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Maryland governor signs provisions amending Maryland Consumer Loan Law’s small lending requirements
On May 15, the Maryland governor signed legislation to establish requirements for lenders making covered loans in the state. Among other things, HB1297 increases the threshold for which a loan is subject to small lending requirements within the Maryland Consumer Loan Law (MCLL) from $6,000 to $25,000. The law also prohibits (i) lenders who are not licensed in the state from making loans of $25,000 or less, unless the person is exempt from requirements under MCLL; (ii) a person contracting “for a covered loan that has a rate of interest, charge, discount, or other consideration greater than the amount authorized under state law”; and (iii) covered loans that would be a violation of the Military Lending Act. Loans that violate these provisions are deemed void and unenforceable except in limited circumstances. The law takes effect January 1, 2019.
Supreme Court of Appeals for West Virginia upholds summary judgment for consumer against check cashing company
On May 11, the Supreme Court of Appeals of West Virginia affirmed summary judgment for a consumer who alleged a check cashing company and its debt collector violated the West Virginia Consumer Credit and Protection Act (WVCCPA) by contacting her multiple times after being notified of her Chapter 7 bankruptcy filing. According to the opinion, the consumer filed a Chapter 7 petition for bankruptcy in February 2012 and the cash checking company was notified on or about March 6, 2012 of the filing. On March 9, the company, in response to the bankruptcy notice, sent a letter to the consumer notifying her collection efforts would be stayed but the company would be pursuing a criminal complaint against her. Additionally, a debt collection agency under contract with the company contacted the consumer five additional times in attempt to collect the debt. The trial court first granted the consumer’s motion for summary judgment in part, finding that the company violated the WVCCPA by not contacting the consumer’s attorney and by threatening criminal prosecution even though the company was aware of the bankruptcy filing. The court awarded the consumer over $19,000 in statutory damages. Subsequently, the trial court granted the consumer’s second motion for summary judgment, holding, among other things, that the company instructed the debt collector to contact the consumer despite having “actual knowledge” that an attorney represented the consumer. The court granted additional statutory damages in the amount of $18,000 and awarded attorney’s fees and costs.
Upon appeal, the Supreme Court of Appeals concluded that the check cashing company’s violations of the WVCCPA were deliberate and intentional, and therefore, the trial court did not abuse its discretion by awarding the consumer over $37,000 in damages and attorney’s fees.
OFAC adds additional Venezuelan government officials to Specially Designated Nationals List
On May 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) made additions to the Specially Designated Nationals List pursuant to Executive Order 13692. OFAC’s additions to the list include four current or former Venezuelan government officials identified as persons who have “exploit[ed] their official positions to engage in narcotics trafficking, money laundering, embezzlement of state funds, and other corrupt activities.” OFAC additionally blocked three companies and 14 properties located in Florida and New York owned by one of the recently added officials. As a result, all assets belonging to the identified individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC, and U.S. persons are generally prohibited from dealing with them.
See here for continuing InfoBytes coverage of actions related to Venezuela.
Federal Reserve Governor discusses Community Reinvestment Act modernization
On May 18, Federal Reserve Board Governor Lael Brainard spoke before a community development conference in New York City to discuss the Community Reinvestment Act’s (CRA) role in supporting low- and moderate-income (LMI) neighborhoods and the importance of “refreshing” CRA regulations to accommodate for, among other things, technology-driven changes that have made banking accessible via online and mobile platforms. Brainard covered five principles for CRA modernization, including (i) updating CRA regulations to accommodate different business models that serve the needs of LMI communities while still sustaining branches; (ii) clarifying performance measures for productive CRA investment activities and finding ways to “reduce the distortions that lead to some areas becoming credit ‘hot spots’ and others credit deserts”; (iii) tailoring CRA regulations and evaluation methods to take into account banks of different sizes and business models; (iv) improving and promoting consistency and predictability across and within agencies; and (v) ensuring that the revised CRA regulations continue to “mutually reinforce[e] laws designed to promote an inclusive financial services industry” as well as “fair access to credit.”
California branch sentenced in BSA/AML obstruction case
On May 18, the U.S. District Court for the Southern District of California sentenced a Netherlands-based financial institution’s U.S. subsidiary for “impairing, impeding and obstructing” the OCC during its 2012 examination by concealing deficiencies in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance programs. As previously covered by InfoBytes, the branch plead guilty in February to one count of conspiracy to defraud the U.S. Government and agreed to pay over $368 million as a result of allowing “hundreds of millions of dollars in untraceable cash, sourced from Mexico and elsewhere, to be deposited into its rural bank branches” without conducting adequate BSA/AML review. In addition to the February plea agreement, the court sentenced the bank to a two-year term of probation and fined the bank $500,000, the maximum statutory fine.
FHA extends foreclosure moratoriums for certain properties in Puerto Rico & U.S. Virgin Islands
On May 16, the Federal Housing Administration (FHA) released Mortgagee Letter ML 2018-03 (ML 2018-03), which extends the 180-day foreclosure moratorium on FHA-insured properties in Puerto Rico & the U.S. Virgin Islands affected by Hurricane Maria for an additional 90 days. As previously covered by InfoBytes, in March, FHA extended the moratorium an additional 60 days to May 18. The foreclosure moratorium is now in effect, for properties that meet certain conditions, until August 16.
Find continuing InfoBytes coverage on disaster relief here.
Trump signs legislation repealing CFPB auto guidance, Mulvaney praises action; CFPB to reexamine ECOA requirements
On May 21, President Trump signed resolution S.J. Res. 57, which repeals CFPB Bulletin 2013-02 on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). The president’s signature completes the disapproval process under the Congressional Review Act (CRA), which began after the Government Accountability Office (GAO) issued a letter in December 2017 to Senator Pat Toomey (R-Pa) stating that “the Bulletin is a general statement of policy and a rule” that is subject to override under the CRA. The Senate passed the disapproval measure in April and the House approved it in the beginning of May. (Previously covered by InfoBytes here.)
The repeal responds to concerns that the bulletin improperly attempted to regulate auto dealers, which the Dodd-Frank Act excluded from the Bureau’s authority. In a statement after the president’s signing, CFPB acting Director Mick Mulvaney praised the action and thanked the president and Congress for “reaffirming that the Bureau lacks the power to act outside of federal statutes.” He also stated that the repeal “clarifies that a number of Bureau guidance documents may be considered rules for purposes of the CRA, and therefore the Bureau must submit them for review by Congress. The Bureau welcomes such review, and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission.”
Additionally, acting Director Mulvaney announced plans to reexamine the requirements of ECOA, “[g]iven a recent Supreme Court decision distinguishing between antidiscrimination statutes that refer to the consequences of actions and those that refer only to the intent of the actor.” Although the decision is not identified, it is likely the June 2015 Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which concluded that disparate impact claims are permitted under the Fair Housing Act but acknowledged some limitations on its application. (Covered by a Buckley Sandler Special Alert.)
CFPB updates TRID Small Entity Compliance Guide and Guide to Forms
On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.
Macau real estate developer sentenced for bribing UN officials
On May 11, Judge Vernon S. Broderick of the SDNY sentenced a Macau real estate developer to 48 months in prison and ordered him to pay a $1 million fine, $302,977 in restitution, and forfeiture of $1.5 million. In July 2017, a jury convicted the developer of two counts of violating the FCPA, one count of paying bribes and gratuities, one count of money laundering, and two counts of conspiracy. The conduct centered on the developer’s role in bribing UN officials in order to build a new multi-billion dollar conference center in Macau.
Five other defendants have been charged; four have pleaded guilty to various charges, and one passed away and the charges against him were dismissed. Of the guilty pleas, two are awaiting sentencing. The other two received sentences of seven months (conspiracy to defraud the United States) and 20 months (bribery).
Prior Scorecard coverage of this matter can be viewed here.
FINRA, SEC reach settlements with Chinese broker-dealers over anti-money laundering compliance
On May 16, the Financial Industry Regulatory Authority (FINRA) and the SEC reached settlements (here and here) with a Chinese-based broker-dealer following an inquiry and investigation into the firm’s anti-money laundering (AML) programs. According to FINRA, the broker-dealer allegedly failed to implement reasonable processes to ensure that its AML programs were able to detect and report potentially suspicious transactions, particularly those concerning penny stocks. In addition, FINRA claimed the broker-dealer’s AML program compliance testing was “inadequate and failed to uncover any of the deficiencies in the firm’s trade monitoring.” In a separate investigation conducted by the SEC in conjunction with FINRA’s inquiry, the broker-dealer reached a settlement over allegations that it failed to, among other things, file suspicious activity reports as required under the Bank Secrecy Act or comply in a timely fashion with SEC record requests. Under the terms of the settlements, the broker-dealer agreed to pay $5.3 million to FINRA for systemic anti-money laundering compliance failures and $860,000 to the SEC. In agreeing to the settlements, the broker-dealer neither admitted nor denied the charges, but consented to the entry of the findings.
The SEC’s investigation also resulted in settlements with a second broker-dealer and its AML officer for allegedly violating the Exchange Act and SEC financial recordkeeping and reporting requirements for not reporting the suspicious sales of billions of penny stock shares. The broker dealer agreed to pay a civil money penalty of $1,000,000 to the SEC, was censured, and was ordered to cease and desist from causing or committing any violations or future violations of the SEC’s suspicious activity reporting requirements. The AML officer was assessed a $15,000 civil money penalty and barred from association with any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agency, or national recognized statistical rating organization for a period of three years, among other things.