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FTC Seeks Additional Comments Regarding Proposed Research on Consumers' Experience with the Auto Finance Industry
On September 14, the FTC published its second Federal Register notice regarding a proposed consumer survey designed to provide the FTC with insights into consumer understanding of the process whereby automobiles are purchased and financed through a dealer. The FTC issued its first notice regarding the survey on January 7, 2016. The second notice summarizes industry comments received in response to its first notice. Commenters suggested that the survey include questions addressing such topics as, (i) consumers’ experiences specifically with “Buy Here Pay Here” dealers; (ii) “yo yo financing scams”; and (iii) add-on products or services. The second notice outlines the FTC’s planned methodology for conducting the survey, and identifies the areas on which the consumer interview questions will focus. The FTC estimates that 170 consumers will participate in the survey and that it will require approximately 367 burden hours. Comments regarding the accuracy of burden estimates, as well as ways to minimize the information collection burden, are due by October 14, 2016.
District Court Dismisses Disparate Impact Claim under the Fair Housing Act
In The Inclusive Cmtys. Project, Inc. v. The Tex. Dep’t of Hous. and Cmty., No. 3:08-cv-00546-D (N.D. Tex. Aug. 26, 2016), on remand from the Supreme Court and the Fifth Circuit, the district court dismissed claims of disparate impact under the Fair Housing Act (FHA) where the plaintiff alleged that the defendant allocated two different types of tax credits in a manner that perpetuated racial segregation. The district court applied the Supreme Court’s previously explained three-part burden-shifting framework to analyze the plaintiff’s claim, and determined that, among other things, the plaintiff’s claim failed to show a “specific, facially neutral policy” causing a racially disparate impact. The court reasoned that “[b]y relying simply on [the defendant’s] exercise of discretion in awarding tax credits, [the plaintiff] has not isolated and identified the specific practice that caused the disparity in the location of low-income housing…. [The plaintiff] cannot rely on this generalized policy of discretion to prove disparate impact.” The district court further reasoned that because the plaintiff had not “sufficiently identified a specific, facially-neutral policy that has caused a statistically disparity,” the court could not “fashion a remedy that removes that policy.” The district court concluded that the plaintiff “failed to prove a prima facie case of discrimination by showing that a challenged practice caused a discriminatory effect” and entered judgment in favor of the defendants.
OFAC Settles with Illinois-based Company for Alleged Violations of the Iranian Transactions and Sanctions Regulations
On September 13, OFAC announced a $4,320,000 settlement with an Illinois-based company to resolve allegations that it violated the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560. From approximately May 5, 2009 to March 2, 2012, OFAC alleges that on 48 occasions the company shipped seeds to consignees located in Europe or the Middle East with the knowledge or reason to know that the seeds were ultimately destined for Iran distributors. The settlement amount reflects OFAC’s consideration of the following aggravating factors: (i) the company acted willfully by engaging in conduct it knew to be prohibited; (ii) the company acted recklessly by ignoring its OFAC compliance responsibilities; (iii) the company’s employees, including mid-level management, had “contemporaneous knowledge” that the seeds were ultimately destined for Iran, and for almost eight months after the Director of Finance learned of OFAC’s investigation, it continued sales to its Iranian distributors; (iv) the company’s conduct resulted in providing $770,000 in economic benefit to Iran; (v) the company failed to cooperate with OFAC at the start of the investigation, providing information that was inaccurate, misleading, or incomplete; and (vi) the company is a subdivision of a commercially sophisticated, international corporation. Mitigating factors considered when determining the settlement amount include, but are not limited to, the company’s lack of sanctions history with OFAC for five years before the first of the alleged 48 violations and the remedial steps the company took to ensure future compliance with OFAC sanctions.
Obama Administration Issues Executive Order Terminating Côte d'Ivoire Sanctions Programs
On September 14, the White House issued an Executive Order titled “Termination of Emergency with Respect to the Situation in or in Relation to Côte d’Ivoire.” The Executive Order terminates the Côte d’Ivoire-related sanctions program. Accordingly, OFAC updated its SDN List to indicate the removal of the sanctions against the country established under the United Nations Security Council’s Resolution 2284. The Executive Order is effective immediately.
OFAC Publishes Burma-Related FAQ
On September 14, President Obama announced his intent to lift certain sanctions against Burma and to designate it as a least-developed beneficiary developing country for the purposes of the Generalized System of Preferences program, a status that would allow imported products from Burma to enjoy lower tariffs and preferential treatment. Accordingly, OFAC published new FAQ 480 to address the President’s announcement regarding the policy change with respect to Burma. The policy change will take effect when the President issues a new Executive Order and, at that time, OFAC “will formally remove the Burmese Sanctions Regulations from the Code of Federal Regulations and take other administrative actions as necessary.”
DOJ Declines FCPA Charges Against UK-Based Pharmaceutical Company Following SEC Settlement
In conjunction with the SEC’s recent settlement with a U.K.-based pharmaceutical company, the company announced on August 30 that the DOJ has closed its parallel foreign bribery investigation. As detailed here, the SEC settled charges against the company for allegedly improper payments made by its wholly owned subsidiaries in China and Russia. Under the SEC settlement, the company agreed to disgorge $4.325 million and pay a $375,000 civil penalty with $822,000 in prejudgment interest.
DOJ and SEC Decline FCPA Action Against California-Based Software Company
On September 8, a California-based software company disclosed in its annual statement that following an investigation into its operations in Russia and certain of the Commonwealth of Independent States, the DOJ and SEC have both declined to bring enforcement actions under the FCPA. An announcement of possible violations was first disclosed in the December 2013 blog post by Roxane Marenberg, Vice President and Deputy General Counsel in the company’s Global Compliance Enablement division. In the post, Marenberg stated that the company was conducting an investigation into alleged FCPA violations at the request of the SEC and DOJ in response to a communication those agencies had received concerning the company’s operations and discounting practices. The company’s disclosures did not provide any further detail about the nature of the business activities being investigated.
Special Alert: NYDFS Stakes Claim on Cybersecurity Regulation
On September 13, the New York Department of Financial Services (DFS) issued a proposed rule establishing cybersecurity requirements for financial services companies, and has thus ventured into new territory for state regulators. In the words of Governor Cuomo, “New York, the financial capital of the world, is leading the nation in taking decisive action to protect consumers and our financial system from serious economic harm that is often perpetrated by state-sponsored organizations, global terrorist networks, and other criminal enterprises."
Given the concentrated position of financial service companies in New York and the regulation’s definition of a Covered Entity – which includes “any Person operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the banking law, the insurance law or the financial services law” – it could create an almost de facto national standard for medium to large financial services companies, regardless of where they keep their servers or suffer a cyberattack. This type of state-level regulation is not unprecedented. In 2003, California passed a data breach notification law that requires companies doing business in California to notify California residents of the breach and more recently amended the law to require 12 months of identity protection and strengthen data security requirements. In 2009, Massachusetts enacted a regulation mandating businesses implement security controls to protect personal information relating to state residents.
The DFS designed the regulation to protect both consumers and the financial industry by establishing minimum cybersecurity standards and processes, while allowing for innovative and flexible compliance strategies by each regulated entity. Yet the proposed regulation goes further than to just ask financial entities to conduct a risk assessment and to design measures to address the identified risks.
Click here to view the full Special Alert.
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Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- John P. Kromer, (202) 349-8040
- Elizabeth E. McGinn, (202) 349-7968
Credit Union National Association: Credit Unions Remain Exempt from the FDCPA
On September 9, the Credit Union National Association (CUNA) sent a letter to the CFPB regarding the CFPB’s initial outline of the proposed rule for third party debt collectors. The letter asserts that, since the Fair Debt Collection Practices Act (FDCPA) was enacted, credit unions have been exempt from the statute’s rules and that to extend any rulemaking pursuant to the statute to include credit unions would be “unlawful.” The CUNA distinguishes credit unions from for-profit debt collectors subject to the FDCPA, claiming that credit unions’ collection approach is more holistic: “They are not just interested in short-term efforts of collecting a debt; instead, they try to find out the specific cause of their member’s financial challenge.” The CUNA is concerned that certain aspects of the CFPB’s proposal as outlined, including the “highlight technical substantiation and oversight requirements,” would negatively impact credit unions. The CUNA reminded the CFPB that pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA), it is required to consider the recommendations in its letter before finalizing any rule.
Top 20 Bank Settles with DOJ Over Alleged Violations of the False Claims Act
On September 13, the DOJ announced a $52.4 million settlement with a top 20 bank to resolve allegations that it violated the False Claims Act by knowingly originating and accepting FHA-insured mortgage loans that did not comply with HUD origination, underwriting, and quality control requirements. It is the smallest settlement of a False Claims Act FHA-insured mortgage loans case against a bank to date as part of the government’s recent enforcement initiative in this area. According to the Statement of Facts issued as part of the settlement agreement, from January 1, 2006 through December 31, 2011 (relevant time period), the bank, while acting as a direct endorsement lender (DEL) in the FHA program, (i) certified certain mortgage loans for FHA insurance that failed to meet HUD underwriting requirements regarding borrower creditworthiness; (ii) failed to adhere to various HUD quality control requirements; and (iii) failed to adhere to HUD’s self-reporting requirements. The DOJ noted that the “claims asserted against [the bank] are allegations only, and there has been no determination of liability.” BuckleySandler represented the bank in this matter.