FYI: 2nd Cir Affirms Dismissal of "Cash vs. Credit Price" Putative TILA Class Action

The U.S. Second Circuit Court of Appeals recently affirmed the dismissal
of a putative class action that had alleged TILA violations in "cash vs.
credit" prices charged in connection with the financing of automobiles
purchases. A copy of the court's opinion is attached.

The named plaintiffs sought to represent a class of customers with poor
credit who purchased used automobiles from defendant Balise Auto Sales,
Inc. ("Balise") under retail installment contracts. The complaint asserted
that Balise buried hidden finance charges in the prices that the
plaintiffs were charged for Balise's automobiles.

Specifically, the complaint alleged that Balise advertised newer, more
valuable used cars in its inventory at market prices, as measured by a
particular used car buying guide, but sold the older, less valuable used
cars to subprime credit customers for prices substantially higher than the
market prices listed in the same guide.

The plaintiffs alleged that, for each of these cars, the portion of the
purchase price in excess of the used car value guide was not actually part
of the cost of the car itself, but rather a hidden finance charge intended
to compensate for the increased risk of lending to customers with poor
credit.

However, the complaint did not allege that Balise priced its older cars
differently for customers with good credit, or for customers paying in
cash. In fact, the complaint was silent as to whether such customers
purchased cars from Balise's older inventory at all.

The Court determined that the named plaintiffs merely alleged they had
received a bad bargain, and ruled that TILA is a disclosure statute, not a
fair pricing law.

Thus, the Second Circuit concluded the complaint did not contain any
allegation from which it could plausibly be inferred that the defendant
auto dealer failed to disclose a finance charge to the named plaintiffs,
or that the plaintiff's "bad bargain" stemmed from an undisclosed finance
charge.

The Court therefore affirmed the judgment of the district court dismissing
the class action for its failure to state a claim under TILA.

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

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FYI: CFPB Issues Interim Final Rule on Parity Act Preemption Under Dodd-Frank, Including One-Year Safe Harbor

The CFPB published for public comment an interim final rule implementing
the Dodd-Frank Act amendments to the Parity Act to allow state housing
creditors to continue to rely on Parity Act preemption for the next year
(until July 22, 2012) in making newly defined "alternative mortgage
transactions" in states where such loans are otherwise prohibited by state
law.

The interim final rule is available at:
http://www.gpo.gov/fdsys/pkg/FR-2011-07-22/pdf/2011-18676.pdf

As you may recall, the Dodd-Frank Act provides that state housing
creditors may only make newly defined "alternative mortgage transactions"
under Alternative Mortgage Transaction Parity Act (Parity Act, or AMTPA)
if they comply with rules issued by the CFPB.

The interim final rule provides a one-year extended compliance period and
a temporary safe harbor in order that lenders may continue to originate
newly defined alternative mortgage transactions (AMTs). Until but not
including July 22, 2012, the interim final rule applies only to state
housing creditors seeking to invoke federal preemption of state law under
the Parity Act.

Compliance with the interim final rule is optional until July 22, 2012 for
federal housing creditors and for state housing creditors that are not
relying on preemption of state law under § 1004.3 (preemption as to newly
defined AMTs).

On July 22, 2012, compliance with § 1004.4 (requirements for newly defined
AMTs) will become mandatory for all creditors, except as provided in §
1004.4(d) (reliance on law other than Parity Act preemption).

The interim final rule applies to an alternative mortgage transaction if
the creditor received an application for that transaction on or after July
22, 2011. If the creditor received the application before July 22, 2011,
the alternative mortgage transaction is generally "grandfathered" and
remains subject to the Parity Act provisions and regulations in effect at
the time of application.

The rule also clarifies that modifications, renewals, or extensions of
alternative mortgage transactions do not result in a loss of Parity Act
preemption. Refinancings are treated as new transactions that must
independently meet the requirements for preemption in effect at the time
of refinancing.

However, due to the Dodd-Frank Act amendments to the Parity Act, the
interim final rule's definition of "alternative mortgage transaction" is
limited to transactions in which the interest rate or finance charge may
be adjusted or renegotiated. As a result, previously preempted state
consumer protection laws will apply to fixed-rate mortgage loans with
interest-only payment periods or negative amortization features,
fixed-rate balloon loans where the lender does not make a commitment to
renew the loan, and certain other fixed-rate products that previously
qualified as alternative mortgage transactions but no longer qualify
because of the Dodd-Frank Act amendments.

The CFPB noted that "interim rules are needed immediately in order to
avoid a suspension in the operation of AMTPA, which would prevent state
housing creditors from making variable rate loans and other alternative
mortgage transactions in states where such loans are otherwise prohibited
by state law."

Accordingly, the CFPB "finds that there is good cause to issue this
interim final rule without notice and comment and effective immediately in
order to avoid the risk of disrupting mortgage markets, placing state
housing creditors at an inappropriate competitive disadvantage, and
reducing consumers' access to credit. In particular, the CFPB is concerned
that failure to issue an interim final rule addressing the modification of
existing AMTPA loans could create uncertainty and discourage such
modifications."

The CFPB also notes that its "interim final rule will be in place as a
temporary measure pending the CFPB's completion of a notice-and-comment
rulemaking to promulgate permanent rules, including rules governing
alternative mortgage transactions made by federally chartered housing
creditors." The CFPB requests public comment in anticipation of that
process. Comments are due on or before September 22, 2011.

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

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,
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Our updates are available on the internet, in searchable format, at:
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FYI: OCC Issues Final Rule on Dodd-Frank Preemption Rule Changes, Visitorial Powers, Other Issues

The OCC issued its final rule to implement the provisions of the
Dodd-Frank Act, including among other things revisions to the OCC's rules
on preemption and visitorial powers.

The final rule is available at:
http://www.occ.treas.gov/news-issuances/news-releases/2011/nr-occ-2011-95a
.pdf

The final rule is substantially the same as the OCC's proposed rule (see
our prior update, below), except that it: (1) provides additional changes
to the visitorial powers provisions; and (2) provides clarification
regarding the applicability of state law to federal savings associations.

PREEMPTION

After extensive analysis of the legislative history, the OCC concluded
"that the Dodd-Frank Act does not create a new, stand-alone 'prevents or
significantly interferes' preemption standard, but rather, incorporates
the conflict preemption legal standard and the reasoning that supports it
in the Supreme Court's Barnett decision."

In addition, the OCC noted that the "prevents or significantly interferes"
phrase cannot be "a new, stand-alone standard, divorced from the reasoning
of the decision without ignoring the language that precedes it, which
directs that the legal standard be the standard for preemption 'in the
decision' of the Court. That standard is conflict preemption, as supported
by the reasoning of the decision, which includes, but is not bounded by,
the 'prevent or significantly interfere' formulation."

Accordingly, although the OCC notes that the "obstruct, impair or
condition" phrase in its 2004 preemption rule was intended to have the
same effect as the Supreme Court's decision in Barnett, the OCC indicates
it is deleting the phrase "obstruct, impair or condition" from its
preemption rule.

In addition, the OCC added that "[t]o the extent that an existing
preemption precedent is exclusively reliant on the phrase 'obstructs,
impairs, or conditions' as the basis for a preemption determination, we
believe that validity of the precedent would need to be reexamined to
ascertain whether the determination is consistent with the Barnett
conflict preemption analysis." However, the OCC also noted that it "has
not identified any OCC-issued preemption precedent that rested only on the
'obstruct, impair, or condition' formulation."

VISITORIAL POWERS

In response to comments, the OCC revised the definition of visitorial
powers at § 7.4000(a)(2)(iv) to include "[i]nvestigating or enforcing
compliance with any applicable Federal or state laws concerning those
activities."

The OCC noted that the change "was intended to include direct
investigations of national banks such as through requests for documents or
testimony directed to the bank to ascertain the bank's compliance with law
through mechanisms not otherwise authorized under the rule," but that the
change "would not include collecting information from other sources or
from the bank through actions that do not constitute visitations or as
authorized under Federal law."

Also in response to comments, the OCC changed the language of the final
rule to simply use the term "applicable law" in § 7.4000(a)(3). The OCC
noted that this language "is an exception from a prohibition of certain
visitorial actions by an attorney general (or other chief state law
enforcement officer), not an authorization," and "[i]n the case of both
non-preempted state law and Federal law, the law in question still must
provide authority for the attorney general to enforce and seek relief as
authorized under that applicable law."

FEDERAL SAVINGS BANKS

The final rule adds new provisions to reflect that federal savings banks
and their subsidiaries are subject to the same laws and legal standards as
are applicable to national banks and their subsidiaries regarding the
preemption of state law, and that federal savings banks and their
subsidiaries to the same visitorial powers that apply to national banks
and their subsidiaries.

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

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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____________________________________________________________

Subject: FYI: OCC Issues NPRM on Dodd-Frank Preemption Rule
Changes, OTS Transfer/Integration, Other Issues
Date: Sun, 29 May 2011 14:22:41 -0500
From: rwutscher@mtwllp.com
To: rwutscher@mtwllp.com
CC: socaloffice@mtwllp.com, dcoffice@mtwllp.com,
chicagooffice@mtwllp.com

The Office of the Comptroller of the Currency issued the attached notice
of proposed rulemaking, in order to implement several provisions of the
Dodd-Frank Act, including:

(a) Changes to national bank preemption and the OCC's visitorial
authority, as referenced in the OCC's May 12, 2011 responding to
Congressional inquiry (attached); and

(b) Implementing the transfer of functions from the Office of Thrift
Supervision, effective July 21, 2011, including assessment rules and
related payment schedules, rules related to OCC organization, the
availability and release of information, and post-employment restrictions
for senior examiners; and

(c) Implementing a moratorium on changes in control of credit card banks
and trust banks, and revisions to federal branch and agency rules
regarding deposit insurance coverage.

The OCC's proposed preemption and visitorial powers rules would:

(1) "Eliminate any ambiguity concerning the preemption standards in OCC
regulations" by removing language from existing OCC rules that provide
that state laws that "obstruct, impair or condition" a national bank's
powers are preempted, and replacing this standard with that which was
articulated in the whole of decision of the Supreme Court of the United
States in Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance
Commissioner, et al., 517 U.S. 25 (1996) (copy attached), and indicating
that "the phrase 'prevent or significantly interfere' is one exemplary
formulation of conflict preemption," but that this phrase "is not the only
formulation; it is not set apart from the others; and it is not presented
as a test different from the others; rather, it is part of the whole of
the Court's reasoning in its decision," and that "the analysis may not
simply stop and isolate those terms from the rest of the decision," and
that "it is necessary to take into account the whole of the conflict
preemption analysis in the Supreme Court's decision"

(2) Eliminate preemption for national bank and federal thrift operating
subsidiaries; and

(3) Recognize the ability of state attorneys general to bring enforcement
actions in court to enforce non-preempted state laws against national
banks.

As part of the integration of the OTS functions into the OCC, the OCC also
indicated that it plans to issue an Interim Final Rule with a request for
comments, effective on the transfer date, that republishes those OTS
regulations the OCC has the authority to promulgate and enforce as of the
transfer date, renumbered and issued as new OCC rules, with nomenclature
and other technical amendments to reflect OCC supervision of Federal
thrifts. The OCC further indicated it will consider more comprehensive
substantive amendments to these regulations, as appropriate, after the
transfer date.

The proposed rule has been published in the Federal Register, and comments
are due by June 27, 2011.

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,
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FYI: NV Sup Ct Holds Non-Borrower Title-Holder Eligible for Mediation, Again Requires Sanctions For Mediation Non-Compliance

The Supreme Court of the State of Nevada recently held that a homeowner,
even if not the borrower or mortgagor but who is on title, is entitled to
participate in the Nevada Foreclosure Mediation Program. The Court also
concluded that the trial court abused its discretion in allowing a
foreclosure to continue despite the lender's alleged failure to comply
with mediation rules concerning the production of documentation at
mediation.

A copy of the opinion is available at:
http://www.nevadajudiciary.us/index.php/advancedopinions/1164-leyva-v-nati
onal-default-servicing-corp-

The mortgagor received and recorded a quitclaim deed in 2007 in exchange
for taking over monthly mortgage payments on a residence in Las Vegas.
The homeowner did not expressly assume the note, however, and it remained
in the original mortgagor's name.

Nonetheless, the homeowner made the mortgage payments in his own name,
rather than the mortgagor's name, for 25 months. Thereafter, the
homeowner defaulted and, upon receiving a notice of election to sell,
decided to pursue mediation through Nevada's foreclosure mediation
program. Both he and the original mortgagor signed the form electing to
mediate.

The Court observed that the relevant statutory provision provided that
either the grantor or the title holder on record could elect to mediate.
Accordingly, as the defendant had recorded his ownership of the subject
property, he was the title holder of record eligible to participate in the
mediation program.

Regarding compliance with the foreclosure statute's documentation
requirements, the Court first noted that the mediator's statement
indicated the servicer had failed to bring the statutorily required
documents to the mediation. Thus, according to the Court, the servicer
had not strictly complied with the statutory requirements regarding
mediation, specifically, the rule requiring that parties bring complete
copies of all of the required documents to the mediation.

Concluding that the relevant statute did require strict compliance, the
Court rejected the servicer's argument that substantial compliance
sufficed and further determined that such noncompliance warranted
sanctions.

The Court then remanded the cause back to the lower court for purposes of
determining appropriate sanctions.

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

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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CONFIDENTIALITY NOTICE: This communication (including any related attachments) is intended only for the person/s to whom it is addressed, and may contain confidential and/or privileged material. Any unauthorized disclosure or use is prohibited. If you received this communication in error, please contact the sender immediately, and permanently delete the communication (including any related attachments) and permanently destroy any copies.

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed by law.