All items from Florida Banking Law Blog

Authored by Jon Sacks and Heather S. Nasonand Jon Sacks and Heather S. Nason of Rogers TowersWhen a closely-held entity applies for a loan, the financial institution usually requires the entity’s owner(s) to guaranty the loan.  If the owner is married, the financial institution may also require the owner(s) spouse(s) to guaranty to improve the likelihood that loan will be repaid if the borrower defaults.  This seems like a logical credit request when structuring a loan since spouses often hold jointly owned assets.
The Equal Credit Opportunity Act (the “ECOA”) makes it “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction…on the basis of…marital status.”  The ECOA defines “applicant” in part as “any person who applies to a creditor directly for an extension, renewal, or continuation of credit”.  Under the ECOA’s implementing Regulation B, the Federal Reserve Board (now under the Consumer Financial Protection Bureau) the term “applicant” is defined to include guarantors.  Regulation B contains a provision that is sometimes referred to as the “spouse-guarantor rule,” which prohibits a creditor from requiring an applicant’s spouse to guarantee a credit instrument.
Is a spouse-guarantor an “applicant” for credit for purposes of asserting protections under the ECOA?  This issue was recently addressed by two federal appeals courts, resulting in two different conclusions.
Sixth Circuit

Posted 2 days 18 hours ago

Authored by Scott J. Kennelly and Scott St. Amand and Scott J. Kennelly and Scott St. Amand of Rogers TowersThe advent of social media has brought about many changes in the world of litigation, not the least of which is the availability of information that previously would have been impossible to discover.  It is hardly an exaggeration that between Facebook, Instagram, Twitter and other social media platforms, millions of people post their every move online.  In fact, there are “apps,” such as Foursquare, that update a user’s location in real time.  With this potentially unlimited record of a litigant’s daily behavior, practitioners are chomping at the bit to acquire such information.
Because the discovery of social media in litigation is so new, there is limited case law on the subject.  As the case law emerges, however, one of the leading questions revolves around what information can be considered “public” and what information is “private”.  Is a Facebook post public if the user has selected privacy settings which allow only a limited group of friends to read the post or see his or her pictures?

Posted 1 week 18 hours ago

Authored by Scott St. Amand and J. Ellsworth Summers, Jr. and Scott St. Amand and J. Ellsworth Summers, Jr. of Rogers TowersAs we mentioned in our previous posts regarding document preservation, establishing a written document retention and destruction policy is essential to any company, large or small.  As with the Pradaxa case out of the Southern District of Illinois, a recent case out of the Northern District of New York, Research Foundation of SUNY v. Nektar Therapeutics, exemplifies the pivotal role such a policy has in the event of litigation.  RF SUNY brought complex breach of contract and breach of the implied duty of good faith and fair dealing actions against Nektar, but it was the defendant, Nektar which filed the instant spoliation motion.
Nektar alleged that the RF SUNY was grossly negligent for failing to preserve documents which “may have been relevant to future litigation” as well as being grossly negligent “in its efforts to preserve documents.” Nektar also alleged that RF SUNY failed to “to timely issue written litigation-hold notices,” “preserve all relevant backup-tape data,” and “suspend its auto-delete practices.”

Posted 1 week 2 days ago

Authored by Adam B. Brandon of Rogers TowersIn addition to ensuring compliance with the federal Fair Debt Collection Practices Act (FDCPA), lenders should take precautions to limit its exposure to claims under the Florida Consumer Collection Practices Act (FCCPA).  For example, lenders should:

  • Ensure that loan accounting systems accurately track the terms of loan modifications, forbearance agreements, and other loan documents at the time those documents are executed.


  • Establish written policies and procedures to reduce errors and to verify the accuracy of accounting systems.  Loan officers should ensure that the policies and procedures are routinely followed by all employees at all levels of a lender’s operations.


  • Periodically review the terms of loan documents to ensure that they are fully reflected in accounting systems.


  • Ensure that correspondence with debtors accounts for all loan modifications.  Be aware that automatically generated notices have greatest risk of not being accurate or up to date.


  • Avoid direct communication with borrowers whose loans are in default and who are also represented by counsel regarding the debt.


Posted 2 weeks 20 hours ago

Authored by Armando Nozzolillo and Michael S. Waskiewiczand Armando Nozzolillo and Michael S. Waskiewicz of Rogers TowersIn the last 2 years, three judges of the Middle District of Florida (Judges Funk, Delano and Williamson) have each issued opinions finding 11 U.S.C. § 707(b)(2) inapplicable in cases converted from a Chapter 13 to a Chapter 7.  These Courts have based their findings on the “plain language” of the provision.
11 U.S.C. § 707(b)(1) generally provides that a Court may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts if the Court finds that granting relief would constitute an abuse of the Bankruptcy Code.  11 U.S.C. § 707(b)(2) generally provides that a Court shall presume that a Chapter 7 case is abusive if the debtor’s current monthly income, when reduced by expenses or payments determined under the provision, is greater than a specified threshold amount set forth therein.  The above-referenced judges all held § 707(b) is inapplicable to converted cases because the cases are converted to a Chapter 7 from another chapter, and thus, are not originally filed under Chapter 7.

Posted 2 weeks 2 days ago

Authored by Douglas L. Waldorf, Jr. of Rogers TowersThe Florida Bar News, in its September 15, 2014 edition, reported that Florida foreclosure volume has declined with the number of filings in the first half of 2014 about 50% of filings for the same period the year prior.  The backlog has also been reduced to about one half that of the prior year.  Some attribute the reduction in filings to the new foreclosure laws passed in July of 2013.  Generally, the new law requires more front-end due diligence by lenders to ensure that they have the legal right to foreclose.  This may, in fact, have caused an increase in internal scrutiny of loan documents resulting in the delay or postponement of foreclosure filings.  Overall, we have an improved economy and corresponding willingness of banks to modify loans rather than foreclosing them and this may also be a factor in the reduction in foreclosures.  It should be noted that Florida is still at the top in comparison to other states in pending foreclosure cases with a backlog still at some 185,000 cases.

Posted 3 weeks 19 hours ago

Authored by Scott J. Kennelly and Janet C. Owens and Scott J. Kennelly and Janet C. Owens of Rogers TowersThere are two “tiers” of penalties for violation of the Florida usury statutes, one civil and the other criminal, and both are severe.  Civil penalties usually involve forfeiture of the entire interest charged (or contracted to be charged), such that only the principal balance may be enforced. If a court determines that unlawful usurious interest charges have actually been received by the lender, then double the amount of usurious interest taken or received must be returned to the borrower. Moreover, a lender may forfeit the right to collect the entire debt, including the principal, if a court determines that it has violated the criminal usury statute. Lenders who have committed criminal usury may also face jail time and fines.

Posted 3 weeks 2 days ago

Authored by Samantha Alves Orender of Rogers TowersIn a previous post, we considered whether guarantors are considered to be “applicants” under the Equal Credit Opportunity Act (the “ECOA”), and today, we will consider whether assignees who acquire debt would be subject to penalties under the ECOA. The question turns on whether assignees are considered to be “creditors” under the law. The ECOA defines “creditor” as “any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.”  15 U.S.C. § 1691a(e).  This definition is supplemented by ECOA’s implementation regulation (Regulation B) as follows, “[a] person is not a creditor regarding any violation of the act or this regulation committed by another creditor unless the person knew or had reasonable notice of the act, policy, or practice that constituted the violation, before becoming involved in the credit transaction.”  12 CFR 202.2(1).

Posted 3 weeks 6 days ago

Authored by Karl Gruss and Edward L. Kellyand Karl Gruss and Edward L. Kelly of Rogers TowersFlorida’s homestead exemption protects a married couple’s primary residence from forced sale to satisfy a judgment lien, but what happens when spouses retain two properties as their individual primary residences, claiming homestead protection on each?  The answer comes down to whether the spouses are “legitimately” separated, and creditors should take note of a recent decision out of the 4th DCA addressing Florida’s homestead tax exemption, Brklacic v. Parrish, that sheds light on what factors a court may consider in analyzing a couple’s separation and dual homestead protection claim.
When would a couple claim legitimate separation?

Posted 4 weeks 2 days ago

Authored by Scott St. Amand of Rogers TowersIn April of 2010, the Office of the Comptroller of the Currency closed First National Bank Myrtle Beach, S.C., a wholly-owned subsidiary of Beach First National Bancshares, a bank holding company, and named the FDIC as its receiver.  As a consequence of the bank’s failure, Bancshares filed for Chapter 7 bankruptcy.  Shortly thereafter, the Trustee filed an adversary proceeding asserting a derivative claim for breach of fiduciary duty and negligence against the officers and directors of the subsidiary bank for injury allegedly caused to the subsidiary bank.
As some readers may know, a bankruptcy Trustee succeeds to all rights of the debtor, including the right to assert any cause of action belonging to the debtor.  Absent statutory modification, this power includes the right to assert the derivative claims of Bancshares (as the subsidiary bank’s sole shareholder) against the directors in their capacity as officers and directors of the subsidiary bank.  However, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), the FDIC, when appointed receiver of a bank, succeeds to all rights, titles, powers and privileges of the insured depository institution, and of any stockholder of such institution with respect to such institution and the assets of the institution.

Posted 5 weeks 13 hours ago