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  • NYDFS Issues Virtual Currency License to XRP II, LLC

    Fintech

    On June 13, the NYDFS announced that it approved XRP II, LLC’s application for a virtual currency license. Before approving the company’s August 2015 application, NYDFS conducted a “rigorous review” of the company’s anti-money laundering, capitalization, consumer protection, and cybersecurity standards. To date, NYDFS has received 26 BitLicense applications; two companies, including this one, have been approved for BitLicenses and two have received state trust charters. NYDFS further noted that it recently denied two applications for a virtual currency license; the companies in receipt of the denial letters were ordered to stop any New York operations.

    Anti-Money Laundering Virtual Currency Licensing NYDFS Privacy/Cyber Risk & Data Security

  • Michigan AG Announces Default Judgment against Auto Title Loan Company

    Consumer Finance

    On June 8, Michigan AG Bill Schuette announced that a Michigan court entered a Default Judgment and Final Order for Permanent Injunction against an auto title loan company, several associated alias companies, and the company manager. The Judgment and Order found the defendants in violation of Michigan law for: (i) engaging in consumer lending without requisite authority or license in Michigan; (ii) charging or receiving interest on title loans in excess of 36%; (iii) misrepresenting in communications with borrowers the status of legal action taken or threatened to be taken in violation of Michigan’s Regulation of Collection Practices Act; (iv) engaging in conduct deemed unlawful under the Michigan Consumer Protection Act during the course of soliciting, selling, and collecting upon unauthorized title loans with illegal interest rates; and (v) transacting business in Michigan without a certificate of authority since at least June 28, 2013. Under the court’s judgment, the company is prohibited from, among other things, (i) making loans in Michigan without proper licensure; (ii) making, servicing, or collecting on any title loans sold or issued to certain Michigan consumers; (iii) accepting title loan interest or other payments made by certain Michigan consumers; (iv) engaging in any collection activities on title loans issued by defendants for certain Michigan consumers; (v) asserting a security interest in any vehicles allegedly pledged as security for repayment of a title loan; and (vi) selling or otherwise transferring interest in any motor vehicle associated with a title loan. The company must also pay a total of $2,208,698, $790,050 of which will be paid to the State and $1,418,648 of which is allocated for consumer restitution.

    State Attorney General Auto Finance Usury

  • OCC Issues Bulletin Regarding Temporary Extensions of SCRA Protections

    Lending

    On June 10, the OCC released Bulletin 2016-20 to inform national banks, federal savings associations, and federal branches and agencies of foreign banks (OCC-supervised institutions) of recent temporary amendments to the Servicemembers Civil Relief Act (SCRA). As previously covered in InfoBytes and as outlined in the OCC’s Bulletin, the Foreclosure Relief and Extension for Servicemembers Act 2015 extends through December 31, 2017 the SCRA provision that protects servicemembers against sale, foreclosure, or seizure of property based on a breach of a secured obligation without a court order or waiver for one year following completion of their service. The OCC’s Bulletin notes that HUD updated its “Servicemembers Civil Relief Act Notice Disclosure” (Form 92070) to reflect the temporary extensions.

    Foreclosure OCC SCRA

  • DOJ Determines that Indiana-Based Medical Device Manufacturer Breached FCPA Deferred Prosecution Agreement

    Federal Issues

    On June 6, the DOJ filed a status report with the U.S. District Court for the District of Columbia stating that an Indiana-based medical device manufacturer had violated its 2012 deferred prosecution agreement (DPA) related to FCPA charges. Specifically, the DOJ stated that it notified the medical device manufacturer on April 15, 2016 that “the government had determined that [it] had breached the DPA based on the conduct in Mexico and Brazil and based on [its] failure to implement and maintain a compliance program as required by the DPA.”

    The medical device manufacturer had settled FCPA charges with the DOJ and SEC in 2012 related to the company’s conduct in Argentina, Brazil, and China. As previously reported in the FCPA Scorecard, the company’s DPA had been extended twice since 2012: once in March 2015 because the company had discovered additional potential FCPA violations in Brazil and Mexico, and again in March 2016. According to the DOJ, the company and the DOJ are in discussions to resolve the matter without a trial.

    FCPA DOJ

  • Businessman Pleads Guilty to Foreign Bribery Charges in Connection with Venezuela's State-Owned Oil Company

    Federal Issues

    On June 16, the DOJ announced that the owner of several U.S.-based energy companies had pleaded guilty to bribery charges related to a scheme to corruptly secure energy contracts from Venezuela’s state-owned oil company. This stems from the previously reported December 2015 charges against the energy companies’ owner and the owner of an oil-field supply company.

    According to admissions made by the energy companies’ owner, he worked with the oil-field supply company’s owner to submit bids for equipment and services to Venezuela’s state-owned oil company. Beginning in 2009, the two individuals agreed to pay bribes to purchasing analysts of the state-owned oil company to ensure that their companies were placed on the state-owned oil company’s bidding panels, which enabled the companies to secure lucrative energy contracts. The energy companies’ owner also admitted to making bribe payments to other officials of the state-owned oil company to ensure that his companies were placed on vendor lists approved by the state-owned oil company and given payment priority over other vendors with outstanding invoices. Previous FCPA Scorecard coverage on these investigations can be found here.

    DOJ

  • Ninth Circuit: Discovery Rule Applies in FDCPA Actions

    Consumer Finance

    On June 8, the Ninth Circuit reversed the district court’s dismissal of a plaintiff’s complaint alleging that the debt collector defendants’ collection action against her violated the Fair Debt Collection Practices Act (FDCPA), finding that the plaintiff’s complaint was filed within one year of the date on which she first learned of the collection action and was thus timely. Lyons v. Michael & Associates, No. 13-56657 (9th Cir. June 8, 2016). On December 7, 2011, the defendants filed a debt collection action against the plaintiff in Monterey, California, despite the fact that the plaintiff resided in San Diego at the time she incurred the debt. On January 3, 2013, the plaintiff initiated a separate action alleging that the defendants violated the FDCPA by bringing their collection action against her in the wrong judicial district. The district court dismissed the plaintiff’s complaint as time-barred, finding that it was filed more than one year after the defendants filed their collection action against plaintiff. The Ninth Circuit reversed, opining that the “discovery rule” applies in FDCPA actions and, therefore, the statute of limitations on the plaintiff’s FDCPA claim did not begin to run until the plaintiff “kn[ew] or ha[d] reason to know of the injury which is the basis of the action.” Because the plaintiff did not have knowledge of the defendants’ collection action until she was served with process—which was less than one year before she filed her action—her FDCPA complaint was timely.

    FDCPA Debt Collection

  • Colorado AG Settles with Lenders Over Alleged Violations of Consumer Credit Protection Laws

    Consumer Finance

    On June 8, Colorado AG Cynthia Coffman announced a settlement with various lenders to resolve allegations that they violated Colorado’s consumer credit protection laws by making, servicing, and collecting high-cost loans. According to AG Coffman, the lenders made unlawful personal loans to more than 5,000 Colorado consumers, some of which had annual interest rates exceeding 355%. The AG’s office asserted that, in “the most egregious cases, consumers paid over five times the amount they borrowed in unlawful fees and interest.” Pursuant to a consent judgment entered by the Denver District Court, the lenders must pay $7,384,005.12 in disgorgement and restitution. The settlement comes after the State of Colorado obtained a $565,000 consent judgment against various entities in January 2014 arising out of similar conduct, making this the second Colorado AG settlement in connection with high-cost loans.

    State Attorney General Consumer Lending Usury

  • CFPB Takes Action Against North Dakota Payment Processor for Alleged Unauthorized Withdrawal Practices

    Fintech

    On June 6, the CFPB filed a complaint against a North Dakota-based third-party payment processor and two of its senior executives for alleged violations of the Dodd-Frank Act’s prohibition against unfair acts and practices. Acting on behalf of its clients, the payment processor transferred funds electronically through a network called the Automated Clearing House, and in the process, according to the CFPB, the payment processor “ignored numerous red flags about the transactions they were processing, including repeated consumer complaints, warnings about potential fraud or illegality raised by banks involved in the transactions, unusually high return rates, and state and federal law enforcement actions against their clients.” The CFPB contends that the defendants failed to: (i) heed warnings, including federal and state enforcement actions taken against the defendants’ clients, from banks and consumers regarding potential fraud or unauthorized debits; (ii) adequately monitor and respond to “enormously” high return rates; and (iii) investigate “red flags” throughout its clients’ application processes that “should have caused it to… perform enhanced due diligence prior to accepting a client for processing.” Regarding the individuals’ involvement in the allegedly unlawful activity, the CFPB’s complaint alleges that both engaged in unfair acts and practices by “actively ignoring” a number of red flags associated with the payment processor’s business activities. The CFPB’s complaint seeks monetary relief, injunctive relief, and penalties.

    CFPB Enforcement Payment Processors Vendor Management UDAAP Third-Party

  • CFPB Releases Report on Supplemental Findings on Payday, Vehicle, and Installment Loans

    Consumer Finance

    On June 2, the CFPB released a report with various analyses of payday loans, payday installment loans, vehicle title loans, and deposit advance products. The report’s six chapters examine: (i) consumer usage and default patterns for vehicle title installment loans and payday installment loans; (ii) consumer account activity before and after the discontinuation of deposit advance products, analyzing whether consumers who used such products “overdrew their accounts or took out payday loans more frequently after banks stopped offering the products”; (iii) the impact of varying state laws on storefront payday lending in Texas, Colorado, Washington, and Virginia; (iv) the share of payday loans that are reborrowed across states, comparing it to varying limits on renewals and requirements for cooling-off periods between the loans; (v) borrower and default patterns for storefront payday loans for three alternative definitions of the loan sequence concept; and (vi) a series of simulations regarding the estimated impacts of certain requirements on the payday, payday installment, and vehicle title loan markets. On June 2, the CFPB simultaneously released its Proposed Rule on Payday, Title, and Installment loans; to review BuckleySandler’s full coverage on the proposal, please see the Special Alert: CFPB’s Proposed Rule Regarding Payday, Title, and Certain Other Installment Loans.

    The CFPB’s recent supplemental report comes after its April 20 report titled “Online Payday Loan Payments” and its May 18 report titled “Single-Payment Vehicle Title Lending.”

    CFPB Payday Lending Installment Loans

  • CFPB Releases "Know Before You Owe" Auto Initiative

    Consumer Finance

    On June 9, the CFPB released an auto loan worksheet designed to help consumers shop for an automobile loan. As part of its Know Before You Owe auto initiative (also known as the Take Control of Your Auto Loan initiative), the online worksheet is intended to help consumers: (i) understand the aggregate amount of the loan – not just the monthly payment – including the interest rate, optional add-ons, and certain fees; (ii) negotiate and compare between loan offers; and (iii) be mindful of how additional financing features, services, or add-ons, such as guaranteed auto protection insurance, extended warranties, and credit insurance, can increase the upfront cost of a loan. In addition to the auto loan worksheet, the CFPB’s Know Before You Owe auto initiative also contains a step-by-step guide designed to help consumers navigate the auto lending process.

    The CFPB simultaneously released a report titled “Consumer Voices on Automobile Financing.” The report covers research related to direct and indirect auto financing, but does not address financing offered by “Buy Here Pay Here” dealers or leasing. According to the report, as of April 20, 2016, the CFPB has received more than 2,000 consumer complaint narratives related to vehicle financing issues. The report identifies the following as common themes among consumer complaint narratives:  (i) a lack of understanding regarding the potential financing options that are available, or a lack in confidence to explore options different from what was originally offered; (ii) difficulties in understanding and negotiating the loan terms, noting that “consumers reported that they did not fully understand the level of the interest rate they were paying until they started making payments”; (iii) failed promises of receiving refinancing or better loan terms in the future; (iv) challenges related to loans lasting “beyond the life of the vehicle”; (v) problems with add-ons, noting that consumers reported that the add-ons they had purchased “were difficult or impossible to use when needed”; and (vi) issues with credit inquiries and dealers submitting loan applications to lenders without consumer permission. The research and findings outlined in the CFPB’s report was used to develop the Take Control of Your Auto Loan initiative.

    CFPB Auto Finance Consumer Complaints

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