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On December 10, the U.S. District Court for the District of Minnesota ruled on a motion for summary judgment concerning whether the Minnesota Mortgage Originator and Servicer Licensing Act’s (MOSLA) provision prohibiting “a mortgage servicer from violating ‘federal law regulating residential mortgage loans’” provides a cause of action under state law when a loan servicer violates RESPA but where the consumer ultimately has no federal cause of action because the consumer “sustained no actual damages and thus has no actionable claim under RESPA.”
As previously covered by InfoBytes, the U.S. Court of Appeals for the 8th Circuit reviewed the district court’s earlier decision to grant summary judgement in favor of a consumer who claimed the mortgage loan servicer failed to adequately respond to his qualified written requests concerning erroneous delinquency allegations. The 8th Circuit overturned that ruling, opining that while the loan servicer failed to (i) conduct an adequate investigation following the plaintiff’s request as to why there was a delinquency for his account, and (ii) failed to provide a complete loan payment history when requested, its failure did not cause actual damages.
Now, revisiting the issue on remand, the district court stated that any MOSLA violation or injury is predicated on the RESPA violation or injury. Reasoning that since there were “no actual damages under RESPA, then there are no actual damages under MOSLA,” the court concluded that the consumer did not have a viable cause of action under MOSLA and dismissed the action with prejudice.
8th Circuit holds employee failed to plead injuries in FCRA suit against employer, law firm, and credit reporting agency
On September 6, the U.S. Court of Appeals for the 8th Circuit held that an employee lacked standing to bring claims under the Fair Credit Reporting Act (FCRA) because she failed to sufficiently plead she suffered injuries. An employee brought a lawsuit against her former employer, a law firm, and a credit reporting agency (defendants) alleging various violations of the FCRA after the employee’s credit report that was obtained as part of the hiring process background check was provided to the employee in response to her records request in a wrongful termination lawsuit she had filed. The district court dismissed the claims against the employer and the law firm and granted judgment on the pleadings for the credit reporting agency. Upon appeal, the 8th Circuit, citing the Supreme Court’s 2016 ruling in Spokeo, Inc. v. Robins (covered by a Buckley Sandler Special Alert), concluded the former employee lacked Article III standing to bring the claims. The court found that the former employee authorized her employer to obtain the credit report and failed to allege the report was used for unauthorized purposes, therefore there was no intangible injury to her privacy. Additionally, the court determined that the injuries to her “reputational harm, compromised security, and lost time” were “‘naked assertion[s]’ of reputational harm, ‘devoid of further factual enhancement.’” As for claims against the law firm and credit reporting agency, the court found that the injury was too speculative as to the alleged failures to take reasonable measures to dispose of her information. Further, whether the credit reporting agency met all of its statutory obligations to ensure the report was for a permissible purpose was irrelevant, as she suffered no injury because she provided the employer with consent to obtain her credit report.
8th Circuit: Bank that discharged employees as a “business necessity” did not violate Section 19 of the FDI Act
On August 29, the U.S. Court of Appeals for the 8th Circuit affirmed a lower court’s order granting summary judgment in favor of a national bank, holding that the bank did not violate the Federal Deposit Insurance Act’s Section 19 employment ban when it discharged African-American and Latino employees who previously had been convicted of crimes involving dishonesty. Under Section 19, individuals who have been convicted of a crime “involving dishonesty or a breach of trust” cannot be employed by a financial institution covered by federal deposit insurance. A bank that violates the ban is subject to criminal penalties, although an individual may request a waiver from the FDIC. According to the order, the bank screened all home mortgage division employees in 2012 and discharged anyone who was found to have a conviction without providing the option to apply for a waiver. The class members—who brought discrimination claims based on a disparate impact theory—complained that the bank’s automatic discharge of all affected employees impacted African Americans and Latinos at a higher rate than white employees, and contended that the bank could have prevented this result with an alternative such as giving employees “advance notice of the need for a Section 19 discharge, granting leave time to seek a waiver, and/or sponsoring a waiver.” The appellate court relied on data showing that approximately half of waiver applications are approved by the FDIC, and class members presented no data to show that sponsored waivers would ameliorate any racial disparity. In addition, the appellate court held that the bank’s decision to comply with the statute was a business necessity in light of the possibility of a $1 million-per-day fine “even if [the bank’s] policy of summarily terminating or not hiring any Section 19 disqualified individual creates a disparate impact.” Moreover, the appellate court stated that the class members “failed to establish a prima facie case of disparate impact,” and did not present a less discriminatory alternative that would serve the bank’s interests in compliance with the statute.
8th Circuit holds a garnishment notice sent after receiving a “cease” letter does not violate the FDCPA
On August 27, the U.S. Court of Appeals for the 8th Circuit affirmed summary judgment for a law firm, holding that a garnishment notice sent after a consumer requested the company cease communication did not violate the Fair Debt Collection Practices Act (FDCPA). The court held that sending a notice of garnishment was permissible because a “creditor may communicate with a debtor after receiving a cease letter to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor.” The court further held that the notice’s inclusion of a contact phone number did not “transform” the notice into a communication regarding the debt because, while the notice was a “communication regarding the debt in a general sense . . . it still fits within the remedy exception” and it would have been “odd” for the notice not to provide contact information. The court also rejected the claim that the law firm violated the FDCPA by discussing possible resolution of the debt in a subsequent phone call initiated by the consumer, noting that the consumer had asked about the debt, and agreeing with the district court that the phone call was “an unsubtle and ultimately unsuccessful attempt to provoke [the law firm] into committing an FDCPA violation.” The court added that prohibiting debt collectors from responding to a consumer’s inquiries after a cease letter would often force debt collectors to file suit in order to resolve debts, which is “clearly at odds with the language and purpose of the FDCPA.”
Finally, the court rejected the argument that the garnishment notice deceived consumers into contacting the law firm to discuss the legal aspects of the garnishment process, when in fact they would be subjected to debt collection efforts. Applying the unsophisticated consumer standard, the court held that the garnishment notice was not deceptive because it did not state that phone calls would be answered by attorneys prepared to answer questions solely about garnishment, and the consumer’s belief to the contrary was “the exact sort of peculiar interpretation against which debt collectors are protected by the objective element of the unsophisticated consumer standard.”
8th Circuit rules Fannie Mae, Freddie Mac net worth sweep payments acceptable under FHFA statutory authority
On August 23, the U.S. Court of Appeals for the 8th Circuit affirmed a lower court’s dismissal of claims brought by shareholders of Fannie Mae and Freddie Mac (GSEs) against the GSEs’ conservator, the Federal Housing Finance Agency (FHFA), alleging that FHFA exceeded its powers under the Housing and Economic Recovery Act (HERA) and “acted arbitrarily and capriciously” when it entered an agreement with the Treasury Department requiring the GSEs to pay their entire net worth, minus a small buffer, as dividends to the Treasury every quarter. In so holding, the 8th Circuit joined the 5th, 6th, 7th, and D.C. Circuits, each of which has previously “rejected materially identical arguments” presented by other GSE shareholders. (See previous InfoBytes coverage on the 5th Circuit decision here.) The shareholders sought an injunction to set aside the so-called “net worth sweep,” asserting that “HERA’s limitation on judicial review does not apply when FHFA exceeds its statutory powers under the Act . . . [and] that the net worth sweep exceeds, and is antithetical to, FHFA’s statutory powers.” However, the appellate court agreed with the lower court and found, among other things, the net worth sweep payments to be acceptable because HERA “grant[s] FHFA broad discretion in its management and operation of Fannie and Freddie” and permits, but does not require, the agency “to preserve and conserve Fannie’s and Freddie’s assets and to return [them] to private operation.” The court also noted that HERA “authorize[d] FHFA to act ‘in the best interests’ of either Fannie and Freddie or itself,” thus affording FHFA more discretion than common law conservators. Finally, the appellate court held that HERA’s anti-injunction provision, which states that “no court may take any action to restrain or affect the exercise of powers or functions of the [FHFA] as a conservator or a receiver,” also precludes enjoining the Treasury Department from participating in the net worth sweep because doing so would “restrain or affect” FHFA.
8th Circuit reverses district court’s decision, rules compound interest not contractually agreed upon violates FDCPA
On July 16, the U.S. Court of Appeals for the 8th Circuit reversed a district court’s decision, holding that under Minnesota law, compound interest cannot be collected unless specifically agreed to in a contract. The decision results from a suit filed by a consumer alleging that a law firm violated the Fair Debt Collection Practice Act (FDCPA) when it sent a debt collection letter seeking payment of credit card debt while asserting that the consumer owed compound interest. The consumer’s suit alleged that the debt’s owner, debt collector, and law firm (defendants) “used a false, deceptive, or misleading representation or means . . . and an unfair or unconscionable means” when attempting to collect the debt. Specifically, the consumer alleged the principal balance included interest on the contractual interest—which he claimed he did not agree to in the underlying credit card agreement—and that as a result, the defendants misrepresented the amount of debt and attempted to collect interest that was not permitted under Minnesota law. The district court dismissed the consumer’s claim, finding that he failed to state an FDCPA claim because he did not allege a materially false statement in the collection letter. The 8th Circuit reversed however, finding that the consumer stated a claim under the FDCPA because a demand to pay an amount of debt that is unauthorized under state law is actionable as a false statement or unfair collection attempt, and that a false representation of the amount of a debt that overstates what is owed under state law is a material violation of the FDCPA. The appellate court also rejected the law firm’s argument that there was no FDCPA violation because the agreement authorized the total amount of interest stated in the letter, further declining to calculate the interest under the credit-card terms provided by the law firm because the consumer had contested the terms as unauthenticated.
On June 13, the U.S. Court of Appeals for the 8th Circuit affirmed the district court’s ruling approving a $17 million class settlement to resolve consumer claims related to a 2013 data breach, which resulted in the compromise of at least 40 million credit cards and theft of personal information of up to 110 million people. The settlement, which consists of $10 million in consumer redress and almost $7 million in plaintiffs’ attorney fees, was preliminarily approved in 2015 by the district court (previously covered by InfoBytes here) but was remanded back to the court by the 8th Circuit for failing to conduct the appropriate pre-certification analysis. After the district court recertified the class, two settlement challengers appealed, arguing that the class was not properly certified as there were not separate counsel for the subclasses and that the court erred in approving the settlement because the award of attorney’s fees was not reasonable. The appellate court disagreed, holding that no fundamental conflict of interest required separate representation for named class members and class members who suffered no actual losses. The court also concluded that the 29 percent in total monetary payment to the plaintiffs’ attorneys was “well within the amounts [the court] has deemed reasonable in the past” and therefore, the district court did not error in its discretion.
8th Circuit affirms dismissal of FDCPA claims, rules false or misleading statements must be material to be actionable
On April 19, the U.S. Court of Appeals for the 8th Circuit affirmed a district court’s decision to grant a debt collector’s motion for judgment on the pleadings, concluding that false or misleading statements under the Fair Debt Collection Practices Act (FDCPA) must be material to be actionable. According to the opinion, the Conciliation Court for the 4th Judicial District of Minnesota previously issued a judgment finding that the debt collector failed to demonstrate “an entitlement to relief” when the debt collector sought payment (including statutory interest) for unpaid medical services. The plaintiff-appellant subsequently filed suit against the debt collector alleging that the debt collector’s conduct before the conciliation court violated the FDCPA. The district court issued a decision—which the 8th Circuit affirmed—holding that the debt collector’s “inadequate documentation of the assignment did not constitute a materially false representation” and, although the debt collector was ultimately unable to collect on the debt, loss of a collection action, standing alone, did not establish a violation of the FDCPA under the materiality standard. Additionally, the 8th Circuit held that the debt collector did not engage in unfair practices under the FDCPA when the debt collector attempted to collect interest on the debt under a Minnesota statute simply because the debtor may have had a legal defense to application of the statute.
8th Circuit reverses district court’s decision, rules plaintiff failed to demonstrate actual damages under RESPA
On April 3, the U.S. Court of Appeals for the 8th Circuit reversed a district court’s decision, which granted summary judgement in favor of a consumer (plaintiff) who claimed a mortgage loan servicer violated the Real Estate Settlement Procedure Act (RESPA) and the Minnesota Mortgage Originator and Servicer Licensing Act when it failed to adequately respond to his qualified written requests concerning erroneous delinquency allegations. The district court ruled that the plaintiff suffered actual damages of $80 under his RESPA claims when the loan servicer “made minimal effort to investigate the error” and failed to provide the plaintiff with requested information about his loan history since origination. The “pattern or practice” of non-compliance also, in the district court’s view, justified $2000 in statutory damages. The plaintiff also received a separate damage award, attorney’s fees and costs under the Minnesota statute. However, under RESPA, a plaintiff must demonstrate proof of actual damages resulting from a loan servicer’s failure, and the three-judge panel argued that the plaintiff “failed to prove actual damages” because the loan servicer’s “failure to comply with RESPA did not cause [the plaintiff’s] alleged harm.” The panel opined that while the loan servicer failed to (i) conduct an adequate investigation following the plaintiff’s request as to why there was a delinquency for his account, and (ii) failed to provide a complete loan payment history when requested, its failure to comply with RESPA involved pre-2011 payment history for which the plaintiff eventually requested and received the relevant loan payment records at no cost. In fact, the panel stated, the only evidence of actual damages was the $80 the plaintiff spent for bank account records, but that expense concerned a separate dispute about whether the plaintiff missed two payments in 2012 and 2013, which the plaintiff eventually acknowledged that he did, in fact, fail to make. Since the loan servicer did not commit an error with respect to the missed payments, the court concluded that the $80 spent by plaintiff were not the result of the loan servicer’s failure to investigate and provide information related to the pre-2011 payment history. To the contrary, with respect to responding to the plaintiff’s inquiries regarding the missing payments, the loan servicer had “complied with its duties under RESPA.”
Furthermore, the panel stated that the plaintiff failed to provide evidence that the loan servicer engaged in a “pattern or practice of noncompliance.” The 8th Circuit remanded the case back to the district court with directions to enter judgment in favor of the loan servicer on the RESPA claims and for further proceedings on claims under the Minnesota statute.
On February 28, the U.S. Court of Appeals for the 8th Circuit affirmed a district court’s decision to grant summary judgment in favor of a national mortgage lender concluding that a borrower’s signed acknowledgment of receipt of TILA’s material disclosures and rescission notice created a rebuttable presumption that the borrowers had received the required number of notices under the law. According to the opinion, the borrowers sought to rescind their mortgage loan on a date close to three-years after settlement, arguing that the lender did not provide the requisite number of copies of required disclosures under TILA. TILA allows for rescission within three days of settlement unless the lender fails to deliver the required notice or material disclosures, which extends the rescission period to three years. After the lender denied the borrower’s request for rescission, a district court dismissed the action as untimely, asserting that the suit must be filed within the same three-year window. Ultimately, in 2015, the Supreme Court held that the three-year period applied to the borrower’s notice of rescission, and not the filing of the lawsuit.
On remand, the district court granted summary judgment in favor of the lender. In affirming the district court’s decision, the 8th Circuit disagreed with the borrower’s position that while they signed an acknowledgment of receipt of the required disclosures, the acknowledgment did not state that each “acknowledge receipt of two copies each.” The circuit court concluded that the signed acknowledgment is “unambiguous and gives rise to the presumption” of proper delivery and each signature by the borrower indicates personal receipt of two copies each.
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