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Fourth Circuit Suggests Borrower Must Plead Tender in TILA Rescission Case
On December 10, the U.S. Court of Appeals for the Fourth Circuit affirmed in an unpublished per curiam opinion the dismissal of a TILA rescission claim because of the borrower’s failure to allege tender of the net loan proceeds. Miranda v. Wells Fargo Bank, N.A., No. 12-1054, 2012 WL 6098229 (4th Cir. December 10, 2012). BuckleySandler filed an amicus brief on behalf of three industry trade groups in Miranda. Although unpublished, the decision marks the first time that the Fourth Circuit has suggested that tender must be plead in a complaint seeking TILA-based rescission. In addition, the decision conflicts with a recent decision from the Tenth Circuit holding that borrowers need not plead ability to tender the loan proceeds. See, Sanders v. Mountain Am. Fed. Credit Union, 689 F.3d 1138, 1144-45 (10th Cir. 2012).
Fannie Mae and Freddie Mac Announce Next Phase of ULDD
On December 13, Fannie Mae and Freddie Mac published the Phase 2 Specification for the Uniform Loan Delivery Dataset (ULDD), the common set of data elements required by Fannie Mae and Freddie Mac for single-family loan deliveries as part of the Uniform Mortgage Data Program, an initiative announced in May 2010 to improve appraisal quality and other loan information. The Phase 2 ULDD specification contains a total of 19 joint data points, of which 15 of which were optional for both Fannie Mae and Freddie Mac as part of the Phase 1 ULDD specification, one data point that was conditionally required for Freddie Mac and optional for Fannie Mae, and three new data points. Lenders must begin collecting the Phase 2 data points for all loans with application received dates on or after March 1, 2014, for loans delivered on or after August 25, 2014.
CFPB Provides Additional Details about Certain Information-Sharing Activities
On December 11, the CFPB announced plans to share consumer complaint data with state regulatory agencies. The CFPB explained that it is providing “real-time access” to its database of consumer complaints in a manner that will protect any personally-identifiable information. Further, the CFPB plans in the future to accept such information from state agencies, and to make data available to other federal agencies, state attorneys general, local agencies, congressional offices, and other governmental organizations like the California mortgage settlement monitor and the national mortgage settlement monitor. This announcement follows a December 6, 2012 Statement of Intent issued by the CFPB in which it describes how it is coordinating broader information-sharing efforts with state banking and financial services regulators, including with regard to enforcement matters.
CSBS Joins with Federal Authorities to Combat Corporate Account Takeover
On December 7, the Conference of State Bank Supervisors announced a joint effort with the U.S. Secret Service (Secret Service) and the Financial Services-Information Sharing and Analysis Center (FS-ISAC) to assist financial institutions in adopting best practices to reduce the risks of corporate account takeover, a form of identity theft where cyber criminals gain control of a business’ bank account by stealing credentials and then initiate fraudulent wire and ACH transactions. The recommended practices were developed by a task force formed by the Texas Banking Commissioner and the Secret Service. Using in part the contributions from leading data security and audit firms that serve the community banking industry, the practices expand upon the “Protect, Detect, and Respond” framework developed by the Secret Service, the FBI, the Internet Crime Complaint Center, and FS-ISAC.
Tenth Circuit Enforces Electronic Agreement Entered Into on an Installation Technician's Laptop
On December 11, the U.S. Court of Appeals for the Tenth Circuit affirmed dismissal of plaintiffs’ claims concerning AT&T’s U-Verse services, based on forum selection and arbitration clauses in the agreements between the parties. Hancock v. Am. Tel. & Tel. Co., Inc., 11-6233, 2012 WL 6132070 (10th Cir. Dec. 11, 2012). In support of the motion to dismiss, AT&T offered declarations from its employees concerning its standard practices for entering into agreements with customers obtaining U-Verse services. Under those practices, customers purchasing U-Verse TV and Voice services agreed to terms of service (TV Terms) that included a forum selection clause. The TV Terms were provided to customers in writing by the installation technician at the time the services were installed. The customers agreed to the TV Terms by clicking on an acknowledgement and acceptance box on the technician’s laptop after being given the printed terms – the acknowledgement and acceptance stated that the customer had received and reviewed the TV Terms. Details of each acceptance were captured and stored on AT&T’s servers at the time of acceptance. Also under AT&T’s standard practices, customers purchasing U-Verse Internet Services agreed to separate terms of service (Internet Terms) during the online registration process – to complete registration, customers had to click on an “I Agree” button underneath the Internet Terms. For two of the plaintiffs, the Internet Terms included a mandatory arbitration clause at the time of registration. For another plaintiff, the mandatory arbitration clause was added after a notice of amendment, describing the new arbitration clause, was provided to the plaintiff via email. On appeal, the court held that the declarations concerning AT&T’s standard practices were admissible in evidence, and since they were not contradicted by the plaintiffs’ affidavits, the district court did not abuse its discretion by accepting the declarations as true. The court went on to hold that under AT&T’s standard practices both the TV Terms and the Internet Terms were clearly presented, and that enforceable contracts were formed between the plaintiffs and AT&T. The court also concluded that the e-mail notification process used to add the arbitration clause to the Internet Terms was sufficient to make the amendment effective.
Congress Acts on Several Banking Bills, Two Set for President's Signature
On December 11, the U.S. Senate passed by voice vote two bills impacting bank supervision and compliance. The first, H.R.4014, amends the Federal Deposit Insurance Act to protect information submitted to the CFPB as part of its supervisory process. The bill provides CFPB-supervised institutions the same non-waiver of privilege protections already afforded to information submitted by supervised entities to federal, state, and foreign banking regulators. For more information about these issues, please see our recent Special Alert. The second bill, H.R. 4367, amends the Electronic Fund Transfer Act to remove the requirement that ATMs have an attached placard disclosing fees. The amended law will require only that fees be disclosed on the ATM screen. Both bills previously were passed by the U.S. House of Representatives and now go to the President. On December 12, the House passed H.R. 5817, which would exempt from Gramm-Leach-Bliley Act (GLBA) annual privacy policy notice requirements any financial institution that (i) provides nonpublic personal information only in accordance with specified requirements, and (ii) has not changed its policies and practices with regard to disclosing nonpublic personal information from those included in its most recent disclosure. The bill now proceeds to the Senate. A fourth bill, S. 3637, which would extend the Transaction Account Guarantee program for two additional years, was blocked in the Senate on December 13, 2012. The program, which was established by the Dodd-Frank Act to provide unlimited deposit insurance for noninterest-bearing transaction accounts, will expire at the end of 2012 if legislators do not take further action to extend the program.
FTC Report Urges Mobile Application Developers to Improve Disclosures, Announces Multiple COPPA Investigations
On December 10, the FTC issued a staff report on the privacy disclosures and practices of mobile applications offered for children in certain online application stores. The report provides the results of an FTC survey of the disclosures and links on the promotion page in the application store, on the application developer’s website, and within the application, for hundreds of applications for children. According to the report, most mobile applications failed to give parents any information needed to determine what data is being collected from their children, how it is being shared, and with whom it is being shared. Further, the FTC states that many applications shared certain information with third parties without disclosing that fact to parents, and a number of applications contained interactive features – such as advertising, the ability to make in-application purchases, and links to social media – without disclosing these features to parents prior to download. The report also states that FTC staff is launching multiple nonpublic investigations of certain entities that may have violated the Children’s Online Privacy Protection Act (COPPA) or engaged in unfair or deceptive trade practices in violation of the FTC Act, and the FTC “strongly urges” the mobile application industry to develop and implement best practices to protect privacy, including those recommended in an FTC privacy report issued earlier this year. In a related development, on December 11, the Center for Digital Democracy filed a complaint with the FTC seeking an investigation of one firm for allegedly offering and operating a mobile application in violation of COPPA.
Fannie Mae Updates Maximum Allowable Attorney Fees, Provides Standard Short Sale FAQs
On December 13, Fannie Mae issued Servicing Guide Announcement SVC-2012-26 to update the maximum allowable foreclosure attorney fees for mortgage loans, participation pool mortgage loans, and MBS mortgage loans serviced under the special servicing option secured by properties located in Idaho, Montana, New Hampshire, Puerto Rico, U.S. Virgin Islands, and Wyoming. All listed fee revisions are effective as of January 1, 2013. Concurrently, Fannie Mae issued Frequently Asked Questions regarding its standard short sale and deed-in-lieu of foreclosure requirements, which were announced last month in SVC-2012-19.
State Law Update: New Jersey Creates Summary Foreclosure Process for Vacant and Abandoned Properties
On December 3, New Jersey Governor Chris Christie signed SB 2156, which authorizes lenders to bring summary actions to foreclose mortgages on vacant and abandoned residential properties, and grants state courts the authority to enter a final residential mortgage foreclosure judgment if it finds, by clear and convincing evidence, that the residential property is “vacant and abandoned.” Vacant and abandoned means: (i) the property is not occupied by a mortgagor or by a tenant who entered into a lease agreement before the mortgagee served notice of intention to commence foreclosure, and (ii) there exist at least two of 15 enumerated conditions that indicate vacancy and abandonment. If the court makes a finding in the foreclosure judgment that the property is vacant and abandoned, the sheriff will be required to sell the property within 60 days of the sheriff’s receipt of any writ of execution issued by the court. The law took effect immediately, but does not become operative until April 1, 2013.
Third Circuit Shields Property Reporting Firm from FCRA Liability
On December 6, the U.S. Court of Appeals for the Third Circuit held that a property reporting firm cannot be held liable for a willful violation of FCRA because the firm’s interpretation that it was not a consumer reporting agency subject to FCRA requirements was not unreasonable. Fuges v. Southwest Fin. Servs., Ltd., No 11-4504, 2012 WL 6051966 (3rd Cir. Dec. 6, 2012). The borrower filed a putative class action against a property reporting firm, alleging that the firm failed to comply with FCRA when it prepared a report requested by a bank in connection with the borrower’s credit application. On the reporting firm’s motion for summary judgment, the district court explained that the property report contained information about deeds, mortgages, parcel number and taxes, and lien information that more closely relate to a particular parcel of property than to a particular consumer, and that the report did not contain a social security number, payment history, previous addresses, or other information typically included in consumer credit reports. It held that no jury could find that the firm acted willfully because the firm’s reading of FCRA as not being applicable to property-reporting activities was not unreasonable, and granted summary judgment in favor of the firm. The appellate court agreed, holding that (i) the statute’s terms are ambiguous, (ii) the firm’s reading of the those terms has some foundation in the statutory text, and was therefore not objectively unreasonable, and (iii) there is no judicial or agency guidance that would suggest that the firm’s reading is contrary to the intended meaning of the provisions in question, and therefore the firm did not run a substantial risk in adopting its interpretation. Further, the court rejected the borrower’s argument that the reporting firm should lose the potential protection of the “reasonable interpretation” defense, because it never actually interpreted FCRA prior to the commencement of the suit. The court affirmed summary judgment in favor of the reporting firm.