Consumer Finance Litigation

The California Court of Appeal for the Second District, Division 4, concluded in Akopyan v. Wells Fargo Home Mortgage, Inc., 155Cal.Rptr.3d245 (Cal.App. 4^th2013) that the Dodd-Frank amendments to the National Bank Act ("NBA") and the Home Owners Loan Act ("HOLA") are prospective, and do not apply retroactively to prior agreements. Thus, applying the authoritative pre-Dodd-Frank preemption provisions of NBA and HOLA, the court held that the plaintiffs' respective contract claims against two national banks were preempted by federal law. In two separately filed, but substantially related, class action suits against defendants Wells Fargo Home Mortgage, Inc. ("Wells Fargo") and Aurora Loan Services, LLC ("Aurora"),the mortgagee plaintiffs alleged claims for breach of contract, unfair business practices, unjust enrichment, and declaratory relief. Specifically, the complaints pertained to the administration of late fees pursuant to provisions of the California Business and Professions Code ("CBPC"), which provides that payments made within (10) days of the due date of a successive billing cycle must be credited to that billing cycle and not to past due balances for the proceeding installment periods. Assuming that state regulations did not apply, Wells Fargo and Aurora applied late payments made by plaintiffs to past due billing cycles, resulting in the accumulation of multiple late fees beyond that deemed permissible under the CBPC. Plaintiffs filed suit in the Los Angeles Superior Court against Wells Fargo and Aurora, respectively, for misapplied late fees and misadministration in accordance with provisions of the CBPC. Wells Fargo and Aurora claimed federal preemption under the NBA and HOLA. Addressing the preemption arguments, the court noted that Dodd-Frank Act amendments and regulatory changes - such as the 2011 merger of the Office of Thrift Supervision ("OTS") into the Office of the Comptroller of Currency ("OCC"), the elimination of field preemption under the HOLA, and changes that allow preemption standards examined in Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 33 (1996)to apply to national banks - are all prospective and do not apply to preexisting agreements and disputes. Thus, the court ultimately found in favor of preemption based on an analysis of the pre-Dodd-Frank preemption standards under the NBA and HOLA. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.