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U.S. SDNY rules on TCPA case
On September 19, U.S. SDNY issued a TCPA consent-related decision granting a vehicle dealer’s motion for summary judgment in part and denying it in part. The plaintiffs alleged the vehicle dealer violated the automatic telephone dialing system (ATDS) and the National Do Not Call (DNC) provisions of the TCPA.
The court granted summary judgment to the defendant on the claim that it used an ATDS but denied summary judgment on the claims related to the national DNC registry, finding that a reasonable jury could determine that the plaintiffs were registered on the registry and did not have an established business relationship with the defendant. Additionally, the court found that no reasonable jury could find that the forms signed by the plaintiffs with an affiliated vehicle dealer provided the express consent needed for the defendant to send marketing messages. The court emphasized that permission may be transferred between parties under the TCPA if “the possibility of that transfer must be apparent from the consent given.”
Finally, the court granted summary judgment to the defendant on the plaintiffs’ claim for treble damages, ruling that no reasonable fact-finder could determine the defendant knowingly or willfully violated the TCPA.
Colorado urges 10th Cir. to reverse lower court’s preliminary injunction
On September 16, the Colorado Attorney General filed a brief in the U.S. Court of Appeals for the Tenth Circuit, urging the court to reverse a District Court’s preliminary injunction against enforcement of Colorado’s UCCC against state-chartered banks not located in Colorado providing loans to Colorado residents.
As previously covered by InfoBytes, the U.S. District Court for the District of Colorado granted a preliminary injunction to prevent the state from enforcing the UCCC, which would have opted Colorado out of Section 521 of DIDMCA and treat loans made to Colorado residents as “made” in Colorado and thus making those loans subject to the state’s usury limits of the UCCC. The defendants argued DIDMCA preempted state interest rate caps based on where the loan was made, and not the bank’s location. In this case, the defendants contended that a loan was “made” in any state where either the bank or borrower was located.
The defendants further maintained that the District Court failed to balance the harms correctly in granting the preliminary injunction, which could lead to irreparable harm to Colorado consumers. The brief stated that the District Court’s interpretation undermined the state’s ability to protect its residents from high-interest loans by out-of-state banks.
6th Circuit reverses decision on plaintiff’s FCRA claim
On August 19, the U.S. Court of Appeals for the Sixth Circuit reversed a District Court’s decision on the FCRA’s reasonable procedures and reasonable reinvestigation provisions. The 6th Circuit found that a consumer reporting agency’s (CRA) unilateral reliance on a state agency’s unpaid balance report, without reviewing a consumer’s submission of a court order abating that unpaid balance, did not meet the FCRA’s reasonable procedures or reasonable reinvestigation standards.
The plaintiff alleged that in mid-2021, following a divorce, a state agency recorded an unpaid spousal support balance in error. Plaintiff sought, and obtained, a court order abating that obligation. But, when the plaintiff attempted to refinance his student loan debt, a lender notified him that a CRA reported unpaid spousal support. Plaintiff obtained another court order, to the same effect, and filed three disputes with the CRA, including one attaching the court orders. The CRA, however, merely confirmed the unpaid spousal support obligation through an automated inquiry and did not remove the unpaid balance mark.
In response, plaintiff filed suit, alleging willful and negligent failure to (i) use reasonable procedures to assure consumer report accuracy, and (ii) reasonably reinvestigate the accuracy of the state agency reports. The District Court, on the CRA’s motion to dismiss, found as sufficient the CRA’s verification of the unpaid balance with the state agency. The FCRA requires CRAs to include in consumer reports “any” failure-to-pay information from state child support agencies.
However, the 6th Circuit found the CRA’s consumer report could be “materially misleading” based on the facts alleged, and therefore inaccurate. The CRA’s alleged failure to consider, and inquire into, the consumer-submitted court orders, and a reliance on automated verification processes, could fail the FCRA’s reasonableness standard. The 6th Circuit explained that the plaintiff raised a factual dispute — one the CRA was capable of resolving — and thus not a legal dispute — which the CRA would not be capable of resolving. In addition, the “unquestioned authenticity” of the court order warranted reliance. As such, the 6th Circuit reversed and remanded.
3rd Circuit vacates order compelling arbitration in FDCPA suit
Recently, the U.S. Court of Appeals for the Third Circuit vacated District Court orders compelling arbitration of an FDCPA class action on the basis that the plaintiff’s allegations of harm were insufficient to establish standing. In this case, plaintiff sought to represent a class and obtain damages from defendant debt collector and its officers, alleging violations of the FDCPA. The plaintiff claimed that a collection letter she received was misleading because it failed to correctly identify the creditor “to whom the debt was owed” and, rather, identified the collection arm of the credit card company. The District Court granted defendant’s motion to stay and compel individual arbitration.
On appeal, the 3rd Circuit concluded that the plaintiff lacked Article III standing, as she did not sufficiently allege a concrete injury. Accordingly, the court vacated the lower court’s orders and remanded with instructions to dismiss the case. The 3rd Circuit, however, declined to address the validity and enforceability of the arbitration award itself, noting that “that question lies with a court of competent jurisdiction — presumably a New Jersey state court or an AAA tribunal.”
7th Circuit: Credit reporting agency did not provide inaccurate info
On August 7, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s decision in favor of a credit reporting agency (the defendant), finding it did not report inaccurate credit information. An individual brought a case against the defendant under the FCRA alleging the company reported inaccurate late payments in her consumer report. The individual made mortgage payments on her home from 2007 to 2015 but was later found delinquent on her mortgage. She settled her debt through a short sale and the account was closed. Years later, the plaintiff discovered her closed mortgage account was still reported as delinquent in her credit reports and contacted the defendant. The defendant confirmed the information on file, and the lower court ruled that all the information “furnished and reported by [the defendant] … was all true.”
The inaccuracy arose when the individual applied for another mortgage in 2020 with a bank. The bank contracted a third party to create a “tri-merge” report aggregating data from the three largest credit reporting agencies. This report showed inconsistent information: the third party failed to include the previous mortgage’s “closed date” or indicate a short sale. The 7th Circuit recognized there was no field for the third party to include this information. This inaccuracy led the individual to file three separate lawsuits. In the suit against the bank’s contracted company, the parties settled, and a district court dismissed the suit with prejudice. However, in this suit, the individual argued that the credit agency’s reporting was inaccurate based on its prepared report. The 7th Circuit held that the credit reporting agency cannot be held liable for a report it neither prepared nor sent, since the individual’s injury was not connected with the defendant’s credit report.
5th Circuit halts DOT’s “junk fee” rule for airlines
On July 29, the U.S. Court of Appeals for the 5th Circuit granted a stay against a recent U.S. Department of Transportation (DOT) rule that regulated how airlines disclose fees to consumers during the booking process. The DOT’s rule was issued in April and dictated how airlines disclosed “ancillary service fees” (e.g., baggage or change fees) during booking. The rule went into effect on July 1. The plaintiffs, a class of large airlines and associations, prevailed by arguing that the rule (i) exceeded the DOT’s authority, (ii) was arbitrary and capricious, and (iii) wrongly bypassed the notice and comment period. The appellate court granted the stay and expedited the petition for review.
CFPB urges district court to move credit card late fee case to D.C.
On July 29, the CFPB submitted a brief to move its credit card late fee case from the U.S. District Court for the Northern District of Texas (located in Fort Worth) to the U.S. District Court for the District of Columbia (D.D.C.). As previously covered by InfoBytes, the U.S. Court of Appeals for the 5th Circuit reversed the U.S. District Court for the Northern District of Texas’s decision to move the case in April, holding that the District Court lacked jurisdiction to change venues. In its latest brief, the CFPB took a different approach. Specifically, the Bureau argued that the only plaintiff located in the Texas venue should be dismissed for lack of standing since the Bureau alleged the plaintiffs failed to establish that the organization from Fort Worth’s interests were “germane to the organization’s purpose.” Accordingly, the Bureau argued the better venue for this case would be the D.D.C.
8th Circuit blocks Biden’s student loan relief plan while in effect
On July 18, the Eighth Circuit for the U.S. Court of Appeals granted the State of Missouri’s emergency motion for an administrative stay to prevent President Biden’s student loan relief plan from taking effect. The White House released a fact sheet in August 2023 on the President’s SAVE Plan. According to the complaint filed by Missouri and six other states, President Biden’s final rule implementing the SAVE Plan, which would have gone into effect on July 1, allegedly attempted to cancel millions of dollars of student loans improperly. The State of Missouri had taken issue with the President’s plan to “evade the limits Congress set out in [the Higher Education Act] for the [income-based repayment] program” by allegedly hiking the exempt-income threshold from 150 to 225 percent, slashing the payment obligation from 15 to 5 percent for undergraduates, and forgiving loans after as few as ten years instead of 25. The administrative stay will be in place until the 8th Circuit rules on the appellants’ motion for an injunction.
Bank regulators appeal to 5th Circuit to lift district court’s final rule ban
On July 18, the OCC, FDIC, and the Fed (the federal banking agencies or FBAs) submitted a brief requesting that the U.S. Court of Appeals for the Fifth Circuit hold oral argument and reverse the U.S. District Court for the Northern District of Texas’ decision to preliminarily enjoin a recently issued Final Rule implementing the Community Reinvestment Act (CRA). The final rule had set forth processes for the FBAs to assess whether the depository institutions they supervise would be “meeting the credit needs of its entire community.” The CRA’s final rule, announced in October 2023, would modernize the CRA, create a new category of assessment areas, and subject large banks to new development tests, among others (covered by InfoBytes here). In February of this year, and previously covered by InfoBytes, several trade associations (plaintiffs) sued the FBAs, claiming the new final rule created a “wholesale and unlawful change” to the 50-year-old statute. The district court agreed and placed a preliminary injunction on the final rule. The FBAs argued that the district court erred in granting the plaintiffs’ preliminary injunction by accepting the “grafting” of two CRA exclusions found nowhere in the statute. The regulators also argued that the CRA’s final rule was an “appropriate exercise” of their authority. Additionally, the regulators argued the district court erred in its conclusion that “any amount of nonrecoverable costs” should be considered irreparable harm. Last, the regulators averred that the district court failed to consider the equities and the public interest weight against granting the preliminary injunction.
The FBAs now, in their appeal to the 5th Circuit, made four arguments based on these alleged errors. First, the FBAs contended they did not exceed their statutory authority by issuing the final rule, which evaluated a bank’s retail lending in facility-based assessment areas because “for certain banks, the bank’s ‘entire community’ includes both the geographic areas where the bank maintained deposit-taking facilities as well as other geographic areas where the bank conducted retail lending.” Second, the regulators emphasized again they did not exceed their statutory authority by including deposit products and digital delivery systems when evaluating whether “credit needs” were being met. Third, the regulators argued that the district court erred in finding that plaintiffs showed “irreparable harm.” Fourth, the FBAs say that the district court’s assessment of the balance of equities and public interest was flawed. For these reasons, it was the regulators’ position that the district court erred in granting the preliminary injunction and that its decision be reversed.
5th Circuit vacates SEC private fund adviser rule
On June 5, the U.S. Court of Appeals for the Fifth Circuit vacated an SEC rule that represented a significant change in how private funds and their fund advisers are regulated. As it stands, the decision will spare private funds and their advisers from what would have been a material increase in regulatory burden. Prior to the 5th Circuit’s ruling, the rule expanded the scope of disclosure, reporting, and other obligations for private funds and their advisers.
You can read more about the court’s decision here as an Orrick Insight.