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Posts published in “Banking”

6th Cir. Reverses Dismissal in Short-Term Cash Advance Class Action Involving Two Definitions of ‘APR’

The U.S. Court of Appeals for the Sixth Circuit recently reversed the dismissal of a breach of contract claim in a putative class action involving short-term cash advance loans, finding that the contract at issue was ambiguous because it provided two inconsistent definitions of “annual percentage rate” that could not be reconciled. A copy of the opinion in Laskaris, et al. v. Fifth Third Bank is available at:  Link to Opinion. The defendant bank created a short-term cash advance program for eligible customers who held checking accounts with the bank.  Specifically, the bank would deposit loans up to $1,000 directly…

DC Cir. Rules in Favor of Bank in Deposit Account Loss Claim

The U.S. Court of Appeals for the D.C. Circuit held recently that plaintiffs failed to offer sufficient evidence to create a genuine dispute of fact as to their accounting and fraudulent concealment claims against a bank based on the disappearance of funds from a savings account that was closed 12 years before the lawsuit was filed. Specifically, the Circuit Court determined that the plaintiffs did not demonstrate the existence of a fiduciary relationship as required for their accounting claim, and they did not establish the detrimental reliance element of their fraudulent concealment claim. Accordingly, the Circuit Court affirmed the trial…

Texas Supreme Court Upholds Contractual Waiver of Statute of Limitations for Deficiency Claims

The Supreme Court of Texas held that the contractual waiver of the statute of limitations on deficiency claims contained in a guaranty agreement was sufficiently “specific and for a reasonable time” as to be enforceable and not void as against public policy. Accordingly, the Texas Supreme Court affirmed the ruling of the appellate court, although it disagreed with portions of the appellate court’s reasoning. A copy of the opinion in Godoy v. Wells Fargo Bank, NA is available at:  Link to Opinion. The lender extended a loan to the borrower, which loan was secured by property owned by the borrower.  A guarantor…

5th Cir. Rules in Lender’s Favor in Agricultural Lien Priority Dispute

In an agricultural lien contest between three creditors of a bankrupt commercial farm, the U.S. Court of Appeals for the Fifth Circuit recently affirmed the trial court’s award of summary judgment in favor of a bank that provided debtor-in-possession financing, holding that the locale of the farm products determined the applicable lien law and that bank’s lien was superior to the liens of two nurseries that supplied trees and shrubs because the latter were either unperfected or unenforceable. A copy of the opinion in Fishback Nursery, Inc. v. PNC Bank is available at:  Link to Opinion. The debtor, “a wholesale…

9th Cir. Holds That Citizenship of Bank Acting as Trustee Generally Controls for Diversity Purposes

The U.S. Court of Appeals for the Ninth Circuit held that the Supreme Court of the United States’ decision in Americold Realty Trust v. ConAgra Foods, Inc. did not upset the Supreme Court’s prior holding in Navarro Ass’n v. Lee, and that “when a trustee files a lawsuit or is sued in her own name her citizenship is all that matters for diversity purposes.” Accordingly, the Ninth Circuit held that the trial court properly exercised its jurisdiction over the matter where the bank — acting as trustee — was sued in its own name, and along with the other named…

8th Cir. Holds State Court Judgment Did Not Preclude Bankruptcy Court from Enforcing Its Own Orders

The U.S. Court of Appeals for the Eighth Circuit recently affirmed a trial court judgment holding a bank and its principal in contempt and sanctioning them for violating a bankruptcy discharge injunction, based on the findings in a parallel state court proceeding. In so ruling, the Eighth Circuit held that the state court judgment did not preclude the bankruptcy court’s ability to enforce its own orders. A copy of the opinion in First State Bank of Roscoe v. Stabler is available at:  Link to Opinion. A bank issued a loan to husband and wife borrowers for their business. After the business failed,…

Fla. Circuit Court Holds Factoring Agreement Not a Usurious Loan Under New York Law

The Circuit Court of the First Judicial Circuit in and for Santa Rosa County, Florida recently rejected a company’s argument that a purchase and sale agreement for the company’s future receivables constituted a “loan” that was unenforceable under New York usury law, because payment to the purchaser of the future receivables was not absolutely guaranteed, but instead contingent, and thus, not a loan subject to the law of usury. A copy of the order in EBF Partners v. Burlow Pharmacy is available at:  Link to Order. A business funding entity (“purchaser”) entered into a purchase and sale agreement with a pharmaceutical…

Ohio Court of Appeals Rules Unsigned Credit Card Agreements Can Be Written Contracts

In a recent decision, the Ohio Court of Appeals considered the question whether, for the purpose of determining the applicable statute of limitations, an unsigned credit card agreement constituted a written or oral contract. In Ohio, the statute of limitations is eight years for a written contract and six years for an oral contract. Ohio Rev. Code Ann. §§ 2305.06, 2305.07. A copy of the opinion in Unifund CCR Partners v. Piaser is available at:  Link to Opinion. The Court noted that existing Ohio law was unclear on the written versus oral contract issue, and that previous decisions had determined…

Arizona Supreme Court Holds Cause of Action on Credit Card Debt Accrues When Payment is Missed in Absence of Acceleration

In a case of first impression, the Arizona Supreme Court recently addressed the question of when the statute of limitations commences on credit card debt that is subject to an optional acceleration clause. A copy of the opinion in Mertola, LLC v. Santos is available at:  Link to Opinion. The consumer obtained a credit card subject to an agreement that provided if he missed any payment the issuer could declare the balance “immediately due and payable.”  The consumer missed a payment in February 2008, but subsequently made a $50 payment, which was less than the minimum payment due, in August 2008.  No notice…

Illinois Student Loan Servicing Rights Act Amended to Exclude Attorneys

On July 27, Gov. Bruce Rauner approved an amendment to Illinois’ Student Loan Servicing Rights Act.  The legislation, HB 4397, passed unanimously in both chambers and becomes effective Dec. 31, 2018. The legislation amends the definition of “student loan servicer” in the Student Loan Servicing Rights Act by excluding “a law firm or licensed attorney that is collecting post-default debt.”  The Act already excluded licensed collection agencies collecting on post-default debt. The Student Loan Servicing Rights Act, which becomes effective on the same date, requires licensing of student loan servicers and includes a “Student Loan Bill of Rights” that imposes…

6th Cir. Rejects Account Overdraft Claims

The U.S. Court of Appeals for the Sixth Circuit recently held that a consumer plaintiff’s breach of contract claim against a defendant bank failed where the bank processed the consumer’s transactions in accordance with the terms of the agreement with the consumer, even though the transactions were not processed in the order they were made by the consumer, which resulted in a greater number of non-sufficient funds (“NSF”) charges. The Court further held that the bank did not violate the agreement’s limit of five NSF charges per day where it initially charged eight NSF fees to the account before manually…

SCOTUS Rules Credit Card Company’s Anti-Steering Rules Did Not Violate Antitrust Law

In a 5-4 ruling, the Supreme Court of the United States held that anti-steering provisions in agreements between a credit card company and merchants wishing to accept the card do not violate federal antitrust law. A copy of the opinion in Ohio v. American Express Co. is available at:  Link to Opinion. The defendant credit card company required merchants who wanted to accept the company’s credit cards to agree to an anti-steering contractual provision. Under the company’s business model, and unlike other credit card companies, it earned most of its revenues not from collecting interest from cardholders but from merchant…