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  • ABA Sues Credit Union Regulator Over Field of Membership Rule

    Courts

    On December 7, the American Bankers Association (ABA) filed a lawsuit in federal court seeking to overturn a final rule published by the National Credit Union Administration (NCUA) in that morning’s Federal Register. The final rule purports to “implement changes in policy affecting: The definition of a local community, a rural district, and an underserved area; the chartering and expansion of a multiple common bond credit union; the expansion of a single common bond credit union that serves a trade, industry or profession; and the process for applying to charter, or to expand, a federal credit union.”

    ABA’s law suit contends, among other things, that by “fail[ing] to adhere to the limitations on federal credit unions established by Congress,” the NCUA’s final rule “upsets the balance Congress struck between granting federal credit unions tax-favored status and limiting their operations to carefully circumscribed groups or localities that share a common bond.” Under the final rule, scheduled to take effect Feb. 6, Federal Credit Unions (FCUs) can apply to serve entire geographic regions, so-called “rural districts” up to 1 million people (which include the entirety of Alaska, North Dakota, South Dakota, Vermont or Wyoming), and areas contiguous to their existing service areas. NCUA is also facilitating easier conversions to community charters.

    Courts Banking NCUA Federal Register Agency Rule-Making & Guidance

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  • Mortgage Companies Penalized for Deceptive Reverse Mortgage Ads; Must Take Corrective Action

    Courts

    On December 7, the CFPB announced that it had entered into consent orders with three reverse mortgage companies to settle claims that their advertisements for those mortgages were deceptive under the Mortgage Acts and Practices Advertising Rule. The alleged misconduct included deceptive advertising campaigns that misrepresented, among other things: (i) the risk of losing home and the right to remain in the home; (ii) expected costs and mortgage payments; (iii) government affiliations of the mortgage company; and (iv) the effectiveness of a reverse mortgage credit product to eliminate debt.

    The consent orders require the companies to make clear and prominent disclosures in their reverse mortgage advertisements and implement systems to ensure they are following all laws. One of the three firms also cannot imply affiliation with the government and must maintain complete and accurate records. In addition, the consent orders impose civil penalties ranging from $65,000 up to $400,000.

    Courts Mortgages Consumer Finance CFPB Reverse Mortgages Mortgage Advertising

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  • Federal District Court Holds Claims Brought by CFPB Alleging Deceptive Conduct Must Meet Heightened Rule 9(b) Standard

    Courts

    In a recent case, a California District Court held that CFPB’s claims alleging deceptive conduct under the Telemarketing Sales Rule (“TSR”) against a credit repair company failed to meet the heightened pleading requirement under Fed. R. Civ. P. 9(b), under which a plaintiff must “state with particularity the circumstances constituting fraud” – including pleading “the time, place, and specific content of the false representations.” CFPB v. Prime Marketing Holdings, LLC, CV 16-07111-BRO, Dkt. No. 32 (C.D. Cal. Nov. 15, 2016).

    Specifically, the court in Prime Marketing Holdings concluded that the CFPB’s general allegations of deception “failed to identify any specific instances where the defendant made such a misrepresentation” including, for instance, “what representations were made, when these representations were made and to whom they were made.” Id. at 12-13. Based on this finding, the court dismissed without prejudice the four deception-based claims. Id.

    Courts Consumer Finance Fraud CFPB Telemarketing Sales Rule

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  • Supreme Court Weighs in on Insider Trading in Salman v United States

    Courts

    In its first insider trading decision in nearly two decades, the US Supreme Court ruled unanimously to uphold an insider trading conviction of an individual who traded while aware of material non-public information received from a friend who received no financial benefit in exchange. Salman v. United States, No. 15-628, 2016 WL 7078448 (U.S. Dec. 6, 2016).

    The defendant in Salman was convicted in 2013 for trading on confidential information obtained through his brother-in-law even though Salmon he gained no tangible financial benefit. The appeal thus presented the Justices with the central question of how to define a “personal benefit” garnered from insider information. In upholding Salman’s conviction, the Supreme Court affirmed that a user of financial tips breaches fiduciary duty with respect to “insider information” from a relative, whether or not the person giving the information receives a tangible financial benefit. In so holding, the Court also undercuts a narrower interpretation in a case decided by the Second Circuit in 2014 that held that the person who provides the tips must receive something of value in exchange for inside information given to family or friends.

    Courts Criminal Enforcement U.S. Supreme Court

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  • PHH Response Due Date Pushed Back as Solicitor General Permitted to Respond to CFPB's Petition in PHH Corp. v. CFPB by December 22

    Courts

    As discussed previously, the D.C. Circuit ordered PHH to respond to the CFPB’s petition for en banc review of the October 2016 three-judge panel decision in PHH Corp. v. CFPB. In an Unopposed Motion for Leave to file the United States' Response, filed December 1, the Office of the Solicitor General sought permission to file its own responsive briefing on or before December 22. In an Order issued December 1, the D.C. Circuit granted the Solicitor General’s request, but also moved back the due date for PHH’s responsive papers so that both responses are now due on December 22.

    Earlier in the week, on November 30, two groups filed amicus briefs in support of the CFPB’s petition together along with motions requesting an invitation from the court. The first brief was submitted by a group of leading consumer protection organizations, while the second brief was filed by a group of 21 current and former members of Congress.

    Courts Consumer Finance CFPB U.S. Senate U.S. House PHH v. CFPB

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  • Federal Judge Blocks Dept. of Labor Overtime Rule from Taking Effect Next Week

    Courts

    On November 22, a federal judge in Texas issued a nationwide preliminary injunction blocking the enactment of the Department of Labor's (DOL’s) new overtime salary threshold under the Fair Labor Standards Act. In his order—issued in response to a lawsuit brought by 21 states and several business groups—Judge Amos L. Mazzant, III noted that the DOL does not have the authority to utilize a salary-level test or an automatic updating mechanism. By granting the preliminary injunction, the judge has delayed the rule (which was set to take effect on December 1) from becoming effective until further legal proceedings may occur. Plaintiffs’ motion for summary judgment, which seeks to invalidate the final rule, has already been briefed.

    Courts Fair Labor Standards Act

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  • Eleventh Circuit Stays Enforcement of FTC's LabMD Order

    Courts

    In an order released November 10 in LabMD, Inc. v. FTC, the Eleventh Circuit stayed the execution of an FTC data security enforcement order against LabMD Inc. pending the appellate court’s own ruling on whether the agency acted on an unreasonable interpretation of what security companies must provide.  LabMD, Inc. v. FTC, No. 16-16270-D, Order Granting Stay (11th Cir. Nov. 10, 2016).

    The FTC had ruled in July that LabMD’s data security practices violated the FTC Act, clarifying and expanding upon the FTC’s authority to regulate corporate data security practices. After an FTC administrative law judge denied LabMD’s request to stay enforcement until the medical company had exhausted its remedies on appeal, LabMD appealed to the Eleventh Circuit, which granted the stay in a unanimous decision.

    Noting that the case turns upon whether the FTC’s interpretation of the FTC Act is reasonable, the Appellate cCourt granted the stay based on its finding that (i) “there are compelling reasons why the FTC’s interpretation may not be reasonable”; (ii) complying with the FTC’s Order would cause LabMD irreparable harm given its financial situation, (iii) there would be no substantial injury to other parties given that LabMD is no longer operating, and (iv) the public interest factor was neutral. The appeal will now proceed on the merits of LabMD’s arguments for reversal of the FTC’s enforcement order.

    Courts FTC Enforcement Privacy/Cyber Risk & Data Security

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  • Supreme Court Hears Oral Arguments on Whether City Has Standing to Bring Mortgage Suits

    Courts

    On November 8, the Supreme Court heard oral arguments in Bank of America Corp. v. City of Miami, addressing whether the Fair Housing Act permits Miami to sue mortgage lenders as an “aggrieved person” for alleged racial discrimination in the sale, rental, and financing of housing. The questions presented to the Court for decision are whether (i) the language in the Fair Housing Act that limits standing to sue to “aggrieved person[s]” means that Congress meant to impose a more narrow standing requirement than that in Article III of the Constitution; and (ii) the proximate cause standard in the Fair Housing Act requires that the plaintiffs show more than the possibility that the defendants could have foreseen the harm that occurred through a chain of consequences.

    Courts Consumer Finance FHA Mortgage Lenders U.S. Supreme Court

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  • Supreme Court Hears Oral Arguments On Whether Federal Jurisdiction Exists Based on Presence of Fannie Mae as a Party

    Courts

    The Supreme Court heard oral arguments in Lightfoot v Cendant Mortgage Corp., the latest in a line of cases assessing the boundaries of the jurisdiction of the federal courts over Federal agencies and instrumentalities. In Lightfoot, the questions before the Court are whether (i) the phrase "to sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal" in Fannie Mae's charter confers original jurisdiction on the federal courts over every case brought by or against Fannie Mae, pursuant to 12 U.S.C. § 1723a(a); and (ii) the majority’s decision in Am. Nat'l Red Cross v. S.G., 505 U.S. 247 (1992) (5-4 decision), should be reversed.

    Courts Banking Fannie Mae U.S. Supreme Court

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  • CFPB and New York Attorney General File Lawsuit Against Network of Collections Companies

    Courts

    On November 2, the CFPB, in partnership with the New York Attorney General, filed a lawsuit in a federal district court against the leaders of a debt collection operation based out of Buffalo. The lawsuit alleges that defendants operate a network of companies that harass and/or deceive consumers into paying inflated debts or amounts they may not owe. The Bureau is seeking to shut down the operation and to obtain compensation for victims and a civil penalty against the companies and partners.

    Courts Consumer Finance CFPB State Attorney General Debt Collection

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