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Financial Services Law Insights and Observations


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  • New Hampshire issues guidance for reopening of branches of financial institutions

    State Issues

    The New Hampshire Banking Department has issued guidance on the reopening of branches and other financial institution offices that were closed due to the Covid-19 pandemic. Banks or credit unions planning to reopen branch offices or other offices are requested to provide notice to the in the manner specified in the guidance and must also ensure that customers and members are aware of any planned reopening. Banks and credit institutions are urged to consult Emergency Order 40 for guidance on precautions to protect the safety of the institutions’ staff and customers.

    State Issues Covid-19 New Hampshire Credit Union Financial Institutions Bank Compliance

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  • District court requires bank to produce consultant’s data breach report


    On May 26, a magistrate judge of the U.S. District Court for the Eastern District of Virginia ordered a national bank to produce to plaintiffs in litigation a forensic analysis performed by a cybersecurity consulting firm regarding the bank’s 2019 data breach, concluding the report was not entitled to work product protection. As previously covered by InfoBytes, in July 2019, the national bank announced that an unauthorized individual had obtained personal information of credit card customers and people who had applied for credit card products. According to the order, after the data breach, the bank’s outside counsel directed a cybersecurity company, which had been engaging in periodic work with the bank since 2015, to prepare a report “‘detailing the technical factors that allowed the criminal hacker to penetrate [the bank]’s security.’” Plaintiffs, in a class action against the bank for the data breach, sought to obtain the report in discovery, but the bank opposed the production, arguing that the report was protected work product created under an agreement with outside counsel in anticipation of litigation.

    The court rejected the bank’s argument, concluding that the bank did not show the consultant’s scope of work under the outside counsel agreement “was any different than the scope of work for incident response services,” and that the bank had not shown the firm would not have performed the services “without the prospect of litigation.” Moreover, the court noted, “[t]he retention of outside counsel does not, by itself, turn a document into work product.” The court compelled production, holding that the report was not entitled to protection under the work product doctrine.

    Courts Discovery Data Breach Privacy/Cyber Risk & Data Security

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  • OFAC issues Iran nuclear FAQ

    Financial Crimes

    On March 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in response to the Department of State’s announcement of an end to certain Iran nuclear-related waivers, issued a new FAQ and added two individuals to the Specially Designated Nationals and Blocked Persons List (SDN List). FAQ 829 provides a 60-day wind-down period for persons currently engaged in activities permitted by these waivers; however, OFAC cautions that such activities should be wound down by July 27 or persons risk exposure to sanctions under U.S. law absent another waiver or exception. The FAQ notes that the Iran Freedom and Counter-Proliferation Act “provides for sanctions on persons determined to knowingly provide significant financial, material, technological, or other support to, or goods or services in support of any activity or transaction on behalf of or for the benefit of, an Iranian person on OFAC’s SDN List.”

    Financial Crimes OFAC Sanctions Department of Treasury Of Interest to Non-US Persons Department of State Iran

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  • FTC reaches settlement with dealership to resolve UDAP and fair lending allegations

    Federal Issues

    On May 27, the FTC announced settlements with a New York City auto dealer and its general manager (collectively, “defendants”) to resolve allegations that the defendants engaged in illegal auto financing sales practices and maintained a policy of charging African-American and Hispanic car buyers more for financing that similarly situated non-Hispanic white consumers. The complaint alleges that the defendants violated the FTC Act, TILA, and ECOA. According to the complaint, the defendants engaged in deceptive and unfair practices by, among other things, allegedly (i) advertising low sales prices but failing to honor them; (ii) inflating the cost through a variety of methods, including telling buyers that they had to pay unnecessary charges to purchase “certified pre-owned” cars, double-charging consumers for taxes and fees without their consent, and altering the terms in the middle of a sale; and (iii) charge higher financing “markups” and fees to African-American and Hispanic customers.

    The defendants—who neither admit nor deny the allegations—have each agreed under the terms of the settlements (see here and here) to pay $1.5 million in consumer redress. The orders also prohibit the defendants from misrepresenting the cost or terms to purchase, lease, or finance a car, and require the defendants to obtain express, informed buyer consent for all charges and provide clear financing disclosures. The defendants are also banned from engaging in unlawful credit discrimination, and are prohibited from engaging in credit transactions unless they establish a fair lending program that will, among other things, provide training for employees and cap the allowed rate markups.

    The Commission vote authorizing the filing of the complaint and stipulated final order was 5-0. Commissioner Chopra issued a concurring statement addressing disparate impact and unfair discrimination in the auto industry, and emphasized it is time for the FTC to use its rulemaking authority to establish protections for car buyers and honest auto dealers. Commissioner Slaughter agreed that there is a need for auto financing and sales market reform, and suggested that the FTC can begin by initiating a rulemaking under Dodd-Frank to regulate dealer markups.

    Federal Issues FTC Fair Lending FTC Act TILA ECOA Enforcement Settlement

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  • ARRC issues LIBOR transition “best practices”

    Federal Issues

    On May 27, the Alternative Reference Rates Committee (ARRC)—a group of private-market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York—released a set of best practices for market participants to transition from LIBOR to the Secured Overnight Financing Rate (SOFR) before the anticipated cessation of LIBOR at the end of 2021. Key practices recommended include: (i) new USD LIBOR cash products should include ARRC-recommended fallback language as soon as possible; (ii) third-party technology and operations vendors should complete enhancements necessary to support the preferred alternative SOFR by the end of 2020 as outlined in previously issued guidance; (iii) new use of LIBOR should end no later than June 30, 2021, depending on the specific cash product market; and (iv) parties that choose to select a replacement rate at their discretion following a LIBOR transition event should disclose the planned rate selection to relevant parties at least six months prior to the new rate’s effective date.

    Find continuing InfoBytes coverage on LIBOR here.

    Federal Issues LIBOR Interest Rate SOFR Vendor Management

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  • HUD issues mortgagee letter extending interim procedures relating to FHA Section 232 approved mortgages

    Federal Issues

    On May 28, the U.S. Department of Housing and Urban Development issued Mortgagee Letter 2020-15 to all FHA Section 232 Approved Mortgagees regarding the extension of interim procedures issued in Mortgagee Letter 20-10 to address site access issues during the Covid-19 pandemic. The guidance provides temporary modifications pertaining to third-party site inspections for Section 232 FHA-insured healthcare facilities with effective dates within 60 days of the issuance of the mortgagee letter. The letter also provides guidance on other aspects relating to Section 232 properties, including regarding Property Capital Needs Assessments, appraisals, Section 232 Phase 1 Environmental Site Assessments, asbestos surveys, and radon testing, among other things.

    Federal Issues Covid-19 HUD Mortgages FHA Third-Party Insurance

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  • FINRA updates guidance on fingerprinting requirements

    Federal Issues

    On May 28, FINRA updated frequently asked questions guidance regarding relief from certain fingerprinting requirements. The guidance notes that, on May 27, the SEC extended its order providing a temporary relief from fingerprinting requirements of the Securities Exchange Act Rule 17f-2 for FINRA members until June 20, 2020. Because FINRA already provided notification to the SEC in March on behalf of its members, their employees, and associated persons, such individuals may continue to rely on the commissioner’s order and FINRA’s notification. However, for an individual seeking registration pursuant to the submission of a Form U4, a FINRA member firm seeking to rely on temporary exemptive relief for registered persons must comply with FINRA’s guidance with respect to FINRA Rule 1010.

    Federal Issues Covid-19 FINRA SEC Securities Exchange Act

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  • New Jersey Department of Banking and Insurance extends no-action position regarding temporary work from home

    State Issues

    On May 28, the New Jersey Department of Banking and Insurance issued Bulletin No. 20-26 to certain licensees regarding temporarily working from home due to Covid-19. The bulletin extends the department’s no-action position regarding licensure for certain branch office locations due to individuals temporarily working from home first announced in Bulletin No 20-06 (covered here).  The no-action position is only effective with a submission that includes specified materials and may be subject to pre-conditions and operating, reporting, and other requirements. Licensees who have already submitted materials to the department in response to Bulletin No. 20-06 are not required to resubmit those materials.

    State Issues Covid-19 New Jersey Licensing Banking Insurance

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  • Oklahoma prohibits local governments from regulating supervised licensees

    State Issues

    On May 21, the Oklahoma governor signed SB 1682, which prohibits any state municipality or other political subdivision from regulating certain practices of businesses and occupations licensed, regulated, and controlled under the supervision of the state’s Department of Consumer Credit. Specifically, local governments may not regulate interest rates, fees, or physical locations, or prevent licensed lenders from engaging in lending practices authorized under the state law. Additionally, SB 1682 allows a person whose rights are violated under the provisions of this section the right to bring an action for injunctive relief. The act takes effect November 1.

    State Issues State Legislation Oklahoma Consumer Lending

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  • New York AG announced proposed settlement with student debt relief companies

    State Issues

    On May 22, the New York attorney general (NYAG) announced a proposed settlement with three student loan debt relief companies and two of the companies’ executive officers (collectively, “defendants”), resolving allegations that the defendants participated in a broader scheme that fraudulently, deceptively, and illegally marketed, sold, and financed student debt relief services to consumers nationwide. As previously covered by InfoBytes, the September 2018 complaint alleged that a total of nine student loan debt relief companies, along with their financing company, and the two individuals violated several federal and state consumer protection statutes, including the Telemarketing Sales Rule, New York General Business Law, the state’s usury cap on interest rates, disclosure requirements under TILA, and the Federal Credit Repair Organization Act. Specifically, the NYAG asserted, among other things, that the defendants (i) sent direct mail solicitations to consumers that deceptively appeared to be from a governmental agency or an entity affiliated with a government agency; (ii) charged consumers over $1,000 for services that were available for free; (iii) requested upfront payments in violation of federal and state credit repair and debt relief laws; and (iv) charged usurious interest rates.

    If approved by the court, the proposed consent judgment would require the five defendants to pay $250,000 of a $5.5 million total judgment, due to their inability to pay. Additionally, the defendants are also permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief product or service—or from assisting others in doing the same. Additionally, the defendants must request that any credit reporting agency to which the defendants reported consumer information in connection with the student loan debt relief services remove the information from those consumers’ credit files. The defendants also agreed not to sell, transfer, or benefit from the personal information collected from borrowers.

    The NYAG previously settled with two other defendants in February, covered by InfoBytes here.

    State Issues State Attorney General Courts Student Lending Debt Relief Usury Telemarketing Sales Rule TILA Credit Repair Organizations Act Settlement

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