Fed Issues Rules on Mortgage Escrows
The Federal Reserve this week issued two rules implementing provisions of the Dodd-Frank Act related to escrow requirements for certain types of mortgage loans.
The Fed announced a final rule that increases the annual percentage rate (APR) that triggers a requirement that a mortgage lender establish an escrow account for property taxes and insurance for first-lien, "jumbo" mortgage loans. The escrow requirement, effective April 1, 2011 for covered loans, applies only if the loan's APR is 2.5 percentage points or more above the average prime offer rate.
The Fed also announced a proposed rule that would expand the minimum period for mandatory escrow accounts for first-lien, higher-priced mortgage loans from one to five years. The minimum period would be longer under certain circumstances, such as when the loan is delinquent or in default.
Separately, in a first sign of the coming transition of authority to the Consumer Financial Protection Bureau, the Fed announced on February 1 that it would not finalize three pending rules, published as part of the Board's comprehensive review of its mortgage lending regulations under Regulation Z, prior to the July transfer of authority for rulemaking to the CFPB.
California Supreme Court: ZIP Collection Violates Song-Beverly
In a decision with potentially far-reaching implications for merchants, in Pineda v. Williams Sonoma Stores, Inc., the California Supreme Court last week held that requesting and recording a credit cardholder's ZIP Code violates the Song-Beverly Credit Card Act of 1971 (Civ. Code 1747 et seq.)
In Pineda, plaintiff alleged that the defendant retailer asked for her postal ZIP code during a credit card purchase transaction. Plaintiff believed that this information was required to complete the transaction, but the retailer later used it to determine plaintiff's address, which it maintained in a database, ostensibly for marketing purposes. Plaintiff filed a putative class action alleging violation of Civil Code section 1747.08, which prohibits a merchant from collection and recording "personal identification information;" as well as violation of California Unfair Competition Law (Bus. and Prof. Code 17200 et seq.) and invasion of privacy.
The trial court granted defendant's demurrer without leave to amend and the Court of Appeal affirmed. The California Supreme Court granted review of the Song-Beverly issue, and reversed, concluding that a ZIP code constitutes “personal identification information” as that phrase is used in section 1747.08.
Here Comes the Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau has a new website, and is making significant personnel additions, creating its internal structure, and otherwise preparing for the commencement of its official authority in July. The CFPB is also blogging, tweeting, facebooking, youtubing, and hiring.
Among many other things, the CFPB's website defines the scope of its "Core Functions" as follows:
* Conduct rule-making, supervision, and enforcement for Federal consumer financial protection laws;
* Restrict unfair, deceptive, or abusive acts or practices;
* Create a center to take consumer complaints;
* Promote financial education;
* Research consumer behavior;
* Monitor financial markets for new risks to consumers; and
* Enforce laws that outlaw discrimination and other unfair treatment in consumer finance.
In December, the U.S. Treasury announced the creation of a new Consumer Inquiry and Complaint database, to be maintained by the CFPB, to track, collect, analyze, and refer consumer inquiries and complaints about consumer financial products and services, scheduled to take effect today. The CFPB has also announced the creation of a future Consumer Response Center to receive consumer complaints and inquiries related to consumer financial services.
No Harassment Under FDCPA With 179 Collection Calls
In Jones v. Rash Curtis & Associates in the Northern District of California, the Court granted summary judgment for defendant in a case that elaborates on plaintiff's burden to show an FDCPA violation.
In Jones, plaintiff alleged approximately 179 collection calls in a one-year time period. Plaintiff's complaint alleged FDCPA violations based on allegations that: (1) defendant constantly and continuously placed collection calls to Plaintiff seeking payment for an alleged debt; (2) defendant placed approximately 200 collection calls to Plaintiff in 2009; (3) defendant contacted Plaintiff’s mother and disclosed the nature and existence of an alleged consumer debt to her; (4) defendant failed to identify itself as a debt collector; and (5) defendant placed collection calls to Plaintiff from blocked and private numbers.
The Court granted summary judgment for defendant on plaintiff's FDCPA claims, noting that plaintiff bears the burden of showing more than simply a high volume of collection calls. The Court identified certain factors that might establish an FDCPA violation for harassment, including: (1) calling a consumer back immediately after the consumer hung up on the collector; (2) calling the consumer after the consumer requested the collector cease communications; or (3) calling the consumer at a time or pace which is known to be inconvenient to the consumer. Absent evidence of these actions, the Court found there was no evidence of harassment. Significantly, the Court noted that plaintiff "did not complain about the content of calls, rarely answered the calls, and never instructed [defendant] to stop calling."
