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CFPB Convenes Small Business Mortgage Panel and Updates Mortgage Disclosure Prototypes
On February 21, the CFPB announced the formation of a small business panel to provide feedback on the Bureau’s mortgage disclosure form initiatives, as required under the Small Business Regulatory Enforcement Fairness Act. That law requires that federal agencies gather small business input to help the agencies fulfill the related legal requirement that regulations avoid significant economic impact on a substantial number of small firms. The panel will provide feedback on small business compliance burdens related to the CFPB’s proposed mortgage disclosures and related proposed regulations. The CFPB’s announcement included the release of several documents that will be shared with the panel, including a detailed overview of the mortgage disclosure proposals under consideration, a fact sheet summarizing the review process, and an outline of questions the panel will address. In a related blog post, the CFPB also sought public comment on the proposals to be considered by the small business panel. The formation of the panel follows the CFPB’s recent release of another round of prototype integrated mortgage disclosures. After several rounds of previous testing, the CFPB provides in this most recent release a prototype loan estimate and settlement disclosure. At this stage, the CFPB no longer is offering multiple versions to compare, but is still testing the prototypes in person while seeking broader public feedback online. The CFPB promises that this is the last round of testing before it turns to crafting a proposed rule.
FTC Seeks Public Input Regarding Motor Vehicle Financing
On February 21, the FTC issued a reminder that public comments may be submitted through April 1, 2012 as part of the FTC’s ongoing project to gather information on consumer experiences in the sale, financing, and leasing of motor vehicles at dealerships. The FTC held multiple events on the topic last year. A recent FTC report identified automobile finance as an area of focus in 2012.
White House Privacy Report Pushes for New Laws and Industry Self-Regulation
On February 23, the White House released a report on consumer privacy, setting out a Consumer Privacy Bill of Rights. The proposed Bill of Rights consists of seven broad principles, including individual control, security, and transparency of data use. The report asks Congress to codify the recommendations as a statute enforceable by the Federal Trade Commission, and identifies FTC enforcement as critical to ensuring privacy protections. Pending or absent congressional action, the report promises that the administration will work with the private sector to adopt new protections on voluntary basis. The administration will hold stakeholder forums to develop legally enforceable codes of conduct. Finally, the report addresses the need for international interoperability and coordination of enforcement.
Fannie Mae Advises Sellers Regarding SEC Disclosures
On February 21, Fannie Mae advised all sellers that on February 9, 2012 it had filed its initial report pursuant to a new SEC rule requiring public disclosure of information regarding asset-backed securities loan repurchase requests, including the identity of the originator. It will continue to disclose such information in quarterly reports to the SEC beginning in May 2012.
HUD Suspends Mortgage Insurance Program for Military Impacted Areas
On February 16, HUD published a final rule to suspend, effective March 19, 2012, the Federal Housing Administration’s mortgage insurance program for military impacted areas. The program is being halted because it is underutilized and borrower needs can be served under comparable terms and conditions through HUD’s primary single-family mortgage insurance program.
NIST Publishes Recommendations for Establishing Governance Structure for Implementation of National Trusted Identities Strategy
On February 7, the National Institute of Standards and Technology (NIST) published a report with recommendations for developing a governance system to implement the National Strategy for Trusted Identities in Cyberspace (NSTIC). The NSTIC directs the federal government to work with private sector stakeholders to establish and maintain an identity ecosystem for internet transactions aimed at promoting trust, privacy, and security. The report summarizes comments received in response to a June 2011 Notice of Inquiry (NOI) that sought public input regarding the establishment and structure of a private sector-led steering group to implement the NSTIC. Based on those comments, stakeholder workshops, and best practices from similar governance efforts, the report presents recommendations in four areas: (i) steering group initiation, (ii) steering group structure, (iii) stakeholder representation, and (iv) international coordination. The report also includes a recommended charter to establish the steering group and notes that, subject to public comment and finalization of the approach outlined in the report, NIST intends to initiate a competitive grant program to fund a secretariat responsible for convening the initial steering group.
Buckley Sandler Litigators Obtain Dismissal in FCPA Sting Criminal Trial
Today, U.S. federal prosecutors abandoned one of the highest profile Foreign Corrupt Practices Act cases ever brought by the DOJ. Judge Richard Leon of the U.S. District Court for the District of Columbia granted the government’s motion to dismiss foreign bribery charges against all remaining defendants facing charges from an FBI sting operation. The defendants were charged with paying bribes to a purported government official from the country of Gabon in connection with contracts to supply Gabon with military and law enforcement products. The government sting operation resulted in the arrests of twenty-two individuals at an industry trade show in Las Vegas in 2010.
BuckleySandler represented John Mushriqui in the case, and in January successfully obtained a mistrial for Mr. Mushriqui following a nearly four-month jury trial after a federal jury failed to reach a unanimous verdict for Mr. Mushriqui and two other defendants, including his sister Jeana Mushriqui.
The mistrial ruling followed the same jury’s acquittal of two other defendants, Judge Leon’s acquittal of another defendant in December 2011, and a July 2011 mistrial involving four other defendants involved in the sting. Between the two Gabon sting trials to date, three defendants were acquitted and seven proceeded to a hung jury. In the face of these outcomes, the government decided to abandon the case with regard to all remaining defendants and will not seek to re-try the defendants whose previous trials ended in a mistrial. The government stated in its motion that it had "carefully considered (1) the outcomes of the first two trials in which, after extensive deliberations, the juries remained hung as to seven defendants and acquitted two defendants, and one defendant was acquitted on the sole charge against him pursuant to Fed. R. Crim. P. 29; (2) the impact of certain evidentiary and other legal rulings in the first two trials and the implications of those rulings for future trials, including with respect to Rule 404(b) and other knowledge and intent evidence the government proposed to introduce; and (3) the substantial governmental resources, as well as judicial, defense, and jury resources, that would be necessary to proceed with another four or more trials, given that the first two trials combined lasted approximately six months. In light of all of the foregoing, the government respectfully submits that continued prosecution of this case is not warranted under the circumstances."
BuckleySandler’s David Krakoff, who represented Mr. Mushriqui at trial along with counsel Lauren Randell, responded to the dismissal stating, “We are extremely pleased that the Department of Justice has decided to do the right thing by moving to dismiss the Indictment against our client John Mushriqui, ending his two year nightmare. We recognize that this was a difficult decision given the substantial resources that the government invested in this case. It's really hard to take on the government, but when you believe in your innocence and fight for your freedom, these cases can be won. Ultimately, the system worked for John Mushriqui. John can start the rest of his life today with his good name intact.”
CFPB Proposes Rule to Define "Larger Participants" in the Consumer Debt Collection And Consumer Reporting Markets
On February 16, the CFPB released a proposed rule to define “larger participants” in the markets for consumer debt collection and consumer reporting, thereby beginning the process by which the CFPB will determine which such entities are subject to its supervision. In short, the proposal uses annual receipts as the metric for determining larger participants. Under the Dodd-Frank Act, the CFPB has authority to supervise, regardless of size, nonbanks that provide to consumers (i) origination, brokerage, or servicing of residential mortgage loans secured by real estate, and related mortgage loan modification or foreclosure relief services; (ii) private education loans; and (iii) payday loans. The CFPB also has the power to supervise “larger participants” in any other market for consumer financial products or services, and the Act grants the CFPB authority to define “larger participants.” In this first effort to define larger participants in specific markets, the CFPB proposes to supervise debt collectors with more than $10 million in annual receipts from debt collection activities, which would cover approximately 175 debt collection firms that collectively account for 63 percent of annual receipts from the debt collection market. Consumer reporting agencies with more than $7 million in annual receipts from consumer reporting activities also would be covered, capturing approximately seven percent of consumer reporting agencies, or about 30 firms, which the CFPB estimates account for approximately 94 percent of the annual receipts from consumer reporting. Stakeholders and the public can submit comments on the proposal through April 17, 2012. The CFPB plans to issue larger participant proposed rules for other markets. Final rules for all markets must be published by July 21, 2012.
Legislators Move Forward on Bill to Address Non-Waiver of Privileged Documents Submitted to CFPB
On February 16, the House Financial Services Committee approved H.R. 4014, which would mandate that providing information to the CFPB for any purpose as part of the supervisory process will not be construed as waiving, destroying, or otherwise affecting any privilege applicable to such information. The bill would accomplish this by amending the Federal Deposit Insurance Act to create the same non-waiver of privilege protections already afforded to information submitted by supervised entities to federal, state, and foreign banking regulators. A substantially identical bill, S. 2099, recently was introduced in the Senate by Chairman Johnson and Ranking Member Shelby of the Senate Banking Committee.
- SEC Complaint, Pfizer
- SEC Complaint, Wyeth
- Pfizer Deferred Prosecution Agreement
- Pfizer DPA Excerpt: Enhanced Compliance Obligations
CFPB Issues Draft Monthly Mortgage Statement, Outlines Future Mortgage Servicing Rules
On February 13, the CFPB released a draft model monthly mortgage statement designed to help implement Dodd-Frank Act amendments to the Truth in Lending Act that require such statements. The CFPB acknowledges that many financial institutions already provide monthly statements to borrowers. However, the Dodd-Frank Act requires specific information to be provided in regular statements, including (i) the principal amount, (ii) the current interest rate, (iii) the interest rate reset date, (iv) a description of late or prepayment fees, (v) housing counselor information, (vi) certain contact information, and (vii) other information prescribed by CFPB regulations. The CFPB has been testing the draft model statement with consumers and now is seeking broader public comment though its website. After this informal comment period ends, the CFPB will proceed to a formal rulemaking through which it will set the requirements for monthly statements and provide a model form for use in complying with the new rules. Institutions will have some flexibility to adjust the model. One day prior, CFPB Director Richard Cordray published an op-ed in which he outlined additional agency efforts regarding mortgage servicing, including future rules that would restrict the use of force-placed insurance and require additional disclosures relating to hybrid adjustable rate-mortgages.