"Wall Street Reform and Consumer Protection Act" Is Now Law
President Obama today signed the "Wall Street Reform and Consumer Protection Act," which will bring comprehensive changes to consumer financial services, and to consumer finance litigation, including mortgages, credit cards, retail credit, debt collection, arbitration, preemption, and auto finance. See details about the changes coming, as seen by the White House, and the President's signing remarks.
Financial Regulatory Reform is (Almost) a Done Deal
The U.S. Senate voted 60-39 yesterday to pass the Wall Street Reform and Consumer Protection Act, which the White House says President Obama will sign into law next week. While consumer finance attorneys digest the massive changes coming with this comprehensive bill (in mortgages, credit cards, retail credit, debt collection, arbitration, preemption, and auto finance), the scope of the changes will likely depend on the implementing regulations, and how these regulations are interpreted by Courts.
A few things are clear now. First, the OTS is fading away. Second, consumer arbitration may be too. Third, federal preemption is likely to be more difficult to obtain in consumer finance litigation.
Conference Reaches Deal on Financial Regulatory Reform
The House-Senate Conference to reconcile financial regulatory reform reached a final agreement on the legislation on Friday. The "Dodd-Frank Wall Street Reform and Consumer Protection Act" calls for the creation of the Consumer Financial Protection Bureau, an independent agency to be housed at the Federal Reserve, with a broad mandate to regulate consumer financial services of virtually all types.
The Consumer Financial Protection Bureau will have an independent director appointed by the President and confirmed by the Senate, with an independent budget and independent rule writing, examination, and enforcement authority. The CFPB consolidates consumer protection responsibilities of the OCC, OTS, FDIC, Federal Reserve, NCUA, HUD, and the FTC. Among other things, the legislation also creates a new Office of Financial Literacy to disseminate information to consumers and a new consumer hotline for consumer questions.
Continue Reading...Tracking the Conference on Financial Regulatory Reform
The House-Senate Conference to reconcile financial regulatory reform legislation begins today. Track the conference with the House Financial Services Committee or the Senate Banking Committee. The hearing also will be broadcast live on C-SPAN and webcast live at the House Financial Services Committee site.
Senate Banking Committee Unveils Financial Reform Plan
The Senate Banking Committee unveiled its version of financial regulatory reform yesterday, including issuing a summary of highlights of the bill as well as the proposed bill. The 1336-page bill differs in substantial respects from the House version passed in December.
Most significantly with regard to consumer finance regulation, the Senate version does not include an independent Consumer Financial Protection Agency, but would house that function at the Federal Reserve. Specifically, Title X of the Senate Version calls for the creation of a "Consumer Financial Protection Bureau" to operate independently within the Federal Reserve.
House Passes Consumer Financial Protection Agency Act
On December 11, 2009, the U.S. House of Representatives passed the “Wall Street Reform and Consumer Protection Act of 2009,” H.R. 4173. This sweeping legislation—a combination of several bills, including a modified version of the Consumer Financial Protection Agency Act, formerly HR 3126—includes broad new regulation of derivatives, executive compensation, systemic risk, investor rights, mortgages, credit-rating agencies, hedge funds and private equity, insurance, and consumer financial protection.
Title IV of the Act (sections 4001 – 4901) provides for the creation of a Consumer Financial Protection Agency (section 4101 – 4703), a new, independent federal agency to oversee virtually every aspect of consumer financial services, including mortgages, credit cards, debit cards, car loans, gift cards, credit reporting agencies, debt collectors, and financial advisers. Certain merchants, such as auto dealers and pawnbrokers, would be exempted.
Continue Reading...Financial Regulatory Reform Moves Out of Committee
The House Financial Services Committee on Thursday voted to approve the Consumer Financial Protection Agency Act, HR 3126.
The legislation is changing in significant ways as it moves through the legislative process. Among the revisions from the administration's original plan, the Committee's approved version would vest authority over the proposed Consumer Financial Protection Agency in a single director, as opposed to a 5-member board. The approved version of the legislation also includes a compromise on federal preemption, which permits the federal regulator to preempt state consumer financial protection laws only after a written finding that the state law “prevents or significantly interferes” with a federally regulated bank or thrift’s exercise of its powers.
Powers of the Proposed Consumer Financial Protection Agency
Subpart F, sections 161 through 166, of the Consumer Financial Protection Agency Act of 2009 (HR 3126, July 8, 2009) provides for the transfer of broad areas of power to regulate consumer financial protection functions from a variety of federal agencies and the Federal Reserve to the proposed Consumer Financial Protection Agency.
In general, the CFPA would have the authority and accountability to supervise, examine, and enforce consumer financial protection laws, including mortgages, credit cards, student loans, auto loans, payday loans, and more. The Act would transfer functions and personnel to the new CFPA and provide for interim powers for the Secretary of Treasury pending the establishment of the CFPA and the completion of the transfer of powers and people.
9th Circuit Details Corporate Citizenship Tests
In a significant case for credit card issuers and retailers, the Ninth Circuit has detailed the application of its tests of corporate citizenship for purposes of federal jurisdiction. In Davis v. HSBC Bank Nevada, N.A., et al., the Court held that retailer Best Buy is not a citizen of California merely because it has more presence in this state than in any other state.
In Davis, plaintiff sued credit card issuer HSBC and retailer Best Buy, asserting claims for violation of California's unfair competition statute, §17200, and false advertising statute, §17500, alleging the companies defrauded consumers by failing to adequately disclose the credit card's annual fee. Defendants removed the case to federal court based on the Class Action Fairness Act of 2005 ("CAFA"). Plaintiff moved to remand based on the local controversy exception to federal jurisdiction, 28 U.S.C. §1332(d)(4), which bars federal jurisdiction where, among other things, at least one defendant is a citizen of the original forum state. The district court granted plaintiff's motion to remand. Defendants appealed.
Continue Reading...Will California Courts Enforce Your Choice of Law?
Defendant Omni, a Nevada corporation with its principal place of business in Nevada, provided a personal loan to plaintiff borrower Joshua Brack, a nonresident member of the military stationed at California's Camp Pendleton. Omni's loan agreement contained a choice of law provision in favor of Nevada law. Brack repaid the loan in full in 2002.
In 2003, Brack filed a class action against Omni, alleging violations of the California Finance Lenders Law (Fin.Code §22000 et seq.), the Consumers Legal Remedies Act ("CLRA") (Civ. Code §1750 et seq.) and California's Unfair Competition Law (Bus. and Prof. Code §17200). After a trial on Omni's Nevada choice of law defense, the trial court entered judgment in favor of Omni. Brack moved to set aside the judgment. The trial court denied the motion and Brack appealed.
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Issuance of Credit Card (Still) Not Subject to CLRA
In Ball, plaintiff sued FleetBoston (later Bank of America) for a violation of California's unfair competition law, Business and Professions Code § 17200 et seq., alleging that FleetBoston's cardholder agreement was procedurally and substantively unconscionable. She later filed an amended complaint adding additional allegations of substantive unconscionability. When Ball filed her complaint and first amended complaint, she did not have a credit card account with FleetBoston. After Proposition 64 and subsequent cases confirmed that a non-cardholder had no standing to sue under 17200, Ball opened a credit card account and sought leave to amend her complaint for a second time to allege her new customer status, to allege violations of the CLRA, and to seek declaratory relief. The Superior Court denied plaintiff's motion for leave to amend. Plaintiff appealed.
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