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InfoBytes
CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
CSBS, AARMR, and NACCA Release Subprime Mortgage Statement. On July 17, the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR), and the National Association of Consumer Credit Administrators (NACCA) jointly released a statement on subprime mortgage lending, following subprime guidance issued by the federal banking agencies last month (see the June 29th issue of InfoBytes). The CSBS, AARMR, and NACCA statement encourages state regulators to adopt the federal agencies’ statement in order to promote “uniform application of the [federal subprime guidance’s] origination and underwriting standards for all mortgage brokers and lenders.” Accordingly, the CSBS, AARMR and NACCA statement “substantially mirrors” the federal subprime guidance to enhance the likelihood that state-regulated non-depository institutions will be subject to subprime guidance consistent to that directed at banks, thrifts, credit unions and their subsidiaries. To read the statement in full, see http://www.csbs.org/Content/NavigationMenu/RegulatoryAffairs/MortgagePolicy/Final_CSBS-AARMR-NACCA_StatementonSubprimeLending.pdf. To view a comparison of the CSBS-AARMR-NACCA Statement with that of the federal banking agencies, see http://www.csbs.org/Content/NavigationMenu/RegulatoryAffairs/MortgagePolicy/Final_CSBS-AARMR-NACCA_StatementonSubprimeLending_Red-LinedVersion.doc.
Federal Banking Agencies Announce Basel II “Implementation,” Basel IA Scrapped. Today the federal banking agencies (FRB, FDIC, OCC, and OTS) announced an agreement resolving “major outstanding issues” in the implementation of the Basel II capital reserve standards, which “will now lead to finalization of a rule implementing” Basel II in the United States. Last fall the federal banking agencies issued a notice of proposed rulemaking (NPR) regarding the Basel II standard (see the September 8, 2006 issue of InfoBytes). In today’s agreement, the banking agencies agreed to preserve the NPR’s “transitional floor periods” limiting the rate at which an institution’s reserve requirements could fall under the new system. However, today’s agreement eliminates the NPR’s limit of a 10% reduction in aggregate capital requirements. The agencies also agreed to replace a proposed “Basel IA” option for “non-core” banks (see the January 5th issue of InfoBytes) with an option to adopt a “standardized approach under the Basel II Accord.” No details regarding this standardized approach have been released at this time. For the official press release regarding the agreement, please see http://www.federalreserve.gov/boarddocs/press/bcreg/2007/20070720/default.htm.
Banking Agencies Release Joint Statement on BSA/AML Compliance. On July 19, the federal banking agencies (OCC, FRB, FDIC, OTS, and NCUA) released a joint statement on Bank Secrecy Act (BSA) / Anti-Money Laundering (AML) compliance to “provide greater consistence among the agencies in enforcement decisions.” The joint statement outlines (i) the BSA compliance requirements shared by all the agencies, (ii) methods by which regulator’s “supervisory concerns” are communicated to financial institutions based on severity, (iii) enforcement procedures for various types of non-compliance, and (iv) suspicious activity report (SAR) reporting and retention requirements. In an official comment, Financial Crimes Enforcement Network (FinCEN) Director James Fries called the joint statement “another positive step with respect to clarity and consistency in the implementation of the Bank Secrecy Act…. The federal financial regulators are making great efforts to eliminate uncertainty about what they expect.” The federal banking agencies’ statement can be found at http://www.federalreserve.gov/boarddocs/press/bcreg/2007/20070719/attachment.pdf.
In a related matter, on July 19, House Financial Services Committee Chairman Barney Frank (D – MA) and Ranking Member Spencer Bachus (R – AL) sent a letter to the Government Accountability Office (GAO) requesting that it examine FinCEN’s “mission and operational capacity” as well as the recent growth in SAR filings. The letter asks the GAO to respond to several questions over the next two years, including whether “the growing volume of SARs…and other requests for information, impair or threaten to impair law enforcement’s capacity to use the information?” The letter can be found at http://www.house.gov/apps/list/press/financialsvcs_dem/ht071907.shtml.
Federal and State Agencies Announce Cooperative Subprime Examination Program. On July 17, the Federal Reserve Board (FRB), Office of the Thrift Supervision (OTS), Federal Trade Commission (FTC), Conference of State Bank Supervisors (CSBS), and American Association of Residential Mortgage Regulators (AARMR) announced a joint program to conduct “targeted consumer-protection compliance reviews” of non-depository subprime mortgage lenders. According to the announcement, the program will begin in the fourth quarter of this year by focusing on “non-depository subsidiaries of bank and thrift holding companies as well as mortgage brokers doing business with, or working for, these entities.” The state regulators will also conduct examinations of independent state-licensed subprime lenders and their brokers. The agencies hope to share information from these reviews and “seek ways to better cooperate in ensuring effective and consistent reviews of these institutions.” For the official press release, please see http://www.ftc.gov/opa/2007/07/subprime.shtm.
Frank Asks GAO to Review ECOA Regulation. On July 16, House Financial Services Committee Chairman Barney Frank (D – MA), with Representative Melvin Watt (D – NC) and Representative Carolyn Molony (D – NY), sent a letter to the Government Accountability Office (GAO) asking it to review the prohibition on collecting and publicly reporting race and gender data for non-mortgage credit under Regulation B, the implementing regulation of the Equal Credit Opportunity Act (ECOA). Pointing out that mortgage lending to minorities increased after passage of the Home Mortgage Disclosure Act, the representatives asked the GAO to review (i) the Federal Reserve Board’s basis for concluding that revising Regulation B would likely increase discrimination against woman- and minority-owned businesses and (ii) the likely impact of such revisions on lenders and small businesses. For a copy of the letter, see http://www.house.gov/apps/list/press/financialsvcs_dem/press2071707.shtml.
STATE ISSUES
Alaska Governor Signs Broker, Lender, Loan Originator Licensing Law. On July 13, Alaska Governor Sarah Palin signed into law HB 162, which creates a licensing scheme for mortgage lenders, mortgage brokers, and individual loan originators. Under the new law, lenders and brokers will be required to become licensed with the Alaska Department of Commerce, Community, and Economic Development. Individual loan originators, who will not be allowed to work for more than one licensee, must also obtain licenses. Among other things, the new law requires the filing of annual reports, the payment of biennial renewal fees, and the completion of 24 hours of regulator approved continuing education every two years for each licensee. The new law becomes effective on July 1, 2008, but persons making or brokering loans on that date will not be required to be licensed until March 1, 2009. For a copy of the law, please see http://www.legis.state.ak.us/basis/get_bill.asp?session=25&bill=Hb+162&submit=Display+Bill+Root.
COURTS
Seventh Circuit: Amount Past Due, Not Total Balance, Is “Debt” on Collection Letter. On July 12, the Court of Appeals for the Seventh Circuit upheld a district court ruling that a debt collection agency did not violate the Fair Debt Collection Practices Act (FDCPA) when it sent a letter that listed the amount currently past due as the “amount of the debt” on the recipients' credit card account. In Barnes v. Advanced Call Center Technologies, LLC, No. 06-4338, – F.3d –, 2007 WL 2003493 (7th Cir. Jul. 12, 2007), the court rejected plaintiffs' arguments that Advanced Call Center Technologies (ACCT) violated the FDCPA by listing as the "Current Amount Due" – a disclosure required by Section 809 of the FDCPA in the initial debt validation notice – the past due amount, rather than the total balance owed on the account. The court stated that both precedent and a common-sense reading of the statute dictate that the amount of the debt must necessarily be only that amount overdue and being sought by the debt collector; otherwise, the recipient of the collection letter would not know either the amount the debt collector (as opposed to the issuer) was seeking to collect or that paying off the entire card balance is not required. The court also rejected the argument that the exact phrase "amount of the debt" -- taken from the statute -- is required in a collection letter, stating that using "current amount due" was sufficiently clear for an "unsophisticated consumer" to understand the letter and the action required. Consequently, the court affirmed the district court's grant of summary judgment to the debt collector. For a copy of this opinion, please see http://www.ca7.uscourts.gov/fdocs/docs.fwx?caseno=06-4338&submit=showdkt.
Letter Offering Minimum Amount of Credit Considered "Firm Offer of Credit" under FCRA. On July 5, the U.S. District Court for the Eastern District of Missouri determined that a promotional letter guaranteeing the plaintiff would receive "a minimum home equity loan of $25,000, subject only to FCRA-approved conditions" constituted a "firm offer of credit" under the Fair Credit Reporting Act (FCRA). Klutho v. Corinthian Mortgage Corp., No. 4:06CV807 HEA, 2007 WL 2002495 (E.D. Mo. July 5, 2007). The plaintiff argued that the letters violated FCRA because they did not include (i) the specific amount of credit being extended, (ii) any interest rate for the credit, (iii) the amortization period of the credit, and (iv) the method under which the interest on the credit will be computed. Relying on other district court FCRA opinions within the Eighth Circuit, the court looked at whether the offer contained "something of value, or more than nominal value." As a result, the court held that a reasonable consumer viewing the mailers would believe they contain some value, i.e., the minimum amount of credit to be extended, and that a loan of at least $25,000 is more than a nominal amount. For a copy of this opinion, please contact .
Safeco Standard Does Not Obviate Inquiry Into Defendants’ Subjective Intent. In the latest installment of this “firm offer of credit” class action lawsuit, a federal district court in Illinois rejected defendant’s argument that the decision in Safeco Ins. Co. of America v. Burr, 127 S.Ct. 2201 (2007), renders its subjective intent irrelevant to finding a willful failure to comply with FCRA’s requirements. Claffey v. River Oaks Hyundai, No. 06 C 310, 2007 WL 2027557 (N.D. Ill., opinion issued July 10, 2007) (for more on this suit, see the May 18, 2007 and the December 15, 2006 issues of InfoBytes). Defendants in Claffey argued that because the Safeco Court held that “reckless disregard” constitutes willfulness, and “reckless disregard” is decided by an objective standard, its subjective intent with respect to FCRA compliance is irrelevant. The court disagreed noting as an initial matter that both the Safeco Court and defendant recognized that a subjective knowing violation of FCRA also constituted willfulness. Moreover, the court found that an objective standard does not render the defendant’s subjective understanding of the law irrelevant. Indeed, “[e]vidence of a party's actions and intentions is unquestionably relevant in determining whether that standard is met in a particular case.” For a copy of the opinion, please contact .
Federal Court Dismisses Indictment in KPMG Case Finding Prosecutorial Misconduct. On July 16, District Judge Lewis A. Kaplan dismissed tax fraud charges against 13 former partners and employees of the KPMG accounting firm on the basis of prosecutorial misconduct by the Manhattan U.S. Attorney’s Office (USAO). United States v. Stein, et al., No. S1 05 Crim. 0888 (LAK) (S.D.N.Y.). The decision followed reversal by an appellate court of a final order issued by Judge Kaplan (see the June 1st issue of InfoBytes). The final order had sought to compel KPMG to pay the defendants’ legal expenses where KPMG was found to have withheld such payment to avoid indictment and secure leniency regarding its own criminal liability under a Justice Department policy that gave credit to companies that refrained from advancing legal fees to employees who may have violated the law. According to Judge Kaplan, in pursuing that policy prosecutors violated the defendants’ constitutional rights to a fair trial and legal representation (see the June 30, 2006 issue of InfoBytes). The USAO requested the dismissals in order to appeal the decision to the Second Circuit Court of Appeals. In granting that request, Judge Kaplan provided additional support for his original decision and broadened his rationale for his finding of prosecutorial misconduct. In the opinion, Judge Kaplan wrote that the USAO “deliberately or callously prevented many of these defendants from obtaining funds for their defense that they would lawfully would have had absent the government’s interference….[and] thereby foreclosed these defendants from presenting defenses they wished to present and in some cases even deprived them of counsel of their choice. This is intolerable….” Judge Kaplan also issued a temporary stay on his July 16, 2007 decision, noting that “[n]othing is intended to suggest that the government satisfied any criterion relating to likelihood of success on appeal.” For a copy of this opinion, see http://www1.nysd.uscourts.gov/cases/show.php?db=special&id=56.
CSBS, AARMR, and NACCA Release Subprime Mortgage Statement. On July 17, the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR), and the National Association of Consumer Credit Administrators (NACCA) jointly released a statement on subprime mortgage lending, following subprime guidance issued by the federal banking agencies last month (see the June 29th issue of InfoBytes). The CSBS, AARMR and NACCA statement encourages state regulators to adopt the federal agencies’ statement in order to promote “uniform application of the [federal subprime guidance’s] origination and underwriting standards for all mortgage brokers and lenders.” Accordingly, the CSBS, AARMR and NACCA statement “substantially mirrors” the federal subprime guidance to enhance the likelihood that state-regulated non-depository institutions will be subject to subprime guidance consistent to that directed at banks, thrifts, credit unions and their subsidiaries. To read the statement in full, see http://www.csbs.org/Content/NavigationMenu/RegulatoryAffairs/MortgagePolicy/Final_CSBS-AARMR-NACCA_StatementonSubprimeLending.pdf. To view a comparison of the CSBS-AARMR-NACCA Statement with that of the federal banking agencies, see http://www.csbs.org/Content/NavigationMenu/RegulatoryAffairs/MortgagePolicy/Final_CSBS-AARMR-NACCA_StatementonSubprimeLending_Red-LinedVersion.doc.
Alaska Governor Signs Broker, Lender, Loan Originator Licensing Law. On July 13, Alaska Governor Sarah Palin signed into law HB 162, which creates a licensing scheme for mortgage lenders, mortgage brokers, and individual loan originators. Under the new law, lenders and brokers will be required to become licensed with the Alaska Department of Commerce, Community, and Economic Development. Individual loan originators, who will not be allowed to work for more than one licensee, must also obtain licenses. Among other things, the new law requires the filing of annual reports, the payment of biennial renewal fees, and the completion of 24 hours of regulator approved continuing education every two years for each licensee. The new law becomes effective on July 1, 2008, but persons making or brokering loans on that date will not be required to be licensed until March 1, 2009. For a copy of the law, please see http://www.legis.state.ak.us/basis/get_bill.asp?session=25&bill=Hb+162&submit=Display+Bill+Root.
Letter Offering Minimum Amount of Credit Considered "Firm Offer of Credit" under FCRA. On July 5, the U.S. District Court for the Eastern District of Missouri determined that a promotional letter guaranteeing the plaintiff would receive "a minimum home equity loan of $25,000, subject only to FCRA-approved conditions" constituted a "firm offer of credit" under the Fair Credit Reporting Act (FCRA). Klutho v. Corinthian Mortgage Corp., No. 4:06CV807 HEA, 2007 WL 2002495 (E.D. Mo. July 5, 2007). The plaintiff argued that the letters violated FCRA because they did not include (i) the specific amount of credit being extended, (ii) any interest rate for the credit, (iii) the amortization period of the credit, and (iv) the method under which the interest on the credit will be computed. Relying on other district court FCRA opinions within the Eighth Circuit, the court looked at whether the offer contained "something of value, or more than nominal value." As a result, the court held that a reasonable consumer viewing the mailers would believe they contain some value, i.e., the minimum amount of credit to be extended, and that a loan of at least $25,000 is more than a nominal amount. For a copy of this opinion, please contact .
Federal and State Agencies Announce Cooperative Subprime Examination Program. On July 17, the Federal Reserve Board (FRB), Office of the Thrift Supervision (OTS), Federal Trade Commission (FTC), Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) announced a joint program to conduct “targeted consumer-protection compliance reviews” of non-depository subprime mortgage lenders. According to the announcement, the program will begin in the fourth quarter of this year by focusing on “non-depository subsidiaries of bank and thrift holding companies as well as mortgage brokers doing business with, or working for, these entities.” The state regulators will also conduct examinations of independent state-licensed subprime lenders and their brokers. The agencies hope to share information from these reviews and “seek ways to better cooperate in ensuring effective and consistent reviews of these institutions.” For the official press release, please see http://www.ftc.gov/opa/2007/07/subprime.shtm.
Federal Banking Agencies Announce Basel II “Implementation,” Basel IA Scrapped. Today the federal banking agencies (FRB, FDIC, OCC, and OTS) announced an agreement resolving “major outstanding issues” in the implementation of the Basel II capital reserve standards, which “will now lead to finalization of a rule implementing” Basel II in the United States. Last fall the federal banking agencies issued a notice of proposed rulemaking (NPR) regarding the Basel II standard (see the September 8, 2006 issue of InfoBytes). In today’s agreement, the banking agencies agreed to preserve the NPR’s “transitional floor periods” limiting the rate at which an institution’s reserve requirements could fall under the new system. However, today’s agreement eliminates the NPR’s limit of a 10% reduction in aggregate capital requirements. The agencies also agreed to replace a proposed “Basel IA” option for “non-core” banks (see the January 5th issue of InfoBytes) with an option to adopt a “standardized approach under the Basel II Accord.” No details regarding this standardized approach have been released at this time. For the official press release regarding the agreement, please see http://www.federalreserve.gov/boarddocs/press/bcreg/2007/20070720/default.htm.
Banking Agencies Release Joint Statement on BSA/AML Compliance. On July 19, the federal banking agencies (OCC, FRB, FDIC, OTS, and NCUA) released a joint statement on Bank Secrecy Act (BSA) / Anti-Money Laundering (AML) compliance to “provide greater consistence among the agencies in enforcement decisions.” The joint statement outlines (i) the BSA compliance requirements shared by all the agencies, (ii) methods by which regulator’s “supervisory concerns” are communicated to financial institutions based on severity, (iii) enforcement procedures for various types of non-compliance, and (iv) suspicious activity report (SAR) reporting and retention requirements. In an official comment, Financial Crimes Enforcement Network (FinCEN) Director James Fries called the joint statement “another positive step with respect to clarity and consistency in the implementation of the Bank Secrecy Act…. The federal financial regulators are making great efforts to eliminate uncertainty about what they expect.” The federal banking agencies’ statement can be found at http://www.federalreserve.gov/boarddocs/press/bcreg/2007/20070719/attachment.pdf.
In a related matter, on July 19, House Financial Services Committee Chairman Barney Frank (D – MA) and Ranking Member Spencer Bachus (R – AL) sent a letter to the Government Accountability Office (GAO) requesting that it examine FinCEN’s “mission and operational capacity” as well as the recent growth in SAR filings. The letter asks the GAO to respond to several questions over the next two years, including whether “the growing volume of SARs…and other requests for information, impair or threaten to impair law enforcement’s capacity to use the information?” The letter can be found at http://www.house.gov/apps/list/press/financialsvcs_dem/ht071907.shtml.
Safeco Standard Does Not Obviate Inquiry Into Defendants’ Subjective Intent. In the latest installment of this “firm offer of credit” class action lawsuit, a federal district court in Illinois rejected defendant’s argument that the decision in Safeco Ins. Co. of America v. Burr, 127 S.Ct. 2201 (2007), renders its subjective intent irrelevant to finding a willful failure to comply with FCRA’s requirements. Claffey v. River Oaks Hyundai, No. 06 C 310, 2007 WL 2027557 (N.D. Ill., opinion issued July 10, 2007) (for more on this suit, see the May 18, 2007 and the December 15, 2006 issues of InfoBytes). Defendants in Claffey argued that because the Safeco Court held that “reckless disregard” constitutes willfulness, and “reckless disregard” is decided by an objective standard, its subjective intent with respect to FCRA compliance is irrelevant. The court disagreed noting as an initial matter that both the Safeco Court and defendant recognized that a subjective knowing violation of FCRA also constituted willfulness. Moreover, the court found that an objective standard does not render the defendant’s subjective understanding of the law irrelevant. Indeed, “[e]vidence of a party's actions and intentions is unquestionably relevant in determining whether that standard is met in a particular case.” For a copy of the opinion, please contact .
Frank Asks GAO to Review ECOA Regulation. On July 16, House Financial Services Committee Chairman Barney Frank (D – MA), with Representative Melvin Watt (D – NC) and Representative Carolyn Molony (D – NY), sent a letter to the Government Accountability Office (GAO) asking it to review the prohibition on collecting and publicly reporting race and gender data for non-mortgage credit under Regulation B, the implementing regulation of the Equal Credit Opportunity Act (ECOA). Pointing out that mortgage lending to minorities increased after passage of the Home Mortgage Disclosure Act, the representatives asked the GAO to review (i) the Federal Reserve Board’s basis for concluding that revising Regulation B would likely increase discrimination against woman- and minority-owned businesses and (ii) the likely impact of such revisions on lenders and small businesses. For a copy of the letter, see http://www.house.gov/apps/list/press/financialsvcs_dem/press2071707.shtml.
Federal Court Dismisses Indictment in KPMG Case Finding Prosecutorial Misconduct. On July 16, District Judge Lewis A. Kaplan dismissed tax fraud charges against 13 former partners and employees of the KPMG accounting firm on the basis of prosecutorial misconduct by the Manhattan U.S. Attorney’s Office (USAO). United States v. Stein, et al., No. S1 05 Crim. 0888 (LAK) (S.D.N.Y.). The decision followed reversal by an appellate court of a final order issued by Judge Kaplan (see the June 1st issue of InfoBytes). The final order had sought to compel KPMG to pay the defendants’ legal expenses where KPMG was found to have withheld such payment to avoid indictment and secure leniency regarding its own criminal liability under a Justice Department policy that gave credit to companies that refrained from advancing legal fees to employees who may have violated the law. According to Judge Kaplan, in pursuing that policy prosecutors violated the defendants’ constitutional rights to a fair trial and legal representation (see the June 30, 2006 issue of InfoBytes). The USAO requested the dismissals in order to appeal the decision to the Second Circuit Court of Appeals. In granting that request, Judge Kaplan provided additional support for his original decision and broadened his rationale for his finding of prosecutorial misconduct. In the opinion, Judge Kaplan wrote that the USAO “deliberately or callously prevented many of these defendants from obtaining funds for their defense that they would lawfully would have had absent the government’s interference….[and] thereby foreclosed these defendants from presenting defenses they wished to present and in some cases even deprived them of counsel of their choice. This is intolerable….” Judge Kaplan also issued a temporary stay on his July 16, 2007 decision, noting that “[n]othing is intended to suggest that the government satisfied any criterion relating to likelihood of success on appeal.” For a copy of this opinion, see http://www1.nysd.uscourts.gov/cases/show.php?db=special&id=56.
Seventh Circuit: Amount Past Due, Not Total Balance, Is “Debt” on Collection Letter. On July 12, the Court of Appeals for the Seventh Circuit upheld a district court ruling that a debt collection agency did not violate the Fair Debt Collection Practices Act (FDCPA) when it sent a letter that listed the amount currently past due as the “amount of the debt” on the recipients' credit card account. In Barnes v. Advanced Call Center Technologies, LLC, No. 06-4338, – F.3d –, 2007 WL 2003493 (7th Cir. Jul. 12, 2007), the court rejected plaintiffs' arguments that Advanced Call Center Technologies (ACCT) violated the FDCPA by listing as the "Current Amount Due" – a disclosure required by Section 809 of the FDCPA in the initial debt validation notice – the past due amount, rather than the total balance owed on the account. The court stated that both precedent and a common-sense reading of the statute dictate that the amount of the debt must necessarily be only that amount overdue and being sought by the debt collector; otherwise, the recipient of the collection letter would not know either the amount the debt collector (as opposed to the issuer) was seeking to collect or that paying off the entire card balance is not required. The court also rejected the argument that the exact phrase "amount of the debt" -- taken from the statute -- is required in a collection letter, stating that using "current amount due" was sufficiently clear for an "unsophisticated consumer" to understand the letter and the action required. Consequently, the court affirmed the district court's grant of summary judgment to the debt collector. For a copy of this opinion, please see http://www.ca7.uscourts.gov/fdocs/docs.fwx?caseno=06-4338&submit=showdkt.
Letter Offering Minimum Amount of Credit Considered "Firm Offer of Credit" under FCRA. On July 5, the U.S. District Court for the Eastern District of Missouri determined that a promotional letter guaranteeing the plaintiff would receive "a minimum home equity loan of $25,000, subject only to FCRA-approved conditions" constituted a "firm offer of credit" under the Fair Credit Reporting Act (FCRA). Klutho v. Corinthian Mortgage Corp., No. 4:06CV807 HEA, 2007 WL 2002495 (E.D. Mo. July 5, 2007). The plaintiff argued that the letters violated FCRA because they did not include (i) the specific amount of credit being extended, (ii) any interest rate for the credit, (iii) the amortization period of the credit, and (iv) the method under which the interest on the credit will be computed. Relying on other district court FCRA opinions within the Eighth Circuit, the court looked at whether the offer contained "something of value, or more than nominal value." As a result, the court held that a reasonable consumer viewing the mailers would believe they contain some value, i.e., the minimum amount of credit to be extended, and that a loan of at least $25,000 is more than a nominal amount. For a copy of this opinion, please contact .
Safeco Standard Does Not Obviate Inquiry Into Defendants’ Subjective Intent. In the latest installment of this “firm offer of credit” class action lawsuit, a federal district court in Illinois rejected defendant’s argument that the decision in Safeco Ins. Co. of America v. Burr, 127 S.Ct. 2201 (2007), renders its subjective intent irrelevant to finding a willful failure to comply with FCRA’s requirements. Claffey v. River Oaks Hyundai, No. 06 C 310, 2007 WL 2027557 (N.D. Ill., opinion issued July 10, 2007) (for more on this suit, see the May 18, 2007 and the December 15, 2006 issues of InfoBytes). Defendants in Claffey argued that because the Safeco Court held that “reckless disregard” constitutes willfulness, and “reckless disregard” is decided by an objective standard, its subjective intent with respect to FCRA compliance is irrelevant. The court disagreed noting as an initial matter that both the Safeco Court and defendant recognized that a subjective knowing violation of FCRA also constituted willfulness. Moreover, the court found that an objective standard does not render the defendant’s subjective understanding of the law irrelevant. Indeed, “[e]vidence of a party's actions and intentions is unquestionably relevant in determining whether that standard is met in a particular case.” For a copy of the opinion, please contact .
Federal Court Dismisses Indictment in KPMG Case Finding Prosecutorial Misconduct. On July 16, District Judge Lewis A. Kaplan dismissed tax fraud charges against 13 former partners and employees of the KPMG accounting firm on the basis of prosecutorial misconduct by the Manhattan U.S. Attorney’s Office (USAO). United States v. Stein, et al., No. S1 05 Crim. 0888 (LAK) (S.D.N.Y.). The decision followed reversal by an appellate court of a final order issued by Judge Kaplan (see the June 1st issue of InfoBytes). The final order had sought to compel KPMG to pay the defendants’ legal expenses where KPMG was found to have withheld such payment to avoid indictment and secure leniency regarding its own criminal liability under a Justice Department policy that gave credit to companies that refrained from advancing legal fees to employees who may have violated the law. According to Judge Kaplan, in pursuing that policy prosecutors violated the defendants’ constitutional rights to a fair trial and legal representation (see the June 30, 2006 issue of InfoBytes). The USAO requested the dismissals in order to appeal the decision to the Second Circuit Court of Appeals. In granting that request, Judge Kaplan provided additional support for his original decision and broadened his rationale for his finding of prosecutorial misconduct. In the opinion, Judge Kaplan wrote that the USAO “deliberately or callously prevented many of these defendants from obtaining funds for their defense that they would lawfully would have had absent the government’s interference….[and] thereby foreclosed these defendants from presenting defenses they wished to present and in some cases even deprived them of counsel of their choice. This is intolerable….” Judge Kaplan also issued a temporary stay on his July 16, 2007 decision, noting that “[n]othing is intended to suggest that the government satisfied any criterion relating to likelihood of success on appeal.” For a copy of this opinion, see http://www1.nysd.uscourts.gov/cases/show.php?db=special&id=56.
Seventh Circuit: Amount Past Due, Not Total Balance, Is “Debt” on Collection Letter. On July 12, the Court of Appeals for the Seventh Circuit upheld a district court ruling that a debt collection agency did not violate the Fair Debt Collection Practices Act (FDCPA) when it sent a letter that listed the amount currently past due as the “amount of the debt” on the recipients' credit card account. In Barnes v. Advanced Call Center Technologies, LLC, No. 06-4338, – F.3d –, 2007 WL 2003493 (7th Cir. Jul. 12, 2007), the court rejected plaintiffs' arguments that Advanced Call Center Technologies (ACCT) violated the FDCPA by listing as the "Current Amount Due" – a disclosure required by Section 809 of the FDCPA in the initial debt validation notice – the past due amount, rather than the total balance owed on the account. The court stated that both precedent and a common-sense reading of the statute dictate that the amount of the debt must necessarily be only that amount overdue and being sought by the debt collector; otherwise, the recipient of the collection letter would not know either the amount the debt collector (as opposed to the issuer) was seeking to collect or that paying off the entire card balance is not required. The court also rejected the argument that the exact phrase "amount of the debt" -- taken from the statute -- is required in a collection letter, stating that using "current amount due" was sufficiently clear for an "unsophisticated consumer" to understand the letter and the action required. Consequently, the court affirmed the district court's grant of summary judgment to the debt collector. For a copy of this opinion, please see http://www.ca7.uscourts.gov/fdocs/docs.fwx?caseno=06-4338&submit=showdkt.
Frank Asks GAO to Review ECOA Regulation. On July 16, House Financial Services Committee Chairman Barney Frank (D – MA), with Representative Melvin Watt (D – NC) and Representative Carolyn Molony (D – NY), sent a letter to the Government Accountability Office (GAO) asking it to review the prohibition on collecting and publicly reporting race and gender data for non-mortgage credit under Regulation B, the implementing regulation of the Equal Credit Opportunity Act (ECOA). Pointing out that mortgage lending to minorities increased after passage of the Home Mortgage Disclosure Act, the representatives asked the GAO to review (i) the Federal Reserve Board’s basis for concluding that revising Regulation B would likely increase discrimination against woman- and minority-owned businesses and (ii) the likely impact of such revisions on lenders and small businesses. For a copy of the letter, see http://www.house.gov/apps/list/press/financialsvcs_dem/press2071707.shtml.
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