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InfoBytes
CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
InfoBytes Breakfast – March 16, 2007 – In conjunction with the American Bar Association's Spring Meeting of the Business Law Section, Buckley Kolar LLP will host a Breakfast for InfoBytes subscribers and other friends of the firm on Friday, March 16th from 7:30 AM until 9:00 AM. We appreciate the large and growing readership of InfoBytes and hope that as many of our subscribers as possible will join us to meet the attorneys and staff of Buckley Kolar who bring you InfoBytes each week. The breakfast will be held at the Embassy Suites near the DC Convention Center where the ABA meeting is being held. Click here for more information and to RSVP.
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
MERS and MISMO Issue Draft Guidelines for PDF Registration and Documentation. In related actions, MISMO (the Mortgage Industry Standards Maintenance Organization) and MERS (the Mortgage Electronic Registration System) issued guidelines for electronic documentation and for registering electronic notes with MERS®. On February 5, 2007, MISMO published an initial copy of its eSigned PDF Guidelines v. 1.0 for public comment. MISMO’s PDF guidelines are intended to provide guidance to properly use PDF to create, use and maintain eMortgage documentation. The guide provides an overview of relevant legal considerations, guidelines for file formatting and fields and sample open source code. To obtain a copy of the MISMO PDF guidance, please go to www.mismo.org and click on “eMortgage Guidelines and Recommendations” or see http://www.mismo.org/files/mismo/eMortgageeSignedPDFGuidelinesv1.0.pdf. On February 8, 2007, MERS published draft PDF Guidelines that provide information on the registration of valid electronic notes (eNotes) with MERS. The draft guidelines also provide background on the underpinnings of eMortgage documentation. MERS is accepting comments on the draft PDF Guidelines until March 10, 2007. To obtain a copy of the draft PDF guidelines, please go to http://www.mersinc.org/news/details.aspx?id=145.
Federal Bank Regulators Request Comment on Basel II Proposals. On February 15, the Federal Banking Agencies (the OCC, FRB, OTS, and FDIC) proposed new and revised guidance related to the Basel II capital accords. (These proposals do not alter proposed rules issued by the Federal Banking Agencies regarding Basel II last September – see the September 29, 2006 issue of InfoBytes for more details.) The recent release (i) revises 2003 and 2004 proposed guidance regarding the capital requirement calculations and (ii) proposes new guidance regarding regulatory oversight of capital adequacy. Comments are due ninety days after the proposed guidance is published in the Federal Register. To view the Banking Agencies’ joint press release, go to http://www.fdic.gov/news/news/press/2007/pr07013.html.
Frank Introduces Bill to Promote “Public Welfare” Lending. On February 15, House Financial Services Committee Chairman Barney Frank (D–MA) introduced H.R. 1066, the “Depository Institution Community Development Investments Enhancement Act.” According to Rep. Frank, the bill would return “public welfare” lending requirements to the form in which they existed prior to the Financial Services Regulatory Relief Act of 2006 (Pub. L. 109-351, enacted last year by the 109th Congress). First, it amends Regulatory Relief Act to permit National Banks and State Member Banks of the Federal Reserve to make investments that are “designed primarily to promote the public welfare, including the welfare of low- and moderate-income communities or families.” The Regulatory Relief Act allowed only investments that “primarily benefited” low and moderate income communities and families. Second, Rep. Frank’s bill amends the Home Owner’s Loan Act to empower Federal Savings Associations to make public welfare loans under stipulations similar to those imposed on National Banks and Member Banks. (The text of H.R. 1066 is not yet available on the Library of Congress’ website, but should be shortly.)
Trade Groups Raise Conflict Between Proposed FDIC Payday Loan Guidelines and National Defense Authorization Act. The Independent Community Bankers of America (ICBA) and American Bankers Association (ABA) have released comment letters that raise concerns about the FDIC’s proposed guidelines on small loans, claiming the guidelines may conflict with the National Defense Authorization Act for 2007. The draft FDIC guidelines are intended to encourage creditors to make more affordable small-dollar loans by offering them favorable treatment under the Community Reinvestment Act. The National Defense Authorization Act limits the terms of consumer credit extended to service members and their families, in an effort to crack down on payday lenders. According to the trade groups, a broad interpretation of the National Defense Authorization Act would bar many of the features suggested in the FDIC guidelines, since the act makes short-term lending to military families difficult. One of the key features of the credit provisions of the Act is its 36 percent APR limit, the calculation of which includes all fees and costs associated with the loan. “A variety of routine and customary factors may make it difficult for small-dollar loans to meet this test when calculated as may be envisioned under the new law,” the ABA said. The FDIC requested comments in December 2006 on the draft guidelines. The ICBA comments are available at http://www.icba.org/files/ICBASites/PDFs/cl020207.pdf, and the ABA comments are available at http://www.aba.com/NR/rdonlyres/DC65CE12-B1C7-11D4-AB4A-00508B95258D/45843/clfdicsmloans07.pdf.
COURTS
Court Takes Strict View of FCRA “Firm Offer” Requirement. Although some recent cases have suggested more flexibility in judicial interpretations of the requirement that a prescreened credit-card solicitation under the Fair Credit Reporting Act (FCRA) consist of a “firm offer,” a judge in the U.S. District Court for the Northern District of Illinois interpreted the term narrowly. In Simpson v. Juniper Bank, No. 06-C-665, 2007 U.S. Dist. LEXIS 9425 (N.D. Ill. Feb. 8, 2007), the court denied the bank’s motion to dismiss the consumer’s claim that it had accessed the consumer’s credit report without a permissible purpose under FCRA. According to the court, although a statement in the initial mailer, “YES! Please send me my Platinum MasterCard,” implied that the consumer was guaranteed a card, the letter did not clearly guarantee that the consumer would receive a credit card because it directed the consumer to “apply” for a card and stated that the consumer was “pre-qualified” rather than “pre-approved” for the card. In addition, the mailer specified a variable annual percentage rate of 11.99%, 15.99%, or 18.99%, depending on the consumer’s circumstances, but did not show a minimum credit limit. The court interpreted the Murray v. GMAC Mortgage “four corners” language as mandating that the “material terms” of the offer be contained in the solicitation letter, and stated: “As it is not clear at this juncture that recipients of the Juniper mailer were guaranteed to receive credit approval or that the offer sufficiently specifies the interest rate and other material terms, the court cannot conclude that [the bank] was offering anything of value to [the consumer]” that would meet the FCRA firm-offer requirement. Please contact for a copy of this decision.
Court Grants Class Certification in FCRA Firm-Offer Case. The U.S. District Court for the Eastern District of Wisconsin granted class action certification to a consumer who alleged that a prescreened mortgage solicitation did not meet the firm-offer requirement. Although the court did not address the substance of the requirement, it did cite Murray v. GMAC Mortgage to support its holding that the case met the “commonality” requirement for class-action certification because whether a “firm offer” exists can be determined from the “four corners” of the offer. Forrest v. C.M.A. Mortgage, Inc., No. 06-C-14, 2007 WL 188979 (E.D. Wis. Jan. 19, 2007). Please contact for a copy of this decision.
Seventh Circuit Disagrees with Regulation B Definition of "Applicant" to Include “Guarantor." Contradicting the longstanding interpretation of Federal Reserve Board (FRB) Regulation B, the U.S. Circuit Court of Appeals for the Seventh Circuit stated in an opinion by Judge Posner that creditor liability provisions under the Equal Credit Opportunity Act (ECOA) apply only to primary "applicants," which, according to the court, is an unambiguous term requiring no interpretation, and not also to "guarantors," as provided in Regulation B. The case involved a business loan in which the owner of the business had personally guaranteed the loan, and the creditor also required his wife to act as a guarantor. In stating that the extension of the ECOA to guarantors in Regulation B was invalid, the court also stated that if, as the wife contended, her guaranty was unenforceable, creditors could lose the value of the entire loan when the primary applicant is unable to make payments. Consequently, the court indicated that such a disproportionate result as compared to the penalties applicable to ECOA violations involving persons applying for loans likely was not the intention of Congress. The court also noted that even if the treatment of guarantors as “applicants” under Regulation B is valid, the creditor did not discriminate against the wife because she owned many of the residences listed as assets on the business owner’s financial statement. Moran Foods, Inc. v. Mid-Atlantic Market Development, LLC, No. 00 C 227, – F.3d –, 2007 U.S. App. LEXIS 2485 (Feb. 5, 2007). A copy of the opinion is available at http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=05-3656_021.pdf.
Third Circuit Rules that Trust Company is a "Consumer" Under Gramm-Leach-Bliley. On January 19, the U.S. Court of Appeals for the Third Circuit in Chao v. Community Trust Company, No. 05-2785, 2007 U.S. App. Lexis 1142 (3d Cir. Jan. 19, 2007) vacated a lower court's orders enforcing a subpoena for financial information issued to Community Trust Company (CTC). CTC argued that the subpoena violates the Right to Financial Privacy Act (RFPA) and the Gramm-Leach-Bliley Act (GLBA). CTC acts as trustee of the Regional Employers’ Assurance Leagues’ Voluntary Employees’ Beneficiary Association (REAL VEBA), a multiple employer/employee welfare benefit trust. CTC maintains an account in REAL VEBA’s name and was ordered to turn over certain financial records in connection with an investigation by the United States Department of Labor (DOL) into REAL VEBA for alleged fiduciary duty violations related to ERISA. CTC refused to turn over financial records, arguing that it would violate financial privacy rights set forth in the RFPA and the GLBA. The U.S. District Court for the Eastern District of Pennsylvania ordered that the subpoena issued by the DOL be enforced. The Third Circuit, however, vacated the District Court’s orders and remanded the case to the District Court for further proceedings. The Third Circuit concluded that the RFPA does not prohibit enforcement of the subpoena, but that REAL VEBA serves as a legal representative of its beneficiaries and this role is sufficient to qualify REAL VEBA as a “consumer” of CTC under the GLBA if the plan beneficiaries are “individuals who obtain services from CTC.” The Court held that it is clear that REAL VEBA beneficiaries “obtain” financial services from CTC, namely the payment of insurance policy premiums and the provision of ministerial financial services. Since REAL VEBA is a "consumer" under the GLBA, CTC may not disclose consumer financial information to unaffiliated third parties unless an exception applies. It noted that the GLBA exception allowing disclosure in response to a properly authorized subpoena may apply and remanded the case for further proceedings to determine if the DOL had jurisdiction to issue the subpoena. For a copy of this decision, see http://www.ca3.uscourts.gov/opinarch/052785p.pdf.
No Personal Jurisdiction Over Foreign Corporation with Marginally Interactive Website. The U..S. District Court for the District of Columbia held in FC Investment Group LC v. IFX Markets, Ltd., No. 04-1939, 2007 U.S. Dist. LEXIS 7919 (D.D.C. Feb. 6, 2007) that maintaining a marginally interactive website does not create general personal jurisdiction. In FC Investment, investors sued a U.K. corporation for fraud in connection with an alleged pyramid scheme. The investors argued that the website, which allowed prospective customers to download applications, view a demonstration of services, and view and manage online accounts, created personal jurisdiction over the defendant. The court, however, held that the website was not “active” enough to justify the exertion of personal jurisdiction. In a fact-specific analysis, the court found it significant that, although prospective customers could download an application, the website did not allow online registration and the majority of the application process was conducted offline. And despite the investors’ assertions that the website allowed for “certain active online transactions,” the court held that the use of an online account by only one resident of the District of Columbia for a very brief period of time – as alleged by the investors – did not justify the exertion of general personal jurisdiction. The online demonstration of the company’s services likewise was not sufficient. The court contrasted this website to the site at issue in Gorman v. Ameritrade Holding Corp., 293 F.3d 506 (D.C. Cir. 2002), where the wide range of services available on defendant’s website, including online account opening and management and the online purchase and sale of securities, justified the exercise of personal jurisdiction over the defendant. The FC Investment opinion may be at odds with Obabueki v. IBM, Inc., Case No. 99-11262, 2001 WL 921172 (S.D.N.Y. Aug. 14, 2001), in which a federal court in New York held that the existence of a downloadable application, which was subsequently faxed in, may have been sufficient to form the basis of personal jurisdiction. The court in Obabueki also appears to have found it significant that the website provided price estimates for specific requests, sample services, as well as information about turnaround time, allowed users to communicate with the defendant via e-mail, and provided approved applicants with a login and password that allowed them to request specific services. For a copy of this decision, please contact .
Arbitration Award Inconsistent with Terms of Arbitration Agreement Void Under FAA. The Montana Supreme Court affirmed a trial court’s refusal to confirm an arbitration award that did not conform with the terms of the arbitration agreement. Bank of America, NA v. Dahlquist, No. DA 06-0165 (MT, opinion issued Feb. 7, 2007). In the underlying suit, plaintiff lender sued defendant borrower over a past due credit card debt. The borrower moved to dismiss, arguing that the action was already the subject of an arbitration award issued by the National Arbitration Counsel (NAC). The credit card agreement did include an arbitration provision, but that provision required the parties to bring the arbitration before JAMS/Endispute. Because the claim had been arbitrated by NAC, the trial court refused to confirm the award, notwithstanding the fact that the lender ignored notices it received regarding the NAC arbitration and did not challenge the NAC award within the three-month required period. Leaving open the question of whether a state court would be the proper venue to confirm an arbitration award pursuant to the Federal Arbitration Act, the Montana Supreme Court held that the trial court acted properly because the arbitration award had no legal validity as it was void ab initio. For a copy of this decision, please contact .
FTC Sues Group For Illegal Pretexting Scheme. On February 14, the Federal Trade Commission (FTC) filed a complaint against Action Research Group, Inc., Eye in the Sky Investigations, Inc., and their principals, alleging that the defendants deceptively obtained and sold confidential phone records of consumers. According to the complaint, the defendants obtained phone records of account-holders from various telecommunications carriers through false pretenses, fraudulent statements and other misrepresentations to induce the carriers to divulge the confidential phone records, which were unfair and deceptive acts or practices in violation of Section 5 of the FTC Act. The defendants then sold the phone records to clients or other third parties. The complaint seeks a permanent injunction to prevent further violations, as well as rescission of contracts, restitution, and disgorgement of ill-gotten monies. The FTC press release and the complaint can be viewed at http://www.ftc.gov/opa/2007/02/arg.htm.
Temporary Injunction Prevents Canadian Telemarketer from Promoting Credit Card Interest Rate Reduction Scam. The U.S. District Court for the Northern District of Illinois issued a temporary injunction against a Canadian telemarketer, Select Personnel Management, Inc. dba Select Management Solutions, barring it from asserting it could reduce American consumer’s credit card interest rates. The court issued the injunction, as well as an asset freeze, at the request of the FTC. The FTC’s complaint alleges that the telemarketer engaged in unfair and deceptive acts or practices in violation of Section 5 of the Federal Trade Commission Act by failing to provide services promised (e.g., obtain credit card rates between 4.75 percent and 9 percent, for a savings of at least $2,500) and by failing to refund consumers’ money when promised services were not performed. In addition, the FTC alleges that the company violated the agency’s Telemarketing Sales Rule by causing consumers’ caller identification systems to register numbers that do not belong to the defendant’s (a practice known as “Caller ID spoofing”). For the full text of the complaint, please see http://www.ftc.gov/os/caselist/0623215/complaint.pdf.
STATE ISSUES
Tennessee Regulator Confirms of Home Loan Protection Act Inapplicable to Banks. On January 31, Commissioner Greg Gonzales of the Tennessee Department of Financial Institutions issued a bulletin stating that most, if not all, of the Tennessee Home Loan Protection Act (Tenn. Code Ann. § 45-20-101 et seq.) is inapplicable to banking institutions. Commissioner Gonzales stated he believed that no portions of the act apply to “national or state banks or trust companies, federal or state savings institutions, federal or state credit unions, or the operating subsidiaries of any of these institutions,” save for the “possible exception” of restrictions on “high cost home loan closing locations” (Tenn. Code Ann. § 45-20-103(17)(B)). To read the Commissioner’s bulletin, see http://www.tennessee.gov/tdfi/banking/bulletins/FI-07-1.html.
FIRM NEWS
Lee Negroni will this month attend the Third Annual International Conference of the Information Technology Law Association in Bangalore, India. She and Buckley Kolar partner John Kromer have been assisting clients with legal issues in the area of business process outsourcing (BPO) for U.S. and India-based financial institution clients. During her trip, Lee will be available to lead discussion groups and present seminars on regulatory issues implicated by BPO in the fields of consumer loan application processing, loan servicing, consumer data privacy and similar subjects, in the cities of Bangalore, Mumbai (Bombay) and Delhi between February 13 and 25, 2007. Lee’s "Blog from Bangalore" is available on the Buckley Kolar website in the News section.
Christopher Witeck will be speaking at American Conference Institute’s Issuer and Investor Forum on Mortgage Backed Securities, being held April 12 & 13 in New York. Mr. Witeck will be conducting a workshop entitled “Advanced Strategies for Negotiating Loan Purchase Agreements.” For more information, see http://americanconference.com/mbs.htm.
Court Takes Strict View of FCRA “Firm Offer” Requirement. Although some recent cases have suggested more flexibility in judicial interpretations of the requirement that a prescreened credit-card solicitation under the Fair Credit Reporting Act (FCRA) consist of a “firm offer,” a judge in the U.S. District Court for the Northern District of Illinois interpreted the term narrowly. In Simpson v. Juniper Bank, No. 06-C-665, 2007 U.S. Dist. LEXIS 9425 (N.D. Ill. Feb. 8, 2007), the court denied the bank’s motion to dismiss the consumer’s claim that it had accessed the consumer’s credit report without a permissible purpose under FCRA. According to the court, although a statement in the initial mailer, “YES! Please send me my Platinum MasterCard,” implied that the consumer was guaranteed a card, the letter did not clearly guarantee that the consumer would receive a credit card because it directed the consumer to “apply” for a card and stated that the consumer was “pre-qualified” rather than “pre-approved” for the card. In addition, the mailer specified a variable annual percentage rate of 11.99%, 15.99%, or 18.99%, depending on the consumer’s circumstances, but did not show a minimum credit limit. The court interpreted the Murray v. GMAC Mortgage “four corners” language as mandating that the “material terms” of the offer be contained in the solicitation letter, and stated: “As it is not clear at this juncture that recipients of the Juniper mailer were guaranteed to receive credit approval or that the offer sufficiently specifies the interest rate and other material terms, the court cannot conclude that [the bank] was offering anything of value to [the consumer]” that would meet the FCRA firm-offer requirement. Please contact for a copy of this decision.
Court Grants Class Certification in FCRA Firm-Offer Case. The U.S. District Court for the Eastern District of Wisconsin granted class action certification to a consumer who alleged that a prescreened mortgage solicitation did not meet the firm-offer requirement. Although the court did not address the substance of the requirement, it did cite Murray v. GMAC Mortgage to support its holding that the case met the “commonality” requirement for class-action certification because whether a “firm offer” exists can be determined from the “four corners” of the offer. Forrest v. C.M.A. Mortgage, Inc., No. 06-C-14, 2007 WL 188979 (E.D. Wis. Jan. 19, 2007). Please contact for a copy of this decision.
MERS and MISMO Issue Draft Guidelines for PDF Registration and Documentation. In related actions, MISMO (the Mortgage Industry Standards Maintenance Organization) and MERS (the Mortgage Electronic Registration System) issued guidelines for electronic documentation and for registering electronic notes with MERS®. On February 5, 2007, MISMO published an initial copy of its eSigned PDF Guidelines v. 1.0 for public comment. MISMO’s PDF guidelines are intended to provide guidance to properly use PDF to create, use and maintain eMortgage documentation. The guide provides an overview of relevant legal considerations, guidelines for file formatting and fields and sample open source code. To obtain a copy of the MISMO PDF guidance, please go to www.mismo.org and click on “eMortgage Guidelines and Recommendations” or see http://www.mismo.org/files/mismo/eMortgageeSignedPDFGuidelinesv1.0.pdf. On February 8, 2007, MERS published draft PDF Guidelines that provide information on the registration of valid electronic notes (eNotes) with MERS. The draft guidelines also provide background on the underpinnings of eMortgage documentation. MERS is accepting comments on the draft PDF Guidelines until March 10, 2007. To obtain a copy of the draft PDF guidelines, please go to http://www.mersinc.org/news/details.aspx?id=145.
Frank Introduces Bill to Promote “Public Welfare” Lending. On February 15, House Financial Services Committee Chairman Barney Frank (D–MA) introduced H.R. 1066, the “Depository Institution Community Development Investments Enhancement Act.” According to Rep. Frank, the bill would return “public welfare” lending requirements to the form in which they existed prior to the Financial Services Regulatory Relief Act of 2006 (Pub. L. 109-351, enacted last year by the 109th Congress). First, it amends Regulatory Relief Act to permit National Banks and State Member Banks of the Federal Reserve to make investments that are “designed primarily to promote the public welfare, including the welfare of low- and moderate-income communities or families.” The Regulatory Relief Act allowed only investments that “primarily benefited” low and moderate income communities and families. Second, Rep. Frank’s bill amends the Home Owner’s Loan Act to empower Federal Savings Associations to make public welfare loans under stipulations similar to those imposed on National Banks and Member Banks. (The text of H.R. 1066 is not yet available on the Library of Congress’ website, but should be shortly.)
Tennessee Regulator Confirms of Home Loan Protection Act Inapplicable to Banks. On January 31, Commissioner Greg Gonzales of the Tennessee Department of Financial Institutions issued a bulletin stating that most, if not all, of the Tennessee Home Loan Protection Act (Tenn. Code Ann. § 45-20-101 et seq.) is inapplicable to banking institutions. Commissioner Gonzales stated he believed that no portions of the act apply to “national or state banks or trust companies, federal or state savings institutions, federal or state credit unions, or the operating subsidiaries of any of these institutions,” save for the “possible exception” of restrictions on “high cost home loan closing locations” (Tenn. Code Ann. § 45-20-103(17)(B)). To read the Commissioner’s bulletin, see http://www.tennessee.gov/tdfi/banking/bulletins/FI-07-1.html.
Seventh Circuit Disagrees with Regulation B Definition of "Applicant" to Include “Guarantor." Contradicting the longstanding interpretation of Federal Reserve Board (FRB) Regulation B, the U.S. Circuit Court of Appeals for the Seventh Circuit stated in an opinion by Judge Posner that creditor liability provisions under the Equal Credit Opportunity Act (ECOA) apply only to primary "applicants," which, according to the court, is an unambiguous term requiring no interpretation, and not also to "guarantors," as provided in Regulation B. The case involved a business loan in which the owner of the business had personally guaranteed the loan, and the creditor also required his wife to act as a guarantor. In stating that the extension of the ECOA to guarantors in Regulation B was invalid, the court also stated that if, as the wife contended, her guaranty was unenforceable, creditors could lose the value of the entire loan when the primary applicant is unable to make payments. Consequently, the court indicated that such a disproportionate result as compared to the penalties applicable to ECOA violations involving persons applying for loans likely was not the intention of Congress. The court also noted that even if the treatment of guarantors as “applicants” under Regulation B is valid, the creditor did not discriminate against the wife because she owned many of the residences listed as assets on the business owner’s financial statement. Moran Foods, Inc. v. Mid-Atlantic Market Development, LLC, No. 00 C 227, – F.3d –, 2007 U.S. App. LEXIS 2485 (Feb. 5, 2007). A copy of the opinion is available at http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=05-3656_021.pdf.
Federal Bank Regulators Request Comment on Basel II Proposals. On February 15, the Federal Banking Agencies (the OCC, FRB, OTS, and FDIC) proposed new and revised guidance related to the Basel II capital accords. (These proposals do not alter proposed rules issued by the Federal Banking Agencies regarding Basel II last September – see the September 29, 2006 issue of InfoBytes for more details.) The recent release (i) revises 2003 and 2004 proposed guidance regarding the capital requirement calculations and (ii) proposes new guidance regarding regulatory oversight of capital adequacy. Comments are due ninety days after the proposed guidance is published in the Federal Register. To view the Banking Agencies’ joint press release, go to http://www.fdic.gov/news/news/press/2007/pr07013.html.
Frank Introduces Bill to Promote “Public Welfare” Lending. On February 15, House Financial Services Committee Chairman Barney Frank (D–MA) introduced H.R. 1066, the “Depository Institution Community Development Investments Enhancement Act.” According to Rep. Frank, the bill would return “public welfare” lending requirements to the form in which they existed prior to the Financial Services Regulatory Relief Act of 2006 (Pub. L. 109-351, enacted last year by the 109th Congress). First, it amends Regulatory Relief Act to permit National Banks and State Member Banks of the Federal Reserve to make investments that are “designed primarily to promote the public welfare, including the welfare of low- and moderate-income communities or families.” The Regulatory Relief Act allowed only investments that “primarily benefited” low and moderate income communities and families. Second, Rep. Frank’s bill amends the Home Owner’s Loan Act to empower Federal Savings Associations to make public welfare loans under stipulations similar to those imposed on National Banks and Member Banks. (The text of H.R. 1066 is not yet available on the Library of Congress’ website, but should be shortly.)
Trade Groups Raise Conflict Between Proposed FDIC Payday Loan Guidelines and National Defense Authorization Act. The Independent Community Bankers of America (ICBA) and American Bankers Association (ABA) have released comment letters that raise concerns about the FDIC’s proposed guidelines on small loans, claiming the guidelines may conflict with the National Defense Authorization Act for 2007. The draft FDIC guidelines are intended to encourage creditors to make more affordable small-dollar loans by offering them favorable treatment under the Community Reinvestment Act. The National Defense Authorization Act limits the terms of consumer credit extended to service members and their families, in an effort to crack down on payday lenders. According to the trade groups, a broad interpretation of the National Defense Authorization Act would bar many of the features suggested in the FDIC guidelines, since the act makes short-term lending to military families difficult. One of the key features of the credit provisions of the Act is its 36 percent APR limit, the calculation of which includes all fees and costs associated with the loan. “A variety of routine and customary factors may make it difficult for small-dollar loans to meet this test when calculated as may be envisioned under the new law,” the ABA said. The FDIC requested comments in December 2006 on the draft guidelines. The ICBA comments are available at http://www.icba.org/files/ICBASites/PDFs/cl020207.pdf, and the ABA comments are available at http://www.aba.com/NR/rdonlyres/DC65CE12-B1C7-11D4-AB4A-00508B95258D/45843/clfdicsmloans07.pdf.
Tennessee Regulator Confirms of Home Loan Protection Act Inapplicable to Banks. On January 31, Commissioner Greg Gonzales of the Tennessee Department of Financial Institutions issued a bulletin stating that most, if not all, of the Tennessee Home Loan Protection Act (Tenn. Code Ann. § 45-20-101 et seq.) is inapplicable to banking institutions. Commissioner Gonzales stated he believed that no portions of the act apply to “national or state banks or trust companies, federal or state savings institutions, federal or state credit unions, or the operating subsidiaries of any of these institutions,” save for the “possible exception” of restrictions on “high cost home loan closing locations” (Tenn. Code Ann. § 45-20-103(17)(B)). To read the Commissioner’s bulletin, see http://www.tennessee.gov/tdfi/banking/bulletins/FI-07-1.html.
Trade Groups Raise Conflict Between Proposed FDIC Payday Loan Guidelines and National Defense Authorization Act. The Independent Community Bankers of America (ICBA) and American Bankers Association (ABA) have released comment letters that raise concerns about the FDIC’s proposed guidelines on small loans, claiming the guidelines may conflict with the National Defense Authorization Act for 2007. The draft FDIC guidelines are intended to encourage creditors to make more affordable small-dollar loans by offering them favorable treatment under the Community Reinvestment Act. The National Defense Authorization Act limits the terms of consumer credit extended to service members and their families, in an effort to crack down on payday lenders. According to the trade groups, a broad interpretation of the National Defense Authorization Act would bar many of the features suggested in the FDIC guidelines, since the act makes short-term lending to military families difficult. One of the key features of the credit provisions of the Act is its 36 percent APR limit, the calculation of which includes all fees and costs associated with the loan. “A variety of routine and customary factors may make it difficult for small-dollar loans to meet this test when calculated as may be envisioned under the new law,” the ABA said. The FDIC requested comments in December 2006 on the draft guidelines. The ICBA comments are available at http://www.icba.org/files/ICBASites/PDFs/cl020207.pdf, and the ABA comments are available at http://www.aba.com/NR/rdonlyres/DC65CE12-B1C7-11D4-AB4A-00508B95258D/45843/clfdicsmloans07.pdf.
Seventh Circuit Disagrees with Regulation B Definition of "Applicant" to Include “Guarantor." Contradicting the longstanding interpretation of Federal Reserve Board (FRB) Regulation B, the U.S. Circuit Court of Appeals for the Seventh Circuit stated in an opinion by Judge Posner that creditor liability provisions under the Equal Credit Opportunity Act (ECOA) apply only to primary "applicants," which, according to the court, is an unambiguous term requiring no interpretation, and not also to "guarantors," as provided in Regulation B. The case involved a business loan in which the owner of the business had personally guaranteed the loan, and the creditor also required his wife to act as a guarantor. In stating that the extension of the ECOA to guarantors in Regulation B was invalid, the court also stated that if, as the wife contended, her guaranty was unenforceable, creditors could lose the value of the entire loan when the primary applicant is unable to make payments. Consequently, the court indicated that such a disproportionate result as compared to the penalties applicable to ECOA violations involving persons applying for loans likely was not the intention of Congress. The court also noted that even if the treatment of guarantors as “applicants” under Regulation B is valid, the creditor did not discriminate against the wife because she owned many of the residences listed as assets on the business owner’s financial statement. Moran Foods, Inc. v. Mid-Atlantic Market Development, LLC, No. 00 C 227, – F.3d –, 2007 U.S. App. LEXIS 2485 (Feb. 5, 2007). A copy of the opinion is available at http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=05-3656_021.pdf.
Court Grants Class Certification in FCRA Firm-Offer Case. The U.S. District Court for the Eastern District of Wisconsin granted class action certification to a consumer who alleged that a prescreened mortgage solicitation did not meet the firm-offer requirement. Although the court did not address the substance of the requirement, it did cite Murray v. GMAC Mortgage to support its holding that the case met the “commonality” requirement for class-action certification because whether a “firm offer” exists can be determined from the “four corners” of the offer. Forrest v. C.M.A. Mortgage, Inc., No. 06-C-14, 2007 WL 188979 (E.D. Wis. Jan. 19, 2007). Please contact for a copy of this decision.
No Personal Jurisdiction Over Foreign Corporation with Marginally Interactive Website. The U..S. District Court for the District of Columbia held in FC Investment Group LC v. IFX Markets, Ltd., No. 04-1939, 2007 U.S. Dist. LEXIS 7919 (D.D.C. Feb. 6, 2007) that maintaining a marginally interactive website does not create general personal jurisdiction. In FC Investment, investors sued a U.K. corporation for fraud in connection with an alleged pyramid scheme. The investors argued that the website, which allowed prospective customers to download applications, view a demonstration of services, and view and manage online accounts, created personal jurisdiction over the defendant. The court, however, held that the website was not “active” enough to justify the exertion of personal jurisdiction. In a fact-specific analysis, the court found it significant that, although prospective customers could download an application, the website did not allow online registration and the majority of the application process was conducted offline. And despite the investors’ assertions that the website allowed for “certain active online transactions,” the court held that the use of an online account by only one resident of the District of Columbia for a very brief period of time – as alleged by the investors – did not justify the exertion of general personal jurisdiction. The online demonstration of the company’s services likewise was not sufficient. The court contrasted this website to the site at issue in Gorman v. Ameritrade Holding Corp., 293 F.3d 506 (D.C. Cir. 2002), where the wide range of services available on defendant’s website, including online account opening and management and the online purchase and sale of securities, justified the exercise of personal jurisdiction over the defendant. The FC Investment opinion may be at odds with Obabueki v. IBM, Inc., Case No. 99-11262, 2001 WL 921172 (S.D.N.Y. Aug. 14, 2001), in which a federal court in New York held that the existence of a downloadable application, which was subsequently faxed in, may have been sufficient to form the basis of personal jurisdiction. The court in Obabueki also appears to have found it significant that the website provided price estimates for specific requests, sample services, as well as information about turnaround time, allowed users to communicate with the defendant via e-mail, and provided approved applicants with a login and password that allowed them to request specific services. For a copy of this decision, please contact .
Arbitration Award Inconsistent with Terms of Arbitration Agreement Void Under FAA. The Montana Supreme Court affirmed a trial court’s refusal to confirm an arbitration award that did not conform with the terms of the arbitration agreement. Bank of America, NA v. Dahlquist, No. DA 06-0165 (MT, opinion issued Feb. 7, 2007). In the underlying suit, plaintiff lender sued defendant borrower over a past due credit card debt. The borrower moved to dismiss, arguing that the action was already the subject of an arbitration award issued by the National Arbitration Counsel (NAC). The credit card agreement did include an arbitration provision, but that provision required the parties to bring the arbitration before JAMS/Endispute. Because the claim had been arbitrated by NAC, the trial court refused to confirm the award, notwithstanding the fact that the lender ignored notices it received regarding the NAC arbitration and did not challenge the NAC award within the three-month required period. Leaving open the question of whether a state court would be the proper venue to confirm an arbitration award pursuant to the Federal Arbitration Act, the Montana Supreme Court held that the trial court acted properly because the arbitration award had no legal validity as it was void ab initio. For a copy of this decision, please contact .
Court Takes Strict View of FCRA “Firm Offer” Requirement. Although some recent cases have suggested more flexibility in judicial interpretations of the requirement that a prescreened credit-card solicitation under the Fair Credit Reporting Act (FCRA) consist of a “firm offer,” a judge in the U.S. District Court for the Northern District of Illinois interpreted the term narrowly. In Simpson v. Juniper Bank, No. 06-C-665, 2007 U.S. Dist. LEXIS 9425 (N.D. Ill. Feb. 8, 2007), the court denied the bank’s motion to dismiss the consumer’s claim that it had accessed the consumer’s credit report without a permissible purpose under FCRA. According to the court, although a statement in the initial mailer, “YES! Please send me my Platinum MasterCard,” implied that the consumer was guaranteed a card, the letter did not clearly guarantee that the consumer would receive a credit card because it directed the consumer to “apply” for a card and stated that the consumer was “pre-qualified” rather than “pre-approved” for the card. In addition, the mailer specified a variable annual percentage rate of 11.99%, 15.99%, or 18.99%, depending on the consumer’s circumstances, but did not show a minimum credit limit. The court interpreted the Murray v. GMAC Mortgage “four corners” language as mandating that the “material terms” of the offer be contained in the solicitation letter, and stated: “As it is not clear at this juncture that recipients of the Juniper mailer were guaranteed to receive credit approval or that the offer sufficiently specifies the interest rate and other material terms, the court cannot conclude that [the bank] was offering anything of value to [the consumer]” that would meet the FCRA firm-offer requirement. Please contact for a copy of this decision.
Seventh Circuit Disagrees with Regulation B Definition of "Applicant" to Include “Guarantor." Contradicting the longstanding interpretation of Federal Reserve Board (FRB) Regulation B, the U.S. Circuit Court of Appeals for the Seventh Circuit stated in an opinion by Judge Posner that creditor liability provisions under the Equal Credit Opportunity Act (ECOA) apply only to primary "applicants," which, according to the court, is an unambiguous term requiring no interpretation, and not also to "guarantors," as provided in Regulation B. The case involved a business loan in which the owner of the business had personally guaranteed the loan, and the creditor also required his wife to act as a guarantor. In stating that the extension of the ECOA to guarantors in Regulation B was invalid, the court also stated that if, as the wife contended, her guaranty was unenforceable, creditors could lose the value of the entire loan when the primary applicant is unable to make payments. Consequently, the court indicated that such a disproportionate result as compared to the penalties applicable to ECOA violations involving persons applying for loans likely was not the intention of Congress. The court also noted that even if the treatment of guarantors as “applicants” under Regulation B is valid, the creditor did not discriminate against the wife because she owned many of the residences listed as assets on the business owner’s financial statement. Moran Foods, Inc. v. Mid-Atlantic Market Development, LLC, No. 00 C 227, – F.3d –, 2007 U.S. App. LEXIS 2485 (Feb. 5, 2007). A copy of the opinion is available at http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=05-3656_021.pdf.
Third Circuit Rules that Trust Company is a "Consumer" Under Gramm-Leach-Bliley. On January 19, the U.S. Court of Appeals for the Third Circuit in Chao v. Community Trust Company, No. 05-2785, 2007 U.S. App. Lexis 1142 (3d Cir. Jan. 19, 2007) vacated a lower court's orders enforcing a subpoena for financial information issued to Community Trust Company (CTC). CTC argued that the subpoena violates the Right to Financial Privacy Act (RFPA) and the Gramm-Leach-Bliley Act (GLBA). CTC acts as trustee of the Regional Employers’ Assurance Leagues’ Voluntary Employees’ Beneficiary Association (REAL VEBA), a multiple employer/employee welfare benefit trust. CTC maintains an account in REAL VEBA’s name and was ordered to turn over certain financial records in connection with an investigation by the United States Department of Labor (DOL) into REAL VEBA for alleged fiduciary duty violations related to ERISA. CTC refused to turn over financial records, arguing that it would violate financial privacy rights set forth in the RFPA and the GLBA. The U.S. District Court for the Eastern District of Pennsylvania ordered that the subpoena issued by the DOL be enforced. The Third Circuit, however, vacated the District Court’s orders and remanded the case to the District Court for further proceedings. The Third Circuit concluded that the RFPA does not prohibit enforcement of the subpoena, but that REAL VEBA serves as a legal representative of its beneficiaries and this role is sufficient to qualify REAL VEBA as a “consumer” of CTC under the GLBA if the plan beneficiaries are “individuals who obtain services from CTC.” The Court held that it is clear that REAL VEBA beneficiaries “obtain” financial services from CTC, namely the payment of insurance policy premiums and the provision of ministerial financial services. Since REAL VEBA is a "consumer" under the GLBA, CTC may not disclose consumer financial information to unaffiliated third parties unless an exception applies. It noted that the GLBA exception allowing disclosure in response to a properly authorized subpoena may apply and remanded the case for further proceedings to determine if the DOL had jurisdiction to issue the subpoena. For a copy of this decision, see http://www.ca3.uscourts.gov/opinarch/052785p.pdf.
FTC Sues Group For Illegal Pretexting Scheme. On February 14, the Federal Trade Commission (FTC) filed a complaint against Action Research Group, Inc., Eye in the Sky Investigations, Inc., and their principals, alleging that the defendants deceptively obtained and sold confidential phone records of consumers. According to the complaint, the defendants obtained phone records of account-holders from various telecommunications carriers through false pretenses, fraudulent statements and other misrepresentations to induce the carriers to divulge the confidential phone records, which were unfair and deceptive acts or practices in violation of Section 5 of the FTC Act. The defendants then sold the phone records to clients or other third parties. The complaint seeks a permanent injunction to prevent further violations, as well as rescission of contracts, restitution, and disgorgement of ill-gotten monies. The FTC press release and the complaint can be viewed at http://www.ftc.gov/opa/2007/02/arg.htm.
Temporary Injunction Prevents Canadian Telemarketer from Promoting Credit Card Interest Rate Reduction Scam. The U.S. District Court for the Northern District of Illinois issued a temporary injunction against a Canadian telemarketer, Select Personnel Management, Inc. dba Select Management Solutions, barring it from asserting it could reduce American consumer’s credit card interest rates. The court issued the injunction, as well as an asset freeze, at the request of the FTC. The FTC’s complaint alleges that the telemarketer engaged in unfair and deceptive acts or practices in violation of Section 5 of the Federal Trade Commission Act by failing to provide services promised (e.g., obtain credit card rates between 4.75 percent and 9 percent, for a savings of at least $2,500) and by failing to refund consumers’ money when promised services were not performed. In addition, the FTC alleges that the company violated the agency’s Telemarketing Sales Rule by causing consumers’ caller identification systems to register numbers that do not belong to the defendant’s (a practice known as “Caller ID spoofing”). For the full text of the complaint, please see http://www.ftc.gov/os/caselist/0623215/complaint.pdf.
MERS and MISMO Issue Draft Guidelines for PDF Registration and Documentation. In related actions, MISMO (the Mortgage Industry Standards Maintenance Organization) and MERS (the Mortgage Electronic Registration System) issued guidelines for electronic documentation and for registering electronic notes with MERS®. On February 5, 2007, MISMO published an initial copy of its eSigned PDF Guidelines v. 1.0 for public comment. MISMO’s PDF guidelines are intended to provide guidance to properly use PDF to create, use and maintain eMortgage documentation. The guide provides an overview of relevant legal considerations, guidelines for file formatting and fields and sample open source code. To obtain a copy of the MISMO PDF guidance, please go to www.mismo.org and click on “eMortgage Guidelines and Recommendations” or see http://www.mismo.org/files/mismo/eMortgageeSignedPDFGuidelinesv1.0.pdf. On February 8, 2007, MERS published draft PDF Guidelines that provide information on the registration of valid electronic notes (eNotes) with MERS. The draft guidelines also provide background on the underpinnings of eMortgage documentation. MERS is accepting comments on the draft PDF Guidelines until March 10, 2007. To obtain a copy of the draft PDF guidelines, please go to http://www.mersinc.org/news/details.aspx?id=145.
No Personal Jurisdiction Over Foreign Corporation with Marginally Interactive Website. The U..S. District Court for the District of Columbia held in FC Investment Group LC v. IFX Markets, Ltd., No. 04-1939, 2007 U.S. Dist. LEXIS 7919 (D.D.C. Feb. 6, 2007) that maintaining a marginally interactive website does not create general personal jurisdiction. In FC Investment, investors sued a U.K. corporation for fraud in connection with an alleged pyramid scheme. The investors argued that the website, which allowed prospective customers to download applications, view a demonstration of services, and view and manage online accounts, created personal jurisdiction over the defendant. The court, however, held that the website was not “active” enough to justify the exertion of personal jurisdiction. In a fact-specific analysis, the court found it significant that, although prospective customers could download an application, the website did not allow online registration and the majority of the application process was conducted offline. And despite the investors’ assertions that the website allowed for “certain active online transactions,” the court held that the use of an online account by only one resident of the District of Columbia for a very brief period of time – as alleged by the investors – did not justify the exertion of general personal jurisdiction. The online demonstration of the company’s services likewise was not sufficient. The court contrasted this website to the site at issue in Gorman v. Ameritrade Holding Corp., 293 F.3d 506 (D.C. Cir. 2002), where the wide range of services available on defendant’s website, including online account opening and management and the online purchase and sale of securities, justified the exercise of personal jurisdiction over the defendant. The FC Investment opinion may be at odds with Obabueki v. IBM, Inc., Case No. 99-11262, 2001 WL 921172 (S.D.N.Y. Aug. 14, 2001), in which a federal court in New York held that the existence of a downloadable application, which was subsequently faxed in, may have been sufficient to form the basis of personal jurisdiction. The court in Obabueki also appears to have found it significant that the website provided price estimates for specific requests, sample services, as well as information about turnaround time, allowed users to communicate with the defendant via e-mail, and provided approved applicants with a login and password that allowed them to request specific services. For a copy of this decision, please contact .
Third Circuit Rules that Trust Company is a "Consumer" Under Gramm-Leach-Bliley. On January 19, the U.S. Court of Appeals for the Third Circuit in Chao v. Community Trust Company, No. 05-2785, 2007 U.S. App. Lexis 1142 (3d Cir. Jan. 19, 2007) vacated a lower court's orders enforcing a subpoena for financial information issued to Community Trust Company (CTC). CTC argued that the subpoena violates the Right to Financial Privacy Act (RFPA) and the Gramm-Leach-Bliley Act (GLBA). CTC acts as trustee of the Regional Employers’ Assurance Leagues’ Voluntary Employees’ Beneficiary Association (REAL VEBA), a multiple employer/employee welfare benefit trust. CTC maintains an account in REAL VEBA’s name and was ordered to turn over certain financial records in connection with an investigation by the United States Department of Labor (DOL) into REAL VEBA for alleged fiduciary duty violations related to ERISA. CTC refused to turn over financial records, arguing that it would violate financial privacy rights set forth in the RFPA and the GLBA. The U.S. District Court for the Eastern District of Pennsylvania ordered that the subpoena issued by the DOL be enforced. The Third Circuit, however, vacated the District Court’s orders and remanded the case to the District Court for further proceedings. The Third Circuit concluded that the RFPA does not prohibit enforcement of the subpoena, but that REAL VEBA serves as a legal representative of its beneficiaries and this role is sufficient to qualify REAL VEBA as a “consumer” of CTC under the GLBA if the plan beneficiaries are “individuals who obtain services from CTC.” The Court held that it is clear that REAL VEBA beneficiaries “obtain” financial services from CTC, namely the payment of insurance policy premiums and the provision of ministerial financial services. Since REAL VEBA is a "consumer" under the GLBA, CTC may not disclose consumer financial information to unaffiliated third parties unless an exception applies. It noted that the GLBA exception allowing disclosure in response to a properly authorized subpoena may apply and remanded the case for further proceedings to determine if the DOL had jurisdiction to issue the subpoena. For a copy of this decision, see http://www.ca3.uscourts.gov/opinarch/052785p.pdf.
FTC Sues Group For Illegal Pretexting Scheme. On February 14, the Federal Trade Commission (FTC) filed a complaint against Action Research Group, Inc., Eye in the Sky Investigations, Inc., and their principals, alleging that the defendants deceptively obtained and sold confidential phone records of consumers. According to the complaint, the defendants obtained phone records of account-holders from various telecommunications carriers through false pretenses, fraudulent statements and other misrepresentations to induce the carriers to divulge the confidential phone records, which were unfair and deceptive acts or practices in violation of Section 5 of the FTC Act. The defendants then sold the phone records to clients or other third parties. The complaint seeks a permanent injunction to prevent further violations, as well as rescission of contracts, restitution, and disgorgement of ill-gotten monies. The FTC press release and the complaint can be viewed at http://www.ftc.gov/opa/2007/02/arg.htm.
Court Takes Strict View of FCRA “Firm Offer” Requirement. Although some recent cases have suggested more flexibility in judicial interpretations of the requirement that a prescreened credit-card solicitation under the Fair Credit Reporting Act (FCRA) consist of a “firm offer,” a judge in the U.S. District Court for the Northern District of Illinois interpreted the term narrowly. In Simpson v. Juniper Bank, No. 06-C-665, 2007 U.S. Dist. LEXIS 9425 (N.D. Ill. Feb. 8, 2007), the court denied the bank’s motion to dismiss the consumer’s claim that it had accessed the consumer’s credit report without a permissible purpose under FCRA. According to the court, although a statement in the initial mailer, “YES! Please send me my Platinum MasterCard,” implied that the consumer was guaranteed a card, the letter did not clearly guarantee that the consumer would receive a credit card because it directed the consumer to “apply” for a card and stated that the consumer was “pre-qualified” rather than “pre-approved” for the card. In addition, the mailer specified a variable annual percentage rate of 11.99%, 15.99%, or 18.99%, depending on the consumer’s circumstances, but did not show a minimum credit limit. The court interpreted the Murray v. GMAC Mortgage “four corners” language as mandating that the “material terms” of the offer be contained in the solicitation letter, and stated: “As it is not clear at this juncture that recipients of the Juniper mailer were guaranteed to receive credit approval or that the offer sufficiently specifies the interest rate and other material terms, the court cannot conclude that [the bank] was offering anything of value to [the consumer]” that would meet the FCRA firm-offer requirement. Please contact for a copy of this decision.
Court Grants Class Certification in FCRA Firm-Offer Case. The U.S. District Court for the Eastern District of Wisconsin granted class action certification to a consumer who alleged that a prescreened mortgage solicitation did not meet the firm-offer requirement. Although the court did not address the substance of the requirement, it did cite Murray v. GMAC Mortgage to support its holding that the case met the “commonality” requirement for class-action certification because whether a “firm offer” exists can be determined from the “four corners” of the offer. Forrest v. C.M.A. Mortgage, Inc., No. 06-C-14, 2007 WL 188979 (E.D. Wis. Jan. 19, 2007). Please contact for a copy of this decision.
Arbitration Award Inconsistent with Terms of Arbitration Agreement Void Under FAA. The Montana Supreme Court affirmed a trial court’s refusal to confirm an arbitration award that did not conform with the terms of the arbitration agreement. Bank of America, NA v. Dahlquist, No. DA 06-0165 (MT, opinion issued Feb. 7, 2007). In the underlying suit, plaintiff lender sued defendant borrower over a past due credit card debt. The borrower moved to dismiss, arguing that the action was already the subject of an arbitration award issued by the National Arbitration Counsel (NAC). The credit card agreement did include an arbitration provision, but that provision required the parties to bring the arbitration before JAMS/Endispute. Because the claim had been arbitrated by NAC, the trial court refused to confirm the award, notwithstanding the fact that the lender ignored notices it received regarding the NAC arbitration and did not challenge the NAC award within the three-month required period. Leaving open the question of whether a state court would be the proper venue to confirm an arbitration award pursuant to the Federal Arbitration Act, the Montana Supreme Court held that the trial court acted properly because the arbitration award had no legal validity as it was void ab initio. For a copy of this decision, please contact .
Temporary Injunction Prevents Canadian Telemarketer from Promoting Credit Card Interest Rate Reduction Scam. The U.S. District Court for the Northern District of Illinois issued a temporary injunction against a Canadian telemarketer, Select Personnel Management, Inc. dba Select Management Solutions, barring it from asserting it could reduce American consumer’s credit card interest rates. The court issued the injunction, as well as an asset freeze, at the request of the FTC. The FTC’s complaint alleges that the telemarketer engaged in unfair and deceptive acts or practices in violation of Section 5 of the Federal Trade Commission Act by failing to provide services promised (e.g., obtain credit card rates between 4.75 percent and 9 percent, for a savings of at least $2,500) and by failing to refund consumers’ money when promised services were not performed. In addition, the FTC alleges that the company violated the agency’s Telemarketing Sales Rule by causing consumers’ caller identification systems to register numbers that do not belong to the defendant’s (a practice known as “Caller ID spoofing”). For the full text of the complaint, please see http://www.ftc.gov/os/caselist/0623215/complaint.pdf.
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