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  • CFPB Announces Enforcement Action Against Telecommunications Company for Alleged Unauthorized Third-Party Charges

    Consumer Finance

    On December 17, the CFPB filed a complaint in the Southern District of New York against a telephone company for allegedly charging its customers tens of millions of dollars in unauthorized third-party charges. According to the CFPB’s press release, for roughly a decade the company “crammed” consumers’ wireless bills with illegal charges by outsourcing payment processing for digital purchases – such as apps, games, and movies – to vendors known as “billing aggregators.” The CFPB alleges that the company failed to properly monitor the aggregators’ billing of customers as a payment processor for the third parties, and violated Dodd-Frank and the CFPA by (i) allowing third party vendors to attach illegitimate charges to consumers’ bills; (ii) billing customers for the unauthorized charges without their consent; (iii) failing to heed red flags showing that the system “was a breeding ground for unauthorized charges”; and (iv) failing to respond to consumer complaints. The complaint seeks refunds for consumers and penalties.

    CFPB Vendors Enforcement SDNY

  • CFPB Files Suit Against Texas Company for Alleged Deceptive Practices Targeting Union Workers

    Consumer Finance

    On December 17, the CFPB announced it filed suit against a Texas-based company for allegedly deceiving consumers into paying fees to sign up for a “sham” credit card. According to the complaint filed in the Northern District of Texas, the CFPB alleges that the company falsely advertised a general-use credit card that, in actuality, could only be used to buy products from the company. The CFPB further alleges that the company deceptively implied an affiliation with unions by, among other things, using pictures of nurses, firefighters, and other public servants in its advertising. The complaint seeks compensation for consumers, a civil penalty, and an injunction against the company.

    Credit Cards CFPB UDAAP Enforcement

  • President Obama Signs Extension of SCRA's One-Year Foreclosure Protection

    Lending

    On December 18, after passing unanimously in both houses of Congress, President Obama signed into law S.3008, the Foreclosure Relief and Extension for Servicemembers Act of 2014. Previously, the SCRA’s protection for servicemembers against foreclosure for one year after the end of active duty was set to expire at the end of 2014. The Act extends this protection until the end of 2015, at which point the foreclosure protection is scheduled to revert to the period of active duty plus 90 days that was in effect in 2008.

    Foreclosure SCRA U.S. Senate U.S. House

  • President Obama Signs Law Allowing Authority To Implement Ukraine-Russian Sanctions

    Federal Issues

    On December 18, President Obama signed into law H.R. 5859, the “Ukraine Freedom Support Act of 2014.” First introduced in the House on December 11, the bill gives the President the authority to impose sanctions against countries, entities, and individual persons that pose potential threats to financial stability through excessive risk-taking with the Russian market. The bill provides authority for sanctions against foreign persons, including executive officers of an entity, relating to (i) banking transactions; (ii) investing in or purchasing equity or debt instruments; (iii) U.S. property transactions; and (iv) Export-Import Bank of the United States assistance. Finally, the bill directs the President to “use U.S. influence to encourage the World Bank Group, the European Bank for Reconstruction and Development, and other international financial institutions to invest in and stimulate private investment in such projects.”

    Sanctions U.S. Senate U.S. House Ukraine Russia

  • OCC Releases Semiannual Report on Key Risk Areas

    Consumer Finance

    On December 17, the OCC announced the release of its semiannual report on key risk areas affecting the federal banking system. Specifically regarding community and midsize banks, the report identifies areas where the OCC intends to heighten its supervisory attention including, but not limited to, corporate governance, operational risk, cyber risk, and compliance risk, specifically related to fair lending and BSA/AML. Other notable takeaways from the report include continued improvement in the overall financial condition of community and midsize banks. However, the report also indicated that smaller banks, due to increased competition for loan demand and low investment yields, continue to experience pressure on earnings.

    OCC Semiannual Risk Report Bank Supervision

  • OCC Announces Release of Annual Credit Survey

    Consumer Finance

    On December 16, the OCC announced the release of their annual survey of credit underwriting practices identifying trends in lending standards and credit risk for the most common types of commercial and retail credit provided by banks. According to the report, leveraged loans, indirect consumer loans, credit cards, large corporate loans, and international loans accounted for the largest easing in underwriting standards. The survey also noted competitive pressures, ample liquidity, and the desire to reach for yield in a low-interest rate environment as contributing factors to the loosened underwriting. As a group, large banks reported the highest share of eased standards. The survey included 91 of the largest banks and thrifts and covered $4.9 trillion of loans representing roughly 94 percent of all loans in the federal banking system.

    OCC

  • SEC Settles FCPA Charges Against Global Manufacturer

    Securities

    On December 15, the SEC settled charges against a global manufacturer for allegedly violating the FCPA by providing non-business payments and travel expenses to Chinese government officials with the expectation of obtaining business. The SEC investigation revealed that approximately $230,000 in improper payments were allegedly made out of the company’s China-based offices and were falsely recorded as business and marketing expenses in the company’s records. The SEC alleged that insufficient internal controls allowed for the payments to continue and that as a result the company profited $1.7 million in contracts with state-owned entities in China. The company self-reported its misconduct and provided “extensive cooperation” during the SEC’s investigation, and will pay $1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty.

    FCPA SEC Enforcement China

  • FINRA Fines Financial Firms for Anti-Money Laundering Failures

    Securities

    On December 18, FINRA announced a joint $1.5 million penalty against two broker-dealers for anti-money laundering failures. According to anti-money laundering compliance program requirements, broker-dealers opening new accounts must identify each customer through an established written Customer Identification Program (CIP). FINRA alleges that the broker-dealers had a deficient CIP system, which over nine years resulted in the failure to conduct customer identity verification for nearly 220,000 new accounts. The firms neither admitted nor denied FINRA’s charges, but agreed to the entry of the agency’s findings.

    FINRA Anti-Money Laundering Enforcement

  • State Bank Regulators Request Feedback On Model Framework for Virtual Currency Activities

    State Issues

    On December 16, the Conference of State Bank Supervisors (CSBS) announced its draft regulatory framework and requested public comment on specific questions intended to aid state regulators on the regulation of virtual currencies. The regulation of virtual currency activities currently varies from state to state. The draft framework is intended to create uniform state regulation. Comments are due by February 16, 2015.

    CSBS Bank Supervision Virtual Currency

  • NY Superintendent of Financial Services Proposes Lighter BitLicense Regulations

    Fintech

    On December 18, Superintendent Lawsky delivered remarks regarding New York’s revised proposal for regulating virtual currency companies. The new proposal stems from the original July 17 proposal and includes certain revisions previously alluded to on October 17. Lawsky noted that the revisions will provide flexibility to virtual currency startups, while simultaneously allowing the New York Department of Financial Services to remain committed to protecting consumers. Most notably, the revised regulation “will offer a two-year transitional BitLicense, which may be issued to those firms who are unable to satisfy all of the requirements of a full license, and will be tailored to startups and small businesses.” According to Lawsky, while the companies will still have to abide by anti-money laundering and consumer protection requirements, the revisions are intended to “strike an appropriate balance between permitting innovation to proceed, while at the same time strongly protecting consumers and helping root out illicit activity.”

    Anti-Money Laundering Virtual Currency NYDFS

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