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District Court Concludes Mortgage Servicer's Actions Violated RESPA
On January 28, the U.S. District Court for the Western Division of Washington, having determined that a mortgage loan servicer violated the Real Estate Settlement Procedures Act (RESPA) and committed the tort of outrage, ordered the servicer to pay more than $200,000 in economic and emotional distress damages to a borrower. Lucero v. Cenlar FSB, No. 13-0602 (W.D. Wash. Jan. 28, 2016). The borrower and servicer had agreed to a loan modification in early 2013. However, the borrower believed that the servicer was misreporting her loan as delinquent, in spite of the modification. In April 2013, the borrower filed a lawsuit against the mortgage servicer alleging “that [it] violated its credit reporting obligations” and “seeking damages related to the way in which [the mortgage servicer] (and others) had sought to foreclose on her mortgage.” The servicer then began charging the plaintiff for attorney’s fees and costs that it was incurring in defending the ongoing litigation. The plaintiff requested additional information regarding the charges on numerous occasions, but it was not until June 2014 that the servicer’s counsel said “that the fees that were charged to her account had incurred in this litigation, that they are recoverable under the Deed of Trust, and that the notifications were required by a federal regulation.” The court found that the servicer “failed to timely and fully respond to [the plaintiff’s] March 25, 2014 requests for information regarding the nature of and jurisdiction for the fees that were appearing on her monthly statements,” a violation RESPA, which requires “servicers to respond to a qualified written request…for information within specified time frames.” It also held that the charging of attorney’s fees to the borrower was not permitted under the Deed of Trust under the circumstances. In awarding emotional distress damages, the court stated that the servicer’s message to the plaintiff – “continue this litigation and we will take your home” – was “beyond the bounds of decency and [] utterly intolerable.”
FCC and FTC Issue MOU for Continued Cooperation on Consumer Protection Matters
On November 16, the FCC and the FTC executed a Memorandum of Understanding (MOU) on continued cooperative efforts to protect consumers from unfair or deceptive acts or practices involving telecommunications services. In an effort to formalize existing cooperation among the agencies, the MOU outlines the ways in which the two agencies will continue to work together, including: (i) coordinating agency initiatives where one agency’s action will significantly impact the other agency’s authority or programs; (ii) sharing investigative techniques and tools, intelligence, technical and legal expertise, as necessary, in addition to best practices in response to reasonable requests for such assistance; and (iii) collaborating on consumer and industry outreach and education efforts, as appropriate. Moreover, the MOU identifies the scope of each agency’s enforcement authority with respect to common carriers, and confirms that the 2003 MOU regarding Telemarketing Enforcement between the two agencies remains effective, stating that the most recent MOU should not “be construed as altering, amending, or invalidating that [2003] MOU.”
Deputy Attorney General Yates Expands on DOJ's White-Collar Prosecution Policy
On November 16, the DOJ’s Deputy AG Sally Yates delivered remarks at the American Bankers Association and American Bar Association Money Laundering Enforcement Conference. Yates focused her remarks on recent revisions – originally outlined in a September 9 policy memorandum – to the United States Attorney’s Manual (USAM), as follows: (i) updating the corporate criminal cases section, specifically the “Principles of Federal Prosecution of Business Organizations” chapter, or the “Filip factors”; (ii) implementing an entirely new section to the civil cases chapter on enforcing claims against individuals in corporate matters; and (iii) updating its policy on parallel proceedings. First, the DOJ updated the Filip factors and the written guidance accompanying the factors to emphasize individual accountability in corporate cases and company cooperation in the DOJ’s investigation of individual wrongdoing. Yates highlighted the following policy change: “In the past, cooperation credit was a sliding scale of sorts and companies could still receive at least some credit for cooperation, even if they failed to fully disclose all facts about individuals. That’s changed now… providing complete information about individuals’ involvement in wrongdoing is a threshold hurdle that must be crossed before [the DOJ will] consider any cooperation credit.” Yates further noted that the new policy does not change the meaning of attorney-client privilege, but requires companies to turn over all relevant non-privileged information with the expectation that the companies respect the boundaries of attorney-client privilege. The USAM’s new chapter on civil cases mimics the individual accountability policies outlined in the Filip factors revisions, with the DOJ instructing its civil attorneys to abide by the same principles that guide criminal prosecutors’ efforts. Finally, revisions to the USAM’s parallel proceedings policy stress the importance of routine communication between criminal prosecutors and civil attorneys handling white collar matters to ensure a “resolution for both the individual and the corporation that is in the best interest of the public.”
FTC Signs Memorandum of Agreement to Prevent Fraudulent and Deceptive Practices Against Servicemembers
On November 12, the FTC announced that it signed a Memorandum of Agreement with the Veterans Administration (VA) to provide mutual assistance in preventing fraudulent and deceptive acts by “institutions of higher learning and other establishments that offer training” targeting U.S. servicemembers, veterans, and dependents using military education benefits. In its press release, the FTC warned servicemembers of for-profit schools that may make unrealistic promises and pressure them to enroll in unnecessary courses or take out loans they may not be able to pay off.
Texas Department of Banking Issues Supervisory Memorandum to Money Services Business License Holders
On October 29, the Texas Department of Banking (the Department) issued a supervisory memorandum to Money Services Business (MSB) license holders. The purpose of the memorandum “is to provide license holders with industry best practices regarding the documentation of [authorized delegate] and agent compliance monitoring efforts.” According to the Department, agents and Authorized Delegates (AD) pose substantial compliance risks to MSBs, with agent and AD file review comprising “a significant component of the examination process for assessing compliance with AML Program requirements and Texas law.” The memorandum provides MSBs with industry guidance on how to meet regulators’ expectations for maintaining documentation in compliance with agent and AD oversight. The Department identifies various documents that support effective agent and AD on-boarding due diligence, including: (i) agent and AD BSA policies and procedures; (ii) approval by foreign regulators to conduct money transmission; (iii) evidence of initial AML/BSA training; and (iv) credit review and approval documents, such as financials and credit reports. Moreover, the memorandum indicates that on-going due diligence requires MSBs to maintain, among other things, evidence to support (i) periodic BSA training; (ii) agent compliance with independent AML review requirements; and (iii) the license holder’s review of updated BSA/AML Program policies and procedures.
National Labor Relations Board Issues Guidance Regarding Electronic Signatures
On October 26, the National Labor Relations Board issued revised guidance regarding its acceptance of electronic signatures to support a showing of interest. The revised guidance requires electronic signatures to contain the following information: (i) the signer’s name; (ii) the signer’s e-mail address or other known contact information, such as a social media account; (iii) the signer’s telephone number; (iv) the language to which the signer has agreed; (v) the electronic submission date; and (vi) the name of the employee’s employer. If the electronic signature technology used does not support digital signatures that can be independently verified by a third party, then “the submitting party must submit evidence that, after the electronic signature was obtained, the submitting party promptly transmitted a communication stating and confirming” the required information. Electronic submissions should not include personal identifiable information, such as the signer’s date of birth and social security number. Finally, a declaration must be submitted with an electronic signature to: (i) identify the technology used and explain how its controls ensure the authenticity of the signature; and (ii) show that the electronically transmitted information explaining what and when the employees signed is the same information that the employees saw and agreed to.
DOJ Unveils New Policy on Individual Liability in White-Collar Prosecutions
On September 9, the Department of Justice (DOJ), issued a policy memorandum concerning DOJ’s goal of holding individuals accountable for corporate fraud or other misconduct. While some of the guidelines set forth in the memorandum are statements of practices already being followed by DOJ, or by specific U.S. Attorney’s Offices, some of the measures are new and reflect an enhanced focus on DOJ’s goal of holding individuals criminally or civilly liable for corporate wrongdoing. The memo sets forth “six key steps” to accomplish this goal and further DOJ’s underlying policies of deterring future illegal activity, incentivizing change in corporate behavior, holding proper parties responsible for their actions, and promoting public confidence in the justice system.
First, the memo provides that, to be eligible to receive any credit for cooperating with the government in a civil or criminal investigation, a company must completely disclose to DOJ all relevant facts about individual misconduct, regardless of the individual’s position, status or seniority at the company. If a company provides incomplete information about individual employees’ misconduct, then the company’s cooperation will not be considered a mitigating factor in a criminal investigation and will not support, in the case of a prosecution, a cooperation-related reduction at sentencing. Likewise, where the company is not completely forthcoming about individual wrongdoing in a civil investigation, DOJ will not consider the company’s cooperation in negotiating a settlement agreement.
Second, the memo provides that both criminal and civil investigations should focus on individuals from the outset of the investigation, in order to discern the full extent of alleged misconduct, increase the likelihood of cooperation by individuals with knowledge of the misconduct, and maximize the chances that resolution of the investigation will include civil or criminal charges against both the company and culpable individuals.
Third, the memo emphasizes that DOJ criminal and civil attorneys should be in routine communication with one another, so that the DOJ can consider the full range of potential remedies to address alleged misconduct by individuals.
Fourth, the memo provides that, absent “extraordinary circumstances,” no corporate resolution will provide protection for criminal or civil liability for any individuals. Fifth, the memo states that DOJ attorneys should not resolve civil or criminal investigations of a corporation without a “clear plan” to resolve related individual cases. In addition, if a decision is made not to prosecute or proceed civilly against individuals who committed the misconduct, DOJ attorneys must memorialize and submit for approval the reasons for that decision.
Finally, the memo provides that civil prosecutors should consistently focus on individuals as well as the company, and evaluate the decision whether to sue an individual based on considerations beyond the individual’s ability to pay. The memo notes that, while DOJ attorneys may validly consider an individual corporate wrongdoer’s ability to satisfy a judgment in determining whether to pursue an action against that person, DOJ attorneys also should consider other goals and concerns in making this determination, including such things as the seriousness of a person’s misconduct, the person’ s past history, the ability to obtain and sustain a judgment, and the long-term deterrent effects of holding an individual accountable.
National Labor Relations Board Determines Parties May Submit E-Signatures to Support a Show of Interest
In a September 1 memorandum, the National Labor Relations Board’s (NLRB) general counsel, Robert Griffin, issued guidance for accepting electronic signatures in support of a showing of interest, per the NLRB’s December 15, 2014 final rule that became effective on April 14, 2015. In its final rule, the NLRB concluded that its regulations were “sufficient to permit the use of electronic signatures” to support a showing of interest and called on Griffin to determine the standards for when and how electronic signatures should be accepted. Ultimately, Griffin determined that “the evidentiary standards that the Board has traditionally applied to handwritten signatures apply equally to electronic signatures and that it is practicable to accept electronic signatures in support of a showing of interest.” Current requirements for a support of showing of interest using handwritten signatures do not require the employee to provide personal contact information; however, the requirements Griffin outlined in the memorandum “are more stringent than what is currently required for non-electronic signatures,” including the prerequisite that an employee provide personal contact information when submitting electronic signatures. In accordance with Congress’s intention that the NLRB, and other Federal Agencies, “accept and use electronic forms and signatures, when practicable,” the NLRB will now accept electronic signatures along with handwritten signatures, effective immediately.
District Court Rejects Lender's Motion to Dismiss in Ongoing Litigation with CFPB
On June 12, the United States District Court for the Eastern District of California denied Castle & Cooke Mortgage’s motion to dismiss in a putative class action brought by affected borrowers stemming from Castle and Cooke’s 2013 settlement with the CFPB. The underlying complaint is based on the allegation that the “loan officer who sold plaintiff his mortgage loan was paid a bonus that was based, at least in part, on the fact that plaintiff received a more expensive and/or less favorable loan than he otherwise would have received.” The complaint seeks various remedies, including actual and statutory damages under the Truth in Lending Act. The complaint contains four separate causes of action: (i) violations of TILA, (ii) violations of the Utah Residential Mortgage Practices and Licensing Act, (iii) unjust enrichment under Utah law, and (iv) violations of the California Unfair Competition Law. Castle & Cooke only moved to dismiss the final two claims. In denying Castle & Cooke’s motion to dismiss, the court found that both challenged claims could be pursued, rejecting Castle & Cooke’s arguments that the claims were inappropriate given the remedies available under TILA. With this denial, the plaintiffs will be able to continue pursuing all four causes of action as the litigation continues.
FTC and CFPB Reauthorize Memorandum of Understanding
On March 12, the FTC announced its coordination with the CFPB to reauthorize for a three-year term their memorandum of understanding (MOU), which outlines the two agencies’ coordination under the Consumer Financial Protection Act. The interagency agreement outlines processes for, among other things, coordinated law enforcement activities, commencement of or settling investigations and actions and proceedings, intervention in law enforcement actions, consultation on rulemaking and guidelines, sharing supervisory information, sharing consumer complaint information, and coordination to minimize duplicative or burdensome oversight or administrative proceedings.