InfoBytes, January 16, 2009
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Topics in this issue:
- Federal Issues
- State Issues
- Courts
- Firm News
- Mortgages
- Banking
- Consumer Finance
- Litigation
- E-Financial Services
- Privacy/Data Security
- Credit Cards
Federal Issues
FDIC to Require Greater TARP Disclosures. On January 13, Federal Deposit Insurance Corporation (FDIC) official John F. Bovenzi testified before the House Committee on Financial Services regarding the use of Troubled Asset Relief Program (TARP) funds. He stated that the Temporary Liquidity Guarantee Program and the Capital Purchase Program (CPP) have succeeded in increasing available capital in the credit market. He noted that, moving forward, the development of a program to assist institutions with addressing their inventories of troubled assets should be a key component of TARP funds. He testified that the FDIC would also work to reduce foreclosures by using its experience in modifying mortgages at IndyMac. The FDIC also plans to issue examiner guidance that will focus on the use of TARP CPP funds by banks and how their capital subscription was used to promote lending and encourage foreclosure prevention efforts. Bovenzi further noted that the federal banking regulatory agencies will measure and assess participating institutions’ success in deploying TARP capital and other financial support from various federal initiatives to ensure that funds are used in a consistent manner. Bovenzi called on Congress to establish standards for loan modifications and to provide for a defined sharing of losses on any default by modified mortgages meeting those standards. He also demanded greater accountability for financial institutions that use TARP funds. For a copy of the testimony, please see http://www.fdic.gov/news/news/speeches/chairman/spjan1309.html.
Federal Banking Agencies to Provide Assistance to Bank of America. On January 16, the U.S Department of Treasury (Treasury), Federal Reserve Board (Fed), and the Federal Deposit Insurance Corporation (FDIC) entered into an agreement with Bank of America to provide financial assistance to the financial institution. Specifically, in exchange for preferred shares, the Treasury and the FDIC will protect Bank of America against “unusually large losses” on a pool of assets worth roughly $118 billion, most of which was assumed by Bank of America through its acquisition of Merrill Lynch. If necessary, the Fed will issue a non-recourse loan to backstop residual risk in the asset pool. In addition, the Treasury will invest $20 billion from the Troubled Asset Relief Program. In exchange, the Treasury will receive preferred stock, and Bank of America must comply with enhanced executive compensation restrictions and implement a mortgage loan modification program. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/bcreg/20090116a.htm.
FHFA Announces Mortgage Data Requirements. On January 15, Federal Housing Finance Agency Director James B. Lockhart announced that Freddie Mac and Fannie Mae (collectively, the GSEs) will be required to obtain loan-level identifiers for the loan originator, loan origination company, field appraiser and supervisory appraiser for mortgage applications taken on or after January 1, 2010. The requirement is consistent with the Secure and Fair Enforcement Mortgage Licensing Act, and is intended to (i) prevent fraud and predatory lending, (ii) ensure mortgages owned and guaranteed by the GSEs are originated by individuals who have complied with the necessary licensing and education requirements, and (iii) restore confidence and transparency in the credit markets. Further, the GSEs will use the data to identify, measure, monitor and control risks. Within the next 30 days, the GSEs will issue further guidance regarding the requirement. For a copy of the press release, which contains links to additional documents, please see http://www.fhfa.gov/webfiles/400/LoanOrigIDS11509.pdf.
HUD Reviews S.A.F.E. Mortgage Licensing Act Model Legislation. The U.S. Department of Housing and Urban Development recently reviewed model legislation developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators regarding the Secure and Fair Enforcement Mortgage Licensing Act (Act). The Act primarily addresses the licensing and registration standards for “loan originators,” as defined by the Act. The model legislation would require loan originators both to obtain a state license and to register under the Nationwide Mortgage Licensing System and Registry. Among other things, the model legislation addresses (i) license and registration requirements, (ii) application procedures, (iii) pre-licensing, renewal, and continuing education requirements, and (iv) enforcement, violation, and penalties. For a copy of the Federal Register notice, please see http://edocket.access.gpo.gov/2009/pdf/E8-31389.pdf. For a copy of the model legislation, please see http://www.hud.gov/offices/hsg/sfh/mps/modellaw.pdf.
FTC Requests Comments Regarding Recently-Proposed Consent Order with Mortgage Foreclosure Rescue Service. On January 15, the Federal Trade Commission (FTC) requested comments regarding the terms of the recently-proposed consent order with American Nationwide Mortgage Company, Inc., a mortgage foreclosure “rescue” service (reported in InfoBytes, Jan. 9, 2009). The FTC must receive comments on or before February 9, 2009. For a copy of the Federal Register notice, please see http://edocket.access.gpo.gov/2009/pdf/E9-840.pdf.
FFIEC Issues Guidance Regarding Remote Deposit Capture. On January 14, the Federal Financial Institutions Examination Council (FFIEC) issued guidance regarding risk management for remote deposit capture (RDC), a digital deposit transaction delivery system. The guidance addresses RDC risk management in an electronic environment, specifically RDC used at customer locations. Among other things, the guidance concludes that financial institutions offering RDC must (i) have sound risk management and mitigation systems that addresses the potential legal, compliance, reputation, and occupational risks of an RDC system, (ii) require adequate risk management at their customers’ locations, (iii) identify the related types and levels of risk exposure prior to implementing RDC and periodically thereafter, (iv) identify the roles, responsibilities and liabilities of all parties through comprehensive contracts and customer agreements, (v) implement appropriate technology and process controls at both the financial institution and the customer’s locations, and (vi) in coordination with customers, implement risk measurement and monitoring systems. For a copy of the press release, please see http://www.occ.gov/ftp/bulletin/2009-4.html. For a copy of the guidance, please see http://www.occ.gov/ftp/bulletin/2009-4a.pdf.
State Issues
Dell Reaches Multi-State Agreement Regarding Financing Practices. On January 12, Dell Inc. and its subsidiary Dell Financial Services, LLC (collectively, Dell) reached a $3.35 million multi-state agreement to settle a dispute alleging deceptive financing practices. Among other things, the allegations stated that Dell deceptively offered consumers “zero-percent” financing for 90 days, but then subsequently charged higher interest rates. Pursuant to the agreement, Dell must (i) disclose in advertisements for promotional credit offers that a majority of consumers will not qualify as “most qualified borrowers” and, thus, will not receive the best annual percentage rate (APR), and must also disclose the range of initial APRs that non-“most qualified borrowers” will likely receive, (ii) inform consumers who are considering applying for promotional financing that the promotional financing will be a revolving open line of credit, that minimum monthly payments will be required, and that the approval of the credit account does not guarantee that the consumer will further qualify for “conditional financing promotions” (e.g. “zero-percent” financing), (iii) explain the calculation of finance charges, disclose any penalties, and inform the consumer of what financing terms will apply to subsequent purchases made using the credit account, and (iv) upon accepting the applicant for a credit account, disclose whether the applicant has qualified for a conditional financing promotion. Dell further agrees to implement written policies and procedures to address (i) alerting consumers that they may cancel orders made with a Dell Credit Account within three days after receiving final credit approval, (ii) communicating between Dell Inc. and Dell Financial Services, LLC when a consumer returns a product purchased with credit, and (iii) providing accurate information to the credit reporting bureaus and removing consumer accounts from collection agencies. As part of the agreement, Dell also settled claims regarding rebates and warranties. For a copy of the press release issued by the Illinois Attorney General, please see http://www.illinoisattorneygeneral.gov/pressroom/2009_01/20090112.html.
Colorado Attorney General Announces Mortgage Fraud Agreements, Action. On January 11, Colorado Attorney General John Suthers made three announcements regarding Colorado foreclosure consultant services and mortgage lending companies. First, the Attorney General reached a settlement agreement with Hawk Financial Services, a foreclosure consultant service, and its sole proprietor regarding contracts that did not contain required mandatory language, disclosures, or cancellation notices. The company also collected full payment from homeowners prior to performing services, in violation of Colorado state law. Pursuant to the agreement, the company will pay restitution, civil penalties, and costs and attorneys fees. Second, the Attorney General issued a cease and desist notice to a foreclosure consultant and loan modification firm, Infinity Funding Group. The company advertised foreclosure rescue services, including loan modifications, and accepted an upfront payment for services from at least one customer. As part of the agreement, the company will refund the upfront fee that it collected. Finally, Colorado Executive Mortgage, a mortgage lender, and its owner/operator agreed to an “Assurance of Discontinuance” to eliminate the deceptive use of teaser rates in advertisements that suggested that the teaser rate was fixed for a traditional five-year adjustable rate mortgage (ARM). The Assurance of Discontinuance (i) prohibits the company from featuring low teaser rates in its advertisements and from concealing material disclosures about the loans; and (ii) requires the company to provide borrowers with a consumer handbook regarding ARMs. For a copy of the press release, please see http://www.ago.state.co.us/press_detail.cfmpressID=938.html.
Temporary Injunction Issued Against Tennessee Mortgage Foreclosure Rescue Company. On January 13, an agreed temporary injunction order was submitted to halt the alleged illegal activities of Patrick & Patrick, LLC, a mortgage foreclosure rescue company, and its principal (collectively, P&P). The order stems from a lawsuit brought by the Tennessee Attorney General against P&P for allegedly charging “service fees” to consumers and then failing to provide the promised foreclosure rescue services. The order, among other things, requires P&P to turn over consumer and financial records by February 4, 2009. For a copy of the press release, please see http://tn.gov/attorneygeneral/press/2009/story/PR3.pdf.
Virginia Joins Multi-State Settlement Agreement with Countrywide. On January 12, Virginia Attorney General Bob McDonnell announced that Virginia has joined the multi-state settlement agreement with Countrywide Financial Corporation (Countrywide). Under the settlement terms, Countrywide and its affiliates will modify certain loans for eligible borrowers. These loan modifications may include an automatic freeze or reduction in interest rates, conversion to fixed-rate loans, or refinancing or reduction of the principal owed. Countrywide will further waive prepayment penalties, late and/or delinquency fees and default fees due from eligible borrowers. In addition, Virginia will receive a portion of (i) the $150 million nationwide “Foreclosure Relief Payment” program for borrowers who either already have lost their homes or who are at least 120 days delinquent on their payments, and (ii) the $70 million nationwide program for relocation assistance for borrowers who do not qualify for a loan modification and who subsequently face foreclosure. For a copy of the press release, please see http://www.oag.state.va.us/PRESS_RELEASES/NewsArchive/011209_Mortgage.html.
Delaware Electronic Notary Law Becomes Effective February 1. On February 1, Delaware S.B. 246, a bill pertaining to electronic notarization, becomes effective (reported in InfoBytes, July 18, 2008). Among other things, the bill authorizes electronic notarization, specifies the form of the electronically reproducible seal, and permits the Delaware Governor to appoint electronic notaries. For a copy of the bill, please see http://www.buckleykolar.com/documents/DE_246.pdf.
Courts
Washington State Court Holds GLBA Disclosure Prohibitions Preempt State FOIA Requirements. On January 6, the Washington State Court of Appeals held that the Gramm-Leach-Bliley Act’s (GLBA) protections against the disclosure of nonpublic personal information preempt the disclosure requirements contained in Washington’s Public Records Act (PRA). Ameriquest Mortgage Co. v. State Attorney General, No. 36245-7-II, 2009 WL 26888 (Wash. Ct. App. Jan. 6, 2009). Following the settlement of investigations by 49 states and the District of Columbia into the conduct of Ameriquest Mortgage Company (Ameriquest), a private attorney in Washington made a request to the Washington Attorney General’s Office (AG) under the PRA for “all records relating to the investigation of Ameriquest.” After the AG provided notice of its intention to produce documents, Ameriquest filed a motion for a preliminary injunction, arguing that the GLBA prohibited providing such information, which included consumer loan files. The trial court denied Ameriquest’s request for a preliminary injunction, holding, inter alia, that the GLBA did not preempt the PRA. Ameriquest appealed the decision, and the Court of Appeals reversed, holding that the GLBA did preempt the PRA. The court rejected the AG’s arguments that (i) it was not subject to the GLBA disclosure prohibitions because it was not a financial institution, and (ii) it was allowed to share the information with the requester because it was “affiliated” with the member of the public making the request. The court held that the GLBA’s disclosure prohibitions extend to entities other than financial institutions, and that members of the public are not “affiliated” with the state for purposes of the GLBA. Accordingly, the court ordered that the nonpublic personal information of the persons whose information is at issue would be protected from disclosure until those persons were notified and given a reasonable opportunity to respond. In dicta, the court noted that redacting nonpublic personal information could be an option for responding to the PRA request, provided that the trial court determines, as a factual matter, what information is nonpublic and personal. For a copy of the opinion, please see http://www.buckleykolar.com/Ameriquest_v_State_AG_WA.pdf.
Eleventh Circuit Rules CRA Supplying Credit Reports to Consumer’s Former Creditors Does Not Willfully Violate FACTA. On January 12, the U.S. Court of Appeals for the Eleventh Circuit held that a consumer reporting agency did not “willfully” violate the Fair Credit Reporting Act (FCRA) when it sold a consumer’s credit report to that consumer’s former creditor. Levine v. World Financial Network National Bank, No. 08-10416, 2009 WL 56886 (11th Cir. Jan. 12, 2009). In Levine, Alliance Data Systems (Alliance) purchased credit reports from Experian Information Solutions Inc. Alliance informed Experian that its report requests were for determining additional services that it could cross-market to its current customers. However, on two occasions, Alliance requested, and Experian sold, the credit reports of the plaintiff, a former customer. The plaintiff subsequently sued Experian, alleging that Experian willfully violated §§ 1681b and 1681e of FCRA because it adopted an “objectively unreasonable” interpretation that FCRA permits selling reports of closed accounts. The court rejected this argument, finding that § 1681b is ambiguous as to whether the FCRA specifically prohibits selling reports on closed accounts. As a result, Experian’s interpretation of the statute to allow sales of reports on closed accounts was “objectively reasonable” under Safeco Ins. Co. of America v. Burr, 127 S.Ct. 2201 (2007) (reported in InfoBytes Special Alert, June 4, 2007). The court also rejected the plaintiff’s claim that Experian did not maintain reasonable procedures to ensure that reports were sold for permissible purposes, because § 1681e does not require additional investigations or procedures to prevent actions that are reasonable under FCRA. Therefore, the court affirmed the lower court’s grant of summary judgment on both claims. A prior decision in this case was reported in InfoBytes, Feb. 24, 2006. For a copy of the opinion, please see http://www.buckleykolar.com/Levine_v_World_Financial.pdf.
Ninth Circuit Rules on “Reasonable” Investigation Requirement. On January 12, the U.S. Court of Appeals for the Ninth Circuit held that a furnisher receiving notice of a dispute from a credit reporting agency (CRA) under the Fair Credit Reporting Act (FCRA) is required to conduct a “reasonable” investigation into the consumer’s dispute. Gorman v. Wolpoff & Abramson, LLP, No. 06-17226, 2009 WL 5709 (9th Cir. Jan. 12, 2009). In a lawsuit stemming from a disputed credit card charge, the plaintiff sued the defendant for various violations of FCRA and state law, alleging that the bank did not conduct a sufficient investigation after being notified by the CRAs that the charges were being disputed. The bank argued that, because the statute only requires “an investigation” into the disputed charge, any investigation will suffice. The court cited, and was persuaded by, sister circuits’ reasoning in similar cases, and held that an “investigation” requires more than just a “cursory or sloppy review of the dispute.” Otherwise, the court concluded, furnishers could escape their duty to investigate “by merely rubber-stamping their earlier submissions, even where circumstances demanded a more thorough inquiry.” The court concluded that the bank’s investigation was reasonable in light of the scant, vague, and/or inaccurate information provided in the CRAs’ notice of dispute, among other reasons. The court emphasized that “the reasonableness of the furnisher’s investigation is measured by its response to the specific information provided by the CRA in the notice of dispute.” For a copy of the opinion, please see http://www.buckleykolar.com/Gorman_v_Wolpoff.pdf.
California State Court Rules FCRA Preempts Private Rights of Action Against Furnishers of Credit Information. On December 29, the California Court of Appeals, First District, Division 1 affirmed a decision holding that private actions under California’s Consumer Credit Reporting Agencies Act (CCRAA) are preempted by the federal Fair Credit Reporting Act (FCRA). Liceaga v. Debt Recovery Solutions, LLC, – Cal. Rptr. 3d –, 2008 WL 5392184 (Cal. App. Dec. 29, 2008). In Liceaga, the plaintiff, allegedly a victim of identity theft, brought an action under the CCRAA against the defendant, a debt collection agency. The plaintiff alleged that the defendant wrongfully reported to credit reporting agencies that the plaintiff defaulted on a debt incurred in her name by the identity thief. The trial court granted the defendant’s motion for judgment on the pleadings. In affirming, the Court of Appeals found that, except for one section providing for a stricter standard for “furnishers” of information, FCRA expressly preempts the CCRAA and does not provide a private right of action to plaintiffs. For a copy of the opinion, please see http://www.buckleykolar.com/Liceaga_v_Debt_Recovery_Solutions.pdf.
Florida Federal Court Holds Internet Payment Confirmations Not “Printed” Under FACTA. On December 18, the U.S. District Court for the Southern District of Florida held that on-screen internet payment confirmations are not "printed," and, thus, are not subject to the truncation requirements for “printed” receipts under the Fair and Accurate Credit Transactions Act (FACTA). Smith v. Under Armour, Inc., – F. Supp. 2d –, 2008 WL 5486764 (S.D. Fla. Dec. 18, 2008). In Smith, the plaintiff made a transaction using the defendant’s website. The plaintiff argued that the defendant violated FACTA because the on-screen purchase confirmation included the plaintiff’s credit card expiration date. After surveying conflicting decisions from several jurisdictions, the court rejected the plaintiff’s argument, holding that an on-screen purchase confirmation is not “printed.” The court relied upon the “commonly understood” meaning of “print” to unambiguously mean “a placement of a mark or imprint on a tangible surface, such as paper.” As a result, the court dismissed the claim. For a copy of the opinion, please see http://www.buckleykolar.com/Smith_v_Under_Armour.pdf.
Fifth Circuit Upholds Dismissal of Alleged RESPA Violations Against MERS. On December 23, the U.S. Court of Appeals for the Fifth Circuit upheld the dismissal of a Real Estate Settlement Procedures Act (RESPA) claim challenging the fee paid by lenders to Mortgage Electronic Registration Systems (MERS). Knighton v. Merscorp Inc. No. 2:07-CV-0029, 2008 WL 5352004 (5th Cir. Dec. 23, 2008). In Knighton, the plaintiffs argued that MERS received referral business from mortgage lenders and that the nominal fee paid by lenders to MERS constituted a kickback in violation of RESPA. Specifically, the plaintiffs argued that MERS acts as the permanent record mortgagee (i.e., receives the loan as a referral), and that MERS members pay a one-time and nominal fee for each registered mortgage. The court rejected this argument because MERS received both the kickback and the business referral; thus, MERS did not receive a referral of business “in exchange” for a kickback. The court also rejected an argument that the MERS registration fee violated RESPA because the services MERS performs do not benefit the borrower, holding that the fee was paid in exchange for a service that was actually performed. As a result, the court upheld the dismissal of both claims. For a copy of the opinion, please see http://www.buckleykolar.com/Knighton_v_Merscorp.pdf.
Ninth Circuit Questions Whether Sending E-Mails to Bypass Spam Filters Violates California Anti-Spam Law. On December 19, the U.S. Court of Appeals for the Ninth Circuit presented a certified question to the California Supreme Court regarding whether sending unsolicited commercial e-mail from multiple domain names for the purpose of bypassing spam filters constitutes “falsified, misrepresented, or forged” header information under California’s anti-spam law. Kleffman v. Vonage Holdings Corp., No. 07-56292, 2008 WL 5264887 (9th Cir. Dec. 19, 2008). In Kleffman, the plaintiff allegedly received multiple unsolicited commercial e-mails from the defendant originating from different domain names. The plaintiff alleged that this violated California’s anti-spam law and subsequently filed a putative class action complaint. The District Court dismissed the claim, holding, inter alia, that the plaintiff failed to state a claim under the plain language of the law. In its order, the Ninth Circuit asked the California Supreme Court to resolve whether the defendant’s alleged practices would constitute “falsified, misrepresented, or forged” header information under California’s anti-spam law. For a copy of the order, please see http://www.buckleykolar.com/Kleffman_v_Vonage.pdf.
Firm News
Matthew Previn will speak on a panel of in-house counsel at the ACI Consumer Finance Class Actions and Litigation Conference in New York City on Jan. 27-28. The panel topic will be “Preventing and Managing Consumer Finance Litigation.”
Jeff Naimon and Grant Mitchell presented a teleconference with Rod Alba for the American Bankers Association regarding the recent RESPA reform rule on December 17.
John Kromer moderated a panel entitled “The New Frontier of Housing Finance” at the ABA’s Committee on Consumer Financial Services Winter Meeting in Scottsdale, Arizona on January 12.
Mortgages
FHFA Announces Mortgage Data Requirements. On January 15, Federal Housing Finance Agency Director James B. Lockhart announced that Freddie Mac and Fannie Mae (collectively, the GSEs) will be required to obtain loan-level identifiers for the loan originator, loan origination company, field appraiser and supervisory appraiser for mortgage applications taken on or after January 1, 2010. The requirement is consistent with the Secure and Fair Enforcement Mortgage Licensing Act, and is intended to (i) prevent fraud and predatory lending, (ii) ensure mortgages owned and guaranteed by the GSEs are originated by individuals who have complied with the necessary licensing and education requirements, and (iii) restore confidence and transparency in the credit markets. Further, the GSEs will use the data to identify, measure, monitor and control risks. Within the next 30 days, the GSEs will issue further guidance regarding the requirement. For a copy of the press release, which contains links to additional documents, please see http://www.fhfa.gov/webfiles/400/LoanOrigIDS11509.pdf.
HUD Reviews S.A.F.E. Mortgage Licensing Act Model Legislation. The U.S. Department of Housing and Urban Development recently reviewed model legislation developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators regarding the Secure and Fair Enforcement Mortgage Licensing Act (Act). The Act primarily addresses the licensing and registration standards for “loan originators,” as defined by the Act. The model legislation would require loan originators both to obtain a state license and to register under the Nationwide Mortgage Licensing System and Registry. Among other things, the model legislation addresses (i) license and registration requirements, (ii) application procedures, (iii) pre-licensing, renewal, and continuing education requirements, and (iv) enforcement, violation, and penalties. For a copy of the Federal Register notice, please see http://edocket.access.gpo.gov/2009/pdf/E8-31389.pdf. For a copy of the model legislation, please see http://www.hud.gov/offices/hsg/sfh/mps/modellaw.pdf.
FTC Requests Comments Regarding Recently-Proposed Consent Order with Mortgage Foreclosure Rescue Service. On January 15, the Federal Trade Commission (FTC) requested comments regarding the terms of the recently-proposed consent order with American Nationwide Mortgage Company, Inc., a mortgage foreclosure “rescue” service (reported in InfoBytes, Jan. 9, 2009). The FTC must receive comments on or before February 9, 2009. For a copy of the Federal Register notice, please see http://edocket.access.gpo.gov/2009/pdf/E9-840.pdf.
Colorado Attorney General Announces Mortgage Fraud Agreements, Action. On January 11, Colorado Attorney General John Suthers made three announcements regarding Colorado foreclosure consultant services and mortgage lending companies. First, the Attorney General reached a settlement agreement with Hawk Financial Services, a foreclosure consultant service, and its sole proprietor regarding contracts that did not contain required mandatory language, disclosures, or cancellation notices. The company also collected full payment from homeowners prior to performing services, in violation of Colorado state law. Pursuant to the agreement, the company will pay restitution, civil penalties, and costs and attorneys fees. Second, the Attorney General issued a cease and desist notice to a foreclosure consultant and loan modification firm, Infinity Funding Group. The company advertised foreclosure rescue services, including loan modifications, and accepted an upfront payment for services from at least one customer. As part of the agreement, the company will refund the upfront fee that it collected. Finally, Colorado Executive Mortgage, a mortgage lender, and its owner/operator agreed to an “Assurance of Discontinuance” to eliminate the deceptive use of teaser rates in advertisements that suggested that the teaser rate was fixed for a traditional five-year adjustable rate mortgage (ARM). The Assurance of Discontinuance (i) prohibits the company from featuring low teaser rates in its advertisements and from concealing material disclosures about the loans; and (ii) requires the company to provide borrowers with a consumer handbook regarding ARMs. For a copy of the press release, please see
http://www.ago.state.co.us/press_detail.cfmpressID=938.html.
Temporary Injunction Issued Against Tennessee Mortgage Foreclosure Rescue Company. On January 13, an agreed temporary injunction order was submitted to halt the alleged illegal activities of Patrick & Patrick, LLC, a mortgage foreclosure rescue company, and its principal (collectively, P&P). The order stems from a lawsuit brought by the Tennessee Attorney General against P&P for allegedly charging “service fees” to consumers and then failing to provide the promised foreclosure rescue services. The order, among other things, requires P&P to turn over consumer and financial records by February 4, 2009. For a copy of the press release, please see http://tn.gov/attorneygeneral/press/2009/story/PR3.pdf.
Virginia Joins Multi-State Settlement Agreement with Countrywide. On January 12, Virginia Attorney General Bob McDonnell announced that Virginia has joined the multi-state settlement agreement with Countrywide Financial Corporation (Countrywide). Under the settlement terms, Countrywide and its affiliates will modify certain loans for eligible borrowers. These loan modifications may include an automatic freeze or reduction in interest rates, conversion to fixed-rate loans, or refinancing or reduction of the principal owed. Countrywide will further waive prepayment penalties, late and/or delinquency fees and default fees due from eligible borrowers. In addition, Virginia will receive a portion of (i) the $150 million nationwide “Foreclosure Relief Payment” program for borrowers who either already have lost their homes or who are at least 120 days delinquent on their payments, and (ii) the $70 million nationwide program for relocation assistance for borrowers who do not qualify for a loan modification and who subsequently face foreclosure. For a copy of the press release, please see http://www.oag.state.va.us/PRESS_RELEASES/NewsArchive/011209_Mortgage.html.
Fifth Circuit Upholds Dismissal of Alleged RESPA Violations Against MERS. On December 23, the U.S. Court of Appeals for the Fifth Circuit upheld the dismissal of a Real Estate Settlement Procedures Act (RESPA) claim challenging the fee paid by lenders to Mortgage Electronic Registration Systems (MERS). Knighton v. Merscorp Inc. No. 2:07-CV-0029, 2008 WL 5352004 (5th Cir. Dec. 23, 2008). In Knighton, the plaintiffs argued that MERS received referral business from mortgage lenders and that the nominal fee paid by lenders to MERS constituted a kickback in violation of RESPA. Specifically, the plaintiffs argued that MERS acts as the permanent record mortgagee (i.e., receives the loan as a referral), and that MERS members pay a one-time and nominal fee for each registered mortgage. The court rejected this argument because MERS received both the kickback and the business referral; thus, MERS did not receive a referral of business “in exchange” for a kickback. The court also rejected an argument that the MERS registration fee violated RESPA because the services MERS performs do not benefit the borrower, holding that the fee was paid in exchange for a service that was actually performed. As a result, the court upheld the dismissal of both claims. For a copy of the opinion, please see http://www.buckleykolar.com/Knighton_v_Merscorp.pdf.
Banking
FDIC to Require Greater TARP Disclosures. On January 13, Federal Deposit Insurance Corporation (FDIC) official John F. Bovenzi testified before the House Committee on Financial Services regarding the use of Troubled Asset Relief Program (TARP) funds. He stated that the Temporary Liquidity Guarantee Program and the Capital Purchase Program (CPP) have succeeded in increasing available capital in the credit market. He noted that, moving forward, the development of a program to assist institutions with addressing their inventories of troubled assets should be a key component of TARP funds. He testified that the FDIC would also work to reduce foreclosures by using its experience in modifying mortgages at IndyMac. The FDIC also plans to issue examiner guidance that will focus on the use of TARP CPP funds by banks and how their capital subscription was used to promote lending and encourage foreclosure prevention efforts. Bovenzi further noted that the federal banking regulatory agencies will measure and assess participating institutions’ success in deploying TARP capital and other financial support from various federal initiatives to ensure that funds are used in a consistent manner. Bovenzi called on Congress to establish standards for loan modifications and to provide for a defined sharing of losses on any default by modified mortgages meeting those standards. He also demanded greater accountability for financial institutions that use TARP funds. For a copy of the testimony, please see http://www.fdic.gov/news/news/speeches/chairman/spjan1309.html.
Federal Banking Agencies to Provide Assistance to Bank of America. On January 16, the U.S Department of Treasury (Treasury), Federal Reserve Board (Fed), and the Federal Deposit Insurance Corporation (FDIC) entered into an agreement with Bank of America to provide financial assistance to the financial institution. Specifically, in exchange for preferred shares, the Treasury and the FDIC will protect Bank of America against “unusually large losses” on a pool of assets worth roughly $118 billion, most of which was assumed by Bank of America through its acquisition of Merrill Lynch. If necessary, the Fed will issue a non-recourse loan to backstop residual risk in the asset pool. In addition, the Treasury will invest $20 billion from the Troubled Asset Relief Program. In exchange, the Treasury will receive preferred stock, and Bank of America must comply with enhanced executive compensation restrictions and implement a mortgage loan modification program. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/bcreg/20090116a.htm.
FFIEC Issues Guidance Regarding Remote Deposit Capture. On January 14, the Federal Financial Institutions Examination Council (FFIEC) issued guidance regarding risk management for remote deposit capture (RDC), a digital deposit transaction delivery system. The guidance addresses RDC risk management in an electronic environment, specifically RDC used at customer locations. Among other things, the guidance concludes that financial institutions offering RDC must (i) have sound risk management and mitigation systems that addresses the potential legal, compliance, reputation, and occupational risks of an RDC system, (ii) require adequate risk management at their customers’ locations, (iii) identify the related types and levels of risk exposure prior to implementing RDC and periodically thereafter, (iv) identify the roles, responsibilities and liabilities of all parties through comprehensive contracts and customer agreements, (v) implement appropriate technology and process controls at both the financial institution and the customer’s locations, and (vi) in coordination with customers, implement risk measurement and monitoring systems. For a copy of the press release, please see http://www.occ.gov/ftp/bulletin/2009-4.html. For a copy of the guidance, please see http://www.occ.gov/ftp/bulletin/2009-4a.pdf.
Consumer Finance
FTC Requests Comments Regarding Recently-Proposed Consent Order with Mortgage Foreclosure Rescue Service. On January 15, the Federal Trade Commission (FTC) requested comments regarding the terms of the recently-proposed consent order with American Nationwide Mortgage Company, Inc., a mortgage foreclosure “rescue” service (reported in InfoBytes, Jan. 9, 2009). The FTC must receive comments on or before February 9, 2009. For a copy of the Federal Register notice, please see http://edocket.access.gpo.gov/2009/pdf/E9-840.pdf.
Dell Reaches Multi-State Agreement Regarding Financing Practices. On January 12, Dell Inc. and its subsidiary Dell Financial Services, LLC (collectively, Dell) reached a $3.35 million multi-state agreement to settle a dispute alleging deceptive financing practices. Among other things, the allegations stated that Dell deceptively offered consumers “zero-percent” financing for 90 days, but then subsequently charged higher interest rates. Pursuant to the agreement, Dell must (i) disclose in advertisements for promotional credit offers that a majority of consumers will not qualify as “most qualified borrowers” and, thus, will not receive the best annual percentage rate (APR), and must also disclose the range of initial APRs that non-“most qualified borrowers” will likely receive, (ii) inform consumers who are considering applying for promotional financing that the promotional financing will be a revolving open line of credit, that minimum monthly payments will be required, and that the approval of the credit account does not guarantee that the consumer will further qualify for “conditional financing promotions” (e.g. “zero-percent” financing), (iii) explain the calculation of finance charges, disclose any penalties, and inform the consumer of what financing terms will apply to subsequent purchases made using the credit account, and (iv) upon accepting the applicant for a credit account, disclose whether the applicant has qualified for a conditional financing promotion. Dell further agrees to implement written policies and procedures to address (i) alerting consumers that they may cancel orders made with a Dell Credit Account within three days after receiving final credit approval, (ii) communicating between Dell Inc. and Dell Financial Services, LLC when a consumer returns a product purchased with credit, and (iii) providing accurate information to the credit reporting bureaus and removing consumer accounts from collection agencies. As part of the agreement, Dell also settled claims regarding rebates and warranties. For a copy of the press release issued by the Illinois Attorney General, please see http://www.illinoisattorneygeneral.gov/pressroom/2009_01/20090112.html.
Eleventh Circuit Rules CRA Supplying Credit Reports to Consumer’s Former Creditors Does Not Willfully Violate FACTA. On January 12, the U.S. Court of Appeals for the Eleventh Circuit held that a consumer reporting agency did not “willfully” violate the Fair Credit Reporting Act (FCRA) when it sold a consumer’s credit report to that consumer’s former creditor. Levine v. World Financial Network National Bank, No. 08-10416, 2009 WL 56886 (11th Cir. Jan. 12, 2009). In Levine, Alliance Data Systems (Alliance) purchased credit reports from Experian Information Solutions Inc. Alliance informed Experian that its report requests were for determining additional services that it could cross-market to its current customers. However, on two occasions, Alliance requested, and Experian sold, the credit reports of the plaintiff, a former customer. The plaintiff subsequently sued Experian, alleging that Experian willfully violated §§ 1681b and 1681e of FCRA because it adopted an “objectively unreasonable” interpretation that FCRA permits selling reports of closed accounts. The court rejected this argument, finding that § 1681b is ambiguous as to whether the FCRA specifically prohibits selling reports on closed accounts. As a result, Experian’s interpretation of the statute to allow sales of reports on closed accounts was “objectively reasonable” under Safeco Ins. Co. of America v. Burr, 127 S.Ct. 2201 (2007) (reported in InfoBytes Special Alert, June 4, 2007). The court also rejected the plaintiff’s claim that Experian did not maintain reasonable procedures to ensure that reports were sold for permissible purposes, because § 1681e does not require additional investigations or procedures to prevent actions that are reasonable under FCRA. Therefore, the court affirmed the lower court’s grant of summary judgment on both claims. A prior decision in this case was reported in InfoBytes, Feb. 24, 2006. For a copy of the opinion, please see http://www.buckleykolar.com/Levine_v_World_Financial.pdf.
Ninth Circuit Rules on “Reasonable” Investigation Requirement. On January 12, the U.S. Court of Appeals for the Ninth Circuit held that a furnisher receiving notice of a dispute from a credit reporting agency (CRA) under the Fair Credit Reporting Act (FCRA) is required to conduct a “reasonable” investigation into the consumer’s dispute. Gorman v. Wolpoff & Abramson, LLP, No. 06-17226, 2009 WL 5709 (9th Cir. Jan. 12, 2009). In a lawsuit stemming from a disputed credit card charge, the plaintiff sued the defendant for various violations of FCRA and state law, alleging that the bank did not conduct a sufficient investigation after being notified by the CRAs that the charges were being disputed. The bank argued that, because the statute only requires “an investigation” into the disputed charge, any investigation will suffice. The court cited, and was persuaded by, sister circuits’ reasoning in similar cases, and held that an “investigation” requires more than just a “cursory or sloppy review of the dispute.” Otherwise, the court concluded, furnishers could escape their duty to investigate “by merely rubber-stamping their earlier submissions, even where circumstances demanded a more thorough inquiry.” The court concluded that the bank’s investigation was reasonable in light of the scant, vague, and/or inaccurate information provided in the CRAs’ notice of dispute, among other reasons. The court emphasized that “the reasonableness of the furnisher’s investigation is measured by its response to the specific information provided by the CRA in the notice of dispute.” For a copy of the opinion, please see http://www.buckleykolar.com/Gorman_v_Wolpoff.pdf.
California State Court Rules FCRA Preempts Private Rights of Action Against Furnishers of Credit Information. On December 29, the California Court of Appeals, First District, Division 1 affirmed a decision holding that private actions under California’s Consumer Credit Reporting Agencies Act (CCRAA) are preempted by the federal Fair Credit Reporting Act (FCRA). Liceaga v. Debt Recovery Solutions, LLC, – Cal. Rptr. 3d –, 2008 WL 5392184 (Cal. App. Dec. 29, 2008). In Liceaga, the plaintiff, allegedly a victim of identity theft, brought an action under the CCRAA against the defendant, a debt collection agency. The plaintiff alleged that the defendant wrongfully reported to credit reporting agencies that the plaintiff defaulted on a debt incurred in her name by the identity thief. The trial court granted the defendant’s motion for judgment on the pleadings. In affirming, the Court of Appeals found that, except for one section providing for a stricter standard for “furnishers” of information, FCRA expressly preempts the CCRAA and does not provide a private right of action to plaintiffs. For a copy of the opinion, please see http://www.buckleykolar.com/Liceaga_v_Debt_Recovery_Solutions.pdf.
Florida Federal Court Holds Internet Payment Confirmations Not “Printed” Under FACTA. On December 18, the U.S. District Court for the Southern District of Florida held that on-screen internet payment confirmations are not "printed," and, thus, are not subject to the truncation requirements for “printed” receipts under the Fair and Accurate Credit Transactions Act (FACTA). Smith v. Under Armour, Inc., – F. Supp. 2d –, 2008 WL 5486764 (S.D. Fla. Dec. 18, 2008). In Smith, the plaintiff made a transaction using the defendant’s website. The plaintiff argued that the defendant violated FACTA because the on-screen purchase confirmation included the plaintiff’s credit card expiration date. After surveying conflicting decisions from several jurisdictions, the court rejected the plaintiff’s argument, holding that an on-screen purchase confirmation is not “printed.” The court relied upon the “commonly understood” meaning of “print” to unambiguously mean “a placement of a mark or imprint on a tangible surface, such as paper.” As a result, the court dismissed the claim. For a copy of the opinion, please see http://www.buckleykolar.com/Smith_v_Under_Armour.pdf.
Litigation
Washington State Court Holds GLBA Disclosure Prohibitions Preempt State FOIA Requirements. On January 6, the Washington State Court of Appeals held that the Gramm-Leach-Bliley Act’s (GLBA) protections against the disclosure of nonpublic personal information preempt the disclosure requirements contained in Washington’s Public Records Act (PRA). Ameriquest Mortgage Co. v. State Attorney General, No. 36245-7-II, 2009 WL 26888 (Wash. Ct. App. Jan. 6, 2009). Following the settlement of investigations by 49 states and the District of Columbia into the conduct of Ameriquest Mortgage Company (Ameriquest), a private attorney in Washington made a request to the Washington Attorney General’s Office (AG) under the PRA for “all records relating to the investigation of Ameriquest.” After the AG provided notice of its intention to produce documents, Ameriquest filed a motion for a preliminary injunction, arguing that the GLBA prohibited providing such information, which included consumer loan files. The trial court denied Ameriquest’s request for a preliminary injunction, holding, inter alia, that the GLBA did not preempt the PRA. Ameriquest appealed the decision, and the Court of Appeals reversed, holding that the GLBA did preempt the PRA. The court rejected the AG’s arguments that (i) it was not subject to the GLBA disclosure prohibitions because it was not a financial institution, and (ii) it was allowed to share the information with the requester because it was “affiliated” with the member of the public making the request. The court held that the GLBA’s disclosure prohibitions extend to entities other than financial institutions, and that members of the public are not “affiliated” with the state for purposes of the GLBA. Accordingly, the court ordered that the nonpublic personal information of the persons whose information is at issue would be protected from disclosure until those persons were notified and given a reasonable opportunity to respond. In dicta, the court noted that redacting nonpublic personal information could be an option for responding to the PRA request, provided that the trial court determines, as a factual matter, what information is nonpublic and personal. For a copy of the opinion, please see http://www.buckleykolar.com/Ameriquest_v_State_AG_WA.pdf.
Eleventh Circuit Rules CRA Supplying Credit Reports to Consumer’s Former Creditors Does Not Willfully Violate FACTA. On January 12, the U.S. Court of Appeals for the Eleventh Circuit held that a consumer reporting agency did not “willfully” violate the Fair Credit Reporting Act (FCRA) when it sold a consumer’s credit report to that consumer’s former creditor. Levine v. World Financial Network National Bank, No. 08-10416, 2009 WL 56886 (11th Cir. Jan. 12, 2009). In Levine, Alliance Data Systems (Alliance) purchased credit reports from Experian Information Solutions Inc. Alliance informed Experian that its report requests were for determining additional services that it could cross-market to its current customers. However, on two occasions, Alliance requested, and Experian sold, the credit reports of the plaintiff, a former customer. The plaintiff subsequently sued Experian, alleging that Experian willfully violated §§ 1681b and 1681e of FCRA because it adopted an “objectively unreasonable” interpretation that FCRA permits selling reports of closed accounts. The court rejected this argument, finding that § 1681b is ambiguous as to whether the FCRA specifically prohibits selling reports on closed accounts. As a result, Experian’s interpretation of the statute to allow sales of reports on closed accounts was “objectively reasonable” under Safeco Ins. Co. of America v. Burr, 127 S.Ct. 2201 (2007) (reported in InfoBytes Special Alert, June 4, 2007). The court also rejected the plaintiff’s claim that Experian did not maintain reasonable procedures to ensure that reports were sold for permissible purposes, because § 1681e does not require additional investigations or procedures to prevent actions that are reasonable under FCRA. Therefore, the court affirmed the lower court’s grant of summary judgment on both claims. A prior decision in this case was reported in InfoBytes, Feb. 24, 2006. For a copy of the opinion, please see http://www.buckleykolar.com/Levine_v_World_Financial.pdf.
Ninth Circuit Rules on “Reasonable” Investigation Requirement. On January 12, the U.S. Court of Appeals for the Ninth Circuit held that a furnisher receiving notice of a dispute from a credit reporting agency (CRA) under the Fair Credit Reporting Act (FCRA) is required to conduct a “reasonable” investigation into the consumer’s dispute. Gorman v. Wolpoff & Abramson, LLP, No. 06-17226, 2009 WL 5709 (9th Cir. Jan. 12, 2009). In a lawsuit stemming from a disputed credit card charge, the plaintiff sued the defendant for various violations of FCRA and state law, alleging that the bank did not conduct a sufficient investigation after being notified by the CRAs that the charges were being disputed. The bank argued that, because the statute only requires “an investigation” into the disputed charge, any investigation will suffice. The court cited, and was persuaded by, sister circuits’ reasoning in similar cases, and held that an “investigation” requires more than just a “cursory or sloppy review of the dispute.” Otherwise, the court concluded, furnishers could escape their duty to investigate “by merely rubber-stamping their earlier submissions, even where circumstances demanded a more thorough inquiry.” The court concluded that the bank’s investigation was reasonable in light of the scant, vague, and/or inaccurate information provided in the CRAs’ notice of dispute, among other reasons. The court emphasized that “the reasonableness of the furnisher’s investigation is measured by its response to the specific information provided by the CRA in the notice of dispute.” For a copy of the opinion, please see http://www.buckleykolar.com/Gorman_v_Wolpoff.pdf.
California State Court Rules FCRA Preempts Private Rights of Action Against Furnishers of Credit Information. On December 29, the California Court of Appeals, First District, Division 1 affirmed a decision holding that private actions under California’s Consumer Credit Reporting Agencies Act (CCRAA) are preempted by the federal Fair Credit Reporting Act (FCRA). Liceaga v. Debt Recovery Solutions, LLC, – Cal. Rptr. 3d –, 2008 WL 5392184 (Cal. App. Dec. 29, 2008). In Liceaga, the plaintiff, allegedly a victim of identity theft, brought an action under the CCRAA against the defendant, a debt collection agency. The plaintiff alleged that the defendant wrongfully reported to credit reporting agencies that the plaintiff defaulted on a debt incurred in her name by the identity thief. The trial court granted the defendant’s motion for judgment on the pleadings. In affirming, the Court of Appeals found that, except for one section providing for a stricter standard for “furnishers” of information, FCRA expressly preempts the CCRAA and does not provide a private right of action to plaintiffs. For a copy of the opinion, please see http://www.buckleykolar.com/Liceaga_v_Debt_Recovery_Solutions.pdf.
Florida Federal Court Holds Internet Payment Confirmations Not “Printed” Under FACTA. On December 18, the U.S. District Court for the Southern District of Florida held that on-screen internet payment confirmations are not "printed," and, thus, are not subject to the truncation requirements for “printed” receipts under the Fair and Accurate Credit Transactions Act (FACTA). Smith v. Under Armour, Inc., – F. Supp. 2d –, 2008 WL 5486764 (S.D. Fla. Dec. 18, 2008). In Smith, the plaintiff made a transaction using the defendant’s website. The plaintiff argued that the defendant violated FACTA because the on-screen purchase confirmation included the plaintiff’s credit card expiration date. After surveying conflicting decisions from several jurisdictions, the court rejected the plaintiff’s argument, holding that an on-screen purchase confirmation is not “printed.” The court relied upon the “commonly understood” meaning of “print” to unambiguously mean “a placement of a mark or imprint on a tangible surface, such as paper.” As a result, the court dismissed the claim. For a copy of the opinion, please see http://www.buckleykolar.com/Smith_v_Under_Armour.pdf.
Fifth Circuit Upholds Dismissal of Alleged RESPA Violations Against MERS. On December 23, the U.S. Court of Appeals for the Fifth Circuit upheld the dismissal of a Real Estate Settlement Procedures Act (RESPA) claim challenging the fee paid by lenders to Mortgage Electronic Registration Systems (MERS). Knighton v. Merscorp Inc. No. 2:07-CV-0029 (5th Cir. December 23, 2008). In Knighton, the plaintiffs argued that MERS received referral business from mortgage lenders and that the nominal fee paid by lenders to MERS constituted a kickback in violation of RESPA. Specifically, the plaintiffs argued that MERS acts as the permanent record mortgagee (i.e., receives the loan as a referral), and that MERS members pay a one-time and nominal fee for each registered mortgage. The court rejected this argument because MERS received both the kickback and the business referral; thus, MERS did not receive a referral of business “in exchange” for a kickback. The court also rejected an argument that the MERS registration fee violated RESPA because the services MERS performs do not benefit the borrower, holding that the fee was paid in exchange for a service that was actually performed. As a result, the court upheld the dismissal of both claims. For a copy of the opinion, please see http://www.buckleykolar.com/Knighton_v_Merscorp.pdf.
Ninth Circuit Questions Whether Sending E-Mails to Bypass Spam Filters Violates California Anti-Spam Law. On December 19, the U.S. Court of Appeals for the Ninth Circuit presented a certified question to the California Supreme Court regarding whether sending unsolicited commercial e-mail from multiple domain names for the purpose of bypassing spam filters constitutes “falsified, misrepresented, or forged” header information under California’s anti-spam law. Kleffman v. Vonage Holdings Corp., No. 07-56292, 2008 WL 5264887 (9th Cir. Dec. 19, 2008). In Kleffman, the plaintiff allegedly received multiple unsolicited commercial e-mails from the defendant originating from different domain names. The plaintiff alleged that this violated California’s anti-spam law and subsequently filed a putative class action complaint. The District Court dismissed the claim, holding, inter alia, that the plaintiff failed to state a claim under the plain language of the law. In its order, the Ninth Circuit asked the California Supreme Court to resolve whether the defendant’s alleged practices would constitute “falsified, misrepresented, or forged” header information under California’s anti-spam law. For a copy of the order, please see http://www.buckleykolar.com/Kleffman_v_Vonage.pdf.
E-Financial Services
Delaware Electronic Notary Law Becomes Effective February 1. On February 1, Delaware S.B. 246, a bill pertaining to electronic notarization, becomes effective (reported in InfoBytes, July 18, 2008). Among other things, the bill authorizes electronic notarization, specifies the form of the electronically reproducible seal, and permits the Delaware Governor to appoint electronic notaries. For a copy of the bill, please see http://www.buckleykolar.com/documents/DE_246.pdf.
Florida Federal Court Holds Internet Payment Confirmations Not “Printed” Under FACTA. On December 18, the U.S. District Court for the Southern District of Florida held that on-screen internet payment confirmations are not "printed," and, thus, are not subject to the truncation requirements for “printed” receipts under the Fair and Accurate Credit Transactions Act (FACTA). Smith v. Under Armour, Inc., – F. Supp. 2d –, 2008 WL 5486764 (S.D. Fla. Dec. 18, 2008). In Smith, the plaintiff made a transaction using the defendant’s website. The plaintiff argued that the defendant violated FACTA because the on-screen purchase confirmation included the plaintiff’s credit card expiration date. After surveying conflicting decisions from several jurisdictions, the court rejected the plaintiff’s argument, holding that an on-screen purchase confirmation is not “printed.” The court relied upon the “commonly understood” meaning of “print” to unambiguously mean “a placement of a mark or imprint on a tangible surface, such as paper.” As a result, the court dismissed the claim. For a copy of the opinion, please see http://www.buckleykolar.com/Smith_v_Under_Armour.pdf.
Privacy/Data Security
Washington State Court Holds GLBA Disclosure Prohibitions Preempt State FOIA Requirements. On January 6, the Washington State Court of Appeals held that the Gramm-Leach-Bliley Act’s (GLBA) protections against the disclosure of nonpublic personal information preempt the disclosure requirements contained in Washington’s Public Records Act (PRA). Ameriquest Mortgage Co. v. State Attorney General, No. 36245-7-II, 2009 WL 26888 (Wash. Ct. App. Jan. 6, 2009). Following the settlement of investigations by 49 states and the District of Columbia into the conduct of Ameriquest Mortgage Company (Ameriquest), a private attorney in Washington made a request to the Washington Attorney General’s Office (AG) under the PRA for “all records relating to the investigation of Ameriquest.” After the AG provided notice of its intention to produce documents, Ameriquest filed a motion for a preliminary injunction, arguing that the GLBA prohibited providing such information, which included consumer loan files. The trial court denied Ameriquest’s request for a preliminary injunction, holding, inter alia, that the GLBA did not preempt the PRA. Ameriquest appealed the decision, and the Court of Appeals reversed, holding that the GLBA did preempt the PRA. The court rejected the AG’s arguments that (i) it was not subject to the GLBA disclosure prohibitions because it was not a financial institution, and (ii) it was allowed to share the information with the requester because it was “affiliated” with the member of the public making the request. The court held that the GLBA’s disclosure prohibitions extend to entities other than financial institutions, and that members of the public are not “affiliated” with the state for purposes of the GLBA. Accordingly, the court ordered that the nonpublic personal information of the persons whose information is at issue would be protected from disclosure until those persons were notified and given a reasonable opportunity to respond. In dicta, the court noted that redacting nonpublic personal information could be an option for responding to the PRA request, provided that the trial court determines, as a factual matter, what information is nonpublic and personal. For a copy of the opinion, please see http://www.buckleykolar.com/Ameriquest_v_State_AG_WA.pdf.
Florida Federal Court Holds Internet Payment Confirmations Not “Printed” Under FACTA. On December 18, the U.S. District Court for the Southern District of Florida held that on-screen internet payment confirmations are not "printed," and, thus, are not subject to the truncation requirements for “printed” receipts under the Fair and Accurate Credit Transactions Act (FACTA). Smith v. Under Armour, Inc., – F. Supp. 2d –, 2008 WL 5486764 (S.D. Fla. Dec. 18, 2008). In Smith, the plaintiff made a transaction using the defendant’s website. The plaintiff argued that the defendant violated FACTA because the on-screen purchase confirmation included the plaintiff’s credit card expiration date. After surveying conflicting decisions from several jurisdictions, the court rejected the plaintiff’s argument, holding that an on-screen purchase confirmation is not “printed.” The court relied upon the “commonly understood” meaning of “print” to unambiguously mean “a placement of a mark or imprint on a tangible surface, such as paper.” As a result, the court dismissed the claim. For a copy of the opinion, please see http://www.buckleykolar.com/Smith_v_Under_Armour.pdf.
Credit Cards
Florida Federal Court Holds Internet Payment Confirmations Not “Printed” Under FACTA. On December 18, the U.S. District Court for the Southern District of Florida held that on-screen internet payment confirmations are not "printed," and, thus, are not subject to the truncation requirements for “printed” receipts under the Fair and Accurate Credit Transactions Act (FACTA). Smith v. Under Armour, Inc., – F. Supp. 2d –, 2008 WL 5486764 (S.D. Fla. Dec. 18, 2008). In Smith, the plaintiff made a transaction using the defendant’s website. The plaintiff argued that the defendant violated FACTA because the on-screen purchase confirmation included the plaintiff’s credit card expiration date. After surveying conflicting decisions from several jurisdictions, the court rejected the plaintiff’s argument, holding that an on-screen purchase confirmation is not “printed.” The court relied upon the “commonly understood” meaning of “print” to unambiguously mean “a placement of a mark or imprint on a tangible surface, such as paper.” As a result, the court dismissed the claim. For a copy of the opinion, please see http://www.buckleykolar.com/Smith_v_Under_Armour.pdf.