For banks operating in Florida (or other jurisdictions with similar provisions regarding security procedures for payment orders), the Eleventh Circuit has recently issued an opinion that may call into question the validity of existing security procedures and the corresponding applicability of the safe-harbor risk shifting provision of Fla. Stat. §670.202.
In Chavez v. Mercantil CommerceBank, N.A., No. 11-15804 (11th Cir. Nov. 27, 2012) Plaintiff Chavez filed suit seeking recovery of funds fraudulently transferred from his account with Mercantil to a third party. Under §670.202(2), banks are relieved from liability for fraudulent payment orders if the bank follows established (and agreed upon) security procedures in good faith and the procedure is considered commercially reasonable. While Mercantil succeeded in asserting §670.202(2) as an affirmative defense on the district court level, the Eleventh Circuit reversed – finding that the established security procedure did not meet the standards articulated by Fla. Stat. §607.201. According to the Eleventh Circuit, the established procedure agreed upon by Mercantil and Chavez – delivery to the bank of a written payment order containing the proper signatures by an authorized representative, and, in the event of delivery via electronic means, a telephone call back by the bank to identify the identity of the representative – did not meet the requirements of §670.201, which at a minimum expressly states that “the comparison of a signature or the communication with an authorized specimen signature is not by itself a security procedure.”
The Eleventh Circuit’s analysis and interpretation of Fla. Stat. §§607.201 – 670.202 may prove helpful in evaluating the existing security measures of financial institutions facing similar obligations and ensure the applicability of safe-harbor provisions that prove to greatly limit risk and liability.
A Wisconsin college student has filed a seven count class action complaint against Experian for its freecreditreport.com ads. The Plaintiff alleges that she was in the midst of purchasing a new car and wanted to check her credit. She claims that in March 2008, she went to freecreditreport.com for a single (but free) credit report and did not see any disclaimers that the service came with a $14.95 per month credit monitoring service. After noticing the fee on her credit card statement months later, she went back to the website and found, in her words, “a poorly displayed disclaimer” of the monthly fee. She was able to cancel the service, but was not able to have her money refunded. She seeks to represent a class of consumers who signed up for a free credit report and were charged the monthly fee.
As noted before, the Government has been trying to crack down on the freecreditreport.com ads by making its own parodies.
Each year, Chief Justice John Roberts. Jr. issues a report about the state of the federal judiciary. For 2009, Justice Roberts reported a 6% year-to-year decline in filings in the Supreme Court and federal courts of appeals. The federal district courts saw a 3% increase in filings over 2008 filings, up to 276,397 filings in 2009. Particularly relevant to the consumer federal services industry (and this blog), Justice Roberts found that, in 2009:
Filings of cases involving consumer credit, such as those filed under the Fair Credit Reporting Act, increased 53% (up 2,143 cases), fueled in part by the current economic downturn, particularly in the nation’s most populous districts.
Justice Roberts concluded that “[t]he courts are operating soundly, and the nation’s dedicated federal judges are conscientiously discharging their duties.” You can read the entirety of his report here.
The Third Circuit just issued an opinion, Alston v. Countrywide Financial Corp., holding that plaintiffs are not required to have suffered an overcharge to bring a cause of action under the Real Estate Settlement Procedures Act (“RESPA”).
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Today, Representative Betsy Markey of Colorado introduced the House companion bill to the bill introduced by Sen. Chris Dodd to the Senate on Monday.
Senate Banking Committee Chairman Chris Dodd introduced a bill today that seeks to freeze interest rates on existing credit card balances. The Credit Card Accountability, Responsibility, and Disclosure Act (the “Credit CARD Act”), passed by Congress in May, currently allows interest rate increases on existing balances under limited circumstances. The new bill, if passed by Congress, would force credit card companies to freeze rates on existing balances until the remaining provision of the Credit CARD Act go into effect in February 2010.
Dodd’s new bill comes just days before the House of Representatives is expected to vote on accelerating to December 1, 2009 the new rules under the Credit CARD Act.