In a decision two years in the making, on Wednesday, November 27, 2013, the Sixth Circuit Court of Appeals brought some clarity to the use of affiliated business arrangements (“ABAs”) under Real Estate Settlement Procedures Act (RESPA). In doing so, the Court dealt a serious blow to what has become a veritable cottage industry for certain RESPA class action plaintiffs’ counsel. The Court affirmed the district court’s summary judgment ruling, and held that HUD’s RESPA Policy Statement setting forth certain guidelines as to what would be considered in determining whether an affiliated business is a “sham” (61 Fed. Reg. 29,258 (June 7, 1996) (“Sham Guidelines”)), was not entitled to deference and could not override Defendants’ showing that they had complied with RESPA’s section 8(c)(4) statutory safe harbor for affiliated business arrangements. See Carter v. Wells Bowen Realty Inc., Slip Op. No. 10-3922 at 5-9 (6th Cir. Nov. 27 2013). This decision—in which an amicus brief, authored by the authors of this article, played an important role—will have many implications for ABAs and for future RESPA class actions. Continue reading this entry
On November 20, 3013, the Consumer Financial Protection Bureau announced its first enforcement action against a payday lender. Cash America International was fined $5 million and was ordered to refund $14 million to its borrowers due to violations of the Military Lending Act. This action was made possible by amendments to the MLA signed into law by President Obama in January, 2013, that gave the CFPB new authority to enforce the MLA. Moreover, the CFPB is working with the Department of Defense, the FTC and with federal banking regulators on new regulations that will expand the types of loans covered by the MLA.
MLA regulations currently impose a 36% annual interest rate cap on extensions of “consumer credit”, which is defined only as tax refund loans, certain payday loans, and short-term auto title loans made to active duty service members and their dependents. According to recent testimony before a Senate committee by Holly Petraeus, CFPB Assistant Director with the Office of Servicemember Affairs, “lenders have easily found ways to get outside of the definitions” and have been able to offer high cost longer term auto loans and installment loans, loans in amounts greater than $2,000, and open-end credit. Not surprisingly, the payday lender trade groups oppose expanding the scope of the “consumer credit” definition. Continue reading this entry
Today, in a broadcast streamed live on the internet, the CFPB unveiled the long awaited final rule that contains the Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (“RESPA”), Regulation X, and the Truth-In-Lending Act (“TILA”), Regulation Z.
The final rule applies to most closed-end consumer mortgage loans (including timeshare estate products), but explicitly exempts home equity lines of credit, reverse mortgages, mortgage loans secured by a mobile home or by a dwelling that is not attached to real property, and loans made by a creditor who makes five or fewer mortgages in a year. The new rule is effective, and new disclosures will be required to be given to consumers for applicable mortgage applications received on or after August 1, 2015. Continue reading this entry
The Consumer Financial Protection Bureau’s (“CFPB”) Remittance Transfer Rule, also known as Regulation E, became effective on October 28, 2013. The Rule established the basic rights, liabilities, and responsibilities of consumers who use remittance transfer services and of financial institutions or other persons that offer these services. The Rule generally applies to transactions that qualify as remittance transfers and are sent by people or companies that qualify as remittance transfer providers. Remittance transfers are electronic transfers of funds that are more than $15 requested by consumers in the United States and sent to people or companies in foreign countries. The rule applies to most companies that offer remittance transfers, including banks, thrifts and credit unions, among others. Continue reading this entry
In a recent case, Hunt v. 21st Mortg. Corp., 2013 U.S. Dist. LEXIS 132574, (N.D. Ala.,. Sept. 17, 2013) the court concluded that based on the facts of that particular case, it was limiting the definition of “automatic telephone dialing system” to mean a system that had the present capacity, at the time the calls were being made, to store or produce and call numbers from a number generator.
The court’s holding, however, appears to be sufficiently narrow so as not to have too drastic of an effect on other TCPA litigation. The court was careful to explain that it agreed with the vast majority of courts that have held that generally telephone systems that are fully equipped and ready to automatically dial numbers at a moment’s notice, even if not used, meet the “automatic telephone dialing system” definition. The court believed that extending that definition to phone systems that could be upgraded to allow for automatic telephone dialing was too broad, because if taken literally it would mean that any telephone would qualify, including individual cell phones. Thus, the court limited the definition to include only phones with the “present capacity” to store or produce and call numbers from a number generator. Continue reading this entry