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CFPB Releases Tips Urging States to Adapt Guides Designed for Financial Caregivers
On October 19, the CFPB released tips on how state bar associations and other legal organizations and professionals in all states can adapt the CFPB’s Managing Someone Else’s Money guides, which were released nationwide in 2013, followed by state-specific guides for Virginia in August 2015, and Florida in September 2015. The four guides – (i) Agents under a power of attorney; (ii) Court-appointed guardians of property and conservators; (iii) Trustees; and (iv) Government-benefit fiduciaries – were designed to help financial caregivers manage another person’s finances and help protect them from financial scam and exploitation. While the CFPB intends to release state-specific guides for Arizona, Georgia, Illinois, and Oregon in early 2016, the agency’s recent release of tips, which includes a list of topics most frequently changed in the state-specific guides, encourages the remaining states and territories that have varying fiduciary laws to adapt similar guides: “We hope this replication package will empower state bar associations and other groups of lawyers, courts, state agencies, and other professionals to collaborate in producing state-specific versions of these guides.”
Fannie Mae Announces New Tools for Lenders
On October 19, Fannie Mae announced four changes: (i) the availability of trended credit data, which may allow a more thorough analysis of borrowers’ credit history; (ii) the availability of nontraditional credit history in Desktop Underwriter; (iii) a new tool, Fannie Mae Connect, which provides a self-service reporting and data analytics portal for customers and business partners; and (iv) the ability to validate a borrower’s income in Desktop Underwriter using data provided by Equifax’s The Work Number®. These changes follow Fannie Mae’s April notification regarding the integration of Collateral Underwriter, an appraisal and analysis application, with Desktop Underwriter and EarlyCheck – an integration intended to help lenders more effectively manage risk, underwrite strong loans, and build their businesses.
Multiple Agencies Take Action Against Paris-Based Investment Bank for Sanctions Violations
On October 20, the DOJ, OFAC, the NYDFS, the Manhattan District Attorney’s Office, and the Federal Reserve simultaneously announced that a Paris-based investment bank would pay a total of more than $787 million to settle multiple alleged violations of U.S. sanctions regulations. The OFAC settlement resolves allegations that the investment bank and certain predecessor banks, between August 6, 2003 and September 16, 2008, processed 4,055 transactions – for a total of approximately $337,043,846 – to or through U.S. financial institutions that involved countries and/or persons subject to the sanctions regulations administered by OFAC. The investment bank settled with OFAC for more than $329,500,000, an amount that reflects the agency’s consideration of the following aggravating factors: (i) the investment bank had indications that its actions had the potential to constitute violations of the U.S. law before the earliest date of the apparent violations; (ii) several managers of the investment bank were aware of the conduct that led to the violations; (iii) the investment bank’s conduct resulted in significant harm to various sanctions programs OFAC oversees and their associated policy objectives; (iv) the investment bank’s size and sophistication, along with its global presence; and (v) the investment bank’s failure to maintain proper controls to prevent the violations from occurring and otherwise maintain an adequate compliance program.
In addition to OFAC’s settlement, parallel actions against the bank resulted in the investment bank agreeing to pay (i) $385 million to the NYDFS; (ii) $90.3 million to the Federal Reserve; (iii) $156 million to the Manhattan District Attorney’s Office; and (iv) $156 million to the U.S. Attorney’s Office for the District of Columbia.
FTC Announces Final Consent Orders Against Auto Dealers for Alleged Deceptive Advertising
On October 20, the FTC announced that, following a public comment period, it approved final consent orders against two Las Vegas auto dealers for allegedly engaging in deceptive advertising practices. In June, the FTC filed two administrative complaints against the auto dealers for (i) misrepresenting the purchase price or leasing offers of vehicles; and (ii) failing to disclose key information in its advertisements, including if a down payment was required at the time of purchase. The final consent orders were unanimously approved in a 5-0 vote by the Commission and prohibit the dealers from (i) engaging in further action that results in violations of the Consumer Leasing Act and the Truth in Lending Act; (ii) misrepresenting the cost of financing or leasing a vehicle; and (iii) stating the down payment amount or percentage without also disclosing repayment terms and the annual percentage rate.
White House Announces Nominations for SEC Commissioner
On October 20, the White House announced two intended nominations for Daniel Gallagher’s replacement as SEC Commissioner, Hester Maria Pierce and Lisa M. Fairfax. Currently, Ms. Pierce is a Senior Research Fellow and Director of Financial Markets Working Group at the Mercatus Center at George Mason University. Previously, she served as a Staff Attorney at the SEC in the Division of Investment Management and as Counsel to SEC Commissioner Paul Atkins. Ms. Fairfax is a professor at George Washington University Law School, where she serves on the Executive Board and as Director for Programs for the George Washington Center for Law, Economics and Finance.
FTC Announces Proposed Settlement with Telecommunications Company for Alleged FCRA Violations
On October 21, the FTC announced a $2.95 million settlement with a telecommunications company for alleged violations of the FCRA. According to the FTC, the company violated the FCRA’s Risk-Based Pricing Rule by failing to provide consumers with a fully compliant risk-based pricing notice when they were placed into a cell phone and data service program with an additional monthly fee because of information from their consumer reports and their credit scores. Specifically, the FTC’s complaint alleges that the company (i) failed to provide consumers in the program with required disclosures in their risk-based pricing notices, such as the key factors that adversely affected their credit scores and language encouraging consumers to verify the accuracy of their consumer reports; and (ii) provided consumers with the disclosures only after they have become contractually obligated. In addition to the $2.95 million civil money penalty, the proposed consent order would require the company to (i) abide by the requirements of the Risk-Based Pricing Rule in the future; (ii) provide consumers with the proper disclosures within five days of signing up for the company’s services, or by a certain date that would allow them to avoid recurring charges; and (iii) send the consumers who originally received incomplete disclosures new, corrected risk-based pricing notices. The proposed order is subject to court approval in the District Court for the District of Kansas.
OFAC Authorizes Certain Transactions and Activities to Liquidate Honduras-Based Bank
On October 21, following the October 7 designation of a Honduras-based bank as a Specially Designated Narcotics Trafficker, OFAC announced that it granted a General License authorizing certain transactions and activities to help with the liquidation and wind down of the same bank. Pursuant the General License, transactions and activities that are otherwise prohibited by OFAC during a bank’s liquidation process will be permitted through 12:01 a.m. ET on December 12, 2015, with the following exceptions: (i) the unblocking of any party pursuant to the Foreign Narcotics Kingpin Sanctions Regulations; and (ii) transactions or dealings that are limited by Executive Order, or are with an individual or entity, other than the Honduras-based bank, that is on OFAC’s List of Specially Designated Nationals or Blocked Persons. Any U.S. persons involved in the bank’s liquidation process must file a report with OFAC’s Licensing Division to include the parties involved, and the type, scope, and dates of the activities conducted.
OFAC Issues Finding of Violation to a Bank for Violations of Iranian Transactions and Sanctions Regulations
On October 21, OFAC issued a Finding of Violation to a Chicago-based bank as the successor of a bank that processed six funds transfers totaling approximately $67,000. According to OFAC, the predecessor bank, between February 3, 2011 and March 10, 2011, processed six funds transfers on behalf of its customer “for the purpose of paying an outstanding balance owed to an Iranian entity located in Iran for the purchase of Iranian-origin carpets,” allegedly resulting in a violation of the Iranian Transactions and Sanctions Regulations (ITSR). The bank allegedly failed to remove its customer “from [its] False Hit List or implement any additional measures to prevent or identify possible violations involving the [customer]” after OFAC removed a general license for the importation of Iranian-origin carpets, which became effective September 29, 2010.
OFAC stated that its determination to issue a Finding of Violation reflects that (i) the predecessor bank may have not been aware of the risks associated with failing to properly review and update a false hit list; (ii) a staff member was aware of the conduct that led to two of the violations, and had “reason to know that the customer may process additional transactions in violation of the ITSR”; and (iii) the bank failed to maintain a compliance program with procedures for updating its internal sanctions list following changes to OFAC-administered sanctions programs. On the other hand, OFAC also considered that (i) no managers or supervisors were aware of the conduct that led to the ITSR violation; (ii) the bank had not previously received a penalty notice or Finding of Violation; and (iii) the bank – pre and post-merger – substantially cooperated with OFAC during the investigation.
HUD Proposes "Quid Pro Quo" Rule to Amend FHA Regulations
On October 21, HUD announced a proposed rule that would formalize the standards for evaluating harassment claims in housing or housing-related transactions under the FHA. The rule – “Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices under the Fair Housing Act” – would define “quid pro quo harassment” and “hostile environment harassment,” respectively, as (i) subjecting a person to an unwelcome request or demand because of the person’s protected characteristic and submission to the request or demand is, explicitly or implicitly, made a condition related to the person’s housing; and (ii) subjecting a person to unwelcome conduct that is sufficiently severe or pervasive such that it interferes with or deprives the person the right to use and enjoy the housing or to exercise other rights protected by the FHA. In addition, the proposed rule also would describe standards for “direct liability” and “vicarious liability”, which would apply to all violations under the Act, not solely harassment. In particular, the proposed rule would define “direct liability” to include (i) a person’s own conduct; (ii) failure to take prompt action with respect to a discriminatory housing practice by an employee or action; and (iii) failing to fulfill a duty to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct. The proposal was published in the Federal Register on October 21, and comments are due by December 21, 2015.
FDIC Adopts Proposed Rule to Increase DIF to Statutorily Required Level
On October 22, the FDIC Board of Directors adopted a proposed rule to increase the Deposit Insurance Fund (DIF) reserve ratio from 1.15 percent to the statutorily required minimum of 1.35 percent. The proposed rule would impose on banks with at least $10 billion in assets a surcharge of 4.5 cents per $100 of their assessment base, after making certain adjustments. The surcharge would begin the quarter after the DIF reserve ratio first reaches or exceeds 1.15 percent and would continue until the reserve ratio first reaches or exceeds 1.35 percent. The proposed rule would implement provisions of the Dodd-Frank Act requiring the DIF reserve ratio to reach 1.35 percent by September 30, 2020 and requiring that the FDIC offset the cost of raising the reserve ratio on banks with assets of less than $10 billion. The FDIC expects that the proposed surcharges combined with its regular assessments would raise the reserve ratio to 1.35 percent before December 31, 2018. The proposed rule also provides for assessment credits for banks with assets of less than $10 billion for the portion of their regular assessments that contributes to the growth in the reserve ratio between 1.15 percent and 1.35 percent.