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District Court: Debt collector did not buy right to arbitrate with credit card account
On March 22, the U.S. District Court for the Eastern District of Pennsylvania ruled that a debt collector (defendant) who purchased a consumer’s credit card account failed to establish that the sale of the account included the sale of the right to arbitrate disputes relating to the account. According to the ruling, a bank sold a consumer’s credit card account to the defendant after the plaintiff defaulted on his payments. The agreement between the consumer and the bank included a mandatory arbitration clause, as well as a class action waiver. When the defendant sent a collection letter to the plaintiff, the plaintiff filed a lawsuit alleging the letter violated the FDCPA because, among other things, it included ambiguous language regarding discount payment options. The defendant moved to compel arbitration. The court denied the defendant’s motion, stating that the sale of the accounts does not axiomatically include the right to arbitrate disputes relating to them, and that the defendant had not provided adequate documentation to support the conclusion that it did in this case. The court found that “subject to further argument and possible evidence clarifying possible ambiguity in the use of the term ‘account’ in the assignment,” the court would not presume that the sale of the accounts included the bank’s rights to compel arbitration.
Three states amend appraisal management company requirements and definitions
On March 25, the Colorado governor signed SB 46, which amends the definition of an appraisal management companies (AMC) in sections of the Colorado Revised Statutes to align with the definition in federal law. The act, with the exception of section 3, takes effect immediately.
On March 19, the Arkansas governor signed SB 393, which amends the registration requirements for AMCs. Under the act, appraisers must hold a license in good standing in the state. Additionally, AMCs are required to (i) implement systems to verify independent appraisals; (ii) establish processes and controls to ensure engaged appraisers are qualified and independent of the transaction; and (iii) conduct appraisal management services in accordance with specified federal regulations in existence on January 1, 2019. The act takes effect 90 days after adjournment of the legislature.
Finally, on March 14, the North Dakota governor signed SB 2075, which amends the state’s code related to AMCs. The amendments clarify that “an individual who has had an appraiser license or certification in this state or in any other state refused, denied, canceled, revoked, or surrendered” may not own an AMC. The restriction also applies to entities owned by such individuals. The act takes effect on August 1.
District Court partially grants summary judgment in favor of CFPB in debt collection action
On March 21, the U.S. District Court for the Northern District of Georgia partially granted the CFPB’s motion for summary judgment against a New York-based company and three individuals for allegedly violating the CFPA and the FDCPA in a debt collection operation, but denied the motion for the remaining defendants—a Georgia-based company and one individual—determining there was a genuine issue of material fact. As previously covered by InfoBytes, in March 2015, the CFPB filed a lawsuit against participants in the debt collection operation, alleging that the participants attempted to collect debt that consumers did not owe or that they were not authorized to collect. Further, the CFPB alleged that the participants used harassing and deceptive techniques, including placing robocalls through a telephone broadcast service provider to millions of consumers, stating that the consumers had engaged in check fraud and threatening them with legal action if they did not provide payment information. As a result, according to the CFPB’s allegations, the participants received millions of dollars in profits from the targeted consumers. The CFPB moved for summary judgment on all claims.
The court granted the motion on all claims against the New York-based company and three individuals, concluding that they committed multiple violations of the CFPA and the FDCPA through, among other things, the robocalls, false legal threats, and the processing of consumer payments. With respect to the CFPA claims against certain individuals, the court found that they provided “substantial assistance” to the other participants in the operation as they committed actions in violation of the CFPA, and therefore were liable themselves. With respect to the Georgia-based company and one individual, the court concluded that there was a genuine issue of material fact as to whether either qualified as a “debt collector” under the FDCPA and, therefore denied the CFPB’s motion as to those claims. Because there are remaining issues as to some of the participants’ liability, the court concluded that a ruling on damages would be premature.
Agencies issue joint statement on Midwest flood disaster relief
On March 25, the OCC, Federal Reserve Board, FDIC, NCUA, and the Conference of State Bank Supervisors (collectively, the “agencies”) issued a joint statement providing guidance to financial institutions impacted by flooding in the Midwest. In the statement, the agencies encourage lenders to work with borrowers in impacted communities and to consider, among other things (i) modifying existing loans based on the facts and circumstances; and (ii) requesting expedited approval to operate temporary bank facilities if faced with operational difficulties. The agencies ask institutions to contact their appropriate federal and/or state regulator if they experience disaster-related difficulties complying with publishing or regulatory reporting requirements. The agencies further note that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The statement also provides links to previously issued examiner guidance for institutions affected by major disasters.
Find continuing InfoBytes coverage on disaster relief here.
North Dakota expands personal identifying information law
On March 20, the North Dakota governor signed SB 2262, which, among other things, amends the state’s law covering the unauthorized use of personal identifying information (PII). Specifically, the bill expands the definition of PII to include, (i) an individual’s payment card information; (ii) an individual’s biometric data; and (iii) any other information that can be used to access a person's financial records. Under the bill, an individual is guilty of an offense if the individual “obtains or attempts to obtain, transfers, records, or uses or attempts to use” any PII of another individual, living or deceased, to obtain anything of value without consent of the other individual. The bill is effective August 1.
Virginia allows institutions to refuse transactions if elder exploitation is suspected
On March 18, the Virginia Governor signed HB 1987, which authorizes staff of financial institutions to refuse a transaction, delay a transaction, or refuse to disburse transaction funds if the staff member (i) has a good faith belief that the transaction may involve the financial exploitation of an aged or incapacitated adult; or (ii) files a report or has knowledge that a report has been filed with the responsible local authority that states in good faith that the transaction may involve financial exploitation of an aged or incapacitated adult. Unless authorized by a court, the bill allows the continued refusal for up to 30 days after the date the transaction was initially requested. The financial institution and its staff are immune from civil or criminal liability under the bill, absent gross negligence or willful misconduct. The bill is effective July 1.
Virginia requires money transmitters to be licensed through NMLS
On March 19, the Virginia governor signed HB 2690, which requires money transmitters to be licensed through the National Multistate Licensing System and Registry (NMLS). The bill also (i) amends the definition of a “member” subject to the law’s requirements to include a person who owns or controls ten percent (previously it was five) of a limited liability company; (ii) allows for reports and other filings to be submitted to the Commissioner through the NMLS; and (iii) changes the due date for the annual licensing fee from September 1 to December 31. Additionally, on March 21, the governor signed HB 2251, which repeals provisions of the state’s mortgage licensing law related to the issuance of transitional mortgage loan originator licenses and replaces them with provisions granting temporary authority to act as a mortgage loan originator. Both bills are effective July 1.
District Court approves relief order in Spokeo
On March 11, the U.S. District Court for the Central District of California approved a stipulation for prospective relief, settling a consumer FCRA action against a purported credit reporting agency (defendant) for alleged procedural violations. In 2016, the case went to the U.S. Supreme Court (covered by a Buckley Special Alert), which remanded the case so the 9th Circuit could fully consider whether the plaintiff had standing under Article III of the Constitution. The approved stipulation lasts three years and, among other things, requires the defendant to (i) post a “clear and appropriately-titled” link to its opt-out privacy form; (ii) create a step requiring that its customers affirmatively agree not to use its information to determine eligibility for a FCRA-related purpose; and (iii) state on all of its webpages that it is not a consumer reporting agency. The order also prohibits the defendant from publishing “any numerical estimates or predictions of consumer credit scores” unless its terms and conditions specify that the information may not be used for FCRA purposes.
9th Circuit: Plaintiffs failed to show harm in FCRA action
On March 25, the U.S. Court of Appeals for the 9th Circuit affirmed dismissal of five plaintiffs’ allegations against two credit reporting agencies, concluding the plaintiffs failed to show they suffered or will suffer concrete injury from alleged information inaccuracies. According to the opinion, the court reviewed five related cases of individual plaintiffs who alleged that the credit reporting agencies violated the FCRA and the California Consumer Credit Report Agencies Act (CCRAA), by not properly reflecting their Chapter 13 bankruptcy plans across their affected accounts after they requested that the information be updated. The lower court dismissed the action, holding that the information in their credit reports was not inaccurate under the FCRA. On appeal, the 9th Circuit, citing to U.S. Supreme Court’s 2016 ruling in Spokeo v. Robins (covered by a Buckley Special Alert), concluded that the plaintiffs failed to show how the alleged misstatements in their credit reports would affect any current or future financial transaction, stating “it is not obvious that they would, given that Plaintiffs’ bankruptcies themselves cause them to have lower credit scores with or without the alleged misstatements.” Because the plaintiffs failed to allege a concrete injury, the court affirmed the dismissal for lack of standing, but vacated the lower court’s dismissal with prejudice, noting that the information may indeed have been inaccurate and leaving the door open for the plaintiffs to refile the action.
FHA updates manual underwriting requirements for single-family mortgages
On March 14, the FHA announced updates to its manual underwriting requirements for single-family mortgages with credit scores under 620 and debt-to-income ratios greater than 43 percent. The updates to the Technology Open to Approved Lenders (TOTAL) Mortgage Scorecard will apply to mortgages with FHA case numbers assigned on or after March 18. This announcement reverses a decision made in August 2016 to remove a manual underwriting rule from the TOTAL Mortgage Scorecard, which the FHA claims has resulted in a “significant increase in higher-risk loans FHA endorses.” Lenders that submit higher-risk mortgages to the TOTAL Mortgage Scorecard through an automated underwriting system now may be informed that these mortgages must be manually underwritten. The FHA noted that “[t]he lender’s final underwriting review decision for those mortgages must be documented in accordance with existing FHA requirements for manually underwritten mortgages.”