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  • 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. 

  • The RMBS Working Group: Is There Life After Eric Holder?
    October 28, 2014
    Andrew W. Schilling & Ross E. Morrison

    Financial institutions are asking what Attorney General Eric Holder’s resignation means for the future of the U.S. Department of Justice’s financial fraud enforcement program generally, and the Residential Mortgage-Backed Securities (RMBS) Working Group specifically.

    Launched in 2012 “to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities,”[1] the RMBS Working Group was criticized early on by some members of Congress for moving too slowly or not at all.[2] But the group’s efforts have recently led to a string of historic, multibillion-dollar settlements.[3]

    Does the attorney general’s exit, coming on the heels of these settlements, suggest that these investigations have run their course and that the department’s new leadership will turn the page? Notably, the enforcement chief of the U.S. Securities and Exchange Commission(a Working Group member) recently stated that the SEC has “completed nearly all of our financial crisis cases” and is moving on to “different areas.”[4] While only time (and the new attorney general) will tell, there is evidence to suggest that the RMBS Working Group may in fact be ramping up rather than winding down.

    Originally published by Law360; reprinted with permission. 

  • The New CFPB Mortgage Origination Rules Deskbook, 1st Edition
    October 17, 2014
    Joseph Reilly

    BuckleySandler lawyer Joseph Reilly authored “The New CFPB Mortgage Origination Rules Deskbook,” published in partnership with the American Bankers Association. Mr. Reilly was assisted by co-author Joseph Kolar and commenter Benjamin Olson.

    This first edition CFPB Deskbook is an all-inclusive compilation of all the mortgage origination rules made by effective by the CFPB in January 2014, including ability-to-repay and Qualified Mortgage requirements, points and fees, loan originator compensation, appraisals, high-cost mortgages and Qualified Mortgage provisions for Federal Housing Administration and Veterans Affairs loans, among others. It also offers a summary of the TILA-RESPA disclosure integration taking effect in 2015.

    The CFPB Deskbook is available in PDF and hard copy formats. Requests for copies should be sent to CFPBDeskbook@buckleysandler.com.

  • Consumer Financial Services Answer Book 2015
    October 14, 2014
    Richard E. Gottlieb (editor)

    BuckleySandler lawyers played a prominent role in the publication of this leading desk reference on consumer financial services, published by the Practising Law Institute.  The lead editor was Richard Gottlieb, who has served in that role since publication of the first edition in 2011 (the book is published annually).    

    The 2015 edition of this publication continues to provide practitioners with a core understanding of the laws governing consumer financial services, addressing developments in such areas as:

    • Latest CFPB enforcement activities, regulations and guidelines
    • Fair Lending
    • Mortgage Origination and Servicing
    • Auto Lending
    • Truth in Lending Act
    • Fair Credit Reporting Act
    • Fair Debt Collection Practices Act
    • Real Estate Settlement Procedures Act
    • Privacy and Identity Theft

     The Consumer Financial Services Answer Book 2015 also includes new chapters on:

    • Credit Cards
    • Electronic Records and eSignatures
    • Short-Term Lending
    • Unfair and Deceptive Acts and Practices
    • Servicemembers Civil Relief Act
    • Telemarketing and the Telephone Consumer Protection Act

    BuckleySandler lawyers, including lead editor Mr. Gottlieb, co-authored several of the book’s chapters:

    • Consumer Loan Products and the Federal Regulation of Consumer Credit: Richard E. Gottlieb and Jeffrey P. Naimon
    • Telemarketing and the Telephone Consumer Protection Act: Richard Gottlieb and Kristopher R. Knabe
    • Credit Cards: Manley Williams, Valerie L. Hletko and Andrew W. Grant
    • Short-Term Lending: Valerie L. Hletko and Andrew P. Pennacchia
    • Servicemembers Civil Relief Act: Kirk D. Jensen and Sasha Leonhardt
    • Real Estate Settlement Procedures Act: Joseph M. Kolar, Clinton R. Rockwell and Melissa Klimkiewicz
    • Preemption: Fredrick S. Levin
    • The Consumer Financial Protection Bureau: Moorari Shah (contributor)
    • Privacy and Identity Theft: Elizabeth E. McGinn
    • Fair Lending/Non-Discrimination: Andrea Mitchell and Warren Traiger
    • Mortgage Loan Servicing; Residential Foreclosures and Evictions: Brett J. Natarelli
    • Electronic Signatures and Records: Margo H.K. Tank and R. David Whitaker

    Click here to learn more about this book. 

  • Should FIRREA Whistleblower Bounties Be Higher?
    September 29, 2014
    Andrew W. Schilling

    On Sept. 17, U.S. Attorney General Eric Holder raised the prospect of amending FIRREA — the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 — to increase its whistleblower awards with the goal of further incentivizing cooperation in financial fraud cases.[1] While FIRREA has become the U.S. Justice Department’s “go-to” statute for pursuing financial fraud cases, its whistleblower awards are relatively stingy by today’s standards, and they are capped by statute at $1.6 million. In contrast, the department’s other key civil fraud statute — the False Claims Act — authorizes whistleblower awards up to 30 percent of the government’s recovery, without limit.

    The attorney general’s proposal, which would bring FIRREA awards in line with FCA awards, comes at a time of staggeringly high FIRREA penalties. Indeed, in the last year, the government has recovered or been awarded FIRREA penalties exceeding $1 billion on three occasions, including a recent penalty of $5 billion.[2] As the debate over the attorney general’s proposal begins, these staggering penalties raise an important question: In a world of multibillion dollar FIRREA penalties, are whistleblower bounties of hundreds of millions of dollars — or even billions of dollars — really necessary to encourage corporate insiders to blow the whistle on fraud?

    Originally published by Law360; reprinted with permission. 

Knowledge + Insights

  • 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.

  • Special Alert: Class Action Suit Filed Based on CFPB Consent Order
    October 17, 2014

    In what may be the first action of its kind, a consumer who received restitution under the CFPB consent order has filed a class action lawsuit based on the same alleged violations.  While this litigation is still in its early stages, it serves as an important reminder that an institution’s exposure does not end when it reaches a public settlement with a regulator and may, in fact, increase.

    SETTLEMENT OF CFPB ACTION

    As previously discussed in a BuckleySandler webinar, on July 24, 2013, the CFPB filed suit against Castle & Cooke Mortgage LLC, its President, and its Senior Vice President of Capital Markets, alleging that the defendants “developed and implemented a scheme by which the Company would pay quarterly bonuses to loan officers in amounts that varied based on the interest rates of the loans they originated” in violation of the Truth in Lending Act’s loan originator compensation rules.

    On November 7, 2013, the defendants entered into a consent order with the CFPB, agreeing to pay $9.2 million for restitution and a $4 million civil penalty to resolve the allegations.  Consistent with current CFPB practice, the consent order stated that “[r]edress provided by the Company shall not limit consumers’ rights in any way” – in other words, affected consumers are not required to sign releases in order to receive remediation.

    CLASS ACTION LAWSUIT

    On July 21, 2014, Luis Cabrales filed a class action lawsuit against Castle & Cooke Mortgage LLC in the U.S. District Court for the Eastern District of California.  The complaint asserts violations of the Truth in Lending Act, the Real Estate Settlement Procedures Act, and state law based on the allegation that the “loan officer who sold plaintiff his mortgage loan was paid a bonus that was based, at least in part, on the fact that plaintiff received a more expensive and/or less favorable loan than he otherwise would have received.”  The complaint seeks various remedies, including actual and statutory damages under the Truth in Lending Act.

    The complaint specifically references the CFPB consent order and states that, “plaintiff received a check from the CFPB in the amount of $795.02, representing his share of the CFPB’s restitution fund.”  However, the complaint further asserts that “[p]laintiff is owed additional amounts as a result of C&C Mortgage’s illegal practices” and that the statute of limitations was tolled until the date the CFPB distributed restitution checks to plaintiff and other members of the putative class.

    KEY TAKE-AWAY

    While the ultimate resolution of this particular private action is unclear, it highlights the substantial ongoing risks for institutions that enter into public settlements with regulators when releases are not obtained as part of the consent order’s remediation plan.

    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.

  • Special Alert: Proposed Amendments to the TRID Rule and Introducing BuckleySandler's TRID Resource Center
    October 15, 2014

    BuckleySandler is pleased to announce our new TILA-RESPA Integrated Disclosure (“TRID”) Resource Center.  The TRID Resource Center is a one-stop shop for TRID issues, providing access to BuckleySandler’s analysis of the TRID rule and the CFPB’s amendments, transcripts of CFPB webinars providing guidance on the rule, and other CFPB publications that will facilitate implementation of the rule.  In particular, the TRID Resource Center will address the following recent developments:

    • Proposed amendments. On October 10, 2014, the CFPB proposed amendments to the TRID rule that, if adopted, would: (1) allow creditors to provide a revised Loan Estimate on the business day after the date the interest rate is locked, instead of the current requirement to provide the revised Loan Estimate on the date the rate is locked; and (2) correct an oversight by creating room on the Loan Estimate form for the disclosure that must be provided on the initial Loan Estimate as a condition of issuing a revised estimate for construction loans where the creditor reasonably expects settlement to occur more than 60 days after the initial estimate is provided.  The proposal would also make a number of additional amendments, clarifications, and corrections, including:
      • Add the Loan Estimate and Closing Disclosure to the list of loan documents that must disclose the name and NMLSR ID number of the loan originator organization and individual loan originator under 12 C.F.R. § 1026.36(g);
      • Provide additional guidance related to the disclosure of escrow accounts, such as when an escrow account is established but escrow payments are not required with a particular periodic payment or range of payments; and
      • Clarify that, consistent with the requirement for the Loan Estimate, the addresses for all properties securing the loan must be provided on the Closing Disclosure, although an addendum may be used for this purpose.

      Comments on the proposal are due by November 10, 2014. For your convenience,we have updated our summary of the TRID rule to identify the most significant proposed changes.

    • Unofficial Transcript of the CFPB’s October 1 Webinar on the Loan Estimate Form.  As it has with past webinars where CFPB staff provide informal guidance,BuckleySandler has prepared a transcript of the CFPB’s October 1, 2014 webinar (hosted by the Federal Reserve) addressing frequently asked questions regarding the Loan Estimate form.  The transcript is provided for informational purposes only and does not constitute legal opinions, interpretations, or advice by BuckleySandler. The transcript was prepared from the audio recording arranged by the Federal Reserve and may have minor inaccuracies due to sound quality. In addition, the transcript has not been reviewed by the CFPB or the Federal Reserve for accuracy or completeness.

    Other items in the TRID Resource Center include:

    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.

     

  • Special Alert: FinCEN Publishes Long-Awaited Proposed Customer Due Diligence Requirements
    September 8, 2014

    On August 4, 2014, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published a Notice of Proposed Rulemaking ("NPRM") that would amend 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 comments 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 are due October 3, 2014.

    Overview: 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 AML program rule (the four pillars) by making CDD a fifth pillar.

    Click here to view the special alert.