Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • OCC Issues New Comptroller’s Licensing Manual Booklet to Provide Guidance on Articles of Association Amendments, Charters, and Bylaws

    Agency Rule-Making & Guidance

    On June 19, the Office of the Comptroller of the Currency (OCC) released Bulletin OCC 2017-23 announcing a new booklet designed to provide consolidated guidance on several policies and procedures impacting national banks and federal savings associations when forming the framework of articles of association or charter documents. The “Articles of Association, Charter, and Bylaw Amendments” booklet, which is a part of the Comptroller’s Licensing Manual, covers:

    • regulatory requirements for articles of association, charters, and bylaws;
    • an overview of the process required to notify the OCC or obtain OCC approval of an amendment;
    • requirements for the content of the articles of association, charters, and bylaws;
    • actions a national bank or federal savings association should take during the amendment process; and
    • references and links to informational resources and sample documents that national banks or federal savings associations may use during the amendment process.

    Agency Rule-Making & Guidance OCC Enforcement Licensing Comptroller's Licensing Manual

  • OCC Announces May 2017 Enforcement Actions

    Federal Issues

    On June 16, the OCC released a list of new enforcement actions taken against national banks, federal savings associations, and former institution-affiliated parties as well as a list of existing enforcement actions that were terminated in May. The actions include cease and desist, civil money penalties (CMP), and removal/prohibition orders. Among the actions, a senior loan originator of an Illinois bank was ordered to cease and desist and pay a CMP of $8,000 due to breaches of fiduciary duty and unsafe or unsound practices involving the transfer via unencrypted email of confidential consumer financial information.

    Federal Issues OCC Enforcement

  • Bipartisan Coalition of State Attorneys General File Petition to the FCC Seeking Broadband Consumer Protections

    Agency Rule-Making & Guidance

    On June 19, New York Attorney General Eric T. Schneiderman announced a petition filed on behalf of a bipartisan coalition of 35 state attorneys general to jointly oppose a cable and telecommunications industry petition, which is intended to stop state and local authorities from enforcing state consumer protection laws and leave the regulating of broadband disclosure requirements to the authority of the FCC. In seeking a declaratory ruling from the FCC, the industry groups request confirmation and clarification on federal regulatory requirements governing broadband speed disclosures, and further assert that “national, uniform rules [are] particularly important” once the FCC launches procedures to implement a “national ‘light-touch framework.’” In response to the petition, the FCC filed a public notice for comment on May 17. The state attorneys general, in responding to the request, claim the petition “asks the FCC to convert a limited safe harbor from FCC’s own enforcement, into blanket federal and state immunity for fixed and wireless broadband companies from liability for false statements contained in advertisements and marketing.” Furthermore, they assert that the industry groups are seeking a ruling that exceeds the FCC’s authority, is “procedurally improper,” and would “upend the longstanding dual federal-state regulation of deceptive practices in the telecommunications industry—which would leave consumers across the country without the basic state protections from unfair and deceptive business practices.”

    Agency Rule-Making & Guidance Privacy/Cyber Risk & Data Security State Attorney General Disclosures

  • Iowa Enacts Amendments to Consumer Credit Code

    State Issues

    Two amendments to the Iowa Consumer Credit Code (ICCC) recently signed into law by Iowa Governor Terry Branstad will go into effect July 1. The ICCC applies to, among others, consumer credit transactions, retail installment sales, lending transactions, and motor vehicle financing.

    Senate File 502, which relates to banks, credit unions, and specific consumer credit transactions, adds a new subsection 2A to the ICCC, which states a supervised loan made in violation of subsection 2 is void and “the consumer is not obligated to pay either the amount financed or the finance charge.” Additionally, “[i]f the consumer has paid any part of the amount financed or the finance charge, the consumer has the right to recover the payment from the [lender] . . . or from an assignee . . . who undertakes direct collection of payments or enforcement of rights arising from the debt.” Open-end loans have a statute of limitations of two years from the date of the violation, and closed-end loans have a statute of limitations of one year after the due date of the last scheduled payment. Other changes under Senate File 502 include a removal of the ban prohibiting returned check fees, an increase in the maximum late fee applied to transactions, and a clause that allows credit reporting charges to be excluded from finance charges.

    Senate File 503, which concerns “the deferral of unpaid installments and deferral charges for certain interest-bearing consumer credit transactions,” contains the following changes, among others: (i) parties may agree in writing to the deferral of unpaid installments before or after default, and (ii) deferral charges are permitted on closed-end, interest-bearing transactions and limited to $30.

    State Issues State Legislation Debt Collection Consumer Lending Consumer Finance

  • PHH v. CFPB Update: PHH Counters CFPB’s Statute of Limitations Interpretation

    Courts

    On June 13, PHH Corporation sent a letter to the U.S. Court of Appeals for the District of Columbia Circuit responding to a June 7 letter from the CFPB that stated RESPA’s three-year statute of limitations is not applicable in its enforcement action against the company. In its letter, the CFPB cited a decision in Kokesh v. SEC where the U.S. Supreme Court ruled that a five-year limit applies to civil penalties, and that, furthermore, “[d]isgorgement in the securities-enforcement context is a ‘penalty’ within the meaning of §2462, and so disgorgement actions must be commenced within five years of the date the claim accrues.” The Bureau further supported its argument for a five-year limit by claiming that RESPA’s three-year statute of limitations provision applies only to “actions” brought in a “United States district court or any other court of competent jurisdiction,” and its administrative proceeding against the company for alleged mortgage kickbacks was not an “action” under RESPA.

    In response, PHH countered that Section 2462 contains a “catch-all limitations period ‘[e]xcept as otherwise provided’ by Congress.” Thus, the D.C. Circuit panel was correct when it held that Congress “otherwise provided” a three-year statute of limitations under RESPA that applies to enforcement proceedings because in the “second part of Section 2614, the term ‘actions’ is not limited to actions brought in court.” PHH further asserts that Dodd-Frank “repeatedly uses the term ‘action’ to encompass court actions and administrative proceedings.”

    As previously covered in InfoBytes, on May 24, the D.C. Circuit, sitting en banc, heard oral arguments on the constitutionality of the CFPB. It did not indicate that it was inclined to revisit the panel’s determination that the Bureau misinterpreted RESPA when applying it to PHH’s practices.

    Courts Litigation Mortgages CFPB PHH v. CFPB RESPA Single-Director Structure

  • Gap Waiver Act Promulgated in Maine

    State Issues

    On June 12, Maine Governor Paul LePage signed into law S.P. 531, “An Act To Amend the Usage and Consumer Protections of Guaranteed Asset Protection [GAP] Waivers.” The Act applies to finance agreements for motor vehicles in which the creditor offers, for a separate charge, to “cancel or waive all or part of the amount due on a borrower’s finance agreement . . . in the event of a total physical damage loss or unrecovered theft.” The GAP waiver agreement must either be included in the auto finance agreement or attached to it as an addendum, and the waiver remains part of the finance contract when the contract is assigned, sold, or transferred. Additionally, the Act provides that the waiver may be sold in the state for a single or monthly payment, but “may not be considered a finance charge or interest” when disclosed in compliance with the Truth in Lending Act.

    A required disclosure with a GAP waiver is a “free-look” period during which the borrower can cancel the waiver agreement and receive a full refund of costs paid for the waiver as long as no waiver benefits have been provided. The waiver contract must also provide clear instructions for the borrower to follow in order to obtain waiver benefits, and the method for calculating the amount of the refund due if the contract is cancelled or terminated early.

    The law takes effect on January 1, 2018.

    State Issues State Legislation Auto Finance Installment Loans TILA

  • German Multinational Chemical Company Agrees to Pay DOJ More Than $11 Million, Receives Declination of FCPA Charges

    Financial Crimes

    On Friday, June 16, the DOJ issued a declination letter to attorneys for North American affiliates of a German multinational chemical company, in which the DOJ declined prosecution and closed an investigation of the company and certain of its subsidiaries and affiliates regarding potential FCPA violations that occurred between November 2006 and December 2009. The affiliates, which trades only on German stock exchanges and which has no securities registered with the SEC, agreed to pay DOJ a combined $11.2 million in disgorgement and forfeiture. 

    According to the DOJ letter, a New Jersey-based company acquired by the affiliate companies in October 2006, made corrupt payments to officials at and related to a Republic of Georgia state-owned and controlled entity to ensure continuity of business. Upon discovering this conduct, the affiliates initiated an internal investigation and subsequently withheld monies earmarked for a company controlled by the Georgian entity. These monies comprise the approximately $3.4 million that the affiliates agreed to forfeit.

    The DOJ letter stated that its decision is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies “to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that the affiliates had, among other things, voluntarily self-reported potential FCPA violations, conducted a thorough and proactive internal investigation, and continues to cooperate fully and remediate its compliance program and internal controls. Notably, the DOJ letter does not foreclose future prosecution of any individuals, and the letter explicitly delineates DOJ’s expectation that the affiliates will continue cooperating fully in any ongoing investigation of individuals.

    Financial Crimes DOJ Anti-Corruption

  • SFO Announces Charges Against British Multinational Bank and Four Former Executives in Qatar

    Financial Crimes

    On Tuesday, June 20, the UK Serious Fraud Office (“SFO”) announced charges against a British multinational bank and four former executives for conspiracy to commit fraud and provision of unlawful financial assistance in violation of the Companies Act 1985. These charges relate to the bank’s capital raising arrangements with a Qatar's state-owned holding company and a contract oil and gas land drilling provider in June and October 2008, as well as to a $3 billion loan facility made available to the State of Qatar acting through the Ministry of Economy and Finance in November 2008. According to the SFO press release, the investigation was first announced in 2012, and the individuals charged include a former Chief Executive Officer of the British multinational bank, a former Executive Chairman of the bank’s Capital Investment Banking and Investment Management in Middle East and North Africa, a former Chief Executive of the bank’s Wealth and Investment Management, and a former European Head of the bank’s Financial Institutions Group.

    While no US-based charges have been announced, the SFO’s announcement comes on the heels of the bank’s March 2017 disclosure to the SEC in which the company stated that “the DOJ and SEC are undertaking an investigation into whether the Group’s relationships with third parties who assist the bank to win or retain business are compliant with the U.S. Foreign Corrupt Practices Act.”

    Financial Crimes SEC UK Serious Fraud Office Fraud

  • Pennsylvania-Based Bank Settles Overdraft Class Action for $1M

    Courts

    On June 12, a Pennsylvania-based bank resolved a class action lawsuit over claims the bank charged its customers improper overdraft fees by agreeing to a proposed $975,000 settlement. According to plaintiff’s unopposed motion for approval of the settlement, the bank had a “practice of assessing overdraft fees even when a customer has sufficient funds in their account to cover all merchant requests for payment.” The plaintiff further alleged that the bank incorrectly charged the fees “to maximize its overdraft fee revenue.” Transactions triggering an overdraft fee using the available balance, but which would not trigger an overdraft fee using the ledger balance, are included in the settlement. The proceeds of the proposed settlement will be distributed to eligible class members within 20 days of the effective date of the settlement.

    A preliminary issue in this case was the bank’s belief that the suit was subject to arbitration. The bank claimed the dispute was governed by an agreement to arbitrate contained in plaintiff’s 2008 account agreement, and not, as plaintiff contended, by plaintiff’s 2010 account agreement, which did not contain an arbitration agreement. The trial court disagreed with the bank. In fact, the Pennsylvania Superior Court affirmed the trial court’s decision that there was no agreement to arbitrate the action, after which the Pennsylvania Supreme Court denied the bank’s petition to appeal that decision.

    Courts Consumer Finance Banking Overdraft Litigation Class Action

  • Senate Banking Committee Seeks Perspectives of Midsized, Regional, and Large Institutions, Regulators on Economic Growth

    Federal Issues

    On June 15, the Senate Committee on Banking, Housing, and Urban Affairs (Committee) held a hearing entitled, “Fostering Economic Growth: Midsized, Regional and Large Institution Perspective”. This is the third in a series of hearings to address economic growth. Frequent topics of discussion in the hearing included stress testing and capital planning—specifically the Federal Reserve’s Comprehensive Capital Analysis and Review stress test. Also discussed was the Systemically Important Financial Institution designation and costs incurred as a result, as well as the Volcker Rule.

    Sen. Mike Crapo (R-Idaho), Chairman of the Committee, remarked in his opening statement that the current regulatory framework is “insufficiently tailored for many of the firms subject to it.”

    Sen. Sherrod Brown (D-Ohio) – ranking member of the Committee—released an opening statement in which he stated “Let me be clear: proposals to weaken oversight of the biggest banks have no place in this committee’s process. . . Having said that, I am optimistic that there is room for agreement on a modified regime for overseeing regional banks.”

    The June 15 hearing—a video of which can be accessed here—included testimony from the following witnesses:

    • Mr. Harris Simmons, Chief Executive Officer and Chairman of Zions Bancorporation, on behalf of the Regional Bank Coalition (prepared statement)
    • Mr. Greg Baer, President of The Clearing House Association (prepared statement)
    • Mr. Robert HillChief Executive Officer of South State Corporation, on behalf of the Midsize Bank Coalition of America (prepared statement)
    • Ms. Saule Omarova, Professor of Law at Cornell University Law School (prepared statement)

    On June 22, the Senate Banking Committee held another hearing entitled “Fostering Economic Growth: Regulator Perspective, the fourth in its series of hearings focusing on economic growth. The hearing is available via webcast here.

    Federal Issues Senate Banking Committee Systemic Risk Bank Regulatory Bank Supervision FDIC OCC NCUA Federal Reserve CCAR Volcker Rule

Pages

Upcoming Events