Fair Lending Update: Oregon House Bill 2682 and Louisiana House Bill 1190 Enacted

Oregon House Bill 2682 was signed by the Governor. The legislation requires that mortgage bankers and mortgage brokers conduct a criminal records check of each individual the banker or broker employs or intends to employ. Applicants for licensure must include with their application evidence that each loan originator has completed an entry-level training course, passed an examination, and for certain individuals, completed continuing education. These requirements also apply to insurance agents that are full-time loan originators. The legislation would prevent a mortgage banker or mortgage broker from employing an individual who has been convicted of a crime. The legislation makes other technical amendments.

Louisiana House Bill 1190 was also signed by the Governor. The legislation provides some clarity on functions performed that to not fall under the definition of "loan originator," such as collecting financial information and other related documents that are part of the application process, ordering verifications of employments, and deposits. The legislation eliminates certain exemptions from the licensing requirement, including: those licensed, supervised, or audited by FNMA, FHLMC, GNMA, HUD mortgagees, VA approved for automatic authority. These mortgagees will be required to obtain licensure should this legislation become law. Further, their employees will need to register as loan originators. Those entities previously exempt will not need to comply with the professional education or examination requirements in order to obtain their license.

Appeals of RESPA Cases Denied by Supreme Court

On June 27, the U.S. Supreme Court denied requests by plaintiffs for review of three important Circuit Court decisions relating to the interpretation of the Real Estate Settlement Procedures Act (RESPA). The Circuit Court decisions that were denied review were Heimmermann v. First Union (11th Circuit), Hirsch v. Bank of America (11th Circuit), and Krzalic v. Republic Title (7th Circuit).

In both Heimmermann and Hirsch, the 11th Circuit Court denied class certification in suits challenging the payment of Yield Spread Premiums to mortgage brokers, based on deference to a 2001 Statement of Policy issued by the Department of Housing and Urban Development (HUD). In Krzalic, the 7th Circuit Court upheld the marking up of recording fees by a title company, finding that the same 2001 HUD Statement of Policy prohibiting markups of settlement service charges is inconsistent with the RESPA statute, and is therefore not entitled to deference.

This follows a previous Supreme Court denial of review in Glover v. Standard Federal, in which the 8th Circuit also denied class certification in a YSP case based on the 2001 HUD policy statement.

FCC Nationwide Do-Not-Call Registry Authorized by FCC

On June 26, the Federal Communications Commission (FCC) finalized changes to its rules implementing the Telephone Consumer Protection Act of 1991. Among other things, the FCC authorized a national do-not-call registry for consumers to avoid certain telemarketing calls. The FCC will implement the registry in conjunction with the Federal Trade Commission (FTC) and enforcement will be coordinated between the FCC and the FTC. The FTC's rule did not apply to certain entities, such as banks, and as such, the FCC issued its own rules to cover this gap in coverage.

This rule apples to all entities that engage in telemarketing (as defined in the order), including those who contact their former customers. However, the Commission's revised definition of "established business relationship" allows a company to contact a customer, for example to inform their prior customer that the interest rates have decreased, for 18 months after a business transaction and three months after an inquiry or application. However, consumers registering with the national registry will be able to provide express written permission to any company from which they wish to receive telemarketing calls. The details of what needs to be contained in the express written permission are covered in the Order.

The national do-not-call list applies to both interstate and intrastate commercial telemarketing calls. States that maintain do-not-call lists must now incorporate the relevant portions of the national do-not-call list in their state lists. The current company-specific do-not-call lists will still be available to consumers who wish to avoid telemarketing calls from specific companies. The FCC also adopted restrictions on the use of predictive dialers in an effort to reduce the number of "hang up" and "dead air" calls consumers experience. The FCC also specified that telemarketers or those engaged in telemarketing solicitations cannot block caller id information. The FCC's rules become effective on October 1, 2003.

GROUP BRINGS SUIT AGAINST THE FTC AND FCC ON NATIONAL DO-NOT-CALL LIST

The American Teleservices Association brought suit in January against the FTC to stop the national do-not-call list. The ATA has expanded their suit to include the FCC and their recently finalized rules on telemarketing. The FTC will begin enforcing the no-not-call list October 1, 2003.

FCC Adopts Rule Prohibiting Unsolicited Faxes

In its 200-page order revising the regulations to the Telephone Consumer Protection Act of 1991, the FCC also tightened its rules on unsolicited faxes. The FCC will now require that permission be obtained in writing by companies sending faxed advertisements to its customers. A facsimile advertisement is not "unsolicited" if the recipient has granted the sender prior express invitation or permission to deliver the advertisement, as evidenced by a signed, written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient's consent to receive such facsimile advertisements from the sender.

The order eliminates the previous "established business relationship" for faxing only. This will impact mortgage lenders, who send rate sheets to mortgage brokers, mortgage brokers who send unsolicited faxes, as well as trade associations who send certain information (unsolicited "material advertising the commercial availability or quality of any property, goods, or services") to their membership via facsimile. This would include any "dual-purpose" faxes as well (those that contain both an unsolicited advertisement and other information).

Fax broadcasters may be liable for unsolicited faxing if there is a high degree of involvement or actual notice of the unlawful activity and the broadcaster fails to take steps to prevent such a facsimile transaction. If an entity violates the rule, it can be subject to FCC enforcement, state enforcement, and consumers have a right of action. These rules will become effective August 25, 2003 (30 days after publication of the Order in the Federal Register). More information is available at namb.org under government affairs.

House Financial Services Committee Passes Consumer Credit Protection Bill

The House Financial Services Committee passed HR 2622, the Fair and Accurate Credit Transactions Act of 2003, on July 24. The legislation will go to the House floor after Congress returns from recess in September. Introduced by Rep. Spencer Bachus (AL), together with Rep. Darlene Hooley (OR), Rep. Judy Biggert (IL), Rep. Dennis Moore (KS) and 29 other co-sponsors, the legislation would make permanent the expiring provisions of the Fair Credit Reporting Act. The legislation would also provide additional protection from identity theft, provide consumers with a free credit report annually, provide additional protections from inaccurate reporting, as well as other protections. The legislation includes language virtually identical to what was enacted in California requiring mortgage lenders and brokers who use credit scores to disclose them and other information to the consumer.

The legislation would also: