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Financial Services Law Insights and Observations

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  • FCC provides safe harbors for blocking illegal robocalls

    Privacy, Cyber Risk & Data Security

    On July 16, the FCC issued an order adopting rules to further encourage phone companies to block illegal and unwanted robocalls and to continue the Commission’s implementation of the TRACED Act (covered by InfoBytes here). The rule establishes two safe harbors from liability for the unintended or inadvertent blocking of wanted calls: (i) voice service providers will not be held liable under the Communications Act and FCC rules on terminating voice service providers that block calls, provided “reasonable analytics,” such as caller ID authentication information, are used to identify and block illegal or unwanted calls; and (ii) voice service providers will not be held liable for blocking calls from “bad-actor upstream voice service providers that continue to allow unwanted calls to traverse their networks.” The FCC’s order also includes a Further Notice of Proposed Rulemaking seeking comments on, among other things, “whether to obligate originating and intermediate providers to better police their networks against illegal calls,” whether the “reasonable analytics” safe harbor should be expanded “to include network-based blocking without consumer opt-out,” and whether the Commission should adopt more extensive redress requirements, and require terminating providers to provide consumers information about blocked calls.

    Privacy/Cyber Risk & Data Security FCC Robocalls TRACED Act

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  • 5th Circuit affirms arbitration in UDAAP action

    Courts

    On July 16, the U.S. Court of Appeals for the Fifth Circuit affirmed a district court’s order compelling arbitration in a lawsuit brought by consumers refuting their liability on a commercial loan, arguing that a Mississippi-based bank “violated numerous state and federal consumer protection laws throughout the loan process.” According to the opinion, the consumers allege a bank representative instructed them to form an LLC and purchase a large plot of land with a commercial loan, as opposed to a consumer loan, in order to receive a “lower interest rate and protection from personal liability[.]” As a part of the transaction, the consumers signed an arbitration agreement that covered “‘any dispute or controversy’ arising from the transaction.” The consumers subsequently filed suit, arguing, among other things, that the bank committed “an unfair, deceptive, abusive act, or practice…by coaxing the [consumers] into forming an LLC and taking out a less favorable commercial loan” rather than a consumer loan, which they originally sought. The bank moved to compel arbitration, and the district court granted the motion and dismissed the action with prejudice.

    On appeal, the 5th Circuit agreed with the district court, rejecting the consumers’ argument that there was not a valid agreement to arbitrate. The appellate court concluded that the agreement was neither procedurally nor substantively unconscionable, noting that the consumers voluntarily entered into the agreement and the provision entitling “the victor in arbitration to recover fees from the losing party” was not “one-sided or oppressive.” Moreover, the appellate court concluded that the consumers failed to provide any federal policy or statute that would support their additional argument that the bank’s alleged UDAAP violation would void an otherwise valid arbitration agreement. Thus, the panel affirmed the district court’s order.

    Courts Appellate Fifth Circuit Arbitration UDAAP

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  • OCC releases recent enforcement actions

    Federal Issues

    On July 16, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included among the actions is a June 23 consent order, which resolves OCC claims that a California-based bank violated a 2016 consent order concerning Bank Secrecy Act/anti-money laundering compliance program deficiencies. According to the OCC, the bank failed to timely comply with the 2016 consent order and is required to pay a $100,000 civil money penalty. The list also includes a July 25 civil money penalty order against a New York-based bank, which requires the payment of $43,000 for an alleged pattern or practice of violations of the Flood Disaster Protection Act and its implementing regulations.

    Additionally, an Iowa-based bank and the OCC reached a formal agreement on June 16 for alleged unsafe or unsound practices related to, among other things, credit underwriting, credit administration, problem loan management, and real estate valuation practices. Among other conditions, the agreement requires the bank to (i) appoint a compliance committee to ensure adherence to the agreement’s provisions; (ii) establish a three-year strategic plan outlining goals and objectives related to the bank’s risk profile and liability structure; (iii) submit a commercial and retail credit underwriting and administration program to ensure the bank “analyzes credit and collateral information sufficient to identify, monitor, and report the [b]ank’s credit risk, properly account for loans, and assign accurate risk ratings in a timely manner”; (iv) implement programs providing for an annual review of loans, loan level stress testing, and problem loan management; (v) implement an exception tracking and reporting system; and (vi) establish an appraisal and evaluation program.

    Federal Issues OCC Enforcement Bank Secrecy Act Anti-Money Laundering Compliance Flood Insurance Underwriting

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  • FTC, Florida issue TRO against rate-reduction operation

    Federal Issues

    On July 16, the FTC and the Florida attorney general announced that the U.S. District Court for the Middle District of Florida granted a temporary restraining order against an allegedly fraudulent credit card interest rate reduction operation. According to the complaint, the operation violated the FTC Act, the Telemarketing Sales Rule, and the Florida Deceptive and Unfair Trade Practices act by targeting “financially distressed consumers and older adults” through telemarketing phone calls promising to substantially reduce their credit card interest rates and charging consumers upfront fees, ranging from $995 to $3,995. The operation typically charged the fees “during, or immediately following, the telemarketing call, often by using remotely created payment orders” against the consumer’s checking account or credit card. The complaint asserts that consumers often did not receive permanently reduced credit card interest rates, nor did they save “thousands of dollars on their credit card debt,” as promised. Beyond the temporary restraining order, the FTC is seeking a permanent injunction, restitution, and civil money penalties.

    Federal Issues FTC State Issues State Attorney General Florida FTC Act Telemarketing Sales Rule Courts

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  • FDIC encourages regulatory relief for Michigan borrowers affected by severe weather

    Federal Issues

    On July 16, the FDIC issued FIL-70-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Michigan affected by severe storms and flooding from May 16 through May 22. In the guidance, the FDIC encourages institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to borrowers affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices, can contribute to the health of the local community and serve the long-term interests of the lending institution.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain filing and publishing requirements.

    Find continuing InfoBytes coverage on disaster relief guidance here.

    Federal Issues FDIC Consumer Finance Disaster Relief Michigan

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  • Fed holds line on 2021 payment services

    Federal Issues

    On July 21, the Federal Reserve Board announced that due to the uncertainties created by the Covid-19 pandemic, it will retain the current schedule of prices for most of its payment services to depository institutions in 2021. The Board notes that the pricing information is normally conveyed later in the year and that the Federal Register notice containing the final fee schedules will be released later in 2020. However, in order to “support the business planning of users and providers of payment services,” it wanted to provide early notice of “its intent to keep most 2021 prices flat.”

    Federal Issues Federal Reserve Covid-19 Payments

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  • Colorado regulator updates guidance to real estate businesses with new mask requirements

    State Issues

    On July 17, the Colorado Department of Regulatory Agencies updated its Safer at Home: Additional Guidance for Real Estate Brokers & Servicers, previously covered here, to account for the Colorado governor’s recently-issued mask ordinance. The updated guidance provides that businesses must refuse service to customers not wearing masks and responds to frequently asked questions regarding the mask ordinance, including whether businesses should follow state or local mask orders.

    State Issues Covid-19 Colorado Mortgages Real Estate

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  • Colorado governor permits further extensions of money transmitter and real estate broker licenses

    State Issues

    On July 19, the Colorado governor issued Executive Order 2020 141, which extends Executive Order D 2020 015, as amended by several earlier orders, until August 18, 2020. Executive Order D 2020 015 authorizes the Department of Regulatory Agencies to promulgate and issue emergency rules extending the expiration date of licenses issued by the Division of Banking for money transmitters and licenses issued by the Division of Real Estate for real estate brokers.

    State Issues Covid-19 Colorado Money Service / Money Transmitters Mortgages Real Estate Mortgage Broker Broker-Dealer Mortgage Licensing Licensing Fintech

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  • Fed expands MSLP to nonprofits

    Federal Issues

    On July 17, the Federal Reserve Board announced that the Main Street Lending Program will support tax-exempt, nonprofit organizations. In June, the Board proposed expanding the program to certain nonprofits (covered by InfoBytes here), and in response to public feedback on the proposal, the Board (i) set the minimum employment threshold for nonprofits to 10 employees from the proposed 50; (ii) eased the donation-based funding limit; and (iii) adjusted several financial eligibility criteria to accommodate a wider range of nonprofit operating models.

    The Main Street nonprofit loans have similar terms as the Main Street for-profit business loans, including the “interest rate, principal and interest payment deferral, five-year term, and minimum and maximum loan sizes.” The Board’s announcement also contains a chart covering the detailed changes and term sheets for the program’s Nonprofit Organization Expanded Loan Facility and Nonprofit Organization New Loan Facility.

    Federal Issues Covid-19 Federal Reserve Lending

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  • Colorado updates guidance for critical financial institutions to reflect recent executive order On July 17, Colorado updated its Safer at Home guidance for critical financial institutions during the

    State Issues

    On July 17, Colorado updated its Safer at Home guidance for critical financial institutions during the Safer at Home for Public Health Order 20-28. The guidance encourages financial institutions to become familiar with Executive Order D 2020 138, which imposes a statewide mask wearing requirement.

    State Issues Covid-19 Colorado Financial Institutions

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