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Financial Services Law Insights and Observations


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  • OFAC sanctions additional Hizballah financiers

    Financial Crimes

    On January 21, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13224 against a Hizballah-affiliated financial facilitator, along with members of an international network of facilitators and companies connected to both the designated individual and a Hizballah-linked financial facilitator sanctioned by OFAC on January 18 (covered by InfoBytes here). According to OFAC, the designated persons evaded sanctions efforts in order to help Hizballah gain access to the international financial system and raise funds to support acts of terrorism and other illicit activities. “Today’s action exposes and targets Hizballah’s misuse of the international financial system to raise and launder funds for its destabilizing activities as the Lebanese people suffer during an unprecedented economic crisis in Lebanon,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson stated. “Treasury is committed to disrupting Hizballah’s illicit activity and attempts to evade sanctions through business networks while the group doubles down on corrupt patronage networks in Lebanon.”

    As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. Additionally, “any entities that are owned, directly or indirectly 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. OFAC further warned that the agency “can prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account of a foreign financial institution that knowingly conducted or facilitated any significant transaction on behalf of a Specially Designated Global Terrorist.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations SDN List Lebanon

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  • District Court finalizes BIPA class action settlement

    Privacy, Cyber Risk & Data Security

    On January 24, the U.S. District Court for the Northern District of Illinois granted final approval to a nearly $877,000 class action settlement to resolve allegations that a food manufacturer’s fingerprint-based timekeeping system violated Illinois’ Biometric Information Privacy Act (BIPA). Class members (both direct employees and temporary staffing workers who worked for the defendant between June 2015 and the date of preliminary approval) alleged that the defendant (i) collected biometric fingerprint identifiers and information without receiving informed written consent from employees; (ii) processed these identifiers and information “without establishing and following a publicly available data retention schedule and destruction policy”; and (iii) disclosed the employees’ identifiers and information to its timekeeping vendor without consent. The defendant contended that since 2020 it has maintained BIPA consents and compliance policies, and “does not retain any finger scan data for separated Illinois employees.” While denying all liability and wrongdoing, the defendant has agreed to pay $876,750 to cover class member payments, attorney fees and costs, settlement administrator costs, and the class representative’s service award.

    Privacy/Cyber Risk & Data Security BIPA Class Action State Issues Courts Settlement Illinois

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  • New Jersey Superior Court grants summary judgment in favor of debt buyer


    On January 21, the Superior Court of New Jersey granted a defendant debt buyer’s cross-motion for summary judgment following the Appellate Division’s partial remand. The plaintiff filed a proposed class action lawsuit in 2017, claiming that the defendant violated the New Jersey Consumer Fraud Act (CFA) by unlawfully acquiring defaulted credit card accounts without obtaining a license to engage as a sales finance company or a consumer lender. The case was dismissed, but later partially remanded on appeal. The Superior Court struck the portion of the complaint alleging class claims and focused on the remaining individual claim concerning the plaintiff’s account. The Superior Court ultimately determined that the plaintiff’s CFA claim failed because the alleged conduct did not rise “to the level of deception, fraud, or misrepresentation in connection with the sale of merchandise or services” required for a claim under CFA. According to the Superior Court, the CFA requires that claimants show an ascertainable loss. The plaintiff’s claim that she suffered a loss by paying the defendant rather than the bank that originally extended the credit was not convincing, the Superior Court stated. The plaintiff admitted “that after the [account] was sold to Defendant, [the bank] did not seek payment of the credit card account. Thus, the record establishes that Plaintiff has not suffered any harm. Without an ascertainable loss, Plaintiff’s CFA claim fails,” the decision said. The Superior Court also disagreed with the plaintiff’s assertion that the defendant was required to obtain a consumer lending license under the New Jersey Consumer Finance Licensing Act. Noting that the defendant is a debt buyer and not a consumer lender, the Superior Court held that the defendant was not required to be licensed.

    Courts Debt Buyer State Issues New Jersey Debt Collection Licensing

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  • 9th Circuit partially reverses FDCPA ruling


    On January 24, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a district court’s summary judgment for a collection law firm (defendant) that “expressly” informed an individual in a collection letter that any dispute must be filed in writing. The plaintiff sued after receiving a collection letter from the defendant that noted, “[u]nder the federal Fair Debt Collection Practices Act, if you dispute this debt, or any portion thereof, you must notify this office in writing within thirty (30) days of receipt of this letter. After notifying this office of a dispute, all debt collection activities will cease until this office obtains verification of the debt and a copy of such verification is mailed to you. If you do not dispute the validity of this debt or any portion thereof within thirty (30) days of receipt of this letter, the debt will be assumed valid. You may request in writing, within thirty (30) days of receipt of this letter, the name and address of the original creditor, if different from the current creditor, which is the homeowners association named above, and we will provide you with the information.” The district court granted summary judgment in favor of the defendant, ruling that the passage did not violate the FDCPA because the third sentence of the disclosure did not mention that the dispute had to be filed in writing.

    On appeal, the 9th Circuit noted that “the court must view the letter ‘through the eyes of the least sophisticated debtor,’” stating that “… the least sophisticated debtor would not extract each sentence of the challenged paragraph, line them up against the disclosures the FDCPA requires, and analyze whether each sentence, in isolation, accurately conveys the required warnings.” The 9th Circuit also noted that, “[i]nstead, the least sophisticated debtor would examine the letter as a whole and would conclude based on the bold text expressly stating that he must dispute the debt in writing that he was required to dispute the debt in writing.” The 9th Circuit also upheld the ruling in favor of the defendant over its assessment of a prelien fee as a reasonable attorney’s fee and “that any implication that the fee was an ‘attorney’s fee’ was true.” The case was remanded back to the district court to address remaining arguments and the plaintiff’s summary judgment motion.

    Courts FDCPA Appellate Ninth Circuit Debt Collection

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  • District Court grants summary judgment for defendant in TCPA case


    On January 18, the U.S. District Court for the Western District of Washington granted a motion for summary judgment in favor of an insurance company (defendant) with respect to a plaintiff’s TCPA allegations. The plaintiff alleged that the defendant, among other things, violated the TCPA by placing telephone calls to him and the putative class members whose telephone numbers are on the National Do Not Call (DNC) Registry. The defendant countered that the plaintiff spoke with the defendant during a 26-minute phone call and provided his personal information and consent to be called by the defendant. The plaintiff alleged that he had not submitted any information, and suggested that hackers may have been involved, and that he had engaged in a lengthy and detailed conversation with the defendant because he was “investigating” the identity of the caller and the motive for calling. However, the court noted that “the personal information [the plaintiff] disclosed during the call supports the contention that he in fact was interested in obtaining a quote and otherwise submitted an internet request,” and that no evidence supported the plaintiff having “investigative” motives. 

    According to the opinion, a “reasonable jury” would find that the defendant had permission to call the plaintiff and that, even if there were questions about whether the plaintiff had requested or consented to the disputed call, the procedures that the defendant had put in place to comply with the law brought it under the purview of the TCPA's safe harbor provision. The court also found that the defendant “produced significant evidence that as part of its routine business practice, it complies with the standards required by the safe harbor provision and had substantially complied with the purpose of the TCPA, ‘to protect consumers from the unwanted intrusion and nuisance of unsolicited telemarketing phone calls and fax advertisements,’ by only calling those who have requested a life insurance quote and consented to be called.”

    Courts Class Action Do Not Call Registry Consumer Protection TCPA

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  • FDIC collaborates with Operation HOPE to promote financial education and opportunities

    On January 24, the FDIC announced a collaboration with Operation HOPE, Inc. to promote financial education. The collaboration will utilize the FDIC’s Money Smart curriculum and other resources to help educate minority- and/or women-owned businesses on how to do business with the agency. According to the FDIC, in 2001, the agency recognized “the importance of financial education, particularly for persons with little or no banking experience,” and created Money Smart. According to the FDIC and Operation Hope Collaboration Arrangement, the FDIC, among other things, will provide training for Operation Hope’s staff on how to teach the Money Smart curriculum and will help the nonprofit identify outreach initiatives to educate minority- and women-owned businesses on how to conduct business with the FDIC. According to FDIC Chairman Jelena McWilliams, the organization and the FDIC “share a common purpose to help every person belong to our nation’s financial system,” and together, “make certain our nation’s economy works for everyone.”

    Bank Regulatory FDIC Small Business Consumer Finance

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  • FDIC approves final rule for trust, mortgage servicing accounts

    On January 21, the FDIC published a final rule that amends the deposit insurance regulations for trust accounts and mortgage servicing accounts. According to the FDIC, the final rule is “intended to make the deposit insurance rules easier to understand for depositors and bankers, facilitate more timely insurance determinations for trust accounts in the event of a bank failure, and enhance consistency of insurance coverage for mortgage servicing account deposits.” The final rule, among other things: (i) establishes a formula to calculate deposit insurance coverage for all revocable and irrevocable trust accounts; (ii) “provides a maximum amount of deposit insurance coverage of $1,250,000 per owner, per insured depository institution for trust deposits”; and (iii) establishes that “a deposit owner’s trust deposits will be insured in an amount up to $250,000 per beneficiary, not to exceed five beneficiaries, regardless of whether a trust is revocable or irrevocable, and regardless of contingencies or the allocation of funds among the beneficiaries.” Additionally, the final rule allows principal and interest funds advanced by a mortgage servicer to be included in the deposit insurance calculation. The rule is effective April 1, 2024. In addition, the FDIC released a fact sheet on the final rule.

    Bank Regulatory Agency Rule-Making & Guidance FDIC Mortgages Mortgage Servicing Deposit Insurance

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  • FinCEN proposes SAR pilot program

    Agency Rule-Making & Guidance

    On January 24, FinCEN issued a Notice of Proposed Rulemaking (NPRM) to establish a limited-duration pilot program for financial institutions to share suspicious activity reports (SARs), pursuant to Section 6212 of the Anti-Money Laundering Act of 2020. The pilot program would allow financial institutions with SAR reporting obligations to share SARs and related information (subject to certain restrictions) with their foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks. The NPRM would expand guidance that previously only permitted SARs to be shared internally with foreign head offices, controlling companies (domestic or foreign), and domestic affiliates, and seeks input on the expected costs and benefits, technical challenges, merits of quarterly reporting, and SAR confidentiality protections. According to FinCEN, the pilot program is intended to provide feedback as the agency considers longer-term approaches towards SAR sharing with foreign affiliates. Comments are due March 28.

    Agency Rule-Making & Guidance FinCEN Financial Crimes SARs Anti-Money Laundering Act of 2020 Of Interest to Non-US Persons

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  • CFPB examines credit card rates and fees

    Federal Issues

    On January 19, the CFPB released a blog on credit card interest and fees. The Bureau noted that credit card debt is rising, and that “from 2015 to 2019, the average assessed interest rate on credit cards increased by more than 20%.” The blog pointed out that the Bureau is examining ways to ensure that there is robust and fair competition in the credit card market. According to the blog, the Bureau “will focus on ensuring a more fair, transparent, and competitive credit card market” by (i) uncovering unfair, anticompetitive practices; (ii) making it easier for consumers to compare, switch, or refinance credit cards; and (iii) scrutinizing junk fees. The Bureau also noted that it is “looking to use a long-dormant authority to help spur better credit card shopping and switching by proposing rules that give consumers more control of their financial data,” and “considering options that will help Americans with credit cards escape high rates and lousy service.”

    Federal Issues CFPB Consumer Finance Fees Credit Cards

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  • CFPB seeks comment on BNPL inquiry

    Federal Issues

    On January 24, the CFPB issued a notice and request for comment in the Federal Register regarding the Bureau’s inquiry into “buy now, pay later” (BNPL) providers. As previously covered by InfoBytes, in December, the Bureau issued a series of orders to five financial technology companies seeking information regarding the risks and benefits of the BNPL credit model. According to the notice, the Bureau seeks to obtain information from “any interested parties” on “the size, scope, and business practices of the BNPL market” to assist the Bureau in understanding “how consumers interact with BNPL providers, and how BNPL business models impact the broader e-commerce and consumer credit marketplaces.” Comments are due by March 25.

    Federal Issues CFPB Buy Now Pay Later Federal Register Consumer Finance

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