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Financial Services Law Insights and Observations


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  • Federal Reserve Board and OCC Renew Efforts to Market Independent Foreclosure Reviews


    On November 13, the Federal Reserve Board and the OCC announced renewed efforts to remind eligible borrowers to participate in the Independent Foreclosure Review Program by December 31, 2012. Under the program, an eligible borrower can have his or her foreclosure reviewed for free 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. The renewed marketing effort includes targeted print, radio, and online advertising, as well as direct coordinated outreach by community, housing, and faith-based groups.

    Foreclosure Federal Reserve OCC

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  • Federal Banking Regulators Issue Supplemental Statement Regarding Borrower and Institution Relief Following Hurricane Sandy


    On November 14, the Federal Reserve Board, the OCC, the National Credit Union Administration, and the FDIC supplemented a prior statement on the impact of Hurricane Sandy on customers and the operations of financial institutions. The supplemental guidance identifies activities that could be considered “reasonable and prudent” steps to assist affected customers, including, for example (i) waiving certain fees and penalties, including ATM and overdraft fees, (ii) easing credit limits and terms for new loans, and (iii) offering payment accommodations. The regulators also provide post-storm guidance regarding loan modifications, the Community Reinvestment Act, and customer identification. The guidance largely mirrors guidance issued by the FDIC on November 9, 2012 in Financial Institution Letter FIL-47-2012.

    FDIC Federal Reserve OCC NCUA Overdraft ATM

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  • DOJ Obtains $100 Million Money Laundering Settlement from Money Services Business

    Consumer Finance

    On November 9, the DOJ announced that a money services business (MSB) agreed to enter into a deferred prosecution agreement (DPA) and pay $100 million for failing to maintain an effective anti-money laundering program and for aiding and abetting wire fraud. The DOJ alleged that over a roughly five year period (2004-2009) the MSB profited on thousands of transactions processed on behalf of agents known to be involved in an international fraud scheme. The MSB’s senior management deferred to sales department executives and ignored recommendations from the MSB’s fraud department that certain agents known to be engaged in fraud be terminated, according to the DOJ. Moreover, the DOJ states that the MSB systematically and willfully failed to meet AML obligations under the Bank Secrecy Act, including by failing to (i) implement policies or procedures to file the required Suspicious Activity Reports (SARs) when victims reported fraud on transactions over $2,000, (ii) file SARs on agents known to be involved in the fraud, (iii) conduct effective AML audits of its agents and outlets, (iv) conduct adequate due diligence on prospective and existing agents by verifying that a legitimate business existed, and (v) sufficiently resource and staff its AML program.

    Pursuant to the DPA, the MSB must (i) create an independent compliance and ethics committee of the board of directors with direct oversight of the chief compliance officer and the compliance program, (ii) adopt a global anti-fraud and anti-money laundering standard to ensure that their agents throughout the world will, at a minimum, be required to adhere to U.S. anti-fraud and anti-money laundering standards, (iii) adopt a bonus system that rates all executives on success in meeting compliance obligations, with failure making the executive ineligible for any bonus for that year, and (iv) adopt enhanced due diligence for agents deemed to be high risk or operating in a high-risk area. The MSB also agreed to retain an independent monitor that will oversee implementation and maintenance of these enhanced compliance obligations, evaluate the overall effectiveness of its anti-fraud and anti-money laundering programs, and report regularly to the DOJ.

    Anti-Money Laundering Bank Secrecy Act DOJ Money Service / Money Transmitters

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  • Buckley Sandler Offers Two Upcoming Complimentary Webinars

    Consumer Finance

    The Evolution of False Claims Act and FIRREA Enforcement

    BuckleySandler LLP will host a webinar on Friday, November 16, 2012, from 1:00 - 2:15 PM ET, focused on the Government's most recent financial fraud enforcement actions, an overview of recent False Claims Act (FCA) cases and the Government's increasing use of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), and what this means for financial institutions that do business with the Government, Government-Sponsored Enterprises (GSEs), and other recipients of federal funds.

    BuckleySandler attorneys Andrew Sandler, Andrew Schilling, Matthew Previn, and Michelle Rogers will cover:

    • A summary of recent enforcement actions by the DOJ, including the U.S. Attorney's Office for the Southern District of New York's (SDNY) use and expansion of      FCA and FIRREA.
    • Understanding what the SDNY's most recent lawsuits mean for the industry.
    • Challenges facing financial services companies who do business with the Government and the GSEs.
    • Predictions about where the Government may go from here.

    This webinar will be of particular interest to in-house legal, compliance, and risk management personnel at banks and other financial services providers that do business with the Government, GSEs and other recipients of federal funds. Please no outside law firms, government agency personnel, consulting firms, or media. After registering and being approved, you will receive a confirmation email containing instructions for joining the webinar. Click here to register.

    The CFPB: Investigations and Enforcement Actions in Focus

    On Thursday, December 6, 2012 from 2:00-3:15 PM E, BuckleySandler LLP will host a webinar to discuss the CFPB's rules governing investigations, enforcement actions, and adjudications. BuckleySandler attorneys Jeff Naimon and Jonice Gray Tucker also will discuss themes prevalent in the first three public enforcement actions undertaken by the CFPB, all of which were predicated, in part, on allegations of unfair and deceptive practices.

    This webinar will be of particular interest to in-house legal, compliance, and risk management personnel at banks and other financial services providers subject to CFPB oversight. Please no outside law firms, government agency personnel, consulting firms, or media. After registering and being approved, you will receive a confirmation email containing instructions for joining the webinar. Click here to register.

    CFPB Enforcement False Claims Act / FIRREA

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  • Banking Regulators Provide Guidance on Basel III Implementation Timeline, Congress Offers Additional Responses to Basel III Proposals

    Consumer Finance

    On November 9, the Federal Reserve Board, the OCC, and the FDIC announced that proposed rules to implement the Basel III regulatory capital accords will not take effect on January 1, 2013. The agencies cite the large volume of comments received in response to the proposed rules as the reason for the delay. Recently, members of three states’ congressional delegations joined others in submitting letters to the federal banking regulators in response to the proposed Basel III regulations. The letters all raise concerns about the potential disproportionate impact of the proposed rules on smaller, community and regional institutions, and challenge the attempt by regulators to apply international accords to all U.S. institutions regardless of size. Members of the Texas delegation focused on provisions that would require all unrealized gains and losses on available-for-sale securities to flow through to common Tier-1 equity, which the lawmakers believe will require community banks to divert capital resources from customer services and bank growth. Indiana Members added concerns about the effect of proposed excessive risk weighting and restrictions on dividends and discretionary bonuses, while Members from South Carolina echoed general concerns about the impact of the proposals on community banks. These legislators join other federal and state policymakers who have submitted similar comments in recent weeks. Scrutiny of the proposals will continue next week with a Senate Banking Committee hearing planned for November 14, 2012 to review the pending rules with representatives from the Federal Reserve Board, the OCC, and the FDIC.

    FDIC Federal Reserve OCC Capital Requirements U.S. Senate U.S. House

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  • Fannie Mae, Freddie Mac Announce Additional Storm Relief Measures


    On November 9, Fannie Mae and Freddie Mac announced that effective immediately servicers can suspend for 90 days evictions and foreclosures involving borrowers affected by Hurricane Sandy in order to assess the borrowers’ situations. In addition, next week Fannie Mae and Freddie Mac will issue guidance to servicers to expand the options they can offer to homeowners impacted by the hurricane. Under the new Fannie Mae guidance, servicers will be authorized to (i) extend forbearance for up to 12 months, where appropriate, (ii) provide loan modifications, once the homeowner is able to resume monthly mortgage payments, (iii) waive any late payment charges, (iv) suspend credit reporting for any homeowner for whom relief is granted, and (v) delay the initiation of any foreclosure action to determine the condition of the property and the borrower’s employment and income status. Freddie Mac’s policy changes will authorize servicers to (i) automatically suspend for 90 days evictions and foreclosure sales for borrowers with homes secured by Freddie Mac owned-or guaranteed mortgages and located in eligible disaster areas, (ii) verbally grant 90-day forbearances to all borrowers in eligible disaster areas, including borrowers with mortgages modified under HAMP or who are currently in a HAMP or Standard Modification Trial Period Plan, and (iii) expedite the distribution of insurance proceeds on storm damage claims. Additionally, Freddie Mac will maintain pricing that was in place at the time of the storm for mortgages that are secured by homes in eligible disaster areas and delivered through Freddie Mac's bulk guarantor channel.

    Foreclosure Freddie Mac Fannie Mae Mortgage Servicing HAMP / HARP Disaster Relief Mortgages Mortgage Modification

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  • FTC Loses Motion in Unfair Billing Case Against Online Payday Loan Referral Service


    On November 7, the U.S. District Court for the Middle District of Florida held that numerous factual issues prevented the court from granting summary judgment on the FTC’s claims that an online payday loan referral business engaged in unfair and deceptive billing practices and failed to provide adequate disclosures. FTC v. Direct Benefits Group, LLC, No 11-1186, 2012 WL 5430989 (M.D. Fla. Nov. 7, 2012). The FTC alleges that the defendants violated the FTC Act by obtaining consumers’ bank account information through payday loan referral websites and debiting their accounts without their consent. The FTC also alleges that the defendants failed to adequately disclose that, in addition to using consumers’ financial information for a payday loan application, they would use it to charge them for enrollments in unrelated programs and services. Although it acknowledged that the FTC had presented substantial evidence regarding consumer complaints about the defendants’ activities, the court held that because the defendants maintain that no consumer could be enrolled in the programs without at least clicking an “okay” button on the defendants’ websites, the FTC was not entitled to summary judgment. A bench trial is scheduled for November 27, 2012, during which the parties will present additional evidence and arguments regarding the content and operation of the websites and whether consumers could enroll in the referral programs without taking affirmative steps to do so.

    FTC Payday Lending Electronic Signatures Lead Generation Consumer Complaints

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  • House Members Release Data Brokers' Responses to Congressional Inquiry


    On November 8, a bipartisan group of lawmakers released the responses of nine firms the lawmakers targeted in July 2012 as “major data brokerage companies” and from which the members sought information about how each firm collects, uses, and protects consumer data. Representative Markey (D-MA) who is leading the inquiry of these firms characterized the responses as incomplete, particularly with regard to how the firms analyze personal information to categorize and rate consumers. Last month, Senator Rockefeller (D-WV) initiated a similar review of data broker practices.

    Consumer Reporting Privacy/Cyber Risk & Data Security

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  • State Banks and Servicers Provide Post-Hurricane Mortgage Relief in New York


    On November 7, New York Governor Andrew Cuomo announced that several major state-chartered banks and mortgage servicers are offering a range of relief for borrowers impacted by Hurricane Sandy. While the particular relief may vary by institution and borrower circumstances, the following types of relief generally are being offered: (i) 90-day postponement of foreclosures and evictions, (ii) 90-day waiver of late fees on mortgage payments, including online payments, (iii) 90-day or more forbearance on mortgage payments where the borrower has been impacted by the storm and is seeking relief, (iv) waiver of interest where a refinancing transaction has been closed, but not funded, (v) late payment relief for borrowers in a trial modification, and (vi) suspension of notification to credit bureaus if borrowers make late payments. Additionally, a state order prohibiting the termination, cancellation, or non-renewal of homeowners’ insurance policies for 30 days started October 26, which means servicers cannot force place insurance on any homeowner who had insurance in effect as of that date.

    Foreclosure Mortgage Servicing

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  • Bank Argues Government's False Claims Act Case Violates National Servicing Settlement


    On November 1, one of the five banks that entered into a comprehensive mortgage servicing settlement earlier this year with the federal government and 49 state attorneys general invoked that agreement in defense of claims recently filed against it by the federal government. Motion of Defendant Wells Fargo Bank, N.A. to Enforce Consent Judgment, United States v. Bank of America Corp., No. 1:12-cv-00361 (D.D.C. Nov. 1, 2012). Wells Fargo’s motion responds to a complaint filed in the Southern District of New York in which the DOJ and HUD allege that the bank falsely certified loans under the FHA’s Direct Endorsement Lender Program in violation of the False Claims Act (FCA) and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). In response, the bank has asked the court overseeing the national servicer settlement to enforce the Consent Judgment the bank entered, which the bank notes includes a comprehensive release for certain liability with respect to its alleged FHA mortgage lending conduct. The bank argues that the release specifically releases liability arising under the FCA and FIRREA for its alleged FHA-certification conduct. The bank seeks declaratory relief with respect to its rights under the servicing settlement, as well as an order enjoining the federal government from pursuing its case in New York. Wells Fargo’s motion indicates that the government plans to oppose the motion.

    Mortgage Origination False Claims Act / FIRREA

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