InfoBytes, December 19, 2008
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Topics in this issue:
- Federal Issues
- State Issues
- Courts
- Firm News
- Mortgages
- Banking
- Consumer Finance
- Litigation
- Privacy/Data Security
- Credit Cards
Federal Issues
Fed Issues Consumer Protection Rules for Credit Cards, Overdraft Services. On December 18, the Federal Reserve Board (Fed) adopted final rules designed to prohibit certain unfair acts or practices and improve the disclosures consumers receive in connection with credit card accounts and other revolving credit plans. The rule amends Regulation AA (Unfair acts or practices) to: (i) protect consumers from unexpected interest charges, including increases in the rate during the first year after account opening and increases in the rate charged on pre-existing credit card balances; (ii) forbid banks from imposing interest charges using the "two-cycle" billing method; (iii) require that consumers receive a reasonable amount of time to make their credit card payments; (iv) prohibit the use of payment allocation methods that unfairly maximize interest charges; and (v) address subprime credit cards by limiting the fees that reduce the amount of available credit. The Fed also issued final rules amending Regulation Z (Truth in Lending) requiring changes to the format, timing, and content requirements for credit card applications and solicitations and for the disclosures that consumers receive throughout the life of an open-end account.
On December 18, the Fed also adopted final amendments to Regulation DD (Truth in Savings) to address depository institutions’ disclosure practices related to overdraft services. The effective date for the final rules adopted under Regulation DD is January 1, 2010. Separately, the Fed proposed rules to amend Regulation E (Electronic Fund Transfers). The proposed rule is designed to provide consumers a choice regarding their institution’s payment of overdrafts for automated teller machine withdrawals and one-time debit card transactions. The Fed proposed two alternative approaches to providing consumer choice, including a proposed requirement that would require institutions to obtain affirmative consent (or opt-in) from consumers before any overdraft fees or charges may be imposed on consumers’ accounts. The comment period for the Regulation E proposal ends 60 days after publication in the Federal Register. Publication of each of the rules is expected shortly.
For a copy of the highlights of the final credit card rules, please see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081218a1.pdf. For a copy of all Federal Register notices and related materials, please see http://www.federalreserve.gov/boarddocs/meetings/2008/20081218/openmaterials.htm.
Fannie and Freddie Issue Guidelines on Streamlined Modification Program. On December 12, the Federal National Mortgage Association (Fannie) and the Federal Home Loan Mortgage Corporation (Freddie) published guidance for their Streamlined Modification Program (SMP). The new guidelines supplement the eligibility information that was provided when the program was first publicized on November 11, 2008 (reported in Infobtyes, Nov. 14, 2008 ). Both Fannie’s and Freddie’s announcements include detailed information about underwriting and modification standards, reporting requirements, and permissible fees and charges. Specifically, both announcements describe a four step process for lowering a qualifying borrower’s mortgage payment to 38% of household monthly gross income. First, the guidance suggests that the servicer should capitalize any arrearages. If payments are still above 38% of income, the guidance suggests that the servicer should then extend the amortization period to 40 years. If that fails to bring the payment within range, the guidance suggests that the servicer should then reduce the interest rate to 3%. Finally, if all three previous measures fail, the guidance suggests that the servicer should then consider forebearance of the principle, resulting in a balloon payment payable upon the earliest of the borrower’s sale of the property or payoff or maturity of the mortgage loan. (Principle write downs or loan forgiveness are still prohibited under the SMP.) In addition, both Fannie Mae’s and Freddie Mac’s announcements contained entity specific material. Fannie Mae’s announcement included guidance on how the SMP affected mortgage backed securities, while Freddie Mac’s bulletin reminded servicers that it suspended all foreclosure sales and scheduled evictions on occupied single-family 1- to 4-unit primary residences for six-weeks beginning November 26, 2008. For a copy of Fannie’s announcement, please see https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0833.pdf. For a copy of Freddie’s Bulletin, please see http://www.freddiemac.com/sell/guide/bulletins/pdf/bll121208.pdf.
Mortgage Lender Settles FTC Discrimination Charges. On December 17, the Federal Trade Commission (FTC) entered into a settlement with Gateway Funding Diversified Mortgage Services, L.P., and its general partner, Gateway Funding Inc. (collectively, "Gateway"), in connection with a complaint filed against Gateway by the FTC alleging violations of the Equal Credit Opportunity Act (ECOA). Gateway allegedly gave mortgage loan officers nearly complete discretion to charge "overages," but failed to monitor whether African-American and Hispanic consumers were paying higher overages than non-Hispanic white borrowers. According to the complaint, this lack of oversight "resulted in African-American and Hispanic applicants being charged higher overages because of their race or ethnicity," and the "disparities in overage are substantial, statistically significant and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants." The settlement imposes a judgment of $2.9 million, all but $200,000 of which is suspended due to the defendants’ inability to pay. For the FTC’s press release and related information, see http://www.ftc.gov/opa/2008/12/gateway.shtm.
NAMB Sues HUD Over RESPA Rule. On December 19, the National Association of Mortgage Brokers (NAMB) announced that it filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD) regarding the new Real Estate Settlement Procedures Act (RESPA) Final Rule. The lawsuit against HUD claims that the Final Rule is "arbitrary and capricious," contrary to the intent of Congress, and fails to offer any rational reasons for its rejection of alternative approaches. The suit claims that requiring only mortgage brokers to disclose yield spread premiums places them at a permanent disadvantage in the marketplace. The suit further alleges that HUD disregarded numerous federal and private sector studies providing evidence that different origination channels disclosing differently confuses consumers, and will often times cause them to choose a more expensive mortgage product. For a copy of the press release, please see http://www.namb.org/namb/NewsBot.asp?MODE=VIEW&ID=253&SnID=132443327.
FDIC Settles with Subprime Credit Card Company. On December 19, the Federal Deposit Insurance Corporation (FDIC) reached a settlement with CompuCredit Corporation, which was charged with deceptive marketing of subprime credit cards. CompuCredit will be required to provide restitution of approximately $114 million to consumers in the form of credits for certain fees. The order also includes a civil money penalty of $2.4 million. In addition, the order requires that credit card solicitations that include representations about credit limits or available credit disclose clearly and prominently, and on the same page, fees and other restrictions affecting initial available credit. The order also includes a broad prohibition against misrepresentations in the marketing of open-end credit products. For a copy of the settlement, please see http://www.fdic.gov/news/news/press/2008/pr08142a.pdf.
FTC Issues Report on Social Security Numbers and ID Theft. On December 17, the Federal Trade Commission (FTC) issued a report on the private sector uses of consumers’ Social Security numbers (SSNs), the relationship between the SSN and identity theft, and the ways in which SSN’s beneficial uses may be preserved while curtailing its availability and value to identity thieves. Noting the strong connection between SSNs and identity theft, the FTC report made five recommendations to prevent identity theft: (i) improve consumer authentication, (ii) restrict the public display and transmission of SSNs, (iii) establish national standards for data protection and breach notification; (iv) conduct outreach to businesses and consumers, and (v) promote coordination and information sharing on use of SSNs. For a copy of the report, please see http://www.ftc.gov/os/2008/12/P075414ssnreport.pdf.
FTC Increases FCRA Allowable Charges. On December 15, the Federal Trade Commission (FTC) reported that it has approved the publication of a Federal Register notice announcing that the ceiling on allowable charges under Section 612(f) of the Fair Credit Reporting Act (FCRA) will increase from $10.50 to $11.00, effective January 1, 2009. The charge applies when a consumer who has received a free annual disclosure does not otherwise qualify for an additional free disclosure. The FTC is required to revise the ceiling each year, based on the Consumer Price Index, rounded to the nearest fifty cents. For a copy of the press release, please see http://www.ftc.gov/opa/2008/12/fcra.shtm.
Federal Banking Agencies Reduce Amount of Goodwill Deduction. On December 16, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision approved a final rule to permit banking organizations to reduce the amount of goodwill it must deduct from tier 1 capital by the amount of any deferred tax liability associated with that goodwill. For a banking organization that elects to apply this final rule, the amount of goodwill the banking organization must deduct from tier 1 capital would reflect the maximum exposure to loss in the event that such goodwill is impaired or derecognized for financial reporting purposes. Banking institutions may adopt its provisions for purposes of regulatory capital reporting for the period ending December 31, 2008. For a copy of the final rule, please see http://www.occ.gov/ftp/release/2008-145a.pdf.
FDIC Increases Risk-Based Assessment Rates. On December 16, the Federal Deposit Insurance Corporation (FDIC) adopted a final rule increasing risk-based assessment rates uniformly by 7 basis points (7 cents for every $100 of deposits), on an annual basis, for the first quarter of 2009. Under the final rule, risk-based rates would range between 12 and 50 basis points (annualized) for the first quarter 2009 assessment. Most institutions would be charged between 12 and 14 basis points. This is designed to help ensure that the reserve ratio returns to at least 1.15 percent by the end of 2013 as required by statute. For a copy of the final rule, please see, http://www.fdic.gov/news/board/08DEC15rule2.pdf.
Federal Banking Agencies Issue New CRA Asset-Size Thresholds. On December 17, the federal banking agencies announced the annual adjustment to the asset-size thresholds used to define "small bank," "small savings association," "intermediate small bank," and "intermediate small savings association" under the Community Reinvestment Act (CRA) regulations. The definitions of small and intermediate small institutions for CRA examinations will change as follows: (i)"small bank" or "small savings association" means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.109 billion; and (ii) "intermediate small bank" or "intermediate small savings association" means a small institution with assets of at least $277 million as of December 31 of both of the prior two calendar years, and less than $1.109 billion as of December 31 of either of the prior two calendar years. These asset-size threshold adjustments are effective January 1, 2009. For a copy of the final rule, please see http://www.fdic.gov/news/news/press/2008/pr08140a.pdf.
FDIC Adopts Final Rule on Recordkeeping Requirements for QFCs. On December 16, the Federal Deposit Insurance Corporation (FDIC) issued a final rule to improve the FDIC’s ability to monitor and evaluate risks in certain insured depository institutions with qualified financial contracts (QFCs), as well as assure preparedness if such institutions fail. The recordkeeping requirements in the final rule will require insured depository institutions defined as troubled to provide certain information to the FDIC, including adequate position level documentation of the counterparty relationships of failed institutions. The final rule requires an institution in troubled condition, upon written notification by the institution’s appropriate federal banking agency or the FDIC, to produce (i) position level and counterparty level data, (ii) certain QFC counterparty and portfolio identifiers, and (iii) other QFC-related information. This information must be made available to the FDIC immediately at the close of processing of the institution’s business day for a period provided in the notification. A de minimus exception is included in the final rule which provides an exemption to institutions with a small number of QFCs from the mandatory electronic files requirements that apply to other institutions. The final rule expands the time frame for compliance from 30 to 60 days and permits institutions to request additional time for compliance, which the FDIC will review on a case-by-case basis. The final rule will be effective 30 days after publication in the Federal Register. For a copy of the final rule, please see http://www.fdic.gov/news/board/08DEC15rule3.pdf.
IRS Streamlines Tax Lien Relief for Homeowners Trying to Refinance or Sell. On December 16, the Internal Revenue Service (IRS) announced that it is making it easier for financially distressed homeowners to sell their homes or refinance their mortgages when there is a federal tax lien on the property. Under the new process, taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien subordinate to the lien to be created by the lender refinancing or restructuring a loan. Further, taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien, if certain conditions are met. The IRS states that the process to request a discharge or a subordination of a tax lien will take approximately thirty days after the submission of the completed application, but the IRS will work to expedite requests. Additional information is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=201343,00.html.
Fed Extends Comment Period for Proposed Reg Z Amendments. On December 17, the Federal Reserve Board (Fed) announced that it is extending the comment period on its proposal to revise the disclosure requirements for mortgage loans under Regulation Z (reported in InfoBytes, December 12, 2008) from January 23, 2009, to February 9, 2009. The proposed revisions to Regulation Z would implement the Mortgage Disclosure Improvement Act (MDIA), which was enacted in July 2008 as an amendment to the Truth in Lending Act (TILA). The extension was granted to give the public additional time to comment on the proposal. For a copy of the notice, please see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081217b1.pdf.
State Issues
North Carolina Commissioner of Banks Reaches Settlement with Countrywide. On December 4, the North Carolina Commissioner of Banks (NCCOB) announced a $16 million dollar settlement with Countrywide Home Loans and Countrywide Mortgage Ventures (collectively, "Countrywide"). The agreement resolves the NCCOB’s allegations that Countrywide violated §§ 24-1.1A and 24-10 of the North Carolina General Statutes, by overcharging 4,800 borrowers on their first or second mortgage loans. As part of the settlement, Countrywide will pay approximately $11.5 million in direct refunds to affected borrowers. Additionally, it will award $2 million in grants to 26 non-profit housing counseling agencies that provide foreclosure prevention counseling through the State Home Foreclosure Prevention Project. Similarly, it will dedicate $900,000 of its settlement fund to the Nationwide Mortgage Licensing System in order to encourage the cooperative State effort to improve licensing and regulation of mortgage loan originators. The remainder of the $16 million settlement, approximately $1.6 million, will reimburse the NCCOB for its examination and investigation expenses. In return for the settlement funds, the NCCOB will hold Countrywide faultless for any of the alleged § 24-1.1A and § 24-10 violations. Homeowners affected by the settlement will receive checks within the next 60 days. For a copy of the settlement please see http://www.nccob.org/mlenforcements/08_170.pdf.
Michigan Extends Mortgage Loan Officer Registration Deadline. On December 18, Governor Janet Granholm (D-MI) signed into law statutes amending the Mortgage Brokers, Lenders, and Servicers Licensing Act (MBLSLA), the Michigan Secondary Mortgage Loan Act (SMLA), and the Michigan Code of Criminal Procedure. Public Acts 323, 324, 325, 326, 327, and 328. Among other things, the law: (i) amends the effective date of mortgage loan officer registration requirements from January 1, 2009 to April 1, 2009; (ii) extends the deadline from December 3, 2008 to April 1, 2009 for an individual to obtain fingerprints and have an FBI and Michigan State Police criminal history check completed, pass the required Michigan mortgage loan officer examination, and submit the required Nationwide Mortgage Licensing System (NMLS) loan officer registration application and the Michigan specific loan officer application; (iii) extends the deadline from December 31, 2008 to March 31, 2009 for a residential mortgage originator and a loan officer to receive compensation for the origination of a mortgage loan; (iv) amends the MBLSLA and SMLA specifying that beginning January 1, 2009, the Michigan State Police and FBI may complete a mortgage loan officer criminal history check; (v) amends the SMLA to require fingerprints, a Michigan State Police and FBI criminal history check, pre-registration and continuing education, testing, and a secondary mortgage loan officer application if the loan officer is not registered as a loan officer under the MBLSLA and will originate for a mortgage broker, lender, or servicer that only brokers, makes, or services secondary mortgage loans; (vi) grants additional authority to the Mortgage Industry Advisory Board to review and make recommendations to the Commissioner concerning the SMLA, and (vii) Expands the revenue sources and allowable uses of the MBLSLA Fund to include the revenue and administrative expenses of the SMLA. For a copy of these materials, please contact .
Texas AG Settles with Two Companies Failing to Properly Dispose of Records, Charges Another. On December 11, Texas Attorney General Greg Abbott reached settlements with two companies charged with exposing customers to identity theft by improperly disposing of records containing the customers’ personal information. The companies, GAB Robins North America, Inc. (GAB) and B&F Finance McAllen, LLC (which is managed by Victory Management Services (Victory)), allegedly left the records in unsecured dumpsters, and failed to alter the records to make the customers’ personal information unreadable before doing so. GAB and Victory have been ordered to pay a combined total of $145,000 in civil penalties and attorney fees, and implement information-security programs to include, among other things, employee training to ensure compliance with privacy protection laws. The Attorney General is also pursuing an enforcement action against a third company, Juan M. Nino Tax Practitioner (Nino), which similarly failed to protect customers’ personal information. Among other things, the Attorney General is requesting $500 for each record that Nino did not dispose of in the manner required by law and an order that Nino adopt a comprehensive information-security program. For a copy of the Attorney General’s press release, please see http://www.oag.state.tx.us/oagNews/release.php?id=2761.
Courts
CAFA Minimal Diversity Requirement Includes Corporation’s State of Incorporation and Principal Place of Business. In a pair of decisions issued the same day, the U.S. Court of Appeals for the Fourth Circuit held that the requirement of "minimal diversity" to support removal to federal court under the Class Action Fairness Act ("CAFA"), was not met where the defendants were citizens of both a foreign state and the forum state, and where all members of the plaintiff classes are defined as citizens of the forum state. Johnson v. Advance America, Cash Advance Centers of South Carolina, Inc., No. 08-2186, 2008 WL 5194301 (4th Cir. Dec. 12, 2008); Dennison v. Carolina Payday Loans, Inc., No. 08-2187, 2008 WL 5194336 (4th Cir. Dec. 12, 2008). Plaintiffs in both cases sued their payday lenders in state court, on behalf of themselves and similarly situated citizens of South Carolina, alleging that the defendants’ conduct in making payday loans violated various state statutes and the common law. The defendants removed the cases to federal court, arguing, among other things, that, because they were citizens of South Carolina as well as another state, they satisfied CAFA’s "minimal diversity" requirement that "any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)(A). The district courts disagreed with this argument, remanding the cases to state court. On appeal, the Fourth Circuit affirmed the decisions of the district courts. According to the Fourth Circuit panel, the federal rules contemplate dual citizenship for corporations for purposes of determining diversity jurisdiction - that is, corporate citizenship is determined by the corporation’s place of incorporation and the location of its principal place of business. Neither defendant was permitted to "ignor[e] the fact that it is also a citizen of South Carolina" simply because it was a citizen of another state as well. Thus, defendants failed to meet their burden of proving that they were not citizens of South Carolina. For a copy of this opinion, please contact .
Ohio Federal Court Dismisses ‘Predatory’ Lending Case. On December 9, a federal court in the northern district of Ohio dismissed a borrower’s claims under the Home Owners Equity Protection Act (HOEPA), the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Fair Credit Reporting Act (FCRA), and other state lending laws regarding a refinanced mortgage loan. Smith v. Encore Credit Corp., No. 4:08 CV 1462, 2008 WL 5169683 (N.D. Ohio Dec. 9, 2008). The borrower plaintiffs allege that when on the verge of defaulting on payments, the defendant engaged in predatory lending practices to refinance their mortgage loan into an adjustable rate mortgage. The plaintiffs sought (i) a declaration that the refinancing was illegal, (ii) rescission of the mortgage, (iii) an injunction against the foreclosure sale of their residence, and (iv) damages. The court denied the defendant’s motion to dismiss on the Rooker-Feldman doctrine, issue preclusion, and Younger abstention. However, the court held that the Anti-Injunction Act prohibited the federal court from enjoining the foreclosure sale ordered by a state court. The court also dismissed the claims for rescission under HOEPA and TILA because the three-year limit for rescission claims under these statutes is absolute. The court further held that even though the Sixth Circuit has not decided whether equitable tolling applies to RESPA, that claim was also time barred. Lastly, the court held that the plaintiffs failed to state a claim under FCRA because there is no Sixth Circuit precedent that there is a private right of action under § 1681s-2(b) and the plaintiffs asserted only that "Defendants" negligently or willfully furnished inaccurate information to the credit reporting agencies failing to allege that the defendants were aware of the dispute. The state law claims were dismissed without prejudice. For a copy of this opinion, please contact .
Tenth Circuit Finds Kansas Payday Lender Licensing Requirement Does Not Violate Dormant Commerce Clause. On December 12, the U.S. Court of Appeals for the Tenth Circuit upheld the district court’s ruling that the Kansas statute requiring licensure for a payday lender that "induces the consumer who is a resident of [Kansas] to enter into the transaction by solicitation in [Kansas] by any means including but not limited to: Mail, telephone, radio, television or any other electronic means" does not run afoul of the dormant Commerce Clause. Quik Payday, Inc. v. Stork, No. 07-3289 (10th Cir. Dec. 12, 2008). The plaintiff payday lender was headquartered in Utah and licensed by Utah’s Department of Financial Institutions to make payday loans in Utah; it had no offices, employees, or other physical presence in Kansas, but made payday loans to Kansas residents over the Internet. In 2005, following a Kansas consumer’s complaint against the plaintiff, the Kansas Office of the State Bank Commissioner (OSBC) ordered the plaintiff to stop all payday lending to Kansas residents, halt any collections on outstanding loans, pay a $5 million civil penalty, return to borrowers the interest, service fees, and profits from the loans made in Kansas, and barred the plaintiff from becoming licensed in Kansas as a payday lender in the future. The plaintiff brought suit under 42 U.S.C. § 1983, arguing that the Kansas consumer-lending statute violated the dormant Commerce Clause by (i) regulating conduct that occurs wholly outside Kansas, (ii) unduly burdening interstate commerce relative to the benefit it confers under the balancing test from Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), and (iii) imposing Kansas requirements when Internet commerce demands nationally uniform regulation. The Tenth Circuit rejected these arguments, finding that (i) the statute, as interpreted by the OSBC, does not regulate extraterritorial conduct, (ii) based on Tenth Circuit precedent, the statute’s burden on interstate commerce does not exceed the benefit that it confers, and (iii) the plaintiff’s national uniformity argument is merely a species of a burden-to-benefit argument, and is not persuasive in the context of the specific regulation of commercial activity at issue in the case as requiring a license in each state does not impose an undue burden. For a copy of this opinion, please see http://caselaw.lp.findlaw.com/data2/circs/10th/073289p.pdf.
Pennsylvania Federal Court Grants Class Certification in Suit Alleging RESPA Violations. On December 12, the U.S. District Court for the Eastern District of Pennsylvania granted class certification in a suit alleging that a title insurance company violated, among others, the Real Estate Settlement Procedures Act (RESPA). Markocki v. Old Republic National Title Ins. Co., No. 06-2422 (E.D. Pa. Dec. 9, 2008). In this case, the plaintiff asserts that the defendant title insurance company violated RESPA by overcharging consumers for title insurance by failing to provide a nondiscretionary discounted premium. According to the plaintiff, rather than charging the proper premium, the defendant issued a higher premium, and unlawfully retained the difference, in violation of RESPA. As such, the plaintiff moved to certify a class. To proceed as a class action, the requirements of Fed. R. Civ. P. 23 must be satisfied. According to Rule 23(a), one or more members of a class may sue as representative parties on behalf of all members only if: (i) the class is so numerous that joinder of all members is impracticable; (ii) there are questions of law or fact common to the class; (iii) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (iv) the representative parties will fairly and adequately protect the interests of the class. After satisfying the prerequisites provided in Rule 23(a), parties seeking class certification must also demonstrate that the action is maintainable under Rule 23(b)(1), (2), or (3). Rule 23(b)(1) addresses cases where prosecuting separate actions by or against individual class members would create a risk of inconsistent judgments or incompatible standards of conduct for the party opposing the class, or would substantially impair or impede a nonparty class member’s ability to protect their interests. Rule 23(b)(2) allows class actions were final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. Rule 23(b)(3) permits class actions where the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. After considering the foregoing factors, the court granted class certification, holding that all the requirements of Fed. R. Civ. P. 23 were met. The court reasoned that the very purpose of the class action mechanism is to surmount the obstacle presented by small recoveries, which serve as a disincentive to prosecute individual actions, by aggregating small potential recoveries into a large action. For a copy of the opinion, please contact .
Firm News
Jeff Naimon and Grant Mitchell will be presenting a teleconference on the new RESPA Reform rule on December 17 at 3PM for the American Bankers Association, with Rod Alba.
Joe Kolar made a presentation with HUD officials in an online webinar sponsored by the Consumer Bankers Association discussing the RESPA rule on December 9.
Jonathan Jerison was a speaker for a "Compliance Tune-Up" presented by the Regulatory Risk Monitor on December 9. For more information, click here.
Clint Rockwell spoke on RESPA and Appraisals at the California Mortgage Bankers Association Conference in Anaheim, CA on December 8.
Joe Kolar spoke on the RESPA Rule LIVE Online Conference sponsored by the Mortgage Bankers Association on December 2.
Mortgages
Fannie and Freddie Issue Guidelines on Streamlined Modification Program. On December 12, the Federal National Mortgage Association (Fannie) and the Federal Home Loan Mortgage Corporation (Freddie) published guidance for their Streamlined Modification Program (SMP). The new guidelines supplement the eligibility information that was provided when the program was first publicized on November 11, 2008 (reported in Infobtyes, Nov. 14, 2008 ). Both Fannie’s and Freddie’s announcements include detailed information about underwriting and modification standards, reporting requirements, and permissible fees and charges. Specifically, both announcements describe a four step process for lowering a qualifying borrower’s mortgage payment to 38% of household monthly gross income. First, the guidance suggests that the servicer should capitalize any arrearages. If payments are still above 38% of income, the guidance suggests that the servicer should then extend the amortization period to 40 years. If that fails to bring the payment within range, the guidance suggests that the servicer should then reduce the interest rate to 3%. Finally, if all three previous measures fail, the guidance suggests that the servicer should then consider forebearance of the principle, resulting in a balloon payment payable upon the earliest of the borrower’s sale of the property or payoff or maturity of the mortgage loan. (Principle write downs or loan forgiveness are still prohibited under the SMP.) In addition, both Fannie Mae’s and Freddie Mac’s announcements contained entity specific material. Fannie Mae’s announcement included guidance on how the SMP affected mortgage backed securities, while Freddie Mac’s bulletin reminded servicers that it suspended all foreclosure sales and scheduled evictions on occupied single-family 1- to 4-unit primary residences for six-weeks beginning November 26, 2008. For a copy of Fannie’s announcement, please see https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0833.pdf. For a copy of Freddie’s Bulletin, please see http://www.freddiemac.com/sell/guide/bulletins/pdf/bll121208.pdf.
Mortgage Lender Settles FTC Discrimination Charges. On December 17, the Federal Trade Commission (FTC) entered into a settlement with Gateway Funding Diversified Mortgage Services, L.P., and its general partner, Gateway Funding Inc. (collectively, "Gateway"), in connection with a complaint filed against Gateway by the FTC alleging violations of the Equal Credit Opportunity Act (ECOA). Gateway allegedly gave mortgage loan officers nearly complete discretion to charge "overages," but failed to monitor whether African-American and Hispanic consumers were paying higher overages than non-Hispanic white borrowers. According to the complaint, this lack of oversight "resulted in African-American and Hispanic applicants being charged higher overages because of their race or ethnicity," and the "disparities in overage are substantial, statistically significant and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants." The settlement imposes a judgment of $2.9 million, all but $200,000 of which is suspended due to the defendants’ inability to pay. For the FTC’s press release and related information, see http://www.ftc.gov/opa/2008/12/gateway.shtm.
NAMB Sues HUD Over RESPA Rule. On December 19, the National Association of Mortgage Brokers (NAMB) announced that it filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD) regarding the new Real Estate Settlement Procedures Act (RESPA) Final Rule. The lawsuit against HUD claims that the Final Rule is "arbitrary and capricious," contrary to the intent of Congress, and fails to offer any rational reasons for its rejection of alternative approaches. The suit claims that requiring only mortgage brokers to disclose yield spread premiums places them at a permanent disadvantage in the marketplace. The suit further alleges that HUD disregarded numerous federal and private sector studies providing evidence that different origination channels disclosing differently confuses consumers, and will often times cause them to choose a more expensive mortgage product. For a copy of the press release, please see http://www.namb.org/namb/NewsBot.asp?MODE=VIEW&ID=253&SnID=132443327.
IRS Streamlines Tax Lien Relief for Homeowners Trying to Refinance or Sell. On December 16, the Internal Revenue Service (IRS) announced that it is making it easier for financially distressed homeowners to sell their homes or refinance their mortgages when there is a federal tax lien on the property. Under the new process, taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien subordinate to the lien to be created by the lender refinancing or restructuring a loan. Further, taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien, if certain conditions are met. The IRS states that the process to request a discharge or a subordination of a tax lien will take approximately thirty days after the submission of the completed application, but the IRS will work to expedite requests. Additional information is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=201343,00.html.
Fed Extends Comment Period for Proposed Reg Z Amendments. On December 17, the Federal Reserve Board (Fed) announced that it is extending the comment period on its proposal to revise the disclosure requirements for mortgage loans under Regulation Z (reported in InfoBytes, December 12, 2008) from January 23, 2009, to February 9, 2009. The proposed revisions to Regulation Z would implement the Mortgage Disclosure Improvement Act (MDIA), which was enacted in July 2008 as an amendment to the Truth in Lending Act (TILA). The extension was granted to give the public additional time to comment on the proposal. For a copy of the notice, please see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081217b1.pdf.
North Carolina Commissioner of Banks Reaches Settlement with Countrywide. On December 4, the North Carolina Commissioner of Banks (NCCOB) announced a $16 million dollar settlement with Countrywide Home Loans and Countrywide Mortgage Ventures (collectively, "Countrywide"). The agreement resolves the NCCOB’s allegations that Countrywide violated §§ 24-1.1A and 24-10 of the North Carolina General Statutes, by overcharging 4,800 borrowers on their first or second mortgage loans. As part of the settlement, Countrywide will pay approximately $11.5 million in direct refunds to affected borrowers. Additionally, it will award $2 million in grants to 26 non-profit housing counseling agencies that provide foreclosure prevention counseling through the State Home Foreclosure Prevention Project. Similarly, it will dedicate $900,000 of its settlement fund to the Nationwide Mortgage Licensing System in order to encourage the cooperative State effort to improve licensing and regulation of mortgage loan originators. The remainder of the $16 million settlement, approximately $1.6 million, will reimburse the NCCOB for its examination and investigation expenses. In return for the settlement funds, the NCCOB will hold Countrywide faultless for any of the alleged § 24-1.1A and § 24-10 violations. Homeowners affected by the settlement will receive checks within the next 60 days. For a copy of the settlement please see http://www.nccob.org/mlenforcements/08_170.pdf.
Michigan Extends Mortgage Loan Officer Registration Deadline. On December 18, Governor Janet Granholm (D-MI) signed into law statutes amending the Mortgage Brokers, Lenders, and Servicers Licensing Act (MBLSLA), the Michigan Secondary Mortgage Loan Act (SMLA), and the Michigan Code of Criminal Procedure. Public Acts 323, 324, 325, 326, 327, and 328. Among other things, the law: (i) amends the effective date of mortgage loan officer registration requirements from January 1, 2009 to April 1, 2009; (ii) extends the deadline from December 3, 2008 to April 1, 2009 for an individual to obtain fingerprints and have an FBI and Michigan State Police criminal history check completed, pass the required Michigan mortgage loan officer examination, and submit the required Nationwide Mortgage Licensing System (NMLS) loan officer registration application and the Michigan specific loan officer application; (iii) extends the deadline from December 31, 2008 to March 31, 2009 for a residential mortgage originator and a loan officer to receive compensation for the origination of a mortgage loan; (iv) amends the MBLSLA and SMLA specifying that beginning January 1, 2009, the Michigan State Police and FBI may complete a mortgage loan officer criminal history check; (v) amends the SMLA to require fingerprints, a Michigan State Police and FBI criminal history check, pre-registration and continuing education, testing, and a secondary mortgage loan officer application if the loan officer is not registered as a loan officer under the MBLSLA and will originate for a mortgage broker, lender, or servicer that only brokers, makes, or services secondary mortgage loans; (vi) grants additional authority to the Mortgage Industry Advisory Board to review and make recommendations to the Commissioner concerning the SMLA, and (vii) Expands the revenue sources and allowable uses of the MBLSLA Fund to include the revenue and administrative expenses of the SMLA. For a copy of these materials, please contact .
Banking
Federal Banking Agencies Reduce Amount of Goodwill Deduction. On December 16, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision approved a final rule to permit banking organizations to reduce the amount of goodwill it must deduct from tier 1 capital by the amount of any deferred tax liability associated with that goodwill. For a banking organization that elects to apply this final rule, the amount of goodwill the banking organization must deduct from tier 1 capital would reflect the maximum exposure to loss in the event that such goodwill is impaired or derecognized for financial reporting purposes. Banking institutions may adopt its provisions for purposes of regulatory capital reporting for the period ending December 31, 2008. For a copy of the final rule, please see http://www.occ.gov/ftp/release/2008-145a.pdf.
FDIC Increases Risk-Based Assessment Rates. On December 16, the Federal Deposit Insurance Corporation (FDIC) adopted a final rule increasing risk-based assessment rates uniformly by 7 basis points (7 cents for every $100 of deposits), on an annual basis, for the first quarter of 2009. Under the final rule, risk-based rates would range between 12 and 50 basis points (annualized) for the first quarter 2009 assessment. Most institutions would be charged between 12 and 14 basis points. This is designed to help ensure that the reserve ratio returns to at least 1.15 percent by the end of 2013 as required by statute. For a copy of the final rule, please see, http://www.fdic.gov/news/board/08DEC15rule2.pdf.
Federal Banking Agencies Issue New CRA Asset-Size Thresholds. On December 17, the federal banking agencies announced the annual adjustment to the asset-size thresholds used to define "small bank," "small savings association," "intermediate small bank," and "intermediate small savings association" under the Community Reinvestment Act (CRA) regulations. The definitions of small and intermediate small institutions for CRA examinations will change as follows: (i)"small bank" or "small savings association" means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.109 billion; and (ii) "intermediate small bank" or "intermediate small savings association" means a small institution with assets of at least $277 million as of December 31 of both of the prior two calendar years, and less than $1.109 billion as of December 31 of either of the prior two calendar years. These asset-size threshold adjustments are effective January 1, 2009. For a copy of the final rule, please see http://www.fdic.gov/news/news/press/2008/pr08140a.pdf.
FDIC Adopts Final Rule on Recordkeeping Requirements for QFCs. On December 16, the Federal Deposit Insurance Corporation (FDIC) issued a final rule to improve the FDIC’s ability to monitor and evaluate risks in certain insured depository institutions with qualified financial contracts (QFCs), as well as assure preparedness if such institutions fail. The recordkeeping requirements in the final rule will require insured depository institutions defined as troubled to provide certain information to the FDIC, including adequate position level documentation of the counterparty relationships of failed institutions. The final rule requires an institution in troubled condition, upon written notification by the institution’s appropriate federal banking agency or the FDIC, to produce (i) position level and counterparty level data, (ii) certain QFC counterparty and portfolio identifiers, and (iii) other QFC-related information. This information must be made available to the FDIC immediately at the close of processing of the institution’s business day for a period provided in the notification. A de minimus exception is included in the final rule which provides an exemption to institutions with a small number of QFCs from the mandatory electronic files requirements that apply to other institutions. The final rule expands the time frame for compliance from 30 to 60 days and permits institutions to request additional time for compliance, which the FDIC will review on a case-by-case basis. The final rule will be effective 30 days after publication in the Federal Register. For a copy of the final rule, please see http://www.fdic.gov/news/board/08DEC15rule3.pdf.
Consumer Finance
FTC Increases FCRA Allowable Charges. On December 15, the Federal Trade Commission (FTC) reported that it has approved the publication of a Federal Register notice announcing that the ceiling on allowable charges under Section 612(f) of the Fair Credit Reporting Act (FCRA) will increase from $10.50 to $11.00, effective January 1, 2009. The charge applies when a consumer who has received a free annual disclosure does not otherwise qualify for an additional free disclosure. The FTC is required to revise the ceiling each year, based on the Consumer Price Index, rounded to the nearest fifty cents. For a copy of the press release, please see http://www.ftc.gov/opa/2008/12/fcra.shtm.
Litigation
CAFA Minimal Diversity Requirement Includes Corporation’s State of Incorporation and Principal Place of Business. In a pair of decisions issued the same day, the U.S. Court of Appeals for the Fourth Circuit held that the requirement of "minimal diversity" to support removal to federal court under the Class Action Fairness Act ("CAFA"), was not met where the defendants were citizens of both a foreign state and the forum state, and where all members of the plaintiff classes are defined as citizens of the forum state. Johnson v. Advance America, Cash Advance Centers of South Carolina, Inc., No. 08-2186, 2008 WL 5194301 (4th Cir. Dec. 12, 2008); Dennison v. Carolina Payday Loans, Inc., No. 08-2187, 2008 WL 5194336 (4th Cir. Dec. 12, 2008). Plaintiffs in both cases sued their payday lenders in state court, on behalf of themselves and similarly situated citizens of South Carolina, alleging that the defendants’ conduct in making payday loans violated various state statutes and the common law. The defendants removed the cases to federal court, arguing, among other things, that, because they were citizens of South Carolina as well as another state, they satisfied CAFA’s "minimal diversity" requirement that "any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)(A). The district courts disagreed with this argument, remanding the cases to state court. On appeal, the Fourth Circuit affirmed the decisions of the district courts. According to the Fourth Circuit panel, the federal rules contemplate dual citizenship for corporations for purposes of determining diversity jurisdiction - that is, corporate citizenship is determined by the corporation’s place of incorporation and the location of its principal place of business. Neither defendant was permitted to "ignor[e] the fact that it is also a citizen of South Carolina" simply because it was a citizen of another state as well. Thus, defendants failed to meet their burden of proving that they were not citizens of South Carolina. For a copy of this opinion, please contact .
Ohio Federal Court Dismisses ‘Predatory’ Lending Case. On December 9, a federal court in the northern district of Ohio dismissed a borrower’s claims under the Home Owners Equity Protection Act (HOEPA), the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Fair Credit Reporting Act (FCRA), and other state lending laws regarding a refinanced mortgage loan. Smith v. Encore Credit Corp., No. 4:08 CV 1462, 2008 WL 5169683 (N.D. Ohio Dec. 9, 2008). The borrower plaintiffs allege that when on the verge of defaulting on payments, the defendant engaged in predatory lending practices to refinance their mortgage loan into an adjustable rate mortgage. The plaintiffs sought (i) a declaration that the refinancing was illegal, (ii) rescission of the mortgage, (iii) an injunction against the foreclosure sale of their residence, and (iv) damages. The court denied the defendant’s motion to dismiss on the Rooker-Feldman doctrine, issue preclusion, and Younger abstention. However, the court held that the Anti-Injunction Act prohibited the federal court from enjoining the foreclosure sale ordered by a state court. The court also dismissed the claims for rescission under HOEPA and TILA because the three-year limit for rescission claims under these statutes is absolute. The court further held that even though the Sixth Circuit has not decided whether equitable tolling applies to RESPA, that claim was also time barred. Lastly, the court held that the plaintiffs failed to state a claim under FCRA because there is no Sixth Circuit precedent that there is a private right of action under § 1681s-2(b) and the plaintiffs asserted only that "Defendants" negligently or willfully furnished inaccurate information to the credit reporting agencies failing to allege that the defendants were aware of the dispute. The state law claims were dismissed without prejudice. For a copy of this opinion, please contact .
Tenth Circuit Finds Kansas Payday Lender Licensing Requirement Does Not Violate Dormant Commerce Clause. On December 12, the U.S. Court of Appeals for the Tenth Circuit upheld the district court’s ruling that the Kansas statute requiring licensure for a payday lender that "induces the consumer who is a resident of [Kansas] to enter into the transaction by solicitation in [Kansas] by any means including but not limited to: Mail, telephone, radio, television or any other electronic means" does not run afoul of the dormant Commerce Clause. Quik Payday, Inc. v. Stork, No. 07-3289 (10th Cir. Dec. 12, 2008). The plaintiff payday lender was headquartered in Utah and licensed by Utah’s Department of Financial Institutions to make payday loans in Utah; it had no offices, employees, or other physical presence in Kansas, but made payday loans to Kansas residents over the Internet. In 2005, following a Kansas consumer’s complaint against the plaintiff, the Kansas Office of the State Bank Commissioner (OSBC) ordered the plaintiff to stop all payday lending to Kansas residents, halt any collections on outstanding loans, pay a $5 million civil penalty, return to borrowers the interest, service fees, and profits from the loans made in Kansas, and barred the plaintiff from becoming licensed in Kansas as a payday lender in the future. The plaintiff brought suit under 42 U.S.C. § 1983, arguing that the Kansas consumer-lending statute violated the dormant Commerce Clause by (i) regulating conduct that occurs wholly outside Kansas, (ii) unduly burdening interstate commerce relative to the benefit it confers under the balancing test from Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), and (iii) imposing Kansas requirements when Internet commerce demands nationally uniform regulation. The Tenth Circuit rejected these arguments, finding that (i) the statute, as interpreted by the OSBC, does not regulate extraterritorial conduct, (ii) based on Tenth Circuit precedent, the statute’s burden on interstate commerce does not exceed the benefit that it confers, and (iii) the plaintiff’s national uniformity argument is merely a species of a burden-to-benefit argument, and is not persuasive in the context of the specific regulation of commercial activity at issue in the case as requiring a license in each state does not impose an undue burden. For a copy of this opinion, please see http://caselaw.lp.findlaw.com/data2/circs/10th/073289p.pdf.
Pennsylvania Federal Court Grants Class Certification in Suit Alleging RESPA Violations. On December 12, the U.S. District Court for the Eastern District of Pennsylvania granted class certification in a suit alleging that a title insurance company violated, among others, the Real Estate Settlement Procedures Act (RESPA). Markocki v. Old Republic National Title Ins. Co., No. 06-2422 (E.D. Pa. Dec. 9, 2008). In this case, the plaintiff asserts that the defendant title insurance company violated RESPA by overcharging consumers for title insurance by failing to provide a nondiscretionary discounted premium. According to the plaintiff, rather than charging the proper premium, the defendant issued a higher premium, and unlawfully retained the difference, in violation of RESPA. As such, the plaintiff moved to certify a class. To proceed as a class action, the requirements of Fed. R. Civ. P. 23 must be satisfied. According to Rule 23(a), one or more members of a class may sue as representative parties on behalf of all members only if: (i) the class is so numerous that joinder of all members is impracticable; (ii) there are questions of law or fact common to the class; (iii) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (iv) the representative parties will fairly and adequately protect the interests of the class. After satisfying the prerequisites provided in Rule 23(a), parties seeking class certification must also demonstrate that the action is maintainable under Rule 23(b)(1), (2), or (3). Rule 23(b)(1) addresses cases where prosecuting separate actions by or against individual class members would create a risk of inconsistent judgments or incompatible standards of conduct for the party opposing the class, or would substantially impair or impede a nonparty class member’s ability to protect their interests. Rule 23(b)(2) allows class actions were final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. Rule 23(b)(3) permits class actions where the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. After considering the foregoing factors, the court granted class certification, holding that all the requirements of Fed. R. Civ. P. 23 were met. The court reasoned that the very purpose of the class action mechanism is to surmount the obstacle presented by small recoveries, which serve as a disincentive to prosecute individual actions, by aggregating small potential recoveries into a large action. For a copy of the opinion, please contact .
Privacy/Data Security
FTC Issues Report on Social Security Numbers and ID Theft. On December 17, the Federal Trade Commission (FTC) issued a report on the private sector uses of consumers’ Social Security numbers (SSNs), the relationship between the SSN and identity theft, and the ways in which SSN’s beneficial uses may be preserved while curtailing its availability and value to identity thieves. Noting the strong connection between SSNs and identity theft, the FTC report made five recommendations to prevent identity theft: (i) improve consumer authentication, (ii) restrict the public display and transmission of SSNs, (iii) establish national standards for data protection and breach notification; (iv) conduct outreach to businesses and consumers, and (v) promote coordination and information sharing on use of SSNs. For a copy of the report, please see http://www.ftc.gov/os/2008/12/P075414ssnreport.pdf.
Texas AG Settles with Two Companies Failing to Properly Dispose of Records, Charges Another. On December 11, Texas Attorney General Greg Abbott reached settlements with two companies charged with exposing customers to identity theft by improperly disposing of records containing the customers’ personal information. The companies, GAB Robins North America, Inc. (GAB) and B&F Finance McAllen, LLC (which is managed by Victory Management Services (Victory)), allegedly left the records in unsecured dumpsters, and failed to alter the records to make the customers’ personal information unreadable before doing so. GAB and Victory have been ordered to pay a combined total of $145,000 in civil penalties and attorney fees, and implement information-security programs to include, among other things, employee training to ensure compliance with privacy protection laws. The Attorney General is also pursuing an enforcement action against a third company, Juan M. Nino Tax Practitioner (Nino), which similarly failed to protect customers’ personal information. Among other things, the Attorney General is requesting $500 for each record that Nino did not dispose of in the manner required by law and an order that Nino adopt a comprehensive information-security program. For a copy of the Attorney General’s press release, please see http://www.oag.state.tx.us/oagNews/release.php?id=2761.
Credit Cards
Fed Issues Consumer Protection Rules for Credit Cards, Overdraft Services. On December 18, the Federal Reserve Board (Fed) adopted final rules designed to prohibit certain unfair acts or practices and improve the disclosures consumers receive in connection with credit card accounts and other revolving credit plans. The rule amends Regulation AA (Unfair acts or practices) to: (i) protect consumers from unexpected interest charges, including increases in the rate during the first year after account opening and increases in the rate charged on pre-existing credit card balances; (ii) forbid banks from imposing interest charges using the "two-cycle" billing method; (iii) require that consumers receive a reasonable amount of time to make their credit card payments; (iv) prohibit the use of payment allocation methods that unfairly maximize interest charges; and (v) address subprime credit cards by limiting the fees that reduce the amount of available credit. The Fed also issued final rules amending Regulation Z (Truth in Lending) requiring changes to the format, timing, and content requirements for credit card applications and solicitations and for the disclosures that consumers receive throughout the life of an open-end account.
On December 18, the Fed also adopted final amendments to Regulation DD (Truth in Savings) to address depository institutions’ disclosure practices related to overdraft services. The effective date for the final rules adopted under Regulation DD is January 1, 2010. Separately, the Fed proposed rules to amend Regulation E (Electronic Fund Transfers). The proposed rule is designed to provide consumers a choice regarding their institution’s payment of overdrafts for automated teller machine withdrawals and one-time debit card transactions. The Fed proposed two alternative approaches to providing consumer choice, including a proposed requirement that would require institutions to obtain affirmative consent (or opt-in) from consumers before any overdraft fees or charges may be imposed on consumers’ accounts. The comment period for the Regulation E proposal ends 60 days after publication in the Federal Register. Publication of each of the rules is expected shortly. For a copy of the highlights of the final credit card rules, please see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081218a1.pdf. For a copy of all Federal Register notices and related materials, please see http://www.federalreserve.gov/boarddocs/meetings/2008/20081218/openmaterials.htm.
FDIC Settles with Subprime Credit Card Company. On December 19, the Federal Deposit Insurance Corporation (FDIC) reached a settlement with CompuCredit Corporation, which was charged with deceptive marketing of subprime credit cards. CompuCredit will be required to provide restitution of approximately $114 million to consumers in the form of credits for certain fees. The order also includes a civil money penalty of $2.4 million. In addition, the order requires that credit card solicitations that include representations about credit limits or available credit disclose clearly and prominently, and on the same page, fees and other restrictions affecting initial available credit. The order also includes a broad prohibition against misrepresentations in the marketing of open-end credit products. For a copy of the settlement, please see http://www.fdic.gov/news/news/press/2008/pr08142a.pdf.