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Inside Washington (03/11/2009)
* WASHINGTON (3/12/09)—The U.S. Supreme Court ruled 5 to 4 this week that a federal court lacked the authority to move a dispute between Discover Financial Services and a cardholder into arbitration. The decision involved a case brought by Discover, which was originally addressed in state court. It is a common practice for lenders to go through state courts to force delinquent borrowers to make good on their debts, but when borrowers act to dispute the lenders’ claim, the lender can force the dispute into arbitration. The lender then often seeks to switch to federal courts, which may be perceived as more amenable to the lender’s case. However, the Supreme Court ruling made it so lenders must now request to move a dispute to arbitration through the state courts. (American Banker March 11) Credit Union National Association (CUNA) Counsel for Special Projects Michael Edwards said of the decision, “This does not change a financial institution's ability to get a borrower to agree to binding arbitration, but it does mean that a financial institution will more frequently have to convince state courts that the binding arbitration provision in a borrower's loan or lease agreement is fair enough not to be voided by the court as 'unconscionable,' especially if the financial institution has already filed suit against the borrower in state court before asking for arbitration.” Generally, Edwards added, state courts are more skeptical of the fairness of binding arbitration than federal courts, and are, therefore, less likely to require that a dispute be moved to binding arbitration or to enforce an arbitrator's decision… * WASHINGTON (3/12/09)—An eight-year battle between bankers and the National Association of Realtors about the banks’ attempts to move into real estate brokerage activities has ended with the bankers acknowledging they have given up the fight. Congress has passed an appropriations bill that contains a permanent ban on the Treasury Department and Federal Reserve Board from finalizing a 2000 plan to authorize banks to get into the brokerage business. The American Bankers Association, leader in the push for real estate broker powers for banks, said it is giving up the issue and that it was not, at this time, any longer a priority issue for bankers (American Banker March 12)… * WASHINGTON (3/12/09)—Legislation was introduced this week called the Fannie Mae and Freddie Mace Full Disclosure Act. It would require the government-sponsored enterprises to pay registration fees and make public information required by the Securities and Exchange Commission. One of the bill’s chief sponsors, Rep. Adam Putnam (R-Fla.) said one of the many factors involved in the country’s current economic meltdown was a failure to require enough transparency and accountability from Fannie and Freddie. Rep. Ed Markey (D-Mass.) is the bill’s chief co-sponsor. (American Banker March 12)…


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