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CFPB Releases Diversity and Inclusion Plan for 2016-2020
On October 27, following a March 4 CFPB Office of the Inspector General report on the CFPB’s diversity and inclusion efforts, the CFPB released a five-year Diversity and Inclusion Strategic Plan. Based on regulations and guidance from the Equal Employment Opportunity Commission and the Dodd-Frank Act, the plan is built around the following objectives: (i) recruit a diverse workforce; (ii) enable individuals to contribute to their full potential; (iii) ensure sustainability of the plan; (iv) increase opportunities for minority and women owned businesses; and (v) assess diversity practices of regulated entities. Regarding the fifth objective, the report states that, through the Office of Minority and Women Inclusion, the CFPB will use interagency policy standards to assess regulated entities’ diversity and inclusion policies and procedures and collect baseline data that will serve as a survey of best practices for institutions.
OCC Updates Floor Plan Lending Guidance
On October 27, the OCC issued an updated Floor Plan Lending booklet of the Comptroller’s Handbook. The revised booklet (i) summarizes the basics of floor plan lending for examiners, including a description of indirect dealer lending and the regulatory and legal foundation for floor plan lending; (ii) provides banks with sound risk management practices and describes regulatory risk rating guidelines; and (iii) includes an expanded examination procedures section with examples of risk rating cases and factors for determining the quantity of credit risk and the quality of credit risk management. The updated booklet replaces a similarly titled booklet issued in March 1990, as well as section 216 of “Floor Plan and Indirect Lending” issued in January 1994 as part of the former Office of Thrift Supervision’s Examination Handbook.
CFPB Monthly Complaint Report Highlights Credit Cards
On October 27, the CFPB released its Monthly Complaint Report focusing on credit card complaints. The CFPB has received over 79,000 credit card-related complaints since it began receiving those complaints in July 2011. According to the report, consumer complaint issues specific to credit cards include: (i) confusion over how late fees are assessed; (ii) confusion about how to dispute inaccuracies in billing statements; (iii) accounts being closed without consent; and (iv) inability to allocate payments as consumers desire. The report also notes that, as of October 1, the CFPB has handled about 726,000 complaints across all product lines since it started receiving complaints.
New York Attorney General Asks Banks to Examine Consumer-Screening Protocols
On October 27, New York Attorney General Eric Schneiderman issued a letter to nearly 100 banks operating in New York requesting that they examine and revise their screening policies for deposit accounts to expand access to mainstream banking to the unbanked and underbanked communities. The letter is part of a 2013 initiative that led to agreements with five banks regarding their screening of applicants seeking to open checking or savings accounts. According to the New York AG’s office, its prior examination revealed that “many financial institutions reject applicants for minor financial missteps, even when those missteps occurred years ago, involved de minimis amounts, or otherwise did not reflect a consumer’s ability to pay responsibly.” In the prior agreements, the five banks committed to taking a number of steps to reform deposit account screening criteria to expand access. The recent letter urges approximately 100 banks to examine their practices and adopt similar measures.
FTC and International Partners Launch New Information-Sharing System
On October 25, the FTC and seven members of the Global Privacy Enforcement Network (GPEN) launched GPEN Alert, a new information-sharing system designed to enhance coordinated efforts to protect consumer privacy. The FTC and seven data protection authorities from Australia, Canada, Ireland, the Netherlands, New Zealand, Norway, and the United Kingdom signed an MOU to participate in GPEN Alert. GPEN Alert is based on the FTC’s Consumer Sentinel Network and will allow participating agencies to confidentially share information about privacy investigations and enforcement actions.
DOJ Announces Sentencing of Former DEA Agent for Criminal Involvement in Silk Road Investigation
On October 19, the DOJ announced that a former DEA agent was sentenced to 78 months in prison for crimes he committed while working as an undercover agent in the Silk Road investigation. On July 1, the former DEA agent pleaded guilty to charges of extortion, money laundering, and obstruction of justice. Using his DEA-sanctioned persona, “Nob,” the former agent sold Ross Ulbricht – Silk Road’s convicted operator – fake drivers’ licenses and inside information about the investigation, directing Ulbricht to conceal his payments, which were made in bitcoin, using encrypted messaging. Understanding that the payments were government property and constituted evidence of a crime, the former agent admitted to falsifying reports and depositing the funds into his own personal bank accounts, receiving more than $100,000 in bitcoin payments from Ulbricht. In addition, the former agent created another, not government-sanctioned online persona, “French Maid,” which he used to solicit and receive approximately $100,000 in bitcoins from Ulbricht in exchange for information on the government’s Silk Road investigation. The former agent also admitted to serving as the chief compliance officer for a digital currency exchange company, even though he did not receive permission from the DEA to do so. In February 2014, the company alerted him to suspicious activity in a certain account, but, using his capacity as a DEA agent, the former agent directed the company to freeze $337,000 in cash and digital currency from the account, and then transferred $300,000 of the digital currency into an account he controlled. In addition to his prison sentence and post-sentence supervision, the former DEA agent will pay $340,000 in restitution.
FTC Announces Agenda, Panelists for Lead Generation Workshop Addressing Consumer Protection Issues
On October 19, the FTC announced the agenda for its upcoming workshop entitled, “Follow the Lead: An FTC Workshop About Online Lead Generation.” As consumers search the internet for goods and services, they are often times asked to provide sensitive personal and financial information that a lead generator may then subsequently transfer to third-party marketing companies. The workshop will examine consumer protection issues raised as a result of the practices of the lead generation industry, and is scheduled to host the following panels in Washington, DC on October 30: (i) Introduction to Lead Generation Marketplace and Mechanics; (ii) Case Study on Lead Generation in Lending; (iii) Case Study on Lead Generation in Education; (iv) Overview of Consumer Protection Concerns and the Legal Landscape; and (v) Looking Ahead – Protecting and Educating Consumers.
CFPB Releases Tips Urging States to Adapt Guides Designed for Financial Caregivers
On October 19, the CFPB released tips on how state bar associations and other legal organizations and professionals in all states can adapt the CFPB’s Managing Someone Else’s Money guides, which were released nationwide in 2013, followed by state-specific guides for Virginia in August 2015, and Florida in September 2015. The four guides – (i) Agents under a power of attorney; (ii) Court-appointed guardians of property and conservators; (iii) Trustees; and (iv) Government-benefit fiduciaries – were designed to help financial caregivers manage another person’s finances and help protect them from financial scam and exploitation. While the CFPB intends to release state-specific guides for Arizona, Georgia, Illinois, and Oregon in early 2016, the agency’s recent release of tips, which includes a list of topics most frequently changed in the state-specific guides, encourages the remaining states and territories that have varying fiduciary laws to adapt similar guides: “We hope this replication package will empower state bar associations and other groups of lawyers, courts, state agencies, and other professionals to collaborate in producing state-specific versions of these guides.”
Fannie Mae Announces New Tools for Lenders
On October 19, Fannie Mae announced four changes: (i) the availability of trended credit data, which may allow a more thorough analysis of borrowers’ credit history; (ii) the availability of nontraditional credit history in Desktop Underwriter; (iii) a new tool, Fannie Mae Connect, which provides a self-service reporting and data analytics portal for customers and business partners; and (iv) the ability to validate a borrower’s income in Desktop Underwriter using data provided by Equifax’s The Work Number®. These changes follow Fannie Mae’s April notification regarding the integration of Collateral Underwriter, an appraisal and analysis application, with Desktop Underwriter and EarlyCheck – an integration intended to help lenders more effectively manage risk, underwrite strong loans, and build their businesses.
Multiple Agencies Take Action Against Paris-Based Investment Bank for Sanctions Violations
On October 20, the DOJ, OFAC, the NYDFS, the Manhattan District Attorney’s Office, and the Federal Reserve simultaneously announced that a Paris-based investment bank would pay a total of more than $787 million to settle multiple alleged violations of U.S. sanctions regulations. The OFAC settlement resolves allegations that the investment bank and certain predecessor banks, between August 6, 2003 and September 16, 2008, processed 4,055 transactions – for a total of approximately $337,043,846 – to or through U.S. financial institutions that involved countries and/or persons subject to the sanctions regulations administered by OFAC. The investment bank settled with OFAC for more than $329,500,000, an amount that reflects the agency’s consideration of the following aggravating factors: (i) the investment bank had indications that its actions had the potential to constitute violations of the U.S. law before the earliest date of the apparent violations; (ii) several managers of the investment bank were aware of the conduct that led to the violations; (iii) the investment bank’s conduct resulted in significant harm to various sanctions programs OFAC oversees and their associated policy objectives; (iv) the investment bank’s size and sophistication, along with its global presence; and (v) the investment bank’s failure to maintain proper controls to prevent the violations from occurring and otherwise maintain an adequate compliance program.
In addition to OFAC’s settlement, parallel actions against the bank resulted in the investment bank agreeing to pay (i) $385 million to the NYDFS; (ii) $90.3 million to the Federal Reserve; (iii) $156 million to the Manhattan District Attorney’s Office; and (iv) $156 million to the U.S. Attorney’s Office for the District of Columbia.