California Consumer Finance Litigation

One to Watch: Arbitration and Complete Preemption

djo@oriellyroche.com (Daniel O'Rielly) — Mon, 24 Nov 2008 06:00:00 -0800

On October 6, 2008, the U.S. Supreme Court heard oral argument in Vaden v. Discover Bank, an appeal from Discover Bank, Discover Financial Services v. Vaden, 489 F.3d 594 (4th Cir. 2007), which will have a significant impact on arbitration and the doctrine of complete preemption.

Vaden arises out of a dispute between credit cardholder and a card issuer. In 2003, Discover Financial Services, a servicing subsidiary of Discover Bank, filed suit against cardholder Vaden in Maryland state court to collect a $10,000 delinquent debt. Vaden filed a putative class action counterclaim in state court, alleging, among other state law causes of action, violation of Maryland's usury laws. Discover Financial Services and Discover Bank filed a free-standing petition to compel arbitration in the U.S. District Court of Maryland, pursuant to Section 4 of the Federal Arbitration Act ("FAA"). Discover asserted that Vaden's state law claims were completely preempted by the Federal Deposit Insurance Act, 12 U.S.C. §1811 et seq. ("FDIA"). The district court granted Discover's motion to compel arbitration. Vaden appealed.

On Vaden's first appeal (Vaden I), the Fourth Circuit held that a district court has subject matter jurisdiction over a petition to compel arbitration under Section 4 of the FAA if a federal question exists in the underlying dispute. The Court rejected Vaden's argument that the jurisdictional analysis could not "look-through" the petition to determine whether the parties' underlying dispute involved a federal question. The Court remanded for the district court to determine several issues, including whether Vaden's counterclaim presented a federal question, whether Discover Financial Services or Discover Bank was the real party in interest, and whether the parties had a valid arbitration agreement.

On remand, the district court held: (1) that Discover Bank was the real party in interest; (2) that Vaden's state law usury claims were completely preempted by the FDIA, meaning the district court had federal question jurisdiction; and (3) that the parties had a valid arbitration agreement. Vaden appealed again. The Fourth Circuit affirmed (Vaden II).

The case presents two questions to the Supreme Court, as framed by respondents:

"(1) Whether the court of appeals correctly ruled that the district court had jurisdiction to compel arbitration under Section 4 of the Federal Arbitration Act where the parties’ underlying dispute is completely preempted by federal banking law.

(2) Whether the court of appeals correctly ruled that the district court’s exercise of jurisdiction to compel arbitration under Section 4 of the Federal Arbitration Act is consistent with this Court’s decision in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002)."

FTC "Red Flags Rule" Enforcement Begins in May 2009

djo@oriellyroche.com (Daniel O'Rielly) — Fri, 21 Nov 2008 06:00:00 -0800

The Federal Trade Commission announced that it would suspend its enforcement of its new "Identify Theft Red Flags Rule," 16 CFR 681.2, until May 1, 2009, allowing subject institutions additional time to prepare for compliance with the new identity theft rules and regulations. FTC enforcement was previously expected to begin November 1, 2008, and the FTC announcement does not affect other federal agencies' enforcement of the original deadline.

The FTC has issued some guidance on complying with the rule, promulgated pursuant to the 2003 Fair and Accurate Credit Transactions Act ("FACTA"). Generally, the rule requires financial institutions and creditors to develop and implement written identify theft prevention programs for "covered accounts." Specifically, institutions "must provide for the identification, detection, and response to patterns, practices, or specific activities–known as 'red flags'–that could indicate identity theft." The FTC has also issued details related to its enforcement policy.

Resources for Tracking the Evolution of Banking

djo@oriellyroche.com (Daniel O'Rielly) — Tue, 18 Nov 2008 17:40:46 -0800

The recent myriad decisions and revisions related to the Troubled Asset Relief Program ("TARP") mean that banking regulations, and banks themselves, are changing daily. Here's how to keep up with the evolving government regulations.

The Federal Reserve publishes a current list of orders on bank applications, including financial institutions applying to become bank holding companies. The Fed also publishes regular updates on the status of TARP. The Treasury Department's website includes resources on the Emergency Economic Stabilization Act as well as a link to Secretary Paulson's November 18, 2008, testimony before Congress and New York Times Op-Ed on "Fighting the Financial Crisis, One Challenge at a Time."

Forbearance of Foreclosure is Within the Statute of Frauds

djo@oriellyroche.com (Daniel O'Rielly) — Fri, 31 Oct 2008 09:21:16 -0800

In Secrest v. Security National Mortgage Loan Trust 2002-2, the Fourth District California Court of Appeal held that an agreement to forbear foreclosure comes within the statute of frauds.

In Secrest, plaintiff borrowers filed suit to enjoin foreclosure proceedings initiated by defendant lenders. Borrowers alleged that lenders' predecessors in interest had entered into an agreement to forbear foreclosure based on certain conditions. Borrowers had in fact made two such agreements, one in 2001 and one in 2002, each of which included a lump sum payment and timely payments on the note securing the deed of trust. Lenders asserted that the forbearance agreement was unenforceable under California's statute of frauds (Civil Code §1624) because lenders did not sign it. The trial court held that the forbearance agreement was unenforceable, and borrowers appealed.

On appeal, borrowers argued that the forbearance agreement was enforceable and that lenders were estopped from asserting the statute of frauds because borrowers had partly performed on the forbearance agreement by making a lump sum payment.

The Court of Appeal disagreed, holding that an agreement to forbear foreclosure falls within the statute of frauds because it constitutes a modification of the note and deed of trust, which fall within the statute of frauds. (Civil Code §§1624, 1628.) Here, because lenders, the "party to be charged" under the statute of frauds, had not signed the forbearance agreement, it was unenforceable. Significantly, the Court noted that one widely cited California law treatise incorrectly suggests that an agreement to forbear foreclosure is enforceable without a writing signed by both parties.

The Court also rejected borrowers' estoppel argument, holding that "under well-established principles of California law, payment of money alone is not enough as a matter of law to take an agreement out of the statute of frauds..." because it is not sufficient to show a change of position in reliance on the agreement.

9th Circuit Remands Class Arbitration Waiver

djo@oriellyroche.com (Daniel O'Rielly) — Fri, 24 Oct 2008 09:30:46 -0800

The Ninth Circuit last week addressed choice of law considerations in the context of a class wide arbitration waiver. In Hoffman v. Citibank (South Dakota), N.A., the Ninth Circuit held that the district court's analysis of California choice of law was flawed, and remanded for the district court to re-analyze whether California or South Dakota law applies to the class arbitration waiver.

In Hoffman, Citibank issued a credit card to Hoffman in 1994 which contained a choice of law provision favoring South Dakota law. In a mailing in 2001, Citibank gave Hoffman notice of a change in the arbitration provision of the cardholder agreement, including a waiver of class arbitration. Hoffman did not object and continued to use the card.

Hoffman later sued Citibank, alleging that Citibank had improperly retroactively increased cardholders' interest rates, among other things. Citibank removed the case to federal court and moved to compel arbitration. The district court applied South Dakota law pursuant to the choice of law provision. Holding that the class arbitration waiver was not unconscionable under South Dakota law, the district court granted Citibank's motion to compel arbitration of plaintiff's claims on an individual basis. Hoffman moved to certify the ruling for immediate appeal. The district court granted the motion and the Ninth Circuit granted Hoffman's petition to be heard.

On appeal, the Ninth Circuit held that the district court did not properly analyze the choice of law question, which appeared to be dispositive of the arbitration issue. The arbitration provision appeared to be enforceable under South Dakota law, but the Ninth Circuit strongly suggested that if California law were to apply, the class arbitration waiver could be held substantively and procedurally unconscionable and unenforceable and, therefore, contrary to a fundamental policy of California.

Specifically, the Ninth Circuit remanded with instructions for the district court to consider the second step of the California choice of law analysis: "whether the enforceability of this class arbitration waiver under South Dakota law is contrary to a fundamental policy of California" against unconscionable class arbitration waivers.

One to Watch: U.S. Supreme Court to Address Preemption

djo@oriellyroche.com (Daniel O'Rielly) — Fri, 10 Oct 2008 06:00:00 -0800

The Supreme Court heard opening day oral arguments in a preemption case that could have far-reaching effects for financial institutions. The case, involving a suit against tobacco company Altria, presents the question whether state law challenges to FTC-authorized statements in advertising are expressly or impliedly preempted by federal law. The Court's opinion could significantly impact the preemption landscape generally, including the balance between state and federal consumer protection statutes.

Court of Appeal Addresses Issues in Foreclosure Litigation

djo@oriellyroche.com (Daniel O'Rielly) — Wed, 08 Oct 2008 10:00:56 -0800

In what may be the leading edge of a wave of litigation related to foreclosures, in FDIC v. Dintino, the California Court of Appeal last week issued an opinion addressing statutes of limitations and attorney's fees related to an IndyMac (FDIC) foreclosure.

In Dintino, IndyMac sued borrower to foreclose on a mortgage, alleging breach of contract, money lent, and unjust enrichment. Borrower raised affirmative defenses based on the statute of limitations, the antideficiency statutes (Code of Civil Procedure §580 et seq.) and the doctrine of unclean hands. Both parties moved for summary judgment. The trial court denied IndyMac's motion for summary judgment and granted, in part, borrower's motion for summary adjudication, holding IndyMac's breach of contract cause of action was barred by the One Action Rule (Code of Civil Procedure §726 et seq.). The trial court rejected borrower's statute of limitations argument, holding IndyMac's unjust enrichment cause of action was not barred by the applicable statute of limitations (Code of Civil Procedure § 337).

The parties stipulated to a bench trial, after which the trial court entered judgment for IndyMac. Borrower moved to recover attorney's fees incurred in the defense of the breach of contract cause of action. The trial court denied the motion. Borrower appealed the partial denial of his motion for summary judgment and the denial of his motion for attorney's fees.

The Court of Appeal reversed, in part, holding: (1) the applicable statute of limitations for IndyMac's unjust enrichment cause of action was Code of Civil Procedure §338, not §337, but the cause of action was not barred because of the discovery rule; and (2) borrower was entitled to recover attorney's fees incurred in the defense of the breach of contract cause of action. The Court remanded for a determination of reasonable attorney's fees.

New Mortgage Laws in California

djo@oriellyroche.com (Daniel O'Rielly) — Tue, 30 Sep 2008 10:36:02 -0800

After California's budget standoff backed up nearly 850 bills on his desk, Governor Schwarzenegger is furiously signing significant legislation that will affect the California mortgage market. Last week, the Governor signed 10 bills into law related to mortgage and housing finance regulation:

SB1461 requires real estate agents to disclose their license number on all first point of contact marketing materials and property purchases beginning July 1, 2009;

SB1737 authorizes the Department of Real Estate to suspend or bar a person who has committed a violation of the Real Estate Law if the suspension or bar is in the best interest of the public;

AB69 mandates that all mortgage loan servicers report specific, detailed data to their licensing agency concerning loan modifications;

AB180 provides a registration and bonding process for foreclosure consultants and prohibits a foreclosure consultant from entering into an agreement to assist an owner in arranging the release of surplus funds after the trustee's sale is conducted;

SB870 allows the California Housing Finance Agency to more quickly establish a mortgage refinance program;

SB1065 includes the refinancing of home mortgages in the criteria for a city or county-administered home financing program;

SB1055 allows taxpayers to exclude the forgiven mortgage debt from their incomes for state income tax purposes which brings the state in compliance with federal law;

SB1604 requires that any private insurance policy maintained by an escrow agent be applied as primary coverage in the event of a loss covered by both the private insurance and the Escrow Agents Fidelity Corporation;

SB1675 provides the California Department of Veterans Affairs with the discretion to structure the terms and conditions of any authorized debt issuance; and

AB2454 would increase potential recovery for harmed consumers applying for Recovery Account payments filed on or after January 1, 2009, to $50,000 for any one transaction and $250,000 for any one licensee.

Details on the "Emergency Economic Stabilization Act"

djo@oriellyroche.com (Daniel O'Rielly) — Sun, 28 Sep 2008 19:25:26 -0800

Congressional leaders and the administration announced agreement this evening on the Troubled Asset Relief Program, reborn as the expanded "Emergency Economic Stabilization Act of 2008." House Speaker Nancy Pelosi issued a statement detailing the agreement. Congressional leadership also released a section-by-section analysis of the proposed legislation and the full text of the bill. The American Bankers Association has posted its reactions and resources, including detailed analysis of versions of the proposed legislation.

A vote on the bill could come as early as Monday.

(No) Agreement on "Troubled Asset Relief Program"?

djo@oriellyroche.com (Daniel O'Rielly) — Thu, 25 Sep 2008 14:03:08 -0800

The administration and the Congress reached preliminary agreement on the "Troubled Asset Relief Program," a massive program that would provide up to $700 billion in increments for the U.S. government to purchase and manage portfolios of troubled asset-backed securities from financial institutions. After several days of testimony in the House and the Senate followed by a presidential address, the administration's proposed program changed substantially in negotiations and emerged as an "Agreement on Principles" today. Late in the day talks stalled and the agreement was called into question.

"Agreement on Principles

1. Taxpayer Protection

a. Requires Treasury Secretary to set standards to prevent excessive or inappropriate executive compensation for participating companies

b. To minimize risk to the American taxpayer, requires that any transaction include equity sharing

c. Requires most profits to be used to reduce the national debt

2. Oversight and Transparency

a. Treasury Secretary is prohibited from acting in an arbitrary or capricious manner or in any way that is inconsistent with existing law

b. Establishes strong oversight board with cease and desist authority

c. Requires program transparency and public accountability through regular, detailed reports to Congress disclosing exercise of the Treasury Secretary’s authority

d. Establishes an independent Inspector General to monitor the use of the Treasury Secretary’s authority

e. Requires GAO audits to ensure proper use of funds, appropriate internal controls, and to prevent waste, fraud, and abuse

3. Homeownership Preservation

a. Maximize and coordinate efforts to modify mortgages for homeowners at risk of foreclosure

b. Requires loan modifications for mortgages owned or controlled by the Federal Government

c. Directs a percentage of future profits to the Affordable Housing Fund and the Capital Magnet Fund to meet America’s housing needs

4. Funding Authority

a. Treasury Secretary’s request for $700 billion is authorized, with $250 billion available immediately and an additional $100 billion released upon his or her certification that funds are needed

b. final $350 billion is subject to a Congressional joint resolution of disapproval."

9th Circuit Rescuscitates California Privacy Law

djo@oriellyroche.com (Daniel O'Rielly) — Thu, 11 Sep 2008 09:27:45 -0800

The Ninth Circuit has partially revived a part of California's erstwhile Financial Information Privacy Law. In American Bankers Association v. Lockyer, the Court held California Financial Code §4053(b)(1) has non-preempted applications and reformed that section to sever its preempted portions.

American Bankers v. Lockyer is a preemption dispute that is as old as the 2003 California Financial Information Privacy Act, California Financial Code §4050 et seq., commonly known as SB1. In American Bankers Association v. Gould, 412 F.3d 1081 (9th Circuit 2005), plaintiffs alleged that the federal Fair Credit Reporting Act ("FCRA") preempted SB1's regulation of information sharing between financial institutions and their affiliates. The Ninth Circuit held that the regulation of nonpublic personal information in 15 U.S.C. 1681t(b)(2) preempted any application to consumer report information in section 4053(b)(1).

The Court remanded for a determination whether any portion of SB1's affiliate sharing regulations in section 4053(b)(1) survived preemption and whether any preempted section was severable. On remand, the district court held that no portion of section 4053(b)(1) survived preemption and that the preempted applications were not severable. Defendants appealed.

The Ninth Circuit reversed, holding that California Financial Code section 4053(b)(1) has non-preempted applications and that the preempted portions are severable.

The Court rejected the argument that 4053(b)(1) was preempted in its entirety because no "physically distinct" section of the statute "applies to information that falls outside the FCRA preemption clause." The Court noted that SB1 has non-preempted applications, meaning some part of the statute could be saved if it were reformed to sever the regulation of consumer report information from the affiliate sharing regulations.

The Court turned to an analysis of the California legislature's intent and held that: (1) a narrowing of section 4053(b)(1) would effect the legislative intent; and (2) the California legislature would have preferred a narrowed statute to no statute at all. Significantly, the Court severed the preempted application even though the statute's severability clause makes no mention of severing a preempted application. The Court's reformation of section 4053(b)(1) narrowed that section to exclude the regulation of consumer report information as defined by FCRA.

Treasury Details its Fannie/Freddie Conservatorship

djo@oriellyroche.com (Daniel O'Rielly) — Mon, 08 Sep 2008 08:21:18 -0800

Less than two months after receiving congressional authority for increased control over Fannie Mae and Freddie Mac, the Treasury Department today released details about its plan to place Fannie and Freddie under federal government conservatorship.

The Treasury Department's fact sheet includes information related to the appointment of James Lockhart, Director of the newly-created Federal Housing Finance Agency ("FHFA"), as conservator for Fannie and Freddie for an indefinite duration. FHFA also issued a statement about the plan.

In addition to the appointment of a conservator, the Treasury plan has four parts: (1) Fannie and Freddie will "modestly increase" their mortgage-backed securities portfolios through the end of 2009; (2) Treasury and FHFA have entered Preferred Stock Purchase Agreements for Fannie and Freddie stock; (3) Treasury will establish a new secured lending credit facility, which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; and (4) Treasury is initiating a temporary program to purchase Fannie and Freddie mortgage-backed securities.

9th Circuit Confirms Limits to TILA Statutory Damages

djo@oriellyroche.com (Daniel O'Rielly) — Tue, 26 Aug 2008 06:00:00 -0800

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.

The creditor did not respond to the Trustee's complaint. The bankruptcy court entered a default judgment in favor of the Trustee and held that the creditor had violated 15 U.S.C. 1638(b)(1), 15 U.S.C. 1632(a), and Regulation Z. The bankruptcy court denied the Trustee any recovery of statutory damages, however, and denied actual damages as well as the Trustee's state law claim. The Trustee appealed to the bankruptcy appellate panel, which affirmed. The Trustee then appealed to the Ninth Circuit.

The Ninth Circuit affirmed, holding that a consumer may not recover statutory damages under 15 U.S.C. 1638(b)(1) or under 15 U.S.C. 1632(a) because the list of exceptions to statutory damages enumerated in 15 U.S.C. 1640(a) encompasses 15 U.S.C. 1638(b)(1) and its corresponding regulation 12 C.F.R. 226.17(b), as well as 15 U.S.C. 1632(a).

The Court also held that the Trustee had failed to show any actual damages in connection with the alleged TILA violations, because the Trustee failed to demonstrate detrimental reliance: that, absent the violations, the borrower "would either have secured a better interest rate elsewhere, or foregone the loan completely." Separately, the Court held that the Trustee's Nevada state law claim was properly denied because she failed to plead the applicable statute with specificity.

Comment Period Closes on Credit Card and Overdraft Rules

djo@oriellyroche.com (Daniel O'Rielly) — Fri, 22 Aug 2008 06:00:00 -0800

The comment period has closed for the Federal Reserve's sweeping proposed rule changes for credit cards and overdrafts. The proposed revisions to Regulation AA, revisions to Regulation DD, and revisions to Regulation Z seek to redefine "unfair or deceptive acts or practices" in connection with credit card accounts and overdraft protection services.

The Federal Reserve reports receiving an unprecedented number of comments on these proposed regulations. The Fed received nearly 50,000 comments on the proposed revisions to Regulation AA alone. On a parallel track, 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, is moving to the floor of the House.

"Credit Cardholders Bill of Rights" Passes Committee

djo@oriellyroche.com (Daniel O'Rielly) — Wed, 13 Aug 2008 06:00:00 -0800

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

djo@oriellyroche.com (Daniel O'Rielly) — Fri, 08 Aug 2008 12:03:30 -0800

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.

A Closer Look at the Housing Bill's "HOPE"

djo@oriellyroche.com (Daniel O'Rielly) — Fri, 01 Aug 2008 06:00:00 -0800

President Bush quietly signed the new Housing Bill this week, as expected. One of the new law's most significant changes is the "HOPE for Homeowners" program, adding new Section 257 to Title II of the National Housing Act (12 U.S.C. §1707 et seq.), among other sections. The HOPE program ("Home Ownership Preservation Entity" fund), which is voluntary for lenders, allows certain mortgage borrowers to refinance current mortgages of owner-occupied homes into FHA-insured 30-year fixed mortgages.

The new insured mortgages cannot exceed 90% of the home's value (determined by a new independent appraisal), which means participating lenders must absorb any deficiency for mortgage borrowers who are underwater on current loans. Lenders also must waive all "penalties for prepayment or refinancing of the eligible mortgage, and all fees and penalties related to default or delinquency on the eligible mortgage." The new loan would extinguish any subordinate liens.
To qualify for the program, a borrower must have a debt-to-income ration of greater than 31%, must provide a certification that the borrower "has not intentionally defaulted on the mortgage or any other debt, and has not...furnished material information known to be false for the purpose of obtaining any eligible mortgage." Borrowers under the program also must document income and share any subsequent equity gains with FHA.

ID on Merchandise Return Not a Violation of Song-Beverly

djo@oriellyroche.com (Daniel O'Rielly) — Thu, 31 Jul 2008 06:00:00 -0800

In Absher v. Autozone, Inc., the Second District California Court of Appeal held that a request for personal identification information in connection with a return of merchandise purchased with a credit card does not violate Civil Code §1747.08, otherwise known as the Song-Beverly Credit Card Act of 1971, which prohibits a merchant from requesting or requiring personal identification information for a credit card payment.

In Absher, plaintiff used a credit card to purchase a locking gas cap from Autozone and immediately tried to return it after he discovered in the store's parking lot that it was the wrong size for his car. Autozone's cashier swiped plaintiff's credit card and asked him to fill out a form with personal identification information, including his name, address, telephone number and signature. Plaintiff filled out the form, and two weeks later sued Autozone in a class action, alleging that Autozone violated Civil Code §1747.08(a)(3) by utilizing a form with spaces for his personal identification information. The trial court granted Autozone's motion for summary judgment. Plaintiff appealed.
The Court of Appeal affirmed, holding that §1747.08(a)(3) does not apply to returns of merchandise purchased with a credit card (as opposed to credit card purchases). The Court rejected plaintiff's argument that §1747.08(a)(3), which references "any credit card transaction," can be read to include returns, since both §§1747.08(a)(1) and (a)(2) apply to credit card purchases ("accepting the credit card as payment.") The Court also noted that §1747.08(a)(3) does not contain any express reference to "an exchange, refund, or return" although a later section, §1747.09(a)(3), does contain such a reference.

Finally, the Court noted that the legislative history of §1747.08(a)(3) revealed that the purpose of the statute was to prevent the misuse of personal identification information (e.g., for marketing purposes) where there was no need for the information to complete the credit card transaction. The Court noted that returns of merchandise are different, since there are legitimate uses (e.g., preventing employee fraud; dealing with damaged return merchandise) of the personal information, other than marketing, that necessitate collecting it to process a return.

Sweeping Housing Bill Expected to Become Law

dena@oriellyroche.com (Dena Roche) — Wed, 30 Jul 2008 06:00:00 -0800

President Bush recently signaled that he will sign the Housing and Economic Recovery Act of 2008, H.R. 3221, which passed the Senate on July 26, 2008 after passing the House last week. Among other things, the massive aid package, aimed at shoring up the troubled housing market, includes $300 billion for homeowners to refinance their mortgages into government-backed loans through the Federal Housing Administration. An estimated 2.5 million households are facing possible foreclosures this year.

The bill also provides emergency financing capacity for mortgage titans Fannie Mae and Freddie Mac, two government-sponsored enterprises which own or guarantee nearly half the nation’s $12 trillion in outstanding home mortgage debt. The bill also creates a new regulator with expanded authority to oversee the two mortgage giants.

The final version of the bill also includes hotly contested provisions for a new low income housing tax credit, new tax exempt bonds for housing, and a new housing trust fund.

Your Scorecard For New Laws and Regulations

djo@oriellyroche.com (Daniel O'Rielly) — Tue, 29 Jul 2008 06:00:00 -0800

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.