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On March 5, FTC Chairman Joseph Simons spoke at the National Association of Attorneys General (NAAG) Winter Meeting to advocate for increased collaboration with state Attorneys General. Noting that such collaboration is critical to the agency’s mission, Simons highlighted FTC consumer protection goals as well as several collaborative efforts, including joint task forces and investigation and enforcement initiatives. Buckley attorneys Michelle L. Rogers, Antonio Reynolds, and Katherine Halliday, co-authors of What To Expect From Increased FTC-State AG Collaboration, discuss how Simons’ pitch to NAAG could turn out to be a useful signal of increased joint FTC-AG enforcement activity in the future.
On March 1, the U.S. District Court for the District of Connecticut signed an order dismissing with prejudice a Fair Housing Act complaint filed by the Connecticut Fair Housing Center through its legal counsel, the National Consumer Law Center, against a Connecticut-based bank. The bank denied all allegations of wrongdoing and liability. Under the terms of the stipulation of dismissal, the bank agreed voluntarily to resolve the claims and, among other things, to (i) revise its fair lending policies and procedures and conduct fair lending training for all employees; (ii) open a loan production office in Hartford; (iii) spend $230,000 on targeted marketing and advertising to minority communities, and provide additional consumer financial education opportunities; (iv) invest $300,000 for subsidies to promote home ownership and enhance access to credit in identified communities; (v) identify a Community Development Officer within the bank; and (vi) expand its community development loan program by investing $5 million over the next three years.
On February 27, the U.S. District Court for the Northern District of California granted a national bank’s request to certify for interlocutory appeal whether state law claims involving interest on escrow accounts were preempted by the Home Owners Loan Act (HOLA). As previously covered by InfoBytes, three plaintiffs filed suit against the bank, arguing that it must comply with a California law that requires mortgage lenders to pay interest on funds held in a consumer’s escrow account, following the U.S. Court of Appeals for the 9th Circuit’s decision in Lusnak v. Bank of America. The bank moved to dismiss the action, arguing, among other things, that the claims were preempted by HOLA. The court acknowledged that HOLA preempted the state interest law as to the originator of the mortgages, a now-defunct federal thrift, but disagreed with the bank’s assertion that the preemption attached throughout the life of the loan, including after the loan was transferred to a bank whose own lending is not covered by HOLA. Specifically, the court looked to the legislative intent of HOLA and noted it was unclear if Congress intended for preemption to attach through the life of the loan, but found a clear goal of consumer protection.
By granting the motion for interlocutory appeal, the court noted that the frequency with which the HOLA issue arises, “weighs in favor of allowing the Ninth Circuit to resolve this question.” Moreover, the court cited to a recent 9th Circuit case, in which the appellate court recognized HOLA preemption as a “novel legal issue.” The court also temporarily granted the bank’s request to stay the proceedings pending the resolution of the 9th Circuit action.
On March 5, Attorneys General from all 50 states, as well as from the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands, sent a letter to the Senate Committee on Commerce, Science, and Transportation supporting a recently introduced bipartisan bill to combat illegal robocalls. Among other things, S. 151, the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), would: (i) grant the FCC three years to take action against robocall violations, instead of the current one-year window; (ii) authorize the agency to issue penalties of up to $10,000 per robocall; and (iii) require service providers to implement the FCC’s new call authentication framework. The AGs state that they “are encouraged that the TRACED Act prioritizes timely, industrywide implementation of call authentication protocols,” and note their support for an interagency working group that the bill would establish consisting of members from the DOJ, FCC, FTC, CFPB, other relevant federal agencies, state AGs, and non-federal stakeholders.
On March 5, the Illinois Attorney General announced a lawsuit against a Georgia-based tax preparation business and its Chicago operators alleging the defendants collected more than $1 million in undisclosed fees from consumers from their anticipated income tax refunds for unnecessary tax-related financial products. According to the press release, the Illinois AG alleges that the defendants advertised services to consumers promising, for a $350 fee, tax refunds double their normal size and free cash advances on anticipated refunds. However, the AG alleges the defendants instead extract high, undisclosed, and unauthorized fees from consumers’ refunds without their knowledge. The complaint asks the court to grant a temporary restraining order to shut down the defendants’ operations.
On March 1, the Superior Court of New Jersey Appellate Division affirmed a lower court’s order granting summary judgment to an auto finance company and dismissing with prejudice a plaintiff’s New Jersey Consumer Fraud Act (CFA) and Fair Credit Reporting Act (FCRA) claims. According to the opinion, the plaintiff entered into a lease agreement for a vehicle serviced by the defendant. The plaintiff, who incurred late charges on 35 of her 39 monthly payments of $300, returned the vehicle before the end of the lease and was required to pay a $495 vehicle return fee, along with wear and tear fees and late charges. The plaintiff subsequently entered into a new lease transaction, in which the dealership agreed to pay the defendant the outstanding payments on her old lease, but did not, according to the court, waive the vehicle return fee. The dealership paid the full balance to the defendant after the plaintiff received notification about an overdue lease payment, and the day after the dealership’s payment was applied, the plaintiff paid an additional $300—which was mistakenly applied to a $395 disposition fee, as opposed to the larger vehicle return fee. The plaintiff made a final payment of $655 to settle the balance of the disposition fee as well as wear and tear fees and late charges. A complaint was filed later by the plaintiff against the defendant alleging that it fraudulently procured an additional $300 lease payment and falsely reported that she was delinquent on payments.
Affirming the lower court, the appeals court concluded that the defendant’s representations regarding the outstanding $300 payment were accurate and, under the lease terms, the plaintiff remained responsible for the vehicle return and wear and tear fees. In addition, the appeals court held that the plaintiff’s FCRA claim failed because the record confirmed that within 30 days of being notified of a dispute with the plaintiff’s credit score, the defendant conducted an investigation and requested that the credit reporting agencies remove the “late marks.”
On February 26, the Wyoming Governor signed SF 125, which classifies digital assets, including virtual currency, as personal property. Specifically, the bill divides digital assets into three categories of intangible personal property within the existing Wyoming Uniform Commercial Code: (i) digital consumer assets are considered “general intangibles”; (ii) digital securities are considered “intangible personal property” and classified as securities and investment property; and (iii) virtual currency is classified as money. Among other things, SF 125 also establishes an opt-in framework for banks to provide custodial services for digital assets as custodians (and authorizes supervision fees for banks that provide such services), and clarifies the jurisdiction of Wyoming courts to hear claims related to digital assets.
On February 26, the Arkansas Governor signed SB 188, which amends certain provisions of the state’s Fair Mortgage Lending Act (the Act) to comply with recent developments in federal law. Among other things, the amendments, which take effect 90 days after adjournment, include (i) modifying the Act’s definition of an “applicant” and “licensee” to now include transitional loan officers; (ii) specifying that an “exempt person” must comply with outlined compensation limits, mortgage banker affiliation disclosures, and loan term negotiation restrictions; (iii) defining a “transitional loan officer” to mean “an individual who, in exchange for compensation as an employee of, or who otherwise receives compensation or remuneration from, a mortgage broker or mortgage banker, is authorized to act as a loan officer subject to a transitional loan officer license,” with term limits of no more greater than 120 days and is not subject to commissioner reapplication, renewal, or extension requirements; and (iv) outlining transitional loan officer termination conditions and employment restrictions. The amendments also address audited financial statement requirements for mortgage bankers and servicers, and state that transitional loan officers may now be subject to criminal background investigations should the state join a multistate automated licensing system.
On February 25, the California Attorney General announced a legislative proposal that would amend several aspects of the California Consumer Privacy Act (CCPA). The CCPA was originally enacted in June 2018 (covered by a Buckley Special Alert) and subsequently amended in September 2018 (covered by InfoBytes here). The CCPA, which carries an effective date of January 1, 2020, on most provisions, sets forth various requirements for businesses that collect, transfer, or sell a consumer’s personal information. Under SB 561, which was introduced on February 22, the law would be amended to (i) expand the right of California citizens to bring private legal actions, removing aspects of the law that provided exclusivity to the AG; (ii) remove provisions that would allow companies to request guidance from the California AG on how to comply with the law, instead allowing the AG to publish general guidance; and (iii) would allow enforcement actions to be brought immediately, removing the 30-day cure window.
On February 26, the U.S. Court of Appeals for the 9th Circuit affirmed a former general counsel’s whistleblower retaliation claim, under California public policy, against a biopharmaceutical manufacturer and its CEO but vacated the jury’s Sarbanes-Oxley Act (SOX) and Dodd-Frank Act verdicts. According to the opinion, the general counsel sued the company and the CEO claiming whistleblower retaliation under SOX, the Dodd-Frank Act, and California wrongful termination case law, claiming the company fired him after he alleged the company may have violated the FCPA in China. The jury awarded the general counsel $11 million, including $2.96 million in lost wages, which was doubled under the Dodd-Frank Act’s whistleblower provision, and $5 million in punitive damages. The company appealed the verdict arguing the district court erred in the instructions to the jury when it stated that statutory provisions of the FCPA constitute “rules or regulations of the SEC for purposes of whether [the general counsel] engaged in protected activity under SOX.”
On appeal, the 9th Circuit concluded the district court’s instructional error was not harmless as to the SOX claim, finding that the statutory provisions of the FCPA are not “rules or regulations of the SEC under SOX” as instructed to the jury. While the error was not harmless, the appellate court rejected entering judgment in favor of the company and instead, remanded the case back for proper instruction. Additionally, the appellate court vacated the district court’s instructions for the jury to enter judgment in favor of the Dodd-Frank Act claim, citing to the Supreme Court decision in Digital Realty Trust Inc. v. Somers. The appellate court concluded that the whistleblower provision of the act does not apply to purely internal reports and entered judgment in favor of the company. As for the California public policy claim, the appellate court determined that the incorrect SOX jury instructions were harmless because his California claim did not depend on SOX and the jury “necessarily would have reached the same verdict under proper instruction.” The affirmation of the California claim and associated damages left the general counsel with an award of nearly $8 million.
- Heidi M. Bauer and Dan Ladd to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Tim Lange to discuss "Update from 2019 NMLS Conference" at the California Mortgage Bankers Association Mortgage Quality & Compliance Committee webinar
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Jon David D. Langlois to discuss "Transaction management-issues surrounding purchase & sale agreements, post acquisition integration & trailing docs" at the Investment Management Network Residential Mortgage Servicing Rights Forum
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Daniel P. Stipano to discuss "The state of the BSA 2019: What’s working, what’s not, and how to improve it" at the West Coast Anti Money-Laundering Forum
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program