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Financial Services Law Insights and Observations

Ohio Federal Court Holds Bank Subsidiaries Not Exempt from Ohio Consumer Sales Practices Act

State Issues

On March 30, the U.S. District Court for the Southern District of Ohio held that subsidiaries of national banks are not exempt from the requirements of Ohio’s Consumer Sales Practices Act (OCSPA). Kline v. Mortgage Elec. Registration Sys., Inc., No. 3:08cv408, 2010 WL 1267809 (S.D. Ohio Mar. 30, 2010). In Kline, the plaintiff borrowers sued their mortgage lender and other defendants, alleging (among other claims) that the mortgage lender engaged in deceptive and misleading practices and violated the OCSPA by seeking to collect illegal service of process fees, late fees, and property inspection fees in connection with the foreclosure of their mortgage. The mortgage lender argued that, as a subsidiary of a national bank, it was exempt from liability under the OCSPA. According to the court, however, “financial institutions” exempt from the OCSPA’s provisions include national banks, but not subsidiaries of national banks. The court therefore rejected the mortgage lender’s argument that it was entitled to judgment on the pleadings on the borrowers’ OCSPA claims.

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