The US Court of Appeals for the Ninth Circuit’s recent decision in Lusnak v. Bank of America, N.A.—holding that the National Bank Act did not preempt a California law requiring banks to pay interest on certain funds held in escrow accounts for mortgage borrowers—has received considerable attention in the consumer finance industry. Bank of
Preemption
Washington Licenses Student Loan Servicers*
*Daniel Pearson is not admitted to practice law in the District of Columbia. He is practicing under the supervision of firm principals.
On March 15, 2018, the State of Washington enacted Senate Bill 6029 (“SB 6029”), titled the “Washington Student Education Loan Bill of Rights,” which takes effect June 7, 2018, and amends the state’s Consumer Loan Act (the “CLA”) to expand its scope to include student loan servicers. Whereas the CLA currently regulates and licenses consumer lenders (both mortgage and non-mortgage), and mortgage servicers, when SB 6029 takes effect the CLA will also regulate and license student loan servicers. As a license is needed under the CLA to make any student loans to residents of Washington, it seems reasonable that if state legislators believed student loan servicers should be licensed in Washington, the CLA should be amended to provide for such licensing rather than enact a new and separate licensing law.¹
With that legislation, Washington becomes the latest state to license student loan servicers, joining California, Connecticut, the District of Columbia, and Illinois.² …
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Military Lending Act and Servicemembers Civil Relief Act: Important Updates
Despite changes in leadership at numerous federal agencies, Washington D.C. continues to focus on lending to servicemembers. In December, Congress extended the time period for protections against foreclosure under the Servicemembers Civil Relief Act. Otherwise, those protections would have expired at the end of 2017.
In addition, the Department of Defense recently amended its Military…
Federal Court Dismisses “Speculative” Lawsuit By New York Department of Financial Services Over Proposed OCC Fintech Charter
By Christopher Comstock & Thomas V. Panoff on
On Tuesday, a federal district court in the Southern District of New York issued an order dismissing a lawsuit brought by the New York Department of Financial Services (NYDFS) regarding a proposal of the Office of the Comptroller of the Currency (OCC) to issue federal charters to certain fintech firms. In dismissing the case, U.S.…
Supreme Court Addresses FDCPA/Time-Barred Debts and Preemption/Arbitration
By Brian Netter, Kris D. Kully & Steven M. Kaplan on
On May 15, the Supreme Court held that a debt collector does not violate the Fair Debt Collections Practices Act (FDCPA) by knowingly attempting to collect a debt in bankruptcy proceedings after the statute of limitations for collecting that debt has expired. As explained in Mayer Brown’s Decision Alerts, the FDCPA generally prohibits a…
NJ Bankruptcy Case Takes Aim at Small Business Financing — Merchant Cash Advances and Bank Partnerships
A complaint filed March 23 by the bankruptcy trustee for Lam Cloud Management, LLC in the United States Bankruptcy Court for the District of New Jersey challenges two small business financing models: (i) merchant cash advances (“MCAs”); and (ii) small business loans originated under bank partnerships. While disposition of the complaint will take time, and all that is available for now are bare allegations, the complaint is another recent challenge involving usury and bank partner programs and warrants attention from entities involved in small business financing and lending. …
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Madden Update: Solicitor General Says the Second Circuit Got it Wrong—But that the Decision Should Still Stand for Now
The controversial decision in Madden v. Midland Funding, LLC, was “incorrect” and “reflects an unduly crabbed conception of [National Bank Act] preemption,” said the Solicitor General and the Office of the Comptroller of the Currency (“OCC”) in the amicus brief filed with the United States Supreme Court on Tuesday. Still, the Solicitor General and the OCC advised the Court not to review the decision of the Second Circuit in Madden. They concluded that this just isn’t the right case for the Court to resolve the important questions of whether and under what circumstances the National Bank Act preempts state usury laws for assignees of loans made by national banks.
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