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InfoBytes
CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
House Passes Bill Raising FHA, GSE Caps, Senate Stalls. On January 29, the House of Representatives voted 385 – 35 to pass the “Recovery Rebates and Economic Stimulus for the American People Act” (H.R. 5140) which, in addition to taxpayer rebates, contains provisions which would temporarily raise the cap on loans that can be insured by the Federal Housing Administration (FHA) and purchased by the government sponsored enterprises (the “GSEs,” including Fannie Mae and Freddie Mac). If enacted, the bill would, through the end of 2008, do the following: (i) increase caps on mortgages in “high-cost” areas eligible for FHA insurance to 125% of the regional median home price and (ii) grant HUD the discretionary authority to increase the limit by another $100,000 beyond that. The bill would also increase the GSEs conforming loan limit to 125% of the regional median home price so long as it does not exceed 175% of the previous limit. The bill, however, does not contain any broader modifications to the FHA or the GSEs regulatory apparatus (discussed in the InfoBytes Jan. 25, 2008). The Senate is now considering a competing bill, the Economic Stimulus Act (number not yet assigned) which was passed by the Senate Finance Committee on January 31 by a vote of 14-7. The Senate bill, which would give larger taxpayer rebates, contains several provisions not included in the agreement reached last week by the House and the Administration, but it contains no increase in the loan caps for FHA and the GSEs. News sources are reporting that the bill will not be considered until Monday at the earliest due to key senators campaigning away from Washington. For more information on this bill, please see http://www.senate.gov/~finance/sitepages/leg/LEG 2008/FINAL Original Bill.pdf.
FinCEN Issues Guidance on CTR Filing for Sole Proprietors and DBAs. On January 25, the Financial Crimes Enforcement Network (FinCEN) issued a ruling clarifying procedures for filing currency transaction reports (CTRs) involving sole proprietorships and businesses using a doing-business-as (DBA) name. First, the ruling states that, when making filings for transactions involving sole proprietorships, reporting institutions need only provide the social security number and home address of the individual. However, FinCEN will continue to accept filings that include both that information, and the tax identification number and contact information of the business. Second, when filing a CTR in connection with a company using a DBA, FinCEN requires the report to include the name of the entity, the DBA name, the entity's EIN, the entity's address, and the entity's business activity. Should reporting institutions prefer to provide dual filings, FinCEN states that it will accept them “to maintain consistency within the present ruling.” For a copy of the ruling, please see http://www.fincen.gov/fin-2008-r001.html.
FTC Submits TILA, ECOA Enforcement Report to FRB. On January 24, the Federal Trade Commission (FTC) sent a report to the Federal Reserve Board (FRB) summarizing its enforcement activities under several acts, including the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA). The report includes discussions of the letters sent by the FTC to 200 mortgage lenders regarding their advertising practices and ongoing ECOA investigations using public Home Mortgage Disclosure Act data. For a copy of the report, please see http://www.ftc.gov/os/2008/01/P064808frb.pdf.
STATE ISSUES
Merrill Lynch Agrees to Refund City that Invested in CDOs, State Files Suit. On January 31, the City of Springfield, Massachusetts, announced that Merrill Lynch had agreed to compensate the city for loses incurred from investing in Collateralized Debt Obligations (CDOs). In spring of 2007, brokers contracted by the city purchased $14 million in CDOs, complex financial instruments often collateralized by pools of mortgages or other secured debt. By December, the CDOs’ value had fallen to 5% of their purchase price and the Massachusetts Attorney General and Secretary of State had commenced an investigation. After the city complained that it had not granted the brokers authority to invest in instruments with such high risk, Merrill Lynch agreed to compensate the city for its losses in full and pay its legal expenses. Nonetheless, on February 1 the Massachusetts Secretary of State filed a complaint accusing Merrill Lynch of violating federal and state securities laws because it had not been authorized by Springfield to make investments as risky as the CDOs and that the instruments were unsuitable for the city’s financial objectives. For more information on the initial settlement, please see http://www.springfieldcityhall.com/COS/merrill_lynch_reimburse_spfld.0.html. For more information on the suit by the State of Massachusetts, please see http://www.sec.state.ma.us/sct/sctml/mlidx.htm.
Ohio AG Sues Freddie Mac for Deceiving Investors. On January 22, Ohio Attorney General Marc Dann filed suit against Freddie Mac accusing it of fraud and “secretly and intentionally participat[ing] in one of the largest housing investment deceptions in modern U.S. economic times.” The class action shareholder suit, brought on behalf Ohio’s public employee pension plan, seeks relief on behalf of purchasers of Freddie Mac stock from August 1, 2006 through November 23, 2007. For a copy of the Attorney General’s press release, please see http://www.ag.state.oh.us/press/08/01/pr080122.pdf.
Oregon Alters Consumer Finance License Fees. On January 28, the Oregon Department of Consumer and Business Services Division of Finance and Corporate Securities (DFCS) published final rules modifying licensing, renewal, and examination fees for state-chartered banks and credit unions, as well as for consumer finance licensees. Under the new rules, “conventional” consumer finance lenders will be required to pay $600 per licensed location and the same amount for each annual renewal. “Short-term” lenders will be required to pay $1200 per location and renewal. The new rules are effective today, February 1, 2008. For a copy of the new rules, please see http://www.cbs.state.or.us/external/dfcs/rules_statutes/rulemaking/441-500-0020.pdf.
COURTS
Financial Services Trade Groups File Amicus Brief in Whitfield v. Radian. Five major financial services trade associations recently filed, with Buckley Kolar serving as lead counsel, an amicus brief in support of a petition for certiorari by the defendant in Whitfield v. Radian Guaranty, Inc., No. 05-5017 (most recently reported in InfoBytes Nov. 9, 2007). At issue in this case is whether "willfulness" under the Fair Credit Reporting Act (FCRA) is an objective standard that can be determined by the court as a matter of law, or whether it is a subjective standard that requires factual development. In Whitfield the Third Circuit held that the issue of “willfulness” was an issue of fact, and remanded the case to a trial-level court (reported in InfoBytes, Aug. 31, 2007). However, in Safeco v. Burr the Supreme Court held that the standard for “willfulness” is objective (reported in InfoBytes Special Alert, June 4, 2007). Therefore Radian has petitioned for certiorari arguing Safeco requires reversal of the Third Circuit’s holding. The amici curiae brief on behalf of Consumer Mortgage Coalition, American Financial Services Association, Consumer Bankers Association, Mortgage Bankers Association, and the Financial Services Roundtable, illustrates the impact of the ruling from an industry standpoint, and discuss the potential waiver of legal privilege that a subjective willfulness standard could require. Buckley Kolar attorneys Jeremiah Buckley, Matthew Previn, Jonathan Jerison, and Kirk Jensen participated in drafting and filing this brief. For a copy of the brief, please see http://www.buckleykolar.com/publications/documents/Whitfieldamicus.pdf.
Ninth Circuit Affirms HOLA Preemption of State Deceptive Advertising and UDAP Claims. The Ninth Circuit recently held that state-law causes of action under deceptive advertising and unfair and deceptive acts and practices (UDAP) statutes are preempted by the Home Owners’ Loan Act (HOLA) and the regulations of the Office of Thrift Supervision (OTS). Silvas v. E*Trade Mortgage Corp., No 06-55556 (9th Cir. Jan. 30, 2008). In this case, the plaintiff paid a mortgage loan lock-in fee of $400 to defendant E*Trade Mortgage, which is subject to HOLA and the OTS regulations. The plaintiff rescinded the loan, pursuant to the Truth in Lending Act (TILA), within three days of closing. The defendant did not refund the lock-in fee (in apparent violation of TILA), and it had advertised and disclosed that the lock-in fee was non-refundable (despite the fact that the fee could be refunded in case of rescission). The plaintiff claimed that E*Trade Mortgage violated California’s deceptive advertising statutes (alleging that the defendant misrepresented that the fee was non-refundable) and UDAP statutes (alleging that E*Trade Mortgage’s lock-in policy was an unlawful business act and that misrepresenting consumers’ rights was a deceptive practice). Any claims under TILA were time-barred. The district court dismissed the claims based on HOLA preemption, and the Ninth Circuit affirmed. The court held that HOLA and the OTS regulations preempted the field in general and, specifically, preempted state laws regarding loan-related fees and advertising. The court said that the plaintiff’s “end run” around TILA “will not do.” For a copy of the opinion, please see http://www.ca9.uscourts.gov/ca9/newopinions.nsf/.
Court Denies Class in “Lawyer-Driven” FACTA Claim. A federal district court recently denied class certification for a claim under the Fair and Accurate Transactions Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA). Azoiani v. Love’s Travel Stops and Country Stores, Inc., No. EDCV 07-90 ODW, 2007 WL 4811627 (S.D. Cal. Dec. 18, 2007). The consumer plaintiff alleged that he made a credit card purchase and was provided with a receipt displaying the credit card’s expiration date. The plaintiff then proposed a class consisting of anyone who, on or after December 4, 2006, was provided at the point of a sale with receipts by Love's with more than the last five digits of the person's credit or debit card number, or the expiration date of the person's credit or debit card. The court denied this class certification holding that the proposed class did not meet the legal requirements of Rule 23(a) and class action was not a superior method of adjudication under Rule 23(b). Although the court found that all the factors weighed against class action adjudication, the court was particularly concerned with the possibility that the result may violate the due process rights of the defendant and the potential for attorney abuse. For a full copy of this decision, please contact .
Personal Credit Report Obtained for Commercial Transaction does not Violate CCCRAA. On January 31, 2008, the Court of Appeals, Second District, California held that the California Consumer Credit Reporting Agencies Act (CCCRAA) did not apply to a commercial lease transaction even though the plaintiff tenant’s personal credit report was obtained and the tenant made a lease payment from her personal account. McClain v. Octagon Plaza, LLC, 2008 WL 257231 (Cal. App. 2 Dist. Jan. 31, 2008). The tenant leased a large commercial space in a shopping center from the defendants for her small business, “Kelly McClain dba A+ Teaching Supplies.” In a dispute over shared expenses, the tenant claimed, inter alia, that the defendants wrongly obtained her personal credit report in violation of the CCCRAA. The court quoted the lower court stating that the report was “provided to a commercial enterprise for a legitimate business purpose, relating to the financial status or payment habits of a commercial enterprise which is the subject of the report.” The court also wrote in a footnote that courts generally conclude “that the designation ‘d.b.a.’ in connection with an individual indicates that the individual operates a business and is liable for its obligations.” For a copy of this opinion, please contact .
Consumer Bound to Arbitration Term in “Welcome Packet” Claimed Not to Have Received. Recently, the Third Circuit held in a nonprecedental opinion that a cable Internet subscriber was contractually bound to an arbitration term contained in a “welcome packet” the Internet provider consistently delivered to each new subscriber. Schwartz v. Comcast Corp., No. 06-4855 (3d. Cir. Nov. 30, 2007). The customer alleged that he lacked knowledge of the terms of the agreement in the welcome packet because he never received the welcome packet. However, the court held that the subscriber was on notice of the terms and bound by the arbitration clause contained within the welcome packet because the Internet provider showed that it consistently delivered welcome packets to each new subscriber. In addition, the subscriber knew that he was receiving service pursuant to a contract, and the subscriber signed a work order indicating his agreement to be bound by the provider’s term of service. For a copy of this opinion, see http://www.ca3.uscourts.gov/opinarch/064855np.pdf.
FIRM NEWS
Jon Jerison and Kirk Jensen will present an audio conference entitled “For All Mortgage Lenders: Dealing with the Fallout from the Current Lending Crisis” on February 6, 2008, from 1:00 PM – 2:30 PM ET. The topics discussed will include the Federal Reserve Board’s pending HOEPA consumer protection rules and Senate Banking Committee Chairman Christopher Dodd’s recently introduced “Home Ownership Preservation and Protection Act” (reported in InfoBytes Dec. 21, 2007 and InfoBytes Dec. 14, 2007 respectively). The conference will be followed by a thirty minute interactive Q&A session with Mr. Jerison and Mr. Jensen. For more information, or to register, please see http://www.aspratt.com/store/77B.php.
Matthew Previn spoke at the American Conference Institute’s conference on Consumer Finance Class Actions and Litigation in New York City. Mr. Previn participated in a panel entitled “Responding to Government Investigations and Enforcement – While Minimizing Potential for Follow-On Litigation,” which discussed topics including (i) recent federal enforcement activity, (ii) issues currently subject to regulatory investigations, (iii) requirements to disclose investigations by regulators, (iv) structuring settlements to prevent follow-on litigations, and (v) techniques to prevent enforcement actions from spawning civil litigation. In addition, Mr. Previn co-lead with Pat Cipollone of Kirkland & Ellis a post-conference workshop entitled “Managing Government Investigations - Boot Camp for Consumer Finance Counsel.” For more information, please see http://www.americanconference.com/finance/consfinlit.htm.
Margo Tank spoke in a webinar entitled “Evidence Requirements for Electronic Signatures & Records” on January 30, from 2:00 PM – 3:00 PM ET. The seminar focused on (i) the legal holdings on the validity of electronic signatures and records, (ii) comparing the reliability of electronic records and signatures to their paper counterparts, (iii) methods to ensure the enforceability of online transactions, and (iv) assessing the most reliable types of e-signatures. For more information, please see http://www.silanis.com/resource-center/webcasts/01302008_Buckley/2008/evidence-requirements-for-electronic-signatures.html.
Financial Services Trade Groups File Amicus Brief in Whitfield v. Radian. Five major financial services trade associations recently filed, with Buckley Kolar serving as lead counsel, an amicus brief in support of a petition for certiorari by the defendant in Whitfield v. Radian Guaranty, Inc., No. 05-5017 (most recently reported in InfoBytes Nov. 9, 2007). At issue in this case is whether "willfulness" under the Fair Credit Reporting Act (FCRA) is an objective standard that can be determined by the court as a matter of law, or whether it is a subjective standard that requires factual development. In Whitfield the Third Circuit held that the issue of “willfulness” was an issue of fact, and remanded the case to a trial-level court (reported in InfoBytes, Aug. 31, 2007). However, in Safeco v. Burr the Supreme Court held that the standard for “willfulness” is objective (reported in InfoBytes Special Alert, June 4, 2007). Therefore Radian has petitioned for certiorari arguing Safeco requires reversal of the Third Circuit’s holding. The amici curiae brief on behalf of Consumer Mortgage Coalition, American Financial Services Association, Consumer Bankers Association, Mortgage Bankers Association, and the Financial Services Roundtable, illustrates the impact of the ruling from an industry standpoint, and discuss the potential waiver of legal privilege that a subjective willfulness standard could require. Buckley Kolar attorneys Jeremiah Buckley, Matthew Previn, Jonathan Jerison, and Kirk Jensen participated in drafting and filing this brief. For a copy of the brief, please see http://www.buckleykolar.com/publications/documents/Whitfieldamicus.pdf.
House Passes Bill Raising FHA, GSE Caps, Senate Stalls. On January 29, the House of Representatives voted 385 – 35 to pass the “Recovery Rebates and Economic Stimulus for the American People Act” (H.R. 5140) which, in addition to taxpayer rebates, contains provisions which would temporarily raise the cap on loans that can be insured by the Federal Housing Administration (FHA) and purchased by the government sponsored enterprises (the “GSEs,” including Fannie Mae and Freddie Mac). If enacted, the bill would, through the end of 2008, do the following: (i) increase caps on mortgages in “high-cost” areas eligible for FHA insurance to 125% of the regional median home price and (ii) grant HUD the discretionary authority to increase the limit by another $100,000 beyond that. The bill would also increase the GSEs conforming loan limit to 125% of the regional median home price so long as it does not exceed 175% of the previous limit. The bill, however, does not contain any broader modifications to the FHA or the GSEs regulatory apparatus (discussed in the InfoBytes Jan. 25, 2008). The Senate is now considering a competing bill, the Economic Stimulus Act (number not yet assigned) which was passed by the Senate Finance Committee on January 31 by a vote of 14-7. The Senate bill, which would give larger taxpayer rebates, contains several provisions not included in the agreement reached last week by the House and the Administration, but it contains no increase in the loan caps for FHA and the GSEs. News sources are reporting that the bill will not be considered until Monday at the earliest due to key senators campaigning away from Washington. For more information on this bill, please see http://www.senate.gov/~finance/sitepages/leg/LEG 2008/FINAL Original Bill.pdf.
Ninth Circuit Affirms HOLA Preemption of State Deceptive Advertising and UDAP Claims. The Ninth Circuit recently held that state-law causes of action under deceptive advertising and unfair and deceptive acts and practices (UDAP) statutes are preempted by the Home Owners’ Loan Act (HOLA) and the regulations of the Office of Thrift Supervision (OTS). Silvas v. E*Trade Mortgage Corp., No 06-55556 (9th Cir. Jan. 30, 2008). In this case, the plaintiff paid a mortgage loan lock-in fee of $400 to defendant E*Trade Mortgage, which is subject to HOLA and the OTS regulations. The plaintiff rescinded the loan, pursuant to the Truth in Lending Act (TILA), within three days of closing. The defendant did not refund the lock-in fee (in apparent violation of TILA), and it had advertised and disclosed that the lock-in fee was non-refundable (despite the fact that the fee could be refunded in case of rescission). The plaintiff claimed that E*Trade Mortgage violated California’s deceptive advertising statutes (alleging that the defendant misrepresented that the fee was non-refundable) and UDAP statutes (alleging that E*Trade Mortgage’s lock-in policy was an unlawful business act and that misrepresenting consumers’ rights was a deceptive practice). Any claims under TILA were time-barred. The district court dismissed the claims based on HOLA preemption, and the Ninth Circuit affirmed. The court held that HOLA and the OTS regulations preempted the field in general and, specifically, preempted state laws regarding loan-related fees and advertising. The court said that the plaintiff’s “end run” around TILA “will not do.” For a copy of the opinion, please see http://www.ca9.uscourts.gov/ca9/newopinions.nsf/.
Oregon Alters Consumer Finance License Fees. On January 28, the Oregon Department of Consumer and Business Services Division of Finance and Corporate Securities (DFCS) published final rules modifying licensing, renewal, and examination fees for state-chartered banks and credit unions, as well as for consumer finance licensees. Under the new rules, “conventional” consumer finance lenders will be required to pay $600 per licensed location and the same amount for each annual renewal. “Short-term” lenders will be required to pay $1200 per location and renewal. The new rules are effective today, February 1, 2008. For a copy of the new rules, please see http://www.cbs.state.or.us/external/dfcs/rules_statutes/rulemaking/441-500-0020.pdf.
FTC Submits TILA, ECOA Enforcement Report to FRB. On January 24, the Federal Trade Commission (FTC) sent a report to the Federal Reserve Board (FRB) summarizing its enforcement activities under several acts, including the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA). The report includes discussions of the letters sent by the FTC to 200 mortgage lenders regarding their advertising practices and ongoing ECOA investigations using public Home Mortgage Disclosure Act data. For a copy of the report, please see http://www.ftc.gov/os/2008/01/P064808frb.pdf.
Ninth Circuit Affirms HOLA Preemption of State Deceptive Advertising and UDAP Claims. The Ninth Circuit recently held that state-law causes of action under deceptive advertising and unfair and deceptive acts and practices (UDAP) statutes are preempted by the Home Owners’ Loan Act (HOLA) and the regulations of the Office of Thrift Supervision (OTS). Silvas v. E*Trade Mortgage Corp., No 06-55556 (9th Cir. Jan. 30, 2008). In this case, the plaintiff paid a mortgage loan lock-in fee of $400 to defendant E*Trade Mortgage, which is subject to HOLA and the OTS regulations. The plaintiff rescinded the loan, pursuant to the Truth in Lending Act (TILA), within three days of closing. The defendant did not refund the lock-in fee (in apparent violation of TILA), and it had advertised and disclosed that the lock-in fee was non-refundable (despite the fact that the fee could be refunded in case of rescission). The plaintiff claimed that E*Trade Mortgage violated California’s deceptive advertising statutes (alleging that the defendant misrepresented that the fee was non-refundable) and UDAP statutes (alleging that E*Trade Mortgage’s lock-in policy was an unlawful business act and that misrepresenting consumers’ rights was a deceptive practice). Any claims under TILA were time-barred. The district court dismissed the claims based on HOLA preemption, and the Ninth Circuit affirmed. The court held that HOLA and the OTS regulations preempted the field in general and, specifically, preempted state laws regarding loan-related fees and advertising. The court said that the plaintiff’s “end run” around TILA “will not do.” For a copy of the opinion, please see http://www.ca9.uscourts.gov/ca9/newopinions.nsf/.
FinCEN Issues Guidance on CTR Filing for Sole Proprietors and DBAs. On January 25, the Financial Crimes Enforcement Network (FinCEN) issued a ruling clarifying procedures for filing currency transaction reports (CTRs) involving sole proprietorships and businesses using a doing-business-as (DBA) name. First, the ruling states that, when making filings for transactions involving sole proprietorships, reporting institutions need only provide the social security number and home address of the individual. However, FinCEN will continue to accept filings that include both that information, and the tax identification number and contact information of the business. Second, when filing a CTR in connection with a company using a DBA, FinCEN requires the report to include the name of the entity, the DBA name, the entity's EIN, the entity's address, and the entity's business activity. Should reporting institutions prefer to provide dual filings, FinCEN states that it will accept them “to maintain consistency within the present ruling.” For a copy of the ruling, please see http://www.fincen.gov/fin-2008-r001.html.
Personal Credit Report Obtained for Commercial Transaction does not Violate CCCRAA. On January 31, 2008, the Court of Appeals, Second District, California held that the California Consumer Credit Reporting Agencies Act (CCCRAA) did not apply to a commercial lease transaction even though the plaintiff tenant’s personal credit report was obtained and the tenant made a lease payment from her personal account. McClain v. Octagon Plaza, LLC, 2008 WL 257231 (Cal. App. 2 Dist. Jan. 31, 2008). The tenant leased a large commercial space in a shopping center from the defendants for her small business, “Kelly McClain dba A+ Teaching Supplies.” In a dispute over shared expenses, the tenant claimed, inter alia, that the defendants wrongly obtained her personal credit report in violation of the CCCRAA. The court quoted the lower court stating that the report was “provided to a commercial enterprise for a legitimate business purpose, relating to the financial status or payment habits of a commercial enterprise which is the subject of the report.” The court also wrote in a footnote that courts generally conclude “that the designation ‘d.b.a.’ in connection with an individual indicates that the individual operates a business and is liable for its obligations.” For a copy of this opinion, please contact .
Oregon Alters Consumer Finance License Fees. On January 28, the Oregon Department of Consumer and Business Services Division of Finance and Corporate Securities (DFCS) published final rules modifying licensing, renewal, and examination fees for state-chartered banks and credit unions, as well as for consumer finance licensees. Under the new rules, “conventional” consumer finance lenders will be required to pay $600 per licensed location and the same amount for each annual renewal. “Short-term” lenders will be required to pay $1200 per location and renewal. The new rules are effective today, February 1, 2008. For a copy of the new rules, please see http://www.cbs.state.or.us/external/dfcs/rules_statutes/rulemaking/441-500-0020.pdf.
Merrill Lynch Agrees to Refund City that Invested in CDOs, State Files Suit. On January 31, the City of Springfield, Massachusetts, announced that Merrill Lynch had agreed to compensate the city for loses incurred from investing in Collateralized Debt Obligations (CDOs). In spring of 2007, brokers contracted by the city purchased $14 million in CDOs, complex financial instruments often collateralized by pools of mortgages or other secured debt. By December, the CDOs’ value had fallen to 5% of their purchase price and the Massachusetts Attorney General and Secretary of State had commenced an investigation. After the city complained that it had not granted the brokers authority to invest in instruments with such high risk, Merrill Lynch agreed to compensate the city for its losses in full and pay its legal expenses. Nonetheless, on February 1 the Massachusetts Secretary of State filed a complaint accusing Merrill Lynch of violating federal and state securities laws because it had not been authorized by Springfield to make investments as risky as the CDOs and that the instruments were unsuitable for the city’s financial objectives. For more information on the initial settlement, please see http://www.springfieldcityhall.com/COS/merrill_lynch_reimburse_spfld.0.html. For more information on the suit by the State of Massachusetts, please see http://www.sec.state.ma.us/sct/sctml/mlidx.htm.
Ohio AG Sues Freddie Mac for Deceiving Investors. On January 22, Ohio Attorney General Marc Dann filed suit against Freddie Mac accusing it of fraud and “secretly and intentionally participat[ing] in one of the largest housing investment deceptions in modern U.S. economic times.” The class action shareholder suit, brought on behalf Ohio’s public employee pension plan, seeks relief on behalf of purchasers of Freddie Mac stock from August 1, 2006 through November 23, 2007. For a copy of the Attorney General’s press release, please see http://www.ag.state.oh.us/press/08/01/pr080122.pdf.
Financial Services Trade Groups File Amicus Brief in Whitfield v. Radian. Five major financial services trade associations recently filed, with Buckley Kolar serving as lead counsel, an amicus brief in support of a petition for certiorari by the defendant in Whitfield v. Radian Guaranty, Inc., No. 05-5017 (most recently reported in InfoBytes Nov. 9, 2007). At issue in this case is whether "willfulness" under the Fair Credit Reporting Act (FCRA) is an objective standard that can be determined by the court as a matter of law, or whether it is a subjective standard that requires factual development. In Whitfield the Third Circuit held that the issue of “willfulness” was an issue of fact, and remanded the case to a trial-level court (reported in InfoBytes, Aug. 31, 2007). However, in Safeco v. Burr the Supreme Court held that the standard for “willfulness” is objective (reported in InfoBytes Special Alert, June 4, 2007). Therefore Radian has petitioned for certiorari arguing Safeco requires reversal of the Third Circuit’s holding. The amici curiae brief on behalf of Consumer Mortgage Coalition, American Financial Services Association, Consumer Bankers Association, Mortgage Bankers Association, and the Financial Services Roundtable, illustrates the impact of the ruling from an industry standpoint, and discuss the potential waiver of legal privilege that a subjective willfulness standard could require. Buckley Kolar attorneys Jeremiah Buckley, Matthew Previn, Jonathan Jerison, and Kirk Jensen participated in drafting and filing this brief. For a copy of the brief, please see http://www.buckleykolar.com/publications/documents/Whitfieldamicus.pdf.
Ninth Circuit Affirms HOLA Preemption of State Deceptive Advertising and UDAP Claims. The Ninth Circuit recently held that state-law causes of action under deceptive advertising and unfair and deceptive acts and practices (UDAP) statutes are preempted by the Home Owners’ Loan Act (HOLA) and the regulations of the Office of Thrift Supervision (OTS). Silvas v. E*Trade Mortgage Corp., No 06-55556 (9th Cir. Jan. 30, 2008). In this case, the plaintiff paid a mortgage loan lock-in fee of $400 to defendant E*Trade Mortgage, which is subject to HOLA and the OTS regulations. The plaintiff rescinded the loan, pursuant to the Truth in Lending Act (TILA), within three days of closing. The defendant did not refund the lock-in fee (in apparent violation of TILA), and it had advertised and disclosed that the lock-in fee was non-refundable (despite the fact that the fee could be refunded in case of rescission). The plaintiff claimed that E*Trade Mortgage violated California’s deceptive advertising statutes (alleging that the defendant misrepresented that the fee was non-refundable) and UDAP statutes (alleging that E*Trade Mortgage’s lock-in policy was an unlawful business act and that misrepresenting consumers’ rights was a deceptive practice). Any claims under TILA were time-barred. The district court dismissed the claims based on HOLA preemption, and the Ninth Circuit affirmed. The court held that HOLA and the OTS regulations preempted the field in general and, specifically, preempted state laws regarding loan-related fees and advertising. The court said that the plaintiff’s “end run” around TILA “will not do.” For a copy of the opinion, please see http://www.ca9.uscourts.gov/ca9/newopinions.nsf/.
Court Denies Class in “Lawyer-Driven” FACTA Claim. A federal district court recently denied class certification for a claim under the Fair and Accurate Transactions Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA). Azoiani v. Love’s Travel Stops and Country Stores, Inc., No. EDCV 07-90 ODW, 2007 WL 4811627 (S.D. Cal. Dec. 18, 2007). The consumer plaintiff alleged that he made a credit card purchase and was provided with a receipt displaying the credit card’s expiration date. The plaintiff then proposed a class consisting of anyone who, on or after December 4, 2006, was provided at the point of a sale with receipts by Love's with more than the last five digits of the person's credit or debit card number, or the expiration date of the person's credit or debit card. The court denied this class certification holding that the proposed class did not meet the legal requirements of Rule 23(a) and class action was not a superior method of adjudication under Rule 23(b). Although the court found that all the factors weighed against class action adjudication, the court was particularly concerned with the possibility that the result may violate the due process rights of the defendant and the potential for attorney abuse. For a full copy of this decision, please contact .
Personal Credit Report Obtained for Commercial Transaction does not Violate CCCRAA. On January 31, 2008, the Court of Appeals, Second District, California held that the California Consumer Credit Reporting Agencies Act (CCCRAA) did not apply to a commercial lease transaction even though the plaintiff tenant’s personal credit report was obtained and the tenant made a lease payment from her personal account. McClain v. Octagon Plaza, LLC, 2008 WL 257231 (Cal. App. 2 Dist. Jan. 31, 2008). The tenant leased a large commercial space in a shopping center from the defendants for her small business, “Kelly McClain dba A+ Teaching Supplies.” In a dispute over shared expenses, the tenant claimed, inter alia, that the defendants wrongly obtained her personal credit report in violation of the CCCRAA. The court quoted the lower court stating that the report was “provided to a commercial enterprise for a legitimate business purpose, relating to the financial status or payment habits of a commercial enterprise which is the subject of the report.” The court also wrote in a footnote that courts generally conclude “that the designation ‘d.b.a.’ in connection with an individual indicates that the individual operates a business and is liable for its obligations.” For a copy of this opinion, please contact .
Consumer Bound to Arbitration Term in “Welcome Packet” Claimed Not to Have Received. Recently, the Third Circuit held in a nonprecedental opinion that a cable Internet subscriber was contractually bound to an arbitration term contained in a “welcome packet” the Internet provider consistently delivered to each new subscriber. Schwartz v. Comcast Corp., No. 06-4855 (3d. Cir. Nov. 30, 2007). The customer alleged that he lacked knowledge of the terms of the agreement in the welcome packet because he never received the welcome packet. However, the court held that the subscriber was on notice of the terms and bound by the arbitration clause contained within the welcome packet because the Internet provider showed that it consistently delivered welcome packets to each new subscriber. In addition, the subscriber knew that he was receiving service pursuant to a contract, and the subscriber signed a work order indicating his agreement to be bound by the provider’s term of service. For a copy of this opinion, see http://www.ca3.uscourts.gov/opinarch/064855np.pdf.
Financial Services Trade Groups File Amicus Brief in Whitfield v. Radian. Five major financial services trade associations recently filed, with Buckley Kolar serving as lead counsel, an amicus brief in support of a petition for certiorari by the defendant in Whitfield v. Radian Guaranty, Inc., No. 05-5017 (most recently reported in InfoBytes Nov. 9, 2007). At issue in this case is whether "willfulness" under the Fair Credit Reporting Act (FCRA) is an objective standard that can be determined by the court as a matter of law, or whether it is a subjective standard that requires factual development. In Whitfield the Third Circuit held that the issue of “willfulness” was an issue of fact, and remanded the case to a trial-level court (reported in InfoBytes, Aug. 31, 2007). However, in Safeco v. Burr the Supreme Court held that the standard for “willfulness” is objective (reported in InfoBytes Special Alert, June 4, 2007). Therefore Radian has petitioned for certiorari arguing Safeco requires reversal of the Third Circuit’s holding. The amici curiae brief on behalf of Consumer Mortgage Coalition, American Financial Services Association, Consumer Bankers Association, Mortgage Bankers Association, and the Financial Services Roundtable, illustrates the impact of the ruling from an industry standpoint, and discuss the potential waiver of legal privilege that a subjective willfulness standard could require. Buckley Kolar attorneys Jeremiah Buckley, Matthew Previn, Jonathan Jerison, and Kirk Jensen participated in drafting and filing this brief. For a copy of the brief, please see http://www.buckleykolar.com/publications/documents/Whitfieldamicus.pdf.
Consumer Bound to Arbitration Term in “Welcome Packet” Claimed Not to Have Received. Recently, the Third Circuit held in a nonprecedental opinion that a cable Internet subscriber was contractually bound to an arbitration term contained in a “welcome packet” the Internet provider consistently delivered to each new subscriber. Schwartz v. Comcast Corp., No. 06-4855 (3d. Cir. Nov. 30, 2007). The customer alleged that he lacked knowledge of the terms of the agreement in the welcome packet because he never received the welcome packet. However, the court held that the subscriber was on notice of the terms and bound by the arbitration clause contained within the welcome packet because the Internet provider showed that it consistently delivered welcome packets to each new subscriber. In addition, the subscriber knew that he was receiving service pursuant to a contract, and the subscriber signed a work order indicating his agreement to be bound by the provider’s term of service. For a copy of this opinion, see http://www.ca3.uscourts.gov/opinarch/064855np.pdf.
Court Denies Class in “Lawyer-Driven” FACTA Claim. A federal district court recently denied class certification for a claim under the Fair and Accurate Transactions Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA). Azoiani v. Love’s Travel Stops and Country Stores, Inc., No. EDCV 07-90 ODW, 2007 WL 4811627 (S.D. Cal. Dec. 18, 2007). The consumer plaintiff alleged that he made a credit card purchase and was provided with a receipt displaying the credit card’s expiration date. The plaintiff then proposed a class consisting of anyone who, on or after December 4, 2006, was provided at the point of a sale with receipts by Love's with more than the last five digits of the person's credit or debit card number, or the expiration date of the person's credit or debit card. The court denied this class certification holding that the proposed class did not meet the legal requirements of Rule 23(a) and class action was not a superior method of adjudication under Rule 23(b). Although the court found that all the factors weighed against class action adjudication, the court was particularly concerned with the possibility that the result may violate the due process rights of the defendant and the potential for attorney abuse. For a full copy of this decision, please contact .
Personal Credit Report Obtained for Commercial Transaction does not Violate CCCRAA. On January 31, 2008, the Court of Appeals, Second District, California held that the California Consumer Credit Reporting Agencies Act (CCCRAA) did not apply to a commercial lease transaction even though the plaintiff tenant’s personal credit report was obtained and the tenant made a lease payment from her personal account. McClain v. Octagon Plaza, LLC, 2008 WL 257231 (Cal. App. 2 Dist. Jan. 31, 2008). The tenant leased a large commercial space in a shopping center from the defendants for her small business, “Kelly McClain dba A+ Teaching Supplies.” In a dispute over shared expenses, the tenant claimed, inter alia, that the defendants wrongly obtained her personal credit report in violation of the CCCRAA. The court quoted the lower court stating that the report was “provided to a commercial enterprise for a legitimate business purpose, relating to the financial status or payment habits of a commercial enterprise which is the subject of the report.” The court also wrote in a footnote that courts generally conclude “that the designation ‘d.b.a.’ in connection with an individual indicates that the individual operates a business and is liable for its obligations.” For a copy of this opinion, please contact .
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