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On April 26, the South Carolina governor signed HB 3180 to enact the South Carolina Servicemembers Civil Relief Act, which will “expand and supplement the rights, benefits, and protections of the federal Servicemembers Civil Relief Act (SCRA)” and provide that a violation of the SCRA is a violation of the state’s act. In particular, the Act expands federal SCRA’s definition of “military service” to include South Carolina guardsman who are on state active duty, subject to certain requirements. It also provides that a “dependent of a servicemember engaged in military service has the same rights and protections provided to a servicemember” under both the Act and the SCRA and expands contract termination rights for servicemembers receiving “military orders to relocate for a period of service of at least ninety days to a location that does not support the contract,” encompassing phone, internet, TV, and gym subscriptions. The Act took effect upon signature and is applicable to contracts executed on or after April 26.
On April 22, the Oklahoma governor signed HB 1387 to permit the state’s Administrator of Consumer Credit to enter into certain cooperative, coordinating, information-sharing agreements with other agencies in place of conducting a separate examination or investigation. According to the Act, the information-sharing agreements apply to any agency that has “supervisory or regulatory responsibility over any entity that has been or may be licensed by the Department of Consumer Credit or any organization affiliated with or representing one or more” such agency, as well as the Oklahoma State Banking Department. The Act is effective November 1.
On April 22, the U.S. Court of Appeals for the 8th Circuit affirmed a district court’s dismissal of a consumer’s FDCPA action. The plaintiff alleged that the credit collections bureau violated the FDCPA’s prohibition against false, misleading, or deceptive representations when it sent a collection letter that included, among other things, the words “PROFESSIONAL DEBT COLLECTORS” along with an acronym for the company, which the plaintiff claimed violated the FDCPA’s provision which states that a debt collection may not use “any business, company, or organization name other than the true name. . . .” The plaintiff further alleged that the defendant violated the FDCPA and Minnesota law by (i) representing that she could submit payments on-line or correspond with the company through a designated website; (ii) stating it may seek pre-judgment interest; and (iii) including the signature of an individual who was not licensed to engage in debt collection activities in the state. The district court dismissed the claims, concluding that the use of the aforementioned language was not false or misleading under the “unsophisticated consumer” standard, and that neither the signature nor the pre-judgment interest statement violated the FDCPA.
On appeal, the 8th Circuit affirmed the dismissal of the claims, holding that the collection letter did not violate the FDCPA, Minnesota law did not prohibit the defendant from seeking pre-judgment interest, and the Minnesota Supreme Court has yet to determine whether the law “allows for the recovery of pre-judgment interest in a case such as this.” Furthermore, the FDCPA “was not meant to convert every violation of a state debt collection law into a federal violation,” the appellate court wrote, and that even if one of the signatories was not licensed in the state to collect debt, the defendant was legally licensed and did not engage in unfair or unconscionable conduct under the statute.
Maryland approves bills on debt settlement services, mortgage lenders, and credit service businesses
On April 18, the Maryland Governor approved several bills concerning debt settlement service providers, mortgage lenders, and credit service businesses.
Under HB 59, registrants providing debt settlement services are required to apply for a license or renewal and obtain a valid unique identifier issued by the Nationwide Multistate Licensing System and Registry (NMLS) on or after July 1. HB 59 also requires the Office of the Commissioner of Financial Regulation (OCFR) to establish a time period of at least two months within which registrants must transfer licensing information to NMLS. Additionally, registration fees are decreased to $400 from $1,000 for the issuance or renewal of a registration.
HB 61 amends the Annotated Code of Maryland related to mortgage lenders, loan servicers, and loan originators to, among other things, (i) alter and clarify certain tangible net worth requirements and criteria for mortgage lenders, servicers, and originators; (ii) repeal a provision that requires licensees to reapply for a license should a location change request not be filed in a timely manner with the OCFR; (iii) extend examination cycle periods; and (iv) amend certain expiration provisions related to mortgage loan originator licensees. The amendments take effect October 1.
Finally, SB 68 amends the definition of a “credit service business” to mean, among other things, any person who represents the ability to provide advice or assistance to consumers concerning improving a consumer’s credit record, establishing a new credit file, or obtaining credit extensions. SB 68 also exempts certain credit services businesses from certain information statement requirements when engaged to obtain an extension of credit for a consumer. Credit services businesses that qualify for an exemption must provide the consumer with certain information concerning the right to file a complaint as well as a copy of the contract before the consumer executes the contract. SB 68 takes effect October 1.
On April 11, the Maryland Attorney General announced an administrative proceeding taken against a title company, its owner, and related businesses for allegedly making unlicensed and usurious title loans secured by consumers’ motor vehicles. According to the AG’s charges, the defendants, among other things, allegedly engaged in unfair or deceptive trade practices by offering consumers high-interest, short-term title loans with typical annual interest rates of 360 percent. The AG contends that the loans offered by the defendants qualify as consumer loans under Maryland law and therefore are subject to state interest rate caps. Furthermore, the AG alleges that the defendants were never licensed by the Maryland Commissioner of Financial Regulation to make consumer loans in the state. The AG seeks an order compelling the defendants “to permanently cease and desist from making unlicensed and usurious consumer loans in Maryland, to pay restitution to all affected consumers, and to pay civil penalties.”
On April 16, the Arkansas governor signed HB 1944, which defines blockchain technology under the state’s Uniform Electronic Transactions Act (UETA). Under the act, “blockchain technology” is defined as “a shared, immutable ledger that facilitates the process of recording one or more transactions and tracking one or more tangible or intangible assets in a business network.” The act also provides definitions for “blockchain distributed ledger technology” and “smart contract” under the UETA. The act takes effect 90 days after adjournment of the legislature.
On April 18, the Oklahoma governor signed SB 720 to create the Oklahoma Small Lenders Act (the Act) and establish a framework to license and regulate small loan lenders in the state through the Department of Consumer Credit (ODCC). Beginning on January 1, 2020, any licensee under the Deferred Deposit Lending Act (DDLA) may begin an application under the Act and all licenses under the DDLA will be terminated and deemed expired on August 1, 2020. As of August 1, 2020, no lender may make a small loan covered by the Act unless they are properly licensed; and “small loan” is defined as an unsecured loan with a period between 60 days and 12 months that is fully amortized and payable in substantially equal periodic payments and contains no prepayment penalty. A licensee may only charge a maximum of 17 percent as a periodic interest rate, and the maximum aggregated principal loan amount of all small loans outstanding per customer is $1,500. Additionally, the Act outlines requirements for licensure, default procedures, reporting requirements, and penalties for violations.
On April 22, the Arizona governor signed HB 2674, a bill defining the term “guaranteed asset protection waivers” (GAP waivers) and clarifying that GAP waivers are not insurance and are thus exempt from the state’s insurance laws. The Act is effective 90 days after the state’s legislative session adjourns sine die.
On April 12, the Appellate Court of Illinois published an opinion affirming the dismissal of a consumer’s counterclaims against a lender in a lawsuit seeking to collect the consumer’s alleged debt from a store credit card. According to the opinion, in January 2017, the lender filed a small claims action seeking to collect credit card debt on which the consumer allegedly defaulted in July 2012. The consumer filed a putative class action counterclaim against the lender alleging, among other things, that the lender’s collection action violated the FDCPA and various Illinois laws because it was time-barred under the four-year statute of limitations period provided to enforce a sale of goods under Section 2-725 of the UCC. The lender moved to dismiss the counterclaims, alleging that its complaint was timely filed within the five-year statute of limitations period applicable to credit card agreements under Section 13-205 of the Illinois Code of Civil Procedure. The lower court granted the lender’s motion to dismiss, holding that the credit card agreement was governed by the five-year statute of limitations applicable to credit card agreements under Section 13-205 of the Illinois Code of Civil Procedure, rather than the four-year statute of limitations under the UCC’s sale of goods provisions. On appeal, the appellate court affirmed the lower court’s decision, rejecting the consumer’s argument that the UCC should apply to the agreement because the consumer could only use the credit card to purchase goods at a single retailer. Specifically, the appellate court held that the type of credit card was immaterial to the analysis and that Section 13-205 of the Illinois Code of Civil Procedure clearly controlled in this case because a tripartite relationship existed among the bank, the cardholder, and the merchant, and the payments made by the bank to the merchant pursuant to the cardholder agreement constituted a loan to the cardholder. As a result, the lender’s complaint was timely filed.
On April 16, the Maryland Attorney General announced a settlement with a reverse mortgage servicer for allegedly charging homeowners illegal inspection fees. According to the Attorney General, from 2010 through 2016, the servicer passed the cost of inspecting properties in default on to homeowners, which Maryland law does not allow. In 2013, the Maryland Commissioner of Financial Regulation put the servicer on notice that it was charging prohibited inspection fees, but the servicer did not cease the activity until January 1, 2017. The servicer has since refunded or reversed nearly $44,000 in property inspection fees charged to consumers. The settlement agreement requires the servicer to (i) refund inspection fees that have not yet been refunded; (ii) provide notice to any sub-servicer that the inspection fees should be refunded or not collected; (iii) pay $5,000 to the state for costs associated with the investigation; and (iv) pay $50,000 in civil money penalties.
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: The CFPB’s proposed debt collection rule
- Buckley Webcast: Trends in e-discovery technology and case law
- Brandy A. Hood to discuss "What the flood? Don’t get washed away by a flood of changes" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Mitigating the risks of banking high risk customers" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano, Kari K. Hall, Brandy A. Hood, and H Joshua Kotin to discuss "Regulations that matter in a deregulatory environment" at the American Bankers Association Regulatory Compliance Conference Power Hour
- Buckley Webcast: Data breach litigation and biometric legislation
- 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 "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium