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  • District Court dismisses TCPA action against ride-sharing company, allows plaintiff to correct deficiencies

    Courts

    On January 16, the U.S. District Court for the Southern District of California granted in part and denied in part a ride-sharing company’s motion to dismiss a proposed TCPA class action, holding that the plaintiff sufficiently alleged the company is vicariously liable for the sent text messages but that the plaintiff failed to sufficiently allege the use of an “automatic telephone dialing system” (autodialer). According to the opinion, the plaintiff received two unsolicited text messages from a commercial messaging system instructing him to download the ride-sharing company’s app and providing a link to download the app. The plaintiff filed suit arguing the commercial text system was acting as an agent of the company for the company’s financial benefit and that the texts were sent using an autodialer in violation of the TCPA. The company moved to dismiss the action. With regard to the use of an autodialer, the court agreed with the company, determining that the plaintiff “merely parrots [the] statutory definition of an [autodialer]” and fails to assert facts that could support a reasonable inference that the company used an autodialer to send the texts. As for vicarious liability, the court concluded that the plaintiff sufficiently alleged the company’s actual authority over the commercial messaging system by asserting the company “instructed its agent or vendor as to the content of the text messages and timing of the sending of the text messages.” The court dismissed the plaintiff’s amended complaint but allowed 30 days for the plaintiff to amend the deficiencies.

    Courts TCPA Class Action Autodialer

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  • Four receive suspended sentences in SFO’s logistics company North Sea case

    Financial Crimes

    On January 11, the U.K.’s Serious Fraud Office (SFO) announced that four more individuals were sentenced in connection with a bribery scheme involving a logistics company’s oil exploration project in the North Sea. Three of the individuals—one former agent of an American energy corporation and two former logistics company directors—pleaded guilty prior to the trial. They received 6, 12, and 15 month prison sentences, although their terms are suspended for two years. The two former directors were also ordered to pay fines of £15,000 and £20,000.  The fourth individual, the logistics company’s former chief commercial officer, was convicted at trial. He received 9 months’ imprisonment (also suspended for two years), and was ordered to pay a £5,000 fine.

    Several of the defendants also received suspended prison terms related to SFO’s logistics company Angola case. See previous FCPA Scorecard coverage of the probes here and here.

    Financial Crimes FCPA

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  • NYDFS fines mortgage loan servicer for alleged violations of Abandoned Property Relief Act

    State Issues

    On January 16, NYDFS announced a $100,000 settlement with a New York state-registered mortgage loan servicer for allegedly failing to register and maintain two properties as required by the state’s Abandoned Property Relief Act. Under the Act, NYDFS can hold banks and mortgage servicers accountable should they fail to fulfill certain maintenance obligations at vacant and abandoned residential properties (“zombie” properties) securing mortgage loans in their portfolios. NYDFS rejected claims that the servicer was unable to maintain the “zombie” properties due to not receiving authorization from the mortgagee and that the properties were not subject to the requirements of the Act because backdated lien releases extinguished its maintenance obligation. Under the terms of the consent order, the servicer has also agreed to provide confirmation within 30 days to NYDFS that all properties subject to New York’s Vacant and Abandoned Property Law have been sufficiently registered with NYDFS’ registry of vacant and abandoned properties, are maintained properly, and that all quarterly filings for each property have been submitted.

    State Issues NYDFS Enforcement Mortgage Servicing

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  • Acting Director Otting says FHFA structure is unconstitutional, will not defend before 5th Circuit

    Courts

    On January 14, acting Director of the FHFA, Joseph Otting, filed a supplemental brief with the U.S. Court of Appeals for the 5th Circuit stating the agency will no longer defend the constitutionality of the FHFA’s structure in the upcoming en banc rehearing. As previously covered by InfoBytes, in July 2018, the 5th Circuit concluded that the FHFA’s single-director structure violates Article II of the Constitution because the director is too insulated from removal by the president. In August, while the agency was still under the leadership of Mel Watt, it petitioned the court for an en banc rehearing, challenging the constitutionality holding. Now, according to the supplemental brief, the FHFA states it “will not defend the constitutionality of [the Housing Economic Recovery Act’s] for-cause removal provision and agrees with the analysis in [the relevant portion] of Treasury’s Supplemental Brief that the provision infringes on the President’s control of executive authority.” The en banc rehearing, which will address the constitutionality issue as well as the plaintiff’s other statutory claims in the case, is scheduled for January 23.

    Courts Fifth Circuit Appellate HERA FHFA Single-Director Structure

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  • Freddie Mac, Fannie Mae issue updated selling guidance addressing government shutdown

    Federal Issues

    On January 16, Freddie Mac and Fannie Mae, in consultation with the FHFA, issued additional temporary guidance on selling policies that may be impacted during the government shutdown.

    Freddie Mac Bulletin 2019-3 provides revisions to temporary guidance previously announced in Bulletin 2019-1 (see previous InfoBytes coverage here), and notifies sellers of temporary changes to certain Guide requirements to further assist impacted borrowers. Due to the length of the shutdown, Freddie Mac has added a minimum reserves requirement in order to offset the risk associated with a borrower’s interruption of income. Sellers must document the greater of two months reserves or the minimum reserves as required by the Loan Product Advisory and the Guide, for impacted mortgages with application received dates of January 16, 2019 or after. In addition, Freddie Mac will allow flexibility in circumstances where a seller is unable to meet the 10-day pre-closing verification of income and employment requirements for impacted mortgages regardless of the application received date. Freddie Mac also directs sellers of government funded, guaranteed, or insured mortgages sold to Freddie Mac to review government agency requirements.

    Fannie Mae Lender Letter LL-2019-2 also provides additional temporary guidance on selling policies that may be impacted during the continued shutdown, and builds upon guidance issued last December. (See LL-2018-06 covered by InfoBytes here.) The additional guidance imposes a minimum liquid financial reserves requirement to offset risk and is applicable to loans with application dates on or after January 16, 2019. The new reserves requirement does not apply to high LTV refinances. Finally, Fannie Mae will provide additional flexibility with regard to verbal verification of employment and paystub age requirements.

    Federal Issues Fannie Mae Mortgages Freddie Mac FHFA

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  • OFAC issues temporary extension of Ukraine-related General Licenses

    Financial Crimes

    On January 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Ukraine-related General Licenses (GL) 13J, 14E, and 16E, which modify the expiration dates of previous Ukraine-based general licenses for wind-down transactions for certain companies that otherwise would be prohibited by Ukraine-Related Sanctions Regulations.

    GL 13J supersedes GL 13I and authorizes, among other things, activities and transactions “ordinarily incident and necessary” for (i) the divestiture of the holdings of specified blocked persons to a non-U.S. person; and (ii) the facilitation of transfers of debt, equity, or other holdings involving specified blocked persons to a non-U.S. person. GL 14E, which supersedes GL 14D, relates to specific wind-down activities involving a Russian aluminum producer sanctioned last April as previously covered by InfoBytes here. GL 16E supersedes GL 16D and authorizes permissible activities with the designated company and its subsidiaries, and applies to the maintenance and wind-down of operations, contracts, and agreements that were effective prior to April 6.

    Financial Crimes Sanctions OFAC Department of Treasury Ukraine International

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  • CFPB asks Congress for clear authority to supervise for MLA compliance

    Federal Issues

    On January 17, the CFPB issued a statement from Bureau Director Kathy Kraninger announcing she has asked Congress to grant the Bureau “clear authority to supervise for compliance with the Military Lending Act (MLA).” The statement expresses Kraninger’s interest in protecting servicemembers and their families and notes the requested authority would complement the Bureau’s MLA enforcement work. The announcement acknowledges the recently introduced House legislation, H.R. 442, which would directly grant the Bureau supervisory authority over the MLA, and also includes suggested draft legislation the Bureau sent to both the U.S. House of Representatives and the U.S. Senate (here and here). The draft legislation would amend the Consumer Financial Protection Act to include a section providing the Bureau “nonexclusive authority to require reports and conduct examinations on a periodic basis” for the purposes of (i) assessing compliance with the MLA; (ii) obtaining information about the compliance systems or procedures associated with the law; and (iii) detecting and assessing associated risks to consumers and to markets.

    As previously covered by InfoBytes, in August 2018, then acting Director Mick Mulvaney internally announced the Bureau would cease supervisory examinations of the MLA, contending the law did not explicitly grant the Bureau the authority to examine financial institutions for compliance. A bipartisan coalition of 33 state Attorneys General wrote to Mulvaney expressing concern over the decision and after her confirmation, a group of 23 House Democrats urged Kraninger to resume the examinations. (Covered by InfoBytes here and here.) 

    The Bureau’s request that Congress grant it authority to examine for compliance with the MLA suggests that it does not intend to do so unless Congress acts. 

    Federal Issues CFPB Succession Military Lending Act Military Lending Supervision U.S. House U.S. Senate

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  • NYDFS issues whistleblowing program guidance and best practices

    State Issues

    On January 7, NYDFS issued guidance providing principles and best practices that all NYDFS-regulated institutions “regardless of industry, size, or number of employees” should consider when designing and implementing a robust whistleblowing program, which the department considers to be an essential component of an institution’s comprehensive compliance program.

    The guidance notes that the design of a whistleblowing program should be based on factors such as the institution’s size, geographical reach and business. However, it outlines ten elements that institutions should, at a minimum, consider how to account for when designing their programs:

    • Independent, well-publicized, easy-to-access, and consistent reporting channels;
    • Strong protections for whistleblower anonymity;
    • Established procedures for identifying and managing the effects of possible conflicts of interest;
    • Adequately trained staff members responsible for receiving a whistleblowing complaints, determining a course of action, and competently managing any investigation, referral, or escalation;
    • Established procedures for appropriately investigating allegations of wrongdoing;
    • Established procedures for ensuring appropriate follow-up to valid complaints;
    • Protections against any form of retaliation;
    • Confidential treatment, including safeguards to protect the confidentiality of the whistleblower and the whistleblowing matters themselves;
    • Appropriate oversight by senior managers, internal and external auditors, and the Board of Directors; and
    • A top-down culture of support for the whistleblowing function.

    As previously covered by InfoBytes, last December NYDFS issued a consent order against an international bank and its New York branch to resolve allegations stemming from an investigation into the governance, controls, and corporate culture relating to the bank’s whistleblower program.

    State Issues Whistleblower

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  • District Court certifies class action against lead generator’s payday lending practices

    Courts

    On January 11, the U.S. District Court for the District of Minnesota granted a motion for class certification in a case challenging a company’s payday lending practices under several Minnesota consumer protection statutes and common law. The plaintiffs filed the proposed class action alleging, among other things, that the company, which generates leads for payday lenders, failed to disclose that it was not licensed in the state, and that the loans may not be legal in Minnesota. The Minnesota Attorney General had notified the company in 2010 and 2012 that it was subject to Minnesota law restricting payday loans and that it was “aiding and abetting lenders that violate Minnesota law.” The court found that the plaintiffs identified “questions of law or fact common to the class that are capable of class-wide resolution,” which “predominate over any questions affecting only individual members.” The court noted that a class action would fairly promote the interests of the class and ensure judicial economy, and that even though the plaintiffs’ proposed method for measuring the amount of damages would require individual inquiry, “it is less consuming than issues requiring individual testimony and will not overwhelm the liability and damages issues capable of class-wide resolution.”

    Courts Payday Lending Class Action State Issues Consumer Lending

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  • DOJ now says the Wire Act applies to all interstate gambling, not just sports betting

    Federal Issues

    On January 14, the DOJ released an opinion broadening the application of the U.S. Wire Act’s prohibition on interstate gambling, concluding that the act also applies to non-sports-related betting. In a reconsideration of its 2011 opinion, which found the act only prohibited sports gambling, the DOJ’s opinion, dated November 2018, states that the act’s limitation “on any sporting event or contest” only applies to the prohibition against transmitting “information assisting in the placing of bets or wagers.” The other prohibitions under Section 1804(a) will now apply to interstate non-sports-related gambling so long as the other elements of the statute are satisfied. The DOJ acknowledged that the decision will likely be tested in the courts, and noted that if Congress finds it appropriate to protect contrary interests, “it retains ultimate authority over the scope of the statute and may amend the statute at any time, either to broaden or narrow its prohibitions.”

    Federal Issues DOJ Mobile Payments Gambling Wire Act

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