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Financial Services Law Insights and Observations

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  • Federal Reserve Board announces revised pricing for its Municipal Liquidity Facility

    Federal Issues

    On August 11, the Federal Reserve Board announced revised pricing for its Municipal Liquidity Facility. The revised pricing reduces the interest rate spread on tax-exempt notes for each credit rating category by 50 basis points and reduces the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes. The MLF, originally covered here, was one of several facilities intended to support the flow of credit in the economy.

    Federal Issues Covid-19 Federal Reserve FRB Interest Rate Credit Ratings

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  • District Court’s reversal of jury verdict in FDCPA case overturned

    Courts

    On December 12, the U.S. Court of Appeals for the Fifth Circuit reversed the district court’s ruling overturning a jury verdict in favor of the consumer for a debt collection company’s (company) violation of the FDCPA and the Texas Fair Debt Collection Practices Act (Texas Act). The consumer sued the company claiming that after she sent the company a letter disputing a debt, the company failed to report to the credit bureaus that the debt was “disputed.” At trial, the jury awarded the consumer $61,000 for the company’s alleged FDCPA and Texas Act violations. Afterwards, the district court granted the company’s post-trial motion for judgment as a matter of law, overturned the jury’s verdict, and dismissed the case, ruling that the consumer failed to provide evidence that the disputed debt was a consumer debt.

    On appeal, the 5th Circuit held that it is within the jury’s discretion to make credibility determinations and that it was permissible for the jury to credit the consumer’s testimony about the consumer nature of the debt—a determination which cannot be disturbed unless it is impossible that the testimony is true. In addition, the appellate court noted that the jury has discretion to draw inferences and that it reasonably inferred that the disputed debt was, in fact, a consumer debt, as the consumer claimed.

    Courts Appellate Fifth Circuit State Issues FDCPA Debt Collection Credit Ratings Credit Report Credit Scores

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  • FDIC adopts final rule to remove references to external credit ratings from international banking regulations

    Agency Rule-Making & Guidance

    On February 15, the FDIC announced it adopted a final rule, which removes references to external credit ratings from its international banking regulations related to permissible investment activities and the pledging of assets. According to FIL-9-2018, among other things, the amended final rule (adopted February 14) modifies the FDIC’s definition of “investment grade” under FDIC Rules and Regulations Part 347 by replacing references to external credit ratings with standards of creditworthiness that conform to Section 939A of the Dodd-Frank Act. As FIL-9-2018 explains, the final rule defines “investment grade” as a security issued by an entity that has adequate capacity to meet financial commitments for the projected life of the exposure. And as the final rule itself explains, this revision was made to “encourage regular, in-depth analysis by the banking organization of credit risks of securities, which is a prudent practice already expected of banks.” The final rule takes effect on April 1.

    Agency Rule-Making & Guidance FDIC International Credit Ratings Dodd-Frank

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