Consumer Financial Services Alert - April 21, 2009

Today, the FRB, OTS, and NCUA proposed clarifications to their December 2008 final rules under the Federal Trade Commission Act prohibiting certain unfair credit card practices. The Fed also proposed clarifications to its December 2008 final rule under the Truth in Lending Act amending Regulation Z to improve the disclosures consumers receive in connection with credit card accounts and other revolving credit plans. Click here for the press release, here for the unfair credit card practices proposal and here for the Regulation Z proposal.

The Eleventh Circuit reversed a decision holding that the statutory damages provision of the Fair and Accurate Credit Transactions Act was unconstitutional. First, the Court of Appeals held that the defendants’ as-applied excessiveness challenge was not ripe for adjudication prior to certification or a trial.  It also ruled that FACTA was not unconstitutionally vague because the statute clearly defines prohibited conduct and available remedies, and does not provide undue discretion to juries because statutory damages range between $100-$1,000. Finally, the Court held that FCRA’s statutory damages provision was not facially excessive because it was not punitive. Click here for Harris v. Mexican Specialty Foods, Inc., Nos. 08-13510, 18-13616 (11th Cir. Apr. 9, 2009).

The FTC launched a web site to help entities covered by the Red Flags Rule design and implement identity theft prevention programs. The Rule requires “creditors” and “financial institutions” to develop written programs to identify the warning signs of identity theft, spot them when they occur, and take appropriate steps to respond to those warning “red flags.” The Rule became effective on November 1, 2008; however, for entities under the FTC’s jurisdiction, the FTC delayed enforcement until May 1, 2009. Click here for the web site which includes a handbook that provides step-by-step guidance on how to implement an identity theft prevention program.