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National Mortgage Settlement Monitor Announces Compliance Vendors
On August 6, Joseph Smith, Jr., the Monitor appointed to implement and oversee the national mortgage servicing settlement, announced the retention of five consulting firms that will assist the Monitor and a primary consulting firm previously retained by the Monitor. Each firm will work with one of the five servicers that are party to the national settlement to ensure execution of the agreement.
CFPB Seeks Input on Amicus Program
On August 2, the CFPB posted a request for email submissions recommending state or federal appellate-level “cases with one or more important legal questions about the interpretation or application of a federal consumer financial protection statute or regulation” in which the CFPB could file an amicus brief. The CFPB also announced that all of its amicus activity will be posted on its website. To date, the CFPB has filed six such briefs, four in cases involving TILA and two related to the FDCPA.
Federal Reserve Banks Publish Report on Regulatory Landscape for Mobile Payments
Recently, the Federal Reserve Banks of Atlanta and Boston published a report on an April 2012 meeting of the Mobile Payments Industry Workgroup and representatives from federal and state banking regulators, the FTC, and the FCC to review the regulatory landscape for mobile payments. The paper notes that (i) remote payments and money transfers are beginning to emerge to facilitate person-to-person payments and cannot be ignored from a regulatory perspective, (ii) growth in nonbank money transfer services is subjecting more nontraditional technology-based companies to state money transmitter licenses and related regulatory oversight, and (iii) the CSBS and the Money Transmitter Regulators Association are creating a nationwide cooperative supervisory system for the coordinated multistate examination of money transmitters. The report also reflects the meeting participants’ consensus that the existing regulatory framework is sufficient for today’s mobile payment services. Still, the report states that the CFPB plans to review mobile payment disclosure practices to ensure that consumers have sufficient information in the event of account discrepancies, assess how disclosures are provided to consumers, and evaluate how the parties in mobile payment transactions handle error resolution and liabilities.
Pharmaceutical Companies Resolve DOJ and SEC FCPA Charges
On August 7, the DOJ and the SEC announced the resolution of FCPA allegations against Pfizer Inc. (Pfizer) and two of its subsidiaries, Pfizer H.C.P. and Wyeth LLC. The DOJ announced that it filed a criminal information in the U.S. District Court for the District of Columbia, as well as a deferred prosecution agreement pursuant to which Pfizer H.C.P. admitted to making improper payments to public officials in Russia and other eastern European countries in attempts to influence decisions to approve and register certain pharmaceutical products. Pfizer H.C.P. must pay a $15 million penalty, but the agreement acknowledges Pfizer’s efforts to investigate and self-report the matter, as well as the company’s “significant cooperation” and extensive remedial efforts. Civil charges brought by the SEC through separate complaints against Pfizer and Wyeth involve similar allegations regarding the companies’ conduct in numerous countries. While Wyeth neither admitted nor denied the SEC allegations, the two parties resolved the cases by agreeing to pay a combined $45 million, committing to certain remedial actions, and reporting to the SEC. Like the DOJ, the SEC notes Pfizer’s voluntary disclosure and cooperation. The SEC complaints and the DOJ deferred prosecution agreements are available on BuckleySandler’s FCPA Score Card.
Fannie Mae Issues Multiple Servicing Announcements
On August 8, Fannie Mae issued three servicing announcements. The first, Announcement SVC-2012-13, reminds servicers that under the Housing and Economic Recovery Act, Fannie Mae must promote diversity through (i) the inclusion and utilization of minorities, women, and individuals with disabilities, and (ii) the use of minority-, women-, and disabled-owned businesses at all levels, in management and employment, in all business and activities, and in all contracts for services of any kind. To that end, Fannie Mae is requiring that servicers complete by November 1, 2012, a supplier registration profile that accurately reflects its ownership status and its team composition report. The second announcement, Announcement SVC-2012-14, notifies servicers that effective October 1, 2012, Fannie Mae no longer will require mandatory pre-foreclosure mediation for loans in Florida. Finally, through Announcement SVC-2012-15, Fannie Mae is establishing a policy to require both an existing and a new document custodian to provide at least thirty days written notice when all or part of the custodian’s business is being acquired by a new document custodian while the servicer remains the same. This new policy is effective immediately.
How to Handle a Government Investigation: 13 Things You Should You Do Immediately If the Government Comes Knocking
Actions you take, or don’t take, in the early hours of a government investigation can have costly and far-reaching consequences for a company. At the root of this is the importance of having a plan in place should your company come under investigation, as the last thing you want to be is caught flat-footed. Do your key employees and legal department staff know what to do immediately if the government initiates an investigation?
Below, BuckleySandler’s Government Enforcement and White Collar attorneys identify 13 steps a company and its employees should take immediately when it becomes aware of a government investigation.
- Inform your in-house counsel. Establish a protocol to ensure that counsel is contacted immediately.
- Preserve documents. Inform all necessary employees of the need to retain documents, including electronic documents, with a document hold memo that replaces standard document retention policies for potentially responsive materials.
- Establish early dialogue with the investigating agency. Communication is critical to understanding the scope of the investigation and to establishing a working relationship with the government.
- Assume a parallel investigation will be initiated. Questions about self-reporting, production, and other strategic decisions should be made under the assumption that a parallel criminal or civil suit will follow.
- Alert the Board of Directors and/or Audit Committee. Schedule a meeting with key executives to carefully review the situation and discuss possible remedies and corrective actions. Be mindful that meeting minutes, notes, or emails may be discoverable.
- Consider implementing internal restrictions on the trading of company stock. Be sure all rules regarding insider trading are upheld.
- Evaluate disclosure issues and formulate a plan to address. With the commencement of a government investigation, a number of governance issues will arise. Carefully consider any and all disclosures that may be necessary and take appropriate action.
- Put your insurance carrier on notice. Put your insurer on notice early to increase your chances of having insurance pay for some or all of the investigation and/or litigation costs.
- Determine if actions are needed with respect to employees who are possible wrongdoers. This may involve implementing restrictions or additional oversight of their activities or even dismissal. All issues involving employees need to be carefully considered from a variety of angles, including employment laws, anti-retaliation provisions, and possible future civil litigation.
- Identify remedial measures if needed. It may be necessary to conduct a gap analysis of existing compliance programs and make changes to avoid a future recurrence.
- Prepare for any anticipated media coverage. Any and all public statements will be carefully scrutinized by the media, the public-at-large, and the investigating agency. Therefore, it is critical that sufficient care and attention is given to any public comments by the company or its spokespeople.
- Notify employees of possible contact by the investigating agency and advise them of their rights and obligations. It is important to remind employees of their responsibility to be truthful when speaking with agents of the government, but that they may choose to have an attorney present if they do decide to be interviewed. You should also reiterate your company’s policy on cooperating with investigations and request that employees inform the legal department of any discussions or contacts with the government.
- Commence an internal investigation if necessary. An internal investigation can help your company determine whether the allegations have merit or not, and if they do, the cause and extent and possible corrective actions.
You may also be interested in reading our related blog post on How to Respond to a Subpoena: 10 Things You Should Do Immediately.
President Obama Expands SCRA Protections for Servicemembers
On August 6, President Obama signed into law the Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012, H.R. 1627. Section 710 of this Act expands foreclosure protections for active duty servicemembers. Currently, under the Servicemembers Civil Relief Act, 50 U.S.C. app. § 533 (SCRA), an individual is entitled to foreclosure protection during the period of active duty and for nine months thereafter. This extended foreclosure protection was set to expire at the end of calendar year 2012, at which point the foreclosure protection would only last for ninety days after the end of active duty.
This bill signing makes three important changes to the SCRA that expand protections for servicemembers:
- The SCRA will continue to provide servicemembers with foreclosure protection during the period of active duty and for nine months thereafter past the end of the current calendar year into 2013;
- One-hundred-and-eighty days from the date of enactment (i.e., February 2, 2013), the mortgage foreclosure protection will extend to one full year after the period of active duty; and
- On January 1, 2015, the SCRA's expanded foreclosure protection will sunset, and the protection period will revert to its 2008 level: the period of active duty service plus ninety days.
Additionally, this Act requires the Comptroller General of the United States to report to Congress information related to the use of this expanded foreclosure protection. This report is due a year-and-a-half after enactment-giving Congress several months to review the report prior to the 2015 sunset.
CFPB Exercises Enforcement Authority Against Alleged Mortgage Modification Scheme
On July 18, the CFPB filed suit against a group of California companies and individuals alleged to have orchestrated a mortgage modification scam in violation of the Consumer Financial Protection Act and Regulation O. According to the CFPB, the defendants engaged in deceptive acts by promising loan modifications in exchange for an advance fee and misrepresenting affiliation with government entities, while taking little or no action to assist borrowers. This is the first known instance in which the CFPB has brought an enforcement action in court. The CFPB is seeking preliminary and permanent injunction, as well as rescission or reformation of contracts, refund of moneys paid, restitution, and disgorgement or compensation for unjust enrichment.
OCC and Federal Reserve Board Extend Independent Foreclosure Review Program Deadline
On August 2, the Federal Reserve Board and the OCC announced that the deadline for borrowers to seek review of their mortgage foreclosures under the Independent Foreclosure Review program has been extended to December 31, 2012. Under the program, an eligible borrower can have his or her foreclosure reviewed by independent consultants to determine whether the borrower was financially injured due to errors, misrepresentations, or other deficiencies in the foreclosure process. An injured borrower may be eligible for compensation or other remedies. The program originally was scheduled to close April 30, 2012, but has been extended numerous times over the past year.
CFPB Publishes Semiannual Report
On July 30, the CFPB published its second semiannual report to Congress. The report, which is mandated by the Dodd-Frank Act, provides an update of CFPB activities from January 1, 2012 through June 30, 2012. Included in the report is an overview of the CFPB’s complaint handling process and updated summary information about complaints received to date. The CFPB also states that it is currently conducting investigations spanning the “full breadth of the Bureau’s enforcement jurisdiction” while attempting to focus on violations that cause the most harm to consumers. As in the first report, this report identifies consumer “shopping challenges”, highlights planned regulatory activities for the remainder of 2012, and compiles citations to testimony and speeches delivered, and reports prepared or expected to be prepared over the coming months.