A Warning to Financial Institutions: Failure to Issue a Litigation Hold May Have Serious Consequences

As electronic discovery has become more prevalent and voluminous, national standards for the preservation of evidence have evolved dramatically in the past decade. Through a proliferation of electronic discovery orders involving discovery compliance, courts have addressed when the duty to preserve evidence arises, signifying a party’s duty to issue a “litigation hold.” Courts have not answered, however, whether a party can withhold documents generated before issuing a litigation hold on the basis of work product protection. Both the duty to preserve evidence and the work product doctrine require the “anticipation of litigation.” Thus, can a party anticipate litigation for purposes of asserting work product protection before it anticipates litigation for purposes of issuing a litigation hold? Read More ›

COMPOUND INTEREST ON OHIO JUDGMENTS BASED ON LOAN DOCUMENTS

On the somewhat unusual occasions when your judgment debtor has assets, the question turns to how do I maximize my judgment and collect every penny legitimately owed to my client?  Here are some thoughts: Read More ›

INDIRECT AUTO LENDING CARRIES FAIR LENDING RISK

A recent guidance published by the Consumer Financial Protection Bureau is a helpful reminder of one of the risks associated with indirect auto lending.[1] The guidance is directed toward auto lenders who rely upon auto dealers to generate consumer loans.  The auto dealer may provide vehicle financing directly to the consumer, or may facilitate indirect financing for a vehicle purchase through a financial institution, a nonbank affiliate of a financial institution, or an independent or “captive” nonbank.

The Blank Personal Guaranty: Just Asking for a Fight

John Williamson, a local bank vice president, meets with Ronnie Roma and Harry Levine about a $25,000 equipment loan for their closely-held business, Highland Farms, LLC.  After the initial conversation, Roma takes the lead on negotiating the loan.  Levine is unaware of the progress of things until Roma emails Levine a blank “Personal Guaranty” to sign so they can “do that loan we discussed with the bank.”  Because the loan is supposed to close the following day, Levine signs the guaranty that includes an obligation to guaranty all the debts of the “Debtor” to the bank, but the name of the “Debtor” is blank when he signs it and the document contains no reference to the specific transaction.  Levine emails a signed copy of the guaranty to Roma. Read More ›

ELECTRONIC FUNDS TRANSFER LIABILITY: BUSINESS CONVENIENCE VERSUS COMMERCIAL REASONABLENESS

In a recent lawsuit rising from cyber account-takeover fraud, the defending financial institution won summary judgment on two issues of apparent subjective analysis under the Uniform Commercial Code’s Chapter 4A.  “The tension in modern society between security and convenience is on full display in this litigation.”  Choice Escrow and Land Title, LLC v. BancorpSouth Bank, (U.S.D.C., WD of Missouri; Case No. 10-03531-CV-S-JTM.  Read More ›

HUD Sets Uniform Standard for Evaluating Discriminatory Effect Claims

Last month, the Department of Housing and Urban Development (“HUD”) issued a formal rule relating to housing discrimination that went into effect Monday, March 18, 2013.[1] The Fair Housing Act, as codified in 42 USC 45, “prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin.”[2] For decades, HUD has interpreted this language to prohibit not just overtly discriminatory practices, but also those “with an unjustified discriminatory effect, regardless of whether there was an intent to discriminate.”[3]  The eleven circuits that have addressed the issue have all concurred, but, over the years, have developed slightly different “methodolog[ies] of proving a claim of discriminatory effects liability.”[4]  In order to establish uniformity in interpretation and application of discriminatory effects liability,[5] HUD issued the new rule entitled “Implementation of the Fair Housing Act’s Discrimination Effects Standard” (the “Rule”).[6] Read More ›

COMMERCIAL LAW “BOOT CAMP” SUCCESSFUL AGAIN

Since 2005, we have offered a 2-day commercial lending training class to our lender clients as well as our newer associates.  This year, we were delighted to have 76 of our clients and friends attend this training on Monday, March 4 and Tuesday, March 5.  Read More ›

The Changing Face of Criminal Background Checks a/k/a There Are Limits to the “Get Out Of Jail Free Card” For Financial Institutions

Human Resource officers with banks and credit unions face unique professional challenges.  While complying with the many general rules governing employment practices, they also must focus on the industry’s unique safety and soundness concerns.  One area where this tension exists is in performance of pre-employment criminal background checks. Read More ›

ATTORNEYS ENGAGED IN RESIDENTIAL MORTGAGE FORECLOSURE SUBJECT TO FAIR DEBT COLLECTION PRACTICES ACT

On January 14, 2013, the Sixth Circuit Court of Appeals ruled that the Fair Debt Collection Practices Act (“FDCPA”) applies to foreclosures, even non-judicial foreclosures, of residential property.  The law firm of Reimer, Arnovitz, Chernek & Jeffrey Co., LPA and two of its attorneys (“RACJ”) were sued for foreclosing on a home for improperly alleging that JPMorgan had conveyed, assigned and transferred all of its rights in a promissory note to Chase Home Finance LLC (“Chase”), an arm of JPMorgan.  Also sued were JP Morgan and Chase. In fact, the Note had already been assigned to Fannie Mae, although the loan was serviced by JP Morgan and subsequently Chase.  The Sixth Circuit held the FDCPA claims could proceed against RACJ based on the improper assertions of ownership of the Note by Chase.  Mortgage foreclosure, including non-judicial foreclosures, was deemed to equal debt collection under the Act.  However, the servicer, Chase, was not liable because the FDCPA only applies to a debt collector, and at the time the loan was assigned to Chase, the Note was not in default.  The Sixth Circuit’s Opinion is also consistent with the Third and Fourth Circuit of the Court of Appeals.  However, a number of district courts have disagreed with this result, instead analyzing foreclosures as the enforcement of security interests rather than the collection of a debt.  The Sixth Circuit concluded that other than repossession agencies and their agents, it could think of no others whose only role in the collection process is the enforcement of the security interest. Read More ›

Consumer Financial Protection Bureau Issues New Rules on Qualified Mortgages

            The Consumer Financial Protection Bureau (“CFPB”) has adopted a final rule creating additional requirements for lenders to document and confirm prospective buyers’ ability to repay their mortgages. CFPB amended Regulation Z[i], which implements the Truth in Lending Act (“TILA”)[ii]. Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”)[iii], which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The rules take effect in January 2014.  

[i] 12 C.F.R. Part 1026

[ii] 15 U.S.C. § 1601 et seq.

[iii] Pub. L. No. 111-203 Read More ›