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CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
President and Congress Act to Forestall the Housing Crisis. On July 30, President Bush signed into law the Housing and Economic Recovery Act of 2008 (H.R. 3221) (first reported in InfoBytes, May 9, 2008), a sweeping piece of legislation that, among other items, (i) reforms government sponsored enterprise (GSE) regulation, (ii) requires licensure of all loan originators, (iii) modernizes the Federal Housing Administration (FHA), and (iv) promotes private-sector loan workouts to prevent foreclosure. The new law reforms GSE regulation by disbanding the Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB) and, in their place, establishing authority under a new agency, the Federal Housing Finance Agency (FHFA). The new law gives the Director of the FHFA increased control over GSE portfolios, authority to set GSE capital requirements, and authority to take prompt corrective action to wind down a troubled GSE. The Director also has stringent oversight over new GSE products, with all new products now requiring public notice and comment and written Director approval. The law raises, on January 1, 2009, the GSE loan limit for single family housing to the greater of $417,000 or 115% of the local area median home price (capped at 150% of the GSE limit, currently $625,500).
The new law requires licensing of all loan originators by setting minimum licensing standards for states and requiring employees of federally-regulated depository institutions or their subsidiaries engaged in loan originator activities to register with the Nationwide Mortgage Licensing System and Registry. Employees that perform only administrative or clerical tasks on behalf of a loan originator are exempt from licensing or registration requirements. In addition to finger-print and background check requirements, loan originators will be required to complete 20 hours of pre-licensing education, pass a written test, and maintain 8 hours of continuing education annually. Should any state fail to enact licensing requirements within a certain time period, the law grants HUD the authority to regulate that state’s loan originators.
In an effort to assist borrowers currently in trouble and to avoid future homeownership crises, the law creates a number of changes at the FHA. Effective January 1, 2009, the FHA can insure mortgages with principal amounts up to the revised GSE limits. However, a number of new restrictions go into effect October 1, 2008, including a required 3.5% down payment, a prohibition on seller-funded down payment assistance, and a limitation on the amount of the loan to 100% of the value of the property. There is a one-year moratorium, beginning October 1, 2008, on risk-based premiums for FHA insured loans. The law also changes FHA Home Equity Conversion (Reverse) Mortgage rules, raising the loan limit and capping origination fees. In addition, parties to the origination of a reverse mortgage cannot be associated with any other financial or insurance activity unless there are appropriate firewalls to prevent potential influence.
The new law establishes a HOPE for Homeowners Program, which is a program that encourages the private sector to refinance struggling homeowners whose existing mortgage was originated on or before January 1, 2008 into long-term fixed rate mortgages, authorizing the FHA to insure up to $300 billion in refinanced mortgages that meet specific criteria. “Rescue loans” are capped at $550,440 and, to be eligible, borrowers must generally have had a debt-to-income ratio of greater than 31% as of March 1, 2008 and the property must be owner-occupied and the only residence the borrower owns any stake in. Most significantly, the existing loan holder must accept as full payoff of the existing loan the refinanced loan amount, which is based on the borrower’s repayment ability and may not exceed 90 % of the current appraised value. Moreover, the refinanced loan amount is further reduced by a 3 % upfront mortgage insurance premium payment to HUD. The lender must agree to waive fees related to default or refinancing and subordinated liens must be extinguished through negotiations with the first lien holder. Any equity appreciation realized by the borrower must be shared with the FHA over a 5 year schedule.
With respect to loan servicers, the law creates a duty to maximize the net present value of pooled mortgages, deeming servicers to act in the best interests of all investors and parties if they agree to implement a modification or workout plan where the recovery on the outstanding principal as a result of modification is greater than the anticipated recovery through foreclosure. Other provisions seeking to limit the likelihood and effects of foreclosures include a $4 billion authorization of money to state and local governments to upkeep foreclosed properties, various tax provisions easing the burden of homeownership and new TILA disclosure requirements.
Lastly, the law offers protections to servicemembers of the U.S. armed forces by temporarily increasing Veterans Affairs-guaranteed loan limits and extending from 90 days to 9 months the stay of foreclosure following discharge from military service. These provisions sunset on December 31, 2010. The 6% mortgage interest-rate cap for active servicemembers now terminates one year after active duty.
For a copy of H.R. 3221 as signed by the President, please see http://www.buckleykolar.com/documents/H.R.3221--Final.pdf.
HUD Inspector General Finds RESPA Violation for Improper Broker Incentives. On July 14, the Department of Housing and Urban Development’s (HUD) Office of the Inspector General issued a report concluding that First Magnus Financial Corporation (First Magnus) violated the Real Estate Settlement Procedures Act (RESPA) when it paid brokers volume-based incentives. First Magnus, a Federal Housing Administration (FHA) approved nonsupervised lender operating out of Tucson, Arizona, issued $58,571 in incentive payments for the period between January 1, 2003 and December 31, 2005. The report asserts that the incentive compensation structure violated RESPA because the incentives were deemed inducements associated with the referrals of brokered FHA mortgages. Although First Magnus closed and filed for bankruptcy on August 21, 2007, the report recommends that FHA require the company to, (i) discontinue its incentive program, (ii) remove the company from active mortgagee status and (iii) take administrative actions against the principal owners and management. For a copy of HUD’s audit report, please see http://www.hud.gov/offices/oig/reports/files/ig0891013.pdf.
Treasury Issues Best Practices for Residential Covered Bonds. On July 28, the U.S. Treasury Department issued a guide, titled “Best Practices for Residential Covered Bonds,” to encourage the growth of the domestic covered bond market. According to the Treasury Department, these best practices are intended to clarify and unify the developing market for covered bonds. Covered bonds are securities that provide liquidity to depository institutions, which are collateralized by high-quality mortgage loans that remain on the issuing institution’s balance sheet. The Treasury states that these types of securities may potentially increase available funds for mortgage lending by offering a new funding source and diversifying institutions’ funding portfolio. A large market for covered bonds exists in Europe, but only two U.S. institutions currently issue covered bonds. In conjunction with the best practices, the Treasury will revise its collateral acceptability policy to include covered bonds as an approved asset category for securing the Treasury's investments and deposits of public money with commercial counterparties. These best practices will serve as a complement to the FDIC’s final policy statement. A copy of the best practices guide is available at http://www.treas.gov/press/releases/reports/USCoveredBondBestPractices.pdf, and the Treasury’s press release is available at http://www.ustreas.gov/press/releases/hp1102.htm.
OCC Closes Two Banks. On July 25, the Office of the Comptroller of the Currency (OCC) closed First National Bank of Nevada of Reno, Nevada, and First Heritage Bank, N.A. of Newport Beach, California. The Federal Deposit Insurance Corporation (FDIC) was named receiver and entered into purchase and assumption agreements with Mutual of Omaha Bank of Omaha, Nebraska. The two banks reopened on July 25, 2008 as Mutual of Omaha Bank. For a copy of the FDIC press release, please see http://www.fdic.gov/news/news/press/2008/pr08063.html.
OCC Confirms Usury Rate Guidance For Bank Operating Subsidiaries. In July, the Office of the Comptroller of the Currency (OCC) published a letter on its website confirming that an operating subsidiary of a bank authorized under 12 C.F.R. § 5.34 looks to the laws of its parent bank’s home state when determining the fees and interest rates that it may impose and export, without regard to usury laws in the borrower’s state of residence. The interpretation applies even when the operating subsidiary has no office in the parent’s home state. For a copy of the OCC’s letter, please see http://www.occ.treas.gov/interp/jul08/int1100.pdf.
STATE ISSUES
Pennsylvania Banking Department to Require Licenses for Internet Payday Lenders. On July 28, the Pennsylvania Banking Department (Department) announced its intention to license Internet payday lenders and other out-of-state companies making consumer loans to Pennsylvania residents. The Department’s previous interpretation of the Pennsylvania Consumer Discount Company Act (CDCA) only required companies with a physical location or employees in the commonwealth to seek licensure, thereby allowing loans via the internet or mail to occur outside the limitations of the CDCA. The Department’s amended position will require any company offering non-mortgage loans of $25,000 or less to Pennsylvania consumers to become licensed under the CDCA. Moreover, licensees must comply with the CDCA’s limits on interest and fees that the licensee can charge. Affected lenders have until February 1, 2009 to obtain a license. For a copy of the press release, please see http://www.banking.state.pa.us/banking/lib/banking/news_and_events/banking_cdca_letter_072808.pdf.
Massachusetts AG and Loan Servicer Enter Agreement Regarding Fremont Loans. On July 31, the Massachusetts Attorney General and WMD Capital Markets, LLC (WMD) entered into an agreement to restructure loans originated by Fremont Investment & Loan (Fremont). WMD specifically agreed to (i) reset the applicable interest rate to the borrowers’ introductory rate, (ii) issue a loan credit and one-time charge-off of origination fees, unpaid past due interest, unpaid late charges, and all unreimbursed corporate and property-related advances (including all foreclosure and litigation costs) once eligible borrowers make their first payment on their revised loan, (iii) further reduce the monthly payment to a level that the borrower can afford for up to three years for eligible borrowers who cannot afford monthly payments at their introductory interest rate, and (iv) offer delinquent borrowers a relocation payment for one year after the agreement. Borrowers will have the option of either pursuing a loan modification or accepting a relocation payment, which is designed to help those borrowers who are unable to afford their mortgage loan, even after a downward adjustment of the monthly payment. The Attorney General’s press release announcing the agreement asserts that the agreement comports with the expanded injunction prohibiting Fremont from assigning or selling Massachusetts loans owned by the company, or the servicing obligations on those loans, unless the buyer agrees in writing to be bound by the obligations set forth in the original injunction against Fremont. For a copy of the Massachusetts Attorney General’s press releasing detailing the agreement, please see http://www.mass.gov/?pageID=cagopressrelease&L=1&L0=Home&sid=Cago&b= pressrelease&f=2008_07_31_fremont_wmd&csid=Cago.
New Hampshire Passes Mortgage Servicing Companies Act. Recently, New Hampshire Governor John Lynch signed S.B. 439, the Mortgage Servicing Companies Act. The Act pertains to money transmitters and mortgage servicing companies. Among other items, the new law requires, (i) the registration of mortgage servicers who service second mortgage loans, (ii) applicants to maintain a minimum net worth requirement "of the lesser of its average daily outstanding money transmissions for the prior calendar year or $1,000,000," and (iii) requires licensed money transmitters to implement education and programs designed to inform "authorized delegates" of responsibilities "consistent with the Bank Secrecy Act and the requirements to file reports required by federal law." The Act becomes effective January 1, 2009. For a copy of the Act, please see http://www.gencourt.state.nh.us/legislation/2008/SB0439.html.
New York Permits Out-of-State Banks to Branch De Novo into New York. On July 21, New York Governor David A. Paterson signed A.11031, a bill allowing out-of-state banks to branch de novo into New York, provided that the out-of-state bank has a principal office in a state which allows New York banks, trust companies and savings banks to branch de novo within that state. The bill alleviates the need for eligible out-of-state banks to merge with or acquire the assets of a local bank in order to enter into New York. The bill is effective immediately. For a copy of the bill, please see http://assembly.state.ny.us/leg/?bn=A11031&sh=t.
Connecticut Attorney General Sues Credit Rating Agencies Alleging Deceptive and Unfair Issuance of Lower Ratings to Municipalities. On July 30, Attorney General Richard Blumenthal, in coordination with the Connecticut Department of Consumer Protection, filed charges against national credit rating agencies, Moody’s Corporation, Fitch, Inc. and The McGraw-Hill Companies (Standard & Poor’s parent company) for allegedly providing municipalities (i.e., cities, towns, school districts and other public entities) with deceptive and deflated credit ratings. The complaints allege that the credit rating agencies “systematically and intentionally” gave lower credit rating to bonds issued to municipalities as compared to corporate and other forms of debt with comparable or even inferior rates of default. Blumenthal further alleges that these artificially low interest rates have cost Connecticut taxpayers millions of dollars in unnecessary bond insurance and higher interest rates. For a copy of the press release and the complaints, please see http://www.ct.gov/ag/cwp/view.asp?Q=420390&A=2795.
COURTS
Pennsylvania Federal Court Grants Motion to Dismiss in Foreclosure Case Based on Rooker-Feldman Doctrine. On July 23, the United States District Court for the Eastern District of Pennsylvania granted a defendant lenders’ motion to dismiss, finding that, (i) the Rooker-Feldman Doctrine and res judicata barred the plaintiff borrower’s claims attempting to challenge and relitigate the state default foreclosure judgment against her, (ii) the Rooker-Feldman Doctrine barred the plaintiff’s claims for rescission (but not monetary damages) under the Truth in Lending Act (TILA), Homeownership and Equity Protection Act (HOEPA), and Real Estate Settlement Procedures Act (RESPA), and (iii) the statute of limitations barred the plaintiff’s request for monetary damages under TILA, HOEPA, and RESPA. Laychock v. Wells Fargo Home Mortgage, No. 07-4478, 2008 WL 2890962 (E.D. Pa. July 23, 2008). In 2007, defendant Wachovia filed a foreclosure complaint in the Philadelphia Court of Common Pleas against the plaintiff. The plaintiff then petitioned the Court of Common Pleas to open the default judgment, and while such petition was pending, the plaintiff filed the federal lawsuit against defendants Wachovia and Wells Fargo alleging 14 state and federal violations, including the following: wrongful use of civil proceedings; abuse of process; breach of contract; two counts of negligence; fraud/fraud on the court; Unfair Trade Practices Consumer Protection Law (UTCPL); TILA; HOEPA; RESPA; Fair Credit Reporting Act (FCRA); Fair Credit Extension Uniformity Act (FCEIA); Civil Rights (Section 1983); and Slander of Title. The court found that the Rooker-Feldman Doctrine, which “prevents ‘inferior’ federal courts from sitting as appellate courts for state court judgments,” barred 11 of the plaintiff’s claims. The Doctrine barred the plaintiff’s claims and request for rescission because such claims require the court to find that the state court was wrong in its foreclosure, and thus the federal court did not have jurisdiction with respect to these claims. Res judicata also precluded these claims and the relevant statute of limitations barred the remaining TILA, HOEPA, and RESPA monetary claims. For a copy of this opinion, please see http://www.buckleykolar.com/documents/Laychock_v_Wells_Fargo.pdf.
Pennsylvania Federal Court Grants Motion to Dismiss ECOA Claim. On July 18, a Pennsylvania federal district court granted a defendant’s motion to dismiss a claim arising under the Equal Credit Opportunity Act (ECOA), affirming that a counteroffer made within thirty days is not an “adverse action” subject to the written notification requirement of the ECOA. Soslau v. PHH Mortgage Corp., No. 06-1422 (E.D. Pa. July 18, 2008). The plaintiff obtained a mortgage from the defendant, PHH Mortgage Corp., formerly known as Cendant Preferred Mortgage (CPM). CPM subsequently informed the plaintiff that she did not qualify for the mortgage, but that another mortgage with higher payments was available, which the plaintiff accepted. The plaintiff argued that CPM failed to provide in writing the reasons for denying the initial credit application, in violation of the ECOA’s written notice requirement regarding denials of credit (Section 1691(d)(2)). The court, relying on its holding in Ricciardi v Ameriquest Mortgage Co., No. 03-2995 (E.D. Pa. Mar. 15, 2004), stated that the offer to provide another mortgage, which the plaintiff accepted, constituted a counteroffer made within thirty days of a denial of credit, and was thus excluded from the ECOA’s written notice requirement. The court further reasoned, again relying on Ricciardi, that “providing” the counteroffer prior to the loan closing was sufficient, and that CPM need not “notify” the plaintiff of the counteroffer. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Soslau_v_PHH.pdf.
Pennsylvania Federal Court Finds TILA’s Extended Three-Year Rescission Period Not a Statute of Limitations. On July 23, a Pennsylvania federal district court held that the Truth in Lending Act’s (TILA) provision for an extended three-year rescission period where a material nondisclosure occurs does not constitute a statute of limitations that can be equitably tolled under discovery rules. Ocasio v. Ocwen Loan Servicing, LLC, No. 07-5410, 2008 WL 2856392 (E.D. Pa. July 23, 2008). The plaintiff in the case sued her mortgage loan servicer, alleging (among other things) TILA violations and seeking rescission. Although the plaintiff filed the action more than three years after the loan closing date, the plaintiff argued that the three-year rescission period under TILA constitutes a statute of limitations that should be equitably tolled because the defendant actively misled her regarding her cause of action. The court disagreed with this interpretation, finding that the Supreme Court’s decision in Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998), controlled this issue. In that case, the Supreme Court held that it is the right to rescind itself that expires following the three year period, rather than merely the ability to seek redress by bringing a lawsuit. Thus, the court held that the plaintiff’s rescission claim was time-barred. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Ocasio_v_Ocwen_Loan.pdf.
Pennsylvania Federal Court Holds That Litigation Documents Can Serve As Initial Communications Under FDCPA. In a recent case, a Pennsylvania federal district court held that a lender did not violate the Fair Debt Collection Practices Act (FDCPA) when it relied on a foreclosure complaint to present the “validation information” required by the Act. Oppong v. First Union Mortgage Corp., No. 02-2149 (E.D. Pa. Jul. 24, 2008). In this case, Wells Fargo Home Mortgage, Inc. (Wells Fargo) assumed the servicing of a loan to a borrower who had already defaulted and against whom the foreclosure complaint had already been filed. The foreclosure complaint included information required by the FDCPA to be delivered to a borrower in connection with debt collection. After judgment was entered against the borrower in the foreclosure action, the borrower disputed the amount of the debt for the first time. When Wells Fargo argued that the borrower failed to dispute the debt in a timely fashion according to the FDCPA, the borrower filed suit against Wells Fargo for violating the FDCPA, arguing that Wells Fargo failed to provide him with the requisite “validation information” concerning his debt. Wells Fargo argued that the foreclosure complaint, which included the necessary information, constituted an “initial notice” under the FDCPA and because it contained the validation information, complied with the law. The court agreed, stating that communications by a creditor to the debtor in the context of litigation constitute initial communications for the purposes of the FDCPA. The court also found that the foreclosure complaint contained the elements necessary to satisfy 15 U.S.C. § 1692g, and were presented in a manner that could be understood by the least sophisticated consumer, satisfying common law requirements of the FDCPA. For additional information on this case, please see http://www.buckleykolar.com/documents/Oppong_v_First_Union.pdf.
Arizona Federal Court Dismisses FACTA Truncation Suit Involving Internet Onscreen Receipt. On May 5, the U.S. District Court for the District of Arizona granted a motion to dismiss a claim alleging that the defendants violated the truncation provision of the Fair and Accurate Credit Transactions Act (FACTA) when it provided an onscreen receipt that included the expiration date of the plaintiff’s credit card. Narson v. GoDaddy.com, Inc., et al., No. 08-0177, 2008 WL 2790211 (D. Ariz. May 5, 2008). The plaintiff alleged that the defendants provided the receipt with the expiration date in violation of FACTA, 15 U.S.C. § 1681c(g). Section 1681c(g) prohibits merchants from “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” At issue in this case was whether the defendants’ providing an onscreen display of an Internet receipt, containing the expiration date of the consumer’s credit card, which may be printed by the consumer constitutes “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” The court concluded that it did not, holding that an Internet receipt which may be printed by the consumer does not fall within the scope of the statute. The court reasoned that FACTA requires the merchant “to print” the receipt in order to violate the statute. Looking to the common definition of “to print,” the court found that it means to transfer information to a tangible medium, such as paper, not to generate information that is displayed on a computer screen. As such, the court determined that the plaintiff failed to state a claim in violation of FACTA. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Narson_v_GoDaddy.pdf.
FIRM NEWS
Clint Rockwell, Kirk Jensen, Chris Witeck, and Severson & Werson partner Mark Lonergan will make joint presentations at the Lenders One Member’s Conference in Chicago, IL on August 5, 2008. The presentations will focus on recent developments in connection with RESPA, H.R. 3221, state licensing issues, litigation developments, and the proposed HOEPA rule.
Jon Jerison was the featured speaker on a Pratt audio conference entitled New Risk-Based Pricing Notice Rule: How FCRA Will Change on July 29, 2008. The conference explored key developments regarding the Fair Credit Reporting Act and analyzed how the new rule will affect lending and financial institutions. For more information, please see http://www.aspratt.com/store/50G.php.
President and Congress Act to Forestall the Housing Crisis. On July 30, President Bush signed into law the Housing and Economic Recovery Act of 2008 (H.R. 3221) (first reported in InfoBytes, May 9, 2008), a sweeping piece of legislation that, among other items, (i) reforms government sponsored enterprise (GSE) regulation, (ii) requires licensure of all loan originators, (iii) modernizes the Federal Housing Administration (FHA), and (iv) promotes private-sector loan workouts to prevent foreclosure. The new law reforms GSE regulation by disbanding the Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB) and, in their place, establishing authority under a new agency, the Federal Housing Finance Agency (FHFA). The new law gives the Director of the FHFA increased control over GSE portfolios, authority to set GSE capital requirements, and authority to take prompt corrective action to wind down a troubled GSE. The Director also has stringent oversight over new GSE products, with all new products now requiring public notice and comment and written Director approval. The law raises, on January 1, 2009, the GSE loan limit for single family housing to the greater of $417,000 or 115% of the local area median home price (capped at 150% of the GSE limit, currently $625,500).
The new law requires licensing of all loan originators by setting minimum licensing standards for states and requiring employees of federally-regulated depository institutions or their subsidiaries engaged in loan originator activities to register with the Nationwide Mortgage Licensing System and Registry. Employees that perform only administrative or clerical tasks on behalf of a loan originator are exempt from licensing or registration requirements. In addition to finger-print and background check requirements, loan originators will be required to complete 20 hours of pre-licensing education, pass a written test, and maintain 8 hours of continuing education annually. Should any state fail to enact licensing requirements within a certain time period, the law grants HUD the authority to regulate that state’s loan originators.
In an effort to assist borrowers currently in trouble and to avoid future homeownership crises, the law creates a number of changes at the FHA. Effective January 1, 2009, the FHA can insure mortgages with principal amounts up to the revised GSE limits. However, a number of new restrictions go into effect October 1, 2008, including a required 3.5% down payment, a prohibition on seller-funded down payment assistance, and a limitation on the amount of the loan to 100% of the value of the property. There is a one-year moratorium, beginning October 1, 2008, on risk-based premiums for FHA insured loans. The law also changes FHA Home Equity Conversion (Reverse) Mortgage rules, raising the loan limit and capping origination fees. In addition, parties to the origination of a reverse mortgage cannot be associated with any other financial or insurance activity unless there are appropriate firewalls to prevent potential influence.
The new law authorizes the FHA to insure up to $300 billion to refinance mortgages originated on or before January 1, 2008 into long-term fixed rate mortgages. “Rescue loans” are capped at $550,440 and, to be eligible, borrowers must have had a debt-to-income ratio of greater than 31% as of March 1, 2008 and the property must be owner-occupied and the only residence the borrower owns any stake in. The lender must agree to waive fees related to default or refinancing and subordinated liens must be extinguished through negotiations with the first lien holder. With respect to loan servicers, the law creates a duty to maximize the net present value of pooled mortgages, deeming servicers to act in the best interests of all investors and parties if they agree to implement a modification or workout plan where the recovery on the outstanding principal, as a result of modification, is greater than the anticipated recovery through foreclosure. Other provisions seeking to limit the likelihood and effects of foreclosures include a $4 billion authorization of money to state and local governments to upkeep foreclosed properties, various tax provisions easing the burden of homeownership and new TILA disclosure requirements.
Under a HOPE for HOMEOWNERS program, the law encourages the private sector to refinance struggling homeowners whose existing mortgage was originated on or before January 1, 2008 into long-term fixed rate mortgages, authorizing FHA to insure up to $300 billion in mortgages that meet specific criteria. “Rescue loans” are capped at $550,440 and, to be eligible, borrowers must generally have had a debt-to-income ratio of greater than 31% as of March 1, 2008 and the property must be owner-occupied and the only residence the borrower owns any stake in. Most significantly, the existing loan holder must accept as full payoff of the existing loan the refinanced loan amount, which is based on the borrower’s repayment ability and may not exceed 90 % of the current appraised value. Moreover, the refinanced loan amount is further reduced by a 3 % upfront mortgage insurance premium payment to HUD. The lender must agree to waive fees related to default or refinancing and subordinated liens must be extinguished through negotiations with the first lien holder. Any equity appreciation realized by the borrower must be shared with the FHA over a 5 year schedule.
With respect to loan servicers, the law creates a duty to maximize the net present value of pooled mortgages, deeming servicers to act in the best interests of all investors and parties if they agree to implement a modification or workout plan where the recovery on the outstanding principal as a result of modification is greater than the anticipated recovery through foreclosure. Other provisions seeking to limit the likelihood and effects of foreclosures include a $4 billion authorization of money to state and local governments to upkeep foreclosed properties, various tax provisions easing the burden of homeownership and new TILA disclosure requirements.
Lastly, the law offers protections to servicemembers of the U.S. armed forces by temporarily increasing Veterans Affairs-guaranteed loan limits and extending from 90 days to 9 months the stay of foreclosure following discharge from military service. These provisions sunset on December 31, 2010. The 6% mortgage interest-rate cap for active servicemembers now terminates one year after active duty.
For a copy of H.R. 3221 as signed by the President, please see http://www.buckleykolar.com/documents/H.R.3221--Final.pdf.
HUD Inspector General Finds RESPA Violation for Improper Broker Incentives. On July 14, the Department of Housing and Urban Development’s (HUD) Office of the Inspector General issued a report concluding that First Magnus Financial Corporation (First Magnus) violated the Real Estate Settlement Procedures Act (RESPA) when it paid brokers volume-based incentives. First Magnus, a Federal Housing Administration (FHA) approved nonsupervised lender operating out of Tucson, Arizona, issued $58,571 in incentive payments for the period between January 1, 2003 and December 31, 2005. The report asserts that the incentive compensation structure violated RESPA because the incentives were deemed inducements associated with the referrals of brokered FHA mortgages. Although First Magnus closed and filed for bankruptcy on August 21, 2007, the report recommends that FHA require the company to, (i) discontinue its incentive program, (ii) remove the company from active mortgagee status and (iii) take administrative actions against the principal owners and management. For a copy of HUD’s audit report, please see http://www.hud.gov/offices/oig/reports/files/ig0891013.pdf.
Pennsylvania Banking Department to Require Licenses for Internet Payday Lenders. On July 28, the Pennsylvania Banking Department (Department) announced its intention to license Internet payday lenders and other out-of-state companies making consumer loans to Pennsylvania residents. The Department’s previous interpretation of the Pennsylvania Consumer Discount Company Act (CDCA) only required companies with a physical location or employees in the commonwealth to seek licensure, thereby allowing loans via the internet or mail to occur outside the limitations of the CDCA. The Department’s amended position will require any company offering non-mortgage loans of $25,000 or less to Pennsylvania consumers to become licensed under the CDCA. Moreover, licensees must comply with the CDCA’s limits on interest and fees that the licensee can charge. Affected lenders have until February 1, 2009 to obtain a license. For a copy of the press release, please see http://www.banking.state.pa.us/banking/lib/banking/news_and_events/banking_cdca_letter_072808.pdf.
Massachusetts AG and Loan Servicer Enter Agreement Regarding Fremont Loans. On July 31, the Massachusetts Attorney General and WMD Capital Markets, LLC (WMD) entered into an agreement to restructure loans originated by Fremont Investment & Loan (Fremont). WMD specifically agreed to (i) reset the applicable interest rate to the borrowers’ introductory rate, (ii) issue a loan credit and one-time charge-off of origination fees, unpaid past due interest, unpaid late charges, and all unreimbursed corporate and property-related advances (including all foreclosure and litigation costs) once eligible borrowers make their first payment on their revised loan, (iii) further reduce the monthly payment to a level that the borrower can afford for up to three years for eligible borrowers who cannot afford monthly payments at their introductory interest rate, and (iv) offer delinquent borrowers a relocation payment for one year after the agreement. Borrowers will have the option of either pursuing a loan modification or accepting a relocation payment, which is designed to help those borrowers who are unable to afford their mortgage loan, even after a downward adjustment of the monthly payment. The Attorney General’s press release announcing the agreement asserts that the agreement comports with the expanded injunction prohibiting Fremont from assigning or selling Massachusetts loans owned by the company, or the servicing obligations on those loans, unless the buyer agrees in writing to be bound by the obligations set forth in the original injunction against Fremont. For a copy of the Massachusetts Attorney General’s press releasing detailing the agreement, please see http://www.mass.gov/?pageID=cagopressrelease&L=1&L0=Home&sid=Cago&b= pressrelease&f=2008_07_31_fremont_wmd&csid=Cago.
New Hampshire Passes Mortgage Servicing Companies Act. Recently, New Hampshire Governor John Lynch signed S.B. 439, the Mortgage Servicing Companies Act. The Act pertains to money transmitters and mortgage servicing companies. Among other items, the new law requires, (i) the registration of mortgage servicers who service second mortgage loans, (ii) applicants to maintain a minimum net worth requirement "of the lesser of its average daily outstanding money transmissions for the prior calendar year or $1,000,000," and (iii) requires licensed money transmitters to implement education and programs designed to inform "authorized delegates" of responsibilities "consistent with the Bank Secrecy Act and the requirements to file reports required by federal law." The Act becomes effective January 1, 2009. For a copy of the Act, please see http://www.gencourt.state.nh.us/legislation/2008/SB0439.html.
Pennsylvania Federal Court Grants Motion to Dismiss in Foreclosure Case Based on Rooker-Feldman Doctrine. On July 23, the United States District Court for the Eastern District of Pennsylvania granted a defendant lenders’ motion to dismiss, finding that, (i) the Rooker-Feldman Doctrine and res judicata barred the plaintiff borrower’s claims attempting to challenge and relitigate the state default foreclosure judgment against her, (ii) the Rooker-Feldman Doctrine barred the plaintiff’s claims for rescission (but not monetary damages) under the Truth in Lending Act (TILA), Homeownership and Equity Protection Act (HOEPA), and Real Estate Settlement Procedures Act (RESPA), and (iii) the statute of limitations barred the plaintiff’s request for monetary damages under TILA, HOEPA, and RESPA. Laychock v. Wells Fargo Home Mortgage, No. 07-4478, 2008 WL 2890962 (E.D. Pa. July 23, 2008). In 2007, defendant Wachovia filed a foreclosure complaint in the Philadelphia Court of Common Pleas against the plaintiff. The plaintiff then petitioned the Court of Common Pleas to open the default judgment, and while such petition was pending, the plaintiff filed the federal lawsuit against defendants Wachovia and Wells Fargo alleging 14 state and federal violations, including the following: wrongful use of civil proceedings; abuse of process; breach of contract; two counts of negligence; fraud/fraud on the court; Unfair Trade Practices Consumer Protection Law (UTCPL); TILA; HOEPA; RESPA; Fair Credit Reporting Act (FCRA); Fair Credit Extension Uniformity Act (FCEIA); Civil Rights (Section 1983); and Slander of Title. The court found that the Rooker-Feldman Doctrine, which “prevents ‘inferior’ federal courts from sitting as appellate courts for state court judgments,” barred 11 of the plaintiff’s claims. The Doctrine barred the plaintiff’s claims and request for rescission because such claims require the court to find that the state court was wrong in its foreclosure, and thus the federal court did not have jurisdiction with respect to these claims. Res judicata also precluded these claims and the relevant statute of limitations barred the remaining TILA, HOEPA, and RESPA monetary claims. For a copy of this opinion, please see http://www.buckleykolar.com/documents/Laychock_v_Wells_Fargo.pdf.
Pennsylvania Federal Court Grants Motion to Dismiss ECOA Claim. On July 18, a Pennsylvania federal district court granted a defendant’s motion to dismiss a claim arising under the Equal Credit Opportunity Act (ECOA), affirming that a counteroffer made within thirty days is not an “adverse action” subject to the written notification requirement of the ECOA. Soslau v. PHH Mortgage Corp., No. 06-1422 (E.D. Pa. July 18, 2008). The plaintiff obtained a mortgage from the defendant, PHH Mortgage Corp., formerly known as Cendant Preferred Mortgage (CPM). CPM subsequently informed the plaintiff that she did not qualify for the mortgage, but that another mortgage with higher payments was available, which the plaintiff accepted. The plaintiff argued that CPM failed to provide in writing the reasons for denying the initial credit application, in violation of the ECOA’s written notice requirement regarding denials of credit (Section 1691(d)(2)). The court, relying on its holding in Ricciardi v Ameriquest Mortgage Co., No. 03-2995 (E.D. Pa. Mar. 15, 2004), stated that the offer to provide another mortgage, which the plaintiff accepted, constituted a counteroffer made within thirty days of a denial of credit, and was thus excluded from the ECOA’s written notice requirement. The court further reasoned, again relying on Ricciardi, that “providing” the counteroffer prior to the loan closing was sufficient, and that CPM need not “notify” the plaintiff of the counteroffer. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Soslau_v_PHH.pdf.
Pennsylvania Federal Court Finds TILA’s Extended Three-Year Rescission Period Not a Statute of Limitations. On July 23, a Pennsylvania federal district court held that the Truth in Lending Act’s (TILA) provision for an extended three-year rescission period where a material nondisclosure occurs does not constitute a statute of limitations that can be equitably tolled under discovery rules. Ocasio v. Ocwen Loan Servicing, LLC, No. 07-5410, 2008 WL 2856392 (E.D. Pa. July 23, 2008). The plaintiff in the case sued her mortgage loan servicer, alleging (among other things) TILA violations and seeking rescission. Although the plaintiff filed the action more than three years after the loan closing date, the plaintiff argued that the three-year rescission period under TILA constitutes a statute of limitations that should be equitably tolled because the defendant actively misled her regarding her cause of action. The court disagreed with this interpretation, finding that the Supreme Court’s decision in Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998), controlled this issue. In that case, the Supreme Court held that it is the right to rescind itself that expires following the three year period, rather than merely the ability to seek redress by bringing a lawsuit. Thus, the court held that the plaintiff’s rescission claim was time-barred. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Ocasio_v_Ocwen_Loan.pdf.
Treasury Issues Best Practices for Residential Covered Bonds. On July 28, the U.S. Treasury Department issued a guide, titled “Best Practices for Residential Covered Bonds,” to encourage the growth of the domestic covered bond market. According to the Treasury Department, these best practices are intended to clarify and unify the developing market for covered bonds. Covered bonds are securities that provide liquidity to depository institutions, which are collateralized by high-quality mortgage loans that remain on the issuing institution’s balance sheet. The Treasury states that these types of securities may potentially increase available funds for mortgage lending by offering a new funding source and diversifying institutions’ funding portfolio. A large market for covered bonds exists in Europe, but only two U.S. institutions currently issue covered bonds. In conjunction with the best practices, the Treasury will revise its collateral acceptability policy to include covered bonds as an approved asset category for securing the Treasury's investments and deposits of public money with commercial counterparties. These best practices will serve as a complement to the FDIC’s final policy statement. A copy of the best practices guide is available at http://www.treas.gov/press/releases/reports/USCoveredBondBestPractices.pdf, and the Treasury’s press release is available at http://www.ustreas.gov/press/releases/hp1102.htm.
OCC Closes Two Banks. On July 25, the Office of the Comptroller of the Currency (OCC) closed First National Bank of Nevada of Reno, Nevada, and First Heritage Bank, N.A. of Newport Beach, California. The Federal Deposit Insurance Corporation (FDIC) was named receiver and entered into purchase and assumption agreements with Mutual of Omaha Bank of Omaha, Nebraska. The two banks reopened on July 25, 2008 as Mutual of Omaha Bank. For a copy of the FDIC press release, please see http://www.fdic.gov/news/news/press/2008/pr08063.html
OCC Confirms Usury Rate Guidance For Bank Operating Subsidiaries. In July, the Office of the Comptroller of the Currency (OCC) published a letter on its website confirming that an operating subsidiary of a bank authorized under 12 C.F.R. § 5.34 looks to the laws of its parent bank’s home state when determining the fees and interest rates that it may impose and export, without regard to usury laws in the borrower’s state of residence. The interpretation applies even when the operating subsidiary has no office in the parent’s home state. For a copy of the OCC’s letter, please see http://www.occ.treas.gov/interp/jul08/int1100.pdf.
New York Permits Out-of-State Banks to Branch De Novo into New York. On July 21, New York Governor David A. Paterson signed A.11031, a bill allowing out-of-state banks to branch de novo into New York, provided that the out-of-state bank has a principal office in a state which allows New York banks, trust companies and savings banks to branch de novo within that state. The bill alleviates the need for eligible out-of-state banks to merge with or acquire the assets of a local bank in order to enter into New York. The bill is effective immediately. For a copy of the bill, please see http://assembly.state.ny.us/leg/?bn=A11031&sh=t.
Connecticut Attorney General Sues Credit Rating Agencies Alleging Deceptive and Unfair Issuance of Lower Ratings to Municipalities. On July 30, Attorney General Richard Blumenthal, in coordination with the Connecticut Department of Consumer Protection, filed charges against national credit rating agencies, Moody’s Corporation, Fitch, Inc. and The McGraw-Hill Companies (Standard & Poor’s parent company) for allegedly providing municipalities (i.e., cities, towns, school districts and other public entities) with deceptive and deflated credit ratings. The complaints allege that the credit rating agencies “systematically and intentionally” gave lower credit rating to bonds issued to municipalities as compared to corporate and other forms of debt with comparable or even inferior rates of default. Blumenthal further alleges that these artificially low interest rates have cost Connecticut taxpayers millions of dollars in unnecessary bond insurance and higher interest rates. For a copy of the press release and the complaints, please see http://www.ct.gov/ag/cwp/view.asp?Q=420390&A=2795.
Pennsylvania Federal Court Holds That Litigation Documents Can Serve As Initial Communications Under FDCPA. In a recent case, a Pennsylvania federal district court held that a lender did not violate the Fair Debt Collection Practices Act (FDCPA) when it relied on a foreclosure complaint to present the “validation information” required by the Act. Oppong v. First Union Mortgage Corp., No. 02-2149 (E.D. Pa. Jul. 24, 2008). In this case, Wells Fargo Home Mortgage, Inc. (Wells Fargo) assumed the servicing of a loan to a borrower who had already defaulted and against whom the foreclosure complaint had already been filed. The foreclosure complaint included information required by the FDCPA to be delivered to a borrower in connection with debt collection. After judgment was entered against the borrower in the foreclosure action, the borrower disputed the amount of the debt for the first time. When Wells Fargo argued that the borrower failed to dispute the debt in a timely fashion according to the FDCPA, the borrower filed suit against Wells Fargo for violating the FDCPA, arguing that Wells Fargo failed to provide him with the requisite “validation information” concerning his debt. Wells Fargo argued that the foreclosure complaint, which included the necessary information, constituted an “initial notice” under the FDCPA and because it contained the validation information, complied with the law. The court agreed, stating that communications by a creditor to the debtor in the context of litigation constitute initial communications for the purposes of the FDCPA. The court also found that the foreclosure complaint contained the elements necessary to satisfy 15 U.S.C. § 1692g, and were presented in a manner that could be understood by the least sophisticated consumer, satisfying common law requirements of the FDCPA. For additional information on this case, please see http://www.buckleykolar.com/documents/Oppong_v_First_Union.pdf.
Arizona Federal Court Dismisses FACTA Truncation Suit Involving Internet Onscreen Receipt. On May 5, the U.S. District Court for the District of Arizona granted a motion to dismiss a claim alleging that the defendants violated the truncation provision of the Fair and Accurate Credit Transactions Act (FACTA) when it provided an onscreen receipt that included the expiration date of the plaintiff’s credit card. Narson v. GoDaddy.com, Inc., et al., No. 08-0177, 2008 WL 2790211 (D. Ariz. May 5, 2008). The plaintiff alleged that the defendants provided the receipt with the expiration date in violation of FACTA, 15 U.S.C. § 1681c(g). Section 1681c(g) prohibits merchants from “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” At issue in this case was whether the defendants’ providing an onscreen display of an Internet receipt, containing the expiration date of the consumer’s credit card, which may be printed by the consumer constitutes “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” The court concluded that it did not, holding that an Internet receipt which may be printed by the consumer does not fall within the scope of the statute. The court reasoned that FACTA requires the merchant “to print” the receipt in order to violate the statute. Looking to the common definition of “to print,” the court found that it means to transfer information to a tangible medium, such as paper, not to generate information that is displayed on a computer screen. As such, the court determined that the plaintiff failed to state a claim in violation of FACTA. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Narson_v_GoDaddy.pdf.
Massachusetts AG and Loan Servicer Enter Agreement Regarding Fremont Loans. On July 31, the Massachusetts Attorney General and WMD Capital Markets, LLC (WMD) entered into an agreement to restructure loans originated by Fremont Investment & Loan (Fremont). WMD specifically agreed to (i) reset the applicable interest rate to the borrowers’ introductory rate, (ii) issue a loan credit and one-time charge-off of origination fees, unpaid past due interest, unpaid late charges, and all unreimbursed corporate and property-related advances (including all foreclosure and litigation costs) once eligible borrowers make their first payment on their revised loan, (iii) further reduce the monthly payment to a level that the borrower can afford for up to three years for eligible borrowers who cannot afford monthly payments at their introductory interest rate, and (iv) offer delinquent borrowers a relocation payment for one year after the agreement. Borrowers will have the option of either pursuing a loan modification or accepting a relocation payment, which is designed to help those borrowers who are unable to afford their mortgage loan, even after a downward adjustment of the monthly payment. The Attorney General’s press release announcing the agreement asserts that the agreement comports with the expanded injunction prohibiting Fremont from assigning or selling Massachusetts loans owned by the company, or the servicing obligations on those loans, unless the buyer agrees in writing to be bound by the obligations set forth in the original injunction against Fremont. For a copy of the Massachusetts Attorney General’s press releasing detailing the agreement, please see http://www.mass.gov/?pageID=cagopressrelease&L=1&L0=Home&sid=Cago&b= pressrelease&f=2008_07_31_fremont_wmd&csid=Cago.
Pennsylvania Federal Court Grants Motion to Dismiss in Foreclosure Case Based on Rooker-Feldman Doctrine. On July 23, the United States District Court for the Eastern District of Pennsylvania granted a defendant lenders’ motion to dismiss, finding that, (i) the Rooker-Feldman Doctrine and res judicata barred the plaintiff borrower’s claims attempting to challenge and relitigate the state default foreclosure judgment against her, (ii) the Rooker-Feldman Doctrine barred the plaintiff’s claims for rescission (but not monetary damages) under the Truth in Lending Act (TILA), Homeownership and Equity Protection Act (HOEPA), and Real Estate Settlement Procedures Act (RESPA), and (iii) the statute of limitations barred the plaintiff’s request for monetary damages under TILA, HOEPA, and RESPA. Laychock v. Wells Fargo Home Mortgage, No. 07-4478, 2008 WL 2890962 (E.D. Pa. July 23, 2008). In 2007, defendant Wachovia filed a foreclosure complaint in the Philadelphia Court of Common Pleas against the plaintiff. The plaintiff then petitioned the Court of Common Pleas to open the default judgment, and while such petition was pending, the plaintiff filed the federal lawsuit against defendants Wachovia and Wells Fargo alleging 14 state and federal violations, including the following: wrongful use of civil proceedings; abuse of process; breach of contract; two counts of negligence; fraud/fraud on the court; Unfair Trade Practices Consumer Protection Law (UTCPL); TILA; HOEPA; RESPA; Fair Credit Reporting Act (FCRA); Fair Credit Extension Uniformity Act (FCEIA); Civil Rights (Section 1983); and Slander of Title. The court found that the Rooker-Feldman Doctrine, which “prevents ‘inferior’ federal courts from sitting as appellate courts for state court judgments,” barred 11 of the plaintiff’s claims. The Doctrine barred the plaintiff’s claims and request for rescission because such claims require the court to find that the state court was wrong in its foreclosure, and thus the federal court did not have jurisdiction with respect to these claims. Res judicata also precluded these claims and the relevant statute of limitations barred the remaining TILA, HOEPA, and RESPA monetary claims. For a copy of this opinion, please see http://www.buckleykolar.com/documents/Laychock_v_Wells_Fargo.pdf.
Pennsylvania Federal Court Grants Motion to Dismiss ECOA Claim. On July 18, a Pennsylvania federal district court granted a defendant’s motion to dismiss a claim arising under the Equal Credit Opportunity Act (ECOA), affirming that a counteroffer made within thirty days is not an “adverse action” subject to the written notification requirement of the ECOA. Soslau v. PHH Mortgage Corp., No. 06-1422 (E.D. Pa. July 18, 2008). The plaintiff obtained a mortgage from the defendant, PHH Mortgage Corp., formerly known as Cendant Preferred Mortgage (CPM). CPM subsequently informed the plaintiff that she did not qualify for the mortgage, but that another mortgage with higher payments was available, which the plaintiff accepted. The plaintiff argued that CPM failed to provide in writing the reasons for denying the initial credit application, in violation of the ECOA’s written notice requirement regarding denials of credit (Section 1691(d)(2)). The court, relying on its holding in Ricciardi v Ameriquest Mortgage Co., No. 03-2995 (E.D. Pa. Mar. 15, 2004), stated that the offer to provide another mortgage, which the plaintiff accepted, constituted a counteroffer made within thirty days of a denial of credit, and was thus excluded from the ECOA’s written notice requirement. The court further reasoned, again relying on Ricciardi, that “providing” the counteroffer prior to the loan closing was sufficient, and that CPM need not “notify” the plaintiff of the counteroffer. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Soslau_v_PHH.pdf.
Pennsylvania Federal Court Finds TILA’s Extended Three-Year Rescission Period Not a Statute of Limitations. On July 23, a Pennsylvania federal district court held that the Truth in Lending Act’s (TILA) provision for an extended three-year rescission period where a material nondisclosure occurs does not constitute a statute of limitations that can be equitably tolled under discovery rules. Ocasio v. Ocwen Loan Servicing, LLC, No. 07-5410, 2008 WL 2856392 (E.D. Pa. July 23, 2008). The plaintiff in the case sued her mortgage loan servicer, alleging (among other things) TILA violations and seeking rescission. Although the plaintiff filed the action more than three years after the loan closing date, the plaintiff argued that the three-year rescission period under TILA constitutes a statute of limitations that should be equitably tolled because the defendant actively misled her regarding her cause of action. The court disagreed with this interpretation, finding that the Supreme Court’s decision in Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998), controlled this issue. In that case, the Supreme Court held that it is the right to rescind itself that expires following the three year period, rather than merely the ability to seek redress by bringing a lawsuit. Thus, the court held that the plaintiff’s rescission claim was time-barred. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Ocasio_v_Ocwen_Loan.pdf.
Pennsylvania Federal Court Holds That Litigation Documents Can Serve As Initial Communications Under FDCPA. In a recent case, a Pennsylvania federal district court held that a lender did not violate the Fair Debt Collection Practices Act (FDCPA) when it relied on a foreclosure complaint to present the “validation information” required by the Act. Oppong v. First Union Mortgage Corp., No. 02-2149 (E.D. Pa. Jul. 24, 2008). In this case, Wells Fargo Home Mortgage, Inc. (Wells Fargo) assumed the servicing of a loan to a borrower who had already defaulted and against whom the foreclosure complaint had already been filed. The foreclosure complaint included information required by the FDCPA to be delivered to a borrower in connection with debt collection. After judgment was entered against the borrower in the foreclosure action, the borrower disputed the amount of the debt for the first time. When Wells Fargo argued that the borrower failed to dispute the debt in a timely fashion according to the FDCPA, the borrower filed suit against Wells Fargo for violating the FDCPA, arguing that Wells Fargo failed to provide him with the requisite “validation information” concerning his debt. Wells Fargo argued that the foreclosure complaint, which included the necessary information, constituted an “initial notice” under the FDCPA and because it contained the validation information, complied with the law. The court agreed, stating that communications by a creditor to the debtor in the context of litigation constitute initial communications for the purposes of the FDCPA. The court also found that the foreclosure complaint contained the elements necessary to satisfy 15 U.S.C. § 1692g, and were presented in a manner that could be understood by the least sophisticated consumer, satisfying common law requirements of the FDCPA. For additional information on this case, please see http://www.buckleykolar.com/documents/Oppong_v_First_Union.pdf.
Arizona Federal Court Dismisses FACTA Truncation Suit Involving Internet Onscreen Receipt. On May 5, the U.S. District Court for the District of Arizona granted a motion to dismiss a claim alleging that the defendants violated the truncation provision of the Fair and Accurate Credit Transactions Act (FACTA) when it provided an onscreen receipt that included the expiration date of the plaintiff’s credit card. Narson v. GoDaddy.com, Inc., et al., No. 08-0177, 2008 WL 2790211 (D. Ariz. May 5, 2008). The plaintiff alleged that the defendants provided the receipt with the expiration date in violation of FACTA, 15 U.S.C. § 1681c(g). Section 1681c(g) prohibits merchants from “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” At issue in this case was whether the defendants’ providing an onscreen display of an Internet receipt, containing the expiration date of the consumer’s credit card, which may be printed by the consumer constitutes “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” The court concluded that it did not, holding that an Internet receipt which may be printed by the consumer does not fall within the scope of the statute. The court reasoned that FACTA requires the merchant “to print” the receipt in order to violate the statute. Looking to the common definition of “to print,” the court found that it means to transfer information to a tangible medium, such as paper, not to generate information that is displayed on a computer screen. As such, the court determined that the plaintiff failed to state a claim in violation of FACTA. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Narson_v_GoDaddy.pdf.
Arizona Federal Court Dismisses FACTA Truncation Suit Involving Internet Onscreen Receipt. On May 5, the U.S. District Court for the District of Arizona granted a motion to dismiss a claim alleging that the defendants violated the truncation provision of the Fair and Accurate Credit Transactions Act (FACTA) when it provided an onscreen receipt that included the expiration date of the plaintiff’s credit card. Narson v. GoDaddy.com, Inc., et al., No. 08-0177, 2008 WL 2790211 (D. Ariz. May 5, 2008). The plaintiff alleged that the defendants provided the receipt with the expiration date in violation of FACTA, 15 U.S.C. § 1681c(g). Section 1681c(g) prohibits merchants from “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” At issue in this case was whether the defendants’ providing an onscreen display of an Internet receipt, containing the expiration date of the consumer’s credit card, which may be printed by the consumer constitutes “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” The court concluded that it did not, holding that an Internet receipt which may be printed by the consumer does not fall within the scope of the statute. The court reasoned that FACTA requires the merchant “to print” the receipt in order to violate the statute. Looking to the common definition of “to print,” the court found that it means to transfer information to a tangible medium, such as paper, not to generate information that is displayed on a computer screen. As such, the court determined that the plaintiff failed to state a claim in violation of FACTA. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Narson_v_GoDaddy.pdf.
Arizona Federal Court Dismisses FACTA Truncation Suit Involving Internet Onscreen Receipt. On May 5, the U.S. District Court for the District of Arizona granted a motion to dismiss a claim alleging that the defendants violated the truncation provision of the Fair and Accurate Credit Transactions Act (FACTA) when it provided an onscreen receipt that included the expiration date of the plaintiff’s credit card. Narson v. GoDaddy.com, Inc., et al., No. 08-0177, 2008 WL 2790211 (D. Ariz. May 5, 2008). The plaintiff alleged that the defendants provided the receipt with the expiration date in violation of FACTA, 15 U.S.C. § 1681c(g). Section 1681c(g) prohibits merchants from “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” At issue in this case was whether the defendants’ providing an onscreen display of an Internet receipt, containing the expiration date of the consumer’s credit card, which may be printed by the consumer constitutes “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” The court concluded that it did not, holding that an Internet receipt which may be printed by the consumer does not fall within the scope of the statute. The court reasoned that FACTA requires the merchant “to print” the receipt in order to violate the statute. Looking to the common definition of “to print,” the court found that it means to transfer information to a tangible medium, such as paper, not to generate information that is displayed on a computer screen. As such, the court determined that the plaintiff failed to state a claim in violation of FACTA. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Narson_v_GoDaddy.pdf.
Arizona Federal Court Dismisses FACTA Truncation Suit Involving Internet Onscreen Receipt. On May 5, the U.S. District Court for the District of Arizona granted a motion to dismiss a claim alleging that the defendants violated the truncation provision of the Fair and Accurate Credit Transactions Act (FACTA) when it provided an onscreen receipt that included the expiration date of the plaintiff’s credit card. Narson v. GoDaddy.com, Inc., et al., No. 08-0177, 2008 WL 2790211 (D. Ariz. May 5, 2008). The plaintiff alleged that the defendants provided the receipt with the expiration date in violation of FACTA, 15 U.S.C. § 1681c(g). Section 1681c(g) prohibits merchants from “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” At issue in this case was whether the defendants’ providing an onscreen display of an Internet receipt, containing the expiration date of the consumer’s credit card, which may be printed by the consumer constitutes “print[ing] more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” The court concluded that it did not, holding that an Internet receipt which may be printed by the consumer does not fall within the scope of the statute. The court reasoned that FACTA requires the merchant “to print” the receipt in order to violate the statute. Looking to the common definition of “to print,” the court found that it means to transfer information to a tangible medium, such as paper, not to generate information that is displayed on a computer screen. As such, the court determined that the plaintiff failed to state a claim in violation of FACTA. For a copy of the opinion, please see http://www.buckleykolar.com/documents/Narson_v_GoDaddy.pdf.
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