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OFAC sanctions Venezuela’s national development bank and subsidiaries connected to Maduro regime
On March 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Venezuela’s state-owned national development bank and four subsidiaries located in Venezuela, Uruguay, and Bolivia for allegedly providing financial support to former President Maduro. According to Treasury Secretary Steven T. Mnuchin, “[r]egime insiders have transformed [the bank] and its subsidiaries into vehicles to move funds abroad in an attempt to prop up Maduro.” As a result, all property and interests in property of the sanctioned entities (or of any entities owned 50 percent or more by the bank) that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with them.
OFAC concurrently issued five new General Licenses (GL) (see GL 4A, 15, 16, 17, 18), which, among other things, authorize certain transactions involving the sanctioned banks for certain entities, including those necessary to wind down operations or existing contracts. OFAC also published two FAQs to provide additional guidance on the GLs and sanctions.
Furthermore, OFAC also referred financial institutions to Financial Crimes Enforcement Network advisories FIN-2017-A006 and FIN-2017-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds.
Visit here for continuing InfoBytes coverage of actions related to Venezuela.
OFAC sanctions persons connected to an Iran defense entity
On March 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13382 against 14 individuals and 17 entities allegedly connected to Iran's Organization of Defense Innovation and Research (SPND), including “three key SPND front and cover companies, and four of their senior officials.” The State Department previously sanctioned SPND in 2014 for “engaging in or attempting to engage in activities that have materially contributed to, or posed a risk of materially contributing to, the proliferation of [weapons of mass destruction] or their means of delivery.” As a result, all property and interests in property belonging to the identified individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC, and U.S. persons are generally prohibited from entering into transactions with them. In addition, OFAC noted that persons who engage in transactions with the designated individuals and entities may be exposed to sanctions themselves or subject to enforcement action. Moreover, OFAC warned foreign financial institutions that, unless an exemption applies, they may be subject to U.S. sanctions if they knowingly facilitate significant transactions for any of the designed individuals or entities.
Visit here for continuing InfoBytes coverage of actions related to Iran.
New York Federal Reserve Bank launches Fintech Advisory Group
On March 22, the Federal Reserve Bank of New York (New York Fed), one of the 12 regional Federal Reserve System banks that make up the United States' central banking system, announced the launch of its Fintech Advisory Group, which is designed to offer “views and perspectives on the emerging issues related to financial technologies, the application and market impact of these technologies, and the potential impact on the New York Fed’s ability to achieve its missions.” The group’s members will participate on a rotating basis, and will include representatives from financial institutions, nonprofits, and research providers. According to the head of the Supervision Group at the New York Fed, “The Fintech Advisory Group will provide the New York Fed with a more complete picture of the rapidly evolving fintech landscape. The Advisory Group will also gather insights that may inform our interaction with market participants and institutions, our training and hiring efforts, and the application of innovative approaches for internal business use.” The group’s first meeting will be held on April 1.
Kentucky creates separate licenses for check cashing and deferred deposit service businesses
On March 19, the Kentucky governor signed S.B. 145, which establishes separate licenses for check cashing and deferred deposit service businesses. In addition, S.B. 145 creates a new section that allows the Department of Financial Institutions commissioner to (i) require license applications and certain other regulatory filings to also be filed with the State Regulatory Registry (Registry); (ii) report violations, enforcement actions, and other relevant information to the Registry; and (iii) access the Registry as “an agent for requesting information from and distributing information to the [DOJ] or other governmental agencies.” The act takes effect 90 days after adjournment of the legislature.
District Court reduces jury’s $3 million award in FCRA action to $490,000
On March 21, the U.S. District Court for the Northern District of Alabama reduced a consumer’s punitive damages award from $3 million to $490,000 in an action against a credit reporting agency for the alleged misreporting of credit information. According to the opinion, after the consumer had a debt dismissed by small claims court, he requested that the credit reporting agencies remove the trade line from his credit report. When one credit reporting agency refused to initiate a dispute investigation because it suspected fraud, the consumer filed a complaint alleging violations of the FCRA. In May 2018, a jury awarded the consumer $5,000 in compensatory damages and $3 million in punitive damages. The credit reporting agency moved to have the court enter judgment as a matter of law and/or have the judgment amended or altered. The court reviewed the award, noting that the punitive to compensatory damages ratio of 600 to 1 “suspiciously cocked” the “court’s eyebrows.” The court emphasized that a single-digit multiplier would not be sufficient to deter the credit reporting agency from future wrongdoing and instead, applied the 98 to 1 ratio used by the U.S. Court of Appeals for the 4th Circuit, bringing the punitive damages down to $490,000. In addition, the court applied the “one satisfaction” rule, concluding the credit reporting agency did not have to pay the compensatory damages, as the consumer already received settlement proceeds that exceed the jury award from other defendants, and “the injuries the [consumer] described are indivisible between [the credit reporting agency] and the settling defendants.”
CFPB releases 50-state servicemember complaint snapshot
On March 19, the CFPB released the “Complaint Snapshot: Servicemembers, Veterans, and Military Families 50 State Report,” which provides state-specific data on the nearly 34,000 complaints received from servicemembers, veterans, and their families in 2018 (which the CFPB collectively defines as, “servicemember”). Specifically, for each state, the snapshot provides (i) the total number of servicemember complaints handled in 2018 and the percentage change since 2017; (ii) distribution of complaints by product for both servicemembers and non-servicemembers; (iii) distribution of complaints by branch of service; and (iv) a visual representation of complaints by zip code. Notably, servicemember complaints increased by 12 percent from 2017 to 2018. The states with the highest number of servicemember complaints include Texas, California, Florida, and Georgia. The Bureau has received over 133,000 complaints from servicemembers since 2011.
See recent article by Buckley attorneys, "Takeaways from military complaints at the CFPB."
FFIEC releases 2019 HMDA reporting guide
On March 25, the CFPB announced that the Federal Financial Institutions Examinations Council (FFIEC) issued the 2019 edition of the “Guide to HMDA Reporting: Getting It Right!,” which reflects the amendments made to HMDA by the May 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act and the August 2018 interpretive and procedural rule issued by the CFPB. (Covered by InfoBytes here.) The guide includes (i) a summary of responsibilities and requirements; (ii) directions for assembling the necessary tools; and (iii) instructions for reporting HMDA data.
CFPB updates payday section of the Supervision and Examinations Manual
In March, the CFPB updated its examination procedures for short-term, small-dollar lending (payday lending) in its Supervision and Examinations Manual. The procedures are comprised of modules and each examination will cover one more module. Prior to using the procedures, examiners will complete a risk assessment and examination scope memorandum, which will assist in determining which of the five modules the exam will cover: (i) marketing; (ii) application and origination; (iii) payment processing and sustained use; (iv) collections, accounts in default, and consumer reporting; and (v) service provider relationships. The examinations will review for potential violations of TILA, EFTA, FDCPA, FCRA, ECOA, UDAAP, and Gramm-Leach-Bliley Act (GLBA), all of which apply to payday lending.
Federal Reserve releases report on 2017 debit card transactions
On March 21, the Federal Reserve Board announced the release of its biennial report on debit card transactions in 2017. The report is the fifth in a series published every two years pursuant to Section 920 of the Electronic Fund Transfer Act (EFTA). As in prior years, the 2017 report reflected that issuers’ costs of authorizing, clearing, and settling debit card transactions (excluding issuer fraud losses) varied significantly across respondents. Among other things, data compiled in the report estimates that (i) in 2017, payment card networks processed 68.5 billion debit and prepaid card transactions valued at $2.62 trillion in the U.S.; (ii) debit and prepaid card fraud losses to all parties increased to 11.2 basis points in 2017 from 10.3 basis points in 2015; and (iii) the median covered issuer had average fraud prevention and data security costs of 1.5 cents per transaction, down from 1.7 in 2015.
Supreme Court: Law firms conducting nonjudicial foreclosures are not debt collectors under FDCPA
On March 20, the U.S. Supreme Court unanimously affirmed a 2018 10th Circuit decision, holding that law firms performing nonjudicial foreclosures are not “debt collectors” under the FDCPA. Justice Breyer delivered the opinion, which resolves whether FDCPA protections apply to nonjudicial foreclosures conducted by law firms. (Covered by InfoBytes here.) Three considerations led to the Court’s conclusion. First, the Court held that a business pursuing nonjudicial foreclosures would be covered by the Act’s primary definition of a debt collector. However, the Act goes on to state that for the purpose of a specific section, the definition of debt collector “also includes” a business of which the principal purpose is the enforcement of security interests. The Court determined that this phrase only makes sense if such businesses were not covered by the primary definition. Second, the Court noted that Congress appeared to have chosen to differentiate between security-interest enforcers and ordinary debt collectors in order “to avoid conflicts with state nonjudicial foreclosure schemes.” Third, the Court noted that the legislative history of the FDCPA indicated that the final result was likely a compromise between two competing versions of the bill, one of which would have excluded security-interest enforcement entirely, and another that would have treated it as ordinary debt collection.
Justice Sotomayor, in a concurring opinion, wrote that the Court’s statutory interpretation was a “close case” and urged Congress to clarify the statute if the Court has “gotten it wrong.” She noted that making clear that the FDCPA fully encompasses entities pursuing nonjudicial foreclosures “would be consistent with the FDCPA’s broad, consumer-protective purposes.” Justice Sotomayor also stated that the Court’s ruling does not give license to those pursuing nonjudicial foreclosures “to engage in abusive debt collection practices like repetitive nighttime phone calls” and that enforcing a security interest does not grant an actor blanket immunity from the Act.”