In In Re: American Express Merchants’ Litigation (No. 06-1871-cv), a two judge panel of the Second Circuit breathes new life into arguments to strike arbitration clauses. The court held that, because of the allegedly prohibitive costs for pursuing antitrust claims on an individual basis, forcing the plaintiffs to pursue their claims in arbitration would prohibit them from effectively vindicating their federal claims. The court therefore held that the arbitration agreement at issue was unenforceable. Continue reading this entry
Supreme Court In CompuCredit Corp. v. Greenwood Gives Another Victory to Proponents of Arbitration
Posted in Class ActionsFollowing on the heals of its pro-arbitration decision in Concepcion from earlier this year, the United States Supreme Court ruled today that a federal statute that provides for a private right of action and even for class actions, but is silent as to whether these claims can proceed in arbitration, does not trump the Federal Arbitration Act. See CompuCredit Corp. v. Greenwood, 566 U.S. __ (2011).
As the U.S. Supreme Court has stated on numerous occasions, there is “a liberal federal policy favoring arbitration.” Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). In CompuCredit Corp. v. Greenwood, No. 10-948 (U.S. Jan. 10, 2012), the Court trotted out that old refrain again today, holding that the fact that a federal statute provides for a private right of action—while silent on the issue of whether claims under the statute can be pursued in arbitration—does not mean that the plaintiffs can get out of their agreement to arbitrate with the defendant. The plaintiffs were unhappy with the agreement for a credit card they entered into. They argued that the Credit Repair Organizations Act (CROA), 15 U.S.C. § 1679 et seq., specifically provided a requirement for the defendant to disclose to consumers that “You have a right to sue a credit repair organization that violates the Credit Repair Organization Act.” 15 U.S.C. § 1679c(a). The CROA also provides that “Any waiver by any consumer of any protection provided by or any right of the consumer under this subchapter—(1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person.” 15 U.S.C. § 1679f(a).
Defying Senate, President Obama purportedly makes recess appointment of Cordray to lead CFPB
Posted in Consumer Financial Protection BureauFor nearly six months, President Obama’s nomination of Richard Cordray to be the first Director of the Bureau of Consumer Financial Protection (CFPB) has been blocked by Senate Republicans. Today, the President is attempting to call the Senate’s bluff by making a legally questionable recess appointment of Cordray.
Under Article II, Section 2, Clause 3 of the federal Constitution, the President is empowered to make appointments to fill vacancies while the Senate is in recess. These so-called “recess appointments” have a limited duration, expiring when the next session of Congress ends, so Cordray’s appointment would not be effective for the full five-year term contemplated by the Dodd-Frank Act unless he were renominated by the President and confirmed by the Senate.
The Fourth Circuit Declines to Put TILA Form Over Substance
Posted in Truth in Lending ActIn the recent decision, Watkins v. SunTrust Mortg., Inc., No. 10-1915, 2011 WL 6188751 (4th Cir. Dec. 14, 2011), the Fourth Circuit ruled on the specific information that a lender must provide to a borrower in order to comply with TILA’s rescission notice requirement.
The Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”) and the corresponding Regulation Z, 12 C.F.R. pt. 226, require that a borrower in a secured credit transaction be provided with notice of his or her right to rescind the transaction. This rescission right lasts for three days after the closing, unless the lender fails to provide the TILA mandated rescission notice, in which case, the rescission period can last for up to three years.
CFPB Republishes Certain Existing FTC Rules
Posted in Consumer Financial Protection BureauThe Consumer Financial Protection Bureau (CFPB) issued three interim final rules, each effective December 30, 2011, which republish and make minor, nonsubstantive changes to certain existing regulations of the Federal Trade Commission (FTC). The Dodd-Frank Act transferred rulemaking authority for those existing regulations to the CFPB effective July 21, 2011.
CFPB Regulation F (12 CFR Part 1006) republishes the FTC’s regulation (16 CFR Part 901) on procedures for states to apply for exemptions from certain provisions of the Fair Debt Collection Practices Act where the states’ laws are at least as protective of consumers as the federal law. CFPB Regulation I (12 CFR Part 1009) republishes the FTC’s regulation (16 CFR Part 320) on disclosure requirements for depository institutions which do not maintain federal deposit insurance. CFPB Regulation N (12 CFR Part 1014) republishes the FTC’s Mortgage Acts and Practices–Advertising Rule (16 CFR Part 321). CFPB Regulation O (12 CFR Part 1015) republishes the FTC’s Mortgage Assistance Relief Services Rule (16 CFR Part 322).
The CFPB has apparently elected to designate its regulations by letter, which had been the convention used by the Federal Reserve Board. The new CFPB Regulations F, I, N and O should not be confused with existing Federal Reserve Board Regulations F, I, N and O, which address topics such as correspondent banking, issuance and cancelation of Federal Reserve Bank capital stock, relations with foreign banks and bankers, and loans to bank insiders.
Seventh Circuit Reverses Summary Judgment in Dispute Over Truth-in-Lending Act Rescission Notices
Posted in Truth in Lending ActCan a lender ever obtain summary judgment in a dispute over delivery of Truth-in-Lending Act rescission right disclosures? A recent decision by the Seventh Circuit raises significant doubts.
The Truth-in-Lending Act (TILA) requires that lenders notify consumer borrowers in writing of their right to rescind a mortgage loan transaction (secured by their principal residence) within three business days following consummation of the transaction. In implementing this requirement, Federal Reserve Board Regulation Z increased lenders’ burden by requiring them to deliver two such notices in order for notice to be effective (12 C.F.R. § 226.23(b)(1)). If no notice–or only one notice–is given, the consumer may rescind the transaction within three years (rather than three business days) from closing (12 C.F.R. § 226.23(a)(3)). Under TILA, a consumer’s written acknowledgment of receipt of disclosures creates a rebuttable presumption of delivery.
CFPB Report on Credit Card Complaints Proposes Publicly Accessible Database of Complaint Data
Posted in Consumer Financial Protection BureauThe website of the Bureau of Consumer Financial Protection (CFPB) has been soliciting consumer complaints since the CFPB opened for business on July 21, 2011. The CFPB has issued an interim report, detailing the 5,074 complaints the CFPB has received from consumers through November 15, 2011, and now proposes a publicly accessible database of consumer credit card complaints.
Of the complaints received by the CFPB through November 15, 2011, card issuers reported full or partial resolution of the complaints in 3,151 cases (74%), no relief granted in 845 cases (19.8%), and continuing issuer review of the complaints in 258 cases (6.1%). Of the reported resolutions, consumers confirmed that the complaints were satisfactorily resolved in 2,238 cases (71%) and disputed in 400 cases (12.7%), with the 513 cases (16.3%) pending the consumer’s review of the issuer’s reported resolution.
Who’s Your Regulator? Federal Regulatory Agencies Jointly Clarify CFPB Jurisdiction
Posted in Consumer Financial Protection Act; Consumer Financial Protection BureauA new Supervisory Statement clarifies when insured depository institutions and insured credit unions will be subject to supervision and enforcement by the Bureau of Consumer Financial Protection (CFPB). The CFPB issued the Supervisory Statement jointly with the federal prudential regulators–the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), and the National Credit Union Administration (NCUA).
Section 1025 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) gives the CFPB exclusive supervisory authority and primary enforcement authority with respect to federal consumer financial laws over any insured bank, thrift or credit union and its affiliates, but only if its total assets exceed $10 billion (Large Institutions). For other institutions and their affiliates, the federal prudential regulators retain supervisory and enforcement authority with respect to federal consumer financial laws.
Bureau Issues Bulletin on Discretionary Notices of Violation
Posted in Bureau of Consumer Financial ProtectionToday the Consumer Financial Protection Bureau issued the first in a series of periodic bulletins it plans to issue on the policies and priorities of its Office of Enforcement.
Under CFPB Bulletin 2011-04 (Enforcement), the Bureau’s enforcement staff will have the discretion (but not an obligation) to notify potential enforcement targets of potential violations and give them an opportunity to respond before the Bureau recommends or commences an enforcement action. The Bureau will not give pre-enforcement notices if it deems them inappropriate, such as where urgent action is required or in cases of ongoing fraud.
CFPB Releases Supervision and Examination Manual
Posted in Consumer Financial Protection BureauToday the Bureau of Consumer Financial Protection issued its initial Supervision and Examination Manual. The Bureau states that the manual “is a guide to how the CFPB will supervise and examine consumer financial service providers under its jurisdiction for compliance with Federal consumer financial law.”
Much of the manual will be familiar to both examiners and supervised institutions. The manual incorporates examination procedures developed under the auspices of the Federal Financial Institutions Examination Council (FFIEC) for many of the laws in the Bureau’s supervisory jurisdiction. The Bureau will also use FFIEC’s Uniform Consumer Compliance Rating System.