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Maine amends its telephone solicitor violations to include the reassigned numbers database
On March 25, the Governor of Maine approved a new bill, HP 1433, that would require telephone solicitors to leverage the reassigned numbers database. As previously covered by InfoBytes, the FCC created the reassigned numbers database in 2018 to reduce the number of calls inadvertently made to reassigned numbers. This new law would ban telephone providers from calling an individual in combination with the previously codified violations regarding the national or state do-not-call registries. The new law stated that a telephone solicitor would not violate the new law if the solicitor could demonstrate that he used the reassigned numbers database to verify that a person’s telephone number has not been reassigned before calling it. This bill will go into effect on July 16.
State Supreme Court vacates and remands TILA dispute
Recently, the Maine Supreme Judicial Court vacated a judgment in favor of a bank and remanded the decision to re-examine the nature of a loan and consider all relevant evidence to determine if the loan was for commercial purposes. The plaintiffs defaulted on a loan from the defendant, a bank, by securing the loan with a hunting cabin they owned, and a lease for the land on which they had built the cabin. The defendant successfully sued for recovery of the cabin. On appeal, the plaintiffs argued the bank failed to make the requisite disclosures under TILA and thus it was in error to decide in favor of the bank. The bank conceded that it did not make the required disclosures but countered that the credit transaction was not subject to TILA because the loan was for commercial purposes, and if the loan was secured by real property, it was not expected to be used as the principal dwelling of the consumer(s).
First, the court found that it was an error not to consider extrinsic evidence when determining the purpose of the loan because the Official Staff Interpretations of Regulation Z outline factors to be considered in such a determination, which should be given great deference. Moreover, it found that most federal courts applied a holistic approach in determining the purpose of the loan. Because the Business and Consumer Docket court in Maine did not consider any extrinsic evidence, it decided to remand. Second, the court held that the TILA exemption for “credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal dwelling of the consumer . . . in which the total amount financed exceeds $50,000” was inapplicable. Although the loan was for $378,698, the loan was secured by a leasehold. According to the court, the leasehold was an interest in real property, and the language in the exemption referencing “principal dwelling” only modified “personal property” and not “real property.”
U.S. district court holds state laws partially preempted by FCRA
On January 9, the U.S. District Court of Maine entered judgment, determining that Maine law is only partially preempted by the federal Fair Credit Reporting Act (FCRA). The plaintiff, a trade association that represents the major credit reporting agencies, filed the suit as a facial challenge to certain provisions of Maine law, naming the Maine Attorney General and the Superintendent of the Maine Bureau of Consumer Credit Protection as defendants.
According to the complaint, the Maine Medical Debt Reporting Act and the Maine Economic Abuse Debt Reporting Act amended the Maine Fair Credit Reporting Act, adding state-specific restrictions on information inclusion in consumer credit reports. The plaintiff argued that the federal FCRA preempts these provisions and that enforcing these amendments threatens the accuracy, integrity, and reliability of consumer report information.
The court held that while federal law does not “preempt all state laws relating to information contained in consumer reports,” the federal FCRA did preempt provisions of the Maine Medical Debt Reporting Act related to the timing of reporting on veterans’ medical debts by nationwide consumer reporting agencies. The court noted, however, that sections §§ 1681c(a)(7) and (a)(8) of the federal FCRA do not preempt the Maine Medical Debt Reporting Act to the extent that they regulate non-veterans’ medical debt.
Regarding the Maine Economic Abuse Debt Reporting Act, the court held that the provisions related to identity-theft in the federal FCRA preempt state law requirements when identify theft is the only method of economic abuse identified by the consumer. In such cases, the court held that “the blocking of reporting activity on identity-theft-related grounds must proceed according to federal requirements and state requirements are of no effect.” The court noted that its ruling does not “support preemption of Maine’s Economic Abuse Debt Reporting Act insofar as a consumer’s debt is alleged to be the product of economic abuse carried out by means other than or in addition to identity theft.”
CFPB, Maine say loan purpose determines whether TILA applies
On July 12, the CFPB and the State of Maine filed an amicus brief in the Maine Supreme Judicial Court arguing that determining whether a loan is covered by TILA requires an assessment of the borrower’s primary purpose in entering into the transaction. The action involves a couple who obtained a loan from the bank to purchase land for the construction of a home. Due to the 2008 financial crisis, the value of the property depreciated, resulting in insufficient proceeds from the sale of the home to fully pay off the loan. To cover the shortfall, the couple acquired a new loan from the bank and used a cabin they owned as collateral. When the loan’s term ended, the couple defaulted after being unable to make the required balloon payment. The bank sued, seeking to take possession of the cabin. At trial, the couple attempted to present evidence that the bank had not provided them with certain necessary disclosures mandated by TILA and did not assess their ability to repay the loan. The couple maintained “that the bank’s liability under TILA fully offset the amount they owed to the bank under the loan.” The court determined, however, that since the loan documents indicated a commercial purpose, TILA did not apply.
The couple attempted to introduce extrinsic evidence to show that even though the loan was labeled “commercial,” it was actually used for personal, family, or household purposes and therefore was a covered consumer loan. The court relied on a case (Bordetsky v. JAK Realty Trust) holding that, for purposes of determining the applicability of Maine’s notice of default statute for residential real estate foreclosures, “courts should not look to extrinsic evidence to determine whether the loan had a commercial or consumer purpose if the loan document states on its face that the loan has a commercial purpose.”
The brief explained that TILA generally applies to consumer loans (i.e., loans that are primarily for a personal, family, or household purpose) but not to loans made for a commercial purpose, and that the Maine Consumer Credit Code fully incorporates TILA. The brief argued that the borrower’s primary purpose for obtaining the loan should determine whether TILA and the Maine Consumer Credit Code apply, and presented three arguments as to why the trial court erred in concluding that TILA is not applicable on the sole basis that the loan is labeled as a “commercial loan.” First, statutory text provides that a loan is generally covered by TILA if a borrower obtained the loan primarily for a family, personal or household purpose. TILA “requires a substantive and fact-intensive inquiry into the reasons why the borrower entered into the transaction,” the brief explained. Second, judicial precedent has established that “determining whether a loan has a covered purpose requires looking beyond the four corners of the contract.” The trial court erred in relying on Bordetsky because it pertains to a different Maine statute and does not address the judicial precedent or administrative guidance that govern TILA coverage, the brief said. Finally, permitting creditors to evade TILA by labeling a loan as “commercial” is at odds with TILA’s remedial purpose, the brief maintained.
“Why the consumer borrowed the money—not the label that the company sticks on the loan—determines whether the loan is covered by the law,” Seth Frotman, general counsel and senior advisor to the CFPB director, said in a blog post.
Maine Supreme Judicial Court affirms denial of arbitration in online contract formation case
Earlier this year, the Maine Supreme Judicial Court affirmed a lower court’s decision to deny a ride-sharing company’s motion to compel arbitration in case concerning the enforceability of contracts formed through a smart phone application. In agreeing with the plaintiff that the terms and conditions were not binding under the circumstances, the Court concluded that the plaintiff was not provided reasonable notice of, nor manifested her assent to, binding arbitration when she clicked “DONE” after setting up her account and entering payment information. The Court characterized the company’s rider registration process as a “sign-in wrap agreement,” in which the plaintiff was informed she was assenting to the terms by creating an account, instead of having to affirmatively signify agreement with the terms. The Court stated that while it has not yet considered the enforceability of online contracts, “other courts have held that the formation of online contracts is governed by the same principles as traditional contracts.” The Court analyzed the enforceability of a sign-in wrap agreement using the following three components: (i) “Conspicuous terms or access to terms: The more likely that the user must at least view, if not read, the terms themselves as a condition of utilizing the website or the product, the more likely that a court will hold that the terms are binding”; (ii) “Uncluttered screen: Where notice or the hyperlink to agreement terms appears on an interface that is cluttered with other features and therefore is not easily spotted, an agreement is less likely to be binding on the user”; and (iii) “Explicit manner of expressing assent: The more obvious the user’s assent to terms, the more likely the terms will be binding.”
The Court determined that the plaintiff did not have reasonable notice because the hyperlink containing the terms was presented in muted gray coloring, was “not obviously identifiable as a hyperlink,” and the sequence in which it appeared during the registration process “render[ed] it relatively inconspicuous” and made it less likely to draw the user’s attention, particularly because the focus of the registration process was on entering payment information rather than on the terms. The Court distinguished its conclusion from a decision issued by the U.S. Court of Appeals for the Second Circuit in Meyer v. Uber Technologies Inc., et al. (covered by InfoBytes here), which the company heavily relied upon. In Meyer, the 2nd Circuit upheld contract formation on the grounds that a “reasonably prudent smartphone user” would have been on “reasonably conspicuous notice” of the terms and conditions of service and that the text beneath the registration button put the plaintiff on notice that clicking “REGISTER” meant acceptance of those terms—regardless of whether he actually reviewed them. “The interface in Meyer increased the likelihood that the terms would come to the user’s attention—the hyperlink text to the terms in Meyer was underlined and in blue, and the hyperlink itself appeared in close proximity to the “REGISTER” button,” the Court wrote.
The Court further concluded that the plaintiff did not manifest her assent to the terms because a reasonably prudent user would conclude that by clicking “DONE” she was only entering her payment information given the heading of the window read “LINK PAYMENT.” While the court acknowledged that the hyperlink containing the terms was on the same page as the “DONE” button, the notice did not state that “By clicking DONE, you agree to the Terms.”
The Court concluded that the company “could have designed its rider app to incorporate scrollwrap or clickwrap contracts that provided adequate notice of [the company’s] original and updated Terms and required consumers to express actual assent” but “apparently decided not to do so.” Furthermore, the Court found that a subsequent email notifying users of updates to the terms (which also required arbitration) did not obligate the plaintiff to arbitrate her dispute because the email did not require users to read or acknowledge the updated terms to remain registered as rider.
1st Circuit vacates ruling in Maine FCRA case
On February 10, the U.S. Court of Appeals for the First Circuit vacated a district court’s ruling that the FCRA preempts amendments to the Maine Fair Credit Reporting Act that govern how certain debts are reported to credit reporting agencies. As previously covered by InfoBytes, a trade association—whose members include the three nationwide consumer credit reporting agencies (CRAs)—sued the Maine attorney general and the superintendent of Maine’s Bureau of Consumer Credit Protection (collectively, “defendants”) for enacting the 2019 amendments, which, among other things, place restrictions on how medical debts can be reported by the CRAs and govern how CRAs must investigate debt that is allegedly a “product of ‘economic abuse.’” The trade association argued that the amendments, which attempt to regulate the contents of an individual’s consumer report, are preempted by the FCRA, and contended that language under FCRA Section 1681t(b)(1)(E) should be read to encompass all claims relating to information contained in consumer reports. The district court agreed, ruling that, as a matter of law, the amendments are preempted by § 1681t(b)(1)(E). According to the court, Congress’ language and amendments to the FCRA’s structure “reflect an affirmative choice by Congress to set ‘uniform federal standards’ regarding the information contained in consumer credit reports,” and that “[b]y seeking to exclude additional types of information” from consumer reports, the amendments “intrude upon a subject matter that Congress has recently sought to expressly preempt from state regulation.” The defendants appealed.
On appeal, the plaintiff argued that the phrase “relating to information contained in consumer reports” broadly preempts all state laws, but the appellate court was not persuaded and concluded that the broad interpretation “is not the most natural reading of the statute’s syntax and structure.” The 1st Circuit found “no reason to presume that Congress intended, in providing some federal protections to consumers regarding the information contained in credit reports, to oust all opportunity for states to provide more protections, even if those protections would not otherwise be preempted as ‘inconsistent’ with the FCRA under 15 U.S.C. § 1681t(a).” In addition, the court reminded the plaintiff that “even where Congress has chosen to preempt state law, it is not ousting states of regulatory authority; state regulators have concurrent enforcement authority under the FCRA, subject to some oversight by federal regulators.” As such, the appellate court held that the FCRA did not broadly preempt the entirety of Maine’s amendments, and remanded the case back to the district court to determine the scope under which the amendments may be preempted by the FCRA.
Maine to establish program to assist homeowners impacted by Covid-19
On May 28, Maine’s Bureau of Consumer Protection announced the Maine Homeowner Assistance Fund (HAF) Program to mitigate financial hardship for certain homeowners resulting from the Covid-19 pandemic. The details of the program are still in development as the superintendent holds meetings with stakeholders.
Maine governor launches grant program for small businesses and nonprofits
On August 20, the Maine governor launched a $200 million economic grant program to assist Maine small businesses and nonprofits. To qualify for a grant, a business or nonprofit must demonstrate financial relief need due to Covid-19 impacts or a related public health response. Additionally, the business or organization must meet eligibility requirements, including having “significant operations” in Maine and being current and in good standing with certain tax filings through July 31, 2020. Grants may be used to cover expenses including, payroll costs and expenses, rent or mortgage payments for business facilities, and utilities payments. The application period begins on August 21, 2020, and runs through September 2, 2020. Awards will be made in early October. Additional information about the program can be found on the Maine Department of Economic and Community Development’s website.
Maine Real Estate Commission adopt emergency rule regarding sales agent examinations
On May 1, the Maine Department of Professional and Financial Regulation, Real Estate Commission, adopted an emergency rule extending the time period during which applicants for a sales agent license have to pass the sales agent examination after they successfully complete the sales agent course. The time is extended from one year to 180 days after testing sites fully reopen.
Maine governor relaxes certain lending requirements for Covid-19 loan guarantee program
On April 21, Maine’s governor issued an executive order concerning the Covid-19 Loan Guarantee Program recently established by Maine’s legislature. The order suspends the enforcement of certain statutory lending requirements law to allow financial institutions to consider a consumer’s creditworthiness and extent the amortization period of loans issued pursuant to the program. The order also extends certain grace periods, repayment periods, and claims provisions.