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Category Archives: Litigation & Enforcement Actions

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Client of Blast Fax Solutions Provider Hit with $22 Million TCPA Judgment

Posted in Litigation & Enforcement Actions, Privacy & Information Security

By: Joseph C. Wylie II, Molly K. McGinleyNicole C. Mueller

A new decision once again highlights the dangers that companies face if their independent contractors engage in conduct that violates the Telephone Consumer Protection Act, and highlights the need to monitor contractor compliance with the TCPA. In City Select Auto Sales, Inc. v. David/Randall Assocs., Inc., a federal court in New Jersey recently found a roofing company, David/Randall Associates, liable for $22.4 million under the TCPA for the actions of its blast fax solutions provider, Business to Business Solutions (B2B).… Continue Reading

K&L Gates Adds CFPB Deputy Enforcement Director as Consumer Financial Services Partner in Washington, D.C., Office

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions

By: Steven M. Kaplan

The Washington, D.C., office of global law firm K&L Gates LLP welcomes former Consumer Financial Protection Bureau (CFPB) deputy enforcement director for litigation Ori Lev as a partner in the firm’s consumer financial services practice.

Lev arrives at K&L Gates following nearly 20 years of public service at a variety of United States government agencies. Prior to the CFPB, he served as the chief of enforcement for the Department of the Treasury’s Office of Foreign Assets Control and as a litigator for the Department of Justice (DOJ) and the Federal Trade Commission (FTC). His extensive practice … Continue Reading

U.S. Supreme Court Allows DOL Interpretation on Overtime for Mortgage Loan Officers

Posted in Litigation & Enforcement Actions, Mortgage Lending, Other Federal Agencies & GSEs

By: Thomas H. Petrides, John L. Longstreth

On March 9, 2015, the U.S. Supreme Court held that the U. S. Department of Labor (DOL) could issue a controversial “Administrator’s Interpretation,” which had concluded in 2010 that loan officers in the mortgage banking industry generally do not qualify as exempt from overtime under the administrative exemption of the federal Fair Labor Standards Act (FLSA).  The Supreme Court reversed a ruling of the U.S. Court of Appeals for the D.C. Circuit that had struck down the DOL administrative ruling.… Continue Reading

CFPB Targets Pre-Dispute Arbitration Agreements in Consumer Financial Services Contracts in New Report to Congress

Posted in Bureau of Consumer Financial Protection (CFPB), Credit Cards, Litigation & Enforcement Actions

By: Andrew C. Glass, Robert W. SparkesRoger L. Smerage

In the wake of the Great Recession, numerous federal government actors have sought to limit, and in some cases, eliminate, the inclusion of pre-dispute arbitration agreements in consumer financial services contracts.  For instance, in 2010, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Congress amended the federal Truth-in-Lending Act to prohibit the use of pre-dispute arbitration provisions in residential mortgage contracts and home-equity line-of-credit agreements.  See 15 U.S.C. § 1639c(e)(1).  Now, acting pursuant to a mandate provided by the Dodd-Frank Act, … Continue Reading

The Supreme Court to Consider Whether Spousal Loan Guarantors Are “Applicants” for Credit under ECOA

Posted in Bureau of Consumer Financial Protection (CFPB), Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions

By: Andrew C. Glass, Olivia Kelman

The United States Supreme Court has granted certiorari to decide whether the Equal Credit Opportunity Act (“ECOA”) excludes loan guarantors from the definition of “applicants” entitled to bring suit under the Act. See Hawkins v. Community Bank of Raymore, No. 14-520 (U.S. Mar. 2, 2015). Specifically, the Court will decide whether the Federal Reserve Board exceeded its authority in its 2003 amendment to Regulation B, the regulation implementing ECOA, to purportedly bring guarantors within the ambit of ECOA’s protection. The Court’s decision may have far-reaching implications for lenders extending credit guaranteed by … Continue Reading

A Primer on Insurance Coverage Issues under the Telephone Consumer Protection Act

Posted in Litigation & Enforcement Actions, Privacy & Information Security

By: Steven P. WrightGregory N. BlaseSamantha A. Miko

In the past several years, plaintiffs’ attorneys around the country have exploited a once-unknown 1991 law, the Telephone Consumer Protection Act (“TCPA”), to obtain headline-grabbing, multimillion-dollar judgments and settlements from some of the country’s largest financial services companies. Because financial services companies are often required to communicate with customers by telephone, these companies have attracted an undue amount of attention from the TCPA plaintiffs’ bar. Seemingly, each new day brings another lawsuit or settlement, and so, it is no surprise that the TCPA remains a hot topic in … Continue Reading

New York DFS Clarifies New Debt Collection Regulations

Posted in Litigation & Enforcement Actions, Mortgage Servicing, Preemption & Federalism

By: Steven M. Kaplan, Gregory N. BlaseChristopher E. Shelton

Responding to industry questions about New York’s new debt collection regulations, most of which take effect on March 3, 2015, the Department of Financial Services has published a detailed FAQ on its website. We previously analyzed the regulations in a client alert.

As we anticipated in our alert, the FAQ confirms that “debt servicers, including companies that service student loans, home equity loans or mortgages … who collect or attempt to collect a debt that was not in default at the time it was obtained for collection … Continue Reading

Department of Justice Settles Its First Discrimination Case against a “Buy Here, Pay Here” Used Car Dealership

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Other Federal Agencies & GSEs, Personal Property Financing

By: Melanie Brody, Anjali Garg

On February 10, 2015, the Department of Justice (DOJ) and the North Carolina Attorney General announced a settlement against two “buy here, pay here” used car dealerships and the companies’ presidents. The settlement resolves allegations under the Equal Credit Opportunity Act, its implementing regulation (Regulation B), the North Carolina Unfair and Deceptive Trade Practices Act, and the North Carolina Uniform Commercial Code, that the companies engaged in “reverse redlining” by allegedly targeting African American borrowers for used car loans using unfair and predatory terms.… Continue Reading

Two for the Price of One? The First Circuit Holds that a Violation of the FDCPA is a Per Se Violation of the Massachusetts Consumer Protection Statute

Posted in Litigation & Enforcement Actions

By: Brian M. Forbes, Laura P. Rich

A recent decision by the United States Court of Appeals for the First Circuit, McDermott v. Marcus, Errico, Emmer & Brooks, P.C., may have broad implications for persons and entities involved in debt-collection activities in Massachusetts. In McDermott, the First Circuit addressed the scope of the Massachusetts consumer protection statute, M.G.L. c. 93A, § 11 (“Chapter 93A”) and its interplay with the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). While prior decisions from the First Circuit had suggested that a violation of the FDCPA may … Continue Reading

Justices Sotomayor and Scalia Lead the Way as the Supreme Court Hears Argument on the Fair Housing Act Disparate-Impact Question

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending

By: Paul F. Hancock, Andrew C. Glass, Roger L. Smerage, and Olivia Kelman

On January 21, 2015, the United States Supreme Court heard oral argument in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc. (the “Texas DHCA case”). The case presents the question whether the Fair Housing Act recognizes a disparate-impact theory of liability. See Tex. Dep’t of Hous. & Cmty. Affairs v. The Inclusive Cmtys. Project, Inc., — S. Ct. —, 2014 WL 4916193 (Oct. 2, 2014) (No. 13-1371) (granting petition for writ of certiorari). Under that theory, a plaintiff … Continue Reading

United States Supreme Court: TILA Does Not Require Consumers To File A Lawsuit Within Three Years In Order To Assert A Right To Rescind

Posted in Litigation & Enforcement Actions, Mortgage Servicing

By: Brian M. Forbes and Gregory N. Blase

For several years, federal courts have struggled with the question of whether a consumer who wishes to rescind a loan pursuant to the federal Truth in Lending Act (“TILA”) may do so by sending a notice of rescission within three years after the closing date, or whether the statute also requires the consumer to file a lawsuit within that three-year time period. On January 13, 2015, the United States Supreme Court, in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, slip op. (U.S. Jan. 13, 2015), resolved that question and held … Continue Reading

Removing a Barrier: The Supreme Court Holds That, Under CAFA, Notices of Removal Need Not Include Evidence Supporting the Amount in Controversy

Posted in Litigation & Enforcement Actions

By: Irene C. Freidel, Ryan M. Tosi, Matthew N. Lowe

On December 15, 2014, the United States Supreme Court held in Dart Cherokee Basin Operating Co., LLC v. Owens that a class action defendant need only allege the requisite amount of controversy “plausibly” in the notice of removal and need not provide evidence supporting the amount in controversy unless challenged by the plaintiff or questioned by the court.[1]The Court’s holding is consistent with the requirement that a notice of removal contain only a “short and plain” statement setting forth the bases for removal. The decision resolves a significant … Continue Reading

Another CFPB Loan Originator Compensation Enforcement Action

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Lending

By: Kris D. Kully

The Consumer Financial Protection Bureau (CFPB) has once again charged a mortgage lender with paying compensation to loan originators based on loan terms, which is prohibited under the Truth in Lending Act and its Regulation Z. This week, the CFPB asked a federal court to approve an order requiring Franklin Loan Corporation (which lends in California and Illinois) to pay $730,000 for allegedly paying loan originators quarterly bonuses based on loan terms.… Continue Reading

Eleventh Circuit Bolsters FCC Interpretation of “Prior Express Consent” under the TCPA

Posted in Litigation & Enforcement Actions

By: Gregory N. Blase, Andrew C. Glass, Samantha A. Miko

The U.S. Court of Appeals for the Eleventh Circuit recently bolstered the Federal Communications Commission’s (“FCC”) interpretation of “prior express consent,” a key term under the Telephone Consumer Protection Act (“TCPA”).

In Mais v. Gulf Coast Collection Bureau, Inc., the plaintiff’s wife provided the plaintiff’s cellphone number on a hospital admittance form. The form disclosed that any information supplied could be shared with the hospital’s affiliates and used for any purpose, including for billing. After the plaintiff failed to pay a hospital affiliate’s invoice for treatment services … Continue Reading

A Hard Rain Has Started to Fall A Product-by-Product Review of the CFPB’S First 60 Enforcement Actions

Posted in Bureau of Consumer Financial Protection (CFPB), FHA/VA, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing

By: Jon Eisenberg

Between July 17, 2012 and October 9, 2014, the Consumer Financial Protection Bureau brought 60 enforcement actions. According to our unofficial tally, they resulted in settlements requiring the payment of $2.2 billion in restitution, $174 million in CFPB civil money penalties, and, in a few cases, other forms of consumer relief. In this alert, we discuss the products and alleged practices that led to those recoveries. Our purpose is simple—what’s past is likely prologue when it comes to CFPB enforcement actions. Understanding the conduct that produced the first 60 enforcement actions will help companies avoid becoming one … Continue Reading

FinCEN Acknowledges the Problem, But a Solution Will Require More

Posted in Litigation & Enforcement Actions, Other Federal Agencies & GSEs, Payment Systems

By: David L. Beam

Money services businesses (“MSBs”) have been losing access to banking services. Increased scrutiny by bank regulators of MSB relationships have led banks to conclude that providing services to MSBs carries increased compliance and reputational risk. Even if these risks can be managed in theory through appropriate due diligence and controls, many banks have decided that costs and risks of offering banking services to MSBs outweigh the revenue that they generate.… Continue Reading

U.S. District Court Strikes Down HUD’s Fair Housing Act Disparate Impact Rule

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

By: Paul F. Hancock, Andrew C. Glass, Roger L. Smerage, and Olivia Kelman

On Monday, November 3, 2014, Judge Richard J. Leon of the U.S. District Court for the District of Columbia struck down the disparate impact rule promulgated by the U.S. Department of Housing and Urban Development (“HUD”) in March 2013 under the Fair Housing Act.  The court held that HUD had issued the rule—codified at 24 C.F.R. § 100.500—in contravention of the plain language of the Fair Housing Act.  The case is styled American Insurance Association, et al. v. United States Department of Housing & Continue Reading

If Bernanke Wants to Refinance, Maybe He Needs a Co-Signer?

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Lending

By: Kristie D. Kully, Laurence E. Platt

While former Federal Reserve Chairman Ben Bernanke may be known for his loose monetary policy, unfortunately his mortgage lender is not. According to Bloomberg News, Mr. Bernanke complained (while addressing a conference of the National Investment Center for Seniors Housing and Care in Chicago on October 2) that he was recently unable to refinance his mortgage loan.

Although Mr. Bernanke reportedly remarked that “it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” it’s hard to blame lenders. Mr. Bernanke may seem to be … Continue Reading

K&L Gates Announcement: K&L Gates Receives Top Rankings in BTI’s Litigation Outlook Survey

Posted in Litigation & Enforcement Actions, Securitization

K&L Gates has been ranked as one of three top law firms as a “Powerhouse” in Class Action and Torts Litigation for the second consecutive year.  The firm was also named as a “Standout” in Securities and Finance Litigation, Complex Commercial Litigation and Routine Commercial Litigation in BTI Consulting Group’s 2015 Litigation Outlook survey.

In addition, the firm was once again included in BTI’s “Honor Roll of Most Feared Law Firms” listing as well as on the honor roll of firms noted by clients for IP Litigation.

The rankings were based on direct client feedback from more than 300 interviews … Continue Reading

Mortgage Broker or Mini-Correspondent: CFPB Issues Policy Guidance on Questions for Consideration

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Lending

By: Holly Spencer Bunting, Anaxet Y. Jones

In response to what the CFPB views as an increasing trend among mortgage brokers shifting to a mini-correspondent lender model, the CFPB recently issued “Policy Guidance on Supervisory and Enforcement Considerations Relevant to Mortgage Brokers Transitioning to Mini-Correspondent Lenders” (“Policy Guidance”) regarding the application of Regulations X (RESPA) and Z (TILA) to transactions involving mini-correspondent lenders. In addition to providing background on the differences between brokers and mini-correspondents and certain requirements of Regulations X and Z, the Policy Guidance identifies questions the CFPB may consider when reviewing mini-correspondent transactions and … Continue Reading

Inspector General Urges FHFA to Consider Suing Servicers, Force-Placed Insurers

Posted in Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, Kerri M. Smith, * Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

On June 25, 2014, the inspector general of the Federal Housing Finance Agency (FHFA) issued a report on force-placed insurance with only one recommendation: FHFA should consider suing servicers and force-placed insurers for hundreds of millions of dollars in allegedly “excessive” force-placed insurance premiums.

As we discussed in a recent blog post, “force-placed” or “lender-placed” insurance is an area of increasing controversy, with Fannie Mae and Freddie Mac rolling out new … Continue Reading

Recent Force-Placed Insurance Initiatives by FHFA & CFPB Suggest Divergent Priorities

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Servicing, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, *Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

Force-placed insurance is under continuing scrutiny by the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB). However, each agency’s focus is slightly different. FHFA, perhaps galvanized by a New York enforcement action, has focused on conflicts of interest between servicers and insurers. The CFPB has focused on erroneous placing of insurance and excessive charges.… Continue Reading

Commonwealth of Massachusetts v. FHFA: Fremont Meets The Federal Government

Posted in Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs, UDAAP

By: Irene C. Freidel

On June 2, 2014, the Commonwealth of Massachusetts sued the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac in state court, under Massachusetts’ consumer protection statute (“Chapter 93A”) to force them to sell foreclosed properties to non-profit organizations at fair market value, so that the properties can then be re-sold or leased back to the former homeowner. See Commonwealth of Massachusetts v. Federal Housing Finance Agency, et al., C.A. No. 14-1763 (June 2, 2014). Among other things, the lawsuit seeks a declaration that the GSEs’ current anti-fraud guidelines violate Massachusetts foreclosure law (M.G.L. … Continue Reading

CFPB Widens RESPA Enforcement to Focus on Affiliated Business Arrangement Disclosures

Posted in Bureau of Consumer Financial Protection (CFPB), Litigation & Enforcement Actions, Mortgage Lending

By: Holly Spencer Bunting, Anaxet Y. Jones

The CFPB once again has taken aim at affiliated business arrangements (“AfBAs”), only this time, it is targeting AfBA disclosures. In prior enforcement actions, the CFPB focused on the validity of the AfBA, bringing actions against alleged “sham” AfBAs. However, in its most recent enforcement action, the CFPB entered into a consent order with a real estate brokerage company, alleging that it referred consumers to its affiliate, but failed to provide an adequate AfBA disclosure. The CFPB also alleged that the brokerage company improperly required the use of its affiliate title insurance … Continue Reading