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  • Supreme Court vacates $10 million judgment in light of TransUnion ruling

    Courts

    On January 10, the U.S. Supreme Court issued a short summary disposition granting a petition for a writ of certiorari filed by a lender and an appraisal management company. Rather than hearing arguments in the case, the Court immediately vacated the judgment against the defendants and ordered the U.S. Court of Appeals for the Fourth Circuit to reexamine its decision in light of the Court’s ruling in TransUnion v. Ramirez (which clarified the type of concrete injury necessary to establish Article III standing, and was covered by InfoBytes here).

    As previously covered by InfoBytes, in March 2021, a divided 4th Circuit affirmed a district court’s award of over $10 million in penalties and damages based on a summary judgment that an appraisal practice common before 2009 was unconscionable under the West Virginia Consumer Credit and Protection Act. During the appeal, the defendants argued that summary judgment was wrongfully granted and that the class should not have been certified since individual issues predominated over common ones, but the appellate court majority determined, among other things, that there was not a large number of uninjured members within the plaintiffs’ class because plaintiffs paid for independent appraisals and “received appraisals that were tainted.”

    The defendants argued in their petition to the Court that the 4th Circuit’s “fundamentally unjust” holding could not stand in the wake of TransUnion, which ruled that every class member must be concretely harmed by an alleged statutory violation in order to have Article III standing. According to the defendants, the divided panel “affirmed the class certification and the class-wide statutory-damages award, because the class members all faced the same risk of harm: the appraisers had been ‘exposed’ to the supposed procedural error, and the class members paid for the appraisals, even though the court ‘cannot evaluate whether’ any harm ever materialized.”

    Courts U.S. Supreme Court Fourth Circuit Appellate Appraisal Appraisal Management Companies Settlement Mortgages State Issues Consumer Finance West Virginia

  • District Court denies plaintiff’s motion to remand FDCPA

    Courts

    On December 22, the U.S. District Court for the Northern District of California denied a plaintiff’s motion to remand, ruling that a default judgment allegedly obtained fraudulently in an underlying collection lawsuit qualifies as a concrete injury in fact to the plaintiff in an FDCPA suit. According to the order, the plaintiff sued the defendants, a process server and its employee, for fraudulently certifying that service of process had been made to the plaintiff in a state debt collection action and obtaining a default judgment against the plaintiff as a result, which the plaintiff described as engaging in the practice of “sewer service.” The plaintiff sued the defendants in state court and the action was removed to federal court by the defendants. The plaintiff filed a motion to remand for lack of standing, claiming that his complaint “does not sufficiently allege a concrete harm to confer [Article III] standing to Plaintiff” because the complaint “solely asserts a bare procedural violation of the [FDCPA].” While “Article III requires plaintiff to show ‘(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief,’” the court noted that the plaintiff’s argument “focuses only on the ‘concreteness’ of the ‘injury in fact.’” Applying the U.S. Court of Appeals for the Ninth Circuit’s two-step framework for determining whether a statutory violation is a “concrete” harm, and considering the U.S. Supreme Court’s decision in TransUnion LLC v. Ramirez decision (covered by InfoBytes here), the court found that the plaintiff’s complaint sufficiently alleged a “concrete” injury in fact for alleged violations of the FDCPA arising from alleged sewer service.

    Specifically, the court indicated that the 9th Circuit’s first step requires the court “‘[t]o identify the interests protected by the FDCPA’ by examining the ‘[h]istorical practice’ and the ‘legislative judgment’ underlying the provisions at issue’” and determine whether “the FDCPA ‘provisions at issue were established to protect the plaintiff’s concrete interests.’” Although the defendants failed to identify any historical or common-law practices, the court found that legislative history of the FDCPA indicates that Congress enacted the statute to protect consumers from abusive collection practices, which include engaging in sewer service. The court further cited to district courts’ decisions concluding that “the ‘FDCPA codifies Plaintiff's concrete interest in being free from abusive debt collection practices.’” Turning to step two of the 9th Circuit’s framework, the court considered whether the sewer service allegations present a material risk of harm that had materialized and “actually harm[ed] Plaintiff’s interests under the FDCPA.” The court found that the “Complaint sufficiently allege[d] that the risk of harm to Plaintiff’s concrete interests materialized” because the “Complaint plead[ed] that the fraudulent proof of service specifically targeted Plaintiff, advanced the state debt collection action against Plaintiff to a stage where default judgment was pending, and caused Plaintiff to obtain legal representation to defend Plaintiff in the state debt collection action [which] do more than present a ‘risk of harm’ to Plaintiff’s interests under step two.” On this basis, the court denied the plaintiff’s motion to remand the action.

    Courts FDCPA California Debt Collection Ninth Circuit Appellate U.S. Supreme Court

  • 2nd Circuit addresses TCPA’s definition of “unsolicited advertisement”

    Courts

    On January 6, the U.S. Court of Appeals for the Second Circuit held that an unsolicited fax asking recipients to participate in a market research survey in exchange for money does not constitute as an “unsolicited advertisement” under the TCPA. According to the opinion, the plaintiff medical services company claimed the defendant sent two unsolicited faxes seeking participants for its market research surveys in exchange for an “honorarium of $150,” and filed a putative class action alleging violations of the TCPA, as amended by the Junk Fax Prevention Act of 2005 (JFPA). The district court agreed with the defendant that an unsolicited faxed invitation to participate in a market research survey is not an “unsolicited advertisement” under the TCPA and dismissed the case.

    The TCPA, as amended by the JFPA, defines an “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission.” On appeal, the 2nd Circuit found that the defendant’s faxes asking participants to take part in a market survey “plainly do not advertise the availability of any of those three things, and therefore cannot be ‘advertisements’ under the TCPA.” The 2nd Circuit added that “[t]his is not to say that any communication that offers to pay the recipient money is thereby not an advertisement. One could imagine many examples of communications, including faxed surveys, offering the recipient both money and services, that might incur liability under the TCPA.” The 2nd Circuit recognized that its decision disagrees with the 3rd Circuit’s ruling in Fischbein v. Olson Research Group, which held that faxes such as the ones at issue are advertisements because “an offer of payment in exchange for participation in a market survey is a commercial transaction, so a fax highlighting the availability of that transaction is an advertisement under the TCPA.” The 2nd Circuit held that in Fischbein the 3rd Circuit mistakenly relied “on an encyclopedia definition of what constitutes a ‘commercial transaction’. . . rather than focusing on the definition of ‘advertisement’ that the TCPA and FCC regulations provide.”

    Courts TCPA Privacy/Cyber Risk & Data Security Second Circuit Third Circuit Appellate Faxes

  • 11th Circuit affirms FCRA suit dismissal

    Courts

    On December 23, the U.S. Court of Appeals for the Eleventh Circuit affirmed a lower court’s dismissal of an FCRA case where a furnisher (defendant) allegedly failed to conduct a reasonable investigation in response to materials that the plaintiff had sent to two credit reporting agencies (CRAs), which was then forwarded to the furnisher. According to the opinion, the plaintiff had submitted a letter to each CRA requesting they remove a dispute notation on her credit report with respect to her account with the furnisher because the account in question was no longer being disputed. The CRAs forwarded the plaintiff’s request to the furnisher, who then investigated and notified the CRAs that the account was still being disputed. The plaintiff did not otherwise directly tell the furnisher that she no longer disputed the tradeline. After discovering that the account was still reported as disputed, the plaintiff filed suit under the FCRA against the furnisher for failing to investigate the dispute and failing to direct the CRAs to remove the notation of account in dispute. The district court granted the defendant’s motion to dismiss for the plaintiff’s failure to state a claim.

    On appeal, the 11th Circuit found that the letter sent by the plaintiff to the CRAs failed “to make anything clear” to the furnisher. The appellate court explained that the plaintiff “could have written a better letter: one that made clear that she was attempting to revoke her dispute for the first time or, better yet, one addressed to the bank itself. But that is not the letter on which she premised her lawsuit.” The appellate court also noted that, although the furnisher could have contacted the plaintiff directly, the FCRA does not require the furnisher to do so. In effect, “[w]hat [the plaintiff] wants [the bank] to do — either (1) to intuit that she no longer disputed the tradeline from her report to the CRAs or (2) to reach out to her directly to clarify and confirm that she no longer wished to dispute the tradeline — goes beyond what FCRA reasonableness requires,” the appellate court explained in its ruling. The appellate court therefore found that it was reasonable for the furnisher to review its official records, which indicated that the tradeline was still in dispute, and retain the dispute notation on the plaintiff’s credit report.

    Courts Appellate Eleventh Circuit FCRA Credit Reporting Agency Consumer Finance

  • District Court temporarily halts enforcement of New York’s user data-sharing ordinances

    Privacy, Cyber Risk & Data Security

    On December 27, the U.S. District Court for the Southern District of New York issued a stipulation and order in a consolidated action, temporarily reprieving three delivery app companies from complying with New York City’s Administrative Code §§ 20-847.3 and 20-563.7 (collectively, “the ordinances”). The amended complaint contends that the ordinances “create an unconstitutional, privacy-infringing, data-disclosure requirement pursuant to which third-party food-ordering and delivery platforms. . . must divulge, against their will, sensitive, proprietary customer information,” including full names, phone numbers, email addresses, delivery addresses, and order contents to New York City restaurants “regardless of whether that restaurant maintains any security infrastructure, and regardless of whether the customer has expressly consented to their personal information being so shared.” According to the plaintiffs, the ordinances “state that customers are presumed to have consented to this dangerous flow of their information unless they specifically opt out for each and every order they place, contrary to the common view that opt-out requests should be valid for at least several months.” The plaintiffs allege, among other things, that the ordinances are preempted by New York State’s Right of Privacy and violate delivery app companies’ First Amendment rights.

    Notably, while New York City “has agreed to stay enforcement of the Challenged Laws pending final determination by this Court resolving, or disposing of, this action in exchange for Plaintiff’s agreement not to file a motion for a preliminary injunction,” the stipulation and order is not an indefinite agreement to stop enforcement of the ordinances.

    Privacy/Cyber Risk & Data Security Courts New York State Issues Consumer Protection

  • District Court preliminarily approves TCPA class action

    Courts

    On December 27, the U.S. District Court for the Eastern District of Washington granted class certification and preliminarily approved a putative class action settlement alleging two Washington cannabis companies violated the TCPA by sending unsolicited promotional text messages without consumer consent. According to the plaintiff’s unopposed motion for preliminary approval of the settlement, the plaintiff contended that she did not consent to receiving commercial texts from defendants, and alleged violations of the TCPA as well as Washington’s Consumer Protection Act predicated on the defendants’ alleged violations of Washington’s Commercial Electronic Mail Act. The preliminarily approved settlement would give affected consumers vouchers totaling up to $618,000. Class counsel also intends to move for a class representative award and attorneys’ fees and expenses. The proposed settlement class includes anyone in Washington who received at least one unsolicited commercial text message from or on behalf of the defendants after June 22, 2015, and through the date of class certification.

    The court granted final approval to the settlement on April 11.

    Courts State Issues Consumer Protection Privacy/Cyber Risk & Data Security Class Action TCPA Washington

  • 7th Circuit: Collector did not violate FCRA by obtaining a “propensity-to-pay score”

    Courts

    On December 22, the U.S. Court of Appeals for the Seventh Circuit affirmed summary judgment in favor of a defendant debt collector in an FCRA action alleging a plaintiff’s credit information was acquired without a permissible purpose. The plaintiff and her husband jointly filed for bankruptcy protection. The bankruptcy court ordered a discharge of their debts, which included a debt incurred by the plaintiff’s husband that was being serviced by the defendant. The defendant was notified of the discharge (which included each of the four former last names used by the plaintiff) and scanned its system for affected accounts; however, by the time it received notice of the bankruptcy, it had already closed the account it had been servicing. Later, another account bearing one of the plaintiff’s former names was placed with the defendant. The defendant sent the account to a third-party vendor to see if the individual had filed for bankruptcy protection and did not received any bankruptcy results. It then ordered a “propensity-to-pay-score” from a credit reporting agency. The plaintiff’s records were eventually updated by the third-party vendor with information about the bankruptcy, and the defendant closed the account. However, the plaintiff noted the soft inquiry on her credit report and sued, alleging the defendant did not have a permissible purpose to make such an inquiry. The district court granted summary judgment to the defendant.

    On appeal, the 7th Circuit determined that the plaintiff had suffered a concrete injury, concluding that an “unauthorized inquiry into a consumer’s propensity‐to‐pay score is analogous to the unlawful inspection of one’s mail, wallet, or bank account.” However, after reviewing the merits of the case, the appellate court held that an alleged invasion of privacy was not enough for it to overturn the district court’s ruling. There was no negligent violation of the FCRA “because no reasonable juror could conclude that the inquiry into [the plaintiff’s] propensity‐to‐pay score resulted in actual damages,” the appellate court wrote. Additionally, while the 7th Circuit acknowledged that the plaintiff’s debt was discharged by the time the defendant obtained her propensity-to-pay score, there was no willful violation of the FCRA because the defendant “lacked actual knowledge of the bankruptcy” and “did not recklessly disregard the possibility that debt had been discharged.” The appellate court added that the evidence showed that the defendant “had a reasonable basis for relying on its procedures.”

    Courts Bankruptcy FCRA Appellate Seventh Circuit Consumer Finance Debt Collection

  • Agencies file amicus brief on use of term “applicant” in ECOA

    Courts

    On December 16, the CFPB filed a joint amicus brief with the DOJ, Federal Reserve Board, and the FTC arguing that the term “applicant” as used in ECOA and its implementing rule, Regulation B, includes both those seeking credit as well as persons who have sought and have received credit (i.e., current borrowers). (See also a Bureau blog post discussing the brief.) The amicus brief is in support of a plaintiff in an action where the plaintiff consumer sued a national bank for closing his credit card account without providing an explanation for the adverse action as required by ECOA. The case is currently on appeal before the U.S. Court of Appeals for the Seventh Circuit after a district court determined that ECOA protections only apply “during the process of requesting credit and do not protect those with existing credit accounts.”

    The central issue identified in the brief revolves around whether ECOA applies beyond persons seeking credit to persons who have already received credit. The brief focused on this issue by analyzing (i) ECOA’s text, history and purpose; (ii) the application of Regulation B; and (iii) alleged incorrect interpretations in the underlying defendant’s arguments. In looking at the text of ECOA, the brief asserted that ECOA applies to “applicants” without regard to how their credit is resolved because ECOA defines “applicant” as “any person who applies to a creditor directly for an extension, renewal, or continuation of credit, or applies to a creditor indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit.” In further analyzing the statutory text, the brief further explained that ECOA also gives consumers the right to adverse action notices, which include the “revocation of credit” as well as a “change in the terms of an existing credit arrangement”—actions, the brief stated, “that can be taken only with respect to persons who have already received credit.” The brief also stated that legislative history shows it was Congress’s intent to reach discrimination “in any aspect of a credit transaction.”

    In looking at the context of Regulation B, the brief asserted, among other things, that ECOA’s protections continue to apply after an applicant receives credit, explaining that Regulation B “did so by defining ‘applicant’ to include, ‘[w]ith respect to any creditor[,] … any person to whom credit is or has been extended by that creditor.’” Moreover, the brief asserted, ECOA provides a private right of action, which allows aggrieved applicants to file suits for alleged ECOA/Regulation B violations. In this instance, the term “applicant” cannot be meant to refer only to consumers with pending credit applications because otherwise a consumer whose application was denied on a prohibited basis would have no private right of action recourse. These references, the brief emphasized, “further confirm that the term “applicant” is not limited to those currently applying for credit.”

    Courts CFPB DOJ Federal Reserve FTC Amicus Brief ECOA Regulation B Appellate Seventh Circuit Consumer Finance

  • CFPB reaches settlement with online lender

    Federal Issues

    On December 30, the U.S. District Court for the Northern District of California approved the stipulated final judgment and order against a California-based online lender (defendant) for alleged violations of fair lending regulations and a 2016 consent order. As previously covered by InfoBytes, the CFPB filed a complaint against the defendant (the third action taken against the defendant by the CFPB) for allegedly violating the terms of a 2016 consent order related to false claims about its lending program. The 2016 consent order alleged that the defendant engaged in deceptive practices by misrepresenting, among other things, the fees it charged, the loan products that were available to consumers, and whether the loans would be reported to credit reporting companies, in violation of the CFPA, TILA, and Regulation Z (covered by InfoBytes here). According to the September 8 complaint, the defendants continued with much of the same illegal and deceptive marketing that was prohibited by the 2016 consent order. Among other things, the complaint alleged that the defendants violated the terms of the 2016 consent order and various laws by: (i) deceiving consumers about the benefits of repeat borrowing; and (ii) failing to provide timely and accurate adverse-action notices, which is in violation of ECOA and Regulation B.

    The settlement prohibits the defendant from: (i) making new loans; (ii) collecting on outstanding loans to harmed consumers; (iii) selling consumer information; and (iv) making misrepresentations when providing loans or collecting debt or helping others that are doing so. The order also imposes a $100,000 civil money penalty based on the defendant’s inability to pay.

    Federal Issues CFPB Enforcement CFPA TILA ECOA Regulation Z Regulation B Consumer Finance Fair Lending Online Lending UDAAP Deceptive Courts

  • 5th Circuit says bank and mortgage servicer did not engage in “dual tracking”

    Courts

    On December 15, the U.S. Court of Appeals for the Fifth Circuit affirmed summary judgment in favor of defendants in a mortgage foreclosure action. According to the opinion, after the plaintiff fell behind on his mortgage payments, the defendant bank’s mortgage servicer approved him for a trial loan modification plan that required timely reduced payments for a period of three months. The plaintiff stated that he complied with the trial plan but that the defendant bank nevertheless foreclosed on his property and sold the property to a third defendant. The plaintiff further claimed that he did not learn about the sale of his property until two months after it happened when the third defendant sought to evict him. The plaintiff sued the bank and mortgage servicer for violating RESPA and the Texas Debt Collection Act (TDCA), and sued the purchaser of the property “asserting claims to quiet title and for trespass to try title.” All defendants moved for summary judgment, which the district court granted based on evidence that refuted each allegation. The plaintiff appealed.

    On appeal, the 5th Circuit first reviewed, among other claims, the plaintiff’s RESPA claim, which alleged the bank and mortgage servicer engaged in “dual tracking” by initiating foreclosure proceedings while the plaintiff’s trial modification plan was purportedly still active. According to the court, dual tracking occurs when “the lender actively pursues foreclosure while simultaneously considering the borrower for loss mitigation options.” The appellate court agreed with the district court’s conclusion that summary judgment was appropriate because the plaintiff did not submit his first payment by the deadline established under the trial modification plan, and thus “did not timely accept the Trial Modification Plan.” As such, the bank and mortgage servicer did not engage in “dual tracking” because there was no obligation to notify the plaintiff of any denial of a permanent loan modification or to provide an opportunity to appeal, and accordingly was not considering the plaintiff for loss mitigation options. The court also found deficiencies in the plaintiff’s Texas law and TDCA claims.

    Courts Appellate Fifth Circuit RESPA Consumer Finance Mortgages State Issues Mortgage Servicing Foreclosure

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