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Financial Services Law Insights and Observations

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  • Maryland expands scope of unfair and deceptive practices under the Maryland Consumer Protection Act, increases maximum civil penalties

    State Issues

    On May 15, the Maryland governor signed HB1634, the Financial Consumer Protection Act of 2018, which expands the definition of “unfair and deceptive trade practices” under the Maryland Consumer Protection Act (MPCA) to include “abusive” practices, and violations of the federal Military Lending Act (MLA) and Servicemembers Civil Relief Act (SCRA). The law also, among other things:

    • Civil Penalties. Increases the maximum civil penalties for certain consumer financial violations to $10,000 for the initial violation and $25,000 for subsequent violations
    • Debt Collection. Prohibits a person from engaging in unlicensed debt collection activity in violation of the Maryland Collection Agency Licensing Act or engaging in certain conduct in violation of the federal FDCPA.
    • Enforcement Funds. Requires the governor to appropriate at least $700,000 for the Office of the Attorney General (OAG) and at least $300,000 to the Office of the Commissioner of Financial Regulation (OCFR) for certain enforcement activities.
    • Student Loan Ombudsman. Creates a Student Loan Ombudsman position within the OCFR and establishes specific duties for the role, including receiving, reviewing, and attempting to resolve complaints from student loan borrowers.
    • Required Studies. Requires the OCFR to conduct a study on Fintech regulation, including whether the commissioner has the statutory authority to regulate such firms. The law also requires the Maryland Financial Consumer Protection Commission (MFCPC) to conduct multiple studies, including studies on (i) cryptocurrencies and initial coin offerings and (ii) the CFPB’s arbitration rule (repealed by a Congressional Review Act measure in November 2017).

    State Issues UDAAP SCRA Military Lending Act FDCPA Student Lending Arbitration Civil Money Penalties Fintech Cryptocurrency State Legislation

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  • FTC Commissioner calls for stricter penalties and structural remedies against recidivist companies that violate consent orders

    Federal Issues

    On May 14, FTC Commissioner Rohit Chopra released a memo to FTC staff and commissioners calling for more forceful penalties and structural remedies against companies and individuals that fail to comply with consent orders. Chopra announced that a key consideration for the FTC will be “whether the proposed remedies address the underlying causes of the noncompliance.” He proposed several “structural remedies” for the FTC to consider implementing against “recidivist” companies such as (i) banning certain business practices; (ii) forcing divestiture or closure of problematic operating units; (iii) removing company executives and board directors responsible for overseeing conduct that violates an order; (iv) dismissing third-party compliance consultants who fail to detect conduct that violates an order; (v) targeting company executives and through “clawbacks, forfeitures, and reforms to executive compensation agreements;” and (vi) requiring firms to raise equity capital should corporate debt “create risks to consumers and competition in the form of an order violation.” Chopra stated that repeat offenders who “flout our orders must face severe consequences—irrespective of whether they are small-time scammers or sophisticated corporations.”

    Federal Issues FTC Enforcement Civil Money Penalties

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  • Treasury adjusts for inflation maximum civil monetary penalties assessed under OFAC sanction regulations

    Agency Rule-Making & Guidance

    On March 19, the U.S. Treasury Department published a final rule in the Federal Register that adjusts for inflation the maximum amount of civil monetary penalties that may be assessed by the Treasury’s Terrorism Risk Insurance Program, Office of Foreign Assets Control, and Financial Crimes Enforcement Network for violations of laws administered by those agencies. The rule became effective immediately.

    Agency Rule-Making & Guidance Financial Crimes OFAC Civil Money Penalties Department of Treasury Federal Register Sanctions

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  • FinCEN adjusts civil penalties for inflation

    Agency Rule-Making & Guidance

    On March 19, the Financial Crimes Enforcement Network (FinCEN) published a final rule  adjusting upward the maximum amount of the civil monetary penalties within its jurisdiction, as required by the Inflation Adjustment Act. As explained in the rule, the new maximum penalty amounts for 2018 are calculated by multiplying the corresponding 2017 penalty by a “cost-of-living adjustment” multiplier—which for 2018 has been set by the OMB at 1.02041—and then rounding to the nearest dollar. The rule is effective March 19. 

    Agency Rule-Making & Guidance FinCEN Civil Money Penalties

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  • Agencies adjust civil penalties for inflation

    Agency Rule-Making & Guidance

    On January 12, the CFPB published a final rule adjusting upward the maximum amount of each civil penalty within their jurisdictions, as required by the Inflation Adjustment Act. As explained in the rule, the new maximum penalty amounts for 2018 are calculated by multiplying the corresponding 2017 penalty by a “cost-of-living adjustment” multiplier—which for 2018 has been set by the OMB at 1.02041—and then rounding to the nearest dollar. The new penalty amounts apply to civil penalties assessed after January 15, 2018.

    In addition, the FDIC, the OCC, and the Federal Reserve recently issued similar Civil Penalty Inflation Adjustment notices.

    Agency Rule-Making & Guidance CFPB OCC FDIC Civil Money Penalties

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