Federal Issues

FinCEN Proposes Making Non-Bank Mortgage Companies Subject to Anti-Money Laundering Program, Suspicious Activity Report Regulations. On July 15, the Financial Crimes Enforcement Network (FinCEN) issued an advance notice of proposed rulemaking with respect to the possible application of its anti-money laundering (AML) program and suspicious activity report (SAR) regulations to non-bank residential mortgage lenders and originators. FinCEN specifically seeks comment regarding (i) whether to adopt an “incremental approach” to the issuance of such regulations that would initially affect only those “persons” engaged in non-bank residential mortgage lending or origination, (ii) how the regulations should define these persons, (iii) the financial crime and money laundering risks posed by these persons, (iv) how AML programs for these persons should be structured, (v) whether these persons should be subject to Bank Secrecy Act requirements beyond the AML program (e.g., SAR reporting), and (vi) what exemptions, if any, should apply to any AML program or SAR reporting requirements. In 2003, FinCEN issued a similar proposal that, among other things, met difficulties defining which “persons” would be subject to the proposal. Comments are due within 30 days after the proposal is published in the Federal Register. For a copy of the press release, please see http://www.fincen.gov/news_room/nr/pdf/20090715.pdf. For a copy of the notice, please see http://www.fincen.gov/statutes_regs/frn/pdf/ANPRM.pdf.

Treasury Proposes Legislation Regarding Executive Compensation, Authority to Protect Investors. The U.S. Department of the Treasury has proposed legislation to address executive compensation and strengthen the Securities and Exchange Commission’s (SEC) authority to protect investors under the ”Investor Protection Act of 2009.” The proposed legislation, with respect to investor protection, would (i) establish consistent standards for broker-dealers and investment advisers, (ii) grant the SEC authority to limit or restrict mandatory arbitration clauses, (iii) improve the timing and quality of disclosures, (iv) permit the SEC to conduct consumer testing of disclosures and rules, (v) expand protections for whistleblowers, and (vi) harmonize liability standards for aiding and abetting securities fraud. In addition, the legislation would make permanent the Investor Advisory Committee presently established within the SEC. For a copy of the press release regarding these provisions of the legislation, please see http://www.treas.gov/press/releases/tg205.htm. The proposed legislation would seek to address concerns about executive compensation by requiring "say-on-pay” provisions, including (i) a non-binding annual shareholder vote on compensation for public companies, (ii) a separate shareholder vote on golden parachutes, and (iii) a "clear and simple disclosure" of the amounts executives would receive under a golden parachute. Regarding the independence of executive compensation boards, the proposed legislation, among other things, (i) requires the independence of compensation committee members, similar to the independence of audit committee members under the Sarbanes-Oxley Act, (ii) requires the independence of compensation consultants and legal counsel from management, (iii) grants authority to compensation committees to hire advisers (e.g., compensation consultants and outside counsel) to best reflect the interests of shareholders in the compensation committee’s pay decisions, and (iv) requires a compensation committee to disclose and explain if it does not employ a compensation consultant. For a copy of the fact sheets, please see http://www.financialstability.gov/latest/tg_07162009b.html and 
http://www.financialstability.gov/latest/tg_07162009.html. For a copy of the proposed legislation, please see http://www.treasury.gov/press/releases/docs/tg_218IX.pdf.

Frank, Dodd Urge Agencies to Investigate Subordinate Mortgage Lien Values. On July 10, Representative Barney Frank (D-MA) and Senator Christopher J. Dodd (D-CT) issued a joint letter to the heads of the federal banking regulatory agencies to request an inquiry into subordinate–lien loans being carried on the balance sheets of mortgage servicers. The letter contends that a major impediment to the HOPE for Homeowners refinance program has been the unwillingness of subordinate-lien holders to extinguish these liens to participate in the program because the value of these liens on the balance sheets is higher than the value of extinguishing the liens under the to the program. The letter argues that the loss allowances associated with some subordinate liens may be insufficient to "realistically and accurately reflect their value.” The letter suggests that if the loss allowances reflected greater losses, participation in HOPE for Homeowners might increase. For a copy of the letter, please see 
http://www.house.gov/apps/list/press/financialsvcs_dem/press_071009.shtml.

Federal Reserve Board Issues Interim Final Rule Implementing CCARD. On July 15, the Federal Reserve Board (Fed) issued an interim final rule to implement provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CCARD). The interim final rule implements provisions of CCARD under which creditors must, among other things, (i) provide written notice 45 days before a “significant” change to the terms of an account (e.g., an increase to an annual percentage rate), (ii) inform consumers, in the same notice, of the right to cancel the card before the changes to into effect, and (iii) in general, deliver periodic statements for open-end consumer credit accounts at least 21 days before payment is due. The interim final rule implements provisions of the statute that become effective August 20, 2009. The Fed will implement additional provisions of CCARD in stages. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090715a.htmFor a copy of the interim final rule, please click here.

OTS Memorandum Addresses CCARD “Look-Back” Provision. On July 13, the Office of Thrift Supervision (OTS) issued a memorandum regarding the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CCARD). The memorandum strongly encourages OTS-regulated institutions to consider the “look-back” provision of CCARD, under which increases in annual percentage rates after January 1, 2009 must be reviewed at least once every six months to assess whether factors contributing to the APR increase have changed. According to the OTS, APRs might require reduction if such factors are no longer present. The memorandum follows a letter by Senator Christopher J. Dodd (D-CT) on July 9 that urged the federal banking regulatory agencies to implement and enforce the look-back provision (reported in InfoBytes, July 10, 2009). For a copy of the OTS memorandum, please see here.

FTC, California Attorney General Announce Operation to Investigate Mortgage Relief Services Companies. On July 15, the Federal Trade Commission (FTC) and California Attorney General Edmund G. Brown Jr. announced a law enforcement effort to coordinate national and state agencies to crack down on 189 mortgage modification scams as part of the nationwide “Operation Loan Lies.” Attorney General Brown announced litigation against fourteen companies and twenty-one individuals who claimed to offer mortgage relief services but failed to provide loan modification assistance or any other mortgage relief to customers. One of the named defendants, U.S. Homeowners Assistance, an Irvine, CA based company, allegedly violated the California Business and Professions Code, the California Civil Code, and the California Penal Code. According to the complaint, the company (i) falsely claimed to be a government agency, (i) falsely advertised a 98% success rate in aiding homeowners, and (iii) charged between $1,200 and $3,500 in illegal upfront fees. The complaint seeks $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to prevent the company from offering foreclosure services. In addition to Attorney General Brown’s complaints, the FTC announced four lawsuits against mortgage relief services companies, all in Southern California. In its press release, the FTC further announced the settlement of an April 2008 complaint against Foreclosure Solutions, LLC, a company that allegedly failed to provide advertised foreclosure prevention services (reported in InfoBytes, May 2, 2008). Among other things, the settlement imposes a $8.5 million judgment, subject to suspension, and contains record-keeping and reporting provisions to ensure compliance with the order. For a copy of the FTC’s press release, please see http://www.ftc.gov/opa/2009/07/loanlies.shtm.  For a copy of Attorney General Brown’s press release, please see http://ag.ca.gov/newsalerts/release.php?id=1767.

ABA Urges FTC, Congress to Clarify Whether Red Flags Rule Applies to Attorneys. On June 13, the American Bar Association (ABA) resolved to urge the Federal Trade Commission (FTC) and U.S. Congress to clarify whether the FTC’s Red Flags Rule applies to attorneys while providing legal services to clients. The FTC will begin enforcing the Red Flag Rule with respect to attorneys and law firms on August 1, 2009 (reported in InfoBytes, May 1, 2009), and the ABA is seeking to gain an exemption from these rules for attorneys. For a copy of the ABA’s resolution, please see http://bit.ly/n1Zwdj. For more materials by the ABA regarding the Red Flags Rule, please see http://bit.ly/16Ijyd.

FinCEN Issues Advisory Rending Anti-Money Laundering, Counter-Terrorist Deficiencies. On July 10, the Financial Crimes Enforcement Network (FinCEN) issued an advisory regarding deficiencies in the anti-money laundering and counter-terrorist financing regimes of Iran, Uzbekistan, Turkmenistan, Pakistan, and Sao Tome and Príncipe. With particular attention to these countries, the advisory reminds banks and financial institutions that FinCEN regulations require the application of due diligence to correspondent accounts maintained for foreign financial institutions and the filing of suspicious activity reports under certain circumstances. For a copy of the advisory, please see http://1.usa.gov/pi7Nmp.

David Stevens Sworn in as Assistant Secretary for Housing, FHA Commissioner. On July 15, David Stevens was sworn in as Assistant Secretary for Housing and Federal Housing Administration Commissioner at the U.S. Department of Housing and Urban Development. Stevens had been confirmed by the Senate on July 10. For a copy of the press release, please see http://1.usa.gov/pPKTil.

State Issues

Additional States Enact SAFE Act Legislation. Arizona, Delaware, and Hawaii each recently passed bills reflecting compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires states to implement a sufficient regulatory system for licensing and supervising mortgage loan originators. Arizona HB 2143, Delaware SB 73, and Hawaii SB 1218 (which was enacted over the veto of Hawaii Governor Linda Lingle) each require mortgage loan originators to (i) submit to fingerprinting for the purpose of a criminal history background check, (ii) complete at least twenty hours of pre-licensing education, (iii) receive a passing score on a qualified written test developed by the Nationwide Mortgage Licensing System, and (iv) complete at least eight hours of annual continuing education. Arizona HB 2143 also amends certain definitions and exemptions applicable to the licensing of mortgage loan originators. Licensure under all three bills is required as early as July 31, 2010. For a copy of Arizona HB 2143, please click hereFor a copy of Delaware SB 73, please click hereFor a copy of Hawaii SB 1218, please click
here
.

Georgia Regulator Issues Notice of Proposed Rulemaking. On July 13, the Georgia Department of Banking and Finance provided notice of its intent to adopt new and amended rules regarding licensed mortgage companies. The proposed rules are primarily responsive to recently approved mortgage loan originator licensing requirements. Specifically, the proposed rules address (i) licensure requirements, (ii) license, registration, and supervision fees, (iii) renewal requirements, (iv) books and records requirements, (v) administrative fines, and (vi) challenges to information entered into the Nationwide Mortgage Licensing System and Registry. Comments are due by August 13, 2009. For a copy of the proposed rules, please see http://1.usa.gov/nkL7HY.

Courts

Pennsylvania Court Holds Consumer Loan Law Applies to Out-of-State Companies. On July 10, in a 4-3 decision, the Pennsylvania Commonwealth Court upheld an interpretation of the Pennsylvania Consumer Discount Company Act (CDCA) that applied the law to companies with no physical presence in Pennsylvania. Cash Am. Net of Nev., LLC v. Dep’t of Banking, No. 8 M.D. 2009, 2009 WL 197499 (Pa. Commw. Ct. July 10, 2009). In July 2008, the Pennsylvania Department of Banking (Department) announced that, after more than 70 years of interpreting the requirements of the CDCA to apply only to Pennsylvania persons, all persons making non-mortgage consumer loans to Pennsylvania residents – whether or not those persons had any physical presence in Pennsylvania – would be required to comply with the requirements of the CDCA (reported in InfoBytes, Aug. 1, 2008). The CDCA limits the interest and fees a non-bank company can charge for non-mortgage loans of $25,000 or less. The petitioner, an online payday lender located in Nevada, sued the Department for a declaratory judgment, alleging that the new interpretation was both procedurally improper and substantively incorrect. The Commonwealth Court rejected both arguments. First, the court held that the new interpretation was merely a statement of policy, nonbinding on the courts or even the Department itself. Therefore, the policy did not need to be adopted through the procedures reserved for formal regulations. Second, the court held that the Department’s new interpretation of the reach of the CDCA “is the correct one,” even while acknowledging that “the Department formerly endorsed a contrary interpretation of that section.” Three judges joined in a dissenting opinion, which argued that the Department’s earlier interpretation of the limits of the CDCA was the correct one. For a copy of the opinion, please see here.

Texas Federal Court Dismisses RESPA Claim Alleging Title Insurance Rate Mark-Up. On July 9, the U.S. District Court for the Northern District of Texas dismissed a borrower’s putative class action suit alleging that a title insurance company violated the Real Estate Settlement Procedures Act (RESPA) by charging title insurance rates in excess of the rates filed with the Texas Department of Insurance. Hancock v. Chicago Title Insurance Company, No. 3:07-CV-1441-D, 2009 WL 2002919 (N.D. Tex. July 9, 2009). In this case, the plaintiff borrower refinanced his home mortgage loan and purchased title insurance from the defendant title insurance agency; the insurance rate was allegedly in excess of the rates that the title insurance agency filed with the Texas Department of Insurance. The borrower alleged that the practice of charging higher rates and allegedly splitting excessive fees with local title agents violated section 8(b) of RESPA, which bars fee splitting when no services are performed. In explicitly rejecting HUD’s interpretation in this area, but following several recent decisions by federal courts, the court held that a title insurer does not violate RESPA when it charges a premium in excess of a state’s rate rules and then splits the fee with its title agent if services are actually performed. The court also granted summary judgment for a claim of unjust enrichment; however, the court refused to dismiss state-law claims alleging money had and received and breach of implied contract. For a copy of the opinion, please click here.

Illinois Federal Court Certifies Class in FACTA Suit Despite Lack of Injury to Plaintiff. On July 8, 2009, the U.S. District Court for the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a suit alleging violations of the Fair Credit Reporting Act (FCRA), as amended by the Fair and Accurate Credit Transactions Act (FACTA), reasoning that neither the consumer’s lack of injury nor the possibility of “ruinous” financial exposure for the defendant defeated class certification. Armes v. Shanta Enterprise, Inc., No. 07-c-5766, 2009 WL 2020781 (N.D. Ill. July 9, 2009). In Armes, the consumer claimed that the defendant violated FACTA when it issued the consumer a receipt that contained his entire credit card number along with its expiration date. The consumer sought to certify a class consisting of all persons to whom the defendant provided a receipt displaying more than the last five digits of the person’s credit or debit card number in any transaction occurring after December 4, 2006. Following the Seventh Circuit’s reasoning in Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006) (reported in InfoBytes, Jan. 20, 2006), the court rejected the defendant’s arguments that a class action was not the superior method to adjudicate the claim because of the possibility of “ruinous” financial exposure and because the consumer suffered no actual injury as a result of the violation The court reasoned that FCRA “does not make distinctions between the level of harm a customer may have suffered,” and that a legislative decision had been made to authorize awards as high as $1000 per person for FCRA violations. The court further reasoned that the damages claim for each potential class member would likely not be large enough to sustain individual actions. Accordingly, the court granted the consumer’s motion to certify the class. For a copy of the opinion, please click here.

New York Federal Court Dismisses FDCPA Claim Regarding Follow-Up Letter. On June 20, the U.S. District Court for the Eastern District of New York held that a debt collector did not violate the Fair Debt Collection Practices Act (FDCPA) because a follow-up letter sent to a debtor subsequent to a validation notice did not “overshadow” or contradict the validation notice. Weber v. Computer Credit, Inc., No. 09-CV-187, 2009 WL 1883046 (E.D. N.Y. June 30, 2009). In this case, the defendant debt collector sent a collection letter containing a validation notice (which the court held complied with the FDCPA) to the debtor regarding the debt. The debt collector subsequently sent a “follow-up” letter to the debtor that the debtor alleged "overshadowed" and contradicted the FDCPA-compliant validation notice. Specifically, the debtor alleged that language in the follow-up letter stating “we expect your cooperation [in collecting the debt]” was “implicit threatening language” that would give the impression to the least sophisticated consumer that the debtor could no longer dispute the debt. In granting the debt collector’s motion to dismiss, the court held that the follow-up letter was not "overshadowing" or contradictory. The court reasoned that the follow-up letter explicitly referenced the initial letter that informed the debtor of the debtor’s right to dispute the debt, suggesting that the previous communication remained in effect. The court further reasoned that the letter did not violate the FDCPA because (i) it did not demand immediate payment and (ii) did not threaten adverse consequences. For a copy of the opinion, please see here.

Washington Federal Court Holds IP Addresses Are Not Personally Identifiable Information. On June 23, the U.S. District Court for the Western District of Washington ruled that Microsoft did not breach its consumer license agreement that prohibits the collection of personally identifiable information when it collected consumers’ Internet Protocol (IP) addresses. Johnson v. Microsoft Corp., No. C06-0900RAJ, 2009 WL 1794400 (W.D. Wash. June 23, 2009). The case arose after the plaintiff consumers alleged that the defendant breached the terms of its End User License Agreement (EULA) with the consumers by, among other things, installing verification software that detected the consumers’ IP addresses. The terms of the EULA provided that the defendant would not transmit “personally identifiable information” from a consumer’s computer without that consumer’s consent. However, the phrase “personally identifiable information” was not defined in the EULA. The consumers argued that the court should apply a definition of the phrase taken from the defendant’s own security glossary available on its website. Under that definition, IP addresses would be “personally identifiable information.” The court rejected this argument, finding that the security glossary was not part of the EULA, nor was it incorporated by reference. The court further noted that personally identifiable information must identify a person. Because IP addresses can identify only computers, the court held that, unless alternately defined by an agreement, IP addresses are not “personally identifiable information.” As a result, the court granted the defendant’s motion for summary judgment. For a copy of the opinion please click here.

Firm News

The attorneys of BuckleySandler LLP, in conjunction with A.S. Pratt, have made available an approximately five hour On-Demand Audio Conference as part of Pratt’s “Fair Lending On-Demand Audio Conference” series. For more information and to order the audio conference, please see http://www.aspratt.com/store/11500709.php.

Jerry Buckley was recently quoted in a BankInfoSecurity.com article regarding the proposed regulatory reform by the Obama Administration. See http://www.bankinfosecurity.com/articles.php?art_id=1560 for the text of the article.

Comments by Andrew Sandler along with a reference to BuckleySandler were included in an article published by Reuters. For a copy of the article, please see http://www.reuters.com/article/domesticNews/idUSTRE5546ZC20090605.

Andrew Sandler was interviewed by the Washington Business Journal. The interview concerning Corporate Risk Advisers appeared in the June 19-25, 2009 issue.

Jeff Naimon spoke on June 7 and June 8 at the American Bankers Association Regulatory Compliance Conference in Orlando, Florida on the “New Mortgage Transaction” panel.

Margo Tank spoke in an audio conference series entitled "Building Effective Electronic Records and Electronic Records Management Systems: Navigating the Legal Traps" on June 10.

Andrea Lee Negroni delivered an audio conference on foreclosure rescue scams through Sheshunoff/A.S. Pratt Audio Conferences on June 30.

Miscellany

OTS to Host Information Security Webinar. The Office of Thrift Supervision will host a webinar regarding information security for senior managers of savings associations. The webinar, entitled “When the Worst Happens: Managing an Information Security Incident,” will occur on Wednesday, July 29, 2009, at 3:00 p.m. (EDT). For further information or to register, please see http://www.ots.treas.gov/_apps/databreach/index.cfm.

Mortgages

FinCEN Proposes Making Non-Bank Mortgage Companies Subject to Anti-Money Laundering Program, Suspicious Activity Report Regulations. On July 15, the Financial Crimes Enforcement Network (FinCEN) issued an advance notice of proposed rulemaking with respect to the possible application of its anti-money laundering (AML) program and suspicious activity report (SAR) regulations to non-bank residential mortgage lenders and originators. FinCEN specifically seeks comment regarding (i) whether to adopt an “incremental approach” to the issuance of such regulations that would initially affect only those “persons” engaged in non-bank residential mortgage lending or origination, (ii) how the regulations should define these persons, (iii) the financial crime and money laundering risks posed by these persons, (iv) how AML programs for these persons should be structured, (v) whether these persons should be subject to Bank Secrecy Act requirements beyond the AML program (e.g., SAR reporting), and (vi) what exemptions, if any, should apply to any AML program or SAR reporting requirements. In 2003, FinCEN issued a similar proposal that, among other things, met difficulties defining which “persons” would be subject to the proposal. Comments are due within 30 days after the proposal is published in the Federal Register. For a copy of the press release, please see http://www.fincen.gov/news_room/nr/pdf/20090715.pdf. For a copy of the notice, please see http://www.fincen.gov/statutes_regs/frn/pdf/ANPRM.pdf.

Frank, Dodd Urge Agencies to Investigate Subordinate Mortgage Lien Values. On July 10, Representative Barney Frank (D-MA) and Senator Christopher J. Dodd (D-CT) issued a joint letter to the heads of the federal banking regulatory agencies to request an inquiry into subordinate–lien loans being carried on the balance sheets of mortgage servicers. The letter contends that a major impediment to the HOPE for Homeowners refinance program has been the unwillingness of subordinate-lien holders to extinguish these liens to participate in the program because the value of these liens on the balance sheets is higher than the value of extinguishing the liens under the to the program. The letter argues that the loss allowances associated with some subordinate liens may be insufficient to "realistically and accurately reflect their value.” The letter suggests that if the loss allowances reflected greater losses, participation in HOPE for Homeowners might increase. For a copy of the letter, please see 
http://www.house.gov/apps/list/press/financialsvcs_dem/press_071009.shtml.

David Stevens Sworn in as Assistant Secretary for Housing, FHA Commissioner. On July 15, David Stevens was sworn in as Assistant Secretary for Housing and Federal Housing Administration Commissioner at the U.S. Department of Housing and Urban Development. Stevens had been confirmed by the Senate on July 10. For a copy of the press release, please see http://1.usa.gov/pPKTil.

Additional States Enact SAFE Act Legislation. Arizona, Delaware, and Hawaii each recently passed bills reflecting compliance with the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires states to implement a sufficient regulatory system for licensing and supervising mortgage loan originators. Arizona HB 2143, Delaware SB 73, and Hawaii SB 1218 (which was enacted over the veto of Hawaii Governor Linda Lingle) each require mortgage loan originators to (i) submit to fingerprinting for the purpose of a criminal history background check, (ii) complete at least twenty hours of pre-licensing education, (iii) receive a passing score on a qualified written test developed by the Nationwide Mortgage Licensing System, and (iv) complete at least eight hours of annual continuing education. Arizona HB 2143 also amends certain definitions and exemptions applicable to the licensing of mortgage loan originators. Licensure under all three bills is required as early as July 31, 2010.  For a copy of Arizona HB 2143, please click hereFor a copy of Delaware SB 73, please click hereFor a copy of Hawaii SB 1218, please click
here
.

Georgia Regulator Issues Notice of Proposed Rulemaking. On July 13, the Georgia Department of Banking and Finance provided notice of its intent to adopt new and amended rules regarding licensed mortgage companies. The proposed rules are primarily responsive to recently approved mortgage loan originator licensing requirements. Specifically, the proposed rules address (i) licensure requirements, (ii) license, registration, and supervision fees, (iii) renewal requirements, (iv) books and records requirements, (v) administrative fines, and (vi) challenges to information entered into the Nationwide Mortgage Licensing System and Registry. Comments are due by August 13, 2009. For a copy of the proposed rules, please see http://1.usa.gov/nkL7HY.

Texas Federal Court Dismisses RESPA Claim Alleging Title Insurance Rate Mark-Up. On July 9, the U.S. District Court for the Northern District of Texas dismissed a borrower’s putative class action suit alleging that a title insurance company violated the Real Estate Settlement Procedures Act (RESPA) by charging title insurance rates in excess of the rates filed with the Texas Department of Insurance. Hancock v. Chicago Title Insurance Company, No. 3:07-CV-1441-D, 2009 WL 2002919 (N.D. Tex. July 9, 2009). In this case, the plaintiff borrower refinanced his home mortgage loan and purchased title insurance from the defendant title insurance agency; the insurance rate was allegedly in excess of the rates that the title insurance agency filed with the Texas Department of Insurance. The borrower alleged that the practice of charging higher rates and allegedly splitting excessive fees with local title agents violated section 8(b) of RESPA, which bars fee splitting when no services are performed. In explicitly rejecting HUD’s interpretation in this area, but following several recent decisions by federal courts, the court held that a title insurer does not violate RESPA when it charges a premium in excess of a state’s rate rules and then splits the fee with its title agent if services are actually performed. The court also granted summary judgment for a claim of unjust enrichment; however, the court refused to dismiss state-law claims alleging money had and received and breach of implied contract. For a copy of the opinion, please click here.

Banking

Treasury Proposes Legislation Regarding Executive Compensation, Authority to Protect Investors. The U.S. Department of the Treasury has proposed legislation to address executive compensation and strengthen the Securities and Exchange Commission’s (SEC) authority to protect investors under the ”Investor Protection Act of 2009.” The proposed legislation, with respect to investor protection, would (i) establish consistent standards for broker-dealers and investment advisers, (ii) grant the SEC authority to limit or restrict mandatory arbitration clauses, (iii) improve the timing and quality of disclosures, (iv) permit the SEC to conduct consumer testing of disclosures and rules, (v) expand protections for whistleblowers, and (vi) harmonize liability standards for aiding and abetting securities fraud. In addition, the legislation would make permanent the Investor Advisory Committee presently established within the SEC. For a copy of the press release regarding these provisions of the legislation, please see http://www.treas.gov/press/releases/tg205.htm. The proposed legislation would seek to address concerns about executive compensation by requiring "say-on-pay” provisions, including (i) a non-binding annual shareholder vote on compensation for public companies, (ii) a separate shareholder vote on golden parachutes, and (iii) a "clear and simple disclosure" of the amounts executives would receive under a golden parachute. Regarding the independence of executive compensation boards, the proposed legislation, among other things, (i) requires the independence of compensation committee members, similar to the independence of audit committee members under the Sarbanes-Oxley Act, (ii) requires the independence of compensation consultants and legal counsel from management, (iii) grants authority to compensation committees to hire advisers (e.g., compensation consultants and outside counsel) to best reflect the interests of shareholders in the compensation committee’s pay decisions, and (iv) requires a compensation committee to disclose and explain if it does not employ a compensation consultant. For a copy of the fact sheets, please see http://www.financialstability.gov/latest/tg_07162009b.html and 
http://www.financialstability.gov/latest/tg_07162009.html. For a copy of the proposed legislation, please see http://www.treasury.gov/press/releases/docs/tg_218IX.pdf.

FinCEN Issues Advisory Rending Anti-Money Laundering, Counter-Terrorist Deficiencies. On July 10, the Financial Crimes Enforcement Network (FinCEN) issued an advisory regarding deficiencies in the anti-money laundering and counter-terrorist financing regimes of Iran, Uzbekistan, Turkmenistan, Pakistan, and Sao Tome and Príncipe. With particular attention to these countries, the advisory reminds banks and financial institutions that FinCEN regulations require the application of due diligence to correspondent accounts maintained for foreign financial institutions and the filing of suspicious activity reports under certain circumstances. For a copy of the advisory, please see http://1.usa.gov/pi7Nmp.

Consumer Finance

FTC, California Attorney General Announce Operation to Investigate Mortgage Relief Services Companies. On July 15, the Federal Trade Commission (FTC) and California Attorney General Edmund G. Brown Jr. announced a law enforcement effort to coordinate national and state agencies to crack down on 189 mortgage modification scams as part of the nationwide “Operation Loan Lies.” Attorney General Brown announced litigation against fourteen companies and twenty-one individuals who claimed to offer mortgage relief services but failed to provide loan modification assistance or any other mortgage relief to customers. One of the named defendants, U.S. Homeowners Assistance, an Irvine, CA based company, allegedly violated the California Business and Professions Code, the California Civil Code, and the California Penal Code. According to the complaint, the company (i) falsely claimed to be a government agency, (i) falsely advertised a 98% success rate in aiding homeowners, and (iii) charged between $1,200 and $3,500 in illegal upfront fees. The complaint seeks $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to prevent the company from offering foreclosure services. In addition to Attorney General Brown’s complaints, the FTC announced four lawsuits against mortgage relief services companies, all in Southern California. In its press release, the FTC further announced the settlement of an April 2008 complaint against Foreclosure Solutions, LLC, a company that allegedly failed to provide advertised foreclosure prevention services (reported in InfoBytes, May 2, 2008). Among other things, the settlement imposes a $8.5 million judgment, subject to suspension, and contains record-keeping and reporting provisions to ensure compliance with the order. For a copy of the FTC’s press release, please see http://www.ftc.gov/opa/2009/07/loanlies.shtm.  For a copy of Attorney General Brown’s press release, please see http://ag.ca.gov/newsalerts/release.php?id=1767.

ABA Urges FTC, Congress to Clarify Whether Red Flags Rule Applies to Attorneys. On June 13, the American Bar Association (ABA) resolved to urge the Federal Trade Commission (FTC) and U.S. Congress to clarify whether the FTC’s Red Flags Rule applies to attorneys while providing legal services to clients. The FTC will begin enforcing the Red Flag Rule with respect to attorneys and law firms on August 1, 2009 (reported in InfoBytes, May 1, 2009), and the ABA is seeking to gain an exemption from these rules for attorneys. For a copy of the ABA’s resolution,please see http://bit.ly/n1Zwdj. For more materials by the ABA regarding the Red Flags Rule, please see http://bit.ly/16Ijyd.

Pennsylvania Court Holds Consumer Loan Law Applies to Out-of-State Companies. On July 10, in a 4-3 decision, the Pennsylvania Commonwealth Court upheld an interpretation of the Pennsylvania Consumer Discount Company Act (CDCA) that applied the law to companies with no physical presence in Pennsylvania. Cash Am. Net of Nev., LLC v. Dep’t of Banking, No. 8 M.D. 2009, 2009 WL 197499 (Pa. Commw. Ct. July 10, 2009). In July 2008, the Pennsylvania Department of Banking (Department) announced that, after more than 70 years of interpreting the requirements of the CDCA to apply only to Pennsylvania persons, all persons making non-mortgage consumer loans to Pennsylvania residents – whether or not those persons had any physical presence in Pennsylvania – would be required to comply with the requirements of the CDCA (reported in InfoBytes, Aug. 1, 2008). The CDCA limits the interest and fees a non-bank company can charge for non-mortgage loans of $25,000 or less. The petitioner, an online payday lender located in Nevada, sued the Department for a declaratory judgment, alleging that the new interpretation was both procedurally improper and substantively incorrect. The Commonwealth Court rejected both arguments. First, the court held that the new interpretation was merely a statement of policy, nonbinding on the courts or even the Department itself. Therefore, the policy did not need to be adopted through the procedures reserved for formal regulations. Second, the court held that the Department’s new interpretation of the reach of the CDCA “is the correct one,” even while acknowledging that “the Department formerly endorsed a contrary interpretation of that section.” Three judges joined in a dissenting opinion, which argued that the Department’s earlier interpretation of the limits of the CDCA was the correct one. For a copy of the opinion, please see here.

New York Federal Court Dismisses FDCPA Claim Regarding Follow-Up Letter. On June 20, the U.S. District Court for the Eastern District of New York held that a debt collector did not violate the Fair Debt Collection Practices Act (FDCPA) because a follow-up letter sent to a debtor subsequent to a validation notice did not “overshadow” or contradict the validation notice. Weber v. Computer Credit, Inc., No. 09-CV-187, 2009 WL 1883046 (E.D. N.Y. June 30, 2009). In this case, the defendant debt collector sent a collection letter containing a validation notice (which the court held complied with the FDCPA) to the debtor regarding the debt. The debt collector subsequently sent a “follow-up” letter to the debtor that the debtor alleged "overshadowed" and contradicted the FDCPA-compliant validation notice. Specifically, the debtor alleged that language in the follow-up letter stating “we expect your cooperation [in collecting the debt]” was “implicit threatening language” that would give the impression to the least sophisticated consumer that the debtor could no longer dispute the debt. In granting the debt collector’s motion to dismiss, the court held that the follow-up letter was not "overshadowing" or contradictory. The court reasoned that the follow-up letter explicitly referenced the initial letter that informed the debtor of the debtor’s right to dispute the debt, suggesting that the previous communication remained in effect. The court further reasoned that the letter did not violate the FDCPA because (i) it did not demand immediate payment and (ii) did not threaten adverse consequences. For a copy of the opinion, please see here.

Securities

Treasury Proposes Legislation Regarding Executive Compensation, Authority to Protect Investors. The U.S. Department of the Treasury has proposed legislation to address executive compensation and strengthen the Securities and Exchange Commission’s (SEC) authority to protect investors under the ”Investor Protection Act of 2009.” The proposed legislation, with respect to investor protection, would (i) establish consistent standards for broker-dealers and investment advisers, (ii) grant the SEC authority to limit or restrict mandatory arbitration clauses, (iii) improve the timing and quality of disclosures, (iv) permit the SEC to conduct consumer testing of disclosures and rules, (v) expand protections for whistleblowers, and (vi) harmonize liability standards for aiding and abetting securities fraud. In addition, the legislation would make permanent the Investor Advisory Committee presently established within the SEC. For a copy of the press release regarding these provisions of the legislation, please see http://www.treas.gov/press/releases/tg205.htm. The proposed legislation would seek to address concerns about executive compensation by requiring "say-on-pay” provisions, including (i) a non-binding annual shareholder vote on compensation for public companies, (ii) a separate shareholder vote on golden parachutes, and (iii) a "clear and simple disclosure" of the amounts executives would receive under a golden parachute. Regarding the independence of executive compensation boards, the proposed legislation, among other things, (i) requires the independence of compensation committee members, similar to the independence of audit committee members under the Sarbanes-Oxley Act, (ii) requires the independence of compensation consultants and legal counsel from management, (iii) grants authority to compensation committees to hire advisers (e.g., compensation consultants and outside counsel) to best reflect the interests of shareholders in the compensation committee’s pay decisions, and (iv) requires a compensation committee to disclose and explain if it does not employ a compensation consultant. For a copy of the fact sheets, please see http://www.financialstability.gov/latest/tg_07162009b.html and 
http://www.financialstability.gov/latest/tg_07162009.html. For a copy of the proposed legislation, please see http://www.treasury.gov/press/releases/docs/tg_218IX.pdf.

Insurance

Texas Federal Court Dismisses RESPA Claim Alleging Title Insurance Rate Mark-Up. On July 9, the U.S. District Court for the Northern District of Texas dismissed a borrower’s putative class action suit alleging that a title insurance company violated the Real Estate Settlement Procedures Act (RESPA) by charging title insurance rates in excess of the rates filed with the Texas Department of Insurance. Hancock v. Chicago Title Insurance Company, No. 3:07-CV-1441-D, 2009 WL 2002919 (N.D. Tex. July 9, 2009). In this case, the plaintiff borrower refinanced his home mortgage loan and purchased title insurance from the defendant title insurance agency; the insurance rate was allegedly in excess of the rates that the title insurance agency filed with the Texas Department of Insurance. The borrower alleged that the practice of charging higher rates and allegedly splitting excessive fees with local title agents violated section 8(b) of RESPA, which bars fee splitting when no services are performed. In explicitly rejecting HUD’s interpretation in this area, but following several recent decisions by federal courts, the court held that a title insurer does not violate RESPA when it charges a premium in excess of a state’s rate rules and then splits the fee with its title agent if services are actually performed. The court also granted summary judgment for a claim of unjust enrichment; however, the court refused to dismiss state-law claims alleging money had and received and breach of implied contract. For a copy of the opinion, please click here.

Litigation

Pennsylvania Court Holds Consumer Loan Law Applies to Out-of-State Companies. On July 10, in a 4-3 decision, the Pennsylvania Commonwealth Court upheld an interpretation of the Pennsylvania Consumer Discount Company Act (CDCA) that applied the law to companies with no physical presence in Pennsylvania. Cash Am. Net of Nev., LLC v. Dep’t of Banking, No. 8 M.D. 2009, 2009 WL 197499 (Pa. Commw. Ct. July 10, 2009). In July 2008, the Pennsylvania Department of Banking (Department) announced that, after more than 70 years of interpreting the requirements of the CDCA to apply only to Pennsylvania persons, all persons making non-mortgage consumer loans to Pennsylvania residents – whether or not those persons had any physical presence in Pennsylvania – would be required to comply with the requirements of the CDCA (reported in InfoBytes, Aug. 1, 2008). The CDCA limits the interest and fees a non-bank company can charge for non-mortgage loans of $25,000 or less. The petitioner, an online payday lender located in Nevada, sued the Department for a declaratory judgment, alleging that the new interpretation was both procedurally improper and substantively incorrect. The Commonwealth Court rejected both arguments. First, the court held that the new interpretation was merely a statement of policy, nonbinding on the courts or even the Department itself. Therefore, the policy did not need to be adopted through the procedures reserved for formal regulations. Second, the court held that the Department’s new interpretation of the reach of the CDCA “is the correct one,” even while acknowledging that “the Department formerly endorsed a contrary interpretation of that section.” Three judges joined in a dissenting opinion, which argued that the Department’s earlier interpretation of the limits of the CDCA was the correct one. For a copy of the opinion, please see here.

Texas Federal Court Dismisses RESPA Claim Alleging Title Insurance Rate Mark-Up. On July 9, the U.S. District Court for the Northern District of Texas dismissed a borrower’s putative class action suit alleging that a title insurance company violated the Real Estate Settlement Procedures Act (RESPA) by charging title insurance rates in excess of the rates filed with the Texas Department of Insurance. Hancock v. Chicago Title Insurance Company, No. 3:07-CV-1441-D, 2009 WL 2002919 (N.D. Tex. July 9, 2009). In this case, the plaintiff borrower refinanced his home mortgage loan and purchased title insurance from the defendant title insurance agency; the insurance rate was allegedly in excess of the rates that the title insurance agency filed with the Texas Department of Insurance. The borrower alleged that the practice of charging higher rates and allegedly splitting excessive fees with local title agents violated section 8(b) of RESPA, which bars fee splitting when no services are performed. In explicitly rejecting HUD’s interpretation in this area, but following several recent decisions by federal courts, the court held that a title insurer does not violate RESPA when it charges a premium in excess of a state’s rate rules and then splits the fee with its title agent if services are actually performed. The court also granted summary judgment for a claim of unjust enrichment; however, the court refused to dismiss state-law claims alleging money had and received and breach of implied contract. For a copy of the opinion, please click here.

Illinois Federal Court Certifies Class in FACTA Suit Despite Lack of Injury to Plaintiff. On July 8, 2009, the U.S. District Court for the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a suit alleging violations of the Fair Credit Reporting Act (FCRA), as amended by the Fair and Accurate Credit Transactions Act (FACTA), reasoning that neither the consumer’s lack of injury nor the possibility of “ruinous” financial exposure for the defendant defeated class certification. Armes v. Shanta Enterprise, Inc., No. 07-c-5766, 2009 WL 2020781 (N.D. Ill. July 9, 2009). In Armes, the consumer claimed that the defendant violated FACTA when it issued the consumer a receipt that contained his entire credit card number along with its expiration date. The consumer sought to certify a class consisting of all persons to whom the defendant provided a receipt displaying more than the last five digits of the person’s credit or debit card number in any transaction occurring after December 4, 2006. Following the Seventh Circuit’s reasoning in Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006) (reported in InfoBytes, Jan. 20, 2006), the court rejected the defendant’s arguments that a class action was not the superior method to adjudicate the claim because of the possibility of “ruinous” financial exposure and because the consumer suffered no actual injury as a result of the violation The court reasoned that FCRA “does not make distinctions between the level of harm a customer may have suffered,” and that a legislative decision had been made to authorize awards as high as $1000 per person for FCRA violations. The court further reasoned that the damages claim for each potential class member would likely not be large enough to sustain individual actions. Accordingly, the court granted the consumer’s motion to certify the class. For a copy of the opinion, please click here.

New York Federal Court Dismisses FDCPA Claim Regarding Follow-Up Letter. On June 20, the U.S. District Court for the Eastern District of New York held that a debt collector did not violate the Fair Debt Collection Practices Act (FDCPA) because a follow-up letter sent to a debtor subsequent to a validation notice did not “overshadow” or contradict the validation notice. Weber v. Computer Credit, Inc., No. 09-CV-187, 2009 WL 1883046 (E.D. N.Y. June 30, 2009). In this case, the defendant debt collector sent a collection letter containing a validation notice (which the court held complied with the FDCPA) to the debtor regarding the debt. The debt collector subsequently sent a “follow-up” letter to the debtor that the debtor alleged "overshadowed" and contradicted the FDCPA-compliant validation notice. Specifically, the debtor alleged that language in the follow-up letter stating “we expect your cooperation [in collecting the debt]” was “implicit threatening language” that would give the impression to the least sophisticated consumer that the debtor could no longer dispute the debt. In granting the debt collector’s motion to dismiss, the court held that the follow-up letter was not "overshadowing" or contradictory. The court reasoned that the follow-up letter explicitly referenced the initial letter that informed the debtor of the debtor’s right to dispute the debt, suggesting that the previous communication remained in effect. The court further reasoned that the letter did not violate the FDCPA because (i) it did not demand immediate payment and (ii) did not threaten adverse consequences. For a copy of the opinion, please see here.

Washington Federal Court Holds IP Addresses Are Not Personally Identifiable Information. On June 23, the U.S. District Court for the Western District of Washington ruled that Microsoft did not breach its consumer license agreement that prohibits the collection of personally identifiable information when it collected consumers’ Internet Protocol (IP) addresses. Johnson v. Microsoft Corp., No. C06-0900RAJ, 2009 WL 1794400 (W.D. Wash. June 23, 2009). The case arose after the plaintiff consumers alleged that the defendant breached the terms of its End User License Agreement (EULA) with the consumers by, among other things, installing verification software that detected the consumers’ IP addresses. The terms of the EULA provided that the defendant would not transmit “personally identifiable information” from a consumer’s computer without that consumer’s consent. However, the phrase “personally identifiable information” was not defined in the EULA. The consumers argued that the court should apply a definition of the phrase taken from the defendant’s own security glossary available on its website. Under that definition, IP addresses would be “personally identifiable information.” The court rejected this argument, finding that the security glossary was not part of the EULA, nor was it incorporated by reference. The court further noted that personally identifiable information must identify a person. Because IP addresses can identify only computers, the court held that, unless alternately defined by an agreement, IP addresses are not “personally identifiable information.” As a result, the court granted the defendant’s motion for summary judgment. For a copy of the opinion please click here.

E-Financial Services

Washington Federal Court Holds IP Addresses Are Not Personally Identifiable Information. On June 23, the U.S. District Court for the Western District of Washington ruled that Microsoft did not breach its consumer license agreement that prohibits the collection of personally identifiable information when it collected consumers’ Internet Protocol (IP) addresses. Johnson v. Microsoft Corp., No. C06-0900RAJ, 2009 WL 1794400 (W.D. Wash. June 23, 2009). The case arose after the plaintiff consumers alleged that the defendant breached the terms of its End User License Agreement (EULA) with the consumers by, among other things, installing verification software that detected the consumers’ IP addresses. The terms of the EULA provided that the defendant would not transmit “personally identifiable information” from a consumer’s computer without that consumer’s consent. However, the phrase “personally identifiable information” was not defined in the EULA. The consumers argued that the court should apply a definition of the phrase taken from the defendant’s own security glossary available on its website. Under that definition, IP addresses would be “personally identifiable information.” The court rejected this argument, finding that the security glossary was not part of the EULA, nor was it incorporated by reference. The court further noted that personally identifiable information must identify a person. Because IP addresses can identify only computers, the court held that, unless alternately defined by an agreement, IP addresses are not “personally identifiable information.” As a result, the court granted the defendant’s motion for summary judgment. For a copy of the opinion please click here.

Privacy/Data Security

ABA Urges FTC, Congress to Clarify Whether Red Flags Rule Applies to Attorneys. On June 13, the American Bar Association (ABA) resolved to urge the Federal Trade Commission (FTC) and U.S. Congress to clarify whether the FTC’s Red Flags Rule applies to attorneys while providing legal services to clients. The FTC will begin enforcing the Red Flag Rule with respect to attorneys and law firms on August 1, 2009 (reported in InfoBytes, May 1, 2009), and the ABA is seeking to gain an exemption from these rules for attorneys. For a copy of the ABA’s resolution, please see http://bit.ly/n1Zwdj. For more materials by the ABA regarding the Red Flags Rule, please see http://bit.ly/16Ijyd.

Illinois Federal Court Certifies Class in FACTA Suit Despite Lack of Injury to Plaintiff. On July 8, 2009, the U.S. District Court for the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a suit alleging violations of the Fair Credit Reporting Act (FCRA), as amended by the Fair and Accurate Credit Transactions Act (FACTA), reasoning that neither the consumer’s lack of injury nor the possibility of “ruinous” financial exposure for the defendant defeated class certification. Armes v. Shanta Enterprise, Inc., No. 07-c-5766, 2009 WL 2020781 (N.D. Ill. July 9, 2009). In Armes, the consumer claimed that the defendant violated FACTA when it issued the consumer a receipt that contained his entire credit card number along with its expiration date. The consumer sought to certify a class consisting of all persons to whom the defendant provided a receipt displaying more than the last five digits of the person’s credit or debit card number in any transaction occurring after December 4, 2006. Following the Seventh Circuit’s reasoning in Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006) (reported in InfoBytes, Jan. 20, 2006), the court rejected the defendant’s arguments that a class action was not the superior method to adjudicate the claim because of the possibility of “ruinous” financial exposure and because the consumer suffered no actual injury as a result of the violation The court reasoned that FCRA “does not make distinctions between the level of harm a customer may have suffered,” and that a legislative decision had been made to authorize awards as high as $1000 per person for FCRA violations. The court further reasoned that the damages claim for each potential class member would likely not be large enough to sustain individual actions. Accordingly, the court granted the consumer’s motion to certify the class. For a copy of the opinion, please click here.

Washington Federal Court Holds IP Addresses Are Not Personally Identifiable Information. On June 23, the U.S. District Court for the Western District of Washington ruled that Microsoft did not breach its consumer license agreement that prohibits the collection of personally identifiable information when it collected consumers’ Internet Protocol (IP) addresses. Johnson v. Microsoft Corp., No. C06-0900RAJ, 2009 WL 1794400 (W.D. Wash. June 23, 2009). The case arose after the plaintiff consumers alleged that the defendant breached the terms of its End User License Agreement (EULA) with the consumers by, among other things, installing verification software that detected the consumers’ IP addresses. The terms of the EULA provided that the defendant would not transmit “personally identifiable information” from a consumer’s computer without that consumer’s consent. However, the phrase “personally identifiable information” was not defined in the EULA. The consumers argued that the court should apply a definition of the phrase taken from the defendant’s own security glossary available on its website. Under that definition, IP addresses would be “personally identifiable information.” The court rejected this argument, finding that the security glossary was not part of the EULA, nor was it incorporated by reference. The court further noted that personally identifiable information must identify a person. Because IP addresses can identify only computers, the court held that, unless alternately defined by an agreement, IP addresses are not “personally identifiable information.” As a result, the court granted the defendant’s motion for summary judgment. For a copy of the opinion please click here.

Credit Cards

Federal Reserve Board Issues Interim Final Rule Implementing CCARD. On July 15, the Federal Reserve Board (Fed) issued an interim final rule to implement provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CCARD). The interim final rule implements provisions of CCARD under which creditors must, among other things, (i) provide written notice 45 days before a “significant” change to the terms of an account (e.g., an increase to an annual percentage rate), (ii) inform consumers, in the same notice, of the right to cancel the card before the changes to into effect, and (iii) in general, deliver periodic statements for open-end consumer credit accounts at least 21 days before payment is due. The interim final rule implements provisions of the statute that become effective August 20, 2009. The Fed will implement additional provisions of CCARD in stages. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090715a.htmFor a copy of the interim final rule, please click here.

OTS Memorandum Addresses CCARD “Look-Back” Provision. On July 13, the Office of Thrift Supervision (OTS) issued a memorandum regarding the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CCARD). The memorandum strongly encourages OTS-regulated institutions to consider the “look-back” provision of CCARD, under which increases in annual percentage rates after January 1, 2009 must be reviewed at least once every six months to assess whether factors contributing to the APR increase have changed. According to the OTS, APRs might require reduction if such factors are no longer present. The memorandum follows a letter by Senator Christopher J. Dodd (D-CT) on July 9 that urged the federal banking regulatory agencies to implement and enforce the look-back provision (reported in InfoBytes, July 10, 2009). For a copy of the OTS memorandum, please see here.

Illinois Federal Court Certifies Class in FACTA Suit Despite Lack of Injury to Plaintiff. On July 8, 2009, the U.S. District Court for the Northern District of Illinois granted a consumer plaintiff’s motion for class certification in a suit alleging violations of the Fair Credit Reporting Act (FCRA), as amended by the Fair and Accurate Credit Transactions Act (FACTA), reasoning that neither the consumer’s lack of injury nor the possibility of “ruinous” financial exposure for the defendant defeated class certification. Armes v. Shanta Enterprise, Inc., No. 07-c-5766, 2009 WL 2020781 (N.D. Ill. July 9, 2009). In Armes, the consumer claimed that the defendant violated FACTA when it issued the consumer a receipt that contained his entire credit card number along with its expiration date. The consumer sought to certify a class consisting of all persons to whom the defendant provided a receipt displaying more than the last five digits of the person’s credit or debit card number in any transaction occurring after December 4, 2006. Following the Seventh Circuit’s reasoning in Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006) (reported in InfoBytes, Jan. 20, 2006), the court rejected the defendant’s arguments that a class action was not the superior method to adjudicate the claim because of the possibility of “ruinous” financial exposure and because the consumer suffered no actual injury as a result of the violation The court reasoned that FCRA “does not make distinctions between the level of harm a customer may have suffered,” and that a legislative decision had been made to authorize awards as high as $1000 per person for FCRA violations. The court further reasoned that the damages claim for each potential class member would likely not be large enough to sustain individual actions. Accordingly, the court granted the consumer’s motion to certify the class. For a copy of the opinion, please click here.