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District Court approves $75 million overdraft settlement
On January 21, the U.S. District Court for the Western District of North Carolina granted final approval to a $75 million class action settlement to resolve allegations that a national bank improperly charged class members overdraft and insufficient fund fees (NSF). Class members include (i) individuals who held consumer checking and/or savings accounts at the bank who paid and were not refunded a retry transaction fee or one or more intrabank transaction fees; and (ii) checking and/or savings account holders who paid and were not refunded an overdraft or NSF fee on a transaction “that would not have been assessed if [the bank] had delayed the posting of previously assessed NSF/[overdraft] fees until the posting of a deposit that was sufficient to cover those fees, all outstanding debit transactions and any additional debit transactions made that day.” Under the terms of the settlement, the bank has agreed to pay $75 million into a settlement fund that will go towards class member payments, notice and administration costs, attorneys’ fee and expenses, and service awards. The bank must also stop assessing certain overdraft and NSF fees, improve its overdraft and NSF disclosures, and improve account disclosures and explanations related to circumstances where an account holder will incur an intrabank transaction fee, as well as disclosures for its fee accrual process.
New Jersey Superior Court grants summary judgment in favor of debt buyer
On January 21, the Superior Court of New Jersey granted a defendant debt buyer’s cross-motion for summary judgment following the Appellate Division’s partial remand. The plaintiff filed a proposed class action lawsuit in 2017, claiming that the defendant violated the New Jersey Consumer Fraud Act (CFA) by unlawfully acquiring defaulted credit card accounts without obtaining a license to engage as a sales finance company or a consumer lender. The case was dismissed, but later partially remanded on appeal. The Superior Court struck the portion of the complaint alleging class claims and focused on the remaining individual claim concerning the plaintiff’s account. The Superior Court ultimately determined that the plaintiff’s CFA claim failed because the alleged conduct did not rise “to the level of deception, fraud, or misrepresentation in connection with the sale of merchandise or services” required for a claim under CFA. According to the Superior Court, the CFA requires that claimants show an ascertainable loss. The plaintiff’s claim that she suffered a loss by paying the defendant rather than the bank that originally extended the credit was not convincing, the Superior Court stated. The plaintiff admitted “that after the [account] was sold to Defendant, [the bank] did not seek payment of the credit card account. Thus, the record establishes that Plaintiff has not suffered any harm. Without an ascertainable loss, Plaintiff’s CFA claim fails,” the decision said. The Superior Court also disagreed with the plaintiff’s assertion that the defendant was required to obtain a consumer lending license under the New Jersey Consumer Finance Licensing Act. Noting that the defendant is a debt buyer and not a consumer lender, the Superior Court held that the defendant was not required to be licensed.
9th Circuit partially reverses FDCPA ruling
On January 24, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a district court’s summary judgment for a collection law firm (defendant) that “expressly” informed an individual in a collection letter that any dispute must be filed in writing. The plaintiff sued after receiving a collection letter from the defendant that noted, “[u]nder the federal Fair Debt Collection Practices Act, if you dispute this debt, or any portion thereof, you must notify this office in writing within thirty (30) days of receipt of this letter. After notifying this office of a dispute, all debt collection activities will cease until this office obtains verification of the debt and a copy of such verification is mailed to you. If you do not dispute the validity of this debt or any portion thereof within thirty (30) days of receipt of this letter, the debt will be assumed valid. You may request in writing, within thirty (30) days of receipt of this letter, the name and address of the original creditor, if different from the current creditor, which is the homeowners association named above, and we will provide you with the information.” The district court granted summary judgment in favor of the defendant, ruling that the passage did not violate the FDCPA because the third sentence of the disclosure did not mention that the dispute had to be filed in writing.
On appeal, the 9th Circuit noted that “the court must view the letter ‘through the eyes of the least sophisticated debtor,’” stating that “… the least sophisticated debtor would not extract each sentence of the challenged paragraph, line them up against the disclosures the FDCPA requires, and analyze whether each sentence, in isolation, accurately conveys the required warnings.” The 9th Circuit also noted that, “[i]nstead, the least sophisticated debtor would examine the letter as a whole and would conclude based on the bold text expressly stating that he must dispute the debt in writing that he was required to dispute the debt in writing.” The 9th Circuit also upheld the ruling in favor of the defendant over its assessment of a prelien fee as a reasonable attorney’s fee and “that any implication that the fee was an ‘attorney’s fee’ was true.” The case was remanded back to the district court to address remaining arguments and the plaintiff’s summary judgment motion.
District Court grants summary judgment for defendant in TCPA case
On January 18, the U.S. District Court for the Western District of Washington granted a motion for summary judgment in favor of an insurance company (defendant) with respect to a plaintiff’s TCPA allegations. The plaintiff alleged that the defendant, among other things, violated the TCPA by placing telephone calls to him and the putative class members whose telephone numbers are on the National Do Not Call (DNC) Registry. The defendant countered that the plaintiff spoke with the defendant during a 26-minute phone call and provided his personal information and consent to be called by the defendant. The plaintiff alleged that he had not submitted any information, and suggested that hackers may have been involved, and that he had engaged in a lengthy and detailed conversation with the defendant because he was “investigating” the identity of the caller and the motive for calling. However, the court noted that “the personal information [the plaintiff] disclosed during the call supports the contention that he in fact was interested in obtaining a quote and otherwise submitted an internet request,” and that no evidence supported the plaintiff having “investigative” motives.
According to the opinion, a “reasonable jury” would find that the defendant had permission to call the plaintiff and that, even if there were questions about whether the plaintiff had requested or consented to the disputed call, the procedures that the defendant had put in place to comply with the law brought it under the purview of the TCPA's safe harbor provision. The court also found that the defendant “produced significant evidence that as part of its routine business practice, it complies with the standards required by the safe harbor provision and had substantially complied with the purpose of the TCPA, ‘to protect consumers from the unwanted intrusion and nuisance of unsolicited telemarketing phone calls and fax advertisements,’ by only calling those who have requested a life insurance quote and consented to be called.”
9th Circuit affirms judgment for defendant in TCPA autodialer suit
On January 19, the U.S. Court of Appeals for the Ninth Circuit affirmed summary judgment in favor of a defendant accused of violating the TCPA after allegedly using an automatic telephone dialing system (autodialer). The plaintiff claimed that the defendant’s platform qualifies as an autodialer since it “stores telephone numbers using a sequential number generator because it uploads a customer’s list of numbers and produces them to be dialed in the same order they were provided, i.e., sequentially.” According to the 9th Circuit, the plaintiff’s interpretation would mean that “virtually any system” with the capability to store a pre-produced list of telephone numbers would qualify as an autodialer if it could also autodial the stored numbers. The court noted that this interpretation was rejected in the U.S. Supreme Court’s 2021 decision in Facebook Inc. v. Duguid, which narrowed the definition of what type of equipment qualifies as an autodialer under the TCPA and held that an autodialer “must have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a using a random or sequential number generator.” (Covered by a Buckley Special Alert here.)
The plaintiff attempted to rely on a footnote in the Court’s ruling, which endeavored to explain why the terms “produce” and “store” were used in the definition of an autodialer, but the 9th Circuit concluded that the footnote discussion was not central to the Court’s analysis in Duguid and therefore did not require it to adopt the plaintiff’s interpretation. After finding that the defendant’s system does not qualify as an autodialer “merely because it stores pre-produced lists of telephone numbers in the order in which they are uploaded,” the appellate court concluded that the plaintiff’s TCPA claims failed. It further determined that even if Duguid did not foreclose the plaintiff’s argument, the district court was correct to conclude that the system at issue “does not have the capacity to automatically dial telephone numbers.”
District Court dismisses data breach class action
On January 19, the U.S. District Court for the Southern District of New York dismissed a class action against a menswear company (defendant) accused of exposing personal information in a December 2020 data breach. According to the opinion, the plaintiff bought items on the defendant’s website in 2013, and more than six years later, hackers allegedly accessed the defendant’s backup cloud database and stole the personal information of the defendant’s online customers, including customers’ addresses, telephone numbers, email addresses, order history, Internet Protocol addresses, encrypted passwords, and partial credit card numbers. The defendant sent notices to affected customers, disclosing that “an unauthorized third party may have been able to view some of your account details, including your contact information and encrypted password.” The notice further explained that users’ encrypted passwords were protected so the actual passwords were not visible, and that users’ payment card information was not affected by the breach. The notice advised that the company was resetting the passwords and had logged users out of their accounts. In response to the message, the plaintiff allegedly changed his password, placed a security freeze on his credit, purchased credit repair and protection services, and purchased a robocall-blocking subscription. The plaintiff alleged that he “spent time dealing with the increased and unwanted spam, text[s], telephone calls, and emails” that he received after the data breach. In dismissing the lawsuit, the court explained that the plaintiff did not show he faced a “substantial” risk of identity theft or fraud. In addition, the court held that “given the nature and age of the data, the likelihood that its exposure would result in harm to [the plaintiff] is too remote to support standing.”
District Court says letter’s disclosure did not violate FDCPA
On January 14, the U.S. District Court for the Western District of Pennsylvania entered judgment in favor of a defendant debt collector accused of violating the FDCPA in a consolidated action concerning disclosure language used in a letter sent to the plaintiffs. The plaintiffs, who had previously been sued by the defendant, hired an attorney who sent a letter to the defendant requesting additional information about the plaintiffs’ debts. The defendant responded and included in its letter a disclosure that stated, “This communication is from a debt collector but is not an attempt to collect a debt. Notice: See Reverse Side for Important Information.” The plaintiffs sued, claiming that the disclosure was a “‘false representation or deceptive means’ used to collect a debt in violation of 15 U.S.C. § 1692e(10)” because “the letter was, indeed, an attempt to collect a debt.” The court disagreed. The court held that “[t]he letters do not demand payment, offer alternatives to default, or request financial information,” and noted that “[i]n fact, the letters make no request of any kind from the debtors,” and that“[t]he letters contain contact information, but do not offer any means of making payment on the alleged debt and expressly disclaim that the letter is an ‘attempt to collect a debt.’” Moreover, the court found that because the defendant’s letter was sent in response to a request from the plaintiffs’ attorney, it could not be considered an attempt to collect a debt. In addition, the court ruled that two new theories put forward in plaintiffs’ summary judgment were procedurally barred.
District Court approves $1.8 million overdraft settlement
On January 14, the U.S. District Court for the Central District of California granted final approval to a $1.8 million class action settlement to resolve allegations that a credit union (defendant) improperly charged members overdraft and insufficient fund fees (NSF). The class members alleged they had wrongfully incurred more than one NSF fee on the same transaction when it was reprocessed again after initially being returned for insufficient funds. The class also alleged that the defendant’s contracts did not authorize such charges. The settlement allocated $715,500 to class members who were charged certain fees between May 2016 and October 2020, and $874,500 to class members who were charged certain fees between May 2016 and February 2020. The amount allocated to each class member is based on the former fees assessed against them. As part of the nearly $1.8 million settlement, the defendant must pay $1.59 million in cash, and must waive roughly $176,000 in uncollected at-issue fees.
CFPB settles FACA dispute over taskforce
On January 14, the CFPB announced publicly that it settled a lawsuit filed by several consumer advocacy groups against the CFPB, which claimed that the Bureau’s Taskforce on Federal Consumer Financial Law established under former Director Kathy Kraninger was “illegally chartered” and violated the Federal Advisory Committee Act (FACA). The consumer advocacy groups alleged that the taskforce—established by the Bureau in 2019 to provide recommendations to improve consumer financial laws and regulations—lacks balance, and that the appointed members who “uniformly represent industry views” have worked on behalf of several large financial institutions or work as industry consultants or lawyers. (Covered by InfoBytes here.) Last November, the parties entered a stipulated settlement in the U.S. District Court for the District of Massachusetts, in which the parties agreed that the Bureau failed to comply with FACA in its establishment and operation of the taskforce. As previously covered by InfoBytes, the stipulated settlement required the Bureau to, among other things, (i) release all taskforce records; (ii) amend the final report to include a disclaimer that the report was produced in violation of FACA; (iii) relocate the taskforce webpage and remove the current version of the report from its website; (iv) issue a press release by January 17, 2022, notifying the public of the settlement agreement; and (v) provide status reports until the Bureau has come into full compliance. In its January 14 press release, in addition to publicly announcing the settlement agreement, the CFPB also reported that all Taskforce records would be made available on the CFPB’s website and that the Bureau had amended the Taskforce’s report to include the requirement disclaimer.
CSBS drops suit against OCC fintech charter after revised application
On January 13, the Conference of State Bank Supervisors (CSBS) announced that it has withdrawn its complaint challenging the OCC’s Special Purpose National Bank (SPNB) Charters and a financial services provider’s application for an OCC nonbank charter. CSBS filed a notice of voluntary dismissal without prejudice in the U.S. District Court for the District of Columbia asking the court to close the case. According to its press release, CSBS voluntarily took this action after the company, which had previously filed an application for an OCC SPNB charter, “amended its application to include seeking FDIC deposit insurance, thus complying with the legal requirement that national banks obtain federal deposit insurance before operating as a bank.”
As previously covered by InfoBytes, CSBS filed a complaint in December 2020, to oppose the OCC’s potential approval of the company’s SPNB charter application. CSBS argued that the company was applying for the OCC’s nonbank charter, which was invalidated by the U.S. District Court for the Southern District of New York in October 2019 (the court concluded that the OCC’s SPNB charter should be “set aside with respect to all fintech applicants seeking a national bank charter that do not accept deposits,” covered by InfoBytes here). At the time, CSBS argued that “by accepting and imminently approving” the company’s application, the “OCC has gone far beyond the limited chartering authority granted to it by Congress under the National Bank Act (NBA) and other federal banking laws,” as the company is not engaged in the “business of banking.” CSBS sought to, among other things, have the court declare the agency’s nonbank charter program unlawful and prohibit the approval of the company’s charter under the NBA without obtaining FDIC insurance.
OCC acting Comptroller of the Currency Michael J. Hsu issued a statement following the withdrawal of the legal challenge. “We must modernize the regulatory perimeter as a prerequisite to conducting business as usual with firms interested in novel activities. Modernizing the bank regulatory perimeter cannot be accomplished by simply defining the activities that constitute ‘doing banking,’ but will also require determining what is acceptable activity to be conducted in a bank. Consolidated supervision will help ensure risks do not build outside of the sight and reach of federal regulators.”