Litigation & Enforcement Actions – Page 8 – Consumer Financial Services Watch

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?

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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.

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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.

A Guaranty Is Only As Good As The Person Who Signs It: Enforcing Commercial Lending Guaranties In Massachusetts

Mar 14 2016

By: Robert W. Sparkes, III and David A. Mawhinney

Guaranties are common practice in the commercial lending industry. Typically, the borrower is a small corporation, limited liability company, or similar entity that is thinly capitalized with few (likely encumbered) assets. Under these circumstances, the borrower’s promise to pay a debt is cold comfort to a commercial lender in the event of a default, where its only source of recovery is likely to be the collateral it holds. For this reason, commercial lenders often condition loans not only on a security interest in the borrower’s property, but also on a separate, individual guaranty agreement executed by a third party, usually the principals of the corporate borrower. Such guaranties provide another avenue through which commercial lenders may recover loan amounts and damages due to the borrower’s default.

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Federal Court of Appeals Holds That Fannie Mae and Freddie Mac Are Not Agents of the United States, But Open Questions Remain

Mar 14 2016

By: Amy Pritchard Williams, Roger L. Smerage

Affirming the dismissal of a qui tam lawsuit based on certifications made to the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the U.S. Court of Appeals for the Ninth Circuit recently held that neither entity is an officer, employee, or agent of the United States. Therefore, demands or requests for payment made to these entities are not claims under 31 U.S.C. § 3729(b)(2)(A)(i) of the False Claims Act. United States ex rel. Adams v. Aurora Loan Services, Inc., — F.3d —-, 2016 WL 697771 (9th Cir. Feb. 22, 2016).

Sixth Circuit Finds “Prior Express Consent” in Affirming Dismissal of TCPA Class Action against Healthcare Provider’s Debt Collector

Mar 10 2016

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

The Sixth Circuit (the “Court”) recently sided with a defendant-debt collector in a putative class action in which the plaintiffs claimed that the defendant’s calls to their cell phones violated the Telephone Consumer Protection Act (“TCPA”). In Baisden v. Credit Adjustments, Inc., the Court held that “prior express consent” can be “obtained and conveyed via intermediaries.” In reaching this conclusion, the Court applied binding guidance from the Federal Communications Commission (“FCC”) and followed the holding of the Eleventh Circuit in Mais v. Gulf Coast Collection Bureau, Inc.

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Catagory:Litigation & Enforcement Actions