CFSL Bulletin The latest Consumer Financial Services Litigation news, developments, and legal thinking

Category Archives: Preemption

Dodd-Frank Did Not Materially Change National Bank Act Preemption Standards

Posted by Michael C. Lueder on Posted in Preemption

The Dodd-Frank Wall Street Reform and Consumer Protection Act did not materially change the National Bank Act preemption standards, according to Iowa federal judge James E. Gritzner. In U.S. Bank National Association v. Schipper, the bank filed a declaratory judgment action against the Superintendent of the Iowa Division of Banking and other state officials in connection with their enforcement of the Iowa Electronic Transfer of Funds Act (“EFTA”). The issue centered around U.S. Bank’s provision of ATM services to certain Iowa state-chartered banks. 

U.S. Bank data processing centers handled Iowa state chartered bank “On-Us” transactions without Iowa regulatory interference. (“On Us” transactions are those where the bank’s customer is using his own bank’s ATM to withdraw funds.) However, U.S. Bank was not permitted to handle “Not-Us” transactions (customers using an ATM his bank does not own) because it had not registered as a central routing unit (“CRU”) with the State of Iowa. 

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The Ninth Circuit Permits Cumulative Recovery Under the FDCPA and California’s Rosenthal Act

Posted by Michael S. Lawrence on Posted in Class Actions; Fair Credit Reporting Act; Fair Debt Collection Practices Act; Preemption; State Consumer Protection Laws

The recent Ninth Circuit decision, Gonzalez v. Arrow Financial Services, LLC, — F.3d —, 2011 WL 4430844 (9th Cir Sept. 23, 2011), addresses several issues relating to claims brought under the Fair Debt Collection Practices Act (“FDCPA”) and examines that statute’s interaction with the corresponding California debt collection statute, the Rosenthal Act.

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Ninth Circuit Issues Ruling on Limitations of Preemption

Posted by Timothy S. Crisp on Posted in Preemption; State Consumer Protection Laws

This week, the U.S. Court of Appeals for the Ninth Circuit ruled that the Rees-Levering Act (also known as the California Automobile Sales Finance Act), a California law regulating debt collection and repossession, is not preempted by the National Bank Act.

In Aguayo v. U.S. Bank, ___ F.3d ___, No. 09-56679 (9th Cir. Aug. 1, 2011), the Ninth Circuit held that a national banking association is subject to the state law, which requires the lender (and any other auto loan lender) to provide each obligor with 15 days’ advance written notice of the lender’s intent to dispose of  a repossessed or surrendered vehicle and of the obligors’ right to redeem the vehicle or reinstate the contract during such 15-day period.  

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Fifth Circuit Affirms Dismissal FDCPA Claims

Posted by Jennifer M. Toussaint on Posted in Class Actions; Fair Debt Collection Practices Act; Preemption

In Castro v. Collecto, Inc., No. 09-50975, 2011 WL 651921 (5th Cir. Feb. 24, 2011), the Fifth Circuit affirmed the dismissal of the plaintiffs’ Fair Debt Collections Practices Act (“FDCPA”) claims, holding that the two year statute of limitations under the Federal Communications Act (“FCA”) did not preempt the four year Texas statue of limitations period for the collection of mobile services debts.

Castro filed suit against the defendants, Collecto, Inc. and U.S. Asset Management, Inc. alleging violations of the FDCPA due to defendants’ attempt to collect an approximately three year old debt owed to Sprint PCS. Castro alleged that the letters sent by the defendants could be interpreted as threatening litigation, despite the fact that the claims were time-barred under the FCA.

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Fourth Circuit Holds State Law Claims Preempted by FCRA Because Sloppy Recordkeeping and Repeated Mistakes Do Not Amount to Malice

Posted by Ellen M. Wheeler on Posted in Fair Credit Reporting Act; Preemption

In Ross v. Federal Deposit Insurance Corp., No. 08-1851, 2010 WL 4261819 (4th Cir. Oct. 29, 2010), the U.S. Court of Appeals for the Fourth Circuit affirmed the grant of summary judgment in favor of Washington Mutual Bank (“WaMu”) and against Charlotte Ross who alleged common law defamation claims, violations of the Fair Credit Reporting Act (FCRA), and violations of the North Carolina Unfair and Deceptive Trade Practices act (NCUDTPA).

Ross became the sole owner of home in 2001 while her husband retained sole responsibility for the mortgage, held by WaMu. Ross nonetheless requested that WaMu send her the mortgage statements and the IRS 1098 form. In the course of fulfilling Ross’s request, WaMu mistakenly listed Ross’s name on the mortgage. 

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Ninth Circuit Dismisses Claims Under the CCRAA

Posted by Jennifer M. Toussaint on Posted in Fair Credit Reporting Act; Preemption

In Carvalho v. Equifax Information Services, LLC, No. 09-15030, 2010 W.L. 3239477 (9th Cir., Aug. 18, 2010), the Ninth Circuit affirmed a lower court’s grant of summary judgment dismissing Plaintiff’s claims under the California Consumer Credit Reporting Agencies Act (“CCRAA”).

The Plaintiff alleged that three credit reporting agencies, Equifax Information Services, LLC (“Equifax”), Experian Information Solutions, Inc. (“Experian”) and Transunion LLC (“Transunion”), erroneously reported a debt on her credit report despite her requests for reinvestigation and correction of outstanding debt information provided to the agencies by Credit Consulting Services (“CCS”), a collection agency. CCS successfully filed a general demurrer alleging that the federal Fair Credit Reporting Act (“FCRA”) preempted the Plaintiff’s claims against it under the CCRAA. Defendant Equifax successfully removed the case to the District Court for the Northern District of California, claiming that the case met the $5 million amount-in-controversy requirement of the Class Action Fairness Act of 2005 (“CAFA”).

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The Consumer Financial Protection Act’s Provisions on Preemption

Posted by Michael C. Lueder on Posted in Bureau of Consumer Financial Protection; Consumer Financial Protection Agency; Preemption

The Dodd-Frank Wall Street Reform and Consumer Protection Act (CFPA) directly addresses its own preemptive effect on State law and amends the National Bank Act to clarify the standards that apply to national banks. The CFPA greatly increases the powers of states to make and enforce laws designed to protect consumers in financial transactions. The default preemption standard for all covered persons is conflict preemption. 

Conflict preemption occurs when a federal law is in “irreconcilable conflict” with State law. It arises when it is impossible to comply with both federal and State law or when State law stands as an obstacle to achieving some federal law objective. 

No covered person is exempt from complying with State law unless that State law is inconsistent with the CFPA and then only to the extent of the inconsistency. The CFPA specifically provides that a State law is not inconsistent if the protection given to consumers is greater than the protection provided in the statute. 

The Consumer Financial Protection Bureau (“Bureau”) has the power to determine what State laws are preempted, and we expect Courts to defer to the Bureau’s determinations as they would those of any administrative agency specifically empowered to interpret the law.

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Ninth Circuit Affirms Dismissal of RESPA Claim for Overcharges

Posted by Thomas R. Mikrut on Posted in Preemption; Real Estate Settlement Procedures Act

The Ninth Circuit affirmed the dismissal of a purported class action under the Real Estate Settlement Procedures Act ("RESPA") because the plain language of RESPA does not apply to the practice of "overcharging," as well as the dismissal of three state law claims that are preempted under the National Bank Act. 

The Plaintiffs claimed that they refinanced their home mortgage loan through Wells Fargo, who charged the Plaintiffs an $800 underwriting fee.  Plaintiffs alleged that this fee was excessive and violated RESPA and California’s Unfair Competition Law because the fee was not reasonably related to the actual costs of underwriting.  The district court dismissed all the claims against the Defendants. 

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Elimination of Preemption Could Create 50 Mini CFPAs

Posted by Michael C. Lueder on Posted in Consumer Financial Protection Agency; Preemption

Senator Chris Dodd’s decision to retire from politics has caused many to conclude that he will not have sufficient clout to assure the creation of a Consumer Financial Protection Agency. That may be. Or perhaps as Roll Call suggested, Senator Dodd might have agreed to step aside in exchange for a promise that he be the first person to head the new agency. Who knows? Perhaps it does not matter. Dramatic change is on the way, and nothing is likely to stop it.

Whether we get a CFPA or not, one shield for national banks is melting away. The preemption defense is dying a slow death. Just a little over one year ago, national banks could count on federal regulators to stand by their side to defend against attacks from state attorneys general. In 2004, the OCC had issued a rule establishing areas of state law that do not apply to national bank lending and deposit-taking activities. It also confirmed that the OCC as the exclusive supervisory authority for national bank activities. Click here for the regulation. According to the OCC, if a state AG claimed a bank was violating its state law, it was the OCC and no one else which had the power to enforce the law against the bank. The state AG’s office could not ask for information, it could not compel testimony, it could not require licenses, and it could not enforce even its own state laws against a national bank.

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Eighth Circuit Finds OTS Regulations Preempt Missouri Unauthorized Practice of Law Claims

Posted by Miki Vucic Tesija on Posted in Preemption

Recently, the Eighth Circuit Court of Appeals issued an important opinion for federal savings associations (FSAs) when it found that federal law preempted Missouri law in a case involving loan-related document preparation by non-attorney employees. Casey v. Federal Deposit Insurance Corporation, et al., No. 09-1096 (8th Cir. Oct. 20, 2009).

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