InfoBytes, September 30, 2011 - A Weekly In-depth review of news & developments in the financial services industry

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In This Issue:

• Federal Issues

• Courts

• Firm News

• Mortgages

• Litigation

• Privacy/Data Security

Excerpt from "Litigation"

Federal District Court Grants Preliminary Injunction Postponing Piece of CARD Act Regulation. On September 23, the U.S. District Court for South Dakota granted a preliminary injunction postponing and enjoining the October 1, 2011 effective date of the Federal Reserve Board's (FRB) amendment to Regulation Z, which would expand a limitation on credit card fees charged in the first year to include fees imposed on the customer prior to the account opening. First Premier Bank v. U.S., No. 11-4103-KES (D.S.D. Sep. 23, 2011). The case arises from First Premier Bank's practice of charging certain customers an upfront fee, not to be paid from the credit being granted, prior to opening a credit card account at the First Premier Bank (the "Bank"). Under the Credit CARD Act, and in accordance with the FRB's initial regulation implementing the Act, lenders are prohibited from charging customers fees during the first year after account opening in excess of 25 percent of the credit limit in effect when the account is opened. The FRB subsequently proposed to amend that limitation to include fees charged prior to account opening. Agreeing with the Bank, the Court found that the language of the Credit CARD Act unambiguously states that the limitation applies to fees charged during the first year of the account, and not to fees assessed prior to account opening. The Court also found that Congressional intent was sufficiently clear that the FRB could not claim to be filling statutory gaps.

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