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8th Circuit reverses debt collection action for lack of standing
On February 24, the U.S. Court of Appeals for the Eighth Circuit vacated and remanded the dismissal of a class action lawsuit concerning a medical collection letter that listed amounts due but did not distinguish between the principal and the interest that the debt collectors were attempting to charge. Plaintiff, who never paid any part of the interest or principal, filed a class action against the defendant debt collectors alleging violations of the FDCPA and the Nebraska Consumer Practices Act (NCPA). The defendants moved for summary judgment, arguing that the plaintiff lacked Article III standing. The district court denied the motion and the jury found for the defendants on all counts except for the NCPA claim, which was not tried before a jury. After trial, the district court determined it had provided improper jury instructions, and sua sponte, entered judgment for the plaintiff as a matter of law on both the NCPA and FDCPA claims. The district court specifically ruled that the NCPA does not allow collection of prejudgment interest by a debt collector without an actual judgment. The defendants appealed.
On appeal, the 8th Circuit focused on whether the plaintiff had standing. The appellate court held that the collection letter did not cause the plaintiff concrete harm, and concluded (quoting TransUnion LLC v. Ramirez, citing Spokeo, Inc. v. Robins) that without a concrete injury in fact, she “is ‘not seeking to remedy any harm to herself but instead is merely seeking to ensure a defendant’s compliance with regulatory law (and, of course, to obtain some money via the statutory damages).’” Without suffering a tangible harm, the appellate court said it could only recognize injuries with “a ‘close relationship’ to harm ‘traditionally’ recognized as providing a basis for a lawsuit in American courts.” The plaintiff pointed to fraudulent misrepresentation and conversion as analogous to her alleged injury, but the appellate court disagreed and determined that the consumer could not establish injury sufficient to satisfy Article III standing. In vacating and remanding the district court’s ruling, the 8th Circuit pointed out that, absent standing, it lacked jurisdiction to decide any other issues raised on appeal.
8th Circuit pauses student debt relief program
On November 14, the U.S. Court of Appeals for the Eighth Circuit granted an emergency motion for injunction pending appeal filed by state attorneys general from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina to temporarily prohibit the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan (announced in August and covered by InfoBytes here). Earlier in October, the 8th Circuit issued an order granting an emergency motion filed by the states, which requested an administrative stay prohibiting the discharge of any student loan debt under the cancellation plan until the appellate court had issued a decision on the states’ motion for an injunction pending an appeal. (Covered by InfoBytes here.) The October order followed a ruling issued by the U.S. District Court for the Eastern District of Missouri, which dismissed the states’ action for lack of Article III standing after concluding that the states—which attempted “to assert a threat of imminent harm in the form of lost tax revenue in the future”— failed to establish imminent and non-speculative harm sufficient to confer standing.
In granting the emergency motion, the appellate court disagreed with the district court’s assertion that the states lacked standing. The 8th Circuit reviewed whether the state of Missouri could rely on any harm the Missouri Higher Education Loan Authority (MOHELA) might suffer as a result of the Department of Education’s cancellation plan. The appellate court found that the relationship between MOHELA and the state is relevant to the standing analysis, especially as Missouri law specifically directs MOHELA (which receives revenue from the student loan accounts it services) to distribute $350 million into the state’s treasury. As such, “MOHELA may well be an arm of the State of Missouri” under this reasoning, the appellate court wrote, adding that several district courts have concluded that MOHELA is an arm of the state. However, regardless of whether MOHELA is an arm of the state, the resulting financial impact due to the cancellation plan would, among other things, affect the state’s ability to fund public higher education institutions, the 8th Circuit noted. “Consequently, we conclude Missouri has shown a likely injury in fact that is concrete and particularized, and which is actual or imminent, traceable to the challenged action of the Secretary, and redressable by a favorable decision,” the appellate court wrote, adding that since one party likely has standing it does not need to address the standing of the other states. The appellate court also determined that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose.” The 8th Circuit explained that it considered several criteria, including the fact that the collection of student loan payments and the accrual of interest have both been suspended. The Missouri attorney general released a statement applauding the 8th Circuit’s decision.
The 8th Circuit’s decision follows a recent ruling issued by the U.S. District Court for the Northern District of Texas, which found that the student loan forgiveness program is “an unconstitutional exercise of Congress’s legislative power.” (Covered by InfoBytes here.)
HUD announces Nebraska and Iowa disaster relief
On February 24, HUD announced disaster assistance for certain areas in Nebraska and Iowa impacted by severe storms, straight-line winds, and tornadoes on December 15, 2021. This follows President Biden’s major disaster declaration for certain counties on February 23. The disaster relief includes providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes. Flexibility measures for state and local governments, public housing authorities, tribes, and tribally designated house entities are also addressed.
Nebraska creates Consumer Affairs Response Team
On December 2, the Nebraska attorney general launched the Consumer Affairs Response Team (CART) to help state residents address complaints and identify scams related to a wide range of consumer-related issues, such as fraud, identity theft, scams, and unfair and deceptive business practices. CART will accept complaints after a consumer has first made a “good-faith-effort” to resolve any issues directly with a business. If CART determines that the consumer’s complaint falls within its authority, it will engage in the dispute resolution process by facilitating communications between the consumer and the business. CART was created after the AG’s office discovered a 65 percent increase in identity theft reports as well as a 27 percent increase in fraud and other types of consumer scams.
Nebraska law establishes a cryptocurrency bank charter
On May 25, the Nebraska governor approved LB 649, the Nebraska Financial Innovation Act, which creates a bank charter for companies that hold cryptocurrencies. The new act defines “digital asset depository institutions” as banks or financial institutions that hold certain digital assets, and will allow existing state-chartered banks to establish areas focused on cryptocurrency services. New businesses will also be able to gain a state banking charter as digital asset depositories. The act provides, among other things, that “at all times, a digital asset depository shall maintain unencumbered liquid assets denominated in United States dollars valued at not less than one hundred percent of the digital assets in custody” and that “compliance with federal and state laws, including, but not limited to, know-your-customer and anti-money-laundering rules and the federal Bank Secrecy Act, is critical to ensuring the future growth and reputation of the blockchain and technology industries as a whole.”
Nebraska governor introduces rental assistance program
On February 22, the governor of Nebraska announced the launch of an emergency rental assistance program. Through the program Nebraska’s Housing Finance Agency, $158 million in federal stimulus funds will be available for distribution to eligible tenants and landlords.
Nebraska Dept. of Banking and Finance updates guidance on temporary branch relocations
The Nebraska Department of Banking and Finance recently updated its March 12, 2020 guidance regarding temporary branch relocations (previously discussed here). The Department will continue to temporarily allow licensed and sponsored mortgage loan originators (MLOs), loan processors, underwriters, and other staff to work from an unlicensed branch upon notification by the sponsor, and approval by the department. Licensed mortgage bankers who have staff working from unlicensed locations must submit an updated list of those employees to the Department through the NMLS on, or before, March 1, June 1, September 1, and at renewal, in 2021. In addition, licensed MLOs must take certain data security measures and not allow customers to come to the unlicensed location. The guidance is effective January 1, 2021.
Nebraska to accept in person business filings
On June 18, the Nebraska secretary of state announced that its Business Services division will be open to the public for business filings, notarizations, and UCC filings. Appointments are required and masks must be worn for in-person appointments.
Nebraska authorizes virtual annual meetings for credit unions
On May 18, the director of the Nebraska Department of Banking and Finance released guidance allowing state-chartered credit unions to hold their annual meetings and certain special member meetings virtually, provided that certain requirements are met.
Nebraska Department of Banking and Finance issues a notice updating its examination activity
On April 27, the Nebraska Department of Banking and Finance issued another notice providing updates to its March 25th notice (previously discussed here), which temporarily ceased all regular examinations until April 24. The notice extends the department’s posture to May 15, 2020. The department will continue certain critical examinations related to safety and soundness, consumer protections, or when there is an urgent or immediate need. The department will resume offsite examinations on June 1, predominately using remote access resources.
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Upcoming Events
- Keisha Whitehall Wolfe to discuss “Tips for successfully engaging your state regulator” at the MBA's State and Local Workshop
- Max Bonici to discuss “Enforcement risk and trends for crypto and digital assets (Part 2)” at ABA’s 2023 Business Law Section Hybrid Spring Meeting
- Jedd R. Bellman to present “An insider’s look at handling regulatory investigations” at the Maryland State Bar Association Legal Summit