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Financial Services Law Insights and Observations

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  • National bank to challenge CFPB on cards suit

    Federal Issues

    On January 30, the CFPB announced that it filed suit in the U.S. District Court for the District of Rhode Island against a national bank (defendant) based upon alleged violations of the Truth in Lending Act (TILA) and its implementing Regulation Z, the Fair Credit Billing Act (FCBA), and the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). The CFPB claims that among other things, when servicing credit card accounts, the defendant did not properly manage consumer billing disputes for unauthorized card use and billing errors, and did not properly credit refunds to consumer accounts resulting from such disputes. Specifically, the complaint alleges that violations included the defendant’s (i) “practice of automatically denying billing error claims or claims of unauthorized use for failure of the consumers to provide Fraud Affidavits, including agreeing to testify as witnesses”; (ii) “failure to refund related finance charges and fees when it resolved billing error notices or claims of unauthorized use in consumers’ favor”; (iii) failure “to provide written notices of acknowledgement or denial in response to billing error notices”; and (iv) failure “to provide credit counseling referrals.” The CFPB is seeking injunctive relief, monetary relief, disgorgement of defendant’s ill-gotten gains, civil money penalties, and costs of the action.

    The defendant issued a response to the suit on January 31, stating that it self-identified the issues to the Bureau five years ago while simultaneously correcting any flawed processes. According to the defendant’s statement, “the CFPB’s action is misguided” and “well beyond the expiration of the statute of limitations. The defendant vows to “vigorously challenge” the suit.

    Federal Issues CFPB Courts Enforcement CARD Act TILA Regulation Z Fair Credit Billing Act Disgorgement Credit Cards Finance Charge Notice

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  • 1st Circuit rejects dismissal of a Massachusetts foreclosure notice action

    Courts

    On February 8, the U.S. Court of Appeals for the 1st Circuit reversed the district court’s dismissal of a Massachusetts homeowners’ action alleging that the mortgage holder failed to comply with the notice requirement in their mortgage before foreclosing on their property. The district court dismissed the action after concluding that the mortgage holder’s notice satisfied the notice requirements by including the default amount, a cure date, and the fact that failure to cure could result in acceleration. The homeowners appealed, arguing that the mortgage holder failed to strictly comply with the provision’s requirements because the notice provided did not include the conditions and time limitations associated with reinstatement after acceleration that were required by a separate provision in the mortgage.

    On appeal, the 1st Circuit reviewed the notice under Massachusetts law, which requires mortgage holders to strictly comply with two types of mortgage terms: (i) ones “directly concerned with the foreclosure sale. . .” and (ii) ones “prescribing actions the mortgagee must take in connection with the foreclosure sale—whether before or after the sale takes place.” In overturning the District Court’s dismissal, the 1st Circuit noted that, because the notice did not contain the additional conditions and time limitations associated with reinstatement from the separate provision, dismissal was inappropriate. 

    Courts Mortgages Foreclosure Notice State Issues

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