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  • 10th Circuit: Extended overdraft fees do not qualify as interest under the NBA

    Courts

    On April 8, the U.S. Court of Appeals for the Tenth Circuit concluded that extended overdraft fees do not legally qualify as interest under the National Bank Act (NBA). According to the opinion, after the plaintiff overdrew funds from his checking account, the bank covered the cost of the item and charged an initial overdraft fee. The bank later began imposing an extended overdraft fee each business day following the initial overdraft, ultimately assessing 36 separate overdraft fees. The plaintiff filed a putative class action, contending that the bank’s extended overdraft fees qualify as interest under the NBA, and that the amount charged (which he claimed translated to an effective annualized interest rate between 501 and 2,462 percent) violated the NBA’s anti-usury provisions because it exceeded Oklahoma’s maximum annualized interest rate of 6 percent. While the plaintiff recognized that the initial overdraft fee qualifies as a “deposit account service,” he argued that the extended overdraft fee “‘is an interest charge levied by [the bank] for the continued extension of credit made in covering a customer’s overdraft’ and therefore cannot be considered connected to the same banking services that [the bank] provides to its depositors.” The district court disagreed and dismissed the action for failure to state a claim after determining that the bank’s extended overdraft fees were fees for “deposit account services” and were not “interest” under the NBA.

    In affirming the district court’s dismissal, the appellate majority (an issue of first impression in the 10th Circuit) agreed that the fees qualify as non-interest account fees rather than interest charges under the NBA. The majority deferred to the OCC’s 2007 Interpretive Letter, which addressed the legality of a similar overdraft program fee structure. The letter “represents OCC’s reasonable interpretation of genuinely ambiguous regulations, and OCC’s determination that fees like [the bank’s] extended overdraft fees are ‘non-interest charges’ is neither plainly erroneous nor inconsistent with the regulations it interprets,” the majority wrote. “As ‘non-interest charges’ under § 7.4002, [the bank’s] extended overdraft fees are not subject to the NBA’s usury limits, and [plaintiff] fails to state a claim,” the majority added.

    The dissenting judge countered that extended overdraft fees are interest, and that the OCC’s interpretation did not deserve deference because these fees “unambiguously” meet the definition of interest under 12 C.F.R. § 7.4001(a). According to the dissenting judge, this regulation provides that “‘interest’ ... includes any payment compensating a creditor ... for an extension of credit,” and that as such, the “definition maps onto extended overdraft fees like [the bank’s]” and thus the plaintiff had stated a claim.

    Courts Appellate Tenth Circuit Overdraft Interest National Bank Act Fees Consumer Finance OCC Class Action

  • 8th Circuit: No standing in FCRA action following Spokeo

    Courts

    On May 3, the U.S. Court of Appeals for the Eighth Circuit vacated a district court’s approval of a class action settlement agreement in an FCRA action after determining that the plaintiff lacked Article III standing in light of the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins. According to the opinion, after the plaintiff applied for employment with the defendant, the defendant made a conditional offer of employment to the plaintiff and also asked her to sign an authorization for release of information so that it could conduct a background investigation of the plaintiff, including a criminal background search. The plaintiff contended that, after the defendant reviewed the background screening report, it withdrew the conditional offer of employment and did not provide her an opportunity before the offer was withdrawn to correct or explain the results in the report. A follow-up letter, which included a copy of the report and a description of her rights under the FCRA, was sent to the plaintiff stating that if she planned to dispute the information she had to do so within seven days from receipt of the letter. The plaintiff commenced the action in February 2016, alleging the defendant violated the FCRA by: (i) “taking adverse employment action based on a consumer report without first providing the report to the applicant”; (ii) “obtaining a consumer report without providing a disclosure form that complied with the FCRA”; and (iii) “exceeding the scope of the authorization by obtaining more information than the disclosed in the authorization.” In May 2016, the parties reached a tentative settlement agreement, but four days later the Supreme Court issued its decision in Spokeo, which requires plaintiffs to show that they have suffered a concrete injury in fact that is fairly traceable to the challenged conduct of the defendant, and not just allege a statutory violation. Following Spokeo, the defendant moved to dismiss for lack of standing, but the district court approved the settlement.

    On appeal, the 8th Circuit concluded that the plaintiff lacked Article III standing to bring her FCRA claims, determining, among other things, that “the right to pre-action explanation to the employer is not unambiguously stated in the text of the statute,” and that “[n]either the text of the FCRA nor the legislative history provide support for [plaintiff’s] claim that she has a right under the FCRA to not only receive a copy of her consumer report, but also discuss directly with the employer accurate but negative information within the report prior to the employer taking adverse action.” The plaintiff “may have demonstrated an injury in law, but not an injury in fact,” the appellate court wrote. With respect to the plaintiff’s other two claims, the appellate court noted that she failed to show any claim of harm—tangible or intangible. Because Schumacher lacked standing to assert any of her claims, the appellate court vacated the district court’s order and remanded the case with instructions to return the case to the state court.

    Courts Appellate Eighth Circuit Spokeo FCRA Class Action

  • District Court preliminarily approves TCPA class action settlement

    Courts

    On October 28, the U.S. District Court for the Northern District of California granted final approval to a $14.1 million settlement in a class action against an affiliate of a real estate services company for allegedly violating the TCPA by soliciting calls to consumers. According to the plaintiff’s motion for preliminary approval, the plaintiff alleged that he received unwanted telephone solicitations on behalf of the defendant to his residential telephone lines that he had previously registered on the “Do Not Call” registry, in addition to alleging that he received repeated unwanted telemarketing calls even after he had requested that the defendant and/or its agents not call him back. Each member of the settlement class, which consists of individuals in the U.S. who received two or more calls since September 13, 2014 on their residential telephone number from the defendant’s affiliate that promoted the purchase of the defendant’s goods and services, will receive $350.00. The final settlement also includes $2.77 million in attorney fees and costs.

    Courts TCPA Class Action Real Estate Do Not Call Registry Settlement

  • District Court dismisses bank from class action on out-of-network ATM fees

    Courts

    On April 4, the U.S. District Court for the Southern District of California granted a defendant bank’s motion for summary judgment and denied class certification in an action concerning out-of-network fees charged on purportedly invalid balance inquiries performed at out-of-network (OON) ATM machines. The defendant is a member of two cardholder networks, which permit account holders to access and use OON ATMs. In 2019, plaintiff account holders filed a lawsuit alleging the defendant violated several California state consumer protection laws and breached its deposit account agreements by systematically charging excessive fees. Plaintiffs further alleged the defendant assessed multiple fees if a consumer made a balance inquiry at the same time as a cash withdrawal. The defendant argued in its motion for summary judgment that the deposit agreement was unambiguous and that its assessment of the OON fees for balance inquiries is permitted under the agreement’s express terms. In agreeing with the defendant that no ambiguity existed in the language in the agreement regarding such fees, the court, among other things, also held that language in the agreement providing the defendant and ATM operators discretion to charge or waive fees for use of OON ATMs did not imply that the defendant relied on that contract term in bad faith. The court found that nothing about the use of the word “may” in the phrase “[w]e may also charge you a fee,” necessitates “the conclusion that the bank ‘abuses its power and takes advantage of contractual uncertainty by charging OON Fees when it knows, or should know, of the [alleged] systematic deception occurring at [OON] ATMs resulting in invalid balance inquiries.’”

    In its motion, the defendant bank also maintained that the claims against it fail because the plaintiffs failed to follow express reporting and pre-dispute notification procedures outlined in their agreements, which require account holders to review their statements and notify the bank within 60 days of any problems or unauthorized transactions. The court declined to find that the pre-dispute procedures provided an alternative basis for summary judgment in favor of the defendant, finding that it was not clear that plaintiffs’ obligation to provide defendant with notice of unauthorized transactions covered disputed OON ATM fees. The court explained that such fees may not be apparent on the plaintiffs’ billing statements and that “the notice provisions seem to relate to major issues such as fraud and unauthorized or stolen checks” rather than problematic fees.

    Courts Class Action State Issues Fees Consumer Finance ATM California

  • District Court approves $90 million settlement in data tracking suit

    Courts

    On March 31, the U.S. District Court for the Northern District of California granted final approval to a $90 million class action settlement resolving claims that a social media platform unlawfully tracked consumers’ browsing data. According to the settlement agreement, the defendant obtained and collected data from approximately 124 million platform users in the U.S. who visited websites that displayed the defendant’s “Like” button between April 22, 2010 and September 26, 2011. According to the settlement, in addition to paying a $90 million settlement, the company must delete the data it had collected from users during the class period.

    Courts Privacy/Cyber Risk & Data Security Class Action California Settlement

  • Social networking apps settle minors' data claims for $1.1 million

    Privacy, Cyber Risk & Data Security

    On March 25, the U.S. District Court for the Northern District of Illinois granted final approval to a $1.1 million class action settlement resolving claims that the operators of two video social networking apps (defendants) “‘surreptitiously tracked, collected, and disclosed the personally identifiable information and/or viewing data of children under the age of 13,’ ‘without parental consent’” in violation of federal and California privacy law. Specifically, plaintiffs asserted violations of the Video Privacy Protection Act (VPPA), the California constitutional right to privacy, the California Consumers Legal Remedies Act (CLRA), and the Illinois Consumer Fraud and Deceptive Businesses Practices Act. Defendants countered that plaintiffs’ state-law claims were preempted by the Children’s Online Privacy Protection Act, and that, furthermore, the “alleged conduct is not within the scope of VPPA or the cited state consumer protection laws” and “does not amount to a common law invasion of privacy or a violation of Plaintiffs’ rights under the California Constitution.” Moreover, defendants argued that plaintiffs could not recover actual damages. According to plaintiffs’ supplemental motion for final approval, following months-long negotiations, the parties agreed to settle the action on a class-wide basis.

    The settlement requires defendants to pay $1.1 million into a non-reversionary settlement fund, to be dispersed pro rata to class members (anyone in the U.S. who, prior to the settlement’s effective date and while under the age of 13, registered for or used the apps) who submit a valid claim after the payment of settlement administration expenses, taxes, fees, and service awards. The court’s order, however, declined to award an objector’s counsel any attorneys’ fees for his efforts to negotiate modified relief because the agreement was negotiated in a separate proceeding in related multidistrict litigation. The court also denied plaintiffs’ motion for sanctions against the objector’s law firm.

    Privacy/Cyber Risk & Data Security Courts Settlement Class Action State Issues Illinois California COPPA

  • District Court approves $50 million class action settlement over recorded calls

    Courts

    On Auguts 4, the U.S. District Court for the Northern District of Illinois approved a class action settlement, resolving allegations that a call center hired by a national bank and its merchant processing servicer (collectively, “defendants”) violated the California Invasion of Privacy Act (CIPA) by recording calls without receiving customers’ permission. According to the plaintiff’s motion for preliminary approval, a lawsuit was filed in 2016 on behalf of a proposed class of small businesses in California who received calls from call center companies attempting to sell credit and debit card payment processing services, alleging, among other things, that the defendants were in a principal-agent relationship with the companies that violated the CIPA by recording telemarketing calls without any warning that the recording was occurring. As previously covered by InfoBytes, class members, comprising California businesses who did not sign a contract for merchant processing services with the servicer, filed suit against another national bank in 2016 claiming the call center placed sales appointment calls to the businesses without disclosing that the calls were being recorded. The preliminarily approved settlement in that case required the defendants to pay $28 million, of which up to $5,000 was paid for each eligible call that a class member received during the class period, which was estimated to be 192,836 individuals. The recent preliminarily approved settlement will require the defendants to pay $50 million, of which up to $5,000 will be paid for each eligible call that a class member received during the class period.

    Courts Settlement Class Action State Issues California Consumer Finance

  • District Court grants final approval in data breach case

    Courts

    On January 4, the U.S. District Court for the Eastern District of Texas granted final approval of a settlement in a class action resolving claims that a software company and its subsidiary (collectively, “defendants”) failed to properly safeguard customers' personally identifiable information (PII). According to the memorandum of law in support of the plaintiff’s motion for preliminary approval, the plaintiffs filed suit after a data breach of the defendant’s systems, alleging that defendant violated numerous states’ privacy and other laws by failing to keep their PII confidential and securely maintained. According to the plaintiffs’ motion for preliminary approval, the settlement establishes a settlement class of approximately 4,341,523 members whose PII was potentially compromised by the breach. The settlement would provide $2,000 for each named plaintiff and reimbursement of up to $5,000 of out-of-pocket expenses per class member, including up to eight hours of lost time at $25 per hour and 12 months of financial fraud protection. Additionally, more funds will be given to the California subclass, comprised of 318,091 individuals, who will receive between $100 and $300 in relief each. The defendants are also be required to pay attorneys’ fees and litigation costs and expenses.

    Courts Class Action Data Breach Privacy/Cyber Risk & Data Security Settlement

  • District Court partially grants motion for class certification

    Courts

    On March 4, the U.S. District Court for the Eastern District of California granted in part a consumer plaintiff’s motion for class certification after denying the defendant credit reporting agency’s motion for summary judgment in an FCRA and California Consumer Credit Reporting Agencies Act (CCRAA) suit. The plaintiff, on behalf of the class, alleged that the defendant “failed to follow reasonable procedures to assure the maximum possible accuracy of the consumer information included in its OFAC Check documents” and “failed to disclose upon request all information in consumer files,” in violation of CCRAA and the FCRA. Additionally, the plaintiff alleged that the defendant “failed to reinvestigate the disputed OFAC-related information that it had prepared and sold” to its clients. In granting in part the plaintiff’s motion for class certification, the district court quoted the U.S. Supreme Court case TransUnion LLC v. Ramirez, which ruled that only a plaintiff concretely harmed by a defendant’s violation of the FCRA has Article III standing to seek damages against a private defendant in federal court (covered by InfoBytes here). In referencing TransUnion LLC v. Ramirez, the district court noted that “[the plaintiff] and the putative class members incurred the ‘same or similar injury’ in that they suffered ‘concrete reputational harm’ from the ‘same conduct’ of [the defendant].” The district court further noted that as a basis for class typicality, “[e]ven if [the plaintiff’s] injuries were slightly more severe than some class members’ injuries, [the plaintiff’s] injuries still arose ‘from the same event or practice or course of conduct that [gave] rise to the claims of other class members and [his claims were] based on the same legal theory.’” Consequently, the district court certified the class with respect to plaintiff’s FCRA allegations for statutory damages and CCRAA claims for injunctive relief. However, the district court denied class certification with respect to plaintiff’s CCRAA allegations for statutory damages, noting that “[t]he CCRAA, unlike the FCRA, requires a showing of actual harm where, as here, the plaintiff is seeking statutory punitive damages” because “individual issues will predominate.”

    Courts OFAC FCRA Class Action California State Issues Consumer Finance

  • District Court: Callers cannot rely on prior cell phone user’s consent to place prerecorded calls

    Courts

    On March 9, the U.S. District Court for the Western District of North Carolina granted in part and denied in part a defendant university’s motion for summary judgment on claims that it unlawfully placed prerecorded calls to reassigned phone numbers based on the previous user’s consent. The plaintiff alleged that the defendant violated the TCPA by calling cellphones without first obtaining the current phone number owner’s prior express consent and making a “telephone solicitation” to individuals listed on the National Do-Not-Call-Registry. The plaintiff also contended that the defendant failed to provide a method for opting-out of receiving future calls. The defendant countered that it could not be held liable for the allegedly unlawful prerecorded calls because it had reasonably relied on the consent of the previous phone number’s user and was unaware that the number had been reassigned.

    In partially denying the defendant’s motion for summary judgment, the court ruled that there was “no basis” in the text of the TCPA to conclude that callers who contact a phone number whose previous user provided consent but whose current owner did not could use “a reasonable reliance or good faith defense” to avoid liability. “Congress passed the TCPA to protect individuals from receiving invasive and unsolicited calls,” the court wrote. “Thus, adopting a good faith or reasonable reliance defense not only would have no basis in the text but also would contravene the stated purpose of the TCPA.” The court also declined to adopt the defendant’s “intended party” argument, finding that “[n]either the language nor the concept of an ‘intended’ party appears” in the TCPA, and that every circuit court that has opined on this issue “has concluded that the term ‘called party’ refers to the individual that actually receives the calls, as opposed to the ‘intended party’ of those calls.”

    However, the court determined that the plaintiff’s allegation that the defendant violated the TCPA’s prohibitions on contacting numbers on the National Do-Not-Call-Registry cannot proceed “because, as a tax-exempt, non-profit organization, [the defendant] is not subject to the provisions regarding the National Do-Not-Call Registry.”

    Courts TCPA Consumer Protection Class Action Do Not Call Registry

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