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GA Department of Banking and Finance Orders Florida Mortgage Lender to Shut Down for Unlicensed Lending Activities
On April 8, the Georgia Department of Banking and Finance issued an Order to Cease and Desist (Order) to a Florida-based mortgage lender. The lender allegedly engaged in residential mortgage origination, brokering, and/or lending activities without having a valid license or the appropriate exemption from the state’s licensing requirements in violation the Georgia Residential Mortgage Act. The Order is final 30 days from the issuance date, but the Department can rescind the Order if, within that 30 day period, the company provides adequate documentation showing that it is either properly licensed or qualifies for exemption.
Georgia Banking Regulator Revokes License of Pennsylvania Mortgage Lender
On April 13, the Georgia Department of Banking and Finance (Department) entered into a Consent Order (Order) with a Pennsylvania-based mortgage lender and its owners for failing to file a timely application with the state regulator. Specifically, the Order was entered into with the lender to resolve a Notice of Intent to Revoke and proposed Orders to Cease and Desist for allegedly, among other things, allowing the acquisition of 10 percent or more of the ownership of a Georgia licensed entity without first filing an application with the Department, conducting business with an unlicensed person who is not exempt from licensing, employing a felon, and making false statements or misrepresenting material facts in mortgage loan documents. Under terms of the Order: (i) the lender must surrender its mortgage license and pay a $5,000 fine; (ii) one of its owners must surrender his MLO license, must pay two fines of $1,000 each to both the Department and the State Regulatory Registry, and is prohibited from being employed by a licensed Georgia mortgage broker or lender for five years; and (iii) another owner must contribute $1,000 to the State Regulatory Registry and is prohibited for five years from acquiring more than 10% voting shares of a Georgia licensed company. The Order also prohibits both aforementioned owners from: (i) applying for mortgage loan originator, mortgage broker, or mortgage lender licenses; (ii) serving as a director, officer or any other equivalent role for a Georgia licensee; and (iii) acting as a branch manager for a Georgia branch of a Georgia licensed mortgage broker or lender.
FCC Enters Into $25 Million Settlement Following Cell Phone Carrier Data Breach
On April 8, the Federal Communications Commission (FCC) announced a $25 million settlement with an international telecommunications carrier concerning the unauthorized release of the personal information of nearly 280,000 customers by certain employees. The alleged data breach took place over a 168-day period at carrier call centers in Mexico, Columbia, and the Philippines where employees of the carrier allegedly were paid by unauthorized third parties to disclose confidential customer information. The third parties appear to have sought the information to unlock and traffic stolen cell phones. The FCC Enforcement Bureau found that the data breach violated a carrier’s duty under Section 222 of the Communications Act and also constituted “an unjust and unreasonable practice” under Section 201. In addition to paying the $25 million civil money penalty, terms of the settlement require the carrier to (i) notify all affected customers and reimburse them for any subsequent credit monitoring services; and (ii) implement new internal policies to improve the carrier’s privacy and data security practices. For more information on the latest regulatory guidance on data security and evolving best practices, please visit the Privacy, Cyber Risk, and Data Security Resource Center.
CFPB Announces Action Against National Debt Collection Company
On March 30, the CFPB announced an enforcement action against a nationwide debt collection operation and its CEO for allegedly violating the FDCPA. The Bureau’s complaint alleges that the debt collection operation (i) posed as state or district attorneys by sending communication letters on prosecutors’ letterheads; (ii) threatened consumers with criminal prosecution for bounced checks before a state or district attorney had determined if a violation had occurred; and (iii) deceived consumers into believing that they must enroll in and pay for a financial education class to avoid potential criminal prosecution for bad checks. In addition to the $50,000 civil money penalty the company will pay, the proposed consent order requires that the debt collection operation: (i) end its deceptive communication practices; (ii) stop threatening customers with imprisonment; (iii) no longer use district attorney letterhead; and (iv) increase its supervision – to include state and district attorneys – of communicating with consumers about diversion programs.
FTC Announces Results of "Operation Ruse Control" on Auto Industry
On March 26, the FTC announced the results of Operation Ruse Control, “a nationwide and cross-border crackdown” on the auto industry with the intent to protect consumers who are purchasing or leasing a car. Efforts taken jointly by the FTC and its law enforcement partners resulted in over 250 enforcement actions, including the six most recent cases that involved (i) fraudulent add-ons; (ii) deceptive advertising; and (iii) auto loan modification. According to the press release, the FTC recently took its first actions against two auto dealers for its add-on practices, which allegedly violate the FTC Act by failing to disclose the significant fees associated with offered programs or services and misrepresenting to consumers that they would save money. Three auto dealers recently “agreed to settle charges that they ran deceptive ads that violated the FTC Act, and also violated the Truth in Lending Act (TILA) and/or Consumer Leasing Act (CLA).” Finally, at the FTC’s request, the U.S. District Court for the Southern District of Florida temporarily put an end to the practices of a company that charged consumers an upfront fee to “negotiate an auto loan modification on their behalf, but then often provided nothing in return.” The FTC’s recent actions are indicative of its ongoing efforts to prevent alleged fraud within the industry.
FTC Settles with Texas-Based Mortgage Company Over Mortgage Relief Scams
On March 5, the U.S. District Court for the Western District of Texas approved a settlement agreement between the FTC and a Texas-based mortgage relief company and its owners (Defendants) to resolve allegations that they charged customers up-front fees for services that were promised to reduce their mortgage interest rates or monthly payments. According to the complaint filed last year, the FTC alleged that the Defendants (i) misled consumers into believing that they would obtain mortgage loan modifications or help consumers avoid foreclosure; (ii) deceived consumers by instructing them to stop payment of their mortgages so that they could afford Defendants’ fees without disclosing that if they did so, consumers “could lose their homes or damage their credit ratings;” and (iii) failed to make required disclosures and illegally charged an upfront fee of, on average, $2,550. Among other requirements, the Order (i) requires the Defendants to pay more than $1.2 million in “equitable monetary relief,” and (ii) prohibits the Defendants from advertising, marketing, promoting or selling debt relief products or services. However, based on an assessment of the Defendants’ financial statements, the judgment will be partially suspended after the FTC receives approximately $68,000.
OFAC Announces Settlement with Money Services Business for Violations of Sanctions Programs
On March 23, Department of the Treasury’s OFAC announced a settlement agreement with a large money services business (MSB) for failing to implement an effective compliance program “to identify, interdict, and prevent transactions in apparent violation of the sanctions programs administered by OFAC.” According to the settlement, prior to the MSB’s 2013 “long term solution” to screen its transactions in real time against OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”), deficiencies in the company’s transaction monitoring compliance procedures allowed for the processing of hundreds of transactions with OFAC-sanctioned individuals and countries. Specifically, OFAC alleged that from October 20, 2009 to April 1, 2013, the MSB processed over 100 transactions to or from an account registered to an individual on the SDN List because its “automated interdiction filter” did not initially identify the account holder as a potential match to the SDN List, and when it did, the MSB Operations Agents dismissed alerts on six separate occasions after failing to obtain or review documentation corroborating the identity of the SDN. Under the terms of the agreement, the MSB will (i) pay over $7 million to the Department of the Treasury and (ii) within six months, provide OFAC a summary of the company’s current policies and procedures as they relate to screening transactions and/or customers” to ensure compliance with OFAC regulations.
DOJ Enters Into Plea Agreement with Oil Company For Violating U.S. Sanctions Laws
On March 25, the DOJ entered into a plea agreement with an oil company that agreed to pay over $230 million and plead guilty for facilitating illegal transactions and participating in trade activities with Iran and Sudan. According to the DOJ, from 2004 through 2010, the oil company’s subsidiaries provided oilfield services to customers in Iran and Sudan, and failed to adhere to U.S. sanctions against Iran and Sudan and enforce internal compliance procedures, resulting in a conspiracy to violate the International Emergency Economic Powers Act. Pending court approval, among other stipulations, the plea agreement also requires the oil company to (i) cease all operations in Iran and Sudan during the probation period; (ii) submit to a three-year period of corporate probation and agree to continue to cooperate with the government and not commit any additional felony violations of U.S. Federal law; and (iii) respond to requests to disclose information related to the company’s compliance with U.S. sanctions laws when requested by U.S. authorities.
Federal and State Agencies Announce $714 Million FX Settlement
On March 19, four federal and state agencies –DOJ, the Department of Labor (DOL), the SEC, and New York Attorney General – entered into a proposed $714 million settlement agreement against a large bank to resolve allegations of fraudulent conduct involving the pricing and misleading representation of a specific foreign exchange product. According to the settlement, for over a decade the bank misled clients about the pricing they received on the bank’s automatic platform used to execute trades on the clients’ behalf. The bank quoted clients prices that were at or near the least favorable interbank rate, purchased the most favorable interbank rate for themselves, and sold the highest prices to clients, profiting from the difference. Under the proposed settlement, the bank will pay (i) a $167.5 million civil penalty to the DOJ to resolve allegations brought under federal statutes including FIRREA and the False Claims Act; (ii) $167.5 million to the State of New York to resolve claims brought under the Martin Act; (iii) $14 million to the DOL for ERISA claims, (iv) $30 million to the SEC to resolve violations of the Investment Company Act, and (v) $335 million to settle private class action suits filed by customers. The bank also agreed to end its employment relationship with senior executives involved in the conduct.
FinCEN Assesses $75,000 Penalty Against Check Casher Business for Violating Anti-Money Laundering Laws
On March 18, the Financial Crimes Enforcement Network (FinCEN) assessed a $75,000 civil money penalty against a Colorado check casher and its general manager and ordered it to cease all business activities for “willfully violating” registration, reporting, and anti-money laundering provisions of the Bank Secrecy Act (BSA). The Colorado-based check casher had been the subject of three BSA compliance examinations by the Internal Revenue Service, “all of which found significant and repeated violations.” Under the BSA, money services business are required to implement anti-money laundering controls, conduct internal compliance reviews, and provide compliance training for all staff in an effort to prevent the facilitation of money laundering and the financing of terrorist activities. The Colorado check casher failed to employ such programs, which resulted in a significant amount of untimely and inaccurate currency transaction reports.