Last month, we wrote about the alphabet soup of federal laws that enable lawyers to act as private attorneys general who fight for consumers. Since then, the importance of these statutes has grown exponentially because the Trump administration opened an attack on the regulatory framework designed to deter the types of abuses and practices that led to the meltdown of the housing market and near-collapse of the U.S. and world economies.
While the president does have the power to rollback some regulations, these consumer protections are enshrined in federal law, prohibiting him from erasing them without Congress. Fortunately, Senate Democrats have already signaled their intent to kill anti-consumer measures via filibuster. Faced with that opposition in the Senate, a variety of consumer regulations will be available for quite a while.
Real Estate Settlement Procedures Act (RESPA)
RESPA is the most important consumer protection statute enacted in the past 25 years because homeowners can now seek and receive substantial financial compensation from big banks and mortgages companies engaged in abusive and/or illegal practices.
The act’s rigid guidelines govern every aspect of mortgage loan servicing aft er origination including the loan modification process. It prohibits dual tracking, which occurs when servicers foreclose on a home while a loan modification is being reviewed; requires servicers to provide homeowners and their attorneys with detailed information upon request; and establishes specific methods for resolving disputes. Servicers are subject to statutory damages of up to $2,000 per violation of the law’s provisions and may be liable for attorney’s fees and court costs.
Because successful suits can generate six-figure settlements, RESPA makes it economically feasible for attorneys who practice consumer law to take on and pursue difficult cases against well-heeled banks and mortgage companies and the “tall building” law firms that represent them. Despite the complicated nature of the cases and the time it takes to prepare and litigate them, we decided to focus on this area of practice for two reasons: first because the act provides an effective way to help people save their homes and rebuild their lives; and, second, because the financial costs violators incur may deter future abuses.
We firmly believe this area of the law will expand in the years ahead as more homeowners and attorneys become aware of its potential for securing justice and just financial settlements for borrowers who have been abused.
Electronic Funds Transfer Act (EFTA)
Signed into law in 1978, EFTA, which establishes the rights and responsibilities of all parties who participate in electronic funds transfer activities, is growing in significance due to the explosion in Internet commerce. The act governs matters related to ATMs, direct deposit, pay-by-phone, payments made via the Internet, electronic check conversion and debit card transactions.
The act requires financial institutions and companies that facilitate electronic fund transfers to provide consumers with the following:
- A written summary of a consumer’s liability for unauthorized transfers.
- A number consumers can call to report unauthorized transfers.
- The fees associated with various types of transfers.
- A summary of an institution’s liability to a consumer if it fails to make or stop a transaction.
- The circumstances in which the institution can share a consumer’s information with a third party.
- A process for reporting errors.
- A notice about the fees that may be charged for using a third-party ATM.
The EFTA is administered by the Federal Deposit Insurance Corporation but consumers do have a private cause of action under the act. Institutions that violate the EFTA may be liable for actual damages, statutory damages of up to $1,000, along with reasonable attorney’s fees and costs.
Equal Credit Opportunity Act (ECOA)
ECOA makes it unlawful for any creditor to discriminate against any applicant for any credit transaction on the basis of race, color, religion, national original, sex, marital status, age, because an applicant’s income is derived in any part from a public assistance program, or because an applicant exercised their rights under the Consumer Credit Protection Act or Truth in Lending Act. Any entity that regularly makes credit decisions – banks, retailers, bankcard companies, finance companies, and credit unions – are covered by the act. ECOA liability has not, however, been expanded to include mortgage loan modifications.
The act is a powerful tool for consumers because civil penalties can include $10,000 in punitive damages, actual damages as well as attorney’s fees. Marc Dann