Source: http://updates.mwbllp.com/2017_01_29_archive.html
Timestamp: 2017-06-22 11:52:35
Document Index: 547474822

Matched Legal Cases: ['§ 1692', '§ 1788', '§ 17200', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 5660', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 5660', '§ 1692', '§ 1692', '§ 5660', '§ 5660', '§ 5670', '§ 1692', '§ 1692', '§ 1692', '§ 1681', '§ 1681', '§ 1681', '§ 1681', '§ 1681', '§ 1681', '§701', '§ 701', '§ 702', '§ 1346', '§ 701', '§702', '§701', '§ 3907', '§ 3907', '§701']

Financial Services Law Developments: 1/29/17 - 2/5/17
The U.S. Court of Appeals for the Ninth Circuit recently held that a notice regarding overdue homeowners association (HOA) assessments contained language that overshadowed and conflicted with the homeowner's federal Fair Debt Collection Practices Act (FDCPA) debt validation rights. Limiting the scope of its ruling in Ho v. ReconTrust Co., NA, 840 F.3d 618, 620 (9th Cir. 2016), the Court rejected the debt collector's argument that in sending the notice regarding overdue HOA assessments, it merely sought to perfect a security interest and was therefore subject only to the limitations under 15 U.S.C. § 1692f(6). A copy of the opinion is available at: Link to Opinion A debt collection law firm sent a notice to a homeowner on behalf of an HOA seeking to collect an overdue homeowner's assessment fee, as well as late, administrative, and legal fees. The notice also included a warning that failure to pay the assessment fee would result in a lien against the property. The law firm subsequently recorded a lien on the homeowner's property. The homeowner filed a complaint, alleging that the debt collector's notice violated the FDCPA, the Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code § 1788 et seq. (Rosenthal Act), and the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. (UCL). As you may recall, the FDCPA requires a debt collector to send the debtor a written notice that informs the debtor of the amount of the debt, to whom the debt is owed, her right to dispute the debt within thirty days of receipt of the letter, and her right to obtain verification of the debt. See 15 U.S.C. § 1692g. Notice of the debtor's right to dispute the debt and to request the name of the original creditor must not be overshadowed or inconsistent with other messages appearing in the communication 15 U.S.C. § 1692g(b). Overshadowing or inconsistency may exist where language in the notice would "confuse a least sophisticated debtor" as to her validation rights. Terran v. Kaplan, 109 F.3d 1428, 1432 (9th Cir. 1997). In other words, "whether the initial communication violates the FDCPA depends on whether it is likely to deceive or mislead a hypothetical 'least sophisticated debtor.'" Id. at 1431. The district court granted the debt collector's motion to dismiss, concluding that the notice "complied with the clarity and accuracy requirements" of the FDCPA, and therefore "did not threaten to take action that could not legally be taken" as prohibited by the FDCPA. The district court dismissed the homeowner's state law claims as dependent on her FDCPA claims. The homeowner appealed, arguing that the notice violated § 1692g for two reasons. First, she contended that the notice demanded payment sooner than the expiration of the requisite thirty-day dispute period provided under 15 U.S.C. § 1692g. Second, she claimed that by threatening to record a lien within thirty-five days, irrespective of whether she disputed the debt, the law firm failed to effectively explain her right to dispute the debt. The debt collector countered that it was only enforcing a security interest and not attempting to collect a debt, and therefore the notice needed to comply only with the FDCPA's obligations relating to enforcement of security interests under 15 U.S.C. § 1692f(6). The debt collector also argued that even if it were subject to the notice requirements under 15 U.S.C. § 1692g, it complied with the statutory requirements because it sent the notice to perfect the HOA's right to record an assessment lien against the homeowner's property under California Civil Code § 5660. The Ninth Circuit disagreed, noting that the FDCPA defines "debt" as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." 15 U.S.C. § 1692a(5). Contrary to the debt collector's contentions, the Ninth Circuit held that the overdue HOA assessment fee was clearly a debt under § 1692a(5), because it related to the homeowner's household and arose from her membership in the HOA. The Court then examined whether the debt collector was subject solely to § 1692f(6). The debt collector argued that, based on the definition of a "debt collector" under 15 U.S.C. § 1692a(6), entities engaged in the enforcement of security interests are subject only to § 1692f(6). The Ninth Circuit disagreed. In a recent ruling, the Ninth Circuit held that where a California foreclosure trustee is engaged solely in the enforcement of a security interest and not in debt collection it is subject only to § 1692f(6) rather than the full scope of the FDCPA. Ho v. ReconTrust Co., NA, 840 F.3d 618, 620 (9th Cir. 2016). However, the Court observed that "[i]f entities that enforce security interests engage in activities that constitute debt collection, they are debt collectors." Id. The Ninth Circuit concluded that the debt collector sent the notice to collect payment of a debt – i.e., the amounts due to the HOA. Even though the debt collector also sought to perfect the HOA's security interest and preserve its right to record a lien in the future, the Court held that the effort to collect payment made the debt collector subject to the full scope of the FDCPA, including § 1692g and § 1692e. Turning to the homeowner's argument that the notice did not provide her with the required thirty days in which to dispute the debt, the Court observed that notice's demand for payment within thirty-five days of the date of the letter was inconsistent with her right to dispute a debt within thirty days of receipt of the letter. See 15 U.S.C. § 1692g(a); Cal. Civ. Code § 5660. The Ninth Circuit held that the least sophisticated debtor, when confronted with such a notice, would reasonably forgo her right to thirty days in which to dispute the debt and seek verification. The Court ruled that infringement of the debtor's right to thirty days in which to dispute the debt therefore plausibly violated 15 U.S.C. § 1692g. See Terran, 109 F.3d at 1434. The homeowner additionally argued that the least sophisticated debtor might not understand, on the basis of the notice, that upon notifying the debt collector of a dispute, all debt collection activities would "cease . . . until the debt collector obtains verification of the debt . . . and a copy of such verification . . . is mailed to the consumer by the debt collector." 15 U.S.C. § 1692g(b). In California, under the Davis-Stirling Act, a homeowners' association may not record a lien with a county recorder's office contemporaneously with mailing the demand letter, but instead must provide notice of the debt at least thirty days prior to recording a lien, during which time a debtor-homeowner may dispute the debt. Cal. Civ. Code § 5660. The Ninth Circuit explained that the obligations imposed on the HOA pursuant to the FDCPA, including the provision requiring suspension of debt collection activities pending debt verification, were thus consistent with the requirements the HOA must satisfy pursuant to the Davis-Stirling Act. Contrary to the debt collector's contentions, the Ninth Circuit held that the HOA's right to record a lien thirty days after providing notice under Cal. Civ. Coe § 5660 was not absolute, but instead was dependent on whether the homeowner disputed the debt. Pursuant to the Davis-Stirling Act, if the homeowner disputed the debt and requested an informal dispute resolution proceeding, the HOA must participate in dispute resolution "prior to recording a lien." Cal. Civ. Code § 5670. The Court agreed that the debt collector's threat of recording of a lien was a debt collection activity, which under the FDCPA must cease if the debtor disputes the debt and the debt collector had not yet mailed verification of the debt to the debtor. In allegedly failing to do so, the Court held that the debt collector's threat of filing a lien would overshadow the homeowner's right to dispute the debt, in violation of 15 U.S.C. § 1692g. The Ninth Circuit held that a least sophisticated debtor would likely (and incorrectly) believe that even if she disputed the debt and the debt collector had not yet mailed verification of the debt to her, the debt collector would record a lien on the thirty-fifth day after the date of the letter, and as a result would reasonably forgo her right to thirty days in which to dispute the debt and seek verification. Accordingly, the Court held that the alleged infringement of the debtor's right to thirty days in which to dispute the debt plausibly violated 15 U.S.C. § 1692g. In sum, the Ninth Circuit concluded that the homeowner had plausibly alleged a claim under the FDCPA (15 U.S.C. § 1692g), and therefore reversed the trial court's dismissal of that claim as well as her related claims under 15 U.S.C. 1692e(5), the Rosenthal Act, and the UCL. Ralph T. WutscherMaurice Wutscher LLPThe Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320Fax: (312) 284-4751 Mobile: (312) 493-0874Email: rwutscher@MauriceWutscher.com Admitted to practice law in Illinois Alabama | California | Florida | Georgia | Illinois | Indiana | Maryland | Massachusetts | Michigan | New Jersey | New York | Ohio | Pennsylvania | Texas | Washington, DC NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates and webinar presentations are available on the internet, in searchable format, at: Financial Services Law Updates and The Consumer Financial Services Blog™ and Webinars and California Finance Law Developments Posted by
FYI: 9th Cir Holds Company Willfully Violated FCRA By Including Liability Waiver in Disclosure Document
In a case of first impression, the U.S. Court of Appeals for the Ninth Circuit recently held that a prospective employer violated the federal Fair Credit Reporting Act ("FCRA") by including a liability waiver in the same document as the statutorily required disclosure notice for obtaining a job applicant's consumer report. In so ruling, the Ninth Circuit held that the company's conduct was "willful" as a matter of law, because the language of the statute clearly contradicted the company's interpretation, and whether or not the company "actually believed that its interpretation was correct is immaterial." A copy of the opinion is available at: Link to Opinion The plaintiff applied for a job with the defendant company in 2011. As part of the process, he signed a "Pre-employment Disclosure Release," which informed him that his credit history and other information would be considered by the company in deciding whether to hire him, authorized the company to obtain the applicant's consumer report, and waived his right to sue for violations of the FCRA. In May of 2014, the plaintiff filed a putative class action in federal court on behalf of himself and any persons whose consumer report was obtained by the company after receiving the subject disclosure within the two-year statute of limitations period. The complaint alleged that the liability waiver violated FCRA, at 15 U.S.C. § 1681b(b)(2)(A)(i), because FCRA requires that the disclosure document consist "solely" of the disclosure. The complaint did not seek to recover actual or compensatory damages, but instead sought to recover statutory and punitive damages, as well attorney's fees and costs. The district court dismissed the complaint without prejudice for failure to state a claim because "willfulness" was insufficiently pled. The amended complaint recited the same facts, but added citations to Federal Trade Commission (FTC) opinion letters and district court opinions that allegedly supported plaintiff's argument that the company knew or should have known that its disclosure document violated the FCRA. The district court again dismissed the complaint, this time with prejudice, because the plaintiff still had not sufficiently pled willfulness, reasoning that the FTC opinion letters "were informal staff opinions, not authoritative guidance[,]" and the district court opinions cited were inapposite because they were decided after the disclosure document at issue had been given to the plaintiff. The plaintiff appealed. On appeal, the Ninth Circuit began its analysis by finding that plaintiff had standing to sue because he alleged more than a "bare procedural violation," which if "divorced from any concrete harm," fails to satisfy the standing test established by the Supreme Court in Spokeo, Inc. v. Robins. This, the Ninth Circuit held, is because the "disclosure requirement at issue, 15 U.S.C. § 1681b(b)(2)(A)(i), creates a right to information by requiring prospective employers to inform job applicants that they intend to procure their consumer reports as part of the employment application process. The Ninth Circuit held that the authorization requirement § 1681b(b)(2)(A)(ii), creates a right to privacy by enabling applicants to withhold permission to obtain the report from the prospective employer, and a concrete injury when applicants are deprived of their ability to meaningfully authorize the credit check. By providing a private cause of action for violations of section 1681b(b)(2)(A), the Court held that Congress recognized the harm such violations cause, thereby articulating a 'chain[] of causation that will give rise to a case or controversy.'" The Ninth Circuit then turned to the question of whether the defendant company violated the FCRA by incorporating a liability waiver into the required disclosure notice, a matter of first impression in the federal appellate courts. The Court concluded that this practice violated the FCRA. First, the Court looked to the plain meaning of the statutory text, rejecting the company's argument that the language was inconsistent and ambiguous. The Ninth Circuit held that "[a]llowing an authorization on the same document as the disclosure is consistent with the purpose of the [FCRA]. … Had the statute required disclosure without conditioning the procurement of a consumer report on the job applicant's authorization, it would have failed to give the applicant control over the procurement of the personal information contained in the consumer report. On the other hand, had the statute conditioned the procurement of a report on the job applicant's authorization without mandating clear disclosure by the prospective employer Congress's purpose would have been frustrated because applicants would not understand what they were authorizing. The disclosure and authorization clauses therefore work in tandem to further the congressional purpose of protecting consumers from 'improper invasion[s] of privacy.'" The Court also found that the FCRA did not implicitly authorize including a liability waiver in the same document as the disclosure, reasoning that just because Congress allowed the disclosure document to be combined with the authorization "does not mean that the statute contains other implicit exceptions as well." Relying on the common law maxim of statutory interpretation "expressio unius est exclusio alterius," the Ninth Circuit rejected the company's argument that "a liability waiver is an implicit exception to the 'solely' requirement in 15 U.S.C. § 1681b(b)(2)(A)(i)." In addition, "an implied exception permitting the inclusion of a liability waiver on the same document as the disclosure does not comport with the FCRA's basic purpose … [and] would frustrate Congress's goa of guarding a job applicant's right to control the dissemination of sensitive personal information." The Ninth Circuit also rejected the company's argument that the FCRA contains explicit language allowing combination of the disclosure with the liability waiver because "a liability waiver is one type of authorization." The Court refused to speculate about the breadth of the term "authorization" because "Congress told us exactly what it meant when it described the authorization as encompassing only 'the procurement of [a consumer] report." Even if the statute were not as clear as the Court thought it to be, the Court reasoned that the company's argument was "inconsistent with the plain meaning of the term 'authorize.' … A consumer may authorize the procurement of a consumer report or waive an employer's liability, but he may not 'authorize' a 'waiver.'" The company also argued that "its inclusion of the liability waiver was permissible because even with the waiver, the disclosure was still 'clear and conspicuous.'" However, the Ninth Circuit found this argument to be irrelevant "[b]ecause the question of whether a disclosure is 'clear and conspicuous' within the meaning of Section 1681b(b)(2)(A)(i) is separate from the question of whether a document consists 'solely' of a disclosure…." Having found that FCRA was violated, the Ninth Circuit addressed whether the violation was willful, finding that it was willful as a matter of law. First, it explained that the Supreme Court has clarified that "willfulness" includes "actions taken in 'reckless disregard of statutory duty,' in addition to actions 'known to violate the Act.'" The Ninth Circuit rejected the company's argument that it did not act willfully because the statute's text is unclear, finding that the company's reading of the statute was not objectively reasonable because "the FCRA unambiguously bars a prospective employer from including a liability waiver on a disclosure document provided a job applicant pursuant to Section 1681b(b)(2)(A)." The Court held that the statute clearly contradicted the company's interpretation, whether or not the company "actually believed that its interpretation was correct is immaterial." The Court found that because the company "ran an 'unjustifiably high risk of violating the statute… [and] acted in 'reckless disregard of statutory duty … [i]ts violation of the FCRA was therefore willful under 15 U.S.C. § 1681n." Finally, the Ninth Circuit rejected the company's argument that the FCRA's two-year statute of limitations barred the plaintiff's claim because he discovered the violation when the disclosure was given to the plaintiff, reasoning that "a prospective employer does not violate Section 1681b(b)(2)(A) by providing a disclosure that violates the FCRA's disclosure requirement. … The employer violate the FCRA only where, after violating its disclosure procedures, it 'procure[s] or cause[s] to be procured' a consumer report about the job applicant." The Court concluded that since the FCRA "unambiguously bars the inclusion of a liability waiver on the same document as a disclosure made pursuant to 15 U.S.C. § 1681b(b)(2)(A)[,] [the company] willfully violated the statute by procuring [plaintiff's] consumer report without providing a disclosure 'in a document that consist[ed] solely of the disclosure.'" Accordingly, the trial court's dismissal order was reversed the case remanded. Ralph T. WutscherMaurice Wutscher LLPThe Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320Fax: (312) 284-4751 Mobile: (312) 493-0874Email: rwutscher@MauriceWutscher.com Admitted to practice law in Illinois Alabama | California | Florida | Georgia | Illinois | Indiana | Maryland | Massachusetts | Michigan | New Jersey | New York | Ohio | Pennsylvania | Texas | Washington, DC NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates and webinar presentations are available on the internet, in searchable format, at: Financial Services Law Updates and The Consumer Financial Services Blog™ and Webinars and California Finance Law Developments Posted by
FYI: 7th Cir Opens Door to Possible CAMELS Rating Litigation Challenges
The U.S. Court of Appeals for the Seventh Circuit recently held that the presence of capital as one of six components in the FDIC's CAMELS rating does not mean that the rating as a whole is committed to agency discretion for the purpose of 5 U.S.C. §701(a)(2) and therefore unreviewable. A copy of the opinion is available at: Link to Opinion As you may recall, the FDIC is charged with conducting a full-scope on site examination every 12-18 months of the banks whose deposits it insures. In June 2015, the FDIC examined a bank and assigned it a 4 in the Uniform Financial Institutions Rating System, called a "CAMELS" rating. In this system, the lowest rating is a 5 and the highest rating is a 1. The bank filed suit against the FDIC alleging the rating should have been a 3, and that the lower rating was arbitrary and capricious. The district court dismissed the suit for want of jurisdiction, ruling that the assignment of ratings is committed to agency discretion by law under 5 U.S.C. § 701(a)(2). The Seventh Circuit held that, when a private party seeks judicial review of administrative action, 5 U.S.C. § 702 and 28 U.S.C. § 1346(a)(2) supply subject matter jurisdiction, and if there are no standards for judicial review -- the usual meaning of "committed to agency discretion by law ' -- then the lawsuit should be dismissed on the merits because the plaintiff cannot show that the agency's action was unlawful. See Vahora v. Holder, 626 F.3d 907, 916–17 (7th Cir. 2010). The Court noted that 5 U.S.C. § 701(a)(2), which prevents review of matters committed to agency discretion by law, does not refer to or limit §702, which creates subject-matter jurisdiction for claims under the Administrative Procedure Act (APA). Further, the Seventh Circuit noted that when the Supreme Court had considered arguments under §701(a)(2) on the merits, it had not remanded the cases with instructions to dismiss for want of jurisdiction. The Seventh Circuit noted that the assignment of a CAMELS rating by the FDIC is not a final decision, where APA review would apply. The rating affects how much a bank must pay for deposit insurance, but here, the bank did not ask the FDIC to lower the rate, only the rating. Further, Court noted that the bank did not request review by the FDIC Supervision Appeals Review Committee. According to the Seventh Circuit, the absence of a final decision would be grounds to dismiss the suit. The effect of CAMLES ratings on deposit insurance premiums creates a concrete stake that makes the dispute judiciable. Yet, the fact that the bank may have initiated the suit prematurely "does not require a court to dismiss the suit when the agency has acquiesced in immediate review." The FDIC argued that the rating is unreviewable because it has discretion to set appropriate levels of capital for a banking institution, as necessary or appropriate in light of the circumstances of the banking institution under 12 U.S.C. § 3907(a)(2). The bank argued that the CAMELS rating system uses six factors, which are rated separately, and the rating as a whole is comprehensive of those six factors, including capital adequacy. The Tenth Circuit previously held that capital adequacy determinations are within the FDIC's discretion and therefore unreviewable, yet management, liquidity, and interest-rate sensitivity were reviewable. See Frontier State Bank v. FDIC, 702 F.3d 588, 593–97 (10th Cir. 2012). The bank argued it was not challenging the capital adequacy factor, but the FDIC argued the bank was attempting to disguise a challenge to a decision protected by 12 U.SC. § 3907(a)(2). The district court did not attempt to resolve this conflict. The Seventh Circuit ordered that the trial court should address these issues on remand. The Seventh Circuit held that "the presence of capital as one of six components in a CAMELS rating does not necessarily mean that the rating as a whole is committed to agency discretion for the purpose of §701(a)(2)." Because the parties did not brief the question, the Seventh Circuit did not "decide whether one or more components of a CAMELS rating other than capital may be committed to agency discretion." Accordingly, the Seventh Circuit vacated the judgment and remanded the matter to the trial court . Ralph T. WutscherMaurice Wutscher LLPThe Loop Center Building 105 W. Madison Street, 18th Floor Chicago, Illinois 60602 Direct: (312) 551-9320Fax: (312) 284-4751 Mobile: (312) 493-0874Email: rwutscher@MauriceWutscher.com Admitted to practice law in Illinois Alabama | California | Florida | Georgia | Illinois | Indiana | Maryland | Massachusetts | Michigan | New Jersey | New York | Ohio | Pennsylvania | Texas | Washington, DC NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you. Our updates and webinar presentations are available on the internet, in searchable format, at: Financial Services Law Updates and The Consumer Financial Services Blog™ and Webinars and California Finance Law Developments Posted by