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9th Circuit Panel Reverses and Remands Dismissal of Pro Se Plaintiff’s Breach of Contract Claim in Connection with Bank’s Trial Loan Modification Process
In an opinion filed on March 13, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit reversed and remanded a district court’s dismissal of a homeowner-plaintiff’s breach of contract claim against a major bank for damages allegedly suffered when she unsuccessfully attempted to modify her home loan over a two-year period. Oskoui v. J.P. Morgan Chase Bank, N.A., [Dkt No. 47-1] Case No. 15-55457 (9th Cir. Mar. 13, 2017) (Trott, S.). The court also remanded with instructions to permit the pro-se plaintiff to amend her complaint to allege a right to rescind in connection with her previously-dismissed TILA claim in light of the Supreme Court’s January 2015 decision in Jesinoski v. Countrywide Home Loans, Inc. And, finally, the panel affirmed the district court’s ruling that the facts alleged demonstrated a claim under California’s Unfair Competition Law (“UCL”) because, among other reasons, the factual record supported a determination that the bank knew or should have known that the homeowner was plainly ineligible for a loan modification; yet, the bank encouraged her to apply for modifications (which she did), and collected payments pursuant to trial modification plans.
In reversing and remanding the district court’s ruling dismissing the breach of contract claim, the Ninth Circuit pointed to the styling on the first-page of the complaint—“BREACH OF CONTRACT”—along with allegations about the explicit offer language contained in the bank’s trial modification documents. The Ninth Circuit relied on the Seventh Circuit’s opinion in Wigod v. Wells Fargo, which it identified as the “leading federal appellate decision on this issue of contract,” to “illuminate the viability” of plaintiff’s breach of contract claim in connection with trial plan documents. 673 F.3d 547 (7th Cir. 2012). The Ninth Circuit remanded the claim with instructions to permit the plaintiff to amend if necessary in order to move forward with her breach of contract claim.
On March 14, the FTC announced that it reached a settlement with a Los-Angeles-based auto dealership group over charges that the group engaged in deceptive and unfair sales and financing practices, deceptive advertising, and deceptive online reviews. The settlement, in the form of a stipulated final order, requires that the auto group pay more than $3.6 million in consumer remediation and is pending approval by the U.S. District Court for the Central District of California. The complaint, which was filed in September of last year, also alleged the defendants participated in deceptive and unfair practices related to add-on products that consumers did not authorize. Furthermore, the FTC claimed the defendants violated TILA and Regulation Z, as well as the Consumer Leasing Act and Regulation M, for “failing to clearly disclose required credit information and lease information in their advertising.” The proposed settlement order prohibits “the defendants from making misrepresentations relating to their advertising, add-on products, financing, and endorsements or testimonials,” and also bars “the defendants from engaging in other unlawful conduct when a sale is cancelled.”
On March 13, the CFPB issued a consent order and stipulation in an enforcement action against the fifth of five Arizona-based title lenders under investigation for advertising periodic interest rates without including corresponding annual percentage rates. As previously covered in Infobytes in September and February, this marks the conclusion of the investigation initiated by the Bureau last year against five title lenders for alleged violations of TILA, Regulation Z, and the Consumer Financial Protection Act’s prohibition against unfair, deceptive, or abusive acts or practices. The terms of the consent order include a $40,000 civil money penalty, an agreement that the lender will refrain from further violations of TILA, and a requirement that the lender submit a comprehensive plan to ensure compliance with all applicable federal consumer financial laws and the terms of the consent order.
On March 1, the House Financial Services Committee met in open session and voted, along party lines, to approve its Budget Views and Estimates for Fiscal Year 2018. Among other things, the plan calls for advancing “legislative proposals—including the Financial CHOICE Act—to replace the failed aspects of the Dodd-Frank Act with free-market alternatives that end bailouts, restore market discipline, ensure that the financial system is more resilient, pare back unnecessary and burdensome regulations, encourage capital formation and economic growth, and protect consumers by preserving financial independence and consumer choice.” In addition, the Committee intends to advance legislation to place the non-monetary policy activities of the independent agencies within the Committee’s jurisdiction on the appropriations process. The Committee voted down, along party lines, a series of amendments submitted by the Democratic members.
On February 21, a national bank fined by the CFPB last September for opening deposit and credit card accounts without customers’ knowledge announced the termination of four current or former senior managers in its Community Banking Department. The individuals will not receive 2016 bonuses and will forfeit unvested equity rewards and vested outstanding options. As previously covered in InfoBytes, the bank’s incentive compensation program encouraged employees to “engage in Improper Sales Practices to satisfy goals and earn financial rewards”—practices that the CFPB alleged were unfair and abusive. The bank eliminated all product sales goals in retail banking effective January 1 of this year, and is conducting its own independent investigation, which is ongoing.
On November 3, the CFPB filed a lawsuit in federal district court against a Virginia pawnbroker for deceiving consumers about the actual annual cost of its loans. In its Complaint, the CFPB alleges both TILA violations and unfair, deceptive, or abusive acts or practices under Dodd-Frank and the CPA. The complaint seeks monetary relief, injunctive relief, and penalties. The CFPB coordinated its investigation with the Virginia Attorney General’s office – which filed its own lawsuit against the same pawnbrokers back in July 2015 for violations of the Virginia Consumer Protection Act.
On October 11, the CFPB issued a consent order to a Virginia-based federal credit union to resolve allegations that its debt collection activities were unfair and deceptive in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to the CFPB’s consent order, the credit union failed to implement adequate compliance controls and employee training on debt collection communications. The credit union’s actions involved employees who sent letters to “hundreds of thousands” of consumers containing various misrepresentations regarding the handling of consumer debt. The consent order alleged that these debt collection letters falsely threatened legal action, wage garnishment, and contacting servicemembers’ commanding officers for failure to remit payments. The consent order also noted that the same threats were made via telephone. The CFPB further contends that the credit union (i) sent approximately 68,000 letters misrepresenting the credit consequences of falling behind on a loan, alleging that members would “find it difficult, if not impossible, to obtain additional credit because of [their] present unsatisfactory credit rating” (internal quotations omitted); and (ii) restricted consumers’ electronic account access and electronic accounts services – without providing adequate notice – once their accounts became delinquent. Pursuant to the consent order, the credit union must (i) pay $23 million in consumer redress; (ii) pay a $5.5 million civil money penalty; and (iii) establish a comprehensive compliance plan regarding its policies and procedures on consumer debt collection communications and electronic account restrictions.
On September 13, the House Financial Services Committee approved by a 30-26 vote the Financial CHOICE Act, Congressman Jeb Hensarling’s (R-TX) legislative replacement to the Dodd-Frank Act. In his opening remarks, Hensarling claimed that the bill aims to end bailouts, support economic growth, and provide regulatory relief to community banks. House Democrats did not offer amendments to the bill, although many expressed adamant disapproval. Congresswoman Carolyn Maloney (D-NY) claimed that the “deeply disturbing” legislation “would take us back to the regulatory stone age.” Various Democrats referenced the CFPB’s recent enforcement action against a national bank to argue that the Financial CHOICE Act’s attempt to remove the CFPB’s authority over abusive practices was one of many reasons to oppose the bill. Democrats unanimously voted against the legislation, while all but one Republican, Congressman Bruce Poliquin (R-ME), voted in favor of moving the legislation forward.
On September 8, the CFPB issued a consent order to a national bank to resolve allegations that its employees opened deposit and credit card accounts for consumers without obtaining consent to do so. According to the CFPB’s consent order, the respondent implemented an incentive compensation program under which employees “engaged in Improper Sales Practices to satisfy goals and earn financial rewards.” The CFPB alleges that the bank’s employees’ Improper Sales Practices were unfair and abusive. Specifically, the consent order alleges that the employees, possibly without consumers’ knowledge or without their consent, (i) opened more than 1.5 million deposit accounts and subsequently transferred money from consumers’ existing accounts to fund the newly opened accounts; (ii) submitted approximately 565,000 credit card account applications on behalf of consumers, with consumers consequently incurring late, annual, and over-draft fees on such accounts; (iii) issued debit cards and created personal identification numbers to activate the cards; and (iv) enrolled consumers in online-banking services. Pursuant to the consent order, the bank, among other things, must pay a civil penalty of $100 million and an expected $2.5 million in consumer redress.
FTC Resolves Operation Collection Protection Charges; Bans Companies from Debt Collection Business
On September 7, the FTC announced separate stipulated orders (here and here) against two groups of debt collectors to resolve November 2015 charges that their debt collection practices were deceptive, abusive, and unfair in violation of the FTC Act and the Fair Debt Collection Practices Act (FDCPA). According to the FTC, the first group of debt collectors (i) attempted to collect on debts consumers claimed they did not owe; (ii) failed to verify the debts; and (iii) impersonated law enforcement, threatened non-compliant consumers with arrests and lawsuits, and made accusations of bank fraud. In addition to barring the defendants from debt collection activities and from “misrepresenting material facts about any financial-related products or services,” the order imposes a judgment of more than $4.47 million. Regarding the second group of debt collectors, the FTC alleged that, in addition to threatening consumers with arrest if purported debts went unpaid and harassing friends, family members, and employees in an attempt to collect debts, they sent “alarming and deceptive text messages to trick consumers into contacting them, without identifying themselves as debt collectors.” Pursuant to the final judgment, the defendants must pay a judgment of approximately $27 million. The order imposes a separate judgment of $11,000 on the individually named defendant.
Filed in federal district court of New York, the actions were part of the FTC’s Operation Collection Protection, a federal-state-local initiative that has brought a total of 148 debt collection-related actions to date.