April 2016 – Consumer Financial Services Watch

“A Bridge Too Far:” CFPB’s Authority Grab Rejected by Federal Judge

Apr 22 2016

Judge cautions new agency against “plow[ing] head long” beyond its jurisdiction

On April 21, 2016, the Consumer Financial Protection Bureau’s investigatory powers and civil investigative demand (“CID”) authority were soundly checked by federal district court judge Richard J. Leon. The Court denied the CFPB’s petition to enforce a CID issued to the Accrediting Council for Independent Colleges and Schools (“ACICS”) seeking information regarding accreditation of for-profit colleges, because the subject of the CID fell squarely outside of the CFPB’s enforcement authority. [1] Judge Leon’s ruling demonstrates that the right to judicial review can provide a backstop to an overly-aggressive and broad investigation.

Untangling the Webb of Arbitrability: The Fourth Circuit Holds That Courts Determine the Availability of Class-Wide Arbitration

Apr 18 2016

By Andrew C. Glass, Robert W. Sparkes III, Loly G. Tor and Eric W. Lee

Is the availability of class-wide arbitration a “gateway” question for courts, or are arbitrators charged with such a decision once a matter is compelled to them? In Dell Webb Communities, Inc. v. Carlson, the Fourth Circuit Court of Appeals followed the lead of the Third and Sixth Circuits and held that courts — not arbitrators — should ordinarily make the decision. The Fourth Circuit’s decision should be welcome news to corporate defendants seeking to enforce individual (“bilateral”) arbitration agreements while preserving the ability to obtain meaningful appellate review of a determination allowing class-wide arbitration.

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Buy One, Get One Free: Appellate Court Strikes Deal to Permit Defendant’s Second Attempt at Removing Class Action Beyond Initial Thirty-Day Removal Window

Apr 18 2016

By Ryan M. Tosi

Addressing an issue of first impression, the Sixth Circuit Court of Appeals in Graiser v. Visionworks of America, Inc., recently upheld a defendant’s second attempt at removing a class action to federal court under the Class Action Fairness Act (“CAFA”), long after the thirty-day removal deadline applicable to traditional diversity jurisdiction expired. The Grasier decision confirms that the defendant does not have a duty to perform any significant investigation of facts relevant to federal jurisdiction independent of the information received from the plaintiff, and that the thirty-day removal period set forth in 28 U.S.C. § 1446(b) applies only after the plaintiff’s pleadings or documents provide the defendant with a clear statement of the damages sought or with sufficient facts from which damages can be readily calculated. As such, a defendant may remove a case under CAFA even if the initial thirty-day removal window has closed where that defendant later receives a document from the plaintiff from which it could be first ascertained that the case was removable under CAFA, thereby providing the defendant with “a new window for removability.”

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D.C. Circuit Appears Poised to Overturn First CFPB Enforcement Action to Reach the Court: Five Key Takeaways From Yesterday’s Oral Argument

Apr 13 2016

By Jon Eisenberg and Irene C. Freidel

Yesterday, the U.S. Court of Appeals for the D.C. Circuit heard oral argument in the first CFPB enforcement case to reach the court. The court appears poised to reverse the CFPB’s decision and also to rule that the concentration of power in a single CFPB Director not subject to removal at will by the President violates the Constitution’s separation of powers. We discuss five key takeaways from the oral argument that are important not only to the parties in the case but potentially to others facing enforcement actions by the CFPB or other government agencies.

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Don’t Look a Gift Card in the Mouth: Beware of Liability Under the Electronic Fund Transfers Act

Apr 07 2016

By Robert W. Sparkes, III, Brian M. Forbes and Soyong Cho

Many of us have had a similar experience. We receive a gift card, put it in a “safe” place with other gift cards, and forget it exists. Inevitably, we uncover the gift card and find ourselves asking questions such as: Does this card still have any value? Has it expired? Can it expire? Will I be charged a fee for use (or non-use)? Should I call the 800 number? The experience invariably ends by putting the card aside and promising to deal with it later. But, what really does happen to the value of those cards?

To read the full alert, click here.

Class Action Settlements From Start To Finish

Apr 06 2016

Please join our seasoned Financial Institutions and Services Litigation attorneys for a webinar that will address the panoply of issues that can arise in connection with class action settlements. We will discuss the ins and outs of the following settlement issues and more:

Mortgage Lenders, Holders, and Servicers Beware: Massachusetts High Court Endorses Condominium Association’s Super Lien Practice

Apr 04 2016

By Sean R. Higgins, Morgan T. Nickerson and Joshua Butera

In a decision that should be read as a warning to mortgage industry participants doing business in the Commonwealth of Massachusetts, the state’s high court has validated a condominium associations’ so-called “rolling” priority lien practice, placing prior-recorded first mortgages at risk. In Drummer Boy Homes Association, Inc. v. Britton, SJC-11969 (Mass. Mar. 29, 2016), the Massachusetts Supreme Judicial Court (SJC) held that there is no limit to the number of priority liens available to condominium associations and/or community associations for unpaid common expenses, ignoring the rights of first mortgage holders. Prior to Drummer Boy, Massachusetts courts had largely held that condominium associations were limited to a single priority lien for six months of unpaid common expenses. The SJC broke with prior decisions and held that a condominium association can enforce multiple priority liens for successive six-month periods based upon language added to the Massachusetts Condominium Act, General Laws, Chapter 183A (“Chapter 183A”) in 1998. In short, following Drummer Boy, any prior-recorded first mortgages may become junior to unlimited condominium association liens for unpaid common expenses.

To read the full alert, click here.

A Careful Balancing Act: Second Circuit Requires Debt Collectors to Disclose When a Consumer’s Current Balance May Increase Due to Interest and Fees

Apr 01 2016

By Andrew C. Glass, Gregory N. Blase, Roger L. Smerage and Eric W. Lee

In Avila v. Riexinger & Associates, LLC, No. 15-1584, — F.3d —, 2016 WL 1104776 (2d Cir. Mar. 22, 2016), the Second Circuit Court of Appeals construed the scope of Section 1692e of the Fair Debt Collection Practices Act (“FDCPA”). Section 1692e prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” The Second Circuit held that when notifying consumers of their current account balance, Section 1692e requires debt collectors to disclose when the balance may increase due to interest and fees and identified certain safe harbor language discussed herein.

To read the full alert, click here.

Archive:April 2016