FYI: MD Fla Sanctions Defendant for Filing Improper Motion for Sanctions After Voluntary Dismissal of All Claims

The U.S. District Court for the Middle District of Florida recently denied a debt collector's motion for sanctions based on the plaintiff's filing of allegedly frivolous consumer protection claims, which the plaintiff consumer voluntarily dismissed with prejudice after demand from the debt collector's counsel, where the debt collector failed to show the claims met the Eleventh Circuit's two-prong test for frivolity.

 

A copy of the opinion is attached.

 

After the plaintiff consumer underwent a medical procedure with a medical imaging company, she allegedly informed the medical imaging company that the debt was discharged in bankruptcy, and the medical imagining company allegedly made a notation on the account.  The medical imaging company allegedly assigned her debt to a debt collector, which attempted to collect the debt with letters and calls to the plaintiff consumer's cellular telephone.

 

The plaintiff consumer filed suit against the debt collector alleging violations of the federal Telephone Consumer Protection Act ("TCPA"), the federal Fair Debt Collection Practices Act ("FDCPA"), and the Florida Consumer Collection Practices Act ("FCCPA").

 

The debt collector's counsel contacted the plaintiff consumer's counsel and demanded voluntarily dismissal of the TCPA and FCCPA claims. The debt collector's counsel stated that the claims were meritless because the debt collector does not use an "automatic telephone dialing system" under the TCPA, and that the debt collector lacked the requisite "actual knowledge" of the illegitimacy of the debt pursuant to Fla. Stat. § 559.72(9) of the FCCPA. 

 

The debt collector's counsel eventually complied, and voluntarily dismissed all of the allegations with prejudice. The debt collector then filed a motion for sanctions against the plaintiff consumer and her counsel, alleging that the TCPA and FCCPA counts were frivolous.

 

As you may recall, Fed. R. Civ. Pro. Rule 11(b) governs the filing of frivolous pleadings. In analyzing this rule, the Court applied the two-prong test established by the Eleventh Circuit for such motion, i.e., "whether the legal claims or factual contentions are objectively frivolous, and, if so, whether a reasonably competent attorney should have known they were frivolous." Thompson v. RelationServe Media, Inc., 610 F.3d 628, 665 (11th Cir. 2010).

 

Under the first step, "[a] factual claim is frivolous if no reasonably competent attorney could conclude that it has a reasonable evidentiary basis." Id. Under the second step, the question is "whether the attorney should have known they were frivolous" or, stated differently, whether "a reasonable investigation would have revealed the error to a reasonably competent attorney." Id.  "Both inquiries measure attorney conduct under an objective reasonably competent attorney standard." Id.

 

The Middle District of Florida held that the debt collector failed to apply the two-prong analysis. The Court noted that the debt collector did not take issue with any lack of pre-filing inquiry, and instead the sole basis for the motion was plaintiff's failure to immediately voluntarily dismiss the counts after the debt collector's demand.  

 

The Court noted that the debt collector's counsel failed to show how its counsel's demands for dismissal rendered the claims objectively frivolous or how the claims would have caused a reasonably competent attorney to know of their frivolity.

 

Moreover, the Court also found that the debt collector failed to show how the claims would be frivolous after reasonable investigation, and failed to suggest any means of non-discovery fact-finding that might have revealed a lack of factual basis for the claims.  The Court noted that debt collector's counsel expected plaintiff's counsel to rely merely on the debt collector's counsel's statements regarding discrete factual issues as the basis for withdrawal and dismissal of the claims.

 

Accordingly, the Middle District of Florida held that the debt collector's motion for sanctions failed to address the applicable standard for such motions, and failed to cite supporting legal authority in contravention of the Middle District's Local Rule 3.01(a), which requires a memorandum of legal authority in support of a motion.

 

The Court further stated that the motion is "self-contradictory" in that it alleged that plaintiff consumer's entire action is frivolous but then only addressed two counts of the three count complaint, and also failed to distinguish the pursued fees and costs between the two counts and the remaining third count.

 

The Court further held that the debt collector's motion was filed for an improper purpose, finding that "the unexceptional nature of Defendant's motion bespeaks an ancillary purpose," as the debt collector filed the motion despite already achieving a voluntary dismissal with prejudice.

 

Accordingly, the Court not only denied the debt collector's motion, but also awarded the plaintiff consumer her reasonable expenses, including attorneys' fees, to be paid by the debt collector's counsel.

 

 

 

Ralph T. Wutscher
Maurice 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@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: Fla App Div (15th Jud Cir) Reverses Dismissal of FDCPA Allegations, Holds Servicer is Not "Creditor," Demand for Amounts Due Under Mortgage Lien is "Debt Collection"

The Appellate Division of the Fifteenth Judicial Circuit of the State of Florida recently reversed dismissal of a federal Fair Debt Collection Practices Act claim alleging a debt collector's letter falsely represented a bank was the creditor of a loan.

 

In so ruling, the Appellate Division confirmed that even though a foreclosure action is not necessarily debt collection, the enforcement of a promissory note constitutes debt collection activity even if done in conjunction with the enforcement of a security interest, and even the debt collector stated it was seeking solely to foreclose the creditor's lien on the real estate, and would not be seeking a personal money judgment against the borrowers.

 

A copy of the opinion is available at:  Link to Opinion

 

A law firm sent borrowers two letters informing them that they were in default, a bank had accelerated all sums due, and the bank was the mortgage servicer and creditor to whom their debt was owed.  The letters stated they were sent in compliance with the FDCPA and should not be considered a payoff letter, but provided information on how to reinstate and pay off the loan.

 

In addition, the letters identified the law firm as a debt collector, but stated the firm was seeking solely to foreclose the creditor's lien on the real estate, and will not be seeking a personal money judgment against the borrowers.

 

Thereafter, the borrowers filed suit against the law firm alleging the letters falsely represented the bank was the creditor, another entity was the actual creditor of the note, and the letters would be deceptive to the least sophisticated consumer.

 

The law firm moved to dismiss arguing that the bank was in possession of the original note, endorsed in blank, and a foreclosure action does not qualify as debt collection under the federal Fair Debt Collection Practices Act (FDCPA).

 

The trial court dismissed the lawsuit and the borrowers appealed.

 

The Appellate Division reversed the dismissal and found the borrowers adequately stated a claim under the FDCPA.

 

As you may recall, to state a claim under the FDCPA, the borrowers must show (1) they were subjected to collection activity arising from consumer debt, (2) the law firm was a debt collector, and (3) the debt collector engaged in an act or omission prohibited by the FDCPA.

 

The Appellate Division recognized that, under Reese v. Ellis, 678 F. 3d 1211 (11th Cir. 2012) and Birster v. Am. Home Mortg. Serv., Inc., 481 F. App'x 579 (11th Cir. 2012), while a foreclosure action is not debt collection, enforcement of a promissory note constitutes debt collection activity even if done in conjunction with the enforcement of a security interest. 

 

In addition, only when a debt collector takes action exclusively related to the enforcement of a mortgagee's security interest, and unrelated to the note itself, does its activity fall outside the scope of the FDCPA, and implicit demands for payment are sufficient to find a communication an attempt to collect debt.

 

Here, the Court noted, the law firm's letters informed the borrowers of impending foreclosure action and advised that all sums recoverable under the note and mortgage were immediately due.

 

The letters further stated that (1) "[T]he entire principle balance and all other sums recoverable under the terms of the promissory Note and Mortgage are now due"; (2) "Additional interest will accrue after the date of this letter"; (3) "If you wish to receive figures to reinstate…or pay off your loan through a specific date, please contact this law firm at…"; and (4) "This law firm is attempting to collect a debt…"

 

The law firm argued the letters contained collection-related "mini-Miranda" disclosures required by the FDCPA that do not convert such foreclosure communications into debt collection efforts.  See, e.g., Diaz v. Fla. Default Law Group, P.L., No. 3:09-cv-524-J-32MCR (M.D. Fla. Jan. 3, 2011).

 

The Appellate Division distinguished Diaz as that decision was prior to Reese and Birster, and noted that Owens v. Ronald R. Wolfe & Associates, P.L., No. 13-61769-CIV (S.D. Fla. June 28, 2013) more recently held that identical language is evidence of collection efforts.

 

As the matter at hand involved only a motion to dismiss, the Appellate Division found the borrowers adequately pled they were subjected to collection activity arising from consumer debt and adequately pled that the law firm was a debt collector.

 

Moreover, accepting facts alleged in the complaint as true, the Appellate Division held the borrowers adequately pled the bank was not the creditor of their loan and the compliant should not have been dismissed for failure to state a claim.

 

The Appellate Division further rejected argument that the litigation privilege or the statute of limitations supported dismissal where Florida's litigation privilege does not extend to violations of federal law, such as the FDCPA, and the complaint was filed within the statute of limitations.

 

Accordingly, the Appellate Division reversed dismissal of the FDCPA claim.

 

 

 

 

Ralph T. Wutscher
Maurice 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@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: 5th Cir Rejects Challenge to Foreclosure Under TX Property Code and TX Debt Collection Act

The U.S. Court of Appeals for the Fifth Circuit recently affirmed summary judgment in favor of the loan owner and its loan servicer because the servicer gave the required 20-day notice of default under the Texas Property Code prior to initiating foreclosure, and the borrower failed to allege violations of the Texas Debt Collection Act ("TDCA").

 

A copy of the opinion is available at: http://www.ca5.uscourts.gov/opinions/pub/15/15-10373-CV0.pdf

 

The borrower obtained a $175,000 loan in 2005 in order to purchase her home, signing a note and deed of trust.  The deed of trust was assigned by the original lender to another entity.

 

The borrower defaulted in 2007 and communicated several times between 2008 and 2012 with the loan owner's servicer about modifying the loan.  On January 15, 2010, the servicer sent the borrower "a notice of default indicating that it planned to accelerate the loan on February 14 if she did not bring it current. She failed to meet the deadline."

 

The servicer filed a foreclosure action in August of 2012, and the borrower sued the servicer and the loan owner in state court in April of 2013.  The loan owner and loan servicer removed the borrower's action to federal court.  The federal court granted summary judgment in defendants' favor. The borrower appealed.

 

On appeal, the borrower argued that the servicer violated section 51.002(d) of the Texas Property Code by supposedly failing to give a notice of default providing at least 20 days to cure before giving the notice of sale.

 

The Fifth Circuit held that even if this section created a private cause of action, an issue not settled by the Texas Supreme Court, the borrower failed to state a claim because the servicer provided undisputed evidence that it sent borrower the notice of default giving her more than the required 20 days to cure, and borrower did not allege that the servicer sent her a notice of sale or otherwise attempted to initiate foreclosure before the 20 days expired.

 

The Court also rejected the borrower's argument that the servicer's communications between 2008 and 2012 regarding a potential loan modification violated Sections 392.301(a)(8), 392.303(a)(2), and 392.304(a)(8) of the Texas Debt Collection Act ("TDCA").

 

More specifically, "section 392.301(a)(8) prohibits mortgage servicers from attempting to recover an outstanding loan by 'threatening to take an action prohibited by law.'" The borrower argued that the servicer's "threatened foreclosure was prohibited by law because [it] had not yet given the statutorily required notice of acceleration," relying on the Fifth Circuit's recent ruling in McCaig v. Wells Fargo Bank, N.A., 788 F.3d 462 (5th Cir. 2015), which held that the economic loss rule does not bar TDCA claims and "[i]n determining whether foreclosure would be prohibited by law what matters is whether the mortgagor has a right to foreclose, not whether the debt is considered in default."

 

The Fifth Circuit reasoned that the borrower mischaracterized McCaig, "in which we decided that a mortgagor [sic] violated Section 392.301(a)(8) by threatening to foreclose after specifically waiving its right to do so" because in the case at bar, the servicer "never waived its contractual right to foreclose, and [borrower] was in default at all times after October of 2007. Thus, irrespective of any statutory notice requirements, [the servicer] did not violate Section 292.301(a)(8) by threatening to foreclose."

 

In addition, "section 392.303(a)(2) prohibits mortgage servicers from using unfair or unconscionable means such as 'collecting or attempting to collect interest or a charge, fee, or expense incidental to the obligation unless [the fee] is expressly authorized by the agreement creating the obligation or legally chargeable to the consumer."

 

The Fifth Circuit held that, although the borrower claimed the servicer charged excessive fees, she was not arguing that the fees were unauthorized under the deed of trust and conceded in response to the motion for summary judgment that the note and deed of trust and note authorized such fees. The Court concluded that section 392.303(a)(2) "prohibits mortgage servicers from attempting to assess fees when such fees are not authorized by the [Deed of Trust]; it does not create a cause of action to challenge assessed fees as unreasonable."  Accordingly, because the borrower failed to allege a violation of Section 392.303(a)(2), summary judgment on that claim was appropriate.

 

Moreover, "section 392.304(a)(8) prohibits mortgage servicers from making misrepresentations about a debt. [The borrower] must show [the servicer] made a misrepresentation that led her to be unaware (1) that she had a mortgage debt, (2) of the specific amount she owed, or (3) that she had defaulted." The borrower argued that the servicer violated this section by allegedly sending her four letters showing different amounts due.

 

The Court rejected this argument because, "[w]hen examined more closely, the letters are consistent with each other and are not a misrepresentation." This is because the letters "explicitly state that they are describing two different types of obligations: notices of the entire outstanding obligation and notices of the amount due to bring the loan current. Each category is internally consistent and consistent with the other. [Borrower's] amount to bring the loan current continued to grow over time because she was not making adequate payments and still occupied the property. The total outstanding obligation grew for the same reason."

 

In addition, the Fifth Circuit held that the borrower failed "to establish any of the elements required by Section 392.304(a)(8) because she never alleged that the servicer "made her unaware of her mortgage debt." Instead, the borrower kept trying to modify until she was sued, which means she must have been aware of the loan she was trying to modify. She also failed to show how the servicer's "alleged misrepresentations misled her as to the 'specific amount' owed … because each letter specifically identifies the obligation it described and stated it accurately."

 

Finally, the Fifth Circuit held that the borrower offered no evidence that the servicer "misrepresented whether her loan was in default" because even if the servicer 'repeatedly sent her information about loan modifications, there is no evidence that [it] equivocated on the status of the loan."  Noting that each of the four letters on which this claim was based expressly stated that the loan was in default, and thus the claim under section 392.304(a)(8) also failed.   

 

 

 

 

Ralph T. Wutscher
Maurice 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@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

California   |   Florida   |   Illinois   |   Indiana   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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FYI: Ga App Ct Rejects FDCPA Challenge to Alleged Affidavit Misrepresentations as Immaterial

The Court of Appeals of Georgia, Second Division, recently held that a debt collector did not violate the federal Fair Debt Collections Practices Act ("FDCPA"), holding that even if the alleged misrepresentations in the debt collector's affidavit were technically false, they were not material and thus failed to state a claim.

 

A copy of the opinion is available at:  Link to Opinion

 

In August of 2006, a national bank issued a credit card to the debtors, who defaulted by failing to pay the account.  In April of 2011, the issuing bank and a debt buying company signed an agreement that provided for the purchase of a list of credit card accounts for six months. The list included the debtors' account.

 

In December of 2012, the debt buyer sued to recover the balance owed. In February of 2013, after the complaint was filed but before it was served, debt buyer's counsel sent a letter to the debtors demanding the balance owed on the credit card plus the court's filing fee of $206.

 

The debtors counterclaimed, alleging that the debt buyer violated the FDCPA and the Georgia Fair Business Practices Act.

 

The parties filed cross-motions for summary judgment and the trial court granted the debt buyer's motion, but denied the debtors' motion. The debtors appealed.

 

On appeal, the debtors argued that debt buyer misrepresented that it acquired the account by assignment because the debt buyer filed affidavits allegedly "containing false statements regarding the date of the assignments and that the filing of these allegedly false affidavits was actionable under 15 USC § 1692e."

 

The Georgia Appellate Court held that "[a] debt collector's false or misleading representation must be 'material' in order for it to be actionable under § 1692e of the FDCPA." If a statement would not mislead the least sophisticated consumer test established by the Eleventh Circuit, the Georgia Appellate Court held "it does not violate the FDCA—even if it is false in some technical sense."

 

The Court rejected the debtors' argument that the "'Bill of Sale' shows a 'charge-off' date of April 15, 2011, whereas an affidavit from [the bank's representative] averred that the date was April 30, 2011" because, contrary to the debtors' argument, "the cited 'Bill of Sale' language refers to the date of the Purchase Agreement, not the date of the 'charge-off.'" Accordingly, the debtors failed to show that "there is anything false about the 'Bill of Sale' language."

 

The Georgia Appellate Court also rejected debtors' argument that the issuing bank's "Affidavit of Sale" was defective because the representative signed it before the sale took place and the other representative's affidavit was defective "because he did not confirm that the assignment actually transpired that day" because, "[e]ven assuming that one of the [issuing bank's] provided a false statement by reporting that the assignment transpired on June 24, 2011, when it actually occurred on June 27, 2011, or vice versa, the [debtors] have not alleged, much less shown, that they—or anyone else—were 'misled, deceived, or otherwise duped' by the different dates given for the assignment."

 

The Georgia Appellate Court distinguished a district court case cited by the debtors, "which held that a debt collector, who claimed to have been assigned the consumer's credit card account, made material false statements that he had personal knowledge of the consumer's debt" because, unlike the consumer in that case, "who claimed she was unaware of any obligation owed to the credit card issuer, the [plaintiffs] readily admitted that they had a credit card account with [the issuing bank], and that they owed a monetary obligation on that account."

 

In addition, the debt buyer in this case "also presented an affidavit and deposition testimony from a company vice president who confirmed that the [plaintiffs'] credit card account was assigned to [defendant]."

 

The Court found that because the debtors "presented no evidence contradicting the fact that the assignment transpired in June 2011, and they presented no evidence that the different reported dates for the assignment frustrated their ability to intelligently choose their response," the debtors' "FDCPA claim based on the filing of the subject affidavits fails."

 

The Court also rejected as without merit the plaintiffs' argument that the letter "notifying them that [defendant] was willing to settle their debt for a reduced amount violated 15 USC § 1692e and 1692f because it included an extra $206 for the filing fee and the case was not filed until months later.

 

While subsection 1692f(1) of the FDCPA "prohibits a debt collector from using any 'unfair or unconscionable means to collect or attempt to collect any debt' including '[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law … [w]hen a debtor has contractually agreed to pay attorney fees and collection costs, however, a debt collector does not violate the FDCPA by stating those fees and costs and including those amounts in the collection letter."

 

Because the credit card agreement in plain and unambiguous language provided for the recovery of court costs, the debt collector "did not violate the FDCPA by including those amounts in the February 2013 letter."

 

Finally, the Court rejected the debtors' argument that the $206 filing fee violated the FDCPA because it was not separately itemized and thus could mislead an unsophisticated consumer because "even assuming that [defendant's] failure to itemize the court costs in the February 2013 letter was a false statement, the [plaintiffs] had to point to specific evidence that the omission was material in order to have an actionable FDCPA claim."

 

Because the debtors never disputed or refuted the amount owed on the credit card account, or the amount of the court costs, the Court held that the debt collector's "omission in the February 2013 letter was not material."

 

Accordingly, the Court held that the trial court did not err in granting summary judgment to the debt collector, and denying the debtors' motion for summary judgment on their counterclaims. Because the state-law claims were based on the alleged FDCPA violations, which failed as a matter of law, the state law claims failed as well.

 

 

 

 

Ralph T. Wutscher
Maurice 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@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

California   |   Florida   |   Illinois   |   Indiana   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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.

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FYI: CFPB Issues Potentially Confusing Bulletin on EFTA Compliance

The Consumer Financial Protection Bureau (CFPB) recently issued a bulletin (Bulletin 2015-06) on November 23 which it says is "intended to remind entities of their obligations under the Electronic Funds Transfer Act and Regulation E" when engaging in preauthorized transfers (PATs) from consumer accounts. The Bulletin falls short on clarity and may provide more confusion than guidance.

 

A copy of the CFPB Bulletin is available at:  Link to Bulletin 2015-06

 

 

E-Sign and the EFTA Guidance

 

As you may recall, preauthorized EFTs (PATs) refer to an "electronic fund transfer authorized in advance to recur at substantially regular intervals."  See 12 CFR § 1005.2(k).  More specifically, a PAT "is one authorized by the consumer in advance of a transfer that will take place on a recurring basis, at substantially regular intervals, and will require no further action by the consumer to initiate the transfer."  See Off. CFPB Comment to 12 CFR § 1005.2(k).

 

Regulation E requires that PATs must be authorized "only by a writing signed or similarly authenticated by the consumer."  See 12 CFR § 1005.10(b).  "The person that obtains the authorization shall provide a copy to the consumer."  Id.

 

The CFPB's Bulletin 2015-06 provides favorable guidance on the interplay between the EFTA and The Electronic Signatures in Global and National Commerce Act ("E-Sign").

 

EFTA and Regulation E require PATs to be in writing and "signed or similarly authenticated" by the consumer. The Bulletin confirms that if an entity uses E-Sign, it can obtain a consumer's signature by use of an oral recording of a consumer's agreement to a PAT.

 

Under E-Sign, provided all E-Sign disclosures and other requirements are satisfied, recording a consumer's statement of, for example, "I have read and agree to the agreement allowing you to debit my bank account $100 on the 5th day of each month for 20 months" would qualify as an electronic signature. The Bulletin provides other examples of electronic signatures.

 

The problem for many is that EFTA and Regulation E require the PAT agreement to be "in writing." As the Bulletin itself notes, E-Sign draws a distinction between an "electronic record" and an "electronic signature."

 

In the above example, we have only obtained an "electronic signature" under E-Sign. While the oral recording of the consumer's voice in the example contains the terms of the agreement, E-Sign expressly prohibits creating an "electronic record" solely by ". . . a recording of an oral communication . . . except as otherwise provided under applicable law."

 

Written PATs May Not Be Oral Recordings

 

Because E-Sign does not allow an oral recording of the terms of an agreement to be an "electronic record," the above example would not likely provide for an "electronic record" of a PAT agreement. We would only have an E-Sign "electronic signature."  If the EFTA and Regulation E required the consumer to be provided with a copy of the written PAT agreement, that creates a problem.

 

As noted by the Bulletin, E-Sign would prohibit an oral recording of an agreement as an "electronic record" where a statute or regulation (such as the EFTA and Regulation E) requires that the agreement "be provided or made available to a consumer in writing."  But that prohibition does not extend to a PAT "authorization" according to the Bureau, because "Regulation E does not specify that entities must provide a writing to consumers when obtaining the authorization."

 

Unfortunately, the wording used here by the CFPB may be misconstrued to mean that the EFTA's "written agreement" requirement may be satisfied by an oral recording of the agreement. That construction appears to be incorrect.

 

What the CFPB  does not clearly say is that the prohibition against the creation of "electronic records" by an oral recording of an agreement does not prohibit you from obtaining an "electronic signature" by use of an oral recording.  Stated differently, the CFPB is addressing, in unfortunately contorted fashion, the distinction between electronic signatures and electronic records.

 

Delivery of Written Agreement

 

What has plagued many under the EFTA is the timing of the delivery of the "written agreement" authorizing the PAT. Must it be provided before the PAT begins and at the time of the "authorization" be it written or E-Sign electronic signature?

 

The Bulletin answers the question by saying that you can obtain an E-Sign Signature and then provide the writing separately, either in paper or as an E-Sign electronic record.

 

But what the Bureau is focusing on is that there must be clear assent to the agreement – "authorization must be readily identifiable as such to the consumer and the terms of the preauthorized EFTs must be clear and readily understandable to the consumer. The authorization process should evidence the consumer's identity and assent to the authorization."

 

In this regard, the above example might provide assent as to amount and timing of the payments.

 

Now, as far as the written agreement is concerned, it may be either in paper or E-Sign compliant electronic record form. 

 

The Bulletin's statement "Regulation E requires persons that obtain authorizations for preauthorized EFTs to provide a copy of the terms of the authorization to the consumer," demonstrates that the "written agreement" requirement does not authorize the use of oral recordings to satisfy the writing requirement.  But is does solve the problem of the assent (signature) occurring before delivery of the writing and not simultaneously with or following the writing.

 

 

 

 

 

Ralph T. Wutscher
Maurice 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@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

California   |   Florida   |   Illinois   |   Indiana   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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 and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments

 

and

 

Insurance Recovery Services