2016 – Page 6 – Consumer Financial Services Watch

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

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.

To read the full alert, click here.

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.

The Supreme Court Charts a Narrow Course in the Use of Statistical Evidence at Class Certification

Mar 30 2016

By April Boyer, Andrew C. Glass, Gregory N. Blase, Yamilet Hurtado and Eric W. Lee

The United States Supreme Court recently ruled in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, — S. Ct. —, 2016 WL 1092414 (U.S. Mar. 22, 2016), as to when a plaintiff may use statistical sampling in seeking to certify a class. The decision was narrowly tailored to the specific facts and cause of action at issue in the matter. Thus, the Court declined to adopt a categorical rule, cautioning that the admissibility of such evidence must be made on a case-by-case basis. Nonetheless, business entities should carefully examine the Court’s guidance in Bouaphakeo, including the admonitions discussed herein.

To read the full alert, click here.

Heard at the 2016 SIFMA Conference

Mar 30 2016

By Stephen G. Topetzes, Jon Eisenberg, Stavroula E. Lambrakopoulos, Shanda N. Hastings, Erin Ardale Koeppel, Nicole A. Baker, Andrew Edwin Porter and Ted Kornobis

Recently, attorneys from K&L Gates’ Government Enforcement practice group attended the Securities Industry and Financial Markets Association’s (“SIFMA”) Compliance and Legal Society Annual Seminar. We wanted to share with you a summary of the highlights of what we “heard at the SIFMA conference” from various regulators about key enforcement issues.

To read the full alert, click here.

Divided Supreme Court Affirms Dismissal of “Spousal Guarantor” ECOA Discrimination Lawsuit

Mar 24 2016

By Andrew C. Glass, Roger L. Smerage and Olivia Kelman

On March 22, 2016, the United States Supreme Court issued its first 4-4 split decision since the passing of Justice Antonin Scalia. In Hawkins v. Community Bank of Raymore, No. 14-520 (U.S. Mar. 22, 2016), the Court reviewed whether the Federal Reserve Board (“FRB”) exceeded its authority when it amended Regulation B, implementing the Equal Credit Opportunity Act (“ECOA”), to cover loan “guarantors” as loan “applicants.” In a per curiam opinion, the Court affirmed the determination of the United States Court of Appeals for the Eighth Circuit that (1) the plain language of ECOA excludes loan guarantors from the definition of loan applicants authorized to bring an antidiscrimination suit under the statute, and thus (2) the FRB’s conflicting amendment was not entitled to deference to be afforded to regulations that interpret silent or ambiguous statutory provisions. Yet, the Court’s even split means that Hawkins will be binding precedent only in the Eighth Circuit and not nationwide.

PREPAID ACCESS GARNERS REGULATORY ATTENTION

Mar 24 2016

By: Sean P. Mahoney

Bank regulators are paying more attention to the role of banks in the prepaid card industry as evidenced by their new guidance on the applicability of know your customer requirements and proposed regulations on record-keeping with respect to master deposit accounts for prepaid cards and other products utilizing “pass-through” deposit insurance.

Increased Scrutiny On “Auto-Defaults”— Road To Enforcement Or Impetus For Change?

Mar 16 2016

By: David E. Fialkow and Hollee M. Watson

Private student loan companies are at the center of increased scrutiny by the Consumer Financial Protection Bureau (the “CFPB”). Speaking at a recent conference, the CFPB student loan ombudsman Seth Frotman warned attendees that student loan companies are at risk of violating the law for placing borrowers in default when the co-signer of the loan dies or declares bankruptcy. See Danielle Douglas-Gabriel, Federal agency warns student loan companies about automatic defaults, The Washington Post (Mar. 8, 2016). This “auto-default” practice occurs when banks and other financial companies provide student borrowers with education loans that grant lenders or servicers the right to trigger a default upon a co-signer’s death or declaration of bankruptcy, even if the loan is paid on time.

Archive:2016