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On April 16, the Maryland Attorney General announced a settlement with a reverse mortgage servicer for allegedly charging homeowners illegal inspection fees. According to the Attorney General, from 2010 through 2016, the servicer passed the cost of inspecting properties in default on to homeowners, which Maryland law does not allow. In 2013, the Maryland Commissioner of Financial Regulation put the servicer on notice that it was charging prohibited inspection fees, but the servicer did not cease the activity until January 1, 2017. The servicer has since refunded or reversed nearly $44,000 in property inspection fees charged to consumers. The settlement agreement requires the servicer to (i) refund inspection fees that have not yet been refunded; (ii) provide notice to any sub-servicer that the inspection fees should be refunded or not collected; (iii) pay $5,000 to the state for costs associated with the investigation; and (iv) pay $50,000 in civil money penalties.
On April 15, the Iowa governor signed HF 260, which amends the maximum interest rate and charges permitted under Iowa Code 2019. Specifically, for interest-bearing consumer credit transactions up to $30,000 (increased from $10,000), the interest rate may not exceed the lesser of $30 or ten percent of the financed amount. The amendments also specify the minimum charge creditors are allowed to collect or retain when prepayments are made in full, and stipulate that if a service charge has been collected on an interest-bearing consumer credit transaction then a “creditor shall not collect or retain a minimum charge upon prepayment.” HF 260 takes effect July 1.
On March 30, the U.S. District Court for the District of Oregon granted a group of car dealerships’ (defendants) summary judgment motion in a putative class action involving claims that the dealership violated Oregon’s Unlawful Trade Practices Act (UTPA) as well as the state’s financial elder-abuse law. The plaintiffs, who all purchased vehicles along with other goods or services from one or more of the defendants, asserted that the defendants allegedly failed to “appropriately disclose [their] specific fees associated with arrangement of financing or the profit margins related to the sale of third-party products and services.” By failing to comply with these disclosure requirements, the plaintiffs alleged that the defendants “wrongfully appropriated money from elderly persons.” Concerning the alleged violations of UTPA, the defendants argued that its section titled “Undisclosed Fee Payments” only applies to referral fees greater than $100 paid to non-employee third-parties and not to other payments made by a dealership to a third party. The court agreed and stated that the defendants’ position was further supported by the state’s official commentary. With regard to the plaintiffs’ other claim concerning deficiencies in the disclosures, the court concluded that “strict recitation of the statute is not required to meet the clear and conspicuous standard,” and that the disclosures in question were clearly visible and easy to understand. Finally, the court granted summary dismissal on the plaintiffs’ claim of elder abuse because the claim was premised on the alleged violations of UTPA, which were dismissed.
On March 6, the North Dakota governor signed HB 1204, which allows a collection agency to collect a transaction fee for processing a credit card payment. Under the amended law, a collection agency may collect, in addition to the principal amount of the claim, a transaction fee up to two and half percent for processing a credit card payment if: (i) the transaction fee is not otherwise prohibited under the law; (ii) a no-cost payment option is available to the debtor; and (iii) the no-cost payment option is disclosed to the debtor at the same time and in the same manner that the credit card information is taken. The law takes effect on August 1.
On March 6, the Indiana Court of Appeals affirmed the lower court’s denial of an auto dealership’s motion to dismiss a proposed class action alleging the dealership violated the Indiana Deceptive Consumer Sales Act (the Consumer Act). According to the opinion, consumers filed the proposed class action alleging that the dealership charged document preparation fees that exceeded the actual costs incurred by the dealership for preparation and that the fees were not affirmatively disclosed or negotiated with the consumers. The proposed class action argued the charging of the fees was an “unfair, abusive, or deceptive act, omission, or practice in connection with a consumer transaction” under the Consumer Act and quoted a statutory provision from the Indiana Motor Vehicle Dealer Services Act (the Dealer Act). The dealership moved to dismiss the action, arguing there was no private right of action under the Dealer Act and that the consumers failed to state a claim for relief under the Consumer Act. The consumers conceded there was no private right under the Dealership Act, but noted the quoted reference was used to merely describe an unfair practice that is prohibited by the Consumer Act. The lower court denied the motion, concluding that the non-disclosure claim fell within the “catch-all” provision of the Consumer Act.
On appeal, the appellate court noted that in order to state a claim under the Consumer Act, the consumer must have alleged the dealership “committed an uncured or incurable deceptive act.” The appellate court acknowledged that the allegations that the dealership charged an unfair fee and “did not state its intention as part of the bargaining process” generally fell within the realm of the Consumer Act, and determined that, even without specifics, the complaint’s “general allegations of uncured and incurable acts are adequate to withstand dismissal.”
On March 5, the Illinois Attorney General announced a lawsuit against a Georgia-based tax preparation business and its Chicago operators alleging the defendants collected more than $1 million in undisclosed fees from consumers from their anticipated income tax refunds for unnecessary tax-related financial products. According to the press release, the Illinois AG alleges that the defendants advertised services to consumers promising, for a $350 fee, tax refunds double their normal size and free cash advances on anticipated refunds. However, the AG alleges the defendants instead extract high, undisclosed, and unauthorized fees from consumers’ refunds without their knowledge. The complaint asks the court to grant a temporary restraining order to shut down the defendants’ operations.
On January 25, the U.S. District Court for the Southern District of California granted a bank’s motion to compel arbitration in connection with a lawsuit concerning the bank’s assessment of two types of fees. According to the order, the plaintiff filed a lawsuit asserting claims for breach of contract and violation of California’s Unfair Competition Law due to the bank’s alleged practice of charging fees for out-of-network ATM use and overdraft fees related to debit card transaction timing. The bank moved to compel arbitration pursuant to the arbitration provision in the deposit account agreement executed between the bank and the plaintiff. The plaintiff argued against arbitration, citing a California Supreme Court case, McGill v. Citibank, which held that “waivers of the right to seek public injunctive relief in any forum are unenforceable.” In response, the bank argued that (i) McGill does not apply because the plaintiff is not seeking public injunctive relief; and (ii) McGill is preempted by the Federal Arbitration Act (FAA). The court agreed with the bank, determining that the relief sought by the plaintiff would primarily benefit her, stating “any public injunctive relief sought by [plaintiff] is merely incidental to her primary aim of gaining compensation for injury.” As for preemption, the court noted that even if the McGill rule was applicable to a contract, it would not survive preemption as the U.S. Supreme Court has “consistently held that the FAA preempts states’ attempts to limit the scope of arbitration agreements,” and “the McGill rule is merely the latest ‘device or formula’ intended to achieve the result of rendering an arbitration agreement against public policy.”
On January 4, the Illinois governor signed HB 4873, which amends the state’s Payday Loan Reform Act (the Act) to increase from $1 to $3 the maximum verification fee that a certified consumer reporting service may charge a lender—and that the lender may pass on to the borrower—for verifying an installment payday loan as required by the Act. The increased verification fees may be charged beginning July 1, 2010. The verification fee paid by the borrower cannot exceed the fee paid by the lender.
Court approves final class action settlement; previously ruled that extended overdrawn balance charge fees are “interest” under National Bank Act
On August 31, the U.S. District Court for the Southern District of California granted final approval to a class action settlement, resolving a suit alleging that a national bank’s overdraft fees exceeded the maximum interest rate permitted by the National Bank Act (NBA). According to the order, the settlement ends a putative class action concerning the bank’s practice of charging a $35 “extended overdrawn balance charge” fee (EOBCs) on deposit accounts that remained overdrawn for more than five days when funds were advanced to honor an overdrawn check. Class members argued that the fee amounted to interest and—when taken into account as a percentage of an account holder’s negative balance—exceeded the NBA’s allowable interest rate. The bank countered, stating that “EOBCs were not ‘interest’ and therefore cannot trigger the NBA.” A 2016 order denying the bank’s motion to dismiss, which departed from several other district courts on this issue, found that “covering an overdraft check is an ‘extension of credit’” and therefore overdraft fees can be considered interest under the NBA. The bank appealed the decision to the 9th Circuit in April 2017, but reached a settlement last October with class members.
Under the terms of the approved settlement, the bank will refrain from charging extended overdraft fees for five years—retroactive to December 31, 2017—unless the U.S. Supreme Court “expressly holds that EOBCs or their equivalent do not constitute interest under the NBA.” The bank also will provide $37.5 million in relief to certain class members who paid at least one EOBC and were not provided a refund or a charge-off, and will provide at least $29.1 million in debt reduction for class members whose overdrawn accounts were closed by the bank while they still had an outstanding balance as a result of one or more EOBCs applied during the class period. The bank also will pay attorneys’ fees.
On August 24, New Jersey Governor Phil Murphy signed AB 2035, which amends the New Jersey Residential Mortgage Lending Act and certain related statutes. Among other technical and clarifying changes, the amendments create a framework for the issuance of a “transitional mortgage loan originator license,” which would allow an “out-of-state mortgage loan originator” or a “registered mortgage loan originator” to obtain temporary authority to engage in the business of mortgage loan origination in New Jersey for 120 days before obtaining a New Jersey mortgage loan originator license. The amendments provide specific definitions for what constitutes a “registered mortgage loan originator” and what constitutes an “out-of-state mortgage loan originator.” Specifically, the amendments define an “out-of-state mortgage loan originator” as an individual who is registered with Nationwide Mortgage Licensing System and currently holds a valid mortgage loan originator license issued under the law of any other state or jurisdiction in the country. And the law amends the definition of “registered mortgage loan originator” to include a requirement that such a person must be validly registered as a mortgage loan originator with a depository institution employer for at least the one-year period prior to applying for licensure under the act.
The amendments revise the types of fees that residential mortgage lenders have the right to charge related to the origination, processing, and closing of a mortgage loan: (i) application fee; (ii) origination fee; (iii) lock-in fee; (iv) commitment fee; (v) warehouse fee; (vi) discount points; and (vii) fees necessary to reimburse the lender for charges imposed by third parties, such as appraisal and credit report fees. The amendments also create a different list of fees a mortgage broker may charge in connection with the brokering of any mortgage loan transaction.
The amendments take effect 90 days after the bill’s enactment.
- Buckley Webcast: Maintaining privilege in cross-border internal investigations
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Daniel P. Stipano to discuss "The state of the BSA 2019: What’s working, what’s not, and how to improve it" at the West Coast Anti Money-Laundering Forum
- Buckley Webcast: The future of the Community Reinvestment Act
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Buckley Webcast: Amendments to the CFPB's proposed debt collection
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- APPROVED Webcast: State and SAFE Act licensing requirements for banks
- John C. Redding to discuss "TCPA compliance in the era of mobile" at the Auto Finance Risk Summit
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: Data breach litigation and biometric legislation
- Buckley Webcast: Trends in e-discovery technology and case law
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium