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Treasury issues general license to extend wind-down period for sanctioned Russian aluminum producer
On April 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License 14 (GL 14) to extend the grace period for specified wind-down activities involving a Russian aluminum producer sanctioned earlier this month. As previously covered in InfoBytes here, the April 6 sanctions—issued pursuant to the Countering America’s Adversaries Through Sanctions Act of 2017—allowed U.S. persons until May 7 to wind down operations involving identified blocked persons. According to Treasury’s press release, GL 14’s new October 23 deadline provides Treasury time to consider the aluminum producer’s petition for delisting given the impact the April 6 sanctions have had on U.S. partners and allies. Additionally, Treasury stated that “OFAC will not impose secondary sanctions on non-U.S. persons for engaging in the same activity involving [the aluminum producer] or its subsidiaries that General License 14 authorizes U.S. persons to engage in.”
The same day, OFAC also issued an amended General License 12A to reflect the authorization in GL 14, and released several new FAQs addressing authorizations and limitations under GL 14.
Visit here for additional InfoBytes coverage on Ukraine/Russian sanctions.
Illinois Attorney General sues online “pension sale” installment lender
On April 19, the Illinois Attorney General announced a lawsuit against a Nevada-based installment loan company alleging the company made illegal installment loans without a license. According to the press release, the Illinois Attorney General alleges that the company markets high rate installment loans in exchange for payments from a consumer’s pension benefits in violation of Illinois law. In addition, the Attorney General claims that the company illegally advertised its loans and concealed high finance charges from consumers and, in some instances, continued to withdraw money from accounts after consumers attempted to cancel the agreement. The Attorney General is seeking the contracts to be voided, an injunction against the behavior, restitution for consumers, and civil money penalties.
New Mexico Attorney General announces settlement with payment card companies to resolve excessive interchange fees
On April 18, the New Mexico Attorney General’s office announced a $3.4 million settlement with the country’s two largest payment card networks to resolve allegations that the companies charged excessive interchange fees during credit and debit card transactions. In 2014, the state filed a lawsuit claiming that the companies’ conduct violated New Mexico’s Antitrust Act and Unfair Practices Act along with various common law theories, including unjust enrichment and civil conspiracy. According to the terms of the settlement, the companies are required to pay a total of $3.4 million into the state’s settlement fund for “law enforcement efforts to prevent and prosecute financial fraud or unfair or deceptive acts or practices, including anti-competitive behavior, and to investigate, enforce, and prosecute other illegal conduct related to financial services or consumer protection and antitrust laws.” In agreeing to the terms of the settlement, the companies did not admit any liability or wrongdoing, did not admit the truth of any allegations or circumstances, and did not waive any defenses.
District court applies Supreme Court standard to dismiss Dodd-Frank whistleblower claims
On April 19, the U.S. District Court for the District of New Jersey dismissed a fired executive’s suit against a global financial services firm alleging whistleblowing retaliation claims under Dodd-Frank under the standard set by the U.S. Supreme Court ruling in Digital Realty Trust Inc. v. Somers. (See Buckley Special Alert on Supreme Court Decision here.) Specifically, the U.S. District court lifted a stay, which the court had imposed pending a decision in Digital Realty Trust, and granted the defendant’s motion to dismiss with prejudice. Noting that the purpose of Dodd-Frank’s anti-retaliation provisions is “to incentivize individuals … to come forward and provide information of securities law violations to the SEC,” the court determined that the plaintiff “had ample time between when he first learned of the violations and his termination to report the misconduct to the SEC,” but he chose not to lodge claims “until well after the fact of the alleged securities violations, his testimony to FINRA and his own termination.” The court also rejected the argument that testimony given to FINRA is sufficient to invoke Dodd-Frank’s whistleblower protections, noting that the plaintiff’s testimony to FINRA “plainly” did not meet statutory requirements.
9th Circuit denies online retailer’s petition for full panel review of decision on standing in data breach case
On April 20, the U.S. Court of Appeals for the 9th Circuit denied an online retailer’s request to have the full bench reconsider the court’s March 8 ruling, which ruling held that the increased risk of fraud or identity theft from a data breach gave consumers Article III standing to sue. As previously covered by InfoBytes, the underlying action results from a 2012 data breach affecting over 24 million shoppers. Previously, the three-judge panel held that the district court erred in dismissing claims brought by consumers who did not allege financial losses as a result of the data breach because, among other things, the stolen information provided hackers the “means to commit fraud or identity theft.” The online retailer appealed the decision, asking the full panel to review. The panel disagreed, upholding the previous decision that the plaintiffs sufficiently alleged the risk of future harm.
CFPB finalizes KBYO amendment to address “black hole”
On April 26, the CFPB issued a final amendment to its “Know Before You Owe” mortgage disclosure rule to address when mortgage lenders with a valid changed circumstance or other justification are permitted to reset tolerances and pass on increased closing costs to consumers using the Closing Disclosure. Last summer, as previously covered in a Buckley Sandler Special Alert, the Bureau published a proposal seeking public comment on whether to close the “black hole” that prohibited creditors from passing on cost increases (particularly rate lock extension fees) when closing was significantly delayed after the Closing Disclosure. After considering comments, the Bureau finalized the proposed amendment. The final amendment will take effect 30 days after publication in the Federal Register.
OCC announces enforcement actions targeting BSA/AML compliance deficiencies
On April 19, 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. The new enforcement actions include cease and desist orders, civil money penalty orders, and removal/prohibition orders. The consent orders described below were among those in the OCC’s list:
Cease and Desist Consent Order. On February 28, the OCC issued a consent order against a Washington-based bank for deficiencies related to its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program. Among other things, the consent order requires the bank to (i) maintain a Compliance Committee consisting of at least three board members; (ii) develop and implement an ongoing BSA/AML risk assessment program; (iii) create and implement BSA internal controls to mitigate risks; (iv) develop and implement policies and procedures for an automated suspicious activity monitoring system; (v) conduct a “Look-Back” to determine whether suspicious activity was timely identified and reported by the bank and whether additional SARs should be filed for previously unreported suspicious activity; (vi) adopt an independent third-party audit program to conduct a review of the bank’s BSA/AML compliance program; and (viii) create a comprehensive training program for appropriate bank personnel. The bank has neither admitted nor denied the findings.
Civil Money Penalty Consent Order. On March 3, the OCC issued a consent order (2018 Order) against an officer of a California-based bank for violating consent orders issued in 2010 and 2014 related to deficiencies identified in the bank’s BSA/AML rules and regulations and for violations of 12 C.F.R. § 21.21 (Procedures for Monitoring Bank Secrecy Act Compliance). According to the 2018 Order, the officer, who was responsible for overseeing the bank’s operations department, allegedly engaged in “unsafe or unsound practices”; made false statements to the OCC and advised other bank employees to corroborate the statements; and “failed to take the necessary actions to ensure that the [b]ank corrected the deficiencies. . .” The 2018 Order requires the officer to, among other things, pay a $5,000 civil money penalty, and—under the cease and desist terms—participate in BSA/AML compliance training and refrain from making any BSA/AML staffing decisions. The officer, while agreeing to the terms of the consent order, has not admitted or denied any wrongdoing.
Wisconsin repeals mortgage escrow interest requirement
On April 17, the Wisconsin governor signed AB 822, which eliminates the requirement that financial institutions pay interest on certain residential mortgage loan escrow accounts. Previously, Wisconsin required institutions to pay interest on escrow accounts at a rate of no less than 5.25 percent if the loan was originated between February 1984 and December 1993, or at a variable rate if the loan was originated on or after January 1, 1994. Effective April 17, financial institutions are not required to pay interest on escrow accounts for residential mortgage loans originated on or after the effective date.
NYDFS encourages financial institutions and insurers to review relationship with NRA
On April 19, the New York Department of Financial Services (NYDFS), at the direction of New York Governor Andrew Cuomo, issued guidance to all NYDFS–regulated insurers and NYDFS-regulated financial institutions encouraging them to review ties to the National Rifle Association (NRA) (available here and here) and similar gun promotion organizations. According to the announcement, the NYDFS is encouraging regulated entities to consider reputational risk and public safety in connection with their relationship with gun promotion organizations. The letters reference recent school violence in Parkland, Florida and note that financial institutions and insurers can play a significant role in public health and safety, and in light of recent events, should manage reputational and other risks associated with dealings with the NRA or other similar gun promotion organizations. The letters conclude by encouraging regulated institutions to take “prompt actions” regarding these concerns.
Federal Reserve releases updates to interagency examination procedures for Regulations X and Z
On April 19, the Federal Reserve Board (Fed) issued a consumer affairs letter (CA 18-3) announcing revised interagency examination procedures for Regulation X (RESPA) and Regulation Z (TILA) that supersede procedures previously issued in September 2015. The updated procedures account for amendments to mortgage servicing rules under Regulations X and Z that took effect October 19, 2017 (see previous InfoBytes coverage here), as well as amendments to Regulation Z published by the CFPB through April 2016, including rules concerning small creditors’ mortgage lending to rural and underserved areas. However, the Fed stated in its letter that, at this time, the updated procedures do not incorporate Regulation Z amendments concerning the CFPB’s TILA-RESPA integrated disclosure rule or those regarding prepaid accounts. These amendments will be addressed in a future update.