Consumer Finance Litigation

The United States Bankruptcy Panel of the First Circuit held that the Home Owner's Loan Act ("HOLA"), 12 U.S.C. § 1461 et seq. preempted certain Massachusetts statutory claims in the recent case Frykberg v. JPMorgan Chase Bank, N.A. (In re Frykberg), No. 12-050, 2013 WL 1704701 (B.A.P. 1st Cir. Apr. 18, 2013). There, the debtor filed an adversary complaint against JP Morgan Chase Bank, N.A. ("Chase") alleging claims under the Massachusetts Consumer Credit Cost Disclosure Act, Mass. Gen. Laws ch. 140D, § 8, and the Massachusetts Predatory Home Loan Practices Act, Mass. Gen. Laws ch. 183C, § 2. Specifically, the debtor alleged that the loan originator had failed to provide certain required disclosures and that he didn't receive the credit counseling required for "high-cost home loans." The bankruptcy court granted summary judgment in favor of Chase on all claims, and the debtor appealed. The judgment was affirmed by the bankruptcy appellate panel, which found that the claims were preempted by HOLA and the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. The bankruptcy appellate panel explained that Mass. Gen. Laws ch. 140D purports to impose requirements regarding disclosures and, therefore, is a type of law identified in 12 C.F.R. § 560.2(b) as definitively preempted by HOLA. Turning to Mass. Gen. Laws ch. 183C, the court applied "field preemption" principles and concluded that the state law was preempted because it affected lending. The court also found that Mass. Gen. Laws ch. 183C defined high-cost loans in a manner inconsistent with TILA, and as a result, TILA preempted the state law. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.