InfoBytes, February 13, 2009
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Topics in this issue:
- Federal Issues
- State Issues
- Courts
- Firm News
- Miscellany
- Mortgages
- Banking
- Consumer Finance
- Insurance
- Litigation
- E-Financial Services
- Privacy/Data Security
- Credit Cards
Federal Issues
Secretary Geithner Announces Financial Stability Plan. On February 10, Treasury Secretary Timothy Geithner outlined the Treasury’s new Financial Stability Plan, which will establish three new assistance programs. Under the Capital Assistance Program, the Treasury will provide financial institutions with a “capital buffer” to help absorb losses and attract private capital. To qualify, a financial institution must undergo both (i) a supervisory review, which allows federal regulators to evaluate the institution’s balance sheet, and (ii) a comprehensive “stress test,” which assesses whether the institution has the capital necessary to continue lending. Additionally, the Treasury will require any institution with over $100 billion in assets, regardless of participation in the Capital Assistance Program, to undergo both the supervisory review and stress test. Under the Public-Private Investment Fund program, the Treasury will assist financial institutions with disposing of non-performing legacy assets by using public money to leverage private capital purchases of troubled and illiquid assets. Finally, under the Consumer and Business Lending Initiative, the Treasury will unfreeze secondary markets by providing private investors with financing for the purchase of new loans. The programs require increased transparency and monitoring, including reporting and planning intended to evidence how funds have preserved or generated new lending. Further, all recipients of new capital investment initiatives will be required to participate in mortgage foreclosure mitigation programs. For a copy of the press release, please see http://www.ustreas.gov/press/releases/tg18.htm.
OTS Urges for Foreclosure Freeze. On February 11, the Office of Thrift Supervision urged OTS-regulated financial institutions to suspend foreclosures on owner-occupied homes until the finalization of the Treasury’s Financial Stability Plan, which Treasury Secretary Geithner has indicated will include provisions regarding mortgage foreclosures. For a copy of the press release, please see http://www.ots.treas.gov/?p=PressReleases&ContentRecord_id=660fa9f3-1e0b-8562-eb9e-1636207722f4.
OCC, OTS Add Requirements for Mortgage Performance Data. On February 13, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) announced additional requirements for mortgage performance data, including a requirement to document the affordability and sustainability of loan modifications. As a result of the new requirements, the next edition of the OCC/OTS Mortgage Metrics report will report the categories of loan modifications that increased borrowers’ monthly principal and interest payments, brought no change to payments, reduced payments by 10% or less, and reduced payments by more than 10%. Future reports will also show trends in the types of modifications undertaken by loan servicers. The new requirements reflect, among other things, recommendations made by the State Foreclosure Prevention Working Group to the OCC and OTS (reported in InfoBytes, Feb. 6, 2009). For a copy of the press release, please see http://www.occ.treas.gov/ftp/release/2009-9.htm.
Freddie Mac Issues Industry Letter Regarding Anti-Predatory Lending. On February 12, the Federal Home Loan Mortgage Corporation (Freddie Mac) issued an Industry Letter reminding its sellers and servicers about its anti-predatory lending requirements set forth in its Single-Family Seller Servicer Guide (Guide) and providing additional guidance regarding anti-predatory lending. The Industry Letter (i) provides greater detail about the excessive points and fees threshold that applies to all mortgages secured by primary residences, (ii) reminds seller/servicers that certain Freddie Mac post-settlement delivery fees, if passed on to the borrower at closing, are included in the points and fees calculations under the Home Ownership and Equity Protection Act (HOEPA) and state anti-predatory lending laws, (iii) restates that no mortgage is eligible for delivery to Freddie Mac if it is a high-cost home loan in any of the 14 states specified in the Guide, regardless of whether the seller or third-party originator holds a federal or state charter, (iv) provides clarification that, if Freddie Mac purchases a high-cost home loan secured by property located in one of the 14 specified states, the mortgage is subject to repurchase regardless of any attempt to cure, (v) reminds seller/servicers that the borrower’s rescission rights under the Truth in Lending Act must expire before a mortgage is delivered for sale to Freddie Mac, and (vi) informs seller/servicers of Freddie Mac’s expectations about their controls for preventing the sale of high-cost home loans to Freddie Mac. For a copy of the letter, please see http://www.freddiemac.com/sell/guide/bulletins/pdf/iltr021209.pdf.
FTC Sues Mortgage Foreclosure Rescue Company. On February 11, the Federal Trade Commission (FTC) charged a Nevada mortgage foreclosure company with violating the FTC Act by falsely representing that it could halt foreclosures in most instances and for failing to provide refunds of up-front fees for foreclosures it could not halt. According to the complaint, the defendant mailed ads advertising foreclosure rescue services to consumers behind on mortgage payments, but subsequently failed to provide the advertised services. The complaint seeks, among other things, a permanent injunction and refunds for consumers. For a copy of the press release, please see http://www.ftc.gov/opa/2009/02/nfr.shtm.
Fed May Expand TALF to $1 Trillion. On February 10, the Federal Reserve Board Announced that it may expand the Term Asset-Backed Securities Loan Facility (TALF) to as much as $1 trillion. The expansion could broaden the eligible collateral to include newly-issued AAA-rated asset-backed securities (e.g. certain mortgage-backed securities). For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20090210b.htm.
State Issues
Maryland Regulator Announces Availability of “Average Prime Offer Rate” for Determining “Higher-Priced” Mortgages. On February 5, the Maryland Commissioner of Financial Regulation announced the availability of the "average prime offer rate" to use when determining whether a mortgage is a "higher-priced" mortgage, as defined by Maryland law. (The “higher-priced” mortgage test was originally reported in InfoBytes, Oct. 31, 2008.) This rate will be based on Federal Financial Institutions Examination Council data available at http://www.ffiec.gov/ratespread/newcalc.aspx. "Higher-priced" mortgages trigger various requirements, such as special disclosures and the adoption of certain risk management practices and control systems. These and related provisions regarding “higher-priced” mortgages will become effective March 19, 2009. For more information, please see http://www.dllr.state.md.us/finance/advisories/advisory2-09.htm.
Memorandum Opinion Concludes TARP Preempts State Foreclosure Laws. On January 30, a memorandum of law issued to Wayne County (Michigan) Sheriff Warren C. Evans by the Sherifff Department’s legal counsel concluded that Title I of the Emergency Economic Stabilization Act of 2008, which created the Troubled Assets Relief Program (TARP), preempts Michigan state law governing foreclosure sales because it evinces a congressional plan to facilitate loan modifications and forestall foreclosures in such a comprehensive way that it “occupies the field of mitigating foreclosures.” According to the memorandum, loans heading to foreclosure may be "troubled assets" that the Secretary of the Treasury has “bought through the TARP framework.” Thus, any foreclosure could violate a homeowner’s right to a loan modification under the TARP. The memorandum further noted that the Sheriff has no way of knowing which loans have been bought by the Treasury Department under the TARP. According to the memorandum, the Sheriff could face unspecified liability if he or his office “foreclose[] a mortgage containing ‘troubled asset(s)’, thereby violating a homeowner’s right to loan modification, especially where the anticipated recovery on the principal outstanding obligation of the mortgage under the modification is likely to be greater than, on a net present value basis, the anticipated recovery on the principal outstanding obligation of the mortgage through foreclosure.” Sheriff Evans has reportedly suspended foreclosures in Wayne County based on the memorandum. For a copy of the memorandum, please see http://www.buckleykolar.com/WC_Tarp_Preemption.pdf.
Connecticut Regulators Announce Data Security Settlement. On February 3, the Connecticut Department of Consumer Protection and Department of Banking announced a settlement with Bank of New York Mellon (BNY Mellon) regarding a 2008 data breach that potentially affected more than 600,000 Connecticut residents. The data breach resulted when a computer tape containing personal data was lost in transport. Initially, BNY Mellon notified potentially-affected consumers and offered to provide them credit monitoring for two years. Under the agreement, BNY Mellon will (i) provide an additional year of credit monitoring, (ii) reimburse anyone from the initially-notified group for any funds stolen as a direct result of the data breach, and (iii) pay $150,000 to the State of Connecticut. For a copy of the press release, please see http://www.ct.gov/dob/cwp/view.asp?a=2245&q=433242.
Pennsylvania Regulator Delays Out-of-State Licensing Requirement for Internet Payday Lenders. According to reports, the Pennsylvania Department of Banking has delayed the February 1, 2009 effective date of a licensing requirement for out-of-state internet payday lenders, which was initially announced on July 26, 2008 (reported in InfoBytes, Aug. 1, 2008). A hearing regarding a final injunction in the matter is reportedly scheduled for April 1, 2009. For additional information, please contact .
Courts
Eleventh Circuit Holds Communication in a Foreclosure Action Not “Communication” Subject to FDCPA. On January 28, the U.S. Court of Appeals for the Eleventh Circuit held that a “confidential payoff letter” created by counsel for one creditor and sent to counsel for another creditor, both of whom were involved in an underlying foreclosure action, is not a “communication” subject to the Fair Debt Collection Practices Act (FDCPA). Acosta v. Campbell, No. 07-10374, 2009 WL 190089 (11th Cir. Jan. 28, 2009). In Acosta, the plaintiff borrower disputed the payment of a mortgage obtained from two of the defendants, his lender and correspondent lender. The property was subsequently foreclosed, and the plaintiff sued. The plaintiff alleged, among other things, that a letter sent to the attorneys for the second mortgage holder, at the second mortgage holder’s request, regarding the collection of the disputed debt violated the FDCPA. The trial court disagreed, and the plaintiff appealed. The Eleventh Circuit affirmed the trial court, finding that, because the court in Vega v. McKay, 351 F.3d 1334 (11th Cir. 2003) (en banc) held that a foreclosure package including an FDCPA notice is not an “initial communication,” a communication made by a foreclosing party or its counsel regarding the foreclosure action is also not a “communication” subject to the FDCPA. For a copy of the opinion, please see http://www.buckleykolar.com/Acosta_v_Campbell.pdf.
Sixth Circuit Holds RESPA Claim Not Subject to Equitable Tolling. On February 12, the U.S. Court of Appeals for the Sixth Circuit rejected a claim that a RESPA action was subject to the doctrines of equitable tolling and estoppel. Egerer v. Woodland Realty, Inc., No. 08-1173, 2009 WL 331041 (6th Cir. Feb. 12, 2009). In Egerer, plaintiffs alleged that the defendant received a kickback from a title insurance company in violation of RESPA. The district court dismissed the case as time-barred. Plaintiffs appealed, arguing that they alleged sufficient evidence to support the application of equitable tolling and estoppel to their claims. The Sixth Circuit affirmed. Noting that the Sixth Circuit had yet to decide whether the RESPA statute of limitations is subject to equitable tolling, the court held that, even if RESPA’s statute of limitations were subject to equitable tolling, the facts of the case did not support such a finding. Specifically, the court of appeals found that the record did not support a finding that the defendants affirmatively concealed alleged RESPA violations and the plaintiffs did not inquire of their real estate agent as to the particulars of the title insurance transaction, thus evidencing a lack of due diligence on plaintiffs’ part to discover the alleged violation. Next, the court of appeals considered the plaintiffs’ equitable estoppel claim, which the court denied, having already established that the plaintiffs had not exercised due diligence to discover the alleged violation. For a copy of the opinion, please see http://www.buckleykolar.com/Egerer_v_Woodland.pdf.
Ninth Circuit Rejects Insurer’s Attempt to Enforce Arbitration Clause in Underlying Loan Contract. On February 11, the U.S. Court of Appeals for the Ninth Circuit held that the arbitration clause in an underlying loan agreement did not apply to the agreement between an insurer and borrower because there was only an “attenuated relation” between the loan agreement and the insurance dispute. Mundi v. Union Security Life Insurance Co., No. 07-16171, 2009 WL 323163 (9th Cir. Feb. 11, 2009). In Mundi, the borrower took out a home equity loan, and the defendant insurance company issued a life insurance policy to cover the loan. The borrower subsequently died, and defendant denied the claim under the policy. The decedent’s estate disputed the denial of the claim and filed suit. The defendant subsequently moved to compel arbitration based on an arbitration clause in the loan agreement. The district court denied the motion, finding that, even though the insurance was purchased to repay the loan in the event of borrower’s death, the claim for insurance did not in any other way implicate the loan agreement. On appeal, the Ninth Circuit affirmed, finding that there was only an “attenuated relation” between the loan agreement and the insurance dispute. Further, the court of appeals rejected the defendant’s argument that arbitration should be compelled on the basis of equitable estoppel because the insurance dispute was not “intertwined with the contract providing for arbitration.” For a copy of the opinion, please see http://www.buckleykolar.com/Mundi_v_Union.pdf.
Illinois Federal Court Rejects Challenge to Constitutionality of Clarification Act. On February 6, the U.S. District Court for the Northern District of Illinois rejected a challenge to the constitutionality of the federal Credit and Debit Card Clarification Act of 2007 (Act). Barbieri v. Redstone American Grill, Inc., No. 07 C 5758, 2009 WL 290467 (N.D. Ill. Feb. 6, 2009). The plaintiff in Barbieri alleged that the defendant willfully violated the Fair and Accurate Credit Transaction Act (FACTA) by printing her credit card expiration dates on two receipts. The defendant moved for summary judgment, arguing that the Act eliminated claims for willful violations of FACTA based on the alleged failure to delete the expiration date from a receipt. In response, the plaintiff argued that the Act was unconstitutional because it violated separation of powers principles and the equal protection and due process clauses. The court, persuaded in part by briefs filed by the Department of Justice, rejected the plaintiff’s arguments and granted summary judgment in favor of the defendant. According to the court, the Act did not violate separation of powers principles because it changed the substantive law and did not improperly usurp the judiciary’s role as factfinder. The court also held that the Act did not violate due process or equal protection, because it did not prevent the plaintiff from accessing the court, and because Congress’ decision to exclude the failure to redact the expiration date from “willful noncompliance” under FACTA was rationally related to the legitimate purpose of protecting consumers while controlling abusive lawsuits. For a copy of the opinion, please see http://www.buckleykolar.com/Barbieri_v_Redstone.pdf.
Illinois Federal Court Holds Lender Violated FCRA by Continuing to Report Inaccurate Information to Credit Reporting Agency. On February 4, the U.S. District Court for the Northern District of Illinois ordered a lender to pay damages, attorneys’ fees, and costs to a borrower after determining that the lender violated the Fair Credit Reporting Act (FCRA) by negligently continuing to report inaccurate information regarding the borrower’s account to credit reporting agencies. Talley v. U.S. Dep’t of Agric., No. 07 C 0705, 2009 WL 303134 (N.D. Ill. Feb. 4, 2009). In Talley, according to the findings of the district court, the plaintiff borrower paid off a loan from the defendant lender. The defendant, however, continued to report the payment history of the loan to TransUnion for nearly six years after payoff. As a result, the plaintiff’s credit report gave the appearance that the plaintiff was regularly 120 days late in making payments. After the plaintiff disputed the inaccurate information with TransUnion, the defendant determined that the plaintiff was correct, but failed to change the way in which it reported the plaintiff’s information to TransUnion. Based on this evidence the court found that the defendant was liable under FCRA for its failure to reasonably investigate its internal reporting of the plaintiff’s credit information and to properly report that information to TransUnion following the receipt of a notice of dispute regarding the credit report’s accuracy. For a copy of the opinion, please see http://www.buckleykolar.com/Talley_v_US.pdf.
California Federal Court Holds Noerr-Pennington Doctrine Does Not Shield Attorneys from FDCPA Claims. On January 29, the U.S. District Court for the Eastern District of California held that the Noerr-Pennington doctrine does not protect attorneys from claims under the Fair Debt Collection Practices Act (FDCPA). Gerber v. Citigroup, Inc., No. CIV S-07097885, 2009 WL 248094 (E.D. Cal. Jan 29, 2009). In Gerber, the plaintiff alleged that defendants, including attorneys, violated the FDCPA, the California Rosenthal Fair Debt Collection Practices Act (RFDCPA) and other common law limitations by harassing him while attempting to collect a credit card debt. The defendants moved to dismiss, claiming that they were protected by the Noerr-Pennington doctrine – which immunizes those who petition any department of the government for redress – because their acts to collect the credit card debt were taken before and during state court litigation. The district court denied the motion with respect to the FDCPA, allowing those claims to proceed against the attorneys. Relying on case law applying the FDCPA to attorneys who “regularly” engage in debt collection activity, including litigation activities, the court held that “[t]o find defendants immunized by the Noerr-Pennington doctrine would eviscerate the [FDCPA]. Debt collectors should not be able to employ tactics forbidden by the FDCPA simply because they also happen to be lawyers, or because they are attempting to collect on a debt owed.” The court granted the motion with respect to the RFDCPA, however, because, unlike the federal FDCPA, the RFDCPA specifically excludes attorneys from the definition of “debt collector.” For a copy of the opinion, please see http://www.buckleykolar.com/Gerber_v_Citigroup.pdf.
Firm News
Jonathan Cannon will speak on RESPA litigation at the National Compliance Summit for Title Companies in Las Vegas, NV on February 19-20.
Colgate Selden will present in a webcast sponsored by the National Association of Federal Credit Unions regarding the RESPA Reform Rule on March 4. Mr. Selden’s presentation is entitled “Real Estate Settlement Overhaul: Complying with RESPA Reform.”
Matthew Previn moderated a panel of in-house counsel at the ACI Consumer Finance Class action and Litigation Conference in New York City on Jan. 27-28.
Heidi Bauer presented during a panel discussion at the Nationwide Mortgage Licensing System User Conference in New Orleans, Louisiana on February 10.
Miscellany
Banks Agree to Suspend Foreclosures Pending Obama Administration Plan. On February 13, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., Morgan Stanley, and Wells Fargo & Co. agreed to suspend foreclosures up through March 6-12 (varying by entity) pending the completion of the Obama administration’s forthcoming plan regarding mortgage foreclosures. For a copy of Citigroup’s press release, please see http://www.citigroup.com/citi/press/2009/090213a.htm.
Mortgages
Freddie Mac Issues Industry Letter Regarding Anti-Predatory Lending. On February 12, the Federal Home Loan Mortgage Corporation (Freddie Mac) issued an Industry Letter reminding its sellers and servicers about its anti-predatory lending requirements set forth in its Single-Family Seller Servicer Guide (Guide) and providing additional guidance regarding anti-predatory lending. The Industry Letter (i) provides greater detail about the excessive points and fees threshold that applies to all mortgages secured by primary residences, (ii) reminds seller/servicers that certain Freddie Mac post-settlement delivery fees, if passed on to the borrower at closing, are included in the points and fees calculations under the Home Ownership and Equity Protection Act (HOEPA) and state anti-predatory lending laws, (iii) restates that no mortgage is eligible for delivery to Freddie Mac if it is a high-cost home loan in any of the 14 states specified in the Guide, regardless of whether the seller or third-party originator holds a federal or state charter, (iv) provides clarification that, if Freddie Mac purchases a high-cost home loan secured by property located in one of the 14 specified states, the mortgage is subject to repurchase regardless of any attempt to cure, (v) reminds seller/servicers that the borrower’s rescission rights under the Truth in Lending Act must expire before a mortgage is delivered for sale to Freddie Mac, and (vi) informs seller/servicers of Freddie Mac’s expectations about their controls for preventing the sale of high-cost home loans to Freddie Mac. For a copy of the letter, please see http://www.freddiemac.com/sell/guide/bulletins/pdf/iltr021209.pdf.
FTC Sues Mortgage Foreclosure Rescue Company. On February 11, the Federal Trade Commission (FTC) charged a Nevada mortgage foreclosure company with violating the FTC Act by falsely representing that it could halt foreclosures in most instances and for failing to provide refunds of up-front fees for foreclosures it could not halt. According to the complaint, the defendant mailed ads advertising foreclosure rescue services to consumers behind on mortgage payments, but subsequently failed to provide the advertised services. The complaint seeks, among other things, a permanent injunction and refunds for consumers. For a copy of the press release, please see http://www.ftc.gov/opa/2009/02/nfr.shtm.
Maryland Regulator Announces Availability of “Average Prime Offer Rate” for Determining “Higher-Priced” Mortgages. On February 5, the Maryland Commissioner of Financial Regulation announced the availability of the "average prime offer rate" to use when determining whether a mortgage is a "higher-priced" mortgage, as defined by Maryland law. (The “higher-priced” mortgage test was originally reported in InfoBytes, Oct. 31, 2008.) This rate will be based on Federal Financial Institutions Examination Council data available at http://www.ffiec.gov/ratespread/newcalc.aspx. "Higher-priced" mortgages trigger various requirements, such as special disclosures and the adoption of certain risk management practices and control systems. These and related provisions regarding “higher-priced” mortgages will become effective March 19, 2009. For more information, please see http://www.dllr.state.md.us/finance/advisories/advisory2-09.htm.
Sixth Circuit Holds RESPA Claim Not Subject to Equitable Tolling. On February 12, the U.S. Court of Appeals for the Sixth Circuit rejected a claim that a RESPA action was subject to the doctrines of equitable tolling and estoppel. Egerer v. Woodland Realty, Inc., No. 08-1173, 2009 WL 331041 (6th Cir. Feb. 12, 2009). In Egerer, plaintiffs alleged that the defendant received a kickback from a title insurance company in violation of RESPA. The district court dismissed the case as time-barred. Plaintiffs appealed, arguing that they alleged sufficient evidence to support the application of equitable tolling and estoppel to their claims. The Sixth Circuit affirmed. Noting that the Sixth Circuit had yet to decide whether the RESPA statute of limitations is subject to equitable tolling, the court held that, even if RESPA’s statute of limitations were subject to equitable tolling, the facts of the case did not support such a finding. Specifically, the court of appeals found that the record did not support a finding that the defendants affirmatively concealed alleged RESPA violations and the plaintiffs did not inquire of their real estate agent as to the particulars of the title insurance transaction, thus evidencing a lack of due diligence on plaintiffs’ part to discover the alleged violation. Next, the court of appeals considered the plaintiffs’ equitable estoppel claim, which the court denied, having already established that the plaintiffs had not exercised due diligence to discover the alleged violation. For a copy of the opinion, please see http://www.buckleykolar.com/Egerer_v_Woodland.pdf.
Ninth Circuit Rejects Insurer’s Attempt to Enforce Arbitration Clause in Underlying Loan Contract. On February 11, the U.S. Court of Appeals for the Ninth Circuit held that the arbitration clause in an underlying loan agreement did not apply to the agreement between an insurer and borrower because there was only an “attenuated relation” between the loan agreement and the insurance dispute. Mundi v. Union Security Life Insurance Co., No. 07-16171, 2009 WL 323163 (9th Cir. Feb. 11, 2009). In Mundi, the borrower took out a home equity loan, and the defendant insurance company issued a life insurance policy to cover the loan. The borrower subsequently died, and defendant denied the claim under the policy. The decedent’s estate disputed the denial of the claim and filed suit. The defendant subsequently moved to compel arbitration based on an arbitration clause in the loan agreement. The district court denied the motion, finding that, even though the insurance was purchased to repay the loan in the event of borrower’s death, the claim for insurance did not in any other way implicate the loan agreement. On appeal, the Ninth Circuit affirmed, finding that there was only an “attenuated relation” between the loan agreement and the insurance dispute. Further, the court of appeals rejected the defendant’s argument that arbitration should be compelled on the basis of equitable estoppel because the insurance dispute was not “intertwined with the contract providing for arbitration.” For a copy of the opinion, please see http://www.buckleykolar.com/Mundi_v_Union.pdf.
Banking
Secretary Geithner Announces Financial Stability Plan. On February 10, Treasury Secretary Timothy Geithner outlined the Treasury’s new Financial Stability Plan, which will establish three new assistance programs. Under the Capital Assistance Program, the Treasury will provide financial institutions with a “capital buffer” to help absorb losses and attract private capital. To qualify, a financial institution must undergo both (i) a supervisory review, which allows federal regulators to evaluate the institution’s balance sheet, and (ii) a comprehensive “stress test,” which assesses whether the institution has the capital necessary to continue lending. Additionally, the Treasury will require any institution with over $100 billion in assets, regardless of participation in the Capital Assistance Program, to undergo both the supervisory review and stress test. Under the Public-Private Investment Fund program, the Treasury will assist financial institutions with disposing of non-performing legacy assets by using public money to leverage private capital purchases of troubled and illiquid assets. Finally, under the Consumer and Business Lending Initiative, the Treasury will unfreeze secondary markets by providing private investors with financing for the purchase of new loans. The programs require increased transparency and monitoring, including reporting and planning intended to evidence how funds have preserved or generated new lending. Further, all recipients of new capital investment initiatives will be required to participate in mortgage foreclosure mitigation programs. For a copy of the press release, please see http://www.ustreas.gov/press/releases/tg18.htm.
OTS Urges for Foreclosure Freeze. On February 11, the Office of Thrift Supervision urged OTS-regulated financial institutions to suspend foreclosures on owner-occupied homes until the finalization of the Treasury’s Financial Stability Plan, which Treasury Secretary Geithner has indicated will include provisions regarding mortgage foreclosures. For a copy of the press release, please see http://www.ots.treas.gov/?p=PressReleases&ContentRecord_id=660fa9f3-1e0b-8562-eb9e-1636207722f4.
OCC, OTS Add Requirements for Mortgage Performance Data. On February 13, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) announced additional requirements for mortgage performance data, including a requirement to document the affordability and sustainability of loan modifications. As a result of the new requirements, the next edition of the OCC/OTS Mortgage Metrics report will report the categories of loan modifications that increased borrowers’ monthly principal and interest payments, brought no change to payments, reduced payments by 10% or less, and reduced payments by more than 10%. Future reports will also show trends in the types of modifications undertaken by loan servicers. The new requirements reflect, among other things, recommendations made by the State Foreclosure Prevention Working Group to the OCC and OTS (reported in InfoBytes, Feb. 6, 2009). For a copy of the press release, please see http://www.occ.treas.gov/ftp/release/2009-9.htm.
Fed May Expand TALF to $1 Trillion. On February 10, the Federal Reserve Board Announced that it may expand the Term Asset-Backed Securities Loan Facility (TALF) to as much as $1 trillion. The expansion could broaden the eligible collateral to include newly-issued AAA-rated asset-backed securities (e.g. certain mortgage-backed securities). For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/monetary/20090210b.htm.
Memorandum Opinion Concludes TARP Preempts State Foreclosure Laws. On January 30, a memorandum of law issued to Wayne County (Michigan) Sheriff Warren C. Evans by the Sherifff Department’s legal counsel concluded that Title I of the Emergency Economic Stabilization Act of 2008, which created the Troubled Assets Relief Program (TARP), preempts Michigan state law governing foreclosure sales because it evinces a congressional plan to facilitate loan modifications and forestall foreclosures in such a comprehensive way that it “occupies the field of mitigating foreclosures.” According to the memorandum, loans heading to foreclosure may be "troubled assets" that the Secretary of the Treasury has “bought through the TARP framework.” Thus, any foreclosure could violate a homeowner’s right to a loan modification under the TARP. The memorandum further noted that the Sheriff has no way of knowing which loans have been bought by the Treasury Department under the TARP. According to the memorandum, the Sheriff could face unspecified liability if he or his office “foreclose[] a mortgage containing ‘troubled asset(s)’, thereby violating a homeowner’s right to loan modification, especially where the anticipated recovery on the principal outstanding obligation of the mortgage under the modification is likely to be greater than, on a net present value basis, the anticipated recovery on the principal outstanding obligation of the mortgage through foreclosure.” Sheriff Evans has reportedly suspended foreclosures in Wayne County based on the memorandum. For a copy of the memorandum, please see http://www.buckleykolar.com/WC_Tarp_Preemption.pdf.
Banks Agree to Suspend Foreclosures Pending Obama Administration Plan. On February 13, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., Morgan Stanley, and Wells Fargo & Co. agreed to suspend foreclosures up through March 6-12 (varying by entity) pending the completion of the Obama administration’s forthcoming plan regarding mortgage foreclosures. For a copy of Citigroup’s press release, please see http://www.citigroup.com/citi/press/2009/090213a.htm.
Consumer Finance
FTC Sues Mortgage Foreclosure Rescue Company. On February 11, the Federal Trade Commission (FTC) charged a Nevada mortgage foreclosure company with violating the FTC Act by falsely representing that it could halt foreclosures in most instances and for failing to provide refunds of up-front fees for foreclosures it could not halt. According to the complaint, the defendant mailed ads advertising foreclosure rescue services to consumers behind on mortgage payments, but subsequently failed to provide the advertised services. The complaint seeks, among other things, a permanent injunction and refunds for consumers. For a copy of the press release, please see http://www.ftc.gov/opa/2009/02/nfr.shtm.
Pennsylvania Regulator Delays Out-of-State Licensing Requirement for Internet Payday Lenders. According to reports, the Pennsylvania Department of Banking has delayed the February 1, 2009 effective date of a licensing requirement for out-of-state internet payday lenders, which was initially announced on July 26, 2008 (reported in InfoBytes, Aug. 1, 2008). A hearing regarding a final injunction in the matter is reportedly scheduled for April 1, 2009. For additional information, please contact .
Eleventh Circuit Holds Communication in a Foreclosure Action Not “Communication” Subject to FDCPA. On January 28, the U.S. Court of Appeals for the Eleventh Circuit held that a “confidential payoff letter” created by counsel for one creditor and sent to counsel for another creditor, both of whom were involved in an underlying foreclosure action, is not a “communication” subject to the Fair Debt Collection Practices Act (FDCPA). Acosta v. Campbell, No. 07-10374, 2009 WL 190089 (11th Cir. Jan. 28, 2009). In Acosta, the plaintiff borrower disputed the payment of a mortgage obtained from two of the defendants, his lender and correspondent lender. The property was subsequently foreclosed, and the plaintiff sued. The plaintiff alleged, among other things, that a letter sent to the attorneys for the second mortgage holder, at the second mortgage holder’s request, regarding the collection of the disputed debt violated the FDCPA. The trial court disagreed, and the plaintiff appealed. The Eleventh Circuit affirmed the trial court, finding that, because the court in Vega v. McKay, 351 F.3d 1334 (11th Cir. 2003) (en banc) held that a foreclosure package including an FDCPA notice is not an “initial communication,” a communication made by a foreclosing party or its counsel regarding the foreclosure action is also not a “communication” subject to the FDCPA. For a copy of the opinion, please see http://www.buckleykolar.com/Acosta_v_Campbell.pdf.
Illinois Federal Court Rejects Challenge to Constitutionality of Clarification Act. On February 6, the U.S. District Court for the Northern District of Illinois rejected a challenge to the constitutionality of the federal Credit and Debit Card Clarification Act of 2007 (Act). Barbieri v. Redstone American Grill, Inc., No. 07 C 5758, 2009 WL 290467 (N.D. Ill. Feb. 6, 2009). The plaintiff in Barbieri alleged that the defendant willfully violated the Fair and Accurate Credit Transaction Act (FACTA) by printing her credit card expiration dates on two receipts. The defendant moved for summary judgment, arguing that the Act eliminated claims for willful violations of FACTA based on the alleged failure to delete the expiration date from a receipt. In response, the plaintiff argued that the Act was unconstitutional because it violated separation of powers principles and the equal protection and due process clauses. The court, persuaded in part by briefs filed by the Department of Justice, rejected the plaintiff’s arguments and granted summary judgment in favor of the defendant. According to the court, the Act did not violate separation of powers principles because it changed the substantive law and did not improperly usurp the judiciary’s role as factfinder. The court also held that the Act did not violate due process or equal protection, because it did not prevent the plaintiff from accessing the court, and because Congress’ decision to exclude the failure to redact the expiration date from “willful noncompliance” under FACTA was rationally related to the legitimate purpose of protecting consumers while controlling abusive lawsuits. For a copy of the opinion, please see http://www.buckleykolar.com/Barbieri_v_Redstone.pdf.
Illinois Federal Court Holds Lender Violated FCRA by Continuing to Report Inaccurate Information to Credit Reporting Agency. On February 4, the U.S. District Court for the Northern District of Illinois ordered a lender to pay damages, attorneys’ fees, and costs to a borrower after determining that the lender violated the Fair Credit Reporting Act (FCRA) by negligently continuing to report inaccurate information regarding the borrower’s account to credit reporting agencies. Talley v. U.S. Dep’t of Agric., No. 07 C 0705, 2009 WL 303134 (N.D. Ill. Feb. 4, 2009). In Talley, according to the findings of the district court, the plaintiff borrower paid off a loan from the defendant lender. The defendant, however, continued to report the payment history of the loan to TransUnion for nearly six years after payoff. As a result, the plaintiff’s credit report gave the appearance that the plaintiff was regularly 120 days late in making payments. After the plaintiff disputed the inaccurate information with TransUnion, the defendant determined that the plaintiff was correct, but failed to change the way in which it reported the plaintiff’s information to TransUnion. Based on this evidence the court found that the defendant was liable under FCRA for its failure to reasonably investigate its internal reporting of the plaintiff’s credit information and to properly report that information to TransUnion following the receipt of a notice of dispute regarding the credit report’s accuracy. For a copy of the opinion, please see http://www.buckleykolar.com/Talley_v_US.pdf.
California Federal Court Holds Noerr-Pennington Doctrine Does Not Shield Attorneys from FDCPA Claims. On January 29, the U.S. District Court for the Eastern District of California held that the Noerr-Pennington doctrine does not protect attorneys from claims under the Fair Debt Collection Practices Act (FDCPA). Gerber v. Citigroup, Inc., No. CIV S-07097885, 2009 WL 248094 (E.D. Cal. Jan 29, 2009). In Gerber, the plaintiff alleged that defendants, including attorneys, violated the FDCPA, the California Rosenthal Fair Debt Collection Practices Act (RFDCPA) and other common law limitations by harassing him while attempting to collect a credit card debt. The defendants moved to dismiss, claiming that they were protected by the Noerr-Pennington doctrine – which immunizes those who petition any department of the government for redress – because their acts to collect the credit card debt were taken before and during state court litigation. The district court denied the motion with respect to the FDCPA, allowing those claims to proceed against the attorneys. Relying on case law applying the FDCPA to attorneys who “regularly” engage in debt collection activity, including litigation activities, the court held that “[t]o find defendants immunized by the Noerr-Pennington doctrine would eviscerate the [FDCPA]. Debt collectors should not be able to employ tactics forbidden by the FDCPA simply because they also happen to be lawyers, or because they are attempting to collect on a debt owed.” The court granted the motion with respect to the RFDCPA, however, because, unlike the federal FDCPA, the RFDCPA specifically excludes attorneys from the definition of “debt collector.” For a copy of the opinion, please see http://www.buckleykolar.com/Gerber_v_Citigroup.pdf.
Insurance
Ninth Circuit Rejects Insurer’s Attempt to Enforce Arbitration Clause in Underlying Loan Contract. On February 11, the U.S. Court of Appeals for the Ninth Circuit held that the arbitration clause in an underlying loan agreement did not apply to the agreement between an insurer and borrower because there was only an “attenuated relation” between the loan agreement and the insurance dispute. Mundi v. Union Security Life Insurance Co., No. 07-16171, 2009 WL 323163 (9th Cir. Feb. 11, 2009). In Mundi, the borrower took out a home equity loan, and the defendant insurance company issued a life insurance policy to cover the loan. The borrower subsequently died, and defendant denied the claim under the policy. The decedent’s estate disputed the denial of the claim and filed suit. The defendant subsequently moved to compel arbitration based on an arbitration clause in the loan agreement. The district court denied the motion, finding that, even though the insurance was purchased to repay the loan in the event of borrower’s death, the claim for insurance did not in any other way implicate the loan agreement. On appeal, the Ninth Circuit affirmed, finding that there was only an “attenuated relation” between the loan agreement and the insurance dispute. Further, the court of appeals rejected the defendant’s argument that arbitration should be compelled on the basis of equitable estoppel because the insurance dispute was not “intertwined with the contract providing for arbitration.” For a copy of the opinion, please see http://www.buckleykolar.com/Mundi_v_Union.pdf.
Litigation
Eleventh Circuit Holds Communication in a Foreclosure Action Not “Communication” Subject to FDCPA. On January 28, the U.S. Court of Appeals for the Eleventh Circuit held that a “confidential payoff letter” created by counsel for one creditor and sent to counsel for another creditor, both of whom were involved in an underlying foreclosure action, is not a “communication” subject to the Fair Debt Collection Practices Act (FDCPA). Acosta v. Campbell, No. 07-10374, 2009 WL 190089 (11th Cir. Jan. 28, 2009). In Acosta, the plaintiff borrower disputed the payment of a mortgage obtained from two of the defendants, his lender and correspondent lender. The property was subsequently foreclosed, and the plaintiff sued. The plaintiff alleged, among other things, that a letter sent to the attorneys for the second mortgage holder, at the second mortgage holder’s request, regarding the collection of the disputed debt violated the FDCPA. The trial court disagreed, and the plaintiff appealed. The Eleventh Circuit affirmed the trial court, finding that, because the court in Vega v. McKay, 351 F.3d 1334 (11th Cir. 2003) (en banc) held that a foreclosure package including an FDCPA notice is not an “initial communication,” a communication made by a foreclosing party or its counsel regarding the foreclosure action is also not a “communication” subject to the FDCPA. For a copy of the opinion, please see http://www.buckleykolar.com/Acosta_v_Campbell.pdf.
Sixth Circuit Holds RESPA Claim Not Subject to Equitable Tolling. On February 12, the U.S. Court of Appeals for the Sixth Circuit rejected a claim that a RESPA action was subject to the doctrines of equitable tolling and estoppel. Egerer v. Woodland Realty, Inc., No. 08-1173, 2009 WL 331041 (6th Cir. Feb. 12, 2009). In Egerer, plaintiffs alleged that the defendant received a kickback from a title insurance company in violation of RESPA. The district court dismissed the case as time-barred. Plaintiffs appealed, arguing that they alleged sufficient evidence to support the application of equitable tolling and estoppel to their claims. The Sixth Circuit affirmed. Noting that the Sixth Circuit had yet to decide whether the RESPA statute of limitations is subject to equitable tolling, the court held that, even if RESPA’s statute of limitations were subject to equitable tolling, the facts of the case did not support such a finding. Specifically, the court of appeals found that the record did not support a finding that the defendants affirmatively concealed alleged RESPA violations and the plaintiffs did not inquire of their real estate agent as to the particulars of the title insurance transaction, thus evidencing a lack of due diligence on plaintiffs’ part to discover the alleged violation. Next, the court of appeals considered the plaintiffs’ equitable estoppel claim, which the court denied, having already established that the plaintiffs had not exercised due diligence to discover the alleged violation. For a copy of the opinion, please see http://www.buckleykolar.com/Egerer_v_Woodland.pdf.
Ninth Circuit Rejects Insurer’s Attempt to Enforce Arbitration Clause in Underlying Loan Contract. On February 11, the U.S. Court of Appeals for the Ninth Circuit held that the arbitration clause in an underlying loan agreement did not apply to the agreement between an insurer and borrower because there was only an “attenuated relation” between the loan agreement and the insurance dispute. Mundi v. Union Security Life Insurance Co., No. 07-16171, 2009 WL 323163 (9th Cir. Feb. 11, 2009). In Mundi, the borrower took out a home equity loan, and the defendant insurance company issued a life insurance policy to cover the loan. The borrower subsequently died, and defendant denied the claim under the policy. The decedent’s estate disputed the denial of the claim and filed suit. The defendant subsequently moved to compel arbitration based on an arbitration clause in the loan agreement. The district court denied the motion, finding that, even though the insurance was purchased to repay the loan in the event of borrower’s death, the claim for insurance did not in any other way implicate the loan agreement. On appeal, the Ninth Circuit affirmed, finding that there was only an “attenuated relation” between the loan agreement and the insurance dispute. Further, the court of appeals rejected the defendant’s argument that arbitration should be compelled on the basis of equitable estoppel because the insurance dispute was not “intertwined with the contract providing for arbitration.” For a copy of the opinion, please see http://www.buckleykolar.com/Mundi_v_Union.pdf.
Illinois Federal Court Rejects Challenge to Constitutionality of Clarification Act. On February 6, the U.S. District Court for the Northern District of Illinois rejected a challenge to the constitutionality of the federal Credit and Debit Card Clarification Act of 2007 (Act). Barbieri v. Redstone American Grill, Inc., No. 07 C 5758, 2009 WL 290467 (N.D. Ill. Feb. 6, 2009). The plaintiff in Barbieri alleged that the defendant willfully violated the Fair and Accurate Credit Transaction Act (FACTA) by printing her credit card expiration dates on two receipts. The defendant moved for summary judgment, arguing that the Act eliminated claims for willful violations of FACTA based on the alleged failure to delete the expiration date from a receipt. In response, the plaintiff argued that the Act was unconstitutional because it violated separation of powers principles and the equal protection and due process clauses. The court, persuaded in part by briefs filed by the Department of Justice, rejected the plaintiff’s arguments and granted summary judgment in favor of the defendant. According to the court, the Act did not violate separation of powers principles because it changed the substantive law and did not improperly usurp the judiciary’s role as factfinder. The court also held that the Act did not violate due process or equal protection, because it did not prevent the plaintiff from accessing the court, and because Congress’ decision to exclude the failure to redact the expiration date from “willful noncompliance” under FACTA was rationally related to the legitimate purpose of protecting consumers while controlling abusive lawsuits. For a copy of the opinion, please see http://www.buckleykolar.com/Barbieri_v_Redstone.pdf.
Illinois Federal Court Holds Lender Violated FCRA by Continuing to Report Inaccurate Information to Credit Reporting Agency. On February 4, the U.S. District Court for the Northern District of Illinois ordered a lender to pay damages, attorneys’ fees, and costs to a borrower after determining that the lender violated the Fair Credit Reporting Act (FCRA) by negligently continuing to report inaccurate information regarding the borrower’s account to credit reporting agencies. Talley v. U.S. Dep’t of Agric., No. 07 C 0705, 2009 WL 303134 (N.D. Ill. Feb. 4, 2009). In Talley, according to the findings of the district court, the plaintiff borrower paid off a loan from the defendant lender. The defendant, however, continued to report the payment history of the loan to TransUnion for nearly six years after payoff. As a result, the plaintiff’s credit report gave the appearance that the plaintiff was regularly 120 days late in making payments. After the plaintiff disputed the inaccurate information with TransUnion, the defendant determined that the plaintiff was correct, but failed to change the way in which it reported the plaintiff’s information to TransUnion. Based on this evidence the court found that the defendant was liable under FCRA for its failure to reasonably investigate its internal reporting of the plaintiff’s credit information and to properly report that information to TransUnion following the receipt of a notice of dispute regarding the credit report’s accuracy. For a copy of the opinion, please see http://www.buckleykolar.com/Talley_v_US.pdf.
California Federal Court Holds Noerr-Pennington Doctrine Does Not Shield Attorneys from FDCPA Claims. On January 29, the U.S. District Court for the Eastern District of California held that the Noerr-Pennington doctrine does not protect attorneys from claims under the Fair Debt Collection Practices Act (FDCPA). Gerber v. Citigroup, Inc., No. CIV S-07097885, 2009 WL 248094 (E.D. Cal. Jan 29, 2009). In Gerber, the plaintiff alleged that defendants, including attorneys, violated the FDCPA, the California Rosenthal Fair Debt Collection Practices Act (RFDCPA) and other common law limitations by harassing him while attempting to collect a credit card debt. The defendants moved to dismiss, claiming that they were protected by the Noerr-Pennington doctrine – which immunizes those who petition any department of the government for redress – because their acts to collect the credit card debt were taken before and during state court litigation. The district court denied the motion with respect to the FDCPA, allowing those claims to proceed against the attorneys. Relying on case law applying the FDCPA to attorneys who “regularly” engage in debt collection activity, including litigation activities, the court held that “[t]o find defendants immunized by the Noerr-Pennington doctrine would eviscerate the [FDCPA]. Debt collectors should not be able to employ tactics forbidden by the FDCPA simply because they also happen to be lawyers, or because they are attempting to collect on a debt owed.” The court granted the motion with respect to the RFDCPA, however, because, unlike the federal FDCPA, the RFDCPA specifically excludes attorneys from the definition of “debt collector.” For a copy of the opinion, please see http://www.buckleykolar.com/Gerber_v_Citigroup.pdf.
E-Financial Services
Illinois Federal Court Rejects Challenge to Constitutionality of Clarification Act. On February 6, the U.S. District Court for the Northern District of Illinois rejected a challenge to the constitutionality of the federal Credit and Debit Card Clarification Act of 2007 (Act). Barbieri v. Redstone American Grill, Inc., No. 07 C 5758, 2009 WL 290467 (N.D. Ill. Feb. 6, 2009). The plaintiff in Barbieri alleged that the defendant willfully violated the Fair and Accurate Credit Transaction Act (FACTA) by printing her credit card expiration dates on two receipts. The defendant moved for summary judgment, arguing that the Act eliminated claims for willful violations of FACTA based on the alleged failure to delete the expiration date from a receipt. In response, the plaintiff argued that the Act was unconstitutional because it violated separation of powers principles and the equal protection and due process clauses. The court, persuaded in part by briefs filed by the Department of Justice, rejected the plaintiff’s arguments and granted summary judgment in favor of the defendant. According to the court, the Act did not violate separation of powers principles because it changed the substantive law and did not improperly usurp the judiciary’s role as factfinder. The court also held that the Act did not violate due process or equal protection, because it did not prevent the plaintiff from accessing the court, and because Congress’ decision to exclude the failure to redact the expiration date from “willful noncompliance” under FACTA was rationally related to the legitimate purpose of protecting consumers while controlling abusive lawsuits. For a copy of the opinion, please see http://www.buckleykolar.com/Barbieri_v_Redstone.pdf.
Privacy/Data Security
Connecticut Regulators Announce Data Security Settlement. On February 3, the Connecticut Department of Consumer Protection and Department of Banking announced a settlement with Bank of New York Mellon (BNY Mellon) regarding a 2008 data breach that potentially affected more than 600,000 Connecticut residents. The data breach resulted when a computer tape containing personal data was lost in transport. Initially, BNY Mellon notified potentially-affected consumers and offered to provide them credit monitoring for two years. Under the agreement, BNY Mellon will (i) provide an additional year of credit monitoring, (ii) reimburse anyone from the initially-notified group for any funds stolen as a direct result of the data breach, and (iii) pay $150,000 to the State of Connecticut. For a copy of the press release, please see http://www.ct.gov/dob/cwp/view.asp?a=2245&q=433242.
Illinois Federal Court Rejects Challenge to Constitutionality of Clarification Act. On February 6, the U.S. District Court for the Northern District of Illinois rejected a challenge to the constitutionality of the federal Credit and Debit Card Clarification Act of 2007 (Act). Barbieri v. Redstone American Grill, Inc., No. 07 C 5758, 2009 WL 290467 (N.D. Ill. Feb. 6, 2009). The plaintiff in Barbieri alleged that the defendant willfully violated the Fair and Accurate Credit Transaction Act (FACTA) by printing her credit card expiration dates on two receipts. The defendant moved for summary judgment, arguing that the Act eliminated claims for willful violations of FACTA based on the alleged failure to delete the expiration date from a receipt. In response, the plaintiff argued that the Act was unconstitutional because it violated separation of powers principles and the equal protection and due process clauses. The court, persuaded in part by briefs filed by the Department of Justice, rejected the plaintiff’s arguments and granted summary judgment in favor of the defendant. According to the court, the Act did not violate separation of powers principles because it changed the substantive law and did not improperly usurp the judiciary’s role as factfinder. The court also held that the Act did not violate due process or equal protection, because it did not prevent the plaintiff from accessing the court, and because Congress’ decision to exclude the failure to redact the expiration date from “willful noncompliance” under FACTA was rationally related to the legitimate purpose of protecting consumers while controlling abusive lawsuits. For a copy of the opinion, please see http://www.buckleykolar.com/Barbieri_v_Redstone.pdf.
Illinois Federal Court Holds Lender Violated FCRA by Continuing to Report Inaccurate Information to Credit Reporting Agency. On February 4, the U.S. District Court for the Northern District of Illinois ordered a lender to pay damages, attorneys’ fees, and costs to a borrower after determining that the lender violated the Fair Credit Reporting Act (FCRA) by negligently continuing to report inaccurate information regarding the borrower’s account to credit reporting agencies. Talley v. U.S. Dep’t of Agric., No. 07 C 0705, 2009 WL 303134 (N.D. Ill. Feb. 4, 2009). In Talley, according to the findings of the district court, the plaintiff borrower paid off a loan from the defendant lender. The defendant, however, continued to report the payment history of the loan to TransUnion for nearly six years after payoff. As a result, the plaintiff’s credit report gave the appearance that the plaintiff was regularly 120 days late in making payments. After the plaintiff disputed the inaccurate information with TransUnion, the defendant determined that the plaintiff was correct, but failed to change the way in which it reported the plaintiff’s information to TransUnion. Based on this evidence the court found that the defendant was liable under FCRA for its failure to reasonably investigate its internal reporting of the plaintiff’s credit information and to properly report that information to TransUnion following the receipt of a notice of dispute regarding the credit report’s accuracy. For a copy of the opinion, please see http://www.buckleykolar.com/Talley_v_US.pdf.
Credit Cards
Illinois Federal Court Rejects Challenge to Constitutionality of Clarification Act. On February 6, the U.S. District Court for the Northern District of Illinois rejected a challenge to the constitutionality of the federal Credit and Debit Card Clarification Act of 2007 (Act). Barbieri v. Redstone American Grill, Inc., No. 07 C 5758, 2009 WL 290467 (N.D. Ill. Feb. 6, 2009). The plaintiff in Barbieri alleged that the defendant willfully violated the Fair and Accurate Credit Transaction Act (FACTA) by printing her credit card expiration dates on two receipts. The defendant moved for summary judgment, arguing that the Act eliminated claims for willful violations of FACTA based on the alleged failure to delete the expiration date from a receipt. In response, the plaintiff argued that the Act was unconstitutional because it violated separation of powers principles and the equal protection and due process clauses. The court, persuaded in part by briefs filed by the Department of Justice, rejected the plaintiff’s arguments and granted summary judgment in favor of the defendant. According to the court, the Act did not violate separation of powers principles because it changed the substantive law and did not improperly usurp the judiciary’s role as factfinder. The court also held that the Act did not violate due process or equal protection, because it did not prevent the plaintiff from accessing the court, and because Congress’ decision to exclude the failure to redact the expiration date from “willful noncompliance” under FACTA was rationally related to the legitimate purpose of protecting consumers while controlling abusive lawsuits. For a copy of the opinion, please see http://www.buckleykolar.com/Barbieri_v_Redstone.pdf.
California Federal Court Holds Noerr-Pennington Doctrine Does Not Shield Attorneys from FDCPA Claims. On January 29, the U.S. District Court for the Eastern District of California held that the Noerr-Pennington doctrine does not protect attorneys from claims under the Fair Debt Collection Practices Act (FDCPA). Gerber v. Citigroup, Inc., No. CIV S-07097885, 2009 WL 248094 (E.D. Cal. Jan 29, 2009). In Gerber, the plaintiff alleged that defendants, including attorneys, violated the FDCPA, the California Rosenthal Fair Debt Collection Practices Act (RFDCPA) and other common law limitations by harassing him while attempting to collect a credit card debt. The defendants moved to dismiss, claiming that they were protected by the Noerr-Pennington doctrine – which immunizes those who petition any department of the government for redress – because their acts to collect the credit card debt were taken before and during state court litigation. The district court denied the motion with respect to the FDCPA, allowing those claims to proceed against the attorneys. Relying on case law applying the FDCPA to attorneys who “regularly” engage in debt collection activity, including litigation activities, the court held that “[t]o find defendants immunized by the Noerr-Pennington doctrine would eviscerate the [FDCPA]. Debt collectors should not be able to employ tactics forbidden by the FDCPA simply because they also happen to be lawyers, or because they are attempting to collect on a debt owed.” The court granted the motion with respect to the RFDCPA, however, because, unlike the federal FDCPA, the RFDCPA specifically excludes attorneys from the definition of “debt collector.” For a copy of the opinion, please see http://www.buckleykolar.com/Gerber_v_Citigroup.pdf.