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Mortgage Lending: 6.5.4.9 “Any Other Law”
The final provision of the savings clause is something of a catchall, preserving “any other law” that the OCC determines to be applicable to national banks in accordance with Barnett Bank.492 This provision also preserves any law “that is made applicable by Federal law.” The Ninth Circuit relied in part on this latter clause in holding that the NBA did not preempt a state law requirement that lenders pay at least 2% interest on escrow accounts.
Mortgage Lending: 6.5.4.11 State Antidiscrimination and Labor Laws
The United States Supreme Court has held that states have the authority to bring suits against national banks to enforce state and federal fair lending laws.514 Many other decisions have held broadly that state antidiscrimination laws are not preempted, whether in the context of lending515 or employment.516 An OCC interpretive letter also states that state antidiscrimination laws are not preempted.517
Mortgage Lending: 6.6.1 National Banks
“Visitation” refers to “the act of a superior or superintending officer, who visits a corporation to examine into its manner [of] conducting business, and enforces an observance of its laws and regulation.”522 Section 484(a) of the NBA states:
Mortgage Lending: 6.6.3 Primary Jurisdiction Distinguished
It is important to distinguish the primary jurisdiction doctrine from the OCC’s visitorial rights over national banks. The primary jurisdiction doctrine permits a court to refer a matter over which it has jurisdiction to an agency regarding an issue within its special competence.542 The court stays further proceedings until the agency issues a ruling. The referral to the agency does not deprive the court of jurisdiction.543
Mortgage Lending: 6.7.3 Rent-a-Bank Issues
Rent-a-bank schemes pose significant problems primarily involving payday, installment, and other small dollar consumer credit.567 A predatory non-bank bootstraps onto a bank’s rate exportation rights (not otherwise available for non-banks) to charge interest rates far in excess of those allowed in the state of the consumer’s residence. While the bank is the nominal originator, the predatory lender may have the dominant economic interest.
Mortgage Lending: 6.8.2 The Riegle-Neal Act and Applicable Law for Branches of Out-of-State, State Banks
A federal statute, the Riegle-Neal Act, provides that a branch of an out-of-state, state-chartered bank can comply with its home state’s laws and not the host state’s laws if federal law preempts the application of the host state’s laws to a national bank.573 In that case, the host state branch of an out-of-state, state-chartered bank is not governed by OCC regulations but instead is governed by the applicable law of the state where the state bank is chartered.
Mortgage Lending: 5.8.3 Unconscionable Inducement
An interesting issue is whether there is a cause of action (or defense)247 of unconscionable inducement that is separate from the cause of action (or defense) of unconscionability. This separate claim or defense should be viable in states that incorporated the common law unconscionability doctrine into a state statute that contains specific language related to inducement. For example, in McFarland v.
Mortgage Lending: 6.8.4 Riegle-Neal Act Preemption When Main Office, Not Host State Branch Extends Credit
If the out-of-state, state-chartered bank has a branch in the host state, but the credit transaction does not involve that branch, then Riegle-Neal Act preemption still should not apply. As discussed in § 5.8.3, supra, the Riegle-Neal Act applies to branch activities, not unrelated activities that take place in the bank’s home state.
Mortgage Lending: 4.2.2.1 Generally
RESPA applies to real estate settlements and loan servicing when the transaction involves a “federally related mortgage loan.”35 This treatise addresses RESPA’s application to settlements. The regulation of mortgage loan servicing, including escrow accounts, is described in NCLC’s Mortgage Servicing and Loan Modifications.36
Mortgage Lending: 4.2.4.1 General
RESPA’s cost disclosure requirements revolve around two forms: the good faith estimate and the HUD-1 or HUD-1A settlement statement. The good faith estimate must—as the name implies—contain a good faith estimate of any anticipated closing costs and must be provided shortly after the borrower applies for a loan. The settlement statement comes later, at the closing, and contains the final itemization of all closing costs. Since 2010 both forms also include a summary of important loan terms.
Mortgage Lending: 6.8.6 The FDIA and FDIC Regulations Do Not Generally Preempt State Law
Other than the Riegle-Neal Act, generally there is no federal preemption of state non-interest rate regulation of state-chartered banks. The FDIC has limited regulatory authority over federally insured state-chartered banks,592 and this limited authority generally is not enough to preempt state law beyond interest rate exportation as specifically provided for in federal legislation.593
Mortgage Lending: 6.9.1 When a Mortgage Loan Is Assigned to a Federal Depository Institution
Preemption applicable to national banks and federal savings associations applies when the federal depository institution originates the loan, and not when the federal depository institution is assigned the loan by a non-federal depository institution.599 Any other rule would, in the words of the Eighth Circuit, “allow an originating bank to cleanse an otherwise illegal loan merely by assigning it to a national bank.”600 Similarly, state law also applies to the non-bank assignor’s own conduct
Mortgage Lending: 9.4.1 Practical Implications
Federal statutes allow for “rate exportation” by most depository institutions—national banks, federal savings associations, and federally insured state-chartered banks, savings associations, credit unions, and industrial loan companies.104 When making loans in other states, these depository institutions can make loans with interest rates as high as the interest-rate cap in the institution’s home state or one percent over the discount rate for ninety-day commercial paper in effect at the federal reserve bank for the district in which the ban
Mortgage Lending: 6.9.2 When a Federal Depository Institution Assigns a Mortgage Loan to a Non-Bank
The OCC issued a rule, effective August 3, 2020, applicable to national banks that provides that “[i]nterest on a loan that is permissible under 12 U.S.C. § 85 [that is, under NBA rate exportation] shall not be affected by the sale, assignment, or other transfer of the loan.”605 The OCC issued a parallel rule with the same effective date, applicable to federal savings associations.606
Unfair and Deceptive Acts and Practices: 4.2.12.5 Relationship of Reliance to Causation
Of course, whether or not a showing of reliance is required, plaintiffs seeking damages must prove causation, or as many courts term it, a causal connection to the UDAP violation.275 Reliance and causation are twin concepts, often intertwined, but not identical,276 and in some circumstances reliance can be an element of causation.277 Nonetheless, a causal connection can be established in many circumstances without proof of reliance.
Unfair and Deceptive Acts and Practices: 4.2.13 Literally True Statements, Partial Truths; Overall Net Impression
Literally true statements can be deceptive.289 Literal truthfulness is only the beginning of deception analysis, which must also analyze whether the statement has deceptive implications.
Unfair and Deceptive Acts and Practices: 4.2.14 Conduct, Pictures, and Brand Names
Conduct can be deceptive,308 as can pictures.309 Thus, for television or internet advertising, the court should look at the implied meaning of visual and audio imagery, and not just the words of an advertisement310 and the visual appearance of a product.311 A brand name can be deceptive.312 It is deceptive to package and
Unfair and Deceptive Acts and Practices: 4.2.15.1 Overview
One of the most important uses of a UDAP statute is to attack the failure to disclose material facts. Where sellers do not make affirmative misrepresentations or it is difficult to prove oral misrepresentations, the key to a UDAP case often is the claim that the seller did not disclose important information.
Unfair and Deceptive Acts and Practices: 4.2.15.2 The FTC Standard
According to federal courts interpreting the FTC Act, representations are deceptive if necessary qualifications are not made, if material facts are not disclosed, or if these disclosures or qualifications are too inconspicuous.321 “To tell less than the whole truth is a well-known method of deception.”322 Even if proper disclosures are made in writing, if a sales presentation effectively obscures the meaning of those disclosures, the total representation is deceptive.
Unfair and Deceptive Acts and Practices: 4.2.15.3.1 General standards
Cases under state UDAP statutes do not utilize such a complex analysis, but have little difficulty finding the failure to disclose to be deceptive.334 Literal truths and half-truths that avoid material facts are deceptive.335 For example, a credit card statement disclosure that past-due accounts would incur a service charge, when no such charge was being imposed for past-due balances of less than $25, violated the Illinois UDAP statute.336 Likewise
Unfair and Deceptive Acts and Practices: 4.2.15.3.2 State regulations
Massachusetts’ UDAP regulations declare as deceptive the failure to disclose any fact which, if disclosed, might have influenced the buyer not to enter into the transaction.358 It is also deceptive to fail to disclose additional relevant information if the failure has the capacity, tendency, or effect of deceiving buyers in any material respect.359 Similarly, Idaho’s UDAP regulations prohibit omitting a material or relevant fact which directly or by implication has the capacity and tendency or e
Unfair and Deceptive Acts and Practices: 4.2.15.3.3 Special duty to disclose for fiduciaries
At common law, a party with a fiduciary relationship to an individual has a duty to disclose information to the individual. For example, trustees, attorneys, income agents, and financial advisors have a special duty of disclosure apart from any UDAP requirement. Whether parties such as loan brokers and creditors are considered fiduciaries is discussed in another treatise in this series.365
Unfair and Deceptive Acts and Practices: 4.2.15.3.4 Must the nondisclosure be knowing?
There are limits as to when the failure to disclose is a UDAP violation. Several UDAP statutes explicitly require that nondisclosure, or certain nondisclosures, be knowing or intentional.372 Some other courts imply the same requirement into the statute, holding that sellers need not disclose information they do not know and should not have known.373
Unfair and Deceptive Acts and Practices: 4.2.15.3.5 Must the seller intend that others rely on the omission?
Some UDAP statutes specify that a failure to disclose is deceptive if there is an intent that others rely upon the omission.381 For example, New Jersey makes an omission a violation of its UDAP statute if a fact is material and the defendant acted knowingly and with the intent that others rely on the omission.382 This intent requirement means that the seller must intend that consumers rely on the omission, not that the seller intends to deceive the consumer.