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Financial Services Law Insights and Observations


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  • District Court says defendant’s request for default judgment was more than "procedural mishap"


    On May 11, the U.S. District Court for the Eastern District of Kentucky partially granted and partially denied a defendant collection attorney’s (defendant’s) motion to dismiss a FDCPA suit. According to the memorandum opinion and order, the plaintiff defaulted on a loan and the defendant was hired to file a collection lawsuit on behalf of the creditor. Though the plaintiff responded to the suit, the defendant filed a motion for default judgment and motion for attorney’s fees, which was not served for the plaintiff. The defendant attempted to have the plaintiff’s employer garnish his wages, but the plaintiff challenged the garnishment. After reviewing the case, the state court vacated the default judgment and ordered the sides to arbitration. The collection suit was ultimately dismissed with prejudice. The current stage of the suit involves the plaintiff suing the defendant, alleging he violated the FDCPA by improperly seeking default judgment, failing to serve the motion for default judgment, opposing his wage garnishment challenge, and requesting disingenuous attorney’s fees. The district court granted the defendant’s motion to dismiss on the attorney’s fees and the provisions related to the wage garnishment. However, in respect to the allegations related to the filing for default judgment and failure to serve, the district court denied the motion to dismiss. The district court noted that the defendant’s “request for default judgment was more than ‘procedural mishap’—it was a ‘false, deceptive, or misleading representation [] in connection with the collection of any debt’ that seemingly caused faulty default judgment to be entered.”

    Courts FDCPA Debt Collection Kentucky Consumer Finance

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  • Kentucky enacts mortgage loan industry regulation bill

    On April 8, the Kentucky governor signed HB 643, which relates to regulating mortgage lenders. Among other things, the bill: (i) permits employees of a licensee to engage in the mortgage lending process from an alternate location if certain conditions are met; (ii) requires supervision and control of employees acting as mortgage loan originators; (iii) establishes requirements for licensees that allow employees to engage in the mortgage lending process from alternate work locations; (iv) prohibits records from being maintained at an alternate work location; and (v) permits mortgage loan companies and mortgage loan brokers to utilize third-party secure storage facilities if certain conditions are met.

    Licensing State Issues Kentucky Mortgages State Legislation

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  • FDIC announces Kentucky and Alabama disaster relief

    Federal Issues

    On April 30, the FDIC issued FIL-31-2021 and FIL-32-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Kentucky and Alabama affected by severe storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.

    Federal Issues FDIC Disaster Relief Kentucky Alabama Consumer Finance CRA Bank Regulatory

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  • Kentucky governor orders closing of all non-life-sustaining businesses

    State Issues

    On March 25, Kentucky Governor Andy Beshear issued an executive order mandating that only “life-sustaining businesses” may remain open and encouraged citizens to remain “healthy at home.” The list of life-sustaining businesses includes banks, credit unions, mortgage companies, payday lenders, check cashers, money transmitters, and securities institutions.

    State Issues Governors Credit Union Mortgages Payday Lending Mortgage Lenders Kentucky Covid-19 Executive Order

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  • Kentucky Department of Financial Institutions provide guidance to non-depository institutions

    State Issues

    On March 24, The Kentucky Department of Financial Institutions (DFI) provided guidance to non-depository institutions to take steps to comply with CDC directives and Governor Andy Beshear’s guidance and executive orders. Entities are ordered to reduce face-to-face transactions; work with customers affected by the coronavirus to meet their financial needs; implement policies and procedures to work constructively with customers (including by restructuring existing loans, extending repayment terms, and waiving fees); manage COVID-19 related staffing issues; and ensure that business continuity plans include pandemic planning.

    State Issues State Regulators Kentucky Non-Depository Institution Business Continuity Covid-19

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  • Kentucky Department of Financial Institutions issues guidance on changes in operations

    State Issues

    The Kentucky Department of Financial Institutions issued a statement recommending Kentucky chartered financial institutions to work with customers affected by Covid-19 to meet their financial needs, including waiving overdraft fees, restructuring existing loans, and extending loan payment terms. The statement provides that any bank or credit union that significantly alters its in-person operations should notify the Director of the Division of Depository Institutions by email.

    State Issues Covid-19 Kentucky

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