In Williams v. Wells Fargo Bank, N.A., Judge Cecilia M. Altonaga of the United States District Court for the Southern District of Florida, ruled that a semicolon contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act means that force-placed insurance provisions contained in the amendments to the Real Estate Settlement Procedures Act (“RESPA”) are not yet in effect. Williams v. Wells Fargo Bank, N.A., S.D. Fla., No. 11-21233-CIV-ALTONAGA/Simonton, September 19, 2011. The Plaintiffs in this case brought claims against Wells Fargo for violation the RESPA amendments, alleging that Wells Fargo unlawfully charged homeowners for force-placed insurance after the homeowners’ property-insurance policies lapsed. The Plaintiffs alleged that Wells Fargo violated the RESPA amendments by using the force-placed insurance to generate kickbacks from a third-party insurer. The Plaintiffs rely on the RESPA amendments that require charges on forced insurance payments to be “bona fide and reasonable,” alleging that these amendments took effect on June 2, 2010 (one day after the Dodd-Frank Act was signed into law).
However, the Court disagreed. Rather, Judge Altonaga held that the new “bona fide and reasonable” standards for force-placed insurance take effect only after the new Consumer Financial Protection Bureau (“CFPB”) finalizes rules to implement Dodd-Frank’s mortgage reforms, or early 2013, if the CFPB fails to finalize its implementing regulations. In particular, the Court looked to Section 1400(c) of the Dodd-Frank Act entitled “Regulations; Effective Date.” The Plaintiffs argued that Section 1400(c) sets the effective date only for those provisions that explicitly mandate implementing rules, and because the RESPA “bona fide and reasonable” amendments do not require any implementing rules, they took effect on June 22, 2010. The Court rejected this argument holding that the semicolon actually showed that the effective dates apply broadly, not just to certain sections. Judge Altonaga ruled that the plain language of Section 1400(c), in particular, the semicolon in the title, indicates that “Effective Date” is not used as a subcategory of “Regulations.” Rather, the semicolon “suspends the thought regarding regulations and begins a new thought involving effective dates.” As such, section 1400(c) addresses both the regulations that are required to be implemented as well as the effective dates for all sections—not only the effective dates of those sections that call for regulations. Based on this interpretation, Judge Altonaga dismissed the Plaintiffs’ RESPA claims because the amendments were not in effect prior to Wells Fargo’s issuance of the force-placed insurance policies.