Skip to main content

Search

Consumer Credit Regulation: 8.9.1 General

The federal Military Lending Act (MLA) offers servicemembers and their dependents important protections from abusive credit card practices. Section 2.2.5, supra, examines the MLA in detail. This section focuses on the MLA’s application to credit cards.

Consumer Credit Regulation: 8.9.3 Military Annual Percentage Rate Cap of 36%

The MLA limits the military annual percentage rate (MAPR) that a creditor can charge to 36%.606 While 36% is greater than most credit card interest rates, the MLA includes in its cap a number of fees, so that certain current interest rates on credit cards may exceed this cap after the fees are factored in. Where open-end credit fees will lead to an MAPR over 36%, the creditor has the option of staying within the regulation’s cap by waiving certain fees and charges.607

Consumer Credit Regulation: 8.9.4 MLA Limitations on Arbitration As Applied to Credit Cards

The MLA prohibits creditors from extending consumer credit where the creditor requires the consumer to submit to arbitration or imposes other onerous legal notice provisions in the case of a dispute.622 Furthermore, MLA regulations prohibit waiver of a covered consumer’s right to legal recourse under any applicable provision of federal or state law, including the Servicemembers Civil Relief Act.623

Consumer Credit Regulation: 8.10.2 Problems Created by Unilateral Changes in Terms

There are at least two problems with these notices. First, these expansive change-in-terms provisions deprive consumers of any “benefit of bargain.” They make a mockery of contract law because the terms of the “bargain” are illusory. They also undermine the Truth in Lending Act’s purpose of ensuring effective disclosure. One court has described change-in-terms provisions as “an Orwellian nightmare, trapped in agreements that can be amended unilaterally in ways [a consumer] never envisioned.”639

Consumer Credit Regulation: 8.10.3.1 Change-in-Terms Notices

The Credit CARD Act specifically requires credit card lenders to provide forty-five days’ notice for any increases in the APR649 and any significant changes in terms for credit card accounts.650 Lenders are required to disclose a summary of the changes using a table format similar to credit card application/solicitation table and account-opening table.651

Consumer Credit Regulation: 8.10.3.2 Limited Right to Reject Changes

The Credit CARD Act requires lenders to provide, in any notice of a change in account terms or an increase in APR, a brief statement of the consumer’s right to cancel the account before the changes take effect.660 Regulation Z interprets this Credit CARD Act provision to substantively provide consumers with a right to reject changes to a credit card account.661

Consumer Credit Regulation: 8.13 Assisting Consumers Overwhelmed by Credit Card Debt

In many cases, consumers who come forward with problems concerning their credit card accounts are financially overwhelmed. Identifying state law or Truth in Lending Act violations may only partially resolve the consumers’ needs. Consumers may be able to obtain relief by the use of strategies such as debt prioritization, bankruptcy, and aggressive foreclosure defense. At the same time, practitioners should also consider educating consumers about the careful use of available credit to avoid new problems in the future.

Federal Deception Law: 10.1.1 Introduction

The federal False Claims Act (FCA) imposes liability on entities and individuals that make false or fraudulent claims to the government for payment for services and products, or that improperly avoid an obligation to repay overpayments to the government.1 Although FCA cases have traditionally been used to file claims against government defense and health care contractors and suppliers, they arise as well in other areas—such as insurance, housing, government entitlement programs, government loan programs, and environmental and labor laws—that offe

Federal Deception Law: 10.1.2.1 Early History

Qui tam actions originated in England8 around the end of the thirteenth century, when private individuals who had suffered injury began bringing actions in the royal courts on their own and on the Crown’s behalf.9 In the fourteenth century, Parliament began enacting statutes that specifically provided for qui tam suits.

Federal Deception Law: 10.1.2.2 Civil War Origins of the Federal False Claims Act

The False Claims Act13 was originally known as the “Informer’s Act” or “Lincoln’s Law.” It was enacted during the height of the Civil War at the urging of President Abraham Lincoln when dramatically increased government spending on military procurement led to widespread fraud by private contractors.14 The most glaring examples of fraud included sawdust sold as munitions and transported to Union soldiers; supplies such as horses and mules sold to units of the Union cavalry and then resold to other un

Federal Deception Law: 10.1.2.3 1943 Amendments

After the Civil War, the False Claims Act fell into disuse, but the military build-up prior to World War II and expansion of the federal government’s economic role provided new opportunities for private contractors to profit through fraud.20 However, because of perceived abuse of the system by qui tam plaintiffs who had no direct knowledge of fraud—yet were able to recover monies under the FCA after a public disclosure of a government criminal investigation—amendments were made in 1943 that restricted the FCA’s qui tam provisi

Federal Deception Law: 10.1.2.5 2009 and 2010 Amendments

In 2009, Congress passed the Fraud Enforcement and Recovery Act of 2009 (FERA),29 which was designed to address a broad range of issues relating to fraud and fraud enforcement, particularly as related to the contemporaneous economic stimulus package. FERA amended the False Claims Act to reverse a number of restrictive court interpretations and to clarify Congressional intent in enacting the 1986 amendments.

Federal Deception Law: 10.2.1 Rights of Relators Under the False Claims Act

False claims acts provide a unique weapon in the consumer attorney’s arsenal—not one used every day, but one whose impact can be dramatic for the wrongdoer and extremely important for the public interest. Consider a whistleblower or other individual who comes to an attorney’s office with inside information about systematic wrongdoing that involves government funding, but a major class action is impractical because:

Federal Deception Law: 10.2.2 Rights of the Government Under the False Claims Act

There are a number of ways in which the government, rather than the relator, exercises control over an FCA case. The lawyers at the Department of Justice determine the nature and scope of the government’s investigation of FCA claims while the case remains under seal, which can typically last three or more years. The government is under no obligation during this time to inform the relator of the progress of its investigation or to involve the relator or their counsel in that investigation.

Federal Deception Law: 10.3.1 False Claims Covered by the Statute

Almost any action that involves fraud in the payment of government funds or in the improper retention of government funds may impose liability under the FCA.42 The FCA is “intended to reach all types of fraud, without qualification, that might result in financial loss to the Government.”43

Federal Deception Law: 10.3.2 Standards for Liability

In order to prevail on an FCA claim, the elements of the action must be proven by a preponderance of the evidence.52 The standard for liability under the FCA makes it clear that it is not a fraud statute to which common law fraud principles invariably apply, although the requirements of Federal Rule of Civil Procedure 9(b) to plead with particularity are imposed.53 Instead, the FCA imposes liability based upon a scienter standard that requires actual knowledge, or deliberate ignorance of—or

Federal Deception Law: 10.3.3.1 Introduction

Most often relators are employees or former employees of a defendant who have direct knowledge of its fraudulent activity and have complained directly or indirectly to company management. Relators may also be outsiders, such as consultants or subcontractors or even competitors who have discovered fraudulent activity by another company.

Federal Deception Law: 10.3.3.2 Persons Excluded from Bringing a False Claims Act Case

The FCA contains few restrictions barring an individual from serving as a relator in a qui tam action. A present or former member of the armed forces is, for example, barred from serving as a relator in a suit against another “member of the armed forces.”59 Such an individual may, however, bring suit against government contractors working for the armed forces.60 Relators also may not bring qui tam actions pro se.

Federal Deception Law: 10.4 The False Claims Act’s Litigation Procedures

The statute of limitations for FCA claims is six years from the date of the violation, or as long as ten years if the case is brought within three years of when the government knew or should have known of the facts underlying the claims.78 To commence an FCA case, the relator files a complaint under seal and serves a copy upon the United States.79 Violation of the seal requirements, either at the time of filing a complaint or thereafter, may lead to dismissal of the case or other sanctions.