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InfoBytes
CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
House Passes Mortgage Restructuring Tax Exemption. On October 4, the House of Representatives passed the Mortgage Forgiveness Debt Relief Act (H.R. 3648) which, if enacted, would prevent the benefits of mortgage debt restructuring from being considered “income” for tax purposes. The bill also grants a tax exemption for mortgage insurance premiums on contracts issued before January 1, 2007. The bill was introduced September 25, passed by committee the next day, and later was passed by the full house by a vote of 386 to 27. It has now been reported to the Senate. For more information, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03648:.
Agencies Propose Joint Rule on Internet Gambling. On October 1, the Department of the Treasury and the Federal Reserve Board proposed a rule to enforce the Unlawful Internet Gambling Enforcement Act (reported in the October 6, 2006 issue of InfoBytes). The rules require all non-exempt participants in “designated payment systems” to “establish and implement written policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit” financial transactions unlawful under the act. Under the proposed rule “unlawful Internet gambling” is defined to be any bet or wager made in a jurisdiction where gambling is illegal, but notes that the intermediate route of such electronic data will not be considered when determining the legality of the wager where it was made. The rules define the “designated payment systems” scrutinized by the act to be (i) automated clearing house systems, (ii) card systems, (iii) check collections systems, (iv) money transmitting businesses, and (v) wire transfer systems. The rule further provides nonexclusive examples of policies and procedures designed to prevent restricted transactions. Comments must be received on or before December 12, 2007. For a full copy of this proposed rule, see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20071001a1.pdf.
FTC Allows Consumer Notification of Ceased Debt Collection. On October 5, 2007, the Federal Trade Commission (FTC) issued an advisory opinion that debt collectors may notify consumers that collection efforts have ceased in compliance with the Fair Debt Collection Practices Act (FDCPA). ACA International, a debt collection trade association, asked the FTC to consider whether consumers should be notified that collection activities have ceased where the consumer has disputed the debt under Section 809 and the debt collector was unable to verify the debt. Considering the purpose of Section 809 was to protect the consumer from further contact with the debt collector unless the consumer owed the debt, the FTC concluded that consumer notification of the debt collector’s inability to verify the debt would further the purpose of the statute. The FTC further noted that Section 805(c) of the FDCPA contained an express provision allowing debt collectors to advise consumers that collection activities have ceased. For the official FTC advisory opinion, please see http://www.ftc.gov/os/closings/staff/P064803fairdebt.pdf.
FTC Intends to Issue Final FACTA Rules Next Week. On October 16, the Board of Governor’s of the Federal Deposit Insurance Corporation (FDIC) intends to vote on final rules under the Fair and Accurate Credit Transactions Act (FACTA) regarding affiliate marketing and identity theft red flags. The FDIC proposed rules regarding affiliate marketing in July 2004 implementing FACTA’s requirement consumers be granted an “opt-out” of information sharing agreements for marketing purposes between affiliated companies (reported in the July 16, 2004 issue of InfoBytes). The FDIC also proposed rules regarding red flags in July 2006 that would require financial institutions to develop systems for detecting identity theft (reported in the July 21, 2006 issue of InfoBytes). For more on the Board of Governor’s itinerary for its next meeting, see http://www.fdic.gov/news/board/notice16Oct2007.html.
Proposed Guidance for Garnishment of Exempt Federal Benefits. The federal banking agencies (OCC, FRB, FDIC, OTS, and NCUA) recently proposed joint guidance to protect exempt federal benefit payments from garnishment. Financial institutions often comply with garnishment orders by freezing accounts, denying access to federal benefit funds, such as social security or federal government pensions, which are generally exempt from federal garnishment orders. The proposed guidance outlines best practices to prevent financial institutions from unlawfully freezing exempt funds. The guidance also seeks industry comments regarding practices and procedures that would mitigate consumer harm when garnishment orders are placed on accounts with some federally exempt assets. Comments are due by November 27, 2007. For a full copy of the proposed rule, please see http://www.ots.treas.gov/docs/4/480998.pdf.
FinCEN Issues Guidance on Common SAR Errors. On October 10, the Financial Crimes Enforcement Network (FinCEN) issued “suggestions” for remedying the ten most common errors in filing suspicious activity reports (SARs). The topics discussed focused on (i) the importance of a complete SAR narrative identifying who, what, when, where, and why, (ii) taking care to complete “field of critical value” such as EINs and government-issued identification documentation, and (iii) identifying the category and character of the suspicious activity. The guidance was based on the study of Money Services Businesses’ filings, but FinCEN felt it could be “informative to financial institutions in other industries in their efforts to implement simple strategies to provide accurate and complete SAR filings.” To view the guidance, please see http://www.fincen.gov/SAR_Common_Errors_Web_Posting.html.
House Passes Affordable Housing Trust Legislation. On October 10, the U.S. House of Representatives passed the National Affordable Housing Trust Fund Act (H.R. 2895) which, if enacted, would establish a fund for federal housing projects and subsidies paid for by fees levied on Fannie Mae and Freddie Mac (discussed in the May 25th issue of InfoBytes) as wells as in connection with some Federal Housing Administration programs. The bill outlines how the fund would allocate and provide assistance to states, Indian tribes, and local communities based on various indices of, among other things, poverty, housing availability, and housing costs. For more information, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.02895:.
STATE ISSUES
Wisconsin Introduces Law Restricting Trigger Leads. On September 27, SB 275 was introduced in the Wisconsin State Senate which, if enacted, would prohibit the furnishing or use of “trigger leads” that are not “consumer reports” as defined in the federal Fair Credit Reporting Act (FCRA). The bill would also prohibit persons who use trigger leads that meet the definition of a “consumer report” from engaging in unfair or deceptive practices, including a specific list of practices such as “failing to state in the initial phase of the solicitation” that the person is not the lender or affiliated with the lender. A trigger lead is defined generally as non-public information provided to a third party indicating that a consumer has applied for credit and providing a name and address, telephone number, or other identifying information. The distinction between a consumer report and other information that does not meet the FCRA definition is apparently intended to avoid preemption under FCRA, which was the fate of a Minnesota law that purported to restrict the use of trigger leads that are “consumer reports.” See Consumer Data Industry Ass’n v. Swanson, No. 07-CV-3376 (PJS/JJG), 2007 WL 2219389 (D. Minn. July 30, 2007), discussed in the August 10, 2007, issue of InfoBytes. For more information on this bill, please see http://www.legis.state.wi.us/2007/data/SB275hst.html.
COURTS
General Liability Waiver Does Not Waive TILA Rights. On October 9, the U.S. District Court for the Western District of Michigan (Vermurlen v. Ameriquest Mortgage Co., 2007 U.S. Dist. LEXIS 75070 (W.D. Mich. Oct. 9, 2007)) ruling on a motion for summary judgment determined that the borrower received notice of the right to rescind the loan as required by TILA, even though the lender used Federal Reserve Board Model Form H-8 rather than H-9 and also voluntarily extended the TILA rescission requirement from 3 days to 7 days. The court concluded that the borrower was clearly and unambiguously notified of the statutory right to rescind and that this right was contractually extended to 7 days. The defendants also argued that a forbearance agreement entered into after a subsequent default generally releasing the lender of any liability stemming from the original loan transaction constituted a waiver by the plaintiff’s of their right to bring suit under TILA. In dismissing this argument, the court followed precedent holding that TILA rights cannot be generally waived as matter of public policy stating “that if consumers were permitted to waive potential TILA claims, the ‘public interest in deterring inconsistent and undecipherable lending practices would be greatly hampered.’” For a copy of the decision, e-mail .
Court Finds FCRA Preempts State Law Regarding Credit Information Disputes. On October 4, the U.S. District Court for the Middle District of Alabama ruled on defendant Trans Union’s partial motion to dismiss and defendant Wachovia Bank’s motion to dismiss in a case brought by a consumer borrower. Knudson v. Wachovia Bank, No. 2:07cv608, 2007 WL 2877564 (M.D. Ala. Oct. 4, 2007). The plaintiff in this case alleged that he paid off his loan with Wachovia Bank on time, but even though he filed many disputes regarding his account with Wachovia, the bank continued to report his account as being delinquent in violation of the Fair Credit Reporting Act (FCRA) and Alabama law. The court held that the plaintiff failed to plead facts sufficient to demonstrate that Wachovia was notified by a consumer reporting agency of a dispute regarding the completeness or accuracy of the account, a requirement to bring a claim for violation of the FCRA provision, 15 U.S.C. § 1681s-2(b), that sets out duties owed by a furnisher of information once the furnisher of information has received notice of a dispute from a consumer reporting agency about the completeness or accuracy of information furnished to the agency. Rather than dismiss the plaintiff’s § 1681s-2(b) claim with prejudice, the court granted the plaintiff an opportunity to amend its complaint to adequately plead this claim. In addition, the court held that the plain language of the preemption provision in 15 U.S.C. § 1681t(b)(1)(F) preempted the plaintiff’s state law claims. Finally, it noted that FCRA does not provide a private right of action for violations of 15 U.S.C. §1681 s-2(a), which generally regulates the furnishing of information before receiving a notice of a dispute from the consumer reporting agency. Please contact for a copy of this decision.
State Court Dismisses Portions of Claims Based on FCRA Preemption. In an unpublished opinion, a Connecticut state trial court partially dismissed common-law claims of intentional and negligent infliction of emotional distress and libel and slander, but only to the extent that they related to “the defendants furnishing false information to credit reporting agencies” or failing to correct that information after being informed that it was inaccurate. The court held that those claims were preempted by the federal Fair Credit Reporting Act (FCRA). Lichtenfels v. Crook, CV065007438S, 2007 Conn. Super. LEXIS 2451 (Conn. Super. Ct. Sept. 17, 2007). The case involved a mortgage servicer that allegedly filed a foreclosure action against borrowers who were not in default. The court discussed the various approaches that district courts have taken to interpreting FCRA’s two potentially applicable preemption provisions, 15 U.S.C. § 1681h(e), which preempts certain state law defamation, invasion of privacy, and negligence actions “except as to false information furnished with malice or willful intent to injure” the consumer, and the more-recently enacted 15 U.S.C. § 1681t(b)(1)(F), which preempts state laws “with respect to the subject matter” of FCRA’s requirements for furnishers of information to credit bureaus (15 U.S.C. § 1681s-2). The FCRA furnisher provisions generally prohibit furnishers from knowingly furnishing inaccurate information to consumer reporting agencies and require them to reinvestigate disputed items when notified of the dispute by the consumer reporting agency. The court rejected all three of the approaches that most district courts have followed to reconciling the two provisions—complete preemption, in which FCRA is held to preempt all state laws affecting the duties of furnishers of information; the “temporal” approach, in which state law is preempted once the furnisher has received notice from any source that the information is inaccurate or disputed; and the “statutory” approach, in which § 1681t is viewed as preempting state statutory causes of action while § 1681h(e) preempts certain common-law causes of action. Instead, the court adopted the approach of Holtman v. Citifinancial Mortgage Co., No. 3:05-cv-1571 (D. Conn June 19, 2006), that § 1681t preempts only claims that relate to conduct covered by the FCRA furnisher provisions. Therefore, it dismissed certain portions of the plaintiffs’ allegations under state law, but left intact those that did not relate to a furnisher’s FCRA duties. For a copy of the opinion, please contact .
Rooker-Feldman Doctrine Reason for Lack of Federal Jurisdiction in FDCPA Suit. In a recent case, a Nebraska federal district court relied on the Rooker-Feldman doctrine to reject a plaintiff's Fair Debt Collection Practices Act (FDCPA) claims in federal court where the plaintiff was not challenging the collection practices themselves. Knobbe v. Bank of America, No. 8-05CV489, 2007 WL 2822750 (D. Neb. Sept. 26, 2007). The lawsuit arose from a credit card debt that Knobbe owed to Bank of America. Over several years, Knobbe disputed the debt and the subsequent collection efforts of Bank of America and two law firms representing the bank. After holding that neither Bank of America (not a "creditor" under the FDCPA) nor the first law firm (claims time-barred by statute of limitations) were liable under FDCPA, the court also dismissed the FDCPA claims against the second law firm, stating that the court had no jurisdiction to hear those claims because they related to the law firm’s representation of the bank in attempting to enforce the judgment. The court noted that, under the Rooker-Feldman doctrine, lower federal courts may not exercise appellate review of state court judgments. Rather, the appropriate federal court for review of those disputes is the U.S. Supreme Court. Applied to the FDCPA, the court noted that where the plaintiff is alleging violations for the collection practices of the debt collector as opposed to challenging the debt itself, the claim is independent from the state court action and the Rooker-Feldman doctrine is not implicated. However, as in the instant case, where the plaintiff challenges the debt and the state court judgment itself, Rooker-Feldman governs and the federal court has no subject matter jurisdiction. Consequently, the court granted summary judgment to the defendants on the federal law claims and dismissed the state law claim for lack of jurisdiction. For a copy of this case, please contact .
Settlement Approved in Suit over Yield Spread Premiums on GFEs. On September 28, a federal court approved a $5.1 million settlement in a class action after finding that failure to adequately disclose yield spread premiums on good faith estimate (GFE) disclosures violated the Real Estate Settlement Procedures Act and the Washington Consumer Loan Act, and that the disclosures constituted a per se violation of the Washington Consumer Protection Act. Pierce v. Novastar Mortgage, Inc., No. C05-5835RJB, (W.D. Wash. Sept. 28, 2007). The court granted summary judgment to the plaintiffs on the bulk of their claims earlier this year (reported in the March 23rd issue of InfoBytes). Of the settlement, $3.3 million is to be paid to named plaintiffs and the speculated 1600 members of the class, and $1.8 million is set aside as attorneys’ fees. For a copy of the opinion and final settlement, please contact .
CDA Immunity Does Not Extend To Website Making Phone Records Available. A federal court in Wyoming rejected a Communications Decency Act of 1996 (CDA) immunity defense raised by a website that purportedly connected seekers and providers of ill-gotten telephone records. FTC v. Accusearch, Inc., Case No. 06-CV-105 (D. Wyo., opinion filed Sept. 28, 2007). The Federal Trade Commission (FTC) sued the owner of a website that allegedly sold telephone records obtained illegally by third parties. The defendant, characterizing itself as an interactive search engine connecting seekers and providers of information, argued that it was immune from liability as an “interactive computer service” under the CDA. The court rejected the defense, finding that the defendant failed to establish two of the three requirements for CDA immunity. While the court accepted that the defendant was an “interactive search engine,” and therefore an “interactive computer service” – thereby satisfying the first element of CDA immunity – it held that the claims asserted by the FTC did not seek to treat it as the publisher of the information (the second element) and that the information published was not provided by another information content provider (the third element). The Court concluded that the second element was not met because, unlike a situation in which liability is based on the delivery or posting of third party records, defendants here “advertised the availability of phone records, solicited orders, purchased the records from third-party sources for a fee, and then resold them to the end-consumers.” The Court found it “ironic that a law intended to reflect a policy aimed at deterring ‘stalking and harassment by means of computer’ is now being urged as a basis for immunizing the sale of phone records used for exactly those purposes.” Moreover, the court rejected defendant’s argument that the information it “published” was provided by “another content provider.” Even though the phone records at issue were originally “created” by telephone companies for lawful purposes, the court found that “by soliciting requests for such phone records and purchasing them for resale, Defendant[] participated in the creation or development of the information, and thus [did] not qualify for [CDA] Immunity” (internal quotations and brackets omitted). For a copy of this opinion, please contact .
CDA Immunizes Internet Search Engine From Allegedly Defamatory Search Results Listing. A federal court in New York dismissed defamation claims against Ask.com, holding that the search engine website enjoys immunity from liability under the Communications Decency Act of 1996 (CDA) as an “interactive computer service.” Murawski v. Pataki, Case No. 06 Civ. 12965 (S.D.N.Y., opinion filed Sept. 26, 2007). Murawski, an unsuccessful New York gubernatorial candidate, sued various boards of election and current and former New York political figures for refusing to place his name on the 2006 ballot. In the suit, Murawski also leveled defamation claims against the owner of a political website and Ask.com. Murawski alleged that search results listed on Ask.com erroneously described him as a “Communist Political Organizer” because the political website listed him after a communist party candidate and Ask.com’s results page eliminated line breaks. In a rather straightforward analysis, the court dismissed the claims against Ask.com, which, as an “interactive computer service” providing information from “another information content provider” – as those terms are defined under the CDA – could not be held liable for the statements. For a copy of this opinion, please contact .
Arkansas Supreme Court Holds Agency Legal Opinions Not FOIA Exempt. On September 27, the Arkansas Supreme Court held that legal opinions issued, and kept in the records, by the Arkansas Department of Finance and Administration (DF&A) are public records that must be disclosed under the Arkansas Freedom of Information Act (FOIA). Ryan & Co. v. Weiss, No. 06-1266, 9/27/07. The Arkansas Supreme Court overturned the circuit court’s decision by holding that such legal opinions are not exempt from disclosure under the privacy protection provisions of FOIA. FOIA provides that any citizen of the State of Arkansas has the right to inspect and copy all public records. FOIA further provides that, a document constitutes a public record if it is a record of official action by a governmental agency that is kept in the records of such agency. The Court held that the Gross Receipts Tax Rule G-75 legal opinions in question are public records under FOIA because they are records of official action by the DF&A, a governmental agency, and DF&A maintains past Rule GR-75 legal opinions in its records. The defendant argued that, even if such legal opinions are public records, they are exempt from disclosure pursuant to Ark. Code. Ann. § 26-18-303 because they are “confidential and privileged” in total. The plaintiff asserted that it requested nothing that would violate the confidentiality of taxpayer information but asserted that it was entitled to that part of the legal opinions containing tax policy and interpretations of law. The Arkansas Supreme Court agreed with the plaintiff, holding that the Rule GR-75 legal opinions are not “confidential and privileged” in total, and that any concerns that may arise to keep tax information confidential will be satisfied by redacting any and all facts and information that might identify any person or entity referenced in such legal opinions. For a copy of this opinion, please see http://courts.state.ar.us/opinions/2007b/20070927/06-1266.pdf.
Class Certified in Case Alleging Credit Card Balance Transfer Program Violated FDCPA. On October 5, a federal district court in Indiana granted a plaintiff’s motion for class certification in a lawsuit alleging that a debt collector’s credit card balance transfer program violated the Fair Debt Collection Practices Act (FDCPA). Balogun v. Midland Credit Management, Inc., No. 1:05-cv-1790-LJM-WTL, 2007 U.S. Dist. LEXIS 74845 (S.D. Ind. Oct. 5, 2007). Midland Credit Management, a debt collector, offered to transfer the plaintiff’s debt balance to a Capital One Visa credit card. According to the plaintiff, Midland and its affiliates violated the FDCPA (which restricts a debt-collector’s third-party communications) by providing information about him and his debt to Capital One in order to facilitate this offer. Midland argued that the court should stay determination of class certification pending a final determination in a similar suit filed against Midland in Illinois. The court denied the motion, explaining that determination of whether the case should proceed as a class action is not tied to the merits. Finding that the plaintiff satisfied the requirements for class certification under Federal Rule of Civil Procedure 23, the court certified the class. For a copy of the opinion, please contact .
MISCELLANY
ESRA to Hold Conference on E-Signatures. The Electronic Signatures & Records Association (ESRA) will hold a conference entitled “Getting E-Signatures Right: Key Business, Technology, and Legal Developments” on November 13-14, 2007 in Washington, DC. Some of the conference topics include (i) success of the ESIGN Act, (ii) long term retention of electronically signed records, (iii) various industry sector case studies and (iv) key trends. Congressman Jay Inslee (D – WA) will be among the speakers, as well as Jeremiah Buckley and Margo Tank of Buckley Kolar, LLP. To learn more about the conference go to http://www.esignrecords.org/events/index.cfm.
FIRM NEWS
Andrea Lee Negroni will moderate a panel on outsourcing mortgage operations to India on October 15, 2007 at the MBA’s 94th Annual Convention (Hynes Convention Center, Third Floor, Boston MA). Panelists include representatives from First Indian Corporation, Adventity/ Profolio Home Mortgage, Mortgage Dynamics, CitiMortgage and Infosys Technology. An international reception will follow the evening of October 15. For the full schedule of events and details on this presentation, see http://events.mortgagebankers.org/94th_annual/sessions/default.aspx#INFO.
Margo Tank will be speaking on a panel titled Electronic Signatures and Private Education Loans at the National Council of Higher Education Loan Programs (NCHELP) Fall Training Conference. The Fall Training Conference will be held November 4 - 7, 2007 in Atlanta, Georgia. To learn more or register, please see http://www.nchelp.org/conferences/event_detail.cfm?id=124.
Jeff Naimon will be speaking at the ACI’s conference on Responsible Mortgage Lending in Las Vegas, November 14-16. Mr. Naimon will be presenting a workshop entitled “Mortgage Regulation Primer: Rules, Restrictions and Requirements for State Regulated and Federally Chartered Mortgage Lenders.” For more information about the conference, or to register, please see https://webserv.c5groupinc.com/www_secure/conf_details.php?conf=4850&view=ovrv.
Margo Tank, Lane Macalester and Judy VanDusen spoke at the ARMA International Annual Conference being held from October 7 - 10 in Baltimore. They appeared on a panel entitled "Emerging Electronic Record Standards in Financial Services." The panel reviewed legal considerations and strategies for implementing effective electronic record management policies and procedures. For more information, please see http://www.arma.org/conference/2007/expo/exposchedule.cfm.
House Passes Mortgage Restructuring Tax Exemption. On October 4, the House of Representatives passed the Mortgage Forgiveness Debt Relief Act (H.R. 3648) which, if enacted, would prevent the benefits of mortgage debt restructuring from being considered “income” for tax purposes. The bill also grants a tax exemption for mortgage insurance premiums on contracts issued before January 1, 2007. The bill was introduced September 25, passed by committee the next day, and later was passed by the full house by a vote of 386 to 27. It has now been reported to the Senate. For more information, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03648:.
General Liability Waiver Does Not Waive TILA Rights. On October 9, the U.S. District Court for the Western District of Michigan (Vermurlen v. Ameriquest Mortgage Co., 2007 U.S. Dist. LEXIS 75070 (W.D. Mich. Oct. 9, 2007)) ruling on a motion for summary judgment determined that the borrower received notice of the right to rescind the loan as required by TILA, even though the lender used Federal Reserve Board Model Form H-8 rather than H-9 and also voluntarily extended the TILA rescission requirement from 3 days to 7 days. The court concluded that the borrower was clearly and unambiguously notified of the statutory right to rescind and that this right was contractually extended to 7 days. The defendants also argued that a forbearance agreement entered into after a subsequent default generally releasing the lender of any liability stemming from the original loan transaction constituted a waiver by the plaintiff’s of their right to bring suit under TILA. In dismissing this argument, the court followed precedent holding that TILA rights cannot be generally waived as matter of public policy stating “that if consumers were permitted to waive potential TILA claims, the ‘public interest in deterring inconsistent and undecipherable lending practices would be greatly hampered.’” For a copy of the decision, e-mail .
Settlement Approved in Suit over Yield Spread Premiums on GFEs. On September 28, a federal court approved a $5.1 million settlement in a class action after finding that failure to adequately disclose yield spread premiums on good faith estimate (GFE) disclosures violated the Real Estate Settlement Procedures Act and the Washington Consumer Loan Act, and that the disclosures constituted a per se violation of the Washington Consumer Protection Act. Pierce v. Novastar Mortgage, Inc., No. C05-5835RJB, (W.D. Wash. Sept. 28, 2007). The court granted summary judgment to the plaintiffs on the bulk of their claims earlier this year (reported in the March 23rd issue of InfoBytes). Of the settlement, $3.3 million is to be paid to named plaintiffs and the speculated 1600 members of the class, and $1.8 million is set aside as attorneys’ fees. For a copy of the opinion and final settlement, please contact .
FTC Intends to Issue Final FACTA Rules Next Week. On October 16, the Board of Governor’s of the Federal Deposit Insurance Corporation (FDIC) intends to vote on final rules under the Fair and Accurate Credit Transactions Act (FACTA) regarding affiliate marketing and identity theft red flags. The FDIC proposed rules regarding affiliate marketing in July 2004 implementing FACTA’s requirement consumers be granted an “opt-out” of information sharing agreements for marketing purposes between affiliated companies (reported in the July 16, 2004 issue of InfoBytes). The FDIC also proposed rules regarding red flags in July 2006 that would require financial institutions to develop systems for detecting identity theft (reported in the July 21, 2006 issue of InfoBytes). For more on the Board of Governor’s itinerary for its next meeting, see http://www.fdic.gov/news/board/notice16Oct2007.html.
Wisconsin Introduces Law Restricting Trigger Leads. On September 27, SB 275 was introduced in the Wisconsin State Senate which, if enacted, would prohibit the furnishing or use of “trigger leads” that are not “consumer reports” as defined in the federal Fair Credit Reporting Act (FCRA). The bill would also prohibit persons who use trigger leads that meet the definition of a “consumer report” from engaging in unfair or deceptive practices, including a specific list of practices such as “failing to state in the initial phase of the solicitation” that the person is not the lender or affiliated with the lender. A trigger lead is defined generally as non-public information provided to a third party indicating that a consumer has applied for credit and providing a name and address, telephone number, or other identifying information. The distinction between a consumer report and other information that does not meet the FCRA definition is apparently intended to avoid preemption under FCRA, which was the fate of a Minnesota law that purported to restrict the use of trigger leads that are “consumer reports.” See Consumer Data Industry Ass’n v. Swanson, No. 07-CV-3376 (PJS/JJG), 2007 WL 2219389 (D. Minn. July 30, 2007), discussed in the August 10, 2007, issue of InfoBytes. For more information on this bill, please see http://www.legis.state.wi.us/2007/data/SB275hst.html.
Agencies Propose Joint Rule on Internet Gambling. On October 1, the Department of the Treasury and the Federal Reserve Board proposed a rule to enforce the Unlawful Internet Gambling Enforcement Act (reported in the October 6, 2006 issue of InfoBytes). The rules require all non-exempt participants in “designated payment systems” to “establish and implement written policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit” financial transactions unlawful under the act. Under the proposed rule “unlawful Internet gambling” is defined to be any bet or wager made in a jurisdiction where gambling is illegal, but notes that the intermediate route of such electronic data will not be considered when determining the legality of the wager where it was made. The rules define the “designated payment systems” scrutinized by the act to be (i) automated clearing house systems, (ii) card systems, (iii) check collections systems, (iv) money transmitting businesses, and (v) wire transfer systems. The rule further provides nonexclusive examples of policies and procedures designed to prevent restricted transactions. Comments must be received on or before December 12, 2007. For a full copy of this proposed rule, see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20071001a1.pdf.
FTC Intends to Issue Final FACTA Rules Next Week. On October 16, the Board of Governor’s of the Federal Deposit Insurance Corporation (FDIC) intends to vote on final rules under the Fair and Accurate Credit Transactions Act (FACTA) regarding affiliate marketing and identity theft red flags. The FDIC proposed rules regarding affiliate marketing in July 2004 implementing FACTA’s requirement consumers be granted an “opt-out” of information sharing agreements for marketing purposes between affiliated companies (reported in the July 16, 2004 issue of InfoBytes). The FDIC also proposed rules regarding red flags in July 2006 that would require financial institutions to develop systems for detecting identity theft (reported in the July 21, 2006 issue of InfoBytes). For more on the Board of Governor’s itinerary for its next meeting, see http://www.fdic.gov/news/board/notice16Oct2007.html.
Court Finds FCRA Preempts State Law Regarding Credit Information Disputes. On October 4, the U.S. District Court for the Middle District of Alabama ruled on defendant Trans Union’s partial motion to dismiss and defendant Wachovia Bank’s motion to dismiss in a case brought by a consumer borrower. Knudson v. Wachovia Bank, No. 2:07cv608, 2007 WL 2877564 (M.D. Ala. Oct. 4, 2007). The plaintiff in this case alleged that he paid off his loan with Wachovia Bank on time, but even though he filed many disputes regarding his account with Wachovia, the bank continued to report his account as being delinquent in violation of the Fair Credit Reporting Act (FCRA) and Alabama law. The court held that the plaintiff failed to plead facts sufficient to demonstrate that Wachovia was notified by a consumer reporting agency of a dispute regarding the completeness or accuracy of the account, a requirement to bring a claim for violation of the FCRA provision, 15 U.S.C. § 1681s-2(b), that sets out duties owed by a furnisher of information once the furnisher of information has received notice of a dispute from a consumer reporting agency about the completeness or accuracy of information furnished to the agency. Rather than dismiss the plaintiff’s § 1681s-2(b) claim with prejudice, the court granted the plaintiff an opportunity to amend its complaint to adequately plead this claim. In addition, the court held that the plain language of the preemption provision in 15 U.S.C. § 1681t(b)(1)(F) preempted the plaintiff’s state law claims. Finally, it noted that FCRA does not provide a private right of action for violations of 15 U.S.C. §1681 s-2(a), which generally regulates the furnishing of information before receiving a notice of a dispute from the consumer reporting agency. Please contact for a copy of this decision.
Proposed Guidance for Garnishment of Exempt Federal Benefits. The federal banking agencies (OCC, FRB, FDIC, OTS, and NCUA) recently proposed joint guidance to protect exempt federal benefit payments from garnishment. Financial institutions often comply with garnishment orders by freezing accounts, denying access to federal benefit funds, such as social security or federal government pensions, which are generally exempt from federal garnishment orders. The proposed guidance outlines best practices to prevent financial institutions from unlawfully freezing exempt funds. The guidance also seeks industry comments regarding practices and procedures that would mitigate consumer harm when garnishment orders are placed on accounts with some federally exempt assets. Comments are due by November 27, 2007. For a full copy of the proposed rule, please see http://www.ots.treas.gov/docs/4/480998.pdf.
FinCEN Issues Guidance on Common SAR Errors. On October 10, the Financial Crimes Enforcement Network (FinCEN) issued “suggestions” for remedying the ten most common errors in filing suspicious activity reports (SARs). The topics discussed focused on (i) the importance of a complete SAR narrative identifying who, what, when, where, and why, (ii) taking care to complete “field of critical value” such as EINs and government-issued identification documentation, and (iii) identifying the category and character of the suspicious activity. The guidance was based on the study of Money Services Businesses’ filings, but FinCEN felt it could be “informative to financial institutions in other industries in their efforts to implement simple strategies to provide accurate and complete SAR filings.” To view the guidance, please see http://www.fincen.gov/SAR_Common_Errors_Web_Posting.html.
FTC Allows Consumer Notification of Ceased Debt Collection. On October 5, 2007, the Federal Trade Commission (FTC) issued an advisory opinion that debt collectors may notify consumers that collection efforts have ceased in compliance with the Fair Debt Collection Practices Act (FDCPA). ACA International, a debt collection trade association, asked the FTC to consider whether consumers should be notified that collection activities have ceased where the consumer has disputed the debt under Section 809 and the debt collector was unable to verify the debt. Considering the purpose of Section 809 was to protect the consumer from further contact with the debt collector unless the consumer owed the debt, the FTC concluded that consumer notification of the debt collector’s inability to verify the debt would further the purpose of the statute. The FTC further noted that Section 805(c) of the FDCPA contained an express provision allowing debt collectors to advise consumers that collection activities have ceased. For the official FTC advisory opinion, please see http://www.ftc.gov/os/closings/staff/P064803fairdebt.pdf.
State Court Dismisses Portions of Claims Based on FCRA Preemption. In an unpublished opinion, a Connecticut state trial court partially dismissed common-law claims of intentional and negligent infliction of emotional distress and libel and slander, but only to the extent that they related to “the defendants furnishing false information to credit reporting agencies” or failing to correct that information after being informed that it was inaccurate. The court held that those claims were preempted by the federal Fair Credit Reporting Act (FCRA). Lichtenfels v. Crook, CV065007438S, 2007 Conn. Super. LEXIS 2451 (Conn. Super. Ct. Sept. 17, 2007). The case involved a mortgage servicer that allegedly filed a foreclosure action against borrowers who were not in default. The court discussed the various approaches that district courts have taken to interpreting FCRA’s two potentially applicable preemption provisions, 15 U.S.C. § 1681h(e), which preempts certain state law defamation, invasion of privacy, and negligence actions “except as to false information furnished with malice or willful intent to injure” the consumer, and the more-recently enacted 15 U.S.C. § 1681t(b)(1)(F), which preempts state laws “with respect to the subject matter” of FCRA’s requirements for furnishers of information to credit bureaus (15 U.S.C. § 1681s-2). The FCRA furnisher provisions generally prohibit furnishers from knowingly furnishing inaccurate information to consumer reporting agencies and require them to reinvestigate disputed items when notified of the dispute by the consumer reporting agency. The court rejected all three of the approaches that most district courts have followed to reconciling the two provisions—complete preemption, in which FCRA is held to preempt all state laws affecting the duties of furnishers of information; the “temporal” approach, in which state law is preempted once the furnisher has received notice from any source that the information is inaccurate or disputed; and the “statutory” approach, in which § 1681t is viewed as preempting state statutory causes of action while § 1681h(e) preempts certain common-law causes of action. Instead, the court adopted the approach of Holtman v. Citifinancial Mortgage Co., No. 3:05-cv-1571 (D. Conn June 19, 2006), that § 1681t preempts only claims that relate to conduct covered by the FCRA furnisher provisions. Therefore, it dismissed certain portions of the plaintiffs’ allegations under state law, but left intact those that did not relate to a furnisher’s FCRA duties. For a copy of the opinion, please contact .
Rooker-Feldman Doctrine Reason for Lack of Federal Jurisdiction in FDCPA Suit. In a recent case, a Nebraska federal district court relied on the Rooker-Feldman doctrine to reject a plaintiff's Fair Debt Collection Practices Act (FDCPA) claims in federal court where the plaintiff was not challenging the collection practices themselves. Knobbe v. Bank of America, No. 8-05CV489, 2007 WL 2822750 (D. Neb. Sept. 26, 2007). The lawsuit arose from a credit card debt that Knobbe owed to Bank of America. Over several years, Knobbe disputed the debt and the subsequent collection efforts of Bank of America and two law firms representing the bank. After holding that neither Bank of America (not a "creditor" under the FDCPA) nor the first law firm (claims time-barred by statute of limitations) were liable under FDCPA, the court also dismissed the FDCPA claims against the second law firm, stating that the court had no jurisdiction to hear those claims because they related to the law firm’s representation of the bank in attempting to enforce the judgment. The court noted that, under the Rooker-Feldman doctrine, lower federal courts may not exercise appellate review of state court judgments. Rather, the appropriate federal court for review of those disputes is the U.S. Supreme Court. Applied to the FDCPA, the court noted that where the plaintiff is alleging violations for the collection practices of the debt collector as opposed to challenging the debt itself, the claim is independent from the state court action and the Rooker-Feldman doctrine is not implicated. However, as in the instant case, where the plaintiff challenges the debt and the state court judgment itself, Rooker-Feldman governs and the federal court has no subject matter jurisdiction. Consequently, the court granted summary judgment to the defendants on the federal law claims and dismissed the state law claim for lack of jurisdiction. For a copy of this case, please contact .
Wisconsin Introduces Law Restricting Trigger Leads. On September 27, SB 275 was introduced in the Wisconsin State Senate which, if enacted, would prohibit the furnishing or use of “trigger leads” that are not “consumer reports” as defined in the federal Fair Credit Reporting Act (FCRA). The bill would also prohibit persons who use trigger leads that meet the definition of a “consumer report” from engaging in unfair or deceptive practices, including a specific list of practices such as “failing to state in the initial phase of the solicitation” that the person is not the lender or affiliated with the lender. A trigger lead is defined generally as non-public information provided to a third party indicating that a consumer has applied for credit and providing a name and address, telephone number, or other identifying information. The distinction between a consumer report and other information that does not meet the FCRA definition is apparently intended to avoid preemption under FCRA, which was the fate of a Minnesota law that purported to restrict the use of trigger leads that are “consumer reports.” See Consumer Data Industry Ass’n v. Swanson, No. 07-CV-3376 (PJS/JJG), 2007 WL 2219389 (D. Minn. July 30, 2007), discussed in the August 10, 2007, issue of InfoBytes. For more information on this bill, please see http://www.legis.state.wi.us/2007/data/SB275hst.html.
General Liability Waiver Does Not Waive TILA Rights. On October 9, the U.S. District Court for the Western District of Michigan (Vermurlen v. Ameriquest Mortgage Co., 2007 U.S. Dist. LEXIS 75070 (W.D. Mich. Oct. 9, 2007)) ruling on a motion for summary judgment determined that the borrower received notice of the right to rescind the loan as required by TILA, even though the lender used Federal Reserve Board Model Form H-8 rather than H-9 and also voluntarily extended the TILA rescission requirement from 3 days to 7 days. The court concluded that the borrower was clearly and unambiguously notified of the statutory right to rescind and that this right was contractually extended to 7 days. The defendants also argued that a forbearance agreement entered into after a subsequent default generally releasing the lender of any liability stemming from the original loan transaction constituted a waiver by the plaintiff’s of their right to bring suit under TILA. In dismissing this argument, the court followed precedent holding that TILA rights cannot be generally waived as matter of public policy stating “that if consumers were permitted to waive potential TILA claims, the ‘public interest in deterring inconsistent and undecipherable lending practices would be greatly hampered.’” For a copy of the decision, e-mail .
Court Finds FCRA Preempts State Law Regarding Credit Information Disputes. On October 4, the U.S. District Court for the Middle District of Alabama ruled on defendant Trans Union’s partial motion to dismiss and defendant Wachovia Bank’s motion to dismiss in a case brought by a consumer borrower. Knudson v. Wachovia Bank, No. 2:07cv608, 2007 WL 2877564 (M.D. Ala. Oct. 4, 2007). The plaintiff in this case alleged that he paid off his loan with Wachovia Bank on time, but even though he filed many disputes regarding his account with Wachovia, the bank continued to report his account as being delinquent in violation of the Fair Credit Reporting Act (FCRA) and Alabama law. The court held that the plaintiff failed to plead facts sufficient to demonstrate that Wachovia was notified by a consumer reporting agency of a dispute regarding the completeness or accuracy of the account, a requirement to bring a claim for violation of the FCRA provision, 15 U.S.C. § 1681s-2(b), that sets out duties owed by a furnisher of information once the furnisher of information has received notice of a dispute from a consumer reporting agency about the completeness or accuracy of information furnished to the agency. Rather than dismiss the plaintiff’s § 1681s-2(b) claim with prejudice, the court granted the plaintiff an opportunity to amend its complaint to adequately plead this claim. In addition, the court held that the plain language of the preemption provision in 15 U.S.C. § 1681t(b)(1)(F) preempted the plaintiff’s state law claims. Finally, it noted that FCRA does not provide a private right of action for violations of 15 U.S.C. §1681 s-2(a), which generally regulates the furnishing of information before receiving a notice of a dispute from the consumer reporting agency. Please contact for a copy of this decision.
State Court Dismisses Portions of Claims Based on FCRA Preemption. In an unpublished opinion, a Connecticut state trial court partially dismissed common-law claims of intentional and negligent infliction of emotional distress and libel and slander, but only to the extent that they related to “the defendants furnishing false information to credit reporting agencies” or failing to correct that information after being informed that it was inaccurate. The court held that those claims were preempted by the federal Fair Credit Reporting Act (FCRA). Lichtenfels v. Crook, CV065007438S, 2007 Conn. Super. LEXIS 2451 (Conn. Super. Ct. Sept. 17, 2007). The case involved a mortgage servicer that allegedly filed a foreclosure action against borrowers who were not in default. The court discussed the various approaches that district courts have taken to interpreting FCRA’s two potentially applicable preemption provisions, 15 U.S.C. § 1681h(e), which preempts certain state law defamation, invasion of privacy, and negligence actions “except as to false information furnished with malice or willful intent to injure” the consumer, and the more-recently enacted 15 U.S.C. § 1681t(b)(1)(F), which preempts state laws “with respect to the subject matter” of FCRA’s requirements for furnishers of information to credit bureaus (15 U.S.C. § 1681s-2). The FCRA furnisher provisions generally prohibit furnishers from knowingly furnishing inaccurate information to consumer reporting agencies and require them to reinvestigate disputed items when notified of the dispute by the consumer reporting agency. The court rejected all three of the approaches that most district courts have followed to reconciling the two provisions—complete preemption, in which FCRA is held to preempt all state laws affecting the duties of furnishers of information; the “temporal” approach, in which state law is preempted once the furnisher has received notice from any source that the information is inaccurate or disputed; and the “statutory” approach, in which § 1681t is viewed as preempting state statutory causes of action while § 1681h(e) preempts certain common-law causes of action. Instead, the court adopted the approach of Holtman v. Citifinancial Mortgage Co., No. 3:05-cv-1571 (D. Conn June 19, 2006), that § 1681t preempts only claims that relate to conduct covered by the FCRA furnisher provisions. Therefore, it dismissed certain portions of the plaintiffs’ allegations under state law, but left intact those that did not relate to a furnisher’s FCRA duties. For a copy of the opinion, please contact .
Rooker-Feldman Doctrine Reason for Lack of Federal Jurisdiction in FDCPA Suit. In a recent case, a Nebraska federal district court relied on the Rooker-Feldman doctrine to reject a plaintiff's Fair Debt Collection Practices Act (FDCPA) claims in federal court where the plaintiff was not challenging the collection practices themselves. Knobbe v. Bank of America, No. 8-05CV489, 2007 WL 2822750 (D. Neb. Sept. 26, 2007). The lawsuit arose from a credit card debt that Knobbe owed to Bank of America. Over several years, Knobbe disputed the debt and the subsequent collection efforts of Bank of America and two law firms representing the bank. After holding that neither Bank of America (not a "creditor" under the FDCPA) nor the first law firm (claims time-barred by statute of limitations) were liable under FDCPA, the court also dismissed the FDCPA claims against the second law firm, stating that the court had no jurisdiction to hear those claims because they related to the law firm’s representation of the bank in attempting to enforce the judgment. The court noted that, under the Rooker-Feldman doctrine, lower federal courts may not exercise appellate review of state court judgments. Rather, the appropriate federal court for review of those disputes is the U.S. Supreme Court. Applied to the FDCPA, the court noted that where the plaintiff is alleging violations for the collection practices of the debt collector as opposed to challenging the debt itself, the claim is independent from the state court action and the Rooker-Feldman doctrine is not implicated. However, as in the instant case, where the plaintiff challenges the debt and the state court judgment itself, Rooker-Feldman governs and the federal court has no subject matter jurisdiction. Consequently, the court granted summary judgment to the defendants on the federal law claims and dismissed the state law claim for lack of jurisdiction. For a copy of this case, please contact .
Settlement Approved in Suit over Yield Spread Premiums on GFEs. On September 28, a federal court approved a $5.1 million settlement in a class action after finding that failure to adequately disclose yield spread premiums on good faith estimate (GFE) disclosures violated the Real Estate Settlement Procedures Act and the Washington Consumer Loan Act, and that the disclosures constituted a per se violation of the Washington Consumer Protection Act. Pierce v. Novastar Mortgage, Inc., No. C05-5835RJB, (W.D. Wash. Sept. 28, 2007). The court granted summary judgment to the plaintiffs on the bulk of their claims earlier this year (reported in the March 23rd issue of InfoBytes). Of the settlement, $3.3 million is to be paid to named plaintiffs and the speculated 1600 members of the class, and $1.8 million is set aside as attorneys’ fees. For a copy of the opinion and final settlement, please contact .
CDA Immunity Does Not Extend To Website Making Phone Records Available. A federal court in Wyoming rejected a Communications Decency Act of 1996 (CDA) immunity defense raised by a website that purportedly connected seekers and providers of ill-gotten telephone records. FTC v. Accusearch, Inc., Case No. 06-CV-105 (D. Wyo., opinion filed Sept. 28, 2007). The Federal Trade Commission (FTC) sued the owner of a website that allegedly sold telephone records obtained illegally by third parties. The defendant, characterizing itself as an interactive search engine connecting seekers and providers of information, argued that it was immune from liability as an “interactive computer service” under the CDA. The court rejected the defense, finding that the defendant failed to establish two of the three requirements for CDA immunity. While the court accepted that the defendant was an “interactive search engine,” and therefore an “interactive computer service” – thereby satisfying the first element of CDA immunity – it held that the claims asserted by the FTC did not seek to treat it as the publisher of the information (the second element) and that the information published was not provided by another information content provider (the third element). The Court concluded that the second element was not met because, unlike a situation in which liability is based on the delivery or posting of third party records, defendants here “advertised the availability of phone records, solicited orders, purchased the records from third-party sources for a fee, and then resold them to the end-consumers.” The Court found it “ironic that a law intended to reflect a policy aimed at deterring ‘stalking and harassment by means of computer’ is now being urged as a basis for immunizing the sale of phone records used for exactly those purposes.” Moreover, the court rejected defendant’s argument that the information it “published” was provided by “another content provider.” Even though the phone records at issue were originally “created” by telephone companies for lawful purposes, the court found that “by soliciting requests for such phone records and purchasing them for resale, Defendant[] participated in the creation or development of the information, and thus [did] not qualify for [CDA] Immunity” (internal quotations and brackets omitted). For a copy of this opinion, please contact .
CDA Immunizes Internet Search Engine From Allegedly Defamatory Search Results Listing. A federal court in New York dismissed defamation claims against Ask.com, holding that the search engine website enjoys immunity from liability under the Communications Decency Act of 1996 (CDA) as an “interactive computer service.” Murawski v. Pataki, Case No. 06 Civ. 12965 (S.D.N.Y., opinion filed Sept. 26, 2007). Murawski, an unsuccessful New York gubernatorial candidate, sued various boards of election and current and former New York political figures for refusing to place his name on the 2006 ballot. In the suit, Murawski also leveled defamation claims against the owner of a political website and Ask.com. Murawski alleged that search results listed on Ask.com erroneously described him as a “Communist Political Organizer” because the political website listed him after a communist party candidate and Ask.com’s results page eliminated line breaks. In a rather straightforward analysis, the court dismissed the claims against Ask.com, which, as an “interactive computer service” providing information from “another information content provider” – as those terms are defined under the CDA – could not be held liable for the statements. For a copy of this opinion, please contact .
Arkansas Supreme Court Holds Agency Legal Opinions Not FOIA Exempt. On September 27, the Arkansas Supreme Court held that legal opinions issued, and kept in the records, by the Arkansas Department of Finance and Administration (DF&A) are public records that must be disclosed under the Arkansas Freedom of Information Act (FOIA). Ryan & Co. v. Weiss, No. 06-1266, 9/27/07. The Arkansas Supreme Court overturned the circuit court’s decision by holding that such legal opinions are not exempt from disclosure under the privacy protection provisions of FOIA. FOIA provides that any citizen of the State of Arkansas has the right to inspect and copy all public records. FOIA further provides that, a document constitutes a public record if it is a record of official action by a governmental agency that is kept in the records of such agency. The Court held that the Gross Receipts Tax Rule G-75 legal opinions in question are public records under FOIA because they are records of official action by the DF&A, a governmental agency, and DF&A maintains past Rule GR-75 legal opinions in its records. The defendant argued that, even if such legal opinions are public records, they are exempt from disclosure pursuant to Ark. Code. Ann. § 26-18-303 because they are “confidential and privileged” in total. The plaintiff asserted that it requested nothing that would violate the confidentiality of taxpayer information but asserted that it was entitled to that part of the legal opinions containing tax policy and interpretations of law. The Arkansas Supreme Court agreed with the plaintiff, holding that the Rule GR-75 legal opinions are not “confidential and privileged” in total, and that any concerns that may arise to keep tax information confidential will be satisfied by redacting any and all facts and information that might identify any person or entity referenced in such legal opinions. For a copy of this opinion, please see http://courts.state.ar.us/opinions/2007b/20070927/06-1266.pdf.
Class Certified in Case Alleging Credit Card Balance Transfer Program Violated FDCPA. On October 5, a federal district court in Indiana granted a plaintiff’s motion for class certification in a lawsuit alleging that a debt collector’s credit card balance transfer program violated the Fair Debt Collection Practices Act (FDCPA). Balogun v. Midland Credit Management, Inc., No. 1:05-cv-1790-LJM-WTL, 2007 U.S. Dist. LEXIS 74845 (S.D. Ind. Oct. 5, 2007). Midland Credit Management, a debt collector, offered to transfer the plaintiff’s debt balance to a Capital One Visa credit card. According to the plaintiff, Midland and its affiliates violated the FDCPA (which restricts a debt-collector’s third-party communications) by providing information about him and his debt to Capital One in order to facilitate this offer. Midland argued that the court should stay determination of class certification pending a final determination in a similar suit filed against Midland in Illinois. The court denied the motion, explaining that determination of whether the case should proceed as a class action is not tied to the merits. Finding that the plaintiff satisfied the requirements for class certification under Federal Rule of Civil Procedure 23, the court certified the class. For a copy of the opinion, please contact .
CDA Immunity Does Not Extend To Website Making Phone Records Available. A federal court in Wyoming rejected a Communications Decency Act of 1996 (CDA) immunity defense raised by a website that purportedly connected seekers and providers of ill-gotten telephone records. FTC v. Accusearch, Inc., Case No. 06-CV-105 (D. Wyo., opinion filed Sept. 28, 2007). The Federal Trade Commission (FTC) sued the owner of a website that allegedly sold telephone records obtained illegally by third parties. The defendant, characterizing itself as an interactive search engine connecting seekers and providers of information, argued that it was immune from liability as an “interactive computer service” under the CDA. The court rejected the defense, finding that the defendant failed to establish two of the three requirements for CDA immunity. While the court accepted that the defendant was an “interactive search engine,” and therefore an “interactive computer service” – thereby satisfying the first element of CDA immunity – it held that the claims asserted by the FTC did not seek to treat it as the publisher of the information (the second element) and that the information published was not provided by another information content provider (the third element). The Court concluded that the second element was not met because, unlike a situation in which liability is based on the delivery or posting of third party records, defendants here “advertised the availability of phone records, solicited orders, purchased the records from third-party sources for a fee, and then resold them to the end-consumers.” The Court found it “ironic that a law intended to reflect a policy aimed at deterring ‘stalking and harassment by means of computer’ is now being urged as a basis for immunizing the sale of phone records used for exactly those purposes.” Moreover, the court rejected defendant’s argument that the information it “published” was provided by “another content provider.” Even though the phone records at issue were originally “created” by telephone companies for lawful purposes, the court found that “by soliciting requests for such phone records and purchasing them for resale, Defendant[] participated in the creation or development of the information, and thus [did] not qualify for [CDA] Immunity” (internal quotations and brackets omitted). For a copy of this opinion, please contact .
CDA Immunizes Internet Search Engine From Allegedly Defamatory Search Results Listing. A federal court in New York dismissed defamation claims against Ask.com, holding that the search engine website enjoys immunity from liability under the Communications Decency Act of 1996 (CDA) as an “interactive computer service.” Murawski v. Pataki, Case No. 06 Civ. 12965 (S.D.N.Y., opinion filed Sept. 26, 2007). Murawski, an unsuccessful New York gubernatorial candidate, sued various boards of election and current and former New York political figures for refusing to place his name on the 2006 ballot. In the suit, Murawski also leveled defamation claims against the owner of a political website and Ask.com. Murawski alleged that search results listed on Ask.com erroneously described him as a “Communist Political Organizer” because the political website listed him after a communist party candidate and Ask.com’s results page eliminated line breaks. In a rather straightforward analysis, the court dismissed the claims against Ask.com, which, as an “interactive computer service” providing information from “another information content provider” – as those terms are defined under the CDA – could not be held liable for the statements. For a copy of this opinion, please contact .
Arkansas Supreme Court Holds Agency Legal Opinions Not FOIA Exempt. On September 27, the Arkansas Supreme Court held that legal opinions issued, and kept in the records, by the Arkansas Department of Finance and Administration (DF&A) are public records that must be disclosed under the Arkansas Freedom of Information Act (FOIA). Ryan & Co. v. Weiss, No. 06-1266, 9/27/07. The Arkansas Supreme Court overturned the circuit court’s decision by holding that such legal opinions are not exempt from disclosure under the privacy protection provisions of FOIA. FOIA provides that any citizen of the State of Arkansas has the right to inspect and copy all public records. FOIA further provides that, a document constitutes a public record if it is a record of official action by a governmental agency that is kept in the records of such agency. The Court held that the Gross Receipts Tax Rule G-75 legal opinions in question are public records under FOIA because they are records of official action by the DF&A, a governmental agency, and DF&A maintains past Rule GR-75 legal opinions in its records. The defendant argued that, even if such legal opinions are public records, they are exempt from disclosure pursuant to Ark. Code. Ann. § 26-18-303 because they are “confidential and privileged” in total. The plaintiff asserted that it requested nothing that would violate the confidentiality of taxpayer information but asserted that it was entitled to that part of the legal opinions containing tax policy and interpretations of law. The Arkansas Supreme Court agreed with the plaintiff, holding that the Rule GR-75 legal opinions are not “confidential and privileged” in total, and that any concerns that may arise to keep tax information confidential will be satisfied by redacting any and all facts and information that might identify any person or entity referenced in such legal opinions. For a copy of this opinion, please see http://courts.state.ar.us/opinions/2007b/20070927/06-1266.pdf.
Class Certified in Case Alleging Credit Card Balance Transfer Program Violated FDCPA. On October 5, a federal district court in Indiana granted a plaintiff’s motion for class certification in a lawsuit alleging that a debt collector’s credit card balance transfer program violated the Fair Debt Collection Practices Act (FDCPA). Balogun v. Midland Credit Management, Inc., No. 1:05-cv-1790-LJM-WTL, 2007 U.S. Dist. LEXIS 74845 (S.D. Ind. Oct. 5, 2007). Midland Credit Management, a debt collector, offered to transfer the plaintiff’s debt balance to a Capital One Visa credit card. According to the plaintiff, Midland and its affiliates violated the FDCPA (which restricts a debt-collector’s third-party communications) by providing information about him and his debt to Capital One in order to facilitate this offer. Midland argued that the court should stay determination of class certification pending a final determination in a similar suit filed against Midland in Illinois. The court denied the motion, explaining that determination of whether the case should proceed as a class action is not tied to the merits. Finding that the plaintiff satisfied the requirements for class certification under Federal Rule of Civil Procedure 23, the court certified the class. For a copy of the opinion, please contact .
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