Maryland Legal Alert for Financial Services

IN THIS ISSUE:

NACHA RULE CHANGE

FOURTH CIRCUIT APPLIES SPOKEO AND AFFIRMS SUMMARY JUDGMENT RULING BASED ON LACK OF STANDING

COMMON CONCERNS RELATED TO FINANCIAL SERVICES AMID COVID-19 PANDEMIC

PPP LOAN AND OTHER CORONAVIRUS TAX BENEFITS

COVID-19 INFORMATION HUB

NACHA Rule Change

The National Automated Clearing House Association (NACHA) issued an operations bulletin suspending the requirement for consumers to submit a “written” statement of unauthorized debit. Under applicable NACHA rules, when a consumer believes an unauthorized automated clearing house (ACH) debit entry has posted to a consumer deposit account, the consumer must provide a statement of unauthorized debit that is signed or similarly authenticated.

NACHA suspended the “in writing or similarly authenticated” requirement indefinitely as a result of COVID-19 social distancing. NACHA indicated that financial institutions can encourage consumers to report unauthorized ACH debits through remote channels (such as via phone and online), but still should “take reasonable care” to have consumers verify claims of unauthorized ACH debits consistent with signature-based procedures — to avoid instances of improper returns.

Please contact Christopher R. Rahlwith any questions concerning ACH authorizations.

Contact Christopher R. Rahl | 410-576-4222

Fourth Circuit Applies Spokeo and Affirms Summary Judgment Ruling Based on Lack of Standing

In a recent decision, the Fourth Circuit Court of Appeals considered the extent to which a plaintiff under the Real Estate Settlement Procedures Act (RESPA) must establish an “injury-in-fact” under the U.S. Supreme Court decision of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).

In this case, the court considered a decision by the U.S. District Court of Maryland involving a purchaser who had sued a real estate broker and title company who had a referral relationship under RESPA. The lower court granted summary judgment in favor of the defendants after concluding that the plaintiff had not suffered any cognizable injury under RESPA when no evidence existed that the plaintiff had been overcharged for services. The lower court had reasoned that, under Spokeo, there was no standing when the only harm alleged was that plaintiff should have had the benefit of “impartial and fair competition between settlement providers,” which does not occur when the title company and real estate broker have a referral relationship.

Analyzing Spokeo, the Fourth Circuit agreed with this analysis, finding that the abstract competition between settlement providers does not create actionable injury under Spokeo absent some showing of overcharge. Alternatively, the Fourth Circuit also concluded that any “unjust enrichment” to the defendants also did not create injury to the plaintiffs. 

Please contact Robert A. Gaumont with any questions concerning this topic.

Contact Robert A. Gaumont | 410-576-4007

Common Concerns Related to Financial Services amid COVID-19 Pandemic

As we all adjust to life amid the COVID-19 pandemic, our Financial Services team has fielded numerous calls from our clients regarding how to navigate federal and state relief programs and how to operate under social distancing orders. Among other issues, clients have been calling about:

• Tuning up existing commercial loan documents to make them suitable for Paycheck Protection Program (PPP) loans;
• Drafting PPP loan documents;
• Virtual annual meetings; and
• Garnishment of stimulus benefits.

Please contact Christopher R. Rahlor Andrew D. Bulgin with any questions concerning these topics.

Contact Christopher R. Rahl | 410-576-4222

Contact Andrew D. Bulgin | 410-576-4280

PPP Loan and Other Coronavirus Tax Benefits

An employer applying for a PPP loan should be aware of how a PPP loan will affect the employer’s ability to take advantage of three coronavirus-related tax benefits: the Payroll Tax Deferral, the Retention Credit and Families First Coronavirus Response Act (FFCRA) Credits.

Under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), employers may defer paying the employer portion of Social Security payroll taxes through December 31, 2020 (Payroll Tax Deferral). Fifty percent of the deferred taxes will be due by December 31, 2021, and the other 50% will be due December 31, 2022.

An employer who has obtained a PPP loan may take advantage of the Payroll Tax Deferral up until its lender forgives the PPP loan, after which point the employer may no longer defer its payment of the employer’s share of Social Security taxes. Taxes deferred prior to PPP loan forgiveness continue to be deferred.

The CARES Act also provides a refundable payroll tax credit for 50% of wages paid (capped at the first $10,000 of wages paid, for a maximum credit of $5,000 per employee) to certain employees by employers affected by coronavirus, including nonprofits (Retention Credit). The number of the employer’s average full-time employees in 2019 determines whether all employees’ wages qualify for the Retention Credit or only those furloughed or faced with reduced hours.

An employer receiving the Retention Credit, however, may not obtain a PPP loan.

Employers may receive tax credits with respect to paid sick leave and paid family and medical leave required under FFCRA Credits. An employer may receive a PPP loan and FFRCA Credits, but an employer receiving FFCRA Credits for qualified leave wages cannot treat those wages as eligible “payroll costs” for purposes of receiving forgiveness of a PPP loan.

Click here to learn more about the tax implications of the FFCRA, the CARES Act and the PPP loan program.

Practice Pointer: Recent federal relief programs offer critical aid to employers affected by coronavirus. Businesses should be aware that these programs, including PPP loans and FFCRA Credits, have unique tax implications that may affect whether and how businesses may be able to utilize these programs.

Please contact Douglas Turner Coats with any questions concerning these topics.

Contact Douglas Turner Coats | 410-576-4002

COVID-19 Information Hub

Coronavirus has spawned a constant stream of business and legal developments. New developments arise on a daily basis. The flood of news can be overwhelming.

We value your time and, to that end, want to make the critical content we provide easy for you to find. For our most up-to-date analysis of the changing coronavirus landscape, please visit Gordon Feinblatt’s COVID-19 Information Hub, where you can find links to our articles and other resources.