Glass & Goldberg | Financing, Property & Bankruptcy Law

The Federal Deposit Insurance Corporation (FDIC) has issued new proposed examination guidance for bank compliance when engaged in lending through third parties.  The new proposal would apply to all banks engaged in “any lending arrangement that relies on a third party to perform a significant aspect of the lending process” as well as institutions seeking to originate loans with banks.

The proposed guidance focuses specifically on three types of third-party relationships, including:

• Banks that originate loans for third parties;
• Banks that originate loans through third parties or jointly with third party lenders; and
• Banks that original loans using platforms developed by third parties.

Highlights from the proposed guidance include:

• Development and implementation of a third-party lending risk management program and compliance management system with adequate staffing to ensure proper oversight;
• Implementation of third party lending policies and procedures by senior management with board approval;
• Establishment of processes to evaluate and monitor third-party lending relationship risks and compliance;
• Increased supervisory attention — including a 12-month examination cycle, third party contract reviews, and risk management and consumer protection examinations — for banks engaged in significant lending activities through third parties.

Comments on the proposed examination guidance will be accepted until October 27, 2016.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

The U.S. District Court for the Southern District of California has dismissed a suit alleging a violation of the Telephone Consumer Protection Act (TCPA) by a bank that made unwanted autodial calls to a plaintiff’s cell phone, ruling that the plaintiff did not show sufficient “concrete injury” to confer standing under the U.S. Supreme Court case of Spokeo v. Robins.

In Romero v. Department Stores National Bank, the plaintiff filed suit against the bank for making more than 290 calls to her cell phone over a six-month period using an automated telephone dialing system in violation of the TCPA.  The plaintiff answered only three of those calls.

After the case was scheduled for trial, the plaintiff submitted a pre-trial memorandum and the court entered a pre-trial order prepared by both parties.  Because none of the documents included any reference to actual damages incurred by the plaintiff, defendant filed a motion to dismiss for lack of standing.

Under Spokeo, a plaintiff must meet three criteria to establish standing: (1) have suffered an injury in fact; (2) the injury can be traced to the defendant’s conduct; and (3) the injury is likely to be redressed by a favorable judicial decision.

In granting the motion to dismiss, the court noted that each alleged violation of the TCPA is a separate claim and a plaintiff must establish an injury in fact for each separate violation.  In examining whether or not the plaintiff could claim injury, the court divided the autodial calls into three categories: (1) calls that the plaintiff was not aware of either because her phone did not ring or she did not hear it; (2) calls that the plaintiff heard but did not answer; and (3) calls the plaintiff answered and spoke with defendant’s representative.

For calls that the plaintiff was unaware of, the court found the plaintiff lacked standing because, “That Defendants placed a call to Plaintiff’s cell phone using an ATDS is merely a procedural violation. For Plaintiff to have suffered ‘lost time, aggravation, and distress,’ she must, at the very least, have been aware of the call when it occurred.”

For calls that the plaintiff heard but did not answer, the court found the plaintiff lacked standing because, “No reasonable juror could find that one unanswered telephone call could cause lost time, aggravation, distress, or any injury sufficient to establish standing.”

For calls that the plaintiff answered and spoke with a representative of the defendants, the court found the plaintiff lacked standing because, “Plaintiff does not offer any evidence demonstrating that Defendants’ use of an ATDS to dial her number caused her greater lost time, aggravation, and distress than she would have suffered had the calls she answered been dialed manually, which would not have violated the TCPA.  Therefore, Plaintiff did not suffer an injury in fact traceable to Defendants’ violation of the TCPA, and lacks standing to make a claim for any violation attributable to the calls she actually answered.”

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

The Consumer Financial Protection Bureau (CFPB) announced on July 28, 2016, that it is considering proposals to overhaul the debt collection industry that would include the following measures:

Substantiation of the debt prior to contact.  Debt collectors would be required to substantiate a debt prior to making any contact with a consumer to ensure they have sufficient information, including the debtor’s full name, address, phone number, account number, default date, amount owed and any payments made following the default date.

Limitation on communication with consumers.  Debt collectors would be limited to six communication attempts per week.  The proposals would also make it easier for consumers to limit how debt collectors can contact them — for example, not allowing calls or communication at work or during specific hours.

Provide specific information on debt and make it easy to dispute.  Debt collectors would be required to provide specific information about the debt in their initial collection notices, and also include details about the consumer’s legal rights.  Collectors would also have to disclose if the debt is time-barred for legal action and also include a perforated portion to the notice that allows consumers to either pay the debt or send in a dispute quickly and easily.

30-day response to disputes.  If a debt collector receives a dispute notice back within 30 days of sending the initial notice, the collector would be required to provide the consumer with a debt report and cannot pursue the debt until that report is sent.

Cease collection efforts without proper documentation.  If a consumer disputes the debt, the collector would be required to halt all collection efforts until the necessary documentation is verified.  A collector cannot collect on any debt that lacks sufficient evidence.  If the collector has knowledge that the debt information could be inaccurate or incomplete, the collector cannot collect until there is sufficient verified information.

Disputes cannot be passed on without response.  If a disputed debt is transferred to another debt collector, the new collector cannot try to collect until the dispute is resolved.  Information on the dispute must be passed on to the new collector when a disputed debt is transferred.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

On August 8, 2016, the U.S. Court of Appeals for the Ninth Circuit ruled that a voicemail message left by a debt collector that did not specifically state, “This communication is from a debt collector,” did not violate the Fair Debt Collection Practices Act (FDCPA).

In Davis v. Hollins Law, a Professional Corporation, plaintiff Michael Davis secured an American Express business credit card at Costco and used it to purchase a number of personal items.  He defaulted on the debt, which was referred to Hollins Law for collection.  Over a two-month period, Davis and Hollins Law had a number of interactions via phone, email and voicemail regarding settlement of the debt.

One voicemail message left for the plaintiff from a Hollins Law employee stated, “Hello, this is a call for Michael Davis from Gregory at Hollins Law. Please call sir, it is important, my number is 866-513-5033. Thank you.”

Following that voicemail, the plaintiff and defendant exchanged 11 separate emails regarding the settlement of the debt, but no agreement was reached.  Two months later, the plaintiff filed suit, alleging a violation of the FDCPA based on the one voicemail message that failed to state the call was from a debt collector.

Even though the plaintiff admitted that he understood the voicemail was from a debt collector because of their ongoing communication regarding the debt, a district court ruled for the plaintiff, stating that a failure to specifically state the voicemail was from a debt collector was a technical violation of Section 1692(e)(11) of the FDCPA.

Upon appeal, the Ninth Circuit overturned the district court ruling, finding that “given the extent of the prior communications . . . the voicemail message’s statement that the call was from ‘Gregory at Hollins Law’ was sufficient to disclose to a debtor with a basic level of understanding that the communication at issue was from a debt collector.”

The court further noted that Section 1692(e)(11) “does not require a subsequent communication from the debt collector to use any specific language so long as it is sufficient to disclose that the communication is from a debt collector, as it was here.”

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

A Missouri federal court has ruled that the location of a guarantor’s bank account in a different state is no bar to a judgment creditor’s ability to levy that guarantor’s deposit accounts.

In Regions Equipment Finance Corp. v. Blue Tee Corp., the plaintiff filed an action for breach of contract after the defendant defaulted on an equipment lease.  The plaintiff was located in Missouri, while the defendant was based in Illinois.  The plaintiff obtained a writ of attachment against the defendant in Missouri and then levied on the defendant’s deposit accounts at Bank of America, a national bank.

The defendant sought to quash the writ based on the fact that his bank accounts were in Illinois, not Missouri.  The plaintiff argued that the accounts were in a national bank and that physical location was not necessary to levy the accounts.  The court found for the plaintiff, ruling that a national bank account is an intangible property and therefore does not have a physical location.

The court found it noteworthy that “Bank of America has made no claim that the defendant’s account is not located in Missouri and is thus not subject to attachment here. Instead, the bank has complied with the writ with the effect being that defendant cannot access the money in its account, whether at the Illinois branch where the account was opened, the New York branch where defendant is located, or any other Bank of America location.”

The court also noted that Missouri law was silent on whether an attachment in Missouri “will lie as to funds held in an account at a national bank that are available to the accountholder at one of the bank’s branches in Missouri.”  Since the account in a national bank made it available in every state where Bank of America has a branch, the court predicted that the Missouri Supreme Court would find that attaching the account was consistent with Missouri law.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

In a case of first impression, the U.S. Court of Appeals for the Ninth Circuit has ruled that when multiple debt collectors have attempted to collect on the same debt, each debt collector must send a verification notice.

The case — Hernandez v. Williams Zinman Parham PC — involved plaintiff Maria Hernandez, who had defaulted on a car loan.  A succession of debt collectors were involved in trying to collect the outstanding balance of the loan.  The plaintiff filed suit against one of the debt collectors, alleging a violation of the Fair Debt Collection Practices Act (FDCPA) because the defendant did not send her a verification notice.  The defendant argued that no such notice was required since the plaintiff had received notice from previous debt collectors attempting to collect on the same debt.

Both the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) submitted amicus briefs to the Ninth Circuit, urging the court to hold that the FDCPA does require every debt collector to send a verification notice.

In its July 26, 2016, decision, the Ninth Circuit reversed an Arizona federal court’s finding for the defendant, ruling that if a verification notice was only sent by the first debt collector in a multiple-collector situation, the consumer’s ability to verify and/or dispute a debt would be restricted.  The court found that the FDCPA “unambiguously requires any debt collector — first or subsequent — to send a … validation notice within five days of its first communication with a consumer in connection with the collection of any debt.”

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

The U.S. Court of Appeals for the Eleventh Circuit has ruled that debt collectors must disclose to consumers that any disputes must be in writing as required by the Fair Debt Collection Practices Act (FDCPA).

In Bishop v. Ross Earle & Bonan, P.A., the defendant sent a letter to the plaintiff’s attorney that failed to disclose the plaintiff had to dispute her debt in writing.  The plaintiff filed suit, alleging that the defendant had violated Section 1692g of the FDCPA that requires this notice as well as a violation of Section 1692e that prohibits “false representation or deceptive means to collect or attempt to collect any debt.”

A district court dismissed the suit for failure to state a claim.  On appeal to the 11^th Circuit, the court resolved the following three issues:

1. Whether a debt collection sent to the plaintiff’s attorney constituted a “communication with the consumer” necessary to trigger Section 1692g of the FDCPA.  The court found that although the communication was indirect, it was still a communication with the consumer.
2. Whether the omission of the “in writing” notice constitutes a waiver of that requirement by the debt collector.  The court found that the language of the statute was clear in requiring a debt collector to inform the consumer of her right to dispute the debt in writing.
3. Whether the omission of the “in writing” notice constitutes a claim for “false representation or deceptive means to collect or attempt to collect any debt” in violation of Section 1692e.  The court found that the plaintiff’s alleged facts were sufficient to state a claim under Section 1692e, although whether the communication at issue was in fact false or deceptive is a question to be determined by a jury.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

A draft of a bill to replace the Dodd-Frank Act — entitled the Financial CHOICE Act — has been released by the House Financial Services Committee with the goal of reforming the Consumer Financial Protection Bureau (CFPB) and financial institution regulations.

In releasing a discussion draft of the new bill, committee chairman Jeb Hensarling (R-TX) said, “Dodd-Frank has failed.  It has contributed to the slowest, smallest, weakest and worst economic recovery of our lifetimes.  We must instead offer all Americans greater opportunities to raise their standards of living and achieve financial independence by replacing Dodd-Frank with real reforms that work.”

The Financial CHOICE Act — CHOICE stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs — would change the structure and authority of the CFPB as well as reform financial institution regulations.  Specifically, the bill would:

• Change CFPB single director to a five-person commission called the Consumer Financial Opportunity Commission (CFOC);
• Make the CFOC’s regulations subject to the Congressional appropriations process;
• Repeal the CFPB’s authority to ban certain bank products and services;
• Repeal the CFPB’s authority to prohibit or limit the use of arbitration agreements;
• Require the CFOC to verify consumer complaint information before making it public;
• Require the CFOC to establish a procedure for issuing written advisory opinions;
• Prohibit the use of the Exchange Stabilization Fund to bail out financial firms or creditors
• Incorporate regulatory relief bills for community financial institutions;
• Make all financial regulatory agencies subject to the REINS Act, bi-partisan commissions, and place them on the appropriations process so that Congress can exercise proper oversight;
• Repeal the authority of the Financial Stability Oversight Council (FSOC) to designate systematically important financial institutions.

A summary of all the provisions of the Financial CHOICE Act can be found here.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

The Federal Trade Commission (FTC) has reached a settlement with five California companies that ban the businesses from participating in the debt collection industry.

The five companies — BAM Financial LLC, d/b/a as West and Associates, Chelsea & Associates, and Chelsea Financial; Everton Financial LLC, also d/b/a West and Associates; and Legal Financial Consulting LLC, also d/b/a West and Associates Services — were charged by the FTC last October with using false threats and other illegal collection practices.

The companies were charged under the FTC’s “Operation Collection Protection,” a coordinated state and federal enforcement initiative aimed at stopping deceptive and abusive debt collection practices.  The program was launched last November and has resulted in more than 100 enforcement actions to date.

The final order against the California companies bans them from debt collection activities and prohibits them from making any misrepresentations about financial products or services.  In addition, the order imposes a $4.8 million judgment that will be partially satisfied by the surrender of certain assets as well as payments by company principals Luis O. Carrera and Roberto Llaury of $59,207 and $50,562 respectively.

The order was entered on July 11, 2016, by the U.S. District Court for the Central District of California.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.