"...providing significant leadership to the industry and their clients."

Chambers USA

News and Resources


  • Blocking CAFA Remand: Lessons From A Prevailing Defendant
    November 17, 2014
    Robyn C. Quattrone, Dustin A. Linden & Stephen M. LeBlanc

    The Class Action Fairness Act[1] was designed, at least in part, to allow defendants to remove to federal court class actions strategically filed by plaintiffs in sympathetic state court jurisdictions. This newfound ability for defendants to have a say in which venue hears their case fundamentally changed the class action litigation landscape, creating a whole new set of procedures to learn and navigate — and with them, a whole new set of strategies to employ and hurdles to clear.

    Originally published in Law360; reposted with permission. 

  • Justices' Questioning in Jesinoski May Be Cause for Concern
    November 4, 2014
    Kirk Jensen, Sasha Leonhardt & Sara Ruvic

    Section 1635 of the Truth in Lending Act provides that a borrower may rescind certain mortgage loans within three days as a matter of right, and within three years if certain conditions are satisfied. The three-year extended rescission right applies only if a borrower does not receive certain material disclosures at loan closing.

    But what if the creditor disagrees with the borrower regarding whether the borrower qualifies for the extended rescission period? For several years, the circuit courts have been split on whether in such cases a borrower who has provided notice of rescission within three years must also file a lawsuit within that three-year period, or whether such a borrower may file a lawsuit even after the three-year period lapses. 

    To date, four other circuits agree with the Eighth Circuit’s position that rescission is only effective under TILA if the borrower files suit within three years of rescission. Three circuits, however, have held that a borrower need only provide notice to a creditor to rescind a loan transaction. On Nov. 4, 2014, the U.S. Supreme Court heard oral arguments in Jesinoski v. Countrywide to resolve this circuit split. In their questioning, the justices pressed counsel on whether the statutory text was clear and, if not, what steps a borrower must take to rescind.

    Originally published in Law360; reprinted with permission. 

  • Starter Interrupters Expose Lenders to SCRA Risks
    November 3, 2014
    Kirk Jensen, John Redding, Sasha Leonhardt & Alex Dempsey

    As the subprime auto loan market has grown over the past few years, so too have the number of starter interrupters in use. According to a recent New York Times story, these devices have been installed in approximately 2 million vehicles and are used in about one-quarter of all subprime auto loans. With the expanded prevalence of starter interrupters, however, creditors have also seen an uptick in concerns about their usage; borrowers have complained that their vehicles were disabled while driving on the freeway, while idling in a dangerous part of town, and when borrowers were current on their payments.

    Although starter interrupters have been around since the 1990s, courts and regulators have not yet explored all of the legal implications surrounding this technology, and we are aware of no cases discussing the SCRA implications of utilizing a starter interrupter system. Although regulators have focused their SCRA activities primarily upon home mortgage loans, they have also focused on other types of consumer lending, including auto loans.

    Click here to read the full article. 

  • How to Move the CRA Into the 21st Century
    November 3, 2014
    Warren Traiger

    Warren Traiger authored "How to Move the CRA Into the 21st Century," which appeared in American Banker on November 3, 2014.

    There's a disconnect in the banking agencies' approach to reforming the Community Reinvestment Act.

    On the one hand, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. propose moving the CRA into the 21st century by deemphasizing branches as a means of serving lower-income neighborhoods and individuals. In their recent proposal to amend CRA regulatory guidance, the agencies note that there "are effective alternatives [to branches] in providing needed services to low- and moderate- income geographies and individuals." They specifically cite "technological advances in the retail banking industry, such as Internet or online banking, mobile banking, remote deposit capture and 24-hour Internet banking kiosks."

    On the other hand, the starting point for determining the communities in which a bank has CRA obligations remains rooted in 1977, the year the law was enacted. A bank's assessment area is delineated based on where a bank has a physical presence. That a bank may engage in nationwide lending or deposit-gathering through the technological advances listed by the regulators is irrelevant to defining its assessment area.

    Originally printed in American Banker; reprinted with permission. 

  • FinCEN Publishes Long-Awaited Proposed Customer Due Diligence Requirements
    October 29, 2014
    Amy Davine Kim, James Parkinson, Thomas Sporkin & Michael Zeldin

    On August 4, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published a Notice of Proposed Rulemaking (NPRM) that would amend the existing Bank Secrecy Act (BSA) regulations intended to clarify and strengthen customer due diligence (CDD) obligations for banks, securities broker-dealers, mutual funds, and futures commission merchants and introducing brokers in commodities (collectively, “covered financial institutions”).

    In drafting the modifications, FinCEN clearly took into consideration public comments sent in responding to its February 2012 Advance Notice of Proposed Rulemaking (ANPRM), as the current proposal appears narrower and somewhat less burdensome on financial institutions. Comments on the proposed rulemaking were due by October 3, 2014.

    Under the NPRM, covered financial institutions would be obligated to collect information on the natural persons behind legal entity customers (beneficial owners), and the proposed rule would make CDD an explicit requirement. If adopted the NPRM would amend FinCEN’s anti-money laundering (AML) program rule (the four pillars) by making CDD a fifth pillar.

    Originally published by BuckleySandler here; reprinted by FintechLaw. 

Knowledge + Insights

  • Special Alert: CFPB Takes Enforcement Action Against "Buy-Here, Pay-Here" Auto Dealer for Alleged Unfair Collection and Credit Reporting Tactics
    November 20, 2014

    On November 19, the CFPB announced an enforcement action against a ‘buy-here, pay-here’ auto dealer alleging unfair debt collection practices and the furnishing of inaccurate information about customers to credit reporting agencies. ‘Buy-here, pay-here’ auto dealers typically do not assign their retail installment sale contracts (RISCs) to unaffiliated finance companies or banks, and therefore are subject to the CFPB’s enforcement authority. Consistent with the position it staked out in CFPB Bulletin 2013-07, in this enforcement action the CFPB appears to have applied specific requirements of the Fair Debt Collection Practices Act (FDCPA) to the dealer in its capacity as a creditor based on the CFPB’s broader authority over unfair, deceptive, or abusive acts practices.

    Alleged Violations

    The CFPB charges that the auto dealer violated the Consumer Financial Protection Act, 12 U.S.C. §§ 5531, 5536, which prohibits unfair, deceptive, or abusive acts or practices, by (i) repeatedly calling customers at work, despite being asked to stop; (ii) repeatedly calling the references of customers, despite being asked to stop; and (iii) making excessive, repeated calls to wrong numbers in efforts to reach customers who fell behind on their auto loan payments. Specifically, the CFPB alleges that the auto dealer used a third-party database to “skip trace” for new phone numbers of its customers. As a result, numerous wrong parties were contacted who asked to stop receiving calls. Despite their requests, the auto dealer allegedly failed to prevent calls to these wrong parties or did not remove their contact information from its system.

    In addition, the CFPB alleges that the auto dealer violated the Fair Credit Reporting Act by (i) providing inaccurate information to credit reporting agencies; (ii) improperly handling consumer disputes regarding furnished information; and (iii) not establishing and implementing “reasonable written policies and procedures regarding the accuracy and integrity of the information relating to [customers] that it furnishes to a consumer reporting agency.” Specifically, the CFPB alleges that, since 2010, the auto dealer did not review or update its written furnishing policies, despite knowing that conversion to its third-party servicing platform had led to widespread inaccuracies in furnished information. Also, the consent order alleges that the auto dealer received more than 22,000 credit disputes per year, including disputes regarding the timing of repossessions and dates of first delinquency for charged-off accounts, but nevertheless furnished inaccurate information.


    The consent order requires the auto dealer to (i) end its alleged unfair collection practices; (ii) provide collection options to customers explaining how customers can limit the times of day that the auto dealer can contact them; (iii) provide affected customers with a free annual credit report from one or more of the credit reporting agencies which received inaccurate information; and (iv) pay an $8 million dollar civil money penalty.

    Further, the auto dealer must (i) cease reporting inaccurate repossession information; (ii) correct inaccurate credit reporting information; (iii) implement an audit program to assess the accuracy of information furnished to credit reporting agencies on at least a monthly basis; and (iv) retain an independent consultant to review the auto dealer’s collection and furnishing policies, procedures, and practices and then implement any recommendations or explain in writing why it is not implementing a particular recommendation.

    CFPB’s Continued Focus on Auto Finance

    This action is the latest CFPB enforcement effort in connection with auto finance. In August, the CFPB fined a Texas auto finance company $2.5 million for allegedly failing to have reasonable policies and procedures regarding the accuracy and integrity of customer information furnished to the credit reporting agencies. This action also comes on the heels of the CFPB’s October proposed rule defining the larger participants of the automobile financing market. The comment period on the proposed rule ends December 8th. We anticipate additional CFPB auto finance-related actions as its authority expands.

  • Digital Insights & Trends: "Digital Assets"...or Liabilities?
    November 18, 2014
    Margo Tank

    Delaware’s Fiduciary Access to Digital Assets and Digital Accounts Act (H.B. 345) makes Delaware the latest state to regulate access to “digital assets” after death. Unless the account-holder instructs otherwise, legally appointed fiduciaries will: (1) have the same access to digital assets as they have always had to tangible assets, and (2) the same duty to comply with the account-holder’s instructions. In short, the personal representative or guardian of a digital account-holder can access the emails, documents, audio, video, images, social media content, computer programs, software licenses, usernames and passwords created on the deceased’s digital devices or stored electronically. This access could be very helpful, or extremely problematic, depending on what the digital records reveal.

    Those whose digital data has monetary value, or who do business electronically or through social media should consider digital asset directives in their estate plans, because the terms of service for most online accounts (including Facebook and Yahoo) preclude third party access. Without directives, the prospects could be dim for a blog with embedded advertising if the creator dies and no one else has access to keep the blog going. A social media creator’s intellectual property (blog post content, YouTube videos) can also be valuable, as proved by blogs that became successful books and short videos that spawned movies or advertisements; Adam Sandler is making a movie based on a 2-minute YouTube video. Online gaming items and digital currency like Bitcoin also have monetary value, which is locked up unless someone has access to the deceased’s accounts. For digital data with money value, then, a digital asset estate plan makes sense, and laws like Delaware’s fill the gaps for those who don’t create one.

    But when a deceased’s digital data is highly personal, digital access laws do raise privacy concerns. People use email and social media accounts to reveal themselves only to (what they hope will be) a limited audience. Social media serves some users like the diaries of old, where privacy settings take the place of the little locks and keys. When a personal representative or guardian can access this data, sensitive information is revealed and there’s nothing the deceased can do about it.

    The purpose of “digital access” laws, of course, is to make things easier, not harder or more emotionally wrenching for survivors. However, the law leaves a healthy number of open questions:

    • Does it cover bank accounts? Will national banks be exempt?
    • What is the custodian’s legal exposure if the custodian doesn’t have the necessary passwords for access to the account or to un-encrypt documents, because of the way the custodian’s security systems work?
    • Will the inclusion of agents under durable powers of attorneys, combined with the custodian’s right to rely on the durable power without inquiry, create a new open door to family fraud?
    • How long does the custodian have to hold the records that may be requested?
    • Is the statute worded so that custodians can get the account-holders prior agreement to “opt out”?  And if so, will an “opt out” become standard boilerplate in custody agreements?  Or, will custodians conclude it is better to let the statute operate because the custodian has virtually no due diligence obligation when complying?
    • What about safekeeping agreements that call for automatic destruction of the records upon closing of the account?  Is there an obligation to retrieve the records if they still exist on backup tapes?

    Stay tuned.

  • Special Alert: Lessons Learned from Arab Bank's U.S. Anti-Terrorism Act Verdict
    October 22, 2014

    On September 22, 2014, following a two-month trial, a federal jury in the Eastern District of New York ruled in favor of a group of 297 individual plaintiffs in a civil suit accusing Arab Bank PLC, headquartered in Amman, Jordan, of supporting terrorism. Linde vs. Arab Bank PLC, No. 1:04-CV-2799 (E.D.N.Y. filed July 2, 2004).

    In summary, the plaintiffs alleged that Arab Bank was liable under the U.S. Anti-Terrorism Act, 18 U.S.C. § 2331, et seq. (the “ATA”), for the deaths and/or severe injuries resulting from acts in international terrorism that occurred between 2001 and 2004, because the bank had processed and facilitated payments for Hamas and other terrorist or terrorist-related organizations, their members, the families of suicide bombers, or Hamas front organizations.

    What this means for financial institutions, particularly foreign banks that increasingly face the potential reach of U.S. laws and plaintiffs, remains to be seen. But there are three take-aways worthy of immediate consideration.

    Click here to view the full special alert.