Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—9thCir: Borrower Could Not Maintain FTC Act Claim Against Bank, (Jan 15, 2013)
Law Firms Mentioned:Arbogast Bowen LLP | Morrison & Foerster LLP
Organizations Mentioned:Bank of America | Bank of America, N.A. | Morrison & Foerster, LLP
By John W. Arden, J.D., LLM.
A home mortgage borrower could not maintain an unfair competition claim against its bank under the Federal Trade Commission Act, since the federal statute does not create a private right of action, the U.S. Court of Appeals in San Francisco held (O’Donnell v. Bank of America, N.A, January 9, 2013, Per Curiam).
Brian O’Donnell brought an action for breach of contract, fraud, and unfair competition under the FTC Act, claiming that Bank of America (1) failed to apply monthly payments to principal when borrowers paid an amount insufficient to cover even the accrued interest and (2) failed to make disclosures regarding the terms of credit above and beyond those required by federal law.
The appeals court held that the mortgage agreement did not represent that Bank of America would apply monthly payments to principal if borrowers paid less than accrued interest. Thus, there was no breach of contract that was plausible on its face.
O’Donnell’s fraud and unfair competition claims would force Bank of America to make disclosures above and beyond that required by federal law. The claims were preempted by a federal regulation that allows national banks to make real estate loans “without regard to state law limitations” concerning the term of credit or required disclosures, the Ninth Circuit held.
The federal district court rightly dismissed the unfair competition claim premised on Bank of America’s alleged violation of the FTC Act because the Act does not create a private right of action. The plaintiffs “can’t use California law to engineer one,” the appeals court ruled.
The case is No. 11-16351.
Attorneys: David M. Arbogast (Arbogast Bowen LLP) for Brian O’Donnell. Michael John Agoglia (Morrison & Foerster LLP) for Bank of America, N.A.
Companies: Bank of America, N.A.
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