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Bank Website ADA Litigation

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Although the frequency of bank clients receiving demand letters related to violations of the Americans with Disabilities Act (“ADA”)  based on website (in)accessibility seems to be declining, Bryan Cave lawyers around the country continue to be actively involved in defending such claims in other industries.  In addition to working with the Georgia Bankers Association and the California Bankers Association, Bryan Cave has published updates through a number of blogs that may be of value to our banking clients.

In April, Start Up Bryan Cave, our blog focusing on start ups of all kinds, published “Best Practices for your Corporate Website: How to Avoid an ADA Claim.”

Making your company’s website ADA compliant now, before your company is a target of a lawsuit or a demand letter, makes good business sense.  It will open your company up to more potential customers, limit your liability, position you to deal effectively with the regulatory challenges of growth, improve your company’s reputation in the marketplace and is simply the right thing to do.  Also, being proactive in establishing compliance protocols for your growing company will cause you to stand out among your competitors, make you more attractive to potential investors and partners, and can greatly mitigate any regulatory actions if a regulatory agency decides to audit your business.

In June, BC Retail Law, our blog focusing on clients in the retail sector, published “Retailer Loses ADA Website Accessibility Trial” about the first ADA accessibility litigation to go to trial.  The Court held that Winn-Dixie violated Title III of the ADA because its website was inaccessible to the visually impaired plaintiff.

[D]espite the fact that Winn-Dixie does not conduct sales through its website, the Court found that the website was “heavily integrated” with the physical store locations because customers can use the website to access digital coupons, find store locations, and refill prescriptions through the website.

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Georgia Garnishment Statute Held Unconstitutional

September 15, 2015

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The recent opinion of Judge Marvin Shoob in the Strickland v. Alexander case has created a great deal of confusion among banks about their duties in responding to a summons of garnishment in Georgia.  In that opinion, Judge Shoob declared the Georgia garnishment statute to be unconstitutional on multiple grounds. Primary among the  grounds cited by Judge Shoob was the absence of any notice to the debtor of the existence of statutory exemptions which shield certain funds from garnishment or the procedures available to assert those exemptions.  It is unclear whether the decision will be appealed, modified, or cured by subsequent legislation.  Numerous esoteric questions have been raised by the legal community about the validity of the opinion, but those questions are beyond the scope of this post.

Whether Judge Shoob’s opinion is appealed, modified or cured by the Georgia General Assembly, banks currently face significant questions in its wake.  The most important of these questions is “should a bank continue to answer summons of garnishment or not.”  Many Georgia banks understandably have questions about their potential liability to both creditors and debtors by continuing to participate in the garnishment process.  While banks could choose to litigate the validity of every single summons that they have received or subsequently receive, that is hardly a practical or economical strategy for most of our banking clients.

An initial option available to any bank during this time is to contact the creditor which served the summons and ask that the summons be withdrawn. This may be effective since questions of liability are also being faced by the very creditors who are seeking to use the garnishment process.

If the creditor will not withdraw the summons, and pending a resolution of the constitutional issues by the courts or the General Assembly, the next best option is (1) to continue answering summons of garnishment after performing an appropriate review for the existence of funds covered by statutory exemptions and (2) to pay the non-exempt funds into the registry of the court.  Doing so will eliminate any risk the bank may run to the creditor which served the summons of garnishment through default or otherwise.  Moreover, since a summons is essentially a court order, the bank will have a strong argument that its actions are both justified and in good faith.  We note that even Judge Shoob found that the bank involved in the Strickland v. Alexander case could not be found liable for responding to the summons.  See Strickland Order at p. 9.

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Lessons Learned in Recent Participation Agreement Litigation

December 22, 2014

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Banks have increasingly used participation agreements over the last several decades to pool loans among multiple lenders—with an originating or lead bank selling a portion of the loan to one or more banks as loan participants.  Loan participations can inure to the benefit of both the lead and participating bank, allowing the banks to pool their resources. Through loan participations, lead banks obtain the opportunity to make larger loans to their customers without the obligation to carry the entire asset on their books, and participant banks obtain the ability to participate in larger loans or in different markets than would otherwise be available to them.

To facilitate a loan participation, the lead and participating banks typically enter into a written participation agreement to govern the relationship and the obligations owed to each other with respect to the loan. While often derived from bank forms that have been widely circulated and revised on an ad hoc basis over years, participation agreements can differ significantly in their terms and requirements. These terms are far from boilerplate and can have a critical impact upon the rights of the parties when there is a dispute over the administration of the loan or the collateral.

During the recent economic recession, disputes between originating and participating banks over loan participations have become all too common. These disputes have arisen most frequently because the banks involved find that when the loan is downgraded or the borrower defaults, the banks discover that they have differing interests in the handling of the loan. Some originating banks have a greater interest in working with the borrower in such situations than their participants. Some participant banks have a greater interest in pursuing an aggressive collection of the loan than their originating banks and sometimes vice versa. No situation is identical. Unfortunately, when the banks involved in such disputes have turned to their participation agreements for guidance, only then have they discovered that the time-worn forms that they have been using for years leave much to be desired. As a result, litigation has frequently ensued.

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Georgia Supreme Court Addresses Non-Judicial Foreclosures

May 20, 2013

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On May 20, 2013, the Georgia Supreme Court issued a unanimous opinion in the You v. JP Morgan Chase case (Case No. S13Q0040).  The You Opinion addresses several questions that the United States District Court for the Northern District of Georgia had certified to the Supreme Court regarding the operation of Georgia’s law governing non-judicial foreclosures.

First, the Supreme Court addressed the question: “Can the holder of a security deed be considered a secured creditor, such that the deed holder can initiate foreclosure proceedings on residential property even if it does not also hold the note or otherwise have any beneficial interest in the debt obligation underlying the deed?” The Supreme Court answered “Yes” to this first question.

Second, the Supreme Court addressed the question “Does O.C.G.A. § 44-14-162.2 (a) require that the secured creditor be identified in the notice described by the statute?”  The Supreme Court answered “No” to this second question.

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New Legislation Introduced on ATM Notices

April 20, 2012

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Legislation has been introduced in the United States House of Representatives that, if passed, would relieve banks of the responsibility of installing and monitoring the presence of physical notices on their ATMs notifying customers about the imposition of ATM transaction fees.

On April 17, 2012, Representatives Blaine Luetkemeyer (R-MO) and David Scott (D-GA) introduced H.R. 4367 which seeks to amend the Electronic Fund Transfer Act to limit the fee disclosure requirement for operators of ATMs to the electronic notice alone. The electronic notice allows a consumer to choose whether the consumer wishes to continue with the ATM transaction and pay the fee or exit the transaction.  This proposed bill comes in the wake of class action litigation filed against banks and other ATM operators nationwide (and most recently against several Georgia community banks) alleging that the banks failed to post or maintain the physical notice on their ATMs.

As currently written, the Electronic Fund Transfer Act requires both a physical notice at or on the ATM in addition to the electronic notice the customer receives on the computer screen when making the withdrawal.  Currently, there are statutory penalties for failure to comply with the Act.  While there is no minimum penalty proscribed for a class action, the statute provides that in a successful class action, plaintiffs may recover up to “the lesser of $500,000 or 1 percent of the net worth of the (ATM operator),” plus attorneys’ fees and costs.  There may be a defense to such claims when the bank maintains procedures reasonably adapted to avoid a failure to comply with the Act and the failure to comply was a “bona fide error.”

Even where banks have been in full compliance with the physical notice requirements, many banks have found that their fee notice placards have mysteriously disappeared or have been removed by persons as yet unknown in the time periods preceding the institution of litigation against them.

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Class Actions Filed Against Four Georgia Banks Over ATM Physical Fee Disclosure

March 15, 2012

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Four class action complaints have been filed in the last two weeks against four different Georgia community banks alleging that the banks have violated the Electronic Fund Transfer Act.  The complaints were filed in the federal courts and all allege that the banks imposed fees on consumers who withdrew cash from the bank’s ATMs and that the banks allegedly failed to post a physical notice on the ATMs that a fee would be imposed for such services.

The Electronic Fund Transfer Act requires both a physical notice at or on the ATM in addition to the electronic notice the customer receives on the computer screen when making the withdrawal.  There are statutory penalties for a failure to comply with the Act.   While there is no minimum penalty proscribed for a class action, the statute provides that in a successful class action, plaintiffs may recover up to “the lesser of $500,000 or 1 percent of the net worth of the (ATM operator),” plus attorneys’ fees and costs.  There may be a defense to such claims when the bank maintains procedures reasonably adapted to avoid a failure to comply with the Act and the failure to comply was a “bona fide error.”

The attorneys associated with these cases have filed similar class actions, alleging the same violations of the Electronic Fund Transfer Act, against other banks, hotels and retailers around the country.

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