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Although not yet confirmed by the SEC, media reports suggest that the SEC has opened several investigations of publicly traded companies who contracted with FIFA. Indictments in the FIFA cases have alleged that certain companies paid kickbacks to officials of FIFA and related organizations in order to win marketing and apparel contracts. The specific companies targeted in the SEC’s new probe have not yet been named. Without the apparent involvement of a foreign official in the FIFA cases, presumably the SEC will be focusing on the books and records and internal controls provisions of the FCPA, along with other potential violations.
Previous FCPA Scorecard coverage of this investigation can be found here.
On February 8, the FTC announced it had settled with four defendants alleged to have operated a phony debt relief service. According to the FTC, the defendants used illegal robocalls to falsely promise consumers lower credit card interest rates in exchange for a $995 fee, and falsely promised refunds. The operation allegedly netted over $13 million from over 13,000 consumers. The FTC’s complaint alleges that instead of negotiating lower rates for consumers, the defendants at most tried to arrange three-way phone calls with credit card companies for some consumers. The defendants agreed in the settlement to be banned from robocalling consumers and from selling debt relief services, and to pay a $13.1 million judgment, which will be suspended upon payment of $159,000 by the settling defendants. Defendants’ assets are subject to sale by a receiver to recover additional funds. The settlement also bars the defendants from a variety of misleading or illegal practices related to phone contacts to consumers.
This week, the U.S. Courts of Appeals for the Second and Eleventh Circuits issued rulings regarding the enforceability of arbitration clauses in customer agreements. On January 31, the Eleventh Circuit, on remand from the U.S. Supreme Court, reversed its earlier unpublished decision that affirmed a district court ruling allowing a consumer class action to proceed against a bank because the class action waiver in the arbitration agreement at issue was substantively unconscionable. The underlying case involves allegations that the bank improperly ordered customer transactions in order to maximize overdraft fees. The bank sought to enforce the arbitration clause in its customer agreement. Given the U.S. Supreme Court's holding in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), which held that the Federal Arbitration Act establishes a broad policy requiring arbitration of such disputes, and preempts state law that may allow class actions despite customer arbitration agreements, the Eleventh Circuit vacated its earlier decision and remanded the case to the district court for further proceedings and reconsideration of the bank's original motion to compel arbitration.
On February 1, the Second Circuit decided not to enforce an arbitration agreement, notwithstanding the Supreme Court's decision in Concepcion. In this case, merchants sued a credit card provider arguing that the card provider's interchange fee system violated federal antitrust laws. The card company moved to compel arbitration and enforce a class action waiver provision in the merchant agreement. The Second Circuit vacated a district court decision to enforce the arbitration agreement. That decision in turn was vacated by the Supreme Court and remanded. The Second Circuit, though, did not find that Concepcion altered its original analysis, and the Second Circuit again held that the class action waiver agreement was unenforceable in this case because the practical effect would be to preclude the merchants' ability to pursue statutory rights, an issue not addressed by Concepcion. Consistent with prior Supreme Court caselaw untouched by Concepcion, the merchants proved as a matter of law that the costs of individual arbitration with the lender would be so costly as to deprive them of statutory protections granted by the antitrust laws.
On January 10, the U.S. Supreme Court ruled (8-1) that the Credit Repair Organizations Act (CROA) does not override the Federal Arbitration Act’s (FAA) broad requirement that arbitration agreements be enforced according to their terms. CompuCredit Corp. v. Greenwood, No. 10-948, 2012 WL 43514 (Jan. 10, 2012). This case involves a proposed class of consumers alleging CompuCredit violated the CROA when it marketed and provided a no-deposit credit card to consumers with poor credit and then charged fees against the credit limit. CompuCredit sought to compel arbitration to enforce the terms of the card agreement, which mandated individual arbitration of disputes. The district court and Ninth Circuit both sided with the proposed class, finding the arbitration clause in conflict with the CROA’s “right to sue” provision and therefore void. On appeal, the consumer respondents urged the Supreme Court to follow the Ninth Circuit and hold that because the CROA requires a disclosure that a consumer has the right to sue a violating credit repair organization, and because the CROA prohibits waiver of any right given under the CROA, the right to file suit cannot be waived by an arbitration agreement. The Supreme Court rejected the Ninth Circuit’s line of reasoning and reversed, holding instead that (i) the FAA establishes a liberal policy requiring enforcement of arbitration agreements according to their terms, (ii) the CROA is silent on arbitration and its disclosure provisions do not create a right to sue that overrides the broad FAA mandate, and (iii) Congress could have specifically prohibited arbitration provisions in the CROA.
In late December, The Federal Financial Institutions Examination Council's (FFIEC) Consumer Compliance Task Force approved revised interagency examination procedures for Regulation Z, Truth in Lending. The new procedures reflect changes to rules implementing the Credit Card Accountability Responsibility and Disclosure Act, as well as revisions required by the Dodd-Frank Act, including an increased threshold for exempt consumer credit transactions.
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer and Dan Ladd to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Tim Lange to discuss "Update from 2019 NMLS Conference" at the California Mortgage Bankers Association Mortgage Quality & Compliance Committee webinar
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Jon David D. Langlois to discuss "Transaction management-issues surrounding purchase & sale agreements, post acquisition integration & trailing docs" at the Investment Management Network Residential Mortgage Servicing Rights Forum
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program