consumer protection

The Montana Supreme Court has ruled that a plaintiff can pursue a lawsuit against the company that promised to help her with credit-card debt relief, the Montana Standard's Kathleen J. Bryan reports. The plaintiff alleges that Global Client Solutions used '“deceptive and fraudulent representations to solicit her participation in an illegal debt settlement plan.”'

The Supreme Court held that the plaintiff's contract with debt-relief firm Global Client Solutions included an arbitration clause that lacked mutuality and was therefore unenforceable, Bryan reports.

The scope of the power of the Consumer Finanical Protection Bureau is under challenge by a New Jersey lender, which is arguing the CFPB Director Richard Cordary illegally imposed a $109 million penalty against it, The Wall Street Journal's Yuka Hayashi reports.

An in-house CFPB judge originally ruled that PHH Corp. took "kickbacks" from mortgage insurers and increased costs for mortgage borrowers. The CFPB says PHH referred borrowers to mortgage-insurance companies and would collect up to 40 percent of the premiums. On appeal, Cordray imposed a penalty that was 18 times more than the in-house judge had sought. Cordray concluded that PHH had violated the law each time it received a monthly payment.

The case is now pending before the U.S. Court of Appeals for the D.C. Circuit and "revolves around the CFPB’s new hard-line interpretation of the four-decade-old Real Estate Settlement Procedure Act, designed to keep lenders and realtors from inflating home-sale transaction costs."

The difference in net worth between the typical white family and black family is $131,000, ProPublica's Paul Kiel reports. As a consequence of that racial wealth gap, black families have smaller financial reserves to fall back on and more likely to be sued over a debt or land in jail because of unpaid tickets and court fines.

Kiel and a reporting partner found that debt-collection lawsuits in three U.S. cities were twice as high in mostly black communities than they were in mostly white communities. 

He suggests reform to debt collection laws, such as reducing the amount of income subject to garnishment or setting a small sum in bank accounts as off limit to collectors.

The U.S. Supreme Court, 6-3, has rejected another class action. This time, the majority of the court ruled this week that a class action cannot proceed against DirecTV over early-termination fees because those fees have to handled by private arbitration, The Washington Post's Robert Barnes reports.

The majority opinion, written by Justice Stephen Breyer, struck down a California law that makes class-action bans in contracts unenforceable.

Barnes further notes the ruling continues the trend of strengthening the authority of companies to channel consumer complaints into arbitration.

Consumer Financial Protection Bureau Director Richard Corday says that new disclosure rules for mortgage lenders have not turned out to be a problem, HousingWire's Ben Lane reports. In a speech last week, Cordary compared the panic about the TILA-RESPA Integrated Disclosures rule to the panic about Y2K. The disclosure rule did not paralyze the market when it came into effect in October, Corday added.

The Washington Post's Kenneth R. Harney reports that mortgage problems make up 28 percent of the 600,000 complaints posted on the Consumer Financial Protection Bureau's website. Complaints about mortgage lenders, debt collectors, credit-card companies and credit bureaus are logged on the site.

The CFPB started posting narratives for those complaints June 25, but lenders can't post their own narratives. David Stevens, president and chief executive of the Mortgage Bankers Association, told Harney the process is one-sided and uses '“unsubstantiated and unverified'” information that can be submitted by anyone, and the bureau does not “'validate the authenticity of the complaint or the individuals making the complaint.”'

Law firms engaged in debt collection can be regulated by New York City, the New York Court of Appeals has ruled. Christy Young Berger, blogging on Accounts Receivable Management's blog, notes that two law firms, Eric M. Berman and Lacy Katzen, argued New York's law encroached on the state's exclusive authority to regulate the legal profession. The New York Court of Appeals, in answering a question posed to it by the U.S. Court of Appeals for the Second Circuit, found that New York's law doesn't encroach on the state's authority to regulate lawyers.

Investors of modest means are now going to be able to take a chance on startups the way that venture capitalists and angel investors can, The New York Times' Stacy Cowley reports. Companies seeking to raise up to $50 million--even though they are not yet publicly traded--will be able to advertise to investors online and through social media. Under the old regulations, companies that didn't want to have to file reports with the Securities and Exchange Commission only could sell shares to "accredited investors with an annual income of more than $200,000 or a net worth of at least $1 million."

The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, won't allow homeowners to get forgiveness on their mortgages even if they owe substantially more on their homes than they are worth, The Huffington Post's Ben Hallman reports. Leaders of FHFA think that giving debt forgiveness to some homeowners would encourage other people to stop paying their mortgages in order to get debt forgiveness too. But the Congressional Budget Office has found that principal reduction plan could help 1.2 million borrowers save their homes and also save Fannie and Freddie, as well as taxpayers, $2.8 billion, Hallman reports.

The U.S. Supreme Court has agreed to decide whether a defendant in a class action case can end litigation by offering full payment to the lead plaintiff, Bloomberg's Greg Stohr reports.

Plaintiff Campbell-Ewald Co. is facing hundreds of millions of dollars for allegedly violating the Telephone Consumer Protection Act (TCPA) by sending automated text messages. The lead plaintiff was offered $1,503 for each text mesage he received, which Campbell-Ewald said makes the case legally moot because the lead plaintiff was offered everything to which he might be entitled.

The TCPA is being criticized by Campbell-Ewald as "' an extortionist weapon in the hands of class action attorneys seeking to extract lucrative attorneys’ fees for class-wide settlements.'"