CFPB Proposes Simplified Card Agreement
The Consumer Financial Protection Bureau this week proposed a sample simplified credit card agreement template. CFPB's stated goal is to make credit card agreements short, clear, consumer-friendly, and consistent. The proposed template contains references to key terms, defined in a separate list. CFPB seeks public comment on the proposed template, and refers the public to its card agreement database for a comparison of current card agreements. CFPB is testing the proposed template with the Pentagon Federal Credit Union.
The proposed template credit card agreement is part of CFPB’s Know Before You Owe campaign, which has also included proposed reforms related to disclosures for mortgages and student loans.
Court Rejects Citi Settlement with S.E.C.
The U.S. district court for the Southern District of New York last week rejected a $285 million proposed settlement between the Securities & Exchange Commission and Citigroup Global Markets. The case involves a $1 billion mortgage debt deal that Citigroup sold in early 2007. The S.E.C. alleged that Citigroup’s marketing materials materially mislead investors by failing to disclose that Citigroup “exercised significant influence” over the selection of assets and retained short positions in the assets it helped to select.
In the proposed deal, the parties agreed to a consent judgment with no admissions of fact or liability, and included Citigroup’s payment of $285 million dollars to the S.E.C. The payment consisted of the return of the $160 million Citigroup profited from the 2007 deal, $30 million of interest, and a $95 million civil penalty. As part of the settlement, Citigroup also consented to injunctive relief enforced by the Court for the next three (3) years.
Continue Reading...CFPB Releases Its First Consumer Response Report
The Consumer Financial Protection Bureau this week released its first Consumer Response Report, detailing consumer complaints regarding credit cards over the first three months of the CFPB's system for Consumer Response.
The Report makes three observations related to the initial credit card complaint data:
- "Consumer Confusion: Many complaints show consumers struggling to understand the terms of credit cards and associated products like debt protection services. These complaints show a mismatch between consumer expectations and the way the product functions.
- Third-Party Fraud: The complaints show some alleged fraudulent credit card charges made by third parties. The CFPB has helped to obtain redress for defrauded consumers in these instances. In some cases, the Bureau has consulted with the appropriate criminal authorities.
- Factual Disputes: There are a large volume of complaints presenting factual disputes between consumer and issuer. The Bureau has generally found that issuers have been willing to resolve these complaints."
The CFPB also released its Proposed Policy Statement on the Disclosure of Certain Credit Card Complaint Data.
U.S. Supreme Court Admonishes Courts to Enforce Arbitration
In a pointed per curiam opinion, the United States Supreme Court recently reiterated that both state and federal courts must apply the "emphatic federal policy in favor of arbitral dispute resolution." State courts "have a prominent role to play as the enforcers of agreements to arbitrate."
In KPMG LLP v. Cocchi, the Court held that when a party moves to compel arbitration, "state and federal courts must examine with care the complaints seeking to invoke their jurisdiction in order to separate arbitrable from nonarbitrable claims. A court may not issue a blanket refusal to compel arbitration merely on the grounds that some of the claims could be resolved by the court without arbitration." In this respect, the FAA "leaves no place for the exercise of discretion.. ."
Continue Reading...Court of Appeal Rejects UCL Action Based on Alleged TISA Violation
In Rose v. Bank of America, N.A. (2nd App. Dist., No. B230859, Nov. 21, 2011), the California Court of Appeal held that California's Unfair Competition Law (Bus. & Prof. Code §§ 17200, et seq., “UCL”) cannot be used to redress violations of the federal Truth in Savings Act (12 U.S.C. §§ 4301, et seq., “TISA”). Although TISA originally included a “private attorney general” provision allowing private plaintiffs to sue banks for alleged TISA violations, a sunset clause repealed the private right of action in 2001.
The Rose plaintiffs alleged that Bank of America failed to properly notify them of increased fees on their deposit accounts, in violation of TISA. They brought a single cause of action under the UCL, alleging unlawful and unfair business practices arising out of the alleged TISA violations. The trial court sustained Bank of America’s demurrer to the complaint, holding that Congress intended to bar a TISA private action and that the UCL cannot be used to plead around an absolute bar to relief. Plaintiff appealed.
7th Circuit Weighs in on FCRA Preemption
The Seventh Circuit Court of Appeals issued an opinion this month upholding significant federal preemption under the Fair Credit Reporting Act. In Purcell v. Bank of America, the Court held that 15 U.S.C. 1681t(b)(1)(F) does not conflict with 15 U.S.C. 1681h(e) and therefore FCRA preempts all state law causes of action, whether based on statute or common law.
In Purcell, plaintiff filed a complaint in Indiana state court alleging that defendant Bank of America incorrectly reported that she was behind on loan payments. Defendant removed the case to federal court, then moved to dismiss. The district court held that plaintiff had no private right of action under 15 U.S.C. 1681s-2(a) and that plaintiff had not properly stated a cause of action under 15 U.S.C. 1681-2(b). Among other things, the district court rejected defendant's argument that 15 U.S.C. 1681t(b)(1)(F) preempts both statutory and common law claims arising out of credit reporting, and instead applied the statutory approach to FCRA preemption. Defendant appealed.
Continue Reading...OCC Dodd-Frank Preemption Rule is Final
The Office of the Comptroller of the Currency (OCC) recently issued a final rule regarding amendments to its regulations, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). With respect to the provisions affecting preemption and visitorial powers, the OCC concluded that Dodd-Frank does not create a stand-alone preemption standard but incorporates the Supreme Court’s Barnett Bank conflict preemption standard and the reasoning that supports it.
Earlier this Summer, the OCC issued a proposed rule that Dodd-Frank’s preemption provision be read to include “the whole of the conflict preemption analysis” in Barnett Bank. In response, the Department of the Treasury issued a comment letter, addressing concerns with the OCC’s interpretation of Dodd-Frank preemption.
Ninth Circuit Affirms FDCPA Summary Judgment
In McCollough v. Johnson, Rodenburg & Lauinger, LLC., No. 09-35767 (9th Cir. Mar. 4, 2011), plaintiff opened a credit card account around 1990 with Chemical Bank, which later merged with Chase. Plaintiff's account became delinquent and in 2000, Chase Manhattan charged off the $3,000 account balance and later sold the account to CACV of Colorado, Ltd. CACV filed a collection action in state court in 2005. Two weeks later, CACV dismissed the case after plaintiff pointed out that the statute of limitations had lapsed. In 2006 CACV 's parent company retained Johnson, Rodenburg & Lauinger (“JRL”), a debt collection law firm, to pursue collection of plaintiff’s debt.
JRL noticed a statute of limitations problem with plaintiff’s account and inquired to CACV, who responded that plaintiff had made a partial payment in 2004, which would extend the statute of limitations to 2009. This information was incorrect: the payment in 2004 was actually the return of court costs to CACV, and not a partial payment on the account. However, based on the incorrect information, JRL filed a collection complaint against plaintiff in state court in 2007. JRL subsequently dismissed the collection action with prejudice based on the statute of limitations.
Continue Reading...TCPA Summary Judgment Scope Defined
In Gutierrez v. Barclays Group (S.D. Cal. Feb. 9, 2011), a district court considered the scope of revoking consent to contact debtors by cell phone and text messages.
In Gutierrez, plaintiff applied for a credit card from defendant Barclays. On his application, plaintiff listed both his and his wife’s cellular phone numbers in his contact information. Plaintiff’s application was approved. Months later, plaintiff’s account became delinquent, and defendant began making collection calls and sending text messages to the two cellular numbers associated with plaintiff’s account. Plaintiff requested, via text message, that defendant stop sending text messages to his cellular phone. Plaintiff’s wife also orally requested that defendant stop calling her cellular phone.
Plaintiff and his wife subsequently filed suit, alleging violation of the Telephone Consumer Protection Act (TCPA), which prohibits making telephone calls using an automatic telephone dialing system or an artificial or prerecorded voice, subject to exemption where the called party has given prior express consent. Among other things, the TCPA also prohibits making calls to “any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call.”
Continue Reading...9th Circuit Defines FACTA Scope for Electronic Receipts
In Simonoff v. Expedia, Inc. (9th Cir. May 24, 2010), the Ninth Circuit held that an “electronically printed” receipt under FACTA does not include an email receipt displayed on a computer screen.
Congress passed the Fair and Accurate Credit Transactions Act (FACTA) in 2003, as an amendment to the Fair Credit Reporting Act. FACTA restricts the electronic printing of more than the last five digits of a credit card number or card expiration dates, on receipts provided to the cardholder at the point of sale.
In Simonoff, plaintiff purchased travel arrangements online through Expedia’s website. Expedia subsequently emailed a receipt for the purchase to the plaintiff, which included the expiration date of plaintiff’s credit card. Plaintiff sued, claiming that the email receipt sent by Expedia violated FACTA. The district court dismissed plaintiff’s claims under Rule 12(b)(6). Plaintiff appealed.
