Alert February 12, 2008

0BFederal Appeals Court Holds that HOLA Preempts California UCL Claims Over Lock-In Fees

The Ninth Circuit ruled that the Home Owners’ Loan Act preempts California state law claims challenging lock-in fees. Plaintiffs paid the lender a $400 lock-in fee at application, but then rescinded the loan within 3 days under the Truth in Lending Act. Plaintiffs brought a class action lawsuit, claiming that the lender violated TILA by not returning the lock-in fee in response to the rescission. Plaintiffs did not sue under TILA, however, instead bringing their claims under California’s Unfair Competition Law, alleging that the lock-in policy was unlawful, unfair and deceptive under the various prongs of the UCL.

In affirming the district court, the Ninth Circuit ruled that the OTS’s broad field preemption regulations, promulgated under HOLA’s authority, preempted plaintiffs’ lawsuit. The Court found the UCL provisions at issue, as applied to plaintiffs’ claims, were all within the scope of the regulation’s list of specifically preempted state laws. It followed the OTS’ methodology for preemption analysis – finding that because the laws were within the scope of the list of state laws preempted, there was no need to even consider whether the field preemption “incidental affects” exceptions applied. Click here for a copy of Silvas v. E*Trade Mortgage Corp., No. 06-55556 (9th Cir., Jan. 30, 2008).