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CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
Senate Passes FHA Modernization Bill. This afternoon the Senate passed the FHA Modernization Act (S. 2338 – reported in the November 16, 2007 issue of InfoBytes) by a vote of 93 to one. S. 2338 as passed differs significantly than FHA reform legislation recently passed by the House (the Expanding American Home Ownership Act - H.R. 1852, reported in the September 21, 2007 issue of InfoBytes). Text of the bill as passed is not yet available, House Financial Services Committee Chairman Barney Frank (D – MA) issued a press release stating that he “look[s] forward to working with the Senate to preserve important elements of the House bill.” For updates on the Senate bill, available as published by the Library of Congress, can be found at http://thomas.loc.gov/cgi-bin/bdquery/z?d110:s.02338:.
Dodd Introduces Anti-Predatory Lending Bill. On December 12, Senate Banking Committee Chairman Chris Dodd (D – CT) introduced the “Homeownership Preservation and Protection Act of 2007” (bill number not yet assigned), which, if enacted, would dramatically alter federal regulation of the mortgage industry. Among the many changes would be (i) expanding the loans covered by the Home Ownership and Equity Protection Act (HOEPA) and prohibiting, among other things, prepayment penalties, balloon payments, and yield-spread premiums in connection with these loans; (ii) defining “subprime” and “nontraditional” mortgages and imposing heightened consumer protection measures on these loans, such as a maximum debt-to-income ratio of 45% and a net tangible benefit requirement; (iii) making mortgage brokers liable for violations of the Truth in Lending Act (TILA); (iv) increasing maximum statutory damages under TILA to $5,000 and maximum class action damages to the lesser of 1% of net worth or $5 million; (v) imposing a fiduciary obligation and a duty of good faith and fair dealing on mortgage brokers; (vi) prohibiting “steering” to more expensive loans; (vii) restricting use of yield-spread premiums for all loans; and (viii) imposing a duty of good faith and fair dealing on appraisers and servicers. The Senate Banking Committee has not yet scheduled a hearing for H.R. 3915, the anti-predatory lending bill recently passed by the House (reported in the November 16, 2007 issue of InfoBytes). For the Banking Committee press release, please see http://banking.senate.gov/index.cfm?Fuseaction=Articles.Detail&Article_id=224. For a copy of the bill, please contact .
House, Senate Committee Democrats Send Letters to FRB on Anticipated HOEPA Rules. The Chairmen and many Democratic members of the House Financial Services Committee and the Senate Banking Committee sent letters to Federal Reserve Board (FRB) Chairman Ben Bernanke asking for specific features to be included in the anticipated rulemaking for the Home Owners Equity Protection Act (HOEPA). On December 7, the Senate Banking Committee letter called on Bernanke to “act[] forcefully to protect consumers” by requiring HOEPA loans to (i) have a debt-to-income ratio under 50%, (ii) use escrow accounts for taxes and insurance, (iii) have adequate documentation to “constrain the use of no- and low-documentation mortgages,” and (iv) prohibit prepayment penalties. Banking Committee members issued a similar request last spring (reported in the April 27, 2007 issue of InfoBytes). On December 13, the letter from the House asked for the rules to (i) prohibit prepayment penalties, (ii) require “realistic” underwriting, and (iii) require income and asset verification. The House letter also asks that the rules eliminate “perverse incentives” such as yield-spread premiums and improve consumer disclosures. The FRB held hearings on possible HOEPA rules in the summer of 2007 (reported in the June 15, 2007 issue of InfoBytes). For a copy of the senators’ letter, please see http://dodd.senate.gov/index.php?q=node/4162. For a copy of the representatives’ letter, please see http://www.house.gov/apps/list/press/financialsvcs_dem/press121307.shtml.
FCC Proposes Rule Making Do-Not-Call Registration Permanent. On December 14, the Federal Communications Commission (FCC) published a proposed rule that would require telemarketers to honor registrations with the National Do Not Call Registry until the consumer cancels the registration or changes their number, overturning the existing five year re-registration requirement. This proposal follows a move by the Federal Trade Commission (FTC) to suspend the re-registration requirement “pending Congressional or agency action on whether to make registration permanent” (reported in the October 26, 2007 issue of InfoBytes). Comments on the proposed rule are due by January 14, 2008. For a copy of this proposed rule, please see http://edocket.access.gpo.gov/2007/pdf/E7-24280.pdf.
FTC Settles Antitrust Charges Filed Against Milwaukee MLS. On December 12, the FTC announced a settlement of antitrust charges against Milwaukee-based Multiple Listing Service, Inc. (MLS) for restricting listings by low-cost real estate brokers on its web-accessible database of properties for sale. In its complaint, the FTC alleged that, by establishing rules prohibiting listings by “exclusive agency contract” brokers, who permit the property owner to sell the property without assistance in exchange for a reduced commission, MLS had acted to unfairly restrain trade and competition. The Board of Directors of MLS rescinded these rules in October 2006 following several similar FTC enforcement actions against listing services (reported in the July 14, 2006 and October 13, 2006 issues of InfoBytes). MLS entered into a provisional settlement agreement that would prohibit listing restrictions on exclusive agency brokers for ten years. In settling these charges, the MLS is prohibited from adopting or enforcing any rule that favors any one type of real estate listing and from interfering with the freedom of sellers and brokers to enter into any kind of lawful listing agreement. The FTC has submitted this agreement for a thirty-day period of public comment before making a final decision. For the FTC press release, please see http://www.ftc.gov/opa/2007/12/mls.shtm.
FTC Charges Payment Processor for Debiting Fraudulent Fees. On December 6, the FTC and the attorneys general from seven states filed charges against a payment processor for violating federal and state laws by providing payment processing services to merchants engaged in deceptive telemarketing or Internet-based schemes. FTC v. Your Money Access, LLC, Civ. No. 07-5147 (E.D. Pa., filed Dec. 11, 2007). The fraudulent schemes attempted to extract bank account information through misrepresentations and omissions in connection with the marketing of products or services. The merchants then transmitted this information to the payment processor, which debited the accounts. The complaint alleges that, by providing access to the banking system and methods for extracting money from consumers’ bank accounts, the defendant processor played a critical role in the fraudulent and deceptive schemes. Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection, said, “The defendants purportedly saw extremely high return rates and looked the other way. We allege that consumers lost millions of dollars as a result, and that the company's conduct violated federal and state laws.” For a copy of the FTC’s press release, see http://www.ftc.gov/opa/2007/12/yma.shtm. For a copy of the complaint, see http://www.ftc.gov/os/caselist/0523122/071211complaint.pdf.
FACTA Direct Dispute Rules Published in the Federal Register. On December 13, the proposed rules implementing Section 312 of the Fair and Accurate Credit Transactions Act (FACTA), permitting consumers to dispute credit information directly with financial institutions, were published in the Federal Register. For more details on these proposed rules, please see the November 16, 2007 issue of InfoBytes. Comments are due February 11, 2008. The rules as published can be found at http://edocket.access.gpo.gov/2007/pdf/E7-23549.pdf.
FTC Increases Maximum Fees for Disclosures to Consumers. The FTC recently raised the maximum fee reporting agencies can charge consumers for certain disclosures of consumer credit information to $10.50, up 50 cents to adjust for inflation. This cap, imposed under the Fair Credit Reporting Act (FCRA), does not apply to consumers’ free annual consumer credit report guaranteed by FACTA. For a copy of this determination, see http://www.ftc.gov/os/2007/12/071212fcra.pdf.
STATE ISSUES
Connecticut Settles Alleged Title Insurance Kickback Scheme for $700,000. The Connecticut Attorney General, Insurance Department, and Department of Consumer Protection have announced that a law firm, a mortgage company, and a real estate broker have agreed to pay $700,000 in fines, forfeitures, and restitution to settle allegations that they engaged in illegal kickback and inducement schemes. Of that amount, $125,000 will be paid as restitution to about 500 consumers who overpaid for certain mortgage-related services as a result of one of the schemes. In this case, the law firm used sham service, rental, and other agreements to conceal kickbacks and unlawful inducements in the sale of title insurance. In exchange, the mortgage company and the real estate broker allegedly provided title insurance business to the law firm, in violation of Connecticut’s ban on payments for referrals of title insurance business. For more information, see http://www.ct.gov/ag/cwp/view.asp?Q=400598&A=2788.
MI House Passes Foreclosure Prevention Initiative. On December 4, the Michigan House of Representatives passed five bills (HB 5443, HB 5444, HB 5445, HB 5446, and HB 5447) that, if enacted, would (i) allow the Michigan State Housing Development Authority (MSHDA) to assist at-risk homeowners in refinancing out of adjustable-rate mortgages to prevent foreclosures and (ii) establish a “Rescue Refinance Program” to assist homeowners delinquent on their mortgages and in danger of losing their homes. A sixth bill, HB 5442, altering regulation of the MSHDA, has not yet passed. According to the legislature’s analysis of the bills, the program will be revenue neutral. For copies of these bills, use the links above or the search function at http://www.legislature.mi.gov/. For the Governor’s press release on the initiative, please see http://www.michigan.gov/gov/0,1607,7-168-23442_21974-181261--,00.html.
COURTS
MD High Court Holds Closing Costs Recapture Is a Prohibited Prepayment Penalty. The Court of Appeals of Maryland has held that a bank’s recapture of closings costs—or any other allegedly deferred charge—is a prohibited prepayment penalty if the charges are recouped when the loan is paid off within three years of consummation. Bednar v. Provident Bank of Maryland, No. 142 (Md. Ct. App. Dec. 13, 2007). In this case, the plaintiff Bednar took out a mortgage loan with the defendant Provident. Provident agreed to waive closing costs if Bednar did not pay off the loan within three years of closing, and the settlement statements indicated that the closing costs were paid by Provident. Two years later, Bednar repaid the entire loan, and Provident collected the closing costs. Bednar filed a class action suit, alleging violations of, among other things, Maryland’s prohibition on prepayment penalties. Provident claimed that the deferred payment of otherwise-authorized closing costs is approved by guidance from the Office of the Maryland Commissioner of Financial Regulation, noting the law does not impose a timeframe in which settlement charges must be collected. The trial court agreed with Provident, but the appeals court reversed the judgment. The court found the statue “completely unambiguous” and stated, “A person or entity is not permitted to evade statutory prohibitions by using a different label for the prohibited conduct.” For a copy of the opinion, please contact .
Circuit Court Holds State Law Tort Claim Preempted by NFIA. The Eleventh Circuit Court of Appeals recently ruled that a homeowner’s state-law claim of bad faith in connection with the denial of a flood insurance claim was expressly preempted by the National Flood Insurance Act (NFIA) and Federal Emergency Management Agency (FEMA) guidance. Shuford v. Fidelity National Property & Casualty Ins. Co., No.07-10230 (11th Cir., Dec. 10, 2007). Following Hurricane Ivan, the plaintiff business property owner filed a claim under her NFIA insurance policy with Fidelity, which was denied. She failed to file a proof of loss, as is required in contested claims, within the FEMA-mandated one-year period. The plaintiff then brought claims against Fidelity, including a state-law claim accusing Fidelity of acting in bad faith for not informing her of the underlying adjuster’s report. The Eleventh Circuit affirmed the district court’s ruling, which held that federal law expressly preempts her claims. The appellate court noted that FEMA’s statement of intent states that “matters pertaining to Standard Flood Insurance Policy, including issues relating to and arising out of claims handling, must be heard in Federal court and are governed exclusively by Federal law.” For a copy of this opinion, please see http://www.ca11.uscourts.gov/opinions/ops/200710230.pdf.
Removal to Federal Court Denied in ECOA, FCRA Claims Brought By New York AG. The U.S. District Court for the Northern District of New York recently denied a defendant’s motion to remove to federal court in a case brought by the New York Attorney General alleging various counts of fraud under both state and federal law. Cuomo v. Dell, Inc., 514 F.Supp.2d 397 (N.D. N.Y., Oct. 16, 2007). The Attorney General alleged, among other things, that defendant Dell violated the Equal Credit Opportunity Act (ECOA) and the FCRA by failing to (i) provide adverse action notices and (ii) correct information sent to credit reporting agencies that was subsequently determined to be false. Dell requested removal to federal court, owing to the federal-law claims. However, the District Court disagreed, noting that the mere presence of federal law in the complaint is not enough to justify removal. Instead, the court found (i) that the causes of action are "merely alternate theories for" the state law claims brought under New York's Executive Law, (ii) that the right to relief does not depend upon federal law, (iii) that the claims are fully actionable under the state laws asserted, and (iv) that the principles of comity and federalism, especially where the case is brought by the state itself, counsel against federal jurisdiction. For a copy of this decision, please contact .
Proof That Identity Was Stolen from Victim Not Required under Federal ID Theft Law. On November 21, the Eleventh Circuit held that Section 1028A(a)(1) of the federal aggravated identity theft statute, 18 U.S.C. § 1028A, does not require the government to prove (i) that the defendant stole the identification of another person, in order to show the possession or use was “without lawful authority,” or (ii) that the defendant knew that the identification belonged to another actual person. United States v. Hurtado, No. 07-11138, 2007 WL 4125820 (11th Cir., Nov. 21, 2007). Section 1028A(a)(1) provides that “[w]hoever, during and in relation to any felony violation enumerated in [Section 1028A(c), including passport fraud], knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.” The defendant was convicted under Section 1028A(a)(1) after applying for a passport using purchased identification documents issued in the name of an actual person residing in Puerto Rico. On appeal, the defendant argued that in order to prove the “without lawful authority” element and the requisite intent under the statute, the government was required to show that he stole the identification documents from, and knew that they belonged to, an actual person. According to the court, however, based on a plain reading of Section 1028A(a)(1) and Congress’s explicit use of the word “stolen” in the preceding statutory section, the government was not required to prove that the defendant stole the victim’s identity. The court also concluded that the term “knowingly” modifies the verbs “transfers, possesses, or uses,” not the subsequent language in Section 1028A(a)(1). Therefore, the defendant did not need to know that the victim was a real person to violate the statute. For a copy of the opinion, please see http://www.ca11.uscourts.gov/opinions/ops/200711138.pdf.
Court Holds TILA Violation Is Not a Defense for Mortgage Foreclosure Action. On November 7, the Superior Court of Connecticut ruled that alleged Truth in Lending Act (TILA) violations do not constitute a legally sufficient special defense in foreclosures. Countrywide Home Loans, Inc. v. Needham, 2007 Conn. Super. LEXIS 2943. The court also ruled that, while a violation of TILA may constitute a violation of the Connecticut Unfair Trade Practices Act (CUTPA), the theory behind the defendant’s claim—that failure to disclose certain fees violated TILA—was invalid as a matter of law. In this case, the plaintiff Countrywide sued the defendant to foreclose on a mortgage. The defendant claimed (among other things) that Countrywide failed to disclose courier, recording, and copy fees in violation of TILA and, consequently, in violation of CUTPA. The court first held that a violation of TILA, even if proven true, does not constitute a special defense to foreclosure, because TILA violations do not address the enforceability of a note or mortgage. Further, the court held that failing to disclose courier, recording, and copy fees does not violate TILA or Regulation Z, and thus Countrywide did not violate the CUTPA. For a copy of this opinion, please contact .
Class Certified in Case Alleging Credit Card Receipt Violations of FCRA. On December 4, the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a case alleging that a merchant violated FCRA, as amended by FACTA, by creating computer-generated credit card receipts that displayed both the last four digits of credit card numbers and credit cards’ expiration dates. Troy v. Red Lantern Inn, Inc., No. 07 C 2418, 2007 WL 4293014 (N.D. Ill., Dec. 4, 2007). The court noted that it is a violation of FCRA to print a credit card receipt with either more than five digits of the credit card’s number or the credit card’s expiration date, and that willful violations of this prohibition result in liability for actual damages sustained by the consumer, ranging from $100 to $1,000. In finding class certification appropriate, the court rejected the merchant’s argument that the high potential statutory damages (alleged to be up to $5 million) would violate its substantive due process rights. The court noted that, in a FCRA firm-offer case, Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir. 2006 – reported in the January 20, 2006 issue of InfoBytes), a court determined that an argument that excessive damages violate due process should be considered only after a class has been certified. For a copy of this opinion, please contact .
Server Location Inadequate to Establish Personal Jurisdiction for FCRA Claim. A federal district court dismissed a Fair Credit Reporting Act (FCRA) “failure to investigate” claim brought against a credit card issuing bank, BB&T, for lack of personal jurisdiction because “none of the alleged events occurred in or arise out of Texas.” Ray v. Experian, 2007 WL 4245459 (N.D. Tex. Nov. 30, 2007). The court found that BB&T, located in North Carolina and doing business with the consumer plaintiff, a resident of South Carolina, was not subject to the Texas court’s general jurisdiction because it had no locations, is not registered to do business, and does not own property in Texas (even though BB&T did have customers in Texas). Moreover, BB&T is not subject to specific jurisdiction in Texas merely because BB&T electronically communicated with computer servers located in Texas. The court noted that communications with servers in Texas “is not a purposeful availment by BB&T of the benefits and protections of Texas’ laws.” For a copy of this opinion, please contact .
Court Rules Reporting a Bankruptcy Ride-Through Not a FCRA Violation. On November 26, a federal district court in Washington dismissed on summary judgment a claim that a loan servicer violated the Fair Credit Reporting Act (FCRA) by reporting that the borrowers’ mortgage loan had been discharged in bankruptcy. Dvorak v. AMC Mortgage Services, Inc., 2007 LEXIS 86604 (E.D. Wash., Nov. 27, 2007). The Ninth Circuit recognizes the “ride-through” option, in which debtors filing for bankruptcy may remain in their home without disclosing it as an asset in a Chapter 7 bankruptcy filing by continuing to make the payments on the mortgage. The court held that even though the debtors did not list their mortgage as a debt in a bankruptcy proceeding, they were still discharged from personal liability on the mortgage note by the bankruptcy, so that the servicer’s report was accurate and did not violate FCRA. The court also noted that, even if the report had been inaccurate, the consumers had no private right of action against the servicer because they did not dispute the item with a consumer reporting agency, which would have triggered a duty for the servicer to investigate once it received notice of the dispute from the agency. The court also dismissed the consumers’ common-law defamation claims, holding that they were preempted by FCRA, which prohibits the same conduct. Finally, the court dismissed without prejudice a common-law claim regarding overcharge on the payoff amount for lack of jurisdiction. For a copy of this opinion, please contact .
FIRM NEWS
Jon Jerison and Kirk Jensen will present an A.S. Pratt audio conference on “Lessons for All Mortgage Lenders: Recovering from the Fallout from the Subprime Lending Crisis,” on Tuesday, December 18, 2007 at 1:00 PM – 2:30 PM ET. For more information, see http://aspratt.com/store/20B.php.
Senate Passes FHA Modernization Bill. This afternoon the Senate passed the FHA Modernization Act (S. 2338 – reported in the November 16, 2007 issue of InfoBytes) by a vote of 93 to one. S. 2338 as passed differs significantly than FHA reform legislation recently passed by the House (the Expanding American Home Ownership Act - H.R. 1852, reported in the September 21, 2007 issue of InfoBytes). Text of the bill as passed is not yet available, House Financial Services Committee Chairman Barney Frank (D – MA) issued a press release stating that he “look[s] forward to working with the Senate to preserve important elements of the House bill.” For updates on the Senate bill, available as published by the Library of Congress, can be found at http://thomas.loc.gov/cgi-bin/bdquery/z?d110:s.02338:.
Dodd Introduces Anti-Predatory Lending Bill. On December 12, Senate Banking Committee Chairman Chris Dodd (D – CT) introduced the “Homeownership Preservation and Protection Act of 2007” (bill number not yet assigned), which, if enacted, would dramatically alter federal regulation of the mortgage industry. Among the many changes would be (i) expanding the loans covered by the Home Ownership and Equity Protection Act (HOEPA) and prohibiting, among other things, prepayment penalties, balloon payments, and yield-spread premiums in connection with these loans; (ii) defining “subprime” and “nontraditional” mortgages and imposing heightened consumer protection measures on these loans, such as a maximum debt-to-income ratio of 45% and a net tangible benefit requirement; (iii) making mortgage brokers liable for violations of the Truth in Lending Act (TILA); (iv) increasing maximum statutory damages under TILA to $5,000 and maximum class action damages to the lesser of 1% of net worth or $5 million; (v) imposing a fiduciary obligation and a duty of good faith and fair dealing on mortgage brokers; (vi) prohibiting “steering” to more expensive loans; (vii) restricting use of yield-spread premiums for all loans; and (viii) imposing a duty of good faith and fair dealing on appraisers and servicers. The Senate Banking Committee has not yet scheduled a hearing for H.R. 3915, the anti-predatory lending bill recently passed by the House (reported in the November 16, 2007 issue of InfoBytes). For the Banking Committee press release, please see http://banking.senate.gov/index.cfm?Fuseaction=Articles.Detail&Article_id=224. For a copy of the bill, please contact .
MD High Court Holds Closing Costs Recapture Is a Prohibited Prepayment Penalty. The Court of Appeals of Maryland has held that a bank’s recapture of closings costs—or any other allegedly deferred charge—is a prohibited prepayment penalty if the charges are recouped when the loan is paid off within three years of consummation. Bednar v. Provident Bank of Maryland, No. 142 (Md. Ct. App. Dec. 13, 2007). In this case, the plaintiff Bednar took out a mortgage loan with the defendant Provident. Provident agreed to waive closing costs if Bednar did not pay off the loan within three years of closing, and the settlement statements indicated that the closing costs were paid by Provident. Two years later, Bednar repaid the entire loan, and Provident collected the closing costs. Bednar filed a class action suit, alleging violations of, among other things, Maryland’s prohibition on prepayment penalties. Provident claimed that the deferred payment of otherwise-authorized closing costs is approved by guidance from the Office of the Maryland Commissioner of Financial Regulation, noting the law does not impose a timeframe in which settlement charges must be collected. The trial court agreed with Provident, but the appeals court reversed the judgment. The court found the statue “completely unambiguous” and stated, “A person or entity is not permitted to evade statutory prohibitions by using a different label for the prohibited conduct.” For a copy of the opinion, please contact .
House, Senate Committee Democrats Send Letters to FRB on Anticipated HOEPA Rules. The Chairmen and many Democratic members of the House Financial Services Committee and the Senate Banking Committee sent letters to Federal Reserve Board (FRB) Chairman Ben Bernanke asking for specific features to be included in the anticipated rulemaking for the Home Owners Equity Protection Act (HOEPA). On December 7, the Senate Banking Committee letter called on Bernanke to “act[] forcefully to protect consumers” by requiring HOEPA loans to (i) have a debt-to-income ratio under 50%, (ii) use escrow accounts for taxes and insurance, (iii) have adequate documentation to “constrain the use of no- and low-documentation mortgages,” and (iv) prohibit prepayment penalties. Banking Committee members issued a similar request last spring (reported in the April 27, 2007 issue of InfoBytes). On December 13, the letter from the House asked for the rules to (i) prohibit prepayment penalties, (ii) require “realistic” underwriting, and (iii) require income and asset verification. The House letter also asks that the rules eliminate “perverse incentives” such as yield-spread premiums and improve consumer disclosures. The FRB held hearings on possible HOEPA rules in the summer of 2007 (reported in the June 15, 2007 issue of InfoBytes). For a copy of the senators’ letter, please see http://dodd.senate.gov/index.php?q=node/4162. For a copy of the representatives’ letter, please see http://www.house.gov/apps/list/press/financialsvcs_dem/press121307.shtml.
Court Holds TILA Violation Is Not a Defense for Mortgage Foreclosure Action. On November 7, the Superior Court of Connecticut ruled that alleged Truth in Lending Act (TILA) violations do not constitute a legally sufficient special defense in foreclosures. Countrywide Home Loans, Inc. v. Needham, 2007 Conn. Super. LEXIS 2943. The court also ruled that, while a violation of TILA may constitute a violation of the Connecticut Unfair Trade Practices Act (CUTPA), the theory behind the defendant’s claim—that failure to disclose certain fees violated TILA—was invalid as a matter of law. In this case, the plaintiff Countrywide sued the defendant to foreclose on a mortgage. The defendant claimed (among other things) that Countrywide failed to disclose courier, recording, and copy fees in violation of TILA and, consequently, in violation of CUTPA. The court first held that a violation of TILA, even if proven true, does not constitute a special defense to foreclosure, because TILA violations do not address the enforceability of a note or mortgage. Further, the court held that failing to disclose courier, recording, and copy fees does not violate TILA or Regulation Z, and thus Countrywide did not violate the CUTPA. For a copy of this opinion, please contact .
Court Rules Reporting a Bankruptcy Ride-Through Not a FCRA Violation. On November 26, a federal district court in Washington dismissed on summary judgment a claim that a loan servicer violated the Fair Credit Reporting Act (FCRA) by reporting that the borrowers’ mortgage loan had been discharged in bankruptcy. Dvorak v. AMC Mortgage Services, Inc., 2007 LEXIS 86604 (E.D. Wash., Nov. 27, 2007). The Ninth Circuit recognizes the “ride-through” option, in which debtors filing for bankruptcy may remain in their home without disclosing it as an asset in a Chapter 7 bankruptcy filing by continuing to make the payments on the mortgage. The court held that even though the debtors did not list their mortgage as a debt in a bankruptcy proceeding, they were still discharged from personal liability on the mortgage note by the bankruptcy, so that the servicer’s report was accurate and did not violate FCRA. The court also noted that, even if the report had been inaccurate, the consumers had no private right of action against the servicer because they did not dispute the item with a consumer reporting agency, which would have triggered a duty for the servicer to investigate once it received notice of the dispute from the agency. The court also dismissed the consumers’ common-law defamation claims, holding that they were preempted by FCRA, which prohibits the same conduct. Finally, the court dismissed without prejudice a common-law claim regarding overcharge on the payoff amount for lack of jurisdiction. For a copy of this opinion, please contact .
Connecticut Settles Alleged Title Insurance Kickback Scheme for $700,000. The Connecticut Attorney General, Insurance Department, and Department of Consumer Protection have announced that a law firm, a mortgage company, and a real estate broker have agreed to pay $700,000 in fines, forfeitures, and restitution to settle allegations that they engaged in illegal kickback and inducement schemes. Of that amount, $125,000 will be paid as restitution to about 500 consumers who overpaid for certain mortgage-related services as a result of one of the schemes. In this case, the law firm used sham service, rental, and other agreements to conceal kickbacks and unlawful inducements in the sale of title insurance. In exchange, the mortgage company and the real estate broker allegedly provided title insurance business to the law firm, in violation of Connecticut’s ban on payments for referrals of title insurance business. For more information, see http://www.ct.gov/ag/cwp/view.asp?Q=400598&A=2788.
MI House Passes Foreclosure Prevention Initiative. On December 4, the Michigan House of Representatives passed five bills (HB 5443, HB 5444, HB 5445, HB 5446, and HB 5447) that, if enacted, would (i) allow the Michigan State Housing Development Authority (MSHDA) to assist at-risk homeowners in refinancing out of adjustable-rate mortgages to prevent foreclosures and (ii) establish a “Rescue Refinance Program” to assist homeowners delinquent on their mortgages and in danger of losing their homes. A sixth bill, HB 5442, altering regulation of the MSHDA, has not yet passed. According to the legislature’s analysis of the bills, the program will be revenue neutral. For copies of these bills, use the links above or the search function at http://www.legislature.mi.gov/. For the Governor’s press release on the initiative, please see http://www.michigan.gov/gov/0,1607,7-168-23442_21974-181261--,00.html.
Server Location Inadequate to Establish Personal Jurisdiction for FCRA Claim. A federal district court dismissed a Fair Credit Reporting Act (FCRA) “failure to investigate” claim brought against a credit card issuing bank, BB&T, for lack of personal jurisdiction because “none of the alleged events occurred in or arise out of Texas.” Ray v. Experian, 2007 WL 4245459 (N.D. Tex. Nov. 30, 2007). The court found that BB&T, located in North Carolina and doing business with the consumer plaintiff, a resident of South Carolina, was not subject to the Texas court’s general jurisdiction because it had no locations, is not registered to do business, and does not own property in Texas (even though BB&T did have customers in Texas). Moreover, BB&T is not subject to specific jurisdiction in Texas merely because BB&T electronically communicated with computer servers located in Texas. The court noted that communications with servers in Texas “is not a purposeful availment by BB&T of the benefits and protections of Texas’ laws.” For a copy of this opinion, please contact .
Class Certified in Case Alleging Credit Card Receipt Violations of FCRA. On December 4, the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a case alleging that a merchant violated FCRA, as amended by FACTA, by creating computer-generated credit card receipts that displayed both the last four digits of credit card numbers and credit cards’ expiration dates. Troy v. Red Lantern Inn, Inc., No. 07 C 2418, 2007 WL 4293014 (N.D. Ill., Dec. 4, 2007). The court noted that it is a violation of FCRA to print a credit card receipt with either more than five digits of the credit card’s number or the credit card’s expiration date, and that willful violations of this prohibition result in liability for actual damages sustained by the consumer, ranging from $100 to $1,000. In finding class certification appropriate, the court rejected the merchant’s argument that the high potential statutory damages (alleged to be up to $5 million) would violate its substantive due process rights. The court noted that, in a FCRA firm-offer case, Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir. 2006 – reported in the January 20, 2006 issue of InfoBytes), a court determined that an argument that excessive damages violate due process should be considered only after a class has been certified. For a copy of this opinion, please contact .
MD High Court Holds Closing Costs Recapture Is a Prohibited Prepayment Penalty. The Court of Appeals of Maryland has held that a bank’s recapture of closings costs—or any other allegedly deferred charge—is a prohibited prepayment penalty if the charges are recouped when the loan is paid off within three years of consummation. Bednar v. Provident Bank of Maryland, No. 142 (Md. Ct. App. Dec. 13, 2007). In this case, the plaintiff Bednar took out a mortgage loan with the defendant Provident. Provident agreed to waive closing costs if Bednar did not pay off the loan within three years of closing, and the settlement statements indicated that the closing costs were paid by Provident. Two years later, Bednar repaid the entire loan, and Provident collected the closing costs. Bednar filed a class action suit, alleging violations of, among other things, Maryland’s prohibition on prepayment penalties. Provident claimed that the deferred payment of otherwise-authorized closing costs is approved by guidance from the Office of the Maryland Commissioner of Financial Regulation, noting the law does not impose a timeframe in which settlement charges must be collected. The trial court agreed with Provident, but the appeals court reversed the judgment. The court found the statue “completely unambiguous” and stated, “A person or entity is not permitted to evade statutory prohibitions by using a different label for the prohibited conduct.” For a copy of the opinion, please contact .
Circuit Court Holds State Law Tort Claim Preempted by NFIA. The Eleventh Circuit Court of Appeals recently ruled that a homeowner’s state-law claim of bad faith in connection with the denial of a flood insurance claim was expressly preempted by the National Flood Insurance Act (NFIA) and Federal Emergency Management Agency (FEMA) guidance. Shuford v. Fidelity National Property & Casualty Ins. Co., No.07-10230 (11th Cir., Dec. 10, 2007). Following Hurricane Ivan, the plaintiff business property owner filed a claim under her NFIA insurance policy with Fidelity, which was denied. She failed to file a proof of loss, as is required in contested claims, within the FEMA-mandated one-year period. The plaintiff then brought claims against Fidelity, including a state-law claim accusing Fidelity of acting in bad faith for not informing her of the underlying adjuster’s report. The Eleventh Circuit affirmed the district court’s ruling, which held that federal law expressly preempts her claims. The appellate court noted that FEMA’s statement of intent states that “matters pertaining to Standard Flood Insurance Policy, including issues relating to and arising out of claims handling, must be heard in Federal court and are governed exclusively by Federal law.” For a copy of this opinion, please see http://www.ca11.uscourts.gov/opinions/ops/200710230.pdf.
Removal to Federal Court Denied in ECOA, FCRA Claims Brought By New York AG. The U.S. District Court for the Northern District of New York recently denied a defendant’s motion to remove to federal court in a case brought by the New York Attorney General alleging various counts of fraud under both state and federal law. Cuomo v. Dell, Inc., 514 F.Supp.2d 397 (N.D. N.Y., Oct. 16, 2007). The Attorney General alleged, among other things, that defendant Dell violated the Equal Credit Opportunity Act (ECOA) and the FCRA by failing to (i) provide adverse action notices and (ii) correct information sent to credit reporting agencies that was subsequently determined to be false. Dell requested removal to federal court, owing to the federal-law claims. However, the District Court disagreed, noting that the mere presence of federal law in the complaint is not enough to justify removal. Instead, the court found (i) that the causes of action are "merely alternate theories for" the state law claims brought under New York's Executive Law, (ii) that the right to relief does not depend upon federal law, (iii) that the claims are fully actionable under the state laws asserted, and (iv) that the principles of comity and federalism, especially where the case is brought by the state itself, counsel against federal jurisdiction. For a copy of this decision, please contact .
Proof That Identity Was Stolen from Victim Not Required under Federal ID Theft Law. On November 21, the Eleventh Circuit held that Section 1028A(a)(1) of the federal aggravated identity theft statute, 18 U.S.C. § 1028A, does not require the government to prove (i) that the defendant stole the identification of another person, in order to show the possession or use was “without lawful authority,” or (ii) that the defendant knew that the identification belonged to another actual person. United States v. Hurtado, No. 07-11138, 2007 WL 4125820 (11th Cir., Nov. 21, 2007). Section 1028A(a)(1) provides that “[w]hoever, during and in relation to any felony violation enumerated in [Section 1028A(c), including passport fraud], knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.” The defendant was convicted under Section 1028A(a)(1) after applying for a passport using purchased identification documents issued in the name of an actual person residing in Puerto Rico. On appeal, the defendant argued that in order to prove the “without lawful authority” element and the requisite intent under the statute, the government was required to show that he stole the identification documents from, and knew that they belonged to, an actual person. According to the court, however, based on a plain reading of Section 1028A(a)(1) and Congress’s explicit use of the word “stolen” in the preceding statutory section, the government was not required to prove that the defendant stole the victim’s identity. The court also concluded that the term “knowingly” modifies the verbs “transfers, possesses, or uses,” not the subsequent language in Section 1028A(a)(1). Therefore, the defendant did not need to know that the victim was a real person to violate the statute. For a copy of the opinion, please see http://www.ca11.uscourts.gov/opinions/ops/200711138.pdf.
Court Holds TILA Violation Is Not a Defense for Mortgage Foreclosure Action. On November 7, the Superior Court of Connecticut ruled that alleged Truth in Lending Act (TILA) violations do not constitute a legally sufficient special defense in foreclosures. Countrywide Home Loans, Inc. v. Needham, 2007 Conn. Super. LEXIS 2943. The court also ruled that, while a violation of TILA may constitute a violation of the Connecticut Unfair Trade Practices Act (CUTPA), the theory behind the defendant’s claim—that failure to disclose certain fees violated TILA—was invalid as a matter of law. In this case, the plaintiff Countrywide sued the defendant to foreclose on a mortgage. The defendant claimed (among other things) that Countrywide failed to disclose courier, recording, and copy fees in violation of TILA and, consequently, in violation of CUTPA. The court first held that a violation of TILA, even if proven true, does not constitute a special defense to foreclosure, because TILA violations do not address the enforceability of a note or mortgage. Further, the court held that failing to disclose courier, recording, and copy fees does not violate TILA or Regulation Z, and thus Countrywide did not violate the CUTPA. For a copy of this opinion, please contact .
Class Certified in Case Alleging Credit Card Receipt Violations of FCRA. On December 4, the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a case alleging that a merchant violated FCRA, as amended by FACTA, by creating computer-generated credit card receipts that displayed both the last four digits of credit card numbers and credit cards’ expiration dates. Troy v. Red Lantern Inn, Inc., No. 07 C 2418, 2007 WL 4293014 (N.D. Ill., Dec. 4, 2007). The court noted that it is a violation of FCRA to print a credit card receipt with either more than five digits of the credit card’s number or the credit card’s expiration date, and that willful violations of this prohibition result in liability for actual damages sustained by the consumer, ranging from $100 to $1,000. In finding class certification appropriate, the court rejected the merchant’s argument that the high potential statutory damages (alleged to be up to $5 million) would violate its substantive due process rights. The court noted that, in a FCRA firm-offer case, Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir. 2006 – reported in the January 20, 2006 issue of InfoBytes), a court determined that an argument that excessive damages violate due process should be considered only after a class has been certified. For a copy of this opinion, please contact .
Server Location Inadequate to Establish Personal Jurisdiction for FCRA Claim. A federal district court dismissed a Fair Credit Reporting Act (FCRA) “failure to investigate” claim brought against a credit card issuing bank, BB&T, for lack of personal jurisdiction because “none of the alleged events occurred in or arise out of Texas.” Ray v. Experian, 2007 WL 4245459 (N.D. Tex. Nov. 30, 2007). The court found that BB&T, located in North Carolina and doing business with the consumer plaintiff, a resident of South Carolina, was not subject to the Texas court’s general jurisdiction because it had no locations, is not registered to do business, and does not own property in Texas (even though BB&T did have customers in Texas). Moreover, BB&T is not subject to specific jurisdiction in Texas merely because BB&T electronically communicated with computer servers located in Texas. The court noted that communications with servers in Texas “is not a purposeful availment by BB&T of the benefits and protections of Texas’ laws.” For a copy of this opinion, please contact .
Court Rules Reporting a Bankruptcy Ride-Through Not a FCRA Violation. On November 26, a federal district court in Washington dismissed on summary judgment a claim that a loan servicer violated the Fair Credit Reporting Act (FCRA) by reporting that the borrowers’ mortgage loan had been discharged in bankruptcy. Dvorak v. AMC Mortgage Services, Inc., 2007 LEXIS 86604 (E.D. Wash., Nov. 27, 2007). The Ninth Circuit recognizes the “ride-through” option, in which debtors filing for bankruptcy may remain in their home without disclosing it as an asset in a Chapter 7 bankruptcy filing by continuing to make the payments on the mortgage. The court held that even though the debtors did not list their mortgage as a debt in a bankruptcy proceeding, they were still discharged from personal liability on the mortgage note by the bankruptcy, so that the servicer’s report was accurate and did not violate FCRA. The court also noted that, even if the report had been inaccurate, the consumers had no private right of action against the servicer because they did not dispute the item with a consumer reporting agency, which would have triggered a duty for the servicer to investigate once it received notice of the dispute from the agency. The court also dismissed the consumers’ common-law defamation claims, holding that they were preempted by FCRA, which prohibits the same conduct. Finally, the court dismissed without prejudice a common-law claim regarding overcharge on the payoff amount for lack of jurisdiction. For a copy of this opinion, please contact .
Circuit Court Holds State Law Tort Claim Preempted by NFIA. The Eleventh Circuit Court of Appeals recently ruled that a homeowner’s state-law claim of bad faith in connection with the denial of a flood insurance claim was expressly preempted by the National Flood Insurance Act (NFIA) and Federal Emergency Management Agency (FEMA) guidance. Shuford v. Fidelity National Property & Casualty Ins. Co., No.07-10230 (11th Cir., Dec. 10, 2007). Following Hurricane Ivan, the plaintiff business property owner filed a claim under her NFIA insurance policy with Fidelity, which was denied. She failed to file a proof of loss, as is required in contested claims, within the FEMA-mandated one-year period. The plaintiff then brought claims against Fidelity, including a state-law claim accusing Fidelity of acting in bad faith for not informing her of the underlying adjuster’s report. The Eleventh Circuit affirmed the district court’s ruling, which held that federal law expressly preempts her claims. The appellate court noted that FEMA’s statement of intent states that “matters pertaining to Standard Flood Insurance Policy, including issues relating to and arising out of claims handling, must be heard in Federal court and are governed exclusively by Federal law.” For a copy of this opinion, please see http://www.ca11.uscourts.gov/opinions/ops/200710230.pdf.
Proof That Identity Was Stolen from Victim Not Required under Federal ID Theft Law. On November 21, the Eleventh Circuit held that Section 1028A(a)(1) of the federal aggravated identity theft statute, 18 U.S.C. § 1028A, does not require the government to prove (i) that the defendant stole the identification of another person, in order to show the possession or use was “without lawful authority,” or (ii) that the defendant knew that the identification belonged to another actual person. United States v. Hurtado, No. 07-11138, 2007 WL 4125820 (11th Cir., Nov. 21, 2007). Section 1028A(a)(1) provides that “[w]hoever, during and in relation to any felony violation enumerated in [Section 1028A(c), including passport fraud], knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.” The defendant was convicted under Section 1028A(a)(1) after applying for a passport using purchased identification documents issued in the name of an actual person residing in Puerto Rico. On appeal, the defendant argued that in order to prove the “without lawful authority” element and the requisite intent under the statute, the government was required to show that he stole the identification documents from, and knew that they belonged to, an actual person. According to the court, however, based on a plain reading of Section 1028A(a)(1) and Congress’s explicit use of the word “stolen” in the preceding statutory section, the government was not required to prove that the defendant stole the victim’s identity. The court also concluded that the term “knowingly” modifies the verbs “transfers, possesses, or uses,” not the subsequent language in Section 1028A(a)(1). Therefore, the defendant did not need to know that the victim was a real person to violate the statute. For a copy of the opinion, please see http://www.ca11.uscourts.gov/opinions/ops/200711138.pdf.
Server Location Inadequate to Establish Personal Jurisdiction for FCRA Claim. A federal district court dismissed a Fair Credit Reporting Act (FCRA) “failure to investigate” claim brought against a credit card issuing bank, BB&T, for lack of personal jurisdiction because “none of the alleged events occurred in or arise out of Texas.” Ray v. Experian, 2007 WL 4245459 (N.D. Tex. Nov. 30, 2007). The court found that BB&T, located in North Carolina and doing business with the consumer plaintiff, a resident of South Carolina, was not subject to the Texas court’s general jurisdiction because it had no locations, is not registered to do business, and does not own property in Texas (even though BB&T did have customers in Texas). Moreover, BB&T is not subject to specific jurisdiction in Texas merely because BB&T electronically communicated with computer servers located in Texas. The court noted that communications with servers in Texas “is not a purposeful availment by BB&T of the benefits and protections of Texas’ laws.” For a copy of this opinion, please contact .
FTC Charges Payment Processor for Debiting Fraudulent Fees. On December 6, the FTC and the attorneys general from seven states filed charges against a payment processor for violating federal and state laws by providing payment processing services to merchants engaged in deceptive telemarketing or Internet-based schemes. FTC v. Your Money Access, LLC, Civ. No. 07-5147 (E.D. Pa., filed Dec. 11, 2007). The fraudulent schemes attempted to extract bank account information through misrepresentations and omissions in connection with the marketing of products or services. The merchants then transmitted this information to the payment processor, which debited the accounts. The complaint alleges that, by providing access to the banking system and methods for extracting money from consumers’ bank accounts, the defendant processor played a critical role in the fraudulent and deceptive schemes. Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection, said, “The defendants purportedly saw extremely high return rates and looked the other way. We allege that consumers lost millions of dollars as a result, and that the company's conduct violated federal and state laws.” For a copy of the FTC’s press release, see http://www.ftc.gov/opa/2007/12/yma.shtm. For a copy of the complaint, see http://www.ftc.gov/os/caselist/0523122/071211complaint.pdf.
FTC Settles Antitrust Charges Filed Against Milwaukee MLS. On December 12, the FTC announced a settlement of antitrust charges against Milwaukee-based Multiple Listing Service, Inc. (MLS) for restricting listings by low-cost real estate brokers on its web-accessible database of properties for sale. In its complaint, the FTC alleged that, by establishing rules prohibiting listings by “exclusive agency contract” brokers, who permit the property owner to sell the property without assistance in exchange for a reduced commission, MLS had acted to unfairly restrain trade and competition. The Board of Directors of MLS rescinded these rules in October 2006 following several similar FTC enforcement actions against listing services (reported in the July 14, 2006 and October 13, 2006 issues of InfoBytes). MLS entered into a provisional settlement agreement that would prohibit listing restrictions on exclusive agency brokers for ten years. In settling these charges, the MLS is prohibited from adopting or enforcing any rule that favors any one type of real estate listing and from interfering with the freedom of sellers and brokers to enter into any kind of lawful listing agreement. The FTC has submitted this agreement for a thirty-day period of public comment before making a final decision. For the FTC press release, please see http://www.ftc.gov/opa/2007/12/mls.shtm.
Proof That Identity Was Stolen from Victim Not Required under Federal ID Theft Law. On November 21, the Eleventh Circuit held that Section 1028A(a)(1) of the federal aggravated identity theft statute, 18 U.S.C. § 1028A, does not require the government to prove (i) that the defendant stole the identification of another person, in order to show the possession or use was “without lawful authority,” or (ii) that the defendant knew that the identification belonged to another actual person. United States v. Hurtado, No. 07-11138, 2007 WL 4125820 (11th Cir., Nov. 21, 2007). Section 1028A(a)(1) provides that “[w]hoever, during and in relation to any felony violation enumerated in [Section 1028A(c), including passport fraud], knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.” The defendant was convicted under Section 1028A(a)(1) after applying for a passport using purchased identification documents issued in the name of an actual person residing in Puerto Rico. On appeal, the defendant argued that in order to prove the “without lawful authority” element and the requisite intent under the statute, the government was required to show that he stole the identification documents from, and knew that they belonged to, an actual person. According to the court, however, based on a plain reading of Section 1028A(a)(1) and Congress’s explicit use of the word “stolen” in the preceding statutory section, the government was not required to prove that the defendant stole the victim’s identity. The court also concluded that the term “knowingly” modifies the verbs “transfers, possesses, or uses,” not the subsequent language in Section 1028A(a)(1). Therefore, the defendant did not need to know that the victim was a real person to violate the statute. For a copy of the opinion, please see http://www.ca11.uscourts.gov/opinions/ops/200711138.pdf.
Class Certified in Case Alleging Credit Card Receipt Violations of FCRA. On December 4, the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a case alleging that a merchant violated FCRA, as amended by FACTA, by creating computer-generated credit card receipts that displayed both the last four digits of credit card numbers and credit cards’ expiration dates. Troy v. Red Lantern Inn, Inc., No. 07 C 2418, 2007 WL 4293014 (N.D. Ill., Dec. 4, 2007). The court noted that it is a violation of FCRA to print a credit card receipt with either more than five digits of the credit card’s number or the credit card’s expiration date, and that willful violations of this prohibition result in liability for actual damages sustained by the consumer, ranging from $100 to $1,000. In finding class certification appropriate, the court rejected the merchant’s argument that the high potential statutory damages (alleged to be up to $5 million) would violate its substantive due process rights. The court noted that, in a FCRA firm-offer case, Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir. 2006 – reported in the January 20, 2006 issue of InfoBytes), a court determined that an argument that excessive damages violate due process should be considered only after a class has been certified. For a copy of this opinion, please contact .
Removal to Federal Court Denied in ECOA, FCRA Claims Brought By New York AG. The U.S. District Court for the Northern District of New York recently denied a defendant’s motion to remove to federal court in a case brought by the New York Attorney General alleging various counts of fraud under both state and federal law. Cuomo v. Dell, Inc., 514 F.Supp.2d 397 (N.D. N.Y., Oct. 16, 2007). The Attorney General alleged, among other things, that defendant Dell violated the Equal Credit Opportunity Act (ECOA) and the FCRA by failing to (i) provide adverse action notices and (ii) correct information sent to credit reporting agencies that was subsequently determined to be false. Dell requested removal to federal court, owing to the federal-law claims. However, the District Court disagreed, noting that the mere presence of federal law in the complaint is not enough to justify removal. Instead, the court found (i) that the causes of action are "merely alternate theories for" the state law claims brought under New York's Executive Law, (ii) that the right to relief does not depend upon federal law, (iii) that the claims are fully actionable under the state laws asserted, and (iv) that the principles of comity and federalism, especially where the case is brought by the state itself, counsel against federal jurisdiction. For a copy of this decision, please contact .
FCC Proposes Rule Making Do-Not-Call Registration Permanent. On December 14, the Federal Communications Commission (FCC) published a proposed rule that would require telemarketers to honor registrations with the National Do Not Call Registry until the consumer cancels the registration or changes their number, overturning the existing five year re-registration requirement. This proposal follows a move by the Federal Trade Commission (FTC) to suspend the re-registration requirement “pending Congressional or agency action on whether to make registration permanent” (reported in the October 26, 2007 issue of InfoBytes). Comments on the proposed rule are due by January 14, 2008. For a copy of this proposed rule, please see http://edocket.access.gpo.gov/2007/pdf/E7-24280.pdf.
FACTA Direct Dispute Rules Published in the Federal Register. On December 13, the proposed rules implementing Section 312 of the Fair and Accurate Credit Transactions Act (FACTA), permitting consumers to dispute credit information directly with financial institutions, were published in the Federal Register. For more details on these proposed rules, please see the November 16, 2007 issue of InfoBytes. Comments are due February 11, 2008. The rules as published can be found at http://edocket.access.gpo.gov/2007/pdf/E7-23549.pdf.
FTC Increases Maximum Fees for Disclosures to Consumers. The FTC recently raised the maximum fee reporting agencies can charge consumers for certain disclosures of consumer credit information to $10.50, up 50 cents to adjust for inflation. This cap, imposed under the Fair Credit Reporting Act (FCRA), does not apply to consumers’ free annual consumer credit report guaranteed by FACTA. For a copy of this determination, see http://www.ftc.gov/os/2007/12/071212fcra.pdf.
Server Location Inadequate to Establish Personal Jurisdiction for FCRA Claim. A federal district court dismissed a Fair Credit Reporting Act (FCRA) “failure to investigate” claim brought against a credit card issuing bank, BB&T, for lack of personal jurisdiction because “none of the alleged events occurred in or arise out of Texas.” Ray v. Experian, 2007 WL 4245459 (N.D. Tex. Nov. 30, 2007). The court found that BB&T, located in North Carolina and doing business with the consumer plaintiff, a resident of South Carolina, was not subject to the Texas court’s general jurisdiction because it had no locations, is not registered to do business, and does not own property in Texas (even though BB&T did have customers in Texas). Moreover, BB&T is not subject to specific jurisdiction in Texas merely because BB&T electronically communicated with computer servers located in Texas. The court noted that communications with servers in Texas “is not a purposeful availment by BB&T of the benefits and protections of Texas’ laws.” For a copy of this opinion, please contact .
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