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District Court partially denies defendants’ time-barred claims, rules certain TSR violations may proceed
On May 3, the U.S. District Court for the Central District of California addressed time-barred claims raised by a group of affiliated law firms and their managing attorneys (defendants) that partnered with a now-defunct entity to offer debt relief services to consumers. The court granted in part and denied in part defendants’ request for summary judgment after determining that many of the allegedly improper up-front fees charged to consumers seeking debt relief were collected within the three-year statute of limitations for enforcement actions. As previously covered in InfoBytes last January, the CFPB claimed, among other things, that the defendants violated the Telemarketing Sales Rule (TSR) by allegedly assisting a different, now-defunct debt relief service company with charging up-front fees. Last May, the district court denied the defendants’ bid for dismissal but at the time “declined to resolve the parties’ dispute over the applicable statute of limitations.” While the CFPB agreed to limit its request for relief to the three years preceding the filing of the suit, the defendants filed a motion for summary judgment arguing that the entire action should be barred because the alleged violations relate to a “singular scheme” discovered by the CFPB in 2012. However, according to the court, federal consumer financial law states that “any violations of the TSR that occur within the relevant limitations period are not time-barred.” Therefore, because the CFPB provided evidence that fees were collected in 2015—well within the applicable statute of limitations—the defendants’ request as to violations of the TSR that allegedly occurred within three years of the filing is denied. Notwithstanding, the court granted part of the defendants’ request for summary judgment and barred all claims related to conduct that occurred outside the three-year window because the CFPB did not oppose the motion.
Oklahoma law allows lenders to charge convenience fees for electronic payments
On April 25, the Oklahoma governor signed into law an act that allows lenders to charge borrowers convenience fees for making payments via debit card, electronic funds transfer, electronic checks or other electronic means. SB 1151 provides that the nonrefundable fees shall not exceed the lesser of (i) the actual third party costs incurred by the lender for accepting and processing electronic payments; and (ii) four percent of the electronic payment transaction. Lenders must notify borrowers of the amount of the fee prior to completing a transaction and provide an opportunity to cancel the transaction without a fee. The law takes effect November 1.
Arizona prohibits gift card fees and certain expiration dates
On April 17, the Arizona governor signed SB 1264, which prohibits the issuance or sale of gift cards in Arizona that are subject to fees or certain expiration dates. Arizona previously allowed gift cards to be subject to an expiration date, a fee, or both as long as the relevant information was clearly and conspicuously disclosed to the consumer before the purchase was made. SB 1264 prohibits gift cards from begin subject to a fee and prohibits the underlying money on a gift card from being subject to an expiration date. The law allows an expiration date with respect to the card, code, or device associated with a gift card, only if the gift card contains a clear and conspicuous disclosure that the underlying monies associated with the card do not expire and the consumer may obtain a replacement. The prohibition on gift card fees and expiration dates does not apply to (i) gift cards that are sold below face value or donated to nonprofit or charitable organizations; (ii) gift cards distributed pursuant to an awards, loyalty, or promotion program when the consumer has given no money or other property in exchange for the card; and (iii) cards for prepaid telecommunications services, electronic funds transfer cards, bank-issued debit or general purpose reloadable prepaid cards not marketed or labeled as gift cards or gift certificates. The law becomes effective 91 days after the end of the legislative session.