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Financial Services Law Insights and Observations


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  • District Court grants preliminary approval to national bank's auto lending settlement


    On August 5, the U. S. District Court for the Central District of California granted preliminary approval and class certification to a settlement of at least $393.5 million to resolve multidistrict allegations that a national bank added force-placed auto insurance to auto loans that may have been unnecessary and without borrowers’ consent. Under the terms of the settlement, the auto insurance underwriter will pay an additional $7.5 million. The allegations stem from a 2017 lawsuit in which borrowers claimed the bank charged them for unnecessary collateral protection insurance. The settlement also requires the bank and the underwriter to pay up to $36 million in attorneys’ fees for the borrower class and up to $500,000 in litigation expenses. However, the court scheduled a settlement fairness hearing for October to examine the fees before granting final approval of the settlement. This settlement follows a 2018 settlement reached between the bank and the CFPB and the OCC concerning a similar set of allegations over the purported billing of force-placed insurance premiums that may not have been required. (See previous InfoBytes coverage here.)

    Courts Auto Finance Force-placed Insurance

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  • 11th Circuit rejects city’s FHA suit against bank


    On July 30, the U.S. Court of Appeals for the 11th Circuit dismissed the City of Miami Gardens (City) Fair Housing Act (FHA) suit against a national bank for lack of standing. This decision was the result of the appeal of a lower court decision previously covered by InfoBytes in June 2018. In the prior decision, the U.S. District Court for the Southern District of Florida granted the national bank’s motion for summary judgment. This was a loss for the City, which had argued that the bank made loans that were more expensive for minority borrowers as compared to non-minority borrowers, resulting in greater rates of default and foreclosure and leading to reduced property values and tax revenue for the City. The district court granted the national bank summary judgment based on the City’s failure to present sufficient evidence of discriminatory lending.

    On appeal, the bank argued that the district court should have dismissed the claims for lack of standing because “‘the undisputed evidence confirmed that none of the 153 loans originated by [the bank] [within the limitation period] foreclosed,’ so the City could not have suffered an injury as a result of any of [the] loans.” The 11th Circuit agreed that the City lacked standing, concluding that the City’s evidence that certain loans may go into foreclosure at some point in the future “does not satisfy the requirement that a threatened injury be ‘imminent, not conjectural or hypothetical.’” Moreover, although the City referenced ten loans that had gone into foreclosure, the appellate court ruled that “the City did not produce any evidence of the effect of these foreclosures on property-tax revenues or municipal spending,” nor that the loans were issued on discriminatory terms.  Accordingly, the 11th Circuit vacated the district court’s award of summary judgment, and held that the district court should have dismissed the action on standing grounds.

    Courts Appellate Eleventh Circuit Fair Lending Disparate Impact Fair Housing Act

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  • President Trump issues Executive Order blocking property of the Government of Venezuela

    Financial Crimes

    On August 5, President Trump issued Executive Order (E.O.) 13884 titled “Blocking Property of the Government of Venezuela,” which, among other things, prevents all property and interest in property of the Government of Venezuela existing within the U.S. or in the possession of a U.S. person from being transferred, paid, exported, withdrawn, or otherwise dealt in. E.O. 13884 is being issued in light of the actions of the Maduro regime, “as well as human rights abuses, including arbitrary or unlawful arrest and detention of Venezuelan citizens, interference with freedom of expression, including for members of the media, and ongoing attempts to undermine Interim President Juan Guaido and the Venezuelan National Assembly's exercise of legitimate authority in Venezuela.”

    In connection with the issuance of the E.O, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued new and revised FAQs, as well as 12 amended general licenses (General Licenses 2A, 3F, 4C, 7C, 8C, 9E, 10A, 13C, 15B, 16B, 18A, 20A) and 13 new general licenses (General Licenses 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33) related to Venezuela.

    Additionally, OFAC issued new guidance highlighting the U.S. government’s “commitment to the unfettered flow of humanitarian aid to the Venezuelan people.” OFAC notes that its regulations and general licenses allow U.S. persons to continue to provide humanitarian support to the Venezuelan people, including via transactions through the U.S. financial system for authorized activities. OFAC sanctions do not prohibit transactions involving the country or people of Venezuela, provided blocked persons or proscribed conduct are not involved.

    For continuing InfoBytes coverage on Venezuela, including more information on blocked persons or actions, click here.

    Financial Crimes Department of Treasury Of Interest to Non-US Persons OFAC Executive Order Venezuela

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  • CFPB extends debt collection comment period

    Agency Rule-Making & Guidance

    On August 2, the CFPB announced that it is extending the comment period on its Notice of Proposed Rulemaking implementing the FDCPA to “facilitate the ability of commenters to consider the issues raised in the NPRM, gather data, and prepare their responses.” The comment period now closes on September 18.

    Detailed InfoBytes coverage on the CFPB’s debt collection proposal is available here.

    Agency Rule-Making & Guidance CFPB Debt Collection Federal Register

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  • President Trump authorizes new sanctions on Russian sovereign debt; OFAC imposes prohibition on certain U.S. bank loans

    Financial Crimes

    On August 1, President Trump issued Executive Order (E.O.) 13883 titled “Administration of Proliferation Sanctions and Amendment of Executive Order 12851,” which authorizes sanctions on new issuances of Russian sovereign debt and directs the U.S. government to attempt to cut off international financing and forbids U.S. bank loans to governments subject to U.S. sanctions for using chemical or nuclear weapons. Among other things, E.O. 13883 allows the Secretary of the Treasury, in consultation with the Secretary of Defense, the authorization to (i) “oppose. . .the extension of any loan or financial or technical assistance to [a sanctioned] country by international financial institutions”; and (ii) “prohibit any U.S. bank from making any loan or providing any credit to the government of [a sanctioned] country, except for loans or credits for the purpose of purchasing food or other agricultural commodities or products.”

    Following the issuance of E.O. 13883, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions on August 3 against the Russian Federation, which will “impos[e] a prohibition related to certain U.S. bank loans and will oppose multilateral development bank assistance to the Russian Federation.” According to OFAC, the sanctions are issued in response to Russia’s use of the “Novichok” nerve agent in the U.K. in March 2018. In order to implement the sanctions related to U.S. bank loans, OFAC issued the CBW Act Directive on August 2—scheduled to take effect August 26 following a required Congressional notification period—which “prohibits U.S. banks from participating in the primary market for non-ruble denominated bonds issued by the Russian sovereign and also prohibits U.S. banks from lending non-ruble denominated funds to the Russian sovereign.” OFAC also released a set of FAQs to provide guidance on the CBW Act Directive, including a discussion of actions undertaken by the U.S. government as well as OFAC’s measures for implementing sanctions related to U.S. bank loans.

    For continuing InfoBytes coverage on Russia click here.

    Financial Crimes Executive Order Sanctions Of Interest to Non-US Persons Russia

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  • CFPB releases TRID FAQs on loan estimates

    Agency Rule-Making & Guidance

    On July 31, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID Rule) compliance. The five new FAQs relate to providing loan estimates to consumers. Highlights include:

    • If a consumer submits the six pieces of information (name, income, social security number, property address, estimate of the value of the property, and loan amount sought) that constitute an application under the TRID Rule, the creditor must ensure that a loan estimate is delivered or placed in the mail within three business days. 
    • A creditor cannot require the consumer to submit anything other than the six pieces of information that constitute an application under the TRID Rule as a condition to providing a loan estimate.
    • A creditor cannot require a consumer to provide verifying documents in order to receive a loan estimate.
    • If a consumer submits the six pieces of information that constitute an application, in order to receive a pre-approval or a pre-qualification letter, the creditor must also provide a loan estimate within three business days of receipt.
    • A creditor may collection additional information, beyond the six pieces of information that constitute an application, it deems necessary to process a request for a mortgage loan, including a request for a pre-approval or pre-qualification letter.

    Agency Rule-Making & Guidance CFPB TRID Regulation Z Disclosures

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  • OFAC sanctions Iran’s foreign minister

    Financial Crimes

    On July 31, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), pursuant to Executive Order (E.O.) 13876, designated Iran’s foreign minister for allegedly acting on behalf of, directly or indirectly, the Supreme Leader of the Islamic Republic of Iran. As previously covered by InfoBytes, in June, the President issued E.O. 13876, which, among other things, authorizes the Secretaries of the Treasury and State Departments to impose sanctions on a foreign financial institution if it is determined the institution has knowingly conducted or facilitated any significant financial transactions for or on behalf of a blocked person. OFAC noted that additional information also indicated the Iranian foreign minister had coordinated with the IRGC-Qods Force, which is designated pursuant to terrorism and human rights authorities. 

    As a result of the sanctions designation, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that persons who engage in transactions with designated individuals and entities may expose themselves to sanctions or be subject to enforcement action.

    Financial Crimes Of Interest to Non-US Persons OFAC Iran Sanctions Executive Order

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  • FDIC Chairman stresses innovation in banking


    On August 2, FDIC Chairman Jelena McWilliams spoke before the Financial Conduct Authority’s 2019 Global AML and Financial Crime TechSprint in Washington, D.C. on the importance of promoting innovation within the banking industry and ramping up efforts to help banks embrace new technologies. McWilliams noted that she is “impatient for transformation,” especially in areas that would assist banks—particularly community banks—in eliminating regulatory uncertainty, adopting new technologies, managing risks, or partnering with fintech startups to improve regulatory compliance in areas such as Bank Secrecy Act/anti-money laundering rules. McWilliams discussed the FDIC’s new office of innovation (FDIC Tech Lab), which was created to support these goals. In particular, McWilliams indicated that the FDIC would support collaboration with developers, institutions, and regulators to pilot new products and services, with the goal of publishing the results of these pilots to facilitate understanding of what worked, what did not, and methods of improvement going forward. According to McWilliams, “[b]y promoting these developments and encouraging our FDIC-supervised institutions to voluntarily adopt a more advanced technological footing, we can help foster the transformation of the community banking sector. In turn, the institutions we supervise can reach greater efficiency with products and services that are more attractive to consumers.”

    Fintech FDIC Artificial Intelligence Bank Secrecy Act Anti-Money Laundering

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  • Federal Reserve developing real-time payment system

    Federal Issues

    On August 5, the Federal Reserve Board (Board) announced that Federal Reserve Banks will develop a “round-the-clock real-time payment and settlement service” called the “FedNow℠ Service.” According to a notice and request for comment, “the service would support depository institutions’ provision of end-to-end faster payment services and would provide infrastructure to promote, ubiquitous, safe, and efficient faster payments in the United States.” The Board is requesting comments on how the service might be designed in order to support payment system stakeholders and the general functioning of the U.S. payment system. FedNow is anticipated to be available in 2023 or 2024. Comments on the notice will be due 90 days after publication in the Federal Register. The Board also released FAQs associated with faster payments.

    In a speech announcing the service, Governor Brainard noted that FedNow will be accessible to all banks and “will permit banks of every size in every community across the country to provide real-time payments to their customers.” Brainard noted that the Board is “uniquely placed to deliver this outcome” given its “long-standing service connections with more than 10,000 banks across the country.”

    As previously covered by InfoBytes, the Board issued a request for comments in October 2018 regarding potential actions the Board could take to facilitate real-time interbank settlement of faster payments. The Board reports that it received over 350 comments and over 90 percent supported the Board operating its own, round-the-clock payment service alongside services provided by the private sector.

    Federal Issues Federal Reserve Payments Federal Register

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  • Ginnie Mae announces new VA refinance loan eligibility requirements

    Agency Rule-Making & Guidance

    On August 1, Ginnie Mae issued All Participants Memorandum APM 19-05 announcing changes to the mortgage-backed securities (MBS) pooling eligibility requirements for Department of Veterans Affairs (VA) refinance loans. In order to establish requirements that positively impact the performance of Ginnie Mae securities and implement the “Protecting Affordable Mortgages for Veterans Act of 2019,” (covered by InfoBytes here) APM 19-05 announces changes applicable to all VA-guaranteed refinance loans and establishes new criteria for VA cash-out refinance loans with loan-to-value (LTV) ratios above 90 percent.

    Effective with MBS guaranteed on or after August 1, a refinance loan is only eligible for Ginnie Mae securities if the date on the refinance loan is on, or after, the later of (i) “the date on which the borrower has made at least six consecutive monthly payments on the loan being refinanced”; and (ii) “the date that is 210 days after the first payment due date of the loan being refinanced.” Additionally, effective with MBS guaranteed on or after November 1, “High LTV VA Cash-Out Refinance Loans”—defined as a VA refinance loan with a LTV ratio that exceeds 90 percent at the time of origination and where the borrower converts any amount of home equity into cash—are, with certain exceptions, ineligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools.

    Agency Rule-Making & Guidance Ginnie Mae MBS Department of Veterans Affairs Securities Refinance Mortgages

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