Litigation & Enforcement Actions – Page 2 – Consumer Financial Services Watch

The Massachusetts Supreme Judicial Court Considers the Effect of a State-Mandated Default Notice on the Validity of Non-Judicial Foreclosures

Feb 24 2020

By Andrew C. Glass, Gregory N. Blase, Jeremy M. McLaughlin, and Hollee M. Boudreau

The Massachusetts Supreme Judicial Court (“SJC”) heard argument on February 13, 2020, on whether compliance with a state-mandated default notice could, nevertheless, void foreclosure sales in Massachusetts. Specifically, the SJC examined whether the provision of the state-mandated notice has the potential to deceive a borrower where it describes a period for reinstating a loan that varies (to the benefit of the borrower) from the period contained in the mortgage.

The Shifting Currents of Arbitration: The Supreme Court of Texas Reverses Course, Holding That the Availability of Class Arbitration Is for the Courts to Decide

Dec 05 2019

By Andrew C. Glass and Robert W. Sparkes, III

In 2004, the Supreme Court of Texas first addressed the issue of whether an arbitrator or a judge decides if an arbitration agreement permits (or prohibits) class arbitration. [1] Purportedly following the lead of the U.S. Supreme Court in Green Tree Financial Co. v. Bazzle, [2] the Texas Court held then that arbitrators “should rule on class certification issues when the contracts at issue commit[] all disputes arising out of the agreement to the arbitrator.” [3]

Absent But Not Forgotten: The Second Circuit Addresses the Impact of Arbitration on Absent Class Members

Nov 26 2019

By: Andrew C. Glass and Robert W. Sparkes, III

In their 2013 concurrence in Oxford Health Plans LLC v. Sutter, Justice Samuel Alito, joined by Justice Clarence Thomas, questioned whether absent class members “will be bound by the arbitrator’s ultimate resolution of th[e] dispute” in a class arbitration.[1] Justice Alito suggested that where an arbitration agreement provides “no reason to think that the absent class members ever agreed to class arbitration,” an affirmative answer was unlikely.[2] He posited that “an arbitrator’s erroneous interpretation of contracts that do not authorize class arbitration cannot bind someone who has not authorized the arbitrator to make that determination.”[3] Taken to its logical end, Justice Alito’s rationale would support an argument that class arbitrations should be limited to adjudicating only the claims of class members who affirmatively opt in to the class arbitration proceedings.

Federal Court Strikes Down FinTech Charter

Oct 28 2019

By Daniel S. Cohen

On October 21, Judge Victor Marrero of the United States District Court for the Southern District of New York issued an order in Lacewell v. Office of the Comptroller of the Currency (No. 18-cv-8377) striking down the Office of the Comptroller of the Currency’s (“OCC”) special purpose national bank charter for fintechs (“FinTech Charter”). After years of challenging the FinTech Charter—a charter authorizing fintechs to engage in non-depository banking activities—the New York Department of Financial Services (“NYDFS”) has, for now, succeeded in overturning the charter. The OCC defended its authority by arguing that 12 CFR Part 5.20(e)(1) is consistent with the National Bank Act (“Act”) and authorizes the OCC to issue special purpose charters to nondepository banking institutions. The Court disagreed, finding that the National Bank Act only authorizes the OCC to charter depository institutions. The Court concluded that the Act allows the OCC to charter institutions engaged in the “business of banking,” and the “business of banking” necessarily includes accepting deposits. Therefore, the FinTech Charter is beyond the OCC’s authority.

American Bankers Association, Consumer Bankers Association, and Housing Policy Council Joint Comments on HUD’s Proposed Rule on the Fair Housing Act’s Standard of Disparate Impact

Oct 24 2019

By Paul F. Hancock and Olivia Kelman

On behalf of the American Bankers Association, Consumer Bankers Association, and Housing Policy Council, K&L Gates Partner Paul F. Hancock and Associate Olivia Kelman crafted a comment that was submitted to the U.S. Department of Housing and Urban Development (“HUD”) on October 18, 2019, addressing the proposed amendments to HUD’s interpretation of the Fair Housing Act’s disparate impact standard. The preamble to the proposed rule states that HUD “proposes to amend” its disparate impact regulation “to better reflect the U.S. Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015).” [1] In that decision, the Supreme Court articulated the standards for, and limitations on, disparate impact claims under the Fair Housing Act. The comment explains that the proposed amendments properly reflect binding precedent and provide necessary guidance regarding the application of the law, and supports the amendments in HUD’s Proposed Rule, with some suggested modifications. A copy of the comment is available here.

Deepening the Divide: D.C. Circuit Continues Circuit Split Regarding Standing in Data Breach Class Action Based on Risk of Future Harm

Jul 09 2019

Authors: Andrew C. Glass, Matthew N. Lowe

The D.C. Circuit Court of Appeals recently reaffirmed its position that a plaintiff can establish Article III standing (federal court subject matter jurisdiction) based solely on the risk of potential future harm following a data breach involving his or her personal information. The decision continues the split between the federal circuit courts of appeals regarding the issue.

In re Office of Personnel Management arose out of an alleged 2014 data breach of the eponymous office (the “OPM”).[1] The plaintiffs, current and former federal employees and their unions, sought to represent a putative class of individuals whose personal information, including social security numbers, addresses, and birth dates, was allegedly exposed in the breach.[2] The plaintiffs asserted that certain putative class members had experienced financial fraud or identity theft as a result of the breach and that other members faced the “ongoing risk that they … will become victims of financial fraud and identity theft in the future.”[3] The district court ruled that the plaintiffs lacked standing to sue, holding that the putative class members who had allegedly experienced financial fraud had not pleaded facts demonstrating that the fraud was traceable to the OPM, and that the members who had only pleaded risk of future injury did not plausibly allege that such injury was either substantial or clearly impending.[4]

“Any Defendant” Does Not Really Mean “Any Defendant”

Jun 18 2019

The U.S. Supreme Court Limits Parties Entitled to Seek Removal of Class Action Claims Under CAFA

Authors: Ryan M. Tosi, Scott G. Ofrias

In a recent decision addressing federal court jurisdiction, the U.S. Supreme Court held that third-party counterclaim defendants cannot remove class action claims to federal court, holding that they are not “defendants” entitled to remove the action from state court to federal court under either the general removal statute, [1] or the federal Class Action Fairness Act (“CAFA”). [2] In a 5-4 decision in the matter of Home Depot U.S.A., Inc. v. Jackson, [3] the Court concluded that only a party sued by the original plaintiff is entitled to remove, and that CAFA’s expansion of removal authority to “any defendant” does not apply to third-party defendants that are not parties to the original action.

Ninth Circuit U-Turns And Approves Nationwide Class Settlement In Automobile Class Action Involving Potential Variations In States’ Laws

Jun 12 2019

Authors: Brian M. Forbes, Robert W. Sparkes, III, Matthew N. Lowe

In a recent 8-3 en banc decision, the Ninth Circuit affirmed the approval of an estimated $210 million class action settlement in In re Hyundai and Kia Fuel Economy Litigation. The Hyundai decision is significant because it reversed an earlier, controversial decision by a three-judge panel of the Ninth Circuit, which rejected the nationwide settlement because the district court failed to “rigorously analyze potential differences in state consumer protection laws” before certifying the class for settlement. The Ninth Circuit’s en banc decision offers some clarity for both plaintiffs and defendants attempting to settle class action litigation in the Ninth Circuit, especially those involving proposed nationwide classes.

HMDA Reality Check: What You Can and Cannot Conclude from New Mortgage Loan Data

Apr 03 2019

Authors: Paul F. Hancock, Olivia Kelman

Extensive data about mortgage lending activity collected pursuant to the Home Mortgage Disclosure Act (“HMDA”) was just made available to the public for the first time on March 29, 2019. More detail about borrowers, about underwriting, and about loan features is now available than ever before, and that information also is easier for the public to access than it ever has been. The mortgage lending industry should expect that the expanded HMDA data will receive significant attention and scrutiny from private organizations and individuals, and the data is certain to spark controversy about the racial, ethnic and gender fairness of mortgage lending.

Revamped Relief: The CFPB’s Proposed Rule to Improve its No-Action Letter Program and to Establish a Regulatory Sandbox

Jan 15 2019

By Andrew C. Glass, Gregory N. Blase, Daniel S. Cohen

INTRODUCTION
In December of 2018, the Senate confirmed Kathy Kraninger as the second Director of the Consumer Financial Protection Bureau (“CFPB”). The path Director Kraninger will chart is uncertain, but the CFPB has already begun initiating changes to which the financial services industry should pay attention. For instance, in mid-December 2018, the CFPB issued a proposed rule to modify its No-Action Letter Program (the “Program”) and to establish a regulatory “sandbox” (a formal process to temporarily exempt companies from certain statues and regulations so they can test new products with consumers). Below, we provide a brief history of the Program as well as a discussion of the key elements of the proposed rule.

Catagory:Litigation & Enforcement Actions