Consumer Financial Protection Bureau Reporter

National Mortgage Database to Be Developed
The Consumer Financial Protection Bureau and Federal Housing Finance Agency have agreed to partner on the creation of a National Mortgage Database to provide a comprehensive repository of detailed mortgage loan information. The database will be used primarily to support the agencies’ policymaking and research efforts and to help regulators better understand emerging mortgage and housing market trends. It will be the first comprehensive repository of detailed mortgage loan information. The CFPB’s notice is at ¶200-151.

Deadline for New Mortgage Disclosures Extended
The Consumer Financial Protection Bureau has extended indefinitely the effective date of a requirement that consumers be given new mortgage loan disclosures that are required by the Dodd-Frank Act. The requirements were to take effect Jan. 21, 2013; however, to give businesses more time to comply and to avoid confusing consumers, the CFPB will not require that the disclosures be implemented until mortgage disclosure forms that integrate the requirements of the Truth in Lending Act and the Real Estate Settlement Procedures Act take effect. These integrated disclosure forms have been proposed, but no final rule has been adopted. This story appears in Report No. 66, Dec. 3, 2012.

CFPB Plans Revisions to Remittance Transfer Rules
The Consumer Financial Protection Bureau has said that it intends to amend the not-yet-effective rules on international remittance transfers to address several problems with the rules as they now stand. In addition, the bureau plans to delay the effective date of the rules, which is now set for Feb. 7, 2013, until 90 days after the amendments are adopted. The rules, which establish notice, disclosure, dispute resolution and other consumer protections for individuals using international remittance transfer services, are found in Subpart B of Reg. E—Electronic Fund Transfers (12 CFR 1005). This story appears in Report No. 66, Dec. 3, 2012.

Federal Banking Law Reporter

Regulators Issue Statement on Restricted Charter Conversions
The federal prudential regulatory agencies and the Conference of State Bank Supervisors have jointly issued a description of the process to be followed when a financial institution subject to ongoing regulatory enforcement activity wishes to convert to a different charter. The Dodd-Frank Act prohibits such conversions without the agreement of the regulatory agencies that are involved, and it requires that conditions be imposed to ensure that the situation that gave rise to the enforcement activity is remedied. This story is in Report No. 2496, Nov. 29, 2012

Little Tucker Act Does Not Waive Immunity from FCRA Suit
Because the Fair Credit Reporting Act includes a specific statement of judicial remedies, the Little Tucker Act cannot be relied on to establish a waiver of sovereign immunity, the Supreme Court has unanimously decided. As a result, an attorney suing the government for an alleged violation of the FCRA will need to convince the U.S. Court of Appeals for the Seventh Circuit that the FCRA waives sovereign immunity and that his suit can proceed. The FCRA prohibits the inclusion on an electronically-printed receipt of a credit card expiration date if the receipt is given to a consumer at the point of the transaction. The attorney used a credit card to pay court filing fees on Pay.gov. According to the attorney, the electronic receipt—which appeared only on his computer screen—displayed the card expiration date, leading him to file a class action against the government. The federal district court dismissed the attorney’s suit after deciding that the FCRA did not include an explicit waiver of sovereign immunity that would permit a suit for damages against the government. The district court, however, did not address the attorney’s argument that a waiver could be found in the Little Tucker Act, which generally waives sovereign immunity against damage suits. On appeal, the U.S. Court of Appeals for the Federal Circuit denied the government’s request for a transfer to the U.S. Court of Appeals for the Seventh Circuit—the circuit in which the district court was located—and reversed the district court. The Federal Circuit said that a waiver of sovereign immunity could be found in the Little Tucker Act because the FCRA could be "fairly interpreted as mandating compensation by the Federal Government for the damage sustained."  The Supreme Court rejected the Federal Circuit’s "fairly interpreted" formulation and said that the Little Tucker Act was irrelevant. U.S. v. Bormes (US) is reported at ¶101-363.

Review of FACT Act Statutory Damages Suit Sought
A consumer has asked the Supreme Court to decide whether a credit card company willfully violated the Fair and Accurate Credit Transactions Act by printing the final digits of an account number on a receipt and whether he could sue for statutory damages even though he had suffered no actual injury. The problem arose from an ambiguity in the FACT Act over the meaning of "account number." According to the U.S. Court of Appeals for the Seventh Circuit, since the act did not define "account number." in a way that distinguished it from a different "credit card number" also used by the company, a violation—if there was one—could not have been willful. In that case, the consumer needed to show actual damages to be able to sue. The appeal was filed as van Straaten v. Shell Oil Products Company, LLC, Dkt. No. 12-489. See ¶101-321.

Regulators Advise on Securities Investments
The Federal Reserve Board and Federal Deposit Insurance Corp. have issued guidance to state banks on how they are to determine whether securities are of investment grade without relying on ratings issued by nationally recognized statistical rating organizations (NRSROs). As of Jan. 1, 2013, state banks no longer may rely solely on these ratings in determining whether securities are of investment grade and thus may be purchased. Under federal law, state banks are subject to the same restrictions as national banks when they purchase securities, the agencies said, and they also are bound by the national bank regulations issued by the Office of the Comptroller of the Currency. The Dodd-Frank Act required all of the regulatory agencies, including the OCC, to amend their regulations to remove references to and requirements that banks rely on ratings by NRSROs; instead, banks are to make their own assessments of a security’s creditworthiness. SR 12-15 and FIL-48-2012 are at ¶62-265.

Fee Schedule for FRBank Priced Services Approved
The Federal Reserve Board has approved the fee schedules, effective Jan. 2, 2013, for payment services the Federal Reserve Banks provide to depository institutions. The FRBanks project that they will recover 102.7 percent of their priced services costs in 2013. They also expect to recover all of their actual and imputed expenses, and earn a profit that is above their targeted return. The Fed’s notices are at ¶49-175 and ¶49-176. Docket No. OP-1447 is at ¶151-840.

FSOC Proposes Money Market Reform
The Financial Stability Oversight Council has voted to propose three rules that would impose structural reforms intended to mitigate the risks posed by money market mutual funds to the financial system. According to the FSOC, the proposals would reduce the risk of runs and significant problems spreading through the financial system. The FSOC recommendations are at ¶151-862.

Consumer Credit Guide

State Claims Against Bank Dismissed for Lack of Injury, Loss
The U.S. District Court for the District of Maryland recently addressed the sufficiency of a consumer’s class-action claims under the Maryland Credit Grantor Closed End Credit Statute (Maryland CLEC) and the Maryland Consumer Protection Act (Maryland CPA) against a bank concerning the bank’s repossession and sale of the consumer’s car. Among other things, the consumer alleged that the bank violated the Maryland CLEC by failing to notify her in writing of the time and place that her repossessed vehicle was to be sold, by failing to provide her with the purchaser’s name and address as well as the number of bids sought and received before the vehicle was sold, and by charging her for costs and expenses the bank incurred during the sale of her vehicle. Similarly, the consumer alleged that the bank violated provisions of the Maryland CPA by misrepresenting the final date on which the consumer’s vehicle could be redeemed, and by notifying the consumer in writing that she still owed a remaining balance on her loan even after the sale of the car—money the bank could not collect due to the bank’s alleged failure to comply with Maryland law. Ultimately, the federal trial court dismissed both state claims against the bank because the consumer failed to adequately plead facts supporting any claimed injury or loss; the consumer’s claims failed to meet established pleading standards. Epps v. JP Morgan Chase Bank, N.A. (DMd) ¶52,456.

State Law Update

Mississippi: The Department of Banking and Consumer Finance has amended its check cashing regulations that were initially issued in 2003. The amendments clarify and update provisions relating to licensee records, annual percentage rate computation, check amount limits for joint accounts and multiple checks, disclosures and advertising. The amended regulations are reflected beginning at Mississippi ¶8101.

Pennsylvania: Governor Tom Corbett recently signed a comprehensive legislative package modernizing the state's banking code and related lending laws. The legislation aims to improve Pennsylvania’s competitive position, enhance the viability of state-chartered banks and savings banks, maintain states’ rights and make the Commonwealth more attractive for both in-state and out-of-state financial institutions to do business. Amendments to the Loan Interest and Protection Law, commonly known as the general usury statute, repeal duplicative disclosure requirements relating to variable rate mortgage loans. The laws are reflected beginning at Pennsylvania ¶6081.

Texas: The Finance Commission of Texas, Office of Consumer Credit Commissioner (OCCC) has amended its rules governing motor vehicle installment sales to implement changes resulting from the OCCC's prior rule review. Substantive changes include streamlining licensing procedures, adding readable typefaces for the standard form of disclosure of equity, and revising notification procedures for certain business changes. The rule amendments are reflected beginning at ¶9131A.2.

Smart Charts Highlights
Some of the latest changes reflected in Consumer Credit Smart Charts include:

• The Legislative Developments Smart Charts are updated regularly as legislation is enacted, allowing users to keep up to date without waiting for a scheduled Report. Links to legislative summaries and to full text of laws amended, repealed or added are provided. Recent updates include:
• Pennsylvania: Banking Law Modernization.

Secured Transactions Guide

Article 9 Notice Provisions not Preempted by Federal Regulations
Repossession notices required by Article 9 of the Ohio UCC were not preempted by the Office of the Comptroller of the Currency regulations because they did not constitute “other credit-related documents.” After two debtors defaulted on a loan, a bank repossessed and sold the vehicle. The debtors brought a class action against the bank, arguing that the bank violated Ohio law by failing to disclose the correct date and minimum bid of the public sale, by failing to conduct a commercially reasonable sale, and by charging prohibited collection fees. The bank responded that the state law requirements were preempted by OCC regulations. The court disagreed. The documents covered by the regulation were documents dealing with disclosures, advertisements, contracts and billing, which related to the beginning of a credit relationship. They were not documents dealing with the end of a credit relationship, such as loan collection and repossession of collateral. Moreover, the regulation explicitly exempted from preemption state laws on debt collection rights. Thus, state laws mandating that consumers be given specified notices if the collateral securing a loan was to be repossessed and sold were not preempted. White v. Wells Fargo Bank, N.A(NDOhio) is at ¶56,297.

Buyer Purchased Vessel Free of Prior Claims and Liens
An individual that purchased a vessel at a court-ordered auction to enforce a preferred ship mortgage received the vessel free and clear of all prior liens and encumbrances. A bank filed an action to foreclose its preferred ship mortgage on the vessel. Although the vessel’s owner, mortgagor and a lien claimant were served with a notice of the vessel’s arrest, no claims for the vessel or any other answer to the bank’s complaint were filed. The vessel was subsequently sold at auction to an individual and the bank sought a decree that all liens on the vessel that were in existence prior to the sale were terminated. Federal law provides that when a vessel is sold by order of a district court in a civil action to enforce a preferred ship mortgage or maritime lien, any claim to the vessel existing on the date of the sale is terminated and the vessel is sold free of all claims. In accordance with the law, all other liens against the vessel were terminated when the vessel was sold. Branch Banking and Trust Co. v. The Vessel, Maggie, Official No. 1205274 (EDTenn) is in Report No. 1132, Nov. 20, 2012.

State Update

Pennsylvania: Pennsylvania has amended its definitions of "commercial implement of husbandry" and "multipurpose agricultural vehicle." The definition of "commercial implement of husbandry" has been amended to remove the requirements that the vehicle be used commercially and be operated or moved upon highways for no more than 180 days of a calendar year. "Multipurpose agricultural vehicle" is now defined as a vehicle which is 62, formerly 60, inches or less in width and 2,000, formerly 1,200, pounds or less in dry weight. The vehicle must be used only for agricultural operations and is limited to incidental use of the highways.  The law appears at Pennsylvania ¶1012.

The exception for motor vehicle dealers to the procedures for transferring ownership of a new vehicle has been amended to add manufacturers’ statements of origin to the procedures. The delivery of a certificate of title or a manufacturer’s statement of origin by the dealer at the time of delivery of the vehicle upon resale is not required if prior to delivery of the vehicle the dealer obtains the applicable powers of attorney to properly execute the transfer of title or the manufacturer’s statement of original and the dealer requests and receives verification from the state of any lienholders, ownership, odometer information and title brands, if the vehicle is titled. The law is at Pennsylvania ¶1023.

Financial Privacy Law Guide

Evidence of Fax Receipt Not Required for TCPA Action
An individual who brought a class action suit against a company for sending over 300,000 unsolicited fax advertisements was not required to provide evidence that the faxes were received, the Supreme Court of Georgia has held. Over a two-year period, the company, a gutters, siding and windows service, had allegedly directed a communications company to send 318,000 unsolicited advertisements to fax machines in the Atlanta area. At trial, the company admitted to sending 306,000 advertisements, and the trial court awarded the class $1,500 in damages for each fax that was sent, totaling $459 million. The company appealed, arguing that damages were erroneously based on the number of faxes sent rather than the number of faxes received. To establish a TCPA claim, an individual must demonstrate: (1) the sender used a fax machine, computer, or other similar device to send the fax; (2) the fax was unsolicited; and (3) the fax contained an advertisement. "The statute does not make actual receipt of a fax an element of a private right of action," the court noted. A story on A Fast Sign Company, Inc. v. American Home Services, Inc. (GaSCt) is in Privacy Extra, Nov. 30, 2012.

Text Message Confirming Opt-Out Did Not Violate TCPA
A bank did not violate the Telephone Consumer Protection Act (TCPA) by sending a consumer a text message confirming that he had opted out of receiving text messages, the U.S. District Court for the Southern District of California has held. Agreeing with the recent decision in Ibey v. Taco Bell Corp. (SDCal) (see ¶100-594), the court concluded that the TCPA does not impose liability for a single, confirmatory text message. In addition, a confirmatory response could not be considered an invasion of privacy. The court concluded that a finding to the contrary would ‘stretch an inflexible interpretation beyond the realm of reason.” Ryabyshchuck v. Citibank South Dakota, N.A. (SDCal) is at ¶100-607.

Company to Pay for Tossing Consumer Data in Dumpsters
A company that provides management services to more than 300 payday loan and check cashing stores, and an affiliated company that owns and operates several stores, will pay $101,500 to settle FTC charges that they violated federal law by allowing sensitive consumer information to be tossed into trash dumpsters. According to the FTC complaint, the companies violated the FTC’s Disposal Rule by failing to take reasonable steps to protect against unauthorized access to consumer information in the disposal of credit reports. They also allegedly violated the Gramm-Leach-Bliley Safeguards Rule and Privacy Rule, which require financial institutions to develop and use safeguards to protect consumer information and to deliver privacy notices to consumers. Further, the FTC charged the companies with violating the FTC Act by misrepresenting that they had implemented reasonable measures to protect sensitive consumer information. This story is in Report No. 137, Nov. 13, 2012.

Individual Retirement Plans Guide

Late Rollover Excused by Confusing Bank Website
An individual was granted a waiver of the 60-day rollover requirement with respect to a distribution from a profit sharing plan to an IRA at a financial institution. The failure of the attempted rollover was due to an error on the financial institution’s website where the individual believed he had opened a rollover IRA account. However, due to the confusion with the web site the taxpayer had opened a regular investment account. The financial institution acknowledged the potential for confusion in using the webpage to open an IRA account. The individual was, therefore, granted 60 days from the issuance of the letter ruling to complete the rollover. IRS Letter Ruling 201240032 is at ¶6388.