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On April 16, the Maryland Attorney General announced a settlement with a reverse mortgage servicer for allegedly charging homeowners illegal inspection fees. According to the Attorney General, from 2010 through 2016, the servicer passed the cost of inspecting properties in default on to homeowners, which Maryland law does not allow. In 2013, the Maryland Commissioner of Financial Regulation put the servicer on notice that it was charging prohibited inspection fees, but the servicer did not cease the activity until January 1, 2017. The servicer has since refunded or reversed nearly $44,000 in property inspection fees charged to consumers. The settlement agreement requires the servicer to (i) refund inspection fees that have not yet been refunded; (ii) provide notice to any sub-servicer that the inspection fees should be refunded or not collected; (iii) pay $5,000 to the state for costs associated with the investigation; and (iv) pay $50,000 in civil money penalties.
On April 16, the U.S. District Court for the Northern District of California granted final approval to a $7.5 million class action settlement resolving allegations that a payment processor and its sales representative violated the TCPA by using an autodialer for telemarketing purposes without first obtaining consumers’ prior express consent. The settlement terms also require the defendants to pay roughly $1.8 million in attorneys’ fees. According to the second amended complaint, the sales representative placed pre-recorded calls to potential clients on behalf of the payment processor through the use of an autodialer, including consumers who had not consented to receiving the calls. The plaintiff further alleged that the payment processor also violated the TCPA by sending facsimile advertisements that did not contain a “Compliant Opt Out Notice” to recipients. The parties reached a preliminary settlement last August following discovery and mediation.
On April 15, U.S. regulators announced settlements totaling $1.3 billion with several banking units of a German-headquartered financial institution to resolve allegations by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the DOJ, the Federal Reserve Board, the New York Department of Financial Services (NYDFS), and the New York County District Attorney’s Office of apparent violations of multiple sanctions programs, including those related to Burma, Cuba, Iran, Libya, Sudan, and Syria. According to OFAC’s announcement, between January 2007 and December 2011, the institution’s banking units in Germany, Austria, and Italy processed thousands of payments through U.S. financial institutions on behalf of sanctioned entities “in a manner that did not disclose underlying sanctioned persons or countries to U.S. financial institutions which were acting as financial intermediaries.”
According to the roughly $611 million combined settlement agreements (see here, here, and here), OFAC considered various aggravating factors, and noted, among other things, that the institution’s banking units failed to sufficiently enforce policies addressing OFAC sanctions concerns or restrict the processing of transactions in U.S. dollars involving persons or countries subject to sanctions programs administered by OFAC. Additionally, OFAC asserted that the Austrian banking unit claimed on several occasions that OFAC’s sanctions programs “were not legally binding or relevant to [the bank].” OFAC further stated that while the banking units failed to voluntarily self-disclose the alleged violations, they have each agreed to implement and maintain compliance commitments to minimize the risk of the recurrence of the alleged conduct.
The approximate $611 million penalty will be deemed satisfied by the banking units’ payments to other U.S. regulators, which includes an almost $317 million forfeiture and roughly $468 million fine to the DOJ, $158 million fine to the Federal Reserve, and $405 million fine to the NYDFS.
On April 12, the DOJ announced that a multinational corporation will pay $1.5 billion in a settlement resolving claims brought under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) that a financial services subsidiary of the corporation misrepresented the quality of loans it originated in connection with the marketing and sale of residential mortgage-backed securities (RMBS). According to the DOJ, between 2005 and 2007, the majority of the mortgage loans sold by the subsidiary for inclusion in RMBS did not comply with the quality representations made about the loans. Specifically, the loan analysts allegedly approved mortgage loans that did not meet criteria outlined in the company’s underwriting guidelines, as they would receive additional compensation based on the number of loans they approved. The DOJ asserts that there were inadequate resources and authority for the subsidiary’s quality control department, resulting in deficiencies in risk management and fraud controls. Additionally, if an investment bank were to reject a loan due to defects in the loan file, the DOJ alleges the subsidiary would attempt to find a new purchaser, without disclosing the previous rejection or identifying the alleged defects. The corporation does not admit to any liability or wrongdoing, but agreed to pay a $1.5 billion civil money penalty to resolve the matter.
On April 11, the FTC announced that a payment processing company and its owner agreed to a $1.8 million settlement resolving allegations that the company repeatedly violated a 2009 court order. That order found that the payment processer knowingly or consciously avoided knowing that debit card transactions it processed, on behalf of an allegedly fraudulent enterprise, were not authorized by the consumers. The FTC alleged that the company violated the 2009 order by, among other things, (i) failing to engage in a reasonable investigation of prospective clients before processing payments on their behalf; (ii) failing to monitor clients’ transactions to ensure that clients were not engaged in illegal behavior; and (iii) failing to adhere to administrative requirements of the order, including submitting a written compliance report to the agency. In addition to the monetary penalty, the new settlement permanently bans the company from working as a payment processor and subjects the company to reporting and recordkeeping requirements.
On April 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against four companies for their alleged involvement in the transportation of oil from Venezuela to Cuba. According to OFAC, the companies’ actions offer support to former President Maduro’s regime and contribute to the humanitarian crisis in Venezuela. In addition, OFAC identified nine vessels as blocked property owned by the identified companies. As a result, all property belonging to the sanctioned entities, and interests in property of the sanctioned entities (or of any entities owned 50 percent or more by them) subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with them. Furthermore, OFAC also referred financial institutions to Financial Crimes Enforcement Network advisories FIN-2017-A006, FIN-2017-A003, and FIN-2018-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds, as well as human rights abuses connected to foreign political figures and their financial facilitators.
Visit here for continuing InfoBytes coverage of actions related to Venezuela.
U.K. subsea services company and subsidiaries to pay $440,000 for Cuban and Iranian sanctions violations
On April 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced two settlements totaling more than $440,000 with a U.K. subsea services company and certain subsidiaries that operate in the oil and gas industry. The first settlement, for $227,500, resolves potential civil liability for seven alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, two of the company/subsidiaries’ Malaysian affiliates produced analytical reports and conducted workshops for oil well drilling projects in Cuban territorial waters related to projects managed by companies including Venezuela’s state-owned oil company, which was previously designated by OFAC in January (see InfoBytes coverage here). OFAC considered various aggravating factors—including that the alleged violations constitute an egregious case—and noted that the company/subsidiaries “willfully violated U.S. sanctions laws and regulations when they knowingly dealt with Cuban interests despite prior notification of their unlawfulness.” OFAC also noted that senior managers “deliberately concealed their dealings with Cuba on multiple occasions.” OFAC considered numerous mitigating factors, including the company/subsidiaries’ voluntarily self-disclosure of the apparent violations and remedial efforts taken to avoid similar violations from occurring in the future.
The same day OFAC announced a second settlement, this time for $213,866, which resolves potential civil liability for 13 alleged CACR violations. The settlement also resolves three alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR) by the company’s U.S.-based investor-parent company. According to OFAC, the company issued sanctions compliance guidance to all of its subsidiaries with instructions that transactions with Cuba and Iran (including indirect third parties) were prohibited. However, certain subsidiaries disregarded the guidance and allegedly engaged in transactions within Cuban and Iranian territorial waters. In reaching the settlement amount, OFAC determined, among other things, that (i) the company voluntarily self-disclosed the apparent violations; (ii) the alleged violations constitute a non-egregious case; (iii) the subsidiaries have confirmed the conduct has been terminated; and (iv) remedial efforts have been undertaken to minimize the risk of similar violations from occurring in the future.
On April 9, U.S. and U.K regulators announced that a London-based global financial institution would pay $1.1 billion to settle allegations by the DOJ, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the Federal Reserve Board, the New York Department of Financial Services (NYDFS), the Manhattan District Attorney, and the U.K.’s Financial Conduct Authority (FCA) for allegedly violating multiple sanctions programs, including those related to Burma, Cuba, Iran, Sudan, and Syria. According to the OFAC announcement, from June 2009 until May 2014, the institution processed thousands of transactions involving persons or countries subject to sanctions programs administered by OFAC, but the majority of the actions at issue concern Iran-related accounts maintained by the institution’s Dubai branches. OFAC alleged the Dubai branches processed transactions through the institution’s New York branches on behalf of customers that were physically located or ordinarily resident in Iran.
According to the $639 million settlement agreement, OFAC noted, among other things, that the institution “acted with reckless disregard and failed to exercise a minimal degree of caution or care” with respect to the actions at issue. Moreover, OFAC alleged that the institution had actual knowledge or reason to know its compliance program was “inadequate to manage the [the institution]’s risk.” OFAC considered numerous mitigating factors, including that the institution’s substantial cooperation throughout the investigation and its undertaking of remedial efforts to avoid similar violations from occurring in the future.
The $639 million penalty will be deemed satisfied by the institution’s payments to other U.S. regulators, which includes, $240 million forfeiture and $480 million fine to the DOJ, $164 million fine to the Federal Reserve, and $180 million fine to the NYDFS. The institution also settled with the FCA for $133 million. The settlement illustrates the risks to foreign financial institutions associated with compliance lapses when processing transactions through the U.S. financial system.
On April 3, the FTC announced that the U.S. District Court for the District of Nevada ordered a publisher and conference organizer and his three companies (defendants) to pay more than $50.1 million to resolve allegations that the defendants made deceptive claims about the nature of their scientific conferences and online journals, and failed to adequately disclose publication fees in violation of the FTC Act. Among other things, the FTC alleged, and the court agreed, that the defendants misrepresented that their online academic journals underwent rigorous peer reviews but defendants did not conduct or follow the scholarly journal industry’s standard review practices and often provided no edits to submitted materials. The court determined that the defendants also failed to disclose material fees for publishing authors work when soliciting authors and often did not disclose fees until the work had been accepted for publication. The court also found that the defendants falsely advertised the attendance and participation of various prominent academics and researchers at conferences without their permission or actual affiliation.
In addition to the monetary judgment, the final order grants injunctive relief and (i) prohibits the defendants from making misrepresentations regarding their publications and conferences; (ii) requires that the defendants clearly and conspicuously disclose all costs associated with publication in their journals; and (iii) requires the defendants to obtain express written consent from any individual the defendants represent as affiliated with their products or services.
On the same day, the FTC also announced a settlement with a subscription box snack service to resolve allegations that the company violated the FTC Act by misrepresenting customer reviews as independent and failing to adequately disclose key terms of its “free trial” programs. Specifically, the FTC alleged that the company provided customers with free products and other incentives in exchange for posting positive online reviews and misrepresented that independent customers made the reviews or posts. The company also allegedly offered “free trial” snack boxes without adequately disclosing key terms of the offer, including the stipulation that if the trial was not canceled on time, the customer would be automatically enrolled as a subscriber and charged the “total amount owed for six months of snack box shipments.” The proposed order, among other things, prohibits the specified behavior and requires the company to pay $100,000 in consumer redress.
On March 28, the U.S. District Court for the Central District of California entered a stipulated final judgment and order resolving the CFPB’s allegations against a California-based company for allegedly buying and selling personal information from payday and installment loan applications without properly vetting buyers and sellers. As previously covered by InfoBytes, the CFPB’s December 2015 complaint alleged that, among other things, the company (i) knew or should have known that the lead generators in its network used false or misleading statements to obtain consumer information; and (ii) connected consumers with lenders that offered less favorable loan terms than were otherwise available, did not comply with state usury limits, or claimed they were exempt from state regulation and jurisdiction. The stipulated order requires the company to pay $1 million for consumer redress and $3 million in civil money penalties. Additionally, the company is banned from acting as a lead generator, lead aggregator, or data broker in connection with the offering of certain loans. The company neither admitted nor denied the allegations.
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Daniel P. Stipano to discuss "The state of the BSA 2019: What’s working, what’s not, and how to improve it" at the West Coast Anti Money-Laundering Forum
- Buckley Webcast: The future of the Community Reinvestment Act
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Buckley Webcast: Amendments to the CFPB's proposed debt collection
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- APPROVED Webcast: State and SAFE Act licensing requirements for banks
- John C. Redding to discuss "TCPA compliance in the era of mobile" at the Auto Finance Risk Summit
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: Data breach litigation and biometric legislation
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- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium