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Financial Services Law Insights and Observations


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  • Credit reporting agency FCRA suit may go forward


    On March 9, the U.S. District Court for the Eastern District of Pennsylvania denied the motion to dismiss and motion to strike a claim of a credit reporting agency (CRA) and its subsidiary (defendants) in a putative class action that alleged the defendants: (i) knowingly used inaccurate eviction information in their tenant screening reports, and (ii) inaccurately represented that they obtained eviction information from public sources, each in violation of the FCRA. Specifically, the plaintiff alleged that the CRA failed to disclose that the eviction information was maintained and sold through the subsidiary, and when the plaintiff requested her credit report from the CRA, the CRA omitted information maintained by the subsidiary and therefore the credit report did not contain “all information in the consumer’s file at the time of the request” as required by the FCRA. She argued that the FCRA prohibits the CRA defendant from skirting the requirement of full and accurate disclosure of consumer information by assigning that duty to a third party—in this case, the subsidiary defendant.

    According to its memorandum, the court rejected the CRA’s argument that it could not be held liable for faulty reports issued by its subsidiary. The court answered the question of whether plaintiff “sufficiently alleged that defendant evaded its obligation to make full and accurate disclosure of plaintiff's consumer file. . .through the use of corporate organization, reorganization, structure or restructuring,” concluding that she did so. The court dismissed the defendants’ motion to strike without prejudice, indicating the defendants can raise their argument again in an opposition to class certification.

    Courts Credit Reporting Agency FCRA Class Action Class Certification CRA Disclosures Credit Report

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  • FDCPA class action garnishments award overturned


    On January 16, the U.S. Court of Appeals for the Sixth Circuit overturned a district court’s class action award to the plaintiffs in an FDCPA action. According to the opinion, the credit card company hired the defendant, a law firm, to collect an unpaid credit card debt from the plaintiff. The defendant filed suit against the plaintiff and secured a judgment against her. The defendant then filed several writ of garnishment requests attempting to satisfy the judgment and, in addition, seeking the costs of the current writ request. In later garnishment requests, the defendant also added the costs of prior failed garnishments. The plaintiff then filed a class action in district court against the defendant alleging the requests for writ of garnishment from the defendant contained false statements in violation of the FDCPA. The court found for the plaintiff and awarded class members a total of $3,662, and attorney’s fees of $186,680 and the defendant appealed.

    After rejecting a jurisdictional argument by the defendant, the appellate court addressed whether the defendant’s writ of garnishment requests seeking all total costs to date, including the cost of the current garnishment,” were false, deceptive, or misleading. The appellate court concluded that it was reasonable to request the costs of the current garnishment request, as Michigan law at the time allowed creditors to include “the total amount of the post-judgment costs accrued to date” in their garnishment requests. Additionally, the opinion pointed to the recently revised Michigan rule that explicitly allows debt collectors to “include the costs associated with filing the current writ of garnishment” as clarification that the prior version of the rule was intended to cover current costs.

    Regarding the costs of prior failed garnishment requests, the opinion stated that Michigan law did not allow a creditor to seek these costs and that including them was therefore a false representation under the FDCPA. The appellate court remanded the case, however, to provide the defendants an opportunity to prove the violation was a “bona fide” mistake of fact and that its procedure for preventing such mistakes were sufficient. In addition to vacating the award and attorney’s fees, and remanding the case, the court vacated the class certification order.

    Courts Appellate Sixth Circuit FDCPA Debt Collection Class Action Class Certification

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  • Data breach settlement of $380.5 million approved in consumer reporting agency class action

    Privacy, Cyber Risk & Data Security

    On January 13, the U.S. District Court for the Northern District of Virginia issued a final order and judgment in a class action settlement between a class of consumers (plaintiffs) and a large consumer reporting agency (company) to resolve allegations arising from a 2017 cyberattack causing a data breach of the company. After the company announced the breach, many consumers filed suit and were eventually joined into a proposed settlement class. As previously covered by InfoBytes, the plaintiffs alleged that the company (i) failed to provide appropriate security to protect stored personal consumer information; (ii) misled consumers regarding the effectiveness and capacity of its security; and (iii) failed to take proper action when vulnerabilities in their security system became known. The company and the plaintiffs later submitted a proposed settlement order to the court.

    According to the final order and judgment, the court certified the settlement class of the approximately 147 million affected consumers, finding the class was adequately represented, and approved the “distribution and allocation plan” as fair and reasonable. In the order granting final approval of the settlement the company agreed to, among other things, pay $380.5 million into a settlement fund and potentially up to $125 million more to cover “certain out-of-pocket losses,” $77.5 million for attorneys’ fees, and approximately $1.4 million for reimbursement of expenses. Class members are eligible for additional benefits including up to 10 years of credit monitoring and identity theft protection services or cash compensation if they already have those services, as well as identity restoration services for seven years. The company also agreed to spend at least $1 billion on data security and technology in the next five years.

    Privacy/Cyber Risk & Data Security Class Action Settlement Data Breach Consumer Data Class Certification Consumer Reporting Agency

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  • Securities class action against bank pared down


    On January 12, the U.S. District Court for the Northern District of California dismissed one of plaintiffs’ causes of action and concluded that only two of the 67 public statements the plaintiffs identified in support of their securities fraud causes of action against a large bank and its former CEO (defendants) related to the defendants “collateral protection insurance (CPI) … practices for auto loan customers” were actionable. The plaintiffs alleged that while, in July 2016, the defendants learned of irregularities with respect to the CPI and, by September 2016, discontinued the program, the defendants did not disclose information on the CPI program’s issues until July 2017, after which time, the defendants’ stock price dropped. The plaintiffs then filed suit based on 67 public statements made by the defendants prior to that time, which the plaintiffs alleged the defendants knew were “false or misleading” and resulted in the bank’s stockholders losing money.

    Upon review, the court found that 65 of the 67 public statements, on which the plaintiffs’ causes of action were based were not actionable. The two statements that the court found may support the plaintiffs’ causes of action were those made by the defendants when they were specifically asked whether they knew about “potential misconduct outside of the already disclosed improper retail banking sales practices” and, each time, “failed to disclose the CPI issue….” With respect to the two statements, the court found that the plaintiffs had “met [their] burden under the PSLRA (private securities litigation reform act)” to show a “strong inference that the defendant acted with the required state of mind,” and that the plaintiffs “adequately pleaded loss causation.” According to the opinion, the defendants did not challenge the plaintiffs’ contentions about the two alleged misstatements’ connection to the purchase or sale of the defendants’ securities, or that the plaintiffs relied on the misstatements or omissions and experienced economic losses as a result.

    Courts Securities Class Action Class Certification Auto Leases Insurance

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  • 11th Circuit vacates class certification in TCPA action against satellite TV provider


    On November 15, the U.S. Court of Appeals for the Eleventh Circuit vacated the district court’s certification order of a class action alleging a national satellite TV company violated the TCPA by contacting individuals who had previously asked to not be contacted. According to the opinion, a consumer filed a class action against the company alleging that the company failed to maintain an “internal do-not-call list,” which allowed the company and its telemarketing service provider to contact him eighteen times after he repeatedly asked to not be contacted. The consumer sought certification “of all persons who received more than one telemarketing call from [the telemarketing service provider] on behalf of [the company] while it failed to maintain an internal do-not-call list.” The district court certified the class and the company appealed.

    On appeal, the 11th Circuit disagreed with the district court, concluding the court incorrectly determined that issues common to the class predominated over issues individual to each member. Specifically, the appellate court noted that the class consisted of unnamed class members who may not have asked the company to stop calling and therefore, would never have been on an internal do-not-call list, had one been properly maintained. Thus, these members were not injured by the company’s failure to comply and their injuries are then “not fairly traceable to [the company’s] alleged wrongful conduct,” resulting in a lack of Article III standing to sue. The appellate court emphasized that recertification is still possible, but the district court would need to determine which of the class members made the request to not be contacted. However, if “few made [the] request[], or if it will be extraordinarily difficult to identify those who did, then the class would be overbroad” and individualized issues may “overwhelm issues common to the class.”

    Courts Appellate Eleventh Circuit TCPA Class Action Class Certification

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