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Louisiana Office of Financial Institutions, Securities Division, reissues update on operations
On July 24, the Louisiana Office of Financial Institutions, Securities Division, reissued an earlier announcement on its operations, which was previously covered here. The announcement provides that: (i) paper copies of registration documents and payment of related fees can be mailed to the LOFI, and certain filings can be submitted electronically; (ii) examinations are being conducted remotely using phone and email correspondence in lieu of traditional on-site examinations; (iii) licensing staff continue to process licensing and registration applications through the CRD/IARD systems; and (iv) enforcement staff are limiting in-person contacts with witnesses and regulatory partners, and are using telecommunications technology to complete tasks remotely.
Louisiana Office of Financial Institutions extends emergency declarations to non-depository entities
On July 24, the Louisiana Office of Financial Institutions extended emergency declarations for residential mortgage lenders, check cashers, bond for deed escrow agents and repossession agents, brokers and lenders licensed under the Louisiana Consumer Credit Law and Deferred Presentment and Small Loan Act, and pawnbrokers. The orders were previously covered here. Such entities are granted the authority to temporarily close licensed locations within Louisiana or to temporarily close and/or relocate to another location within the state. Mortgage loan originators are permitted to work from home, whether located in Louisiana or another state, even if the home is not registered with the LOFI. The declarations also provide instructions for notifying the LOFI of a temporary location change. The declarations will remain in effect as long as there is a public health emergency relating to Covid-19, or until rescinded or replaced.
Louisiana Office of Financial Institutions extends relief provided to state-chartered financial institutions
On July 24, the Louisiana Office of Financial Institutions issued an emergency declaration continuing relief previously provided to Louisiana-chartered financial institutions, as provided in an earlier declaration previously covered here. Among other things, the declaration extends parity granted to loans made under the Main Street Lending Program established by the Federal Reserve System and loans made under the Small Business Administration's Paycheck Protection Program. The declaration also extends relief relating to temporary branch office closures, relocations, reduced operations, and annual meetings.
Washington governor issues proclamation further extending eviction relief
On July 24, the Washington governor issued Proclamation 20-19.3, which amends and extends earlier proclamations regarding evictions and related housing practices. Specifically, Proclamations 20-05 and 20-19 (previously covered here), and any subsequent orders, are amended and extended to temporarily prohibit residential evictions and impose related restrictions. Continuing through October 15, 2020, landlords, property owners, and property managers of residential dwellings and commercial rental properties in Washington may not, among other things, evict a tenant, assess certain fees, or increase the rate of rent or the amount of any deposit, except in certain limited circumstances.
Illinois reissues and extends several Covid-19 executive orders
On July 24, the Illinois governor issued Executive Order 2020-48, which extends several earlier executive orders through August 22, 2020. Among others, the order extends Executive Order 2020-25 regarding garnishment and wage deductions (previously covered here) and Executive Order 2020-30 regarding residential evictions (previously covered here and here).
Massachusetts Appeals Court holds deficiency debt notice should be applied retroactively
On July 21, the Massachusetts Appeals Court held that a 2018 Massachusetts Supreme Judicial Court’s (SJC) decision in Williams v. American Honda Fin. Corp., which resolved a conflict in state law regarding the proper way for a creditor to calculate a consumer’s deficiency debt in an automobile repossession notice, should be applied retroactively. After a consumer defaulted on his car loan, his creditor sent him a presale repossession notice advising him that the amount owed would be reduced by the money received from the sale of the vehicle. This notice was insufficient under Williams, but the creditor argued that the decision should only apply prospectively, and the Superior Court agreed and dismissed the consumer’s complaint. The consumer appealed.
In Williams, the SJC resolved a conflict as to whether the Massachusetts Uniform Commercial Code (UCC), G. L. c. 106, §§ 9-600, or the Massachusetts Motor Vehicle Retail Installment Sales Act (RISA), G. L. c. 255B should be used to calculate a consumer’s deficiency debt in an automobile repossession notice. While both statutes contain similar elements, they also contain conflicting provisions, which the SJC resolved in Williams by holding that all automobile repossession notices are required to state that the consumer’s deficiency debt will be calculated, in accordance with RISA, based on the difference between the unpaid balance and the vehicle’s fair market value. The SJC further determined that the fair market value language in RISA displaces the UCC’s inconsistent safe harbor provision.
The Appeals Court first noted that decisions in Massachusetts construing a statute are presumptively given retroactive effect. The Appeals Court further held that Williams is intended “to give effect to the clear meaning of a statute designed to protect consumers,” which was “best accomplished through retroactive application.” In agreeing with the consumer, and noting that because Williams does not include a retroactive-prospective analysis, the Appeals Court stated that “there are no exceptional circumstances that would justify departure from the presumption of retroactivity.”
Senators question OCC on fair lending
On July 20, a group of eighteen senators wrote to the acting Comptroller of the OCC, Brian Brooks, regarding reports that senior officials at the agency “have undermined OCC examiners’ efforts to investigate and pursue violations of civil rights laws,” including the Fair Housing Act (FHA) and ECOA. The letter cites to reports of at least three instances where examiners allegedly found discriminatory lending patterns present, yet OCC leadership failed to pursue action against the institutions.
The senators argue that failing to pursue fair lending violations “not only harms borrowers and their communities, but also undermines meaningful bank evaluations under the Community Reinvestment Act (CRA).” The senators list a series of questions regarding the OCC’s supervision of the FHA and ECOA since 2017, including information covering the number of fair lending citations that the OCC has issued, as well the number of fair lending referrals the OCC has made to the DOJ. The letter sets a response deadline of July 31.
OCC: Banks may hold cryptocurrency for customers
On July 22, the OCC issued an interpretive letter concluding that national banks and federal savings associations (collectively, “banks”) may hold cryptocurrency on behalf of customers so long as they effectively manage the risks and comply with applicable law. Specifically, the letter responds to a bank’s proposal to offer cryptocurrency custody services to its customers as part of its standard custody business. The OCC notes that “there is a growing demand for safe places, such as banks, to hold unique cryptographic keys associated with cryptocurrencies.” The letter emphasizes that the OCC “generally has not prohibited banks from providing custody services for any particular type of asset,” and providing cryptocurrency custody services “falls within [] longstanding authorities to engage in safekeeping and custody activities.”
The OCC notes that while the custody services will not “entail any physical possession of the cryptocurrency,” OCC regulations authorize banks to provide through electronic means any activities that they are otherwise authorized to perform. Thus, because banks may perform custody services for physical assets, they are “likewise permitted to provide those same services via electronic means (i.e., custody of cryptocurrency).” Additionally, a bank with trust powers has the authority to hold cryptocurrencies in a fiduciary capacity, in the same way they manage other assets they hold as fiduciaries.
The OCC reminds banks that they should develop and implement sound risk management practices, and specifically notes that “custody activities should include dual controls, segregation of duties and accounting controls.” Moreover, banks should “conduct a legal analysis to ensure the activities are conducted consistent with all applicable law,” noting that “[d]ifferent cryptocurrencies may also be subject to different OCC regulations and guidance outside of the custody context, as well as non-OCC regulations.”
OFAC issues amended Ukraine-/Russia-related FAQs
On July 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published nine amended Ukraine-/Russia-related Frequently Asked Questions in response to the issuance of Ukraine-related General Licenses (GL) 13O and 15I. As previously covered by InfoBytes, the newly issued GLs extend the expiration date to January 22, 2021 for the authorization of certain transactions necessary to divest or transfer debt, equity, or other holdings, or wind down operations or existing contracts with a Russian manufacturer previously sanctioned by OFAC in April 2018 (covered by InfoBytes here). Among other things, the FAQs discuss specific permitted activities, transactions, and uses of blocked funds. The FAQs also state that foreign persons will not be subject to sanctions for engaging in activity with the Russian manufacturer or any entities in which the manufacturer owns, directly or indirectly, a 50 percent or greater interest, provided the activity is authorized by GL 15I and occurs within the authorized time period.
9th Circuit affirms $142 million settlement in bank sales practices action
On July 20, the U.S. Court of Appeals for the Ninth Circuit affirmed (in a published and an unpublished opinion) a $142 million class action settlement between a nationwide class of consumers and a national bank, concluding the class was unified by a claim under federal law. The published opinion specifically affirmed the district court’s holding that the class satisfied the predominance requirement under Rule 23 of the Federal Rules of Civil Procedure. In the unpublished memorandum disposition, the 9th Circuit affirmed the district court’s certification of the settlement class, approval of the settlement, award of attorneys’ fees, and approval of notice.
As previously covered by InfoBytes, the settlement covers a 2015 class action lawsuit regarding retail sales practices that involved bank employees creating deposit and credit card accounts without obtaining consent to do so. In April 2017, the bank agreed to expand the original settlement class to include claims dating back to May 2002, resulting in a settlement amount of $142 million. The district court certified the class and approved the settlement. Objectors appealed, arguing that the class did not satisfy the predominance requirement, because the court did not do a choice-of-law analysis.
On appeal, the 9th Circuit upheld the district court’s rulings on the settlement, concluding that the district court did not abuse its discretion in holding the class met the federal predominance requirements. Specifically, the appellate court held that the FCRA claim unified the class, allowing the class to “show that the FCRA’s elements were proven by a common course of conduct.” Moreover, the appellate court concluded that the “existence of potential state-law claims did not outweigh the FCRA claim’s importance.” In a separate unpublished memorandum opinion, the appellate court affirmed, among other things, the award of attorney’s fees, which were “well below the 25% benchmark.”