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On January 12, the U.S. Court of Appeals for the Ninth Circuit reversed the certification of a forty-four state class of consumers, finding that California’s consumer protection laws could not be applied to a nationwide class, and that even a California-only class failed the rigorous analysis required for certification recently affirmed in the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). Mazza v. American Honda Motor Co., Inc., No. 09-55376, 2012 WL 89176 (9th Cir. January 12, 2012).
In Mazza, plaintiffs sued a California vehicle manufacturer for violations of California’s unfair competition and false advertising laws as well as unjust enrichment, alleging that the manufacturer misrepresented and concealed material information in its marketing of vehicles equipped with a collision safety system. The court found that under California’s choice of law rules, each state had an interest in the application of its own laws to the claims of those putative class members who purchased or leased vehicles in those states. Further, material differences among the forty-four states’ laws required that each state’s law must be applied to the transactions that occurred in-state. The court noted that each state has an interest in determining the level of liability faced by companies operating in-state, such that “[m]aximizing consumer and business welfare, and achieving the correct balance for society, does not inexorably favor greater consumer protection; instead, setting a baseline of corporate liability for consumer harm requires balancing the competing interests” in each state. Accordingly, the class could not be maintained under Federal Rule of Civil Procedure 23(b)(3) because the material variations in the laws of the multiple states “overwhelm common issues and preclude predominance for a single nationwide class.” The court also held that even a California-only class failed the predominance requirement of Rule 23(b)(3) because class members could not be presumed to have relied on the manufacturer’s “very limited” advertisements of the collision safety system. According to the court, unlike the sort of “extensive and long-term” fraudulent advertising campaign that could justify a presumption of reliance by members of the class, the manufacturer’s campaign was neither temporally expansive nor affirmatively dishonest. Thus, the individual factual issues regarding whether each class member had actually seen the advertising prior to purchasing or leasing the vehicle precluded class certification.
WEBINAR: An Insider's View of Dealing with State Attorneys General - Insights for Financial Services Firms
Please Join Us for STAGE Network's First Webinar of 2012: An Insider's View of Dealing with State Attorneys General - Insights for Financial Services Firms
Special Guest: Hon. Patrick C. Lynch, former Rhode Island Attorney General and former President of the National Association of Attorneys General.
This webinar will feature a discussion, led by Mr. Lynch, on how to proactively interact with State Attorney General offices to build relationships and open up effective channels of communication.
It will also include practical advice on responding to Civil Investigative Demands. This discussion will be led by Benjamin Klubes of BuckleySandler LLP and Raymond Banoun of Cadwalader, Wickersham & Taft LLP, both of whom have extensive experience dealing with state and federal law enforcement and regulatory agencies on behalf of clients.
When: January 18, 2012 at 2:30 ET
Click here to view the full announcement and agenda.
On January 12, the Department of Justice Office of Legal Counsel, which is responsible for providing legal advice to the President, released the memorandum it prepared in advance of the President’s recent decision to appoint Richard Cordray as CFPB Director. In short, the memorandum finds when the Senate is in a periodic pro forma session in which no business is to be conducted, the President may (i) conclude that the Senate is unavailable to perform its advise-and-consent function and (ii) exercise his power to make recess appointments. Pro forma sessions do not have the legal effect of interrupting an intrasession recess otherwise long enough to qualify as a "Recess of the Senate” under the Constitution. The conclusions are based on three considerations explored in detail in the memorandum: (i) the original understanding of the framers and the “longstanding views” of the executive and legislative branches with regard to the practical availability of the Senate to consider nominees, (ii) the inconsistent result of allowing pro forma sessions to prevent Presidential recess appointments given the purpose of the recess appointment clause and historical practice in similar situations, and (iii) the need to preserve constitutional separation of powers.
On January 11, Fannie Mae published Service Guide Announcement SVC-2012-2, which updates limits for certain foreclosure-related fees. Effective January 1, 2012, Fannie Mae increased the maximum allowable fees for certain pre-foreclosure mediation services performed on loans secured by properties in Florida. Fannie Mae also announced an increase in 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 Hawaii, Iowa, Kentucky, Louisiana, New Mexico, North Dakota, Oklahoma, South Dakota, and Wisconsin. While most of these increased allowable attorney fees are effective for loans referred to an attorney on or after January 1, 2012, the Hawaii fee changes apply to loans referred on or after May 1, 2011.
On January 11, Fannie Mae issued Lender Letter LL-2012-1, reminding servicers to continue to refer borrowers to the Homeowner’s HOPE Hotline, and noting that Fannie Mae now will pay counseling fees directly. For cases initiated prior to January 1, 2012, servicers must invoice counseling fees no later than March 31, 2012 and must submit requests for reimbursement of invoiced fees no later than April 30, 2012.
On January 13, the U.S. Department of Housing and Urban Development (HUD) published a proposed rule to eliminate the process by which interested parties may appeal the maximum allowable loan limit for a geographic area. Noting the modern availability of sales-transaction data at the county level, HUD states that there is no longer a need to allow requests for alternative limits. Further, the appeals disrupt HUD’s overall loan limit determination process, and, by eliminating appeals, HUD will be able to release annual loan limits earlier, thereby providing more certainty to the market. HUD also noted that, because of the availability of transaction data, it received zero requests for appeal of the 2011 loan limits.
On January 5, the FTC announced that Upromise had agreed to settle charges that its collection of consumers’ personal information was deceptive and an unfair practice, and that the collection violated federal law. Upromise’s website offered consumers a “TurboSaver Toolbar” download with a “Personalized Offers” feature to tailor savings opportunities to the consumer. The FTC alleged that the feature collected and transmitted, without encryption, the names of websites consumers visited, which links they clicked on, and information entered into webpages such as search terms, user names, and passwords. According to the FTC, the information collected also included credit card and financial account numbers, security codes and expiration dates, and Social Security numbers. Upromise’s privacy statement, however, stated that (i) the toolbar would only infrequently and inadvertently collect personal identifying information, (ii) personal information would be removed before the data was transmitted, and (iii) Upromise automatically encrypts users’ sensitive information. The proposed settlement requires in part that Upromise (i) destroy data collected, (ii) update its disclosures, (iii) notify consumers regarding the type of information collected and how to disable the toolbar, and (iv) obtain a biennial independent audit for the next twenty years. The proposed settlement is open for public comment through February 6.
On January 5, the U.S. District Court for the District of Rhode Island judge responsible for handling “hundreds” of cases related to mortgage servicing and foreclosure practices appointed Merrill Sherman as special master to assist with resolution of the backlog of pending cases. In re Mortgage Foreclosure Cases, Misc. No. 11-mc-88-M-LDA (D.R.I. Jan. 5, 2012). Under the order, Ms. Sherman, formerly the President and CEO of Bancorp Rhode Island, Inc., has authority to, among other things, (i) order parties to meet and engage in settlement negotiations, (ii) order production of information to facilitate negotiations, and (iii) establish certain other procedural mechanisms to support discussions. The special master also may, among other things, make recommendations for court action to facilitate settlement or better manage the litigation.
On January 11, the CFPB took its first action to implement its nonbank supervision program by releasing the procedures it will use in examining all bank and nonbank mortgage originators. The Mortgage Origination Examination Procedures describe the types of information examiners will collect to (i) evaluate policies and procedures, (ii) assess compliance with applicable consumer financial services law, and (iii) identify risks to consumers throughout the mortgage origination process. CFPB mortgage origination exams will focus on specific products and will cover one or more of the following modules: (i) company business model; (ii) advertising and marketing; (iii) loan disclosures and terms; (iv) underwriting, appraisals, and originator compensation; (v) closing; (vi) fair lending; and (vii) privacy. These newly released procedures are an extension of the Supervision and Examination Manual the CFPB released in October 2011 (see BuckleySandler Special Alert, October 17, 2011).
On January 10, the U.S. Supreme Court ruled (8-1) that the Credit Repair Organizations Act (CROA) does not override the Federal Arbitration Act’s (FAA) broad requirement that arbitration agreements be enforced according to their terms. CompuCredit Corp. v. Greenwood, No. 10-948, 2012 WL 43514 (Jan. 10, 2012). This case involves a proposed class of consumers alleging CompuCredit violated the CROA when it marketed and provided a no-deposit credit card to consumers with poor credit and then charged fees against the credit limit. CompuCredit sought to compel arbitration to enforce the terms of the card agreement, which mandated individual arbitration of disputes. The district court and Ninth Circuit both sided with the proposed class, finding the arbitration clause in conflict with the CROA’s “right to sue” provision and therefore void. On appeal, the consumer respondents urged the Supreme Court to follow the Ninth Circuit and hold that because the CROA requires a disclosure that a consumer has the right to sue a violating credit repair organization, and because the CROA prohibits waiver of any right given under the CROA, the right to file suit cannot be waived by an arbitration agreement. The Supreme Court rejected the Ninth Circuit’s line of reasoning and reversed, holding instead that (i) the FAA establishes a liberal policy requiring enforcement of arbitration agreements according to their terms, (ii) the CROA is silent on arbitration and its disclosure provisions do not create a right to sue that overrides the broad FAA mandate, and (iii) Congress could have specifically prohibited arbitration provisions in the CROA.
- 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
- Tim Lange to discuss "Ease your pain at the state level: Recommendations for navigating the licensing issues in the states" at the Online Lenders Alliance Compliance University
- Amanda R. Lawrence, Aaron C. Mahler, and Jonice Gray Tucker to discuss "Expanded role for the FTC ahead: Implications for bank and nonbank financial institutions" at an American Bar Association Banking Law Committee Webinar
- Buckley Webcast: Flirting with alternatives — Opportunities and challenges created by alternative data, modeling, and technology
- Daniel P. Stipano to discuss "Reporting requirements for credit unions: CTRs and SARs" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Daniel P. Stipano and Moorari K. Shah to discuss "Vendor management: What is the NCUA looking for?" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Summer Regulatory Compliance School
- Warren W. Traiger to discuss "CRA modernization" at the National Association of Industrial Bankers and the Utah Association of Financial Services Annual Convention
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Hank Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates and Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- 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 "Risk management in enforcement actions: Managing risk or micromanaging it" at the American Bar Association Business Law Section Annual Meeting
- Daniel P. Stipano to discuss "Navigating the conflicting federal and state laws for doing business with cannabis companies" at the American Bar Association Business Law Section Annual Meeting
- Tim Lange to discuss "Services and value" at the North American Collection Agency Regulatory Association Annual Conference
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference