9th Circuit Confirms Limits to TILA Statutory Damages
The Ninth Circuit this week confirmed some limits to the recovery of statutory damages under the Truth in Lending Act ("TILA") and Regulation Z. In McDonald v. Checks-N-Advance, Inc. (In Re Ferrell), the Ninth Circuit held that a consumer may not recover statutory damages for violations of the credit disclosure requirements in 15 U.S.C. 1638(b)(1) or 15 U.S.C. 1632(a).
In McDonald, consumer Bobby Ferrell, Jr., borrowed $300 from Checks-N-Advance in 2002. Ferrell defaulted on the loan, and filed for Chapter 13 bankruptcy in 2003. Chapter 13 Trustee Kathleen McDonald, not the creditor, filed a proof of claim for the unpaid loan, then initiated an adversary proceeding to deny the claim. The Trustee's complaint alleged violations of TILA credit disclosures, including 15 U.S.C. 1638(b) and 15 U.S.C. 1632(a), as well as violations of Nevada state consumer loan law.
Continue Reading..."Credit Cardholders Bill of Rights" Passes Committee
The "Credit Cardholders Bill of Rights Act of 2008" (H.R. 5244), which would amend Truth in Lending Act to include new restrictions on billing and practices related to credit cards, has cleared the U.S. House Financial Services Committee and will move to the floor of the House.
As detailed in the summary, the bill's provisions would make significant amendments to existing law, including:
- requiring card issuers to give consumers 45 days notice of any interest rate increases;
- prohibiting card issuers from charging interest on debt that is paid during a grace period (so-called "double cycle billing);
- prohibiting card issuers from increasing rates retroactively on existing balances unrelated to a consumer's card account (so-called "universal default rate increase");
- requiring card issuers to mail billing statements 25 days before the due date and to consider timely any payment received before 5:00 p.m. on the due date;
- restricting terms that may be used in advertisements;
- requiring certain allocations of consumer payments; and
- limiting "over-the-limit" fees card issuers can charge consumers.
These proposed changes follow the Fed's proposed rule changes for credit card and overdraft regulations.
Fed Issues Revised Consumer Compliance Handbook
The Federal Reserve's Division of Consumer and Community Affairs released its updated and revised Consumer Compliance Handbook. The Handbook, intended to provide comprehensive background information on federal consumer compliance statutes and regulations to Federal Reserve examiners, is a critical resource for compliance personnel at any financial institution. The Handbook contains comprehensive resources and background information regarding regulations and statutes on deposits, credit, fair lending, the Community Reinvestment Act, and other applicable laws.
Your Scorecard For New Laws and Regulations
For those fans scoring at home, there are many revised, amended, proposed or new regulations and laws recently enacted or on deck in Sacramento and DC in consumer finance. Many more are likely to come. A summary of the most recent:
California law
• Mortgages: new foreclosure procedures are now law in Civil Code §§2923.5, 2923.6 and 2929.3 and Code of Civil Procedure §1161b.
Federal law
• Credit Cards: the 2008 Credit and Debit Card Receipt Clarification Act, now law, clairifies the Fair and Accurate Credit Transactions Act of 2003;
• Credit Cards and Deposit Accounts: "unfair or deceptive acts or practices" are refined and redefined in revisions to Regulation AA, revisions to Regulation DD, and revisions to Regulation Z;
• Mortgages: Regulation X would get a makeover in HUD's proposed rule amending the Real Estate Settlement Procedures Act;
• Arbitration: the proposed "Arbitration Fairness Act of 2007" would slice and dice the Federal Arbitration Act; the "Automobile Arbitration Fairness Act of 2008," would eviscerate pre-dispute arbitration provisions in auto sales or lease contracts.
California law
• Mortgages: new foreclosure procedures are now law in Civil Code §§2923.5, 2923.6 and 2929.3 and Code of Civil Procedure §1161b.
Federal law
• Credit Cards: the 2008 Credit and Debit Card Receipt Clarification Act, now law, clairifies the Fair and Accurate Credit Transactions Act of 2003;
• Credit Cards and Deposit Accounts: "unfair or deceptive acts or practices" are refined and redefined in revisions to Regulation AA, revisions to Regulation DD, and revisions to Regulation Z;
• Mortgages: Regulation X would get a makeover in HUD's proposed rule amending the Real Estate Settlement Procedures Act;
• Arbitration: the proposed "Arbitration Fairness Act of 2007" would slice and dice the Federal Arbitration Act; the "Automobile Arbitration Fairness Act of 2008," would eviscerate pre-dispute arbitration provisions in auto sales or lease contracts.
9th Circuit Addresses FDCPA "Bona Fide Error" Defense
The Ninth Circuit this week addressed the evidence required to establish a "bona fide error" defense under the FDCPA, 15 U.S.C. 1692k(c). In Reichert v. National Credit Systems, Inc., the Court held that to establish the bona fide error defense, "a showing of 'procedures reasonably adapted to avoid any such error' must require more than a mere assertion to that effect. The procedures themselves must be explained, along with the manner in which they were adapted to avoid the error."
In Reichert, plaintiff debtor sued National Credit Systems ("NCS") in connection with its collection activities for debtor's former landlord. The debt that NCS attempted to collect included a $225 charge by the landlord's attorney for writing a letter to the debtor. The debtor alleged, among other things, that the inclusion of this charge, which was not specifically provided in the lease, violated FDCPA provision 15 U.S.C. §1692f(1). The district court granted summary judgment for the debtor. NCS appealed. Continue Reading...
In Reichert, plaintiff debtor sued National Credit Systems ("NCS") in connection with its collection activities for debtor's former landlord. The debt that NCS attempted to collect included a $225 charge by the landlord's attorney for writing a letter to the debtor. The debtor alleged, among other things, that the inclusion of this charge, which was not specifically provided in the lease, violated FDCPA provision 15 U.S.C. §1692f(1). The district court granted summary judgment for the debtor. NCS appealed. Continue Reading...
9th Circuit Reviews Attorney's Fees Under FDCPA
In Comacho v. Bridgeport Financial, Inc., 523 F.3d 973 (9th Cir. 2008), the Ninth Circuit issued a rare published opinion on calculating attorney's fees under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. ("FDCPA"), reversing a district court's award of fees and remanding for a recalculation. The opinion provides significant guidance on how courts are to calculate attorney's fees under the FDCPA.
In Comacho, plaintiff sued defendant Bridgeport in a putative class action alleging violation of the FDCPA. The parties settled the case shortly after the district court certified a statewide class with more than 7,000 members. As part of the settlement, Bridgeport agreed to pay "reasonable and necessary" attorney's fees to be determined by the district court if the parties could not agree (and they could not). The district court awarded plaintiff $77,069.36 of the $167,434.36 in attorney's fees she sought, and plaintiff appealed. The Ninth Circuit reversed and remanded, holding: (1) the district court failed to identify the relevant community in awarding fees; (2) the district court failed to address or determine the prevailing market rate in awarding attorney's fees; and (3) the district court abused its discretion by awarding a flat $500 award without calculating the lodestar. Continue Reading...
In Comacho, plaintiff sued defendant Bridgeport in a putative class action alleging violation of the FDCPA. The parties settled the case shortly after the district court certified a statewide class with more than 7,000 members. As part of the settlement, Bridgeport agreed to pay "reasonable and necessary" attorney's fees to be determined by the district court if the parties could not agree (and they could not). The district court awarded plaintiff $77,069.36 of the $167,434.36 in attorney's fees she sought, and plaintiff appealed. The Ninth Circuit reversed and remanded, holding: (1) the district court failed to identify the relevant community in awarding fees; (2) the district court failed to address or determine the prevailing market rate in awarding attorney's fees; and (3) the district court abused its discretion by awarding a flat $500 award without calculating the lodestar. Continue Reading...
Are You a "Debt Collector" Under California's FDCPA?
Read together, California’s Rosenthal Fair Debt Collection Practices Act (Civ. Code § 1788 et seq.) and the federal Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.) would appear to have only a few differences. But those few differences matter. Unlike the federal Fair Debt Collection Practices Act, for example, which defines "debt collector" to exclude an employee of the creditor collecting debts owed to the creditor, California’s Rosenthal Act defines “debt collector” more broadly as one who collects debts “on behalf of himself or herself or others.” (Cf. 15 U.S.C. § 1692a and Civ. Code § 1788.2.) This is a significant difference: a credit card company whose employee's collection activities may be exempt from the federal FDCPA could be held liable under California’s Rosenthal FDCPA for the same actions.
