Sheppard Mullin Financial Institutions Law Blog

If wire transfer instructions designate a valid account number, but an incorrect beneficiary, may the bank that accepts the incoming wire rely upon the account number?

Yes, assuming the bank did not have actual knowledge of that inconsistency. So said the court of appeal in Los Angeles in TME Enterprises, Inc. v. Norwest Corporation, 04 C.D.O.S. 10834 (December 9, 2004).

In this case, the plaintiffs were victims of a fraudulent investment scheme and sent funds by wire transfer to an account at the defendant bank. The wire transfer instructions included a valid account number but incorrectly designated the account name (as a trust account). The bank processed the wire transfer manually but had no actual knowledge of the inconsistency.

Should the "yield spread premium" a lender pays to a loan broker be included in the calculation of "points and fees payable by a borrower" under California's predatory lending law?

No, at least according to the Fourth District Court of Appeal in Wolski v. Fremont Investment & Loan, 04 C.D.O.S. 11166 (Dec. 20, 2004).

A yield spread premium "is a bonus paid to a broker when it originates a loan at an interest rate higher than the minimum interest rate approved by the lender for a particular loan. The lender then rewards the broker by paying it a percentage of the 'yield spread' . . . ." In this case, the borrower argued that the YSP should be considered in calculating the "total points and fees payable by the consumer at or before closing" under section 4970(b)(1)(B) of the Financial Code.

Does the 1995 amendment to the Truth In Lending Act lift the $1000 cap for statutory damages for TILA violations involving loans secured by personal (not real) property?

No, the Court answered in a rare 9-0 decision. So, for now, the cap remains in place.

Mostly based on its close reading of the amendment, the Court concluded that while Congress intended to raise the maximum statutory damages for TILA violations on loans secured by real property, it did not intend to increase the $1000 cap regarding loans secured by personal property. In parsing the statute, the Court noted that Congress ordinarily adheres to an "hierarchical scheme in subdividing statutory sections" and that, in the hierarchy, a "subparagraph" is quite different from a "clause."