In Williams v. First Advantage LNS Screening Solutions, Inc., 947 F.3d 735 (11th Cir. Jan. 9, 2020), the plaintiff recovered a jury verdict under the FCRA for $250,000 of compensatory damages and $3.3 Million of punitive damages. The defendant was a criminal background report provider. Because of various mistakes and procedures, the plaintiff’s information was mismatched and inaccurately lead potential employers to believe he had a criminal background. Liability was asserted primarily under 15 U.S.C. § 1681e(b), which requires CRAs to follow “reasonable procedures to ensure maximum possible accuracy.”
In a flurry of new class actions filed on behalf of unhappy small business owners, banks are facing suits alleging they unlawfully prioritized processing large loans under the Paycheck Protection Program (PPP) over smaller ones. Two parallel class actions were filed on April 19, 2020 and April 20, 2020 in California federal court accusing two large banks of reshuffling loan applications instead of processing them on a first-come, first-served basis to purportedly maximize the banks’ profit from the federal loan program. Another similar class action was filed in state court in Texas. The class plaintiffs include a frozen yogurt shop, an auto body shop and a flooring company among others.
The story is becoming all too common. A merchant (or consumer) is convinced to wire money to a fraudulent account because of an incorrect belief that they are wiring the money to the real party. A common example is a fraudster convincing a purchaser of a home to wire money in the mistaken belief that they are wiring the money to a closing attorney or agent. Another common example is a fraudster convincing a company to wire money in the mistaken belief that they are paying a valid vendor. These transactions can involve millions of dollars and it is rare that the money can be recovered after it is sent.
Can insurance cover these losses? Recently the Eleventh Circuit decided Principle Solutions Group, LLC v. Ironshore Indemnity, Inc., 944 F.3d 886, (11th Cir. Dec. 9, 2019). There, the insured employer filed an action against insurer, seeking coverage for a wire transfer of funds made by insured’s employee to scammers. The employer claimed coverage under the “fraudulent instruction” provision of its commercial crime insurance policy, and asserted bad faith.
As we have noted in other postings, plaintiffs continue to bring actions regarding bank fees charged for Overdraft or Not Sufficient Funds (“NSF”) fees. While these claims originally challenged posting order, they are now more creative. For instance, the “Authorize Positive Settle Negative” claims noted in an earlier post. One of the newest theories is that a financial institution should charge an NSF fee only once, no matter how many times that transaction or item is processed.
Over the last decade, financial institutions have seen an avalanche of claims regarding overdraft fees, especially in connection with debit card transactions. These claims are almost always brought as class actions. The early cases concerned the practice of posting “high to low” during nightly processing, allegedly for the purposes of generating more overdraft fees. The lead case was Gutierrez v. Wells Fargo, 704 F.3d 712 (9th Cir. 2012). Eventually, an MDL was created in the Southern District of Florida against a large number of banks, leading to a number of settlements. At about the same time, the Federal Reserve altered Regulation E, requiring deposit institutions to obtain express consent to charge overdraft fees on “everyday” debit card transactions, and providing far greater understanding by consumers of overdraft fees on electronic transactions.
Earlier this week, two Alabama businesses sued their insurers for refusing to pay losses related to COVID-19. The first lawsuit, Wagner Shoes v. Auto-Owners Insurance Co., No. 7:20-cv-465 (N.D. Ala. Apr. 6, 2020), was brought by a shoe store in Tuscaloosa. The second suit, Ollie Irene v. Farmers Insurance Exchange, No. 01-CV-2020-901319 (Jefferson County Cir. Court April 7, 2020), was filed by nationally recognized Mountain Brook restaurant, Ollie Irene.
On April 1st, the Consumer Financial Protection Bureau (“CFPB”) released a policy statement setting forth financial institutions’ obligations during the COVID-19 pandemic. In addition to providing clarity regarding the recently-enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the CFPB’s pronouncement outlines a flexible approach towards credit reporting agencies and furnishers who, despite good-faith efforts, have had difficulty complying with Fair Credit Reporting Act (“FCRA”) requirements during the crisis.
In its recent opinion in Deutsche Bank National Trust Company v. Walker County, the Alabama Supreme Court held Alabama Code § 35-4-50 does not impose a mandatory duty to record assignments of beneficial interests in residential mortgages. In the underlying action, Walker County brought suit against Deutsche Bank National Trust Company, Mortgage Electronic Registration Systems, Inc. (“MERS”), and CIS Financial Services, Inc., after the Bank allegedly relied on Walker County’s real property recording system, but used MERS to record subsequent transfers of the beneficial interests in residential mortgages.
In an important victory for mortgage servicers, the Eleventh Circuit rejected a RESPA claim based on a motion to reschedule a foreclosure sale in Landau v. Roundpoint Mortgage Servicing Corp.
Last month, the Eleventh Circuit affirmed the dismissal of a putative class action suit alleging violations of the Fair Credit Reporting Act thereby delivering an important victory to lenders and other entities that provide consumer information to credit reporting agencies. Under the FCRA, “furnishers” of consumer information are prohibited from providing inaccurate information to credit reporting agencies (“CRAs”) and must investigate when a consumer disputes such information. In Hunt v. JP Morgan Chase Bank, Nat’l Ass’n, Case No. 18-11306, 2019 WL 1873419 (11th Cir. Apr. 25, 2019) (unpublished), a united panel held (in an unpublished opinion) that JP Morgan Chase had not violated its duties as a furnisher under the FCRA when it reported that a customer’s account was past due. Not only was such information accurate when it was provided, but the bank was never even required to investigate its accuracy because the plaintiff’s complaint did not allege that JP Morgan received notice that he disputed the information with the CRAs. The Court did not decide, however, whether JP Morgan had an obligation to “refresh” information it had previously provided.