailings by Chase, Nasca v. J.P. Morgan Chase Bank and Soroka v. J.P. Morgan Chase & Co. (see the March 16, 2007 and March 23, 2007 issues of InfoBytes for discussions of those cases), and noted that FCRA does not explicitly require disclosure of a price or estimated price range. The court rejected the “value” test of Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), but noted that, in any case, this case can be distinguished from Cole because (i) the mailings offered value–a mortgage of up to $417,000 in one case, and at least $15,000 in another; (ii) in contrast to Cole, the mailings were not attempting to sell a depreciating asset in connection with the offer of credit; and (iii) the mailings’ language “is not contradictory” and indicates credit would be extended in the plaintiff applied and met relevant criteria. For a copy of this opinion, please contact .
FCRA Found to Preempt State Tort Action. The Mississippi Supreme Court recently held that the Fair Credit Reporting Act (FCRA) preempts the common law torts of defamation and harassment. Harmon v. Regions Bank, 961 So.2d 693 (Miss. 2007). In this case, the plaintiff consumer alleged under state law that her credit report was “defamed” and that she received harassing phone calls from the defendant Regions Bank. The trial court granted summary judgment on the grounds that the FCRA preempted state tort law. On appeal, the Mississippi Supreme Court affirmed the decision, holding that 12 U.S.C. § 1681h(e) expressly preempts the tort of defamation. The court ruled that the harassment claim is closely related to an invasion of privacy claim, which is also explicitly preempted by the FCRA. Following the common law standard for malice, the court found that the plaintiff did not provide enough evidence that the defendant’s behavior qualified for the malice exception from FCRA. For a copy of this decision, please see http://www.mssc.state.ms.us/Images/Opinions/CO41564.pdf.
Law Firm Did Not Violate FDCPA and FCRA In Attempting to Collect Debt. A federal district court has found that a law firm did not violate the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) in its debt collection practices. Miller v. Wolpoff & Abramson, LLP, No. 1:06-CV-207-TS, 2007 WL 2694607 (N.D. Ind., Sept. 7, 2007). In this case, the plaintiff, Kevin D. Miller, claimed that the law firm Wolpoff & Abramson, LLP (W&A) violated the FDCPA when the firm sent Miller letters demanding payment of a debt that had been assigned to its client, Centurion Capital Corporation. Miller also claimed that W&A received credit reports without a permissible purpose, in violation of FCRA. The plaintiff based his claims on the allegation that Centurion did not own the debt at issue. W&A provided affidavits to the court showing an unbroken chain of assignments from the original creditor, Providian, to Centurion. However, Miller stated that Centurion could not own the debt because the same debt was the subject of a state court claim by another creditor. In granting W&A’s motion for summary judgment on these claims, the court determined that Miller had not provided sufficient evidence to refute the fact of Centurion’s ownership. Therefore, W&A did not make misleading statements of ownership of the debt in violation of FDCPA. Furthermore, W&A was entitled to request Miller’s credit reports in connection with the collection of debt under FCRA, and the court granted summary judgment in favor of W&A on the claim of violation of FCRA as well. For a copy of this opinion, please contact .
E-Financial Services
Defendant’s Refusal to View Website Terms Irrelevant. A federal district court in Alabama ordered a company to pay for services pursuant to agreement terms located on its website, despite the company’s argument that it never visited the website, much less agreed to the terms. In Conference America, Inc. v. Conexant Systems, Inc., Case No. 2:05-cv-01088-WKW (M.D. Ala., Sept. 10, 2007), the plaintiff provided reduced-price conference call services to the defendant pursuant to a written agreement. That agreement did not mention fees associated with deactivation, among other terms. For “new accounts” outside the written agreement, the plaintiff’s website included terms and conditions that did includes such fees. Following unsuccessful contract renewal negotiations, the plaintiff terminated the agreement with defendant, noting that services performed after the effective date would be subject to normal pricing and all other terms and conditions available online. After the effective date, the defendant continued to use the service and asked plaintiff to cancel its accounts on a specific date. The plaintiff billed defendant for those services at normal pricing and charged defendant for deactivation fees. The defendant refused to pay and the plaintiff sued. The court found for the plaintiff. The defendant argued that it should not be bound by the website terms, which it never reviewed, and that the original written agreement was the only contract it ever agreed to. The court rejected this argument, holding that by requesting services after the termination date, the defendant made an offer to buy such services subject to the new terms, whether or not the defendant ever reviewed those terms on the website. According to the court, “[u]nder either unilateral contract or bilateral contract analysis, [defendant] was at risk of [plaintiff] accepting its offer, either through promise or performance.” In fact, the plaintiff both accepted by letter and performed by terminating the services on the agreed date. By doing so, a new contract that included new pricing and terms – including the assessment of termination fees – was created. For a copy of this opinion, please contact .
State Law Requiring License for Internet Lenders Not Unconstitutional. On September 7, a federal district court found that a Kansas law requiring licensure of Internet-based lenders did not violate the Dormant Commerce Clause or the Due Process Clause of the U.S. Constitution. Quik Payday Inc. v. Stork, No. 06-2203 (D. Kan. Sept. 7, 2007). The plaintiff, a Utah company offering short-term, “payday” loans over the Internet, was licensed as a consumer credit lender in Utah but made loans to Kansas consumers without being licensed in Kansas. It alleged that Kan. Stat. Ann. § 16a-1-201, regarding the territorial application of the Kansas Consumer Credit Code, was unconstitutional. This statute provides that a Kansas license is required for all “consumer credit transactions made in this state” and that a transaction is “made in this state” if “the creditor induces the consumer who is a resident of this state to enter the transaction by solicitation in this state by any means,” including by “electronic means.” The plaintiff claimed that § 16a-1-201 “violate[d] the Commerce Clause in three ways: (i) it constitutes an unreasonable and undue burden on interstate commerce under the Pike balancing test; (ii) it regulates conduct occurring wholly outside Kansas; and (iii) it subjects internet payday lending to inconsistent state regulation.” Finding that the statute did not constitute an unreasonable and undue burden on interstate commerce, the court noted that “plaintiff’s conduct is only subject to regulation in Kansas if it solicits in Kansas and then makes a loan to a Kansas consumer,” so “[r]egulation of that specific conduct would not have any significant chilling effect on plaintiff’s ability to conduct business in other places.” Finding that the plaintiff’s conduct did not occur wholly outside of Kansas, the court noted that “[o]nce plaintiff received a loan application with a Kansas address, plaintiff had notice that a loan to that consumer was subject to regulation in Kansas unless the loan was not in fact induced by solicitation in that state.” In addition, in finding that the statute did not subject Internet payday lending to inconsistent state regulation, the court explained that the “discrete nature of the regulated transactions make the internet payday loan industry similar to the insurance industry or any other industry in which a company must tailor its business to conform to the laws of its customer’s state of residence.” Please contact for a copy of this decision.
FTC to Hold Workshop on Debt Collection. The FTC will hold a two-day workshop entitled “Collecting Consumer Debts: The Challenges of Change” in Washington, D.C. on October 10 and 11, 2007. The event is free and open to the public, and no pre-registration is required. The event will also be webcast through the FTC’s website. The conference will focus on several recent changes in the debt collection industry, including the changing roles of creditors and third-parties and methods for verifying a debtor’s identity and amount owed. For more information on the agenda and on viewing the webcast, see http://www.ftc.gov/debtcollectionworkshop.
ESRA to Hold Conference on E-Signatures. The Electronic Signatures & Records Association (ESRA) will hold a conference entitled “Getting E-Signatures Right: Key Business, Technology, and Legal Developments” on November 13-14, 2007 in Washington, DC. Some of the conference topics include (i) success of the ESIGN Act, (ii) long-term retention of electronically signed records, (iii) various industry sector case studies, and (iv) key e-sign trends. Congressman Jay Inslee (D – WA) will be among the speakers, as well as Jeremiah Buckley and Margo Tank of Buckley Kolar, LLP. To learn more about the conference go to http://www.esignrecords.org/events/ESRA-announcement081507.pdf.
Privacy/Data Security
FCRA Found to Preempt State Tort Action. The Mississippi Supreme Court recently held that the Fair Credit Reporting Act (FCRA) preempts the common law torts of defamation and harassment. Harmon v. Regions Bank, 961 So.2d 693 (Miss. 2007). In this case, the plaintiff consumer alleged under state law that her credit report was “defamed” and that she received harassing phone calls from the defendant Regions Bank. The trial court granted summary judgment on the grounds that the FCRA preempted state tort law. On appeal, the Mississippi Supreme Court affirmed the decision, holding that 12 U.S.C. § 1681h(e) expressly preempts the tort of defamation. The court ruled that the harassment claim is closely related to an invasion of privacy claim, which is also explicitly preempted by the FCRA. Following the common law standard for malice, the court found that the plaintiff did not provide enough evidence that the defendant’s behavior qualified for the malice exception from FCRA. For a copy of this decision, please see http://www.mssc.state.ms.us/Images/Opinions/CO41564.pdf.
FTC to Hold Workshop on Debt Collection. The FTC will hold a two-day workshop entitled “Collecting Consumer Debts: The Challenges of Change” in Washington, D.C. on October 10 and 11, 2007. The event is free and open to the public, and no pre-registration is required. The event will also be webcast through the FTC’s website. The conference will focus on several recent changes in the debt collection industry, including the changing roles of creditors and third-parties and methods for verifying a debtor’s identity and amount owed. For more information on the agenda and on viewing the webcast, see http://www.ftc.gov/debtcollectionworkshop.
ESRA to Hold Conference on E-Signatures. The Electronic Signatures & Records Association (ESRA) will hold a conference entitled “Getting E-Signatures Right: Key Business, Technology, and Legal Developments” on November 13-14, 2007 in Washington, DC. Some of the conference topics include (i) success of the ESIGN Act, (ii) long-term retention of electronically signed records, (iii) various industry sector case studies, and (iv) key e-sign trends. Congressman Jay Inslee (D – WA) will be among the speakers, as well as Jeremiah Buckley and Margo Tank of Buckley Kolar, LLP. To learn more about the conference go to http://www.esignrecords.org/events/ESRA-announcement081507.pdf.
Credit Cards
FCRA Firm-Offer Violation Fails to Meet Safeco “Willfulness” Standard. A federal district court, ruling in a Fair Credit Reporting Act (FCRA) case in which it had previously found that the solicitation letter failed to meet the requirements of a firm offer of credit, granted summary judgment to the defendant, because the violation was not “willful” under FCRA under the Supreme Court’s recent precedent in Safeco v. Burr (reported in the June 4th InfoBytes Special Alert). Murray v. Indymac Bank, F.S.B., No. 04-7669 2007 U.S. Dist. LEXIS 67702 (N.D. Ill. September 13, 2007). The Federal District Court of Northern Illinois already ruled that the defendant in this case, Indymac Bank, had violated FCRA by failing to provide a firm offer of credit after accessing the plaintiff’s credit report (reported in the November 10, 2006 issue of InfoBytes). Following the Supreme Court’s ruling in Safeco, Indymac moved for summary judgment, arguing that the violations were not willful, as they were not “knowing violations” and did not “show a reckless disregard for statutory duty.” The district court, after reviewing stipulated facts of Indymac’s compliance process, found in favor of Indymac. In ruling on “knowing violations,” the court noted that the plaintiff had failed to discover “sufficient evidence” that Indymac’s employees had knowledge of the violation, and that the plaintiff “cannot simply ask a trier of fact to speculate that the Indymac employees knew they were violating FCRA.” In the court’s discussion of “recklessness,” it reviewed several aspects of the defendant’s compliance procedures and found undisputed evidence that the defendant “took steps to, at least in part, prescreen customers” and that it had a policy to check “to see if a [firm offer solicitation] letter complies with [FCRA].” The plaintiff argued that the defendant had shown recklessness by failing to seek attorney advice regarding various statutory standards. The court rejected this argument, citing evidence that the defendant had consulted attorneys. The court also noted that, even if attorneys had not been not consulted, this omission did not constitute a violation without “sufficient evidence that … the employees were not knowledgeable as to current law.” The court further said, “There is no reason why [non-attorney employees] necessarily had to be attorneys or consult with attorneys to properly understand the current law that they dealt with in the compliance process.” The plaintiff also argued that, in light of the law at the time of the violation, particularly under Seventh Circuit’s ruling in Cole v. U.S. Capital (reported in the December 17, 2004 issue of InfoBytes), the firm offer letter sent by the defendant was clearly a “gross violation” of FCRA. The court also rejected this argument, noting that the Cole decision was not handed down until after the October 2004 violation in question took place. The court also said that none of the case law at the time of the violation “would have alerted the [defendant’s] employees that the [firm offer] letter violated FCRA. Mere trends in the law in lower courts and in other Circuits were not sufficient to put the [defendant] on notice that the Seventh Circuit was going to rule as it did in Cole.” As the plaintiff’s complaint only alleged willful, and not negligent, violations of FCRA, the district court ruled the plaintiff’s FCRA claims “must fail in their entirety.” For a copy of this opinion, please contact .