Alert July 29, 2008

Federal Court Holds California UCL Claims Preempted by HOLA

A California federal court has ruled that most aspects of a borrower’s attempt to use California’s Unfair Competition Law to challenge various aspects of his loans is preempted by the Homeowners’ Loan Act. The court dismissed plaintiff’s UCL claims alleging “unfair or fraudulent” acts or practices and those based on alleged violations of California’s Financial Code because the claims challenged “the terms of credit,” “loan-related fees,” and “disclosure and advertising,” all of which are expressly preempted under HOLA’s implementing regulations. The court also found preempted plaintiff’s UCL claim based on alleged violations of the Truth in Lending Act because plaintiff was improperly seeking to use the UCL to expand both TILA’s limitations period and its class action damages cap. The court ruled the breach of contract claim was not preempted by HOLA, however, concluding that plaintiff was only seeking enforcement of the contract, not “imposing requirements on defendant’s lending practices.” Click here for Nava v. Virtual Bank, No. 08-069 (E.D. Ca., July 16, 2008).