Truth in Lending: 11.2.3.5 The Role of Congress’s Judgment
Ramirez seems to undercut Spokeo’s holding on the role of Congressional judgment when evaluating standing.
Ramirez seems to undercut Spokeo’s holding on the role of Congressional judgment when evaluating standing.
Ramirez appears to cut back on the principle that Spokeo seemed to adopt that “the risk of real harm” can be a concrete injury in a suit seeking money damages.79 Where there is only a risk of harm, the majority opinion in Ramirez states that standing is confined to suits seeking prospective relief, such as an injunction.80 This statement appears to be dicta, because the Court concluded on the facts that the plaintiffs had not established a risk of harm
The Ramirez Court addressed several additional issues with respect to the plaintiff’s claims that were based on TransUnion’s failure to comply with the FCRA’s file disclosure requirement and its duty to include a summary of consumer rights with a file disclosure.
In Spokeo, Justice Thomas, while concurring in the majority opinion, had proposed a different conceptual framework, founded on a distinction between “private rights” and “public rights.” Quoting Blackstone, he defined private rights as those “belonging to individuals, considered as individuals,” including rights of personal security, property rights, and contract rights.
Claims that banks breached their contracts with depositors by, for example, failing to abide by a clause promising to notify depositors in advance of any fee changes or by charging overdraft fees when the account was not overdrawn are not preempted.211 The savings clause of OCC’s preemption regulation explicitly preserves state contract law.212
Issues that can arise with respect to payments to—or deposits by—consumers include:
Consumers and other payees are increasingly depositing checks electronically through a process called “remote deposit capture.”162 Typically, the consumer takes a picture of their check with a mobile device and uploads the image through an app provided by their bank or a non-bank banking app.
Some debtors seek bankruptcy relief because the limited income they receive from a government benefit program is being reduced to recover an overpayment of benefits. The question of how such overpayments are treated in bankruptcy, including application of the automatic stay, often turns on the type of benefit program involved and the distinction between setoff and recoupment. Both setoff and recoupment involve situations in which the debtor and creditor are obligated to each other.
The Supreme Court has held that a “freeze” on a debtor’s bank account, by a bank to which the debtor owes money, does not constitute a setoff prohibited by the stay.158 The court held that a temporary freeze, while a creditor seeks relief from the stay in order to exercise a right of setoff, is permissible.159 However, a more permanent freeze should be considered differently.
The interception of tax refunds to pay student loans or other debts being collected by the government is another example of an act that is stayed.166 Although it is sometimes not easy to determine the date the intercept actually occurred, if it occurred after the bankruptcy case was filed it is normally possible to have the intercepted funds returned to the debtor.167 The Internal Revenue Service (IRS) has been one of the most frequent adversaries in litigation regarding these issues.
In chapter 13 cases, another type of automatic stay also goes into effect.
The stay does not automatically prohibit commencement or continuation of criminal proceedings.197 Thus, a criminal case based upon a bad check can continue without violation of the stay.198 This exception, however, does not necessarily protect a private creditor who instigates such proceedings in an attempt to collect a debt.199 The exception also does not include the collection of a monetary liability imposed as part of a probation program or as r
The 2005 amendments to the Code created exceptions to the automatic stay provisions for proceedings concerning child custody, visitation rights, domestic violence, and divorce (to the extent the divorce proceeding does not seek to divide property of the estate).207 These exceptions are common sense corrections for proceedings that do not have an impact on bankruptcy. Many people had probably assumed they were not stayed, though in fact they usually were, because they were legal proceedings that could have been commenced prior to petition.
Another exception enacted in 2005 authorizes the continued withholding of wages for repayment of retirement fund loans.223 The wage withholding must be for repayment of a loan from a plan under section 408(b)(1) of the Employee Retirement Income Security Act (ERISA) or that is subject to section 72(p) of the Internal Revenue Code, or from a thrift savings plan in the Federal Employee’s Retirement System.
In addition to section 362(c)(3) and (4), discussed above,226 two exceptions to the automatic stay enacted in 2005 limit its application based upon prior bankruptcy case filings.
Another provision added by the 2005 Act allows creditors with claims secured by real property to seek in rem stay relief in certain limited circumstances.228 If the court enters an in rem order under new section 362(d)(4), and the order is properly recorded, section 362(b)(20) provides that the stay does not apply with respect to the particular property covered by the order in a later case filed within two years after the date of the order.229
Under section 362(b)(22), the eviction of a debtor from residential property in which the debtor resides as a tenant under a lease or rental agreement is not stayed by section 362(a)(3) if the lessor has obtained a judgment for possession prior to the filing of the bankruptcy petition, unless the debtor meets certain conditions.
A second exception to the automatic stay under section 362(a)(3) applies if the lessor files and serves on the debtor a certification under penalty of perjury that:
Another provision enacted in 2005 creates an exception from the automatic stay for postpetition transfers that are not avoidable under sections 544 and 549 of the Bankruptcy Code.268 Generally, section 549 allows avoidance of voluntary and involuntary postpetition transfers, absent authorization of the transfer by the court.
Section 362(b)(26) permits taxing authorities to set off tax refunds for prepetition tax periods against prepetition tax debts. If there is a pending action to determine tax liability, the taxing authority may hold the refund pending the outcome of the action. However, on motion by the trustee and after notice and a hearing, the court may order turnover of the refund, but only if the taxing authority is granted adequate protection for any secured claim it has under section 506(a) of the Code based on its setoff rights.
Among the twenty-eight listed exceptions, several others can apply in consumer bankruptcy cases.
The same actions that can be penalized as violations of the automatic stay might also be unfair trade practices under state law or violations of federal debt collection protections.358 In some cases it may be a good idea to assert such claims in the alternative because of the availability of enhanced damages. But, in any event, the bankruptcy court has exclusive jurisdiction over sanctions for violation of the automatic stay itself.359
The first of the grounds listed in the statute for relief from the stay is a catchall. It provides that the stay may be lifted “for cause.” While it is clear that a lack of adequate protection, as discussed below, is one such cause, the provision is meant to allow courts considerable discretion to grant relief for other reasons. Thus, legal proceedings against the debtor that have nothing to do with bankruptcy would ordinarily be allowed to go forward. Similarly, the court may lift the stay with respect to other activities that will have no effect on the bankruptcy.
Many motions seeking relief from the stay are based on the grounds that the movant does not have “adequate protection” for an interest in property. The provision of adequate protection is a basic concern of the Code, and thus what is meant by that term is of critical importance.
Section 362(d)(2) sets forth one other basis for relief from the automatic stay that is applicable to consumer cases.498 This ground is limited to acts against property and requires proof of two coexisting facts. These are: