FYI: DOJ Reports $3.6MM+ Fair Lending Settlement With

The DOJ reported a $3.6MM+ settlement with a bank in the Detroit,
Michigan area, for supposed violations of the federal Fair Housing Act and
the Equal Credit Opportunity Act.

The DOJ alleged that the bank and its predecessor allegedly "served the
credit needs of the residents of predominantly white neighborhoods in the
Detroit metropolitan area to a significantly greater extent than they have
served the credit needs of majority African-American neighborhoods."

A copy of the complaint is available at:
http://www.justice.gov/crt/about/hce/documents/citizenscomp.pdf

Upon approval and entry by the court, the agreed settlement order will the
bank to: (1) open a loan production office in an African-American
neighborhood in the City of Detroit and hire two community lenders; and
(2) invest approximately $3.6MM in the formerly redlined majority
African-American areas of Wayne County (Detroit), including $1.5 million
in a special financing program to increase the amount of credit the bank
extends in those areas, $1.625MM in matching grants with the City of
Detroit of up to $5,000 per individual to existing homeowners for exterior
improvements, and $500,000 in advertising, marketing, and consumer
financial education targeted to those affected areas.

A copy of the agreed settlement order is available at:
http://www.justice.gov/crt/about/hce/documents/citizenssettle.pdf

The agreement also prohibits the bank from discriminating on the basis of
race or color in any aspect of a residential real estate-related or credit
transaction.

The lawsuit originated from a 2010 referral by the Board of Governors of
the Federal Reserve System to the Justice Department's Civil Rights
Division.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
http://www.mtwllp.com

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FYI: 1st Cir Again Applies Favorable TILA Rulings to MCCCDA

The U.S. Court of Appeals for the First Circuit recently applied its TILA
rulings to Massachusetts law, holding that there was no right to rescind
under Massachusetts law where the numerical dates and deadlines in the
Notice of Right to Cancel were allegedly inaccurate. The First Circuit
also held as untimely Appellants' request to certify questions construing
the Massachusetts Consumer Credit Cost Disclosure Act to the Massachusetts
Supreme Judicial Court. A copy of the opinion is attached.

The Appellant-borrowers ("the Borrowers") obtained a refinance loan from
Encore Credit Corp. ("Encore"), which later sold and assigned the loan.
The loan closed a day later than it was originally scheduled, and the loan
documents were altered by hand to reflect the date change.

Later, the Borrowers fell behind on their payments. The investor
initiated foreclosure proceedings, and rejected the Borrowers' request to
rescind the loan. After filing for bankruptcy, the Borrowers sought
rescission under Massachusetts law charging that their mortgage was
rescindable, because Encore had allegedly failed to provide the proper
closing and rescission dates, and allegedly failed to provide the
Borrowers with "high cost home mortgage loan" disclosures under
Massachusetts law. Both the bankruptcy court and the United States
District Court rejected the Borrowers' arguments, and the First Circuit
affirmed.

Despite the four-year limitations period under the Massachusetts Consumer
Credit Cost Disclosure Act, Mass. Gen. Laws ch. 140D, § 10(a) ("MCCCDA"),
the Borrowers sought to rescind five years after the closing date, based
upon the pending foreclosure. The Borrowers sought to show that the
disclosures they received from Encore incorrectly stated the loan closing
date, and that the disclosures did not provide the deadline to rescind the
loan. To prove that adequate disclosures had been provided in a timely
manner, however, the investor submitted copies of the right to cancel
forms, which the Borrowers had signed and dated, and which also bore a
handwritten date of rescission.

The First Circuit noted that the MCCCDA was patterned on the federal Truth
in Lending Act ("TILA") and that both statutes give consumers the right to
rescind a mortgage "until midnight of the third business day following the
consummation of the transaction." Mass. Gen. Laws ch. 140D, § 10(a); 15
U.S.C. § 1635(a). Under the First Circuit's prior TILA rulings,
"technical deficiencies do not matter if the borrower receives a notice
that effectively gives him notice as to the final date for rescission and
has the three full days to act." The Court determined that the Borrowers
clearly had received adequate notice of their right to cancel under the
MCCCDA also.

The Court similarly rejected the Borrowers' claim that they did not
receive state high cost home mortgage loan disclosures. As you may
recall, the regulations under the MCCCDA require lenders to print a
statement on the loan application above the borrower signature line
advising borrowers that the loan being offered may not be the least
expensive available and that borrowers should shop around for a better
loan. Although the statement was not provided on the Borrowers' loan
application form, it was provided separately at the loan closing. Because
the regulations provide that consumers can rescind only within three days
of receiving the high cost home loan disclosures, and the Borrowers did
not dispute that the warning was provided to them at the time of the loan
transaction, Court held that their opportunity to rescind had long
expired.

Further, the Court also rejected the Borrowers' renewed request for
certification to the Massachusetts Supreme Judicial Court. The Court
noted that the Borrowers had waited until after the bankruptcy court had
denied their motion for reconsideration before seeking certification. The
Court stated that such an approach "is almost always fatal, unless the
court sees strong policy reasons" for certification. The Court also
stated that it does not "normally certify cases that depend not on a
general rule but on a unique fact configuration" as in this situation.

Finally, the Court held that the Borrowers were not entitled to damages
under chapter 93A of the Massachusetts General Laws, because liability for
damages hinged on a successful claim for rescission, which was clearly not
the case here.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
http://www.mtwllp.com

NOTICE: We do not send unsolicited emails. If you received this email in
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please simply reply to this email and state your intention. Thank you.

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Notice Under U.S. Treasury Department Circular 230: To the extent that this e-mail communication and the attachment(s) hereto, if any, may contain written advise concerning or relating to a Federal (U.S.) tax issue, United States Treasury Department Regulations (Circular 230) require that we (and we do hereby) advise and disclose to you that, unless we expressly state otherwise in writing, such tax advise is not written or intended to be used, and cannot be used by you (the addressee) or other person(s), for purposes of (1) avoiding penalties imposed under the United States Internal Revenue Code or (2) promoting, marketing or recommending to any other person(s) the (or any of the) transaction(s) or matter(s) addressed, discussed or referenced herein. Each taxpayer should seek advice from an independent tax advisor with respect to any Federal tax issue(s), transaction(s) or matter(s) addressed, discussed or referenced herein based upon his, her or its particular circumstances.

FYI: Ill App Ct Stops Short of Holding That Banks Are Not Corporations Requiring Registered Agents

An Illinois Appellate Court recently held that a debtor failed to
adequately allege that a bank suing as plaintiff was transacting business
in the state without a certificate of authority, in violation of the
Illinois Business Corporations Act, 805 ILCS 5/13.70, and therefore
reversed the lower court's dismissal of the plaintiff bank's collection
complaint.

A copy of the opinion can be found at:
http://www.state.il.us/court/Opinions/AppellateCourt/2011/1stDistrict/Apri
l/1101279.pdf

Defendant Ebro Foods, Inc. ("Borrower"), executed and delivered to LaSalle
Bank, N.A. a loan and security agreement and revolving note. Additional
defendants ("Guarantors") executed and delivered to the bank separate
continuing unconditional guaranties wherein each guaranteed payment of
Borrower's indebtedness. Borrower defaulted on the loan and the bank's
successor by merger ("Plaintiff Bank") filed a complaint against Borrower,
later dismissed due to Borrower's filing bankruptcy, and against
Guarantors based upon their unconditional guaranties.

Guarantors filed a motion to dismiss, arguing among other things that the
Plaintiff Bank could not bring suit in Illinois because it lacked a
certificate of authority pursuant to Section 13.70 of the Act. At the
time the motion to dismiss was filed, the Illinois Secretary of State's
Web site indicated that the holding company for the Plaintiff Bank was not
in good standing as to its Illinois corporate registration.

In response, the Plaintiff Bank argued that its holding company was not
the same as the Plaintiff Bank, and that the Plaintiff Bank - not its
holding company -- was the plaintiff in the suit. On a motion to
reconsider, the Plaintiff Bank also argued for the first time that
"dismissal was improper because it is a national banking association
authorized to do business in all 50 states, which includes the ability to
sue and be sued," and that the National Bank Act preempts the application
of Section 13.70.

The trial court granted Guarantors' motion to dismiss, and denied the
Plaintiff Bank's motion to reconsider on grounds of waiver. The Plaintiff
Bank appealed, and the Appellate Court reversed, applying an exception to
the waiver issue, in order to "ensure a consistent body of law on which
national banks doing business in Illinois can rely."

The Appellate Court examined the Plaintiff Bank's "ultimate contention as
that the trial court misapplied section 13.70 of the [Illinois Business
Corporations] Act in dismissing its claim." As you may know, Section
13.70 of the Act "requires a foreign corporation to obtain a certificate
of authority in order to maintain a civil action in any court of the
state." See 805 ILCS 5/13.70. However, "there are situations where it
does not need such a certificate." "For example, if a foreign corporation
is engaged in only occasional transactions in the state, it need not
obtain a certificate of authority. Also, if a foreign corporation is
conducting interstate commerce, it is not required to obtain a certificate
of authority." In addition, "Defendants here bear the burden of proving
that [the Plaintiff Bank] was transacting business in the state without a
certificate in violation of the Act."

The Court held that Guarantors failed to meet their burden, reasoning that
"on a section 2-619 motion to dismiss, Guarantors cannot satisfy this
burden merely by showing that [the Plaintiff Bank] is a foreign
corporation without a valid certificate of authority." Rather,
Guarantors "must also allege facts showing that [the Plaintiff Bank] was
not engaged in conducting interstate commerce." In this case, the "record
shows that Guarantors argue only that [the Plaintiff Bank's holding
company's] certificate has been revoked" and "therefore, dismissal of [the
Plaintiff Bank's] complaint on that basis was error."

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
http://www.mtwllp.com

NOTICE: We do not send unsolicited emails. If you received this email in
error, or if you wish to be removed from our update distribution list,
please simply reply to this email and state your intention. Thank you.

Our updates are available on the internet, in searchable format, at:
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The information transmitted (including attachments) is covered by the Electronic Communications Privacy Act, 18 U.S.C. 2510-2521, is intended only for the person(s) or entity/entities to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient(s) is prohibited. If you received this in error, please contact the sender and delete the material from any computer.

Notice Under U.S. Treasury Department Circular 230: To the extent that this e-mail communication and the attachment(s) hereto, if any, may contain written advise concerning or relating to a Federal (U.S.) tax issue, United States Treasury Department Regulations (Circular 230) require that we (and we do hereby) advise and disclose to you that, unless we expressly state otherwise in writing, such tax advise is not written or intended to be used, and cannot be used by you (the addressee) or other person(s), for purposes of (1) avoiding penalties imposed under the United States Internal Revenue Code or (2) promoting, marketing or recommending to any other person(s) the (or any of the) transaction(s) or matter(s) addressed, discussed or referenced herein. Each taxpayer should seek advice from an independent tax advisor with respect to any Federal tax issue(s), transaction(s) or matter(s) addressed, discussed or referenced herein based upon his, her or its particular circumstances.