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Speaking Engagements + Events

  • RESPA Defined in 2013: What's New, What's the Same, and Where Do Compliance Issues Lurk?
    June 12, 2013

    Jonathan Cannon will speak at the National Settlement Services Summit in Cleveland, Ohio on June 12, 2013. Mr. Cannon's session is entitled "RESPA Defined in 2013: What's New, What's the Same and Where Do Compliance Issues Lurk?"

    Program description: In this unique RESPA training, regulatory compliance attorneys will instruct on specific sections of RESPA you should be tuned into to avoid legal trouble down the road. This session will highlight important areas of RESPA title companies should be addressing in their operational platforms.

    Speakers:

    • Jonathan Cannon, associate, BuckleySandler LLP
    • David Tallman, partner, K&L Gates

    Click here to learn more about this conference.

  • American Bankers Association's 2013 Regulatory Compliance Conference
    June 11, 2013

    Andrew Sandler and Kirk Jensen will speak at the American Bankers Association’s Regulatory Compliance Conference, June 11, 2013 in Chicago, IL. 

    Mr. Sandler’s topic is: “Fair and Responsible Banking: Beyond Mortgages." Learn what the regulators’ fair lending/UDAAP concerns are regarding non-mortgage products and the focus of recent non-mortgage fair lending examinations especially direct and indirect auto lending. Issues raised in non-mortgage fair lending enforcement cases will be highlighted and what may be coming in the future including the use of the disparate impact discrimination theory. Learn about the tools, including regression analysis, and some of the pitfalls you may encounter in ensuring you are appropriately managing your non-mortgage fair lending risks; assessing the risks, monitoring indirect dealer relationships, selecting surrogates for analysis, handling pricing discretion and exceptions, and other key aspects of fair lending risk management.

    Mr. Jensen's panel is, "SCRA: Treating Servicemembers Fairly." SCRA issues continue to be front and center on the regulatory risk horizon.  Institutions have paid thousands of dollars in SCRA-related enforcement actions.  While the rules may seem easy, their implementation is not.  Not only are there federal rules, but states have developed their own SCRA laws that must be taken into consideration. In this session we will discuss the latest enforcement actions involving SCRA, the most common SCRA compliance errors in mortgage and consumer lending and we will discuss how institutions have successfully implemented SCRA compliance programs that help them effectively and fairly serve servicemember communities.

    Click here to learn more about this conference.

  • ABA Fair Lending Workshop
    June 8, 2013

    Andrea Mitchell will be speaking at the ABA Fair Lending Workshop, a pre-conference for the ABA Regulatory Compliance Conference, on June 8, 2013 in Chicago. Ms. Mitchell's panel is titlted, "Board Management/Risk Areas for Common Violations," which will include:

    • Understanding common violations and where your risk profile fits
    • Understanding the SMAART process
    • Managing discretion
    • Exceptions policy
    • Business development issues
    • Third party risk

    Click here to learn more about this workshop.

  • FCPA Risks for U.S. & Non-U.S. Execs
    June 4, 2013

    James Parkinson will be speaking in the Strafford CLE webinar, "FCPA Risks for U.S. and Non-U.S. Execs," on Tuesday, June 4, from 1-2:30 EDT.  Following the program there will be a live, interactive Q&A with the audience.

    Program Description: Over the past few years, there has been increased enforcement of both U.S. and non-U.S. executives and employees. This expanded focus puts both companies and executives on alert. Resolution of enforcement actions against companies does not always end the government’s investigation of individual executives.

    Many non-U.S. executives have worked in countries where corruption is an accepted part of business. With individuals facing heightened government scrutiny, counsel must be able to identify the FCPA risks and put in place policies and procedures to minimize the likelihood of violations.

    Two recent decisions from the Southern District of New York provide guidance about the reach of the FCPA and U.S. agencies' ability to pursue enforcement actions against non-U.S. executives.

    Listen as our authoritative panel examines recent enforcement trends and actions against both U.S. and non-U.S. executives and employees. The panel will outline how to identify FCPA risks for individual company executives and employees and offer strategies for minimizing those risks.

    Click here to learn more about this webinar.

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FCPA Score Card

  • International Bribery Charges against Broker-Dealer Employees Result from SEC Exam
    May 7, 2013

    On May 7, the DOJ charged two employees of a U.S. broker-dealer and a senior official in Venezuela’s state economic development bank for their alleged roles in what the DOJ describes as a “massive international bribery scheme.” According to an unsealed criminal complaint, the DOJ accuses the broker-dealer employees and the foreign official of violating the FCPA by conspiring to pay $5 million in bribes to the foreign official in exchange for her directing the economic development bank’s trading business to the broker-dealer, which yielded millions more in mark-ups and mark-downs for the broker-dealer. The government alleges that commissions paid on the directed trades were split with the foreign official through monthly kickbacks and that some of the trades executed for the bank had no discernible business purpose. To further conceal the scheme, the government claims, the kickbacks often were paid using intermediary corporations and offshore accounts, the assets of which the government is pursuing through a separate civil forfeiture action. On the same day, the SEC announced a parallel civil action against the two broker-dealer employees and two other individuals who allegedly participated in and profited from the scheme. The investigations and subsequent criminal and civil charges stemmed from a routine periodic SEC examination of the broker-dealer. The DOJ warned others in the financial services industry, particularly brokers, about engaging in similar activities, and the SEC’s conduct in this case suggests its examiners are focused on conduct that potentially violates the FCPA.

  • Federal Authorities Announce FCPA Action Against Ralph Lauren, First SEC Non-Prosecution Agreement
    April 26, 2013

    On April 22, the DOJ and the SEC announced parallel actions against Ralph Lauren to resolve allegations that a subsidiary of the company paid bribes to Argentine officials over a several-year period to obtain improper customs clearance of merchandise. The SEC action included the agency’s first non-prosecution agreement related to FCPA misconduct, which the SEC determined was appropriate given “Ralph Lauren’s prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC’s investigation.” According to the SEC’s NPA, Ralph Lauren’s cooperation involved (i) reporting preliminary findings of its internal investigation to the staff within two weeks of discovering the illegal payments and gifts, (ii) voluntarily and expeditiously producing documents, (iii) providing English language translations of documents to the staff, (iv) summarizing witness interviews that the company’s investigators conducted overseas, and (v) making overseas witnesses available for staff interviews and bringing witnesses to the U.S. The SEC agreement also required Ralph Lauren to pay over $700,000 in disgorgement and prejudgment interest, while the DOJ required the company to pay a nearly $900,000 penalty.

  • Another Medical Device Case: Philips Settles SEC Administrative Proceeding for $4.5 Million
    April 5, 2013

    On April 5, 2013, Koninklijke Philips Electronics, N.V., the Dutch parent of the Philips group of companies, settled an SEC administrative proceeding for more than $4.5 million.  The SEC alleged that Philips violated the internal controls and books and records provisions of the FCPA based on improper payments by employees of its Polish subsidiary to Polish government officials from 1999-2007 in connection with contracts for medical equipment.  The SEC cited Philips’s voluntary disclosure of the improprieties and subsequent remedial measures in deciding to accept the settlement.

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Publications

  • Private Student Lenders and Servicers Face CFPB Scrutiny
    May 20, 2013
    Benjamin P. Saul

    Regulators and congressional leaders have identified similarities between the lending practices that led to the subprime mortgage crisis and an escalating default rate in the burgeoning level of student loan debt. Rather than wait for a student loan crisis, they appear poised to act to prevent one by various means, including by the reform of student loan servicing practices. To this end, in 2012 the Consumer Financial Protection Bureau released two major reports aimed at curbing purported violations of law. In addition, in March, partly to address the complaints  of student loan debtors, the CFPB announced its intention to supervise and examine the larger non-bank education loan servicers.

    This commentary reviews the 2012 CFPB student loan ombudsman’s annual report, the CFPB’s December 2012 release of examination procedures for student lenders and the proposed regulation on the supervision of non-bank student loan servicers. Taken together, these initiatives leave no doubt that education lending and servicing and the regulation of education lenders and servicers are a top priority for the CFPB.

    Originally published in the Westlaw Journal of Bank & Lender Liability. Reprinted with permission.

  • Spotlight on the SCRA (Part 1 of 3): Increased Enforcement Activity
    May 7, 2013

    The Servicemembers Civil Relief Act (SCRA) is designed to provide protection for military members as they enter active duty. The Act has origins dating back to the Civil War, but was first solidified in 1940 with the passage of the Soldiers and Sailors Civil Relief Act (SSCRA). In 2003, the SSCRA underwent modernizations, but the intent and language remained intact, to become what is known today as the SCRA.

    Following the 2009 financial crisis and the rising number of foreclosures, reports began surfacing about banks and other financial institutions violating the SCRA. The Department of Justice began actively pursuing actions against institutions with the Office of the Comptroller of the Currency becoming involved later.

    According to Kirk Jensen, Partner in BuckleySandler’s Washington, DC office, there are four milestone events in financial services SCRA enforcement as a result. The first is the foreclosure settlements from 2011 with the DOJ. These are the first settlements to focus on the mortgage industry. Secondly, in April of 2012, the DOJ addressed a wider range of issues with an SCRA component that went beyond the 2011 consent orders. As part of OCC consent orders, 14 residential mortgage servicers and two third-party vendors were required to undergo reviews by independent firms. These reviews are broad in scope including an SCRA component. Finally, in July 2012, the DOJ and the OCC entered into consent orders with another financial institution for SCRA violations. This marks the first time the DOJ or OCC expanded the scope to include auto and credit cards.

    “Agencies are acutely focused on the SCRA and it’s vital that companies have the necessary compliance mechanisms in place,” cautions Jensen. “The agencies are interpreting the act very differently than creditors have historically done. The recent enforcement actions demonstrate the agencies have shifted the burden to the creditor in determining if an individual is on active duty.”

  • Help the Fed Get Out of the Mortgage Business
    May 7, 2013
    Jeremiah S. Buckley

    In 2008, when our nation's housing finance system imploded, the Federal Reserve was forced to step in as "lender of last resort" to America's homeowners. Five years later, the Fed remains the principal source of funding for home mortgages, buying mortgage backed bonds issued by Fannie Mae and Freddie Mac (both now in conservatorship) and in the process adding trillions of dollars in mortgage securities to the central bank's balance sheet.

    Click here to read the full article at AmericanBanker.com.

  • Chapter 35A: Fair Lending Litigation
    May 3, 2013
    Shara M. Chang, Valerie L. Hletko, Liana R. Prieto & Benjamin P. Saul

    Benjamin Saul, Valerie Hletko, Liana Prieto, and Shara Chang authored chapter 35A, "Fair Lending Litigation," in the Litigation Services Handbook: The Role of the Financial Expert fifth edition, 2013 cumulative supplement.

    Fair lending has become an increasingly active area of litigation by government agencies and private litigants. At their core, fair lending cases allege unfavorable treatment toward an applicant or borrower in a legally protected class of persons in some aspect of a credit transaction.  This chapter discusses the legal background of fair lending litigation, the expansion of fair lending litigation beyond mortgage underwriting and pricing, the forms of data used in fair lending litigation, the use of proxies, and how to approach statistical analysis of underwriting, pricing, redlining, and default servicing.

    Click here to learn more or purchase this book.

  • The Unconventional Lending Path
    May 2, 2013
    Joseph J. Reilly & Shara M. Chang

    Potential risks and compliance considerations in making ‘non-qualified’ mortgages under the CFPB’s ability-to-repay rule

    When the Consumer Financial Protection Bureau issued its final “ability to repay” rule under Regulation Z in January, the bureau formally set a new regulatory standard requiring all mortgage lenders to make a “reasonable and good faith determination” that a mortgage borrower has a “reasonable ability to repay” a mortgage loan according to its terms. The rule also defines two new categories of “qualified mortgages” (dubbed QMs) that, when made in accordance with specified criteria, provide lenders with protection against borrower lawsuits alleging rule violations.

    Click here to read the full article at IndependentBanker.org.

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Knowledge + Insights

  • Special Alert: CFPB Issues Final Civil Penalty Fund Rule with Request for Comment
    May 9, 2013

    On April 26, the Consumer Financial Protection Bureau (CFPB or the Bureau) issued a final rule, effective immediately, that sets forth procedures for the administration of the Consumer Financial Civil Penalty Fund (Civil Penalty Fund or Fund). Under Dodd-Frank, all civil penalties obtained by the CFPB are deposited into the Civil Penalty Fund, which may be used to compensate victims and, to the extent any funds remain, to fund consumer education and financial literacy programs. The final rule identifies categories of victims who may receive payments from the Civil Penalty Fund and articulates the Bureau's interpretation of the types of payments that may be appropriate for these victims. It also establishes procedures for allocating funds for such payments to victims and for consumer education and financial literacy programs. The CFPB simultaneously issued a proposed rule, seeking comment on possible revisions to the final rule. The CFPB is accepting comments on the proposed rule through July 8, 2013.

    Pursuant to the final rule, victims are eligible for compensation from the Fund if a final order in a Bureau enforcement action imposed a civil penalty for the particular violation that harmed the victim. A final order is defined as a consent order or settlement issued by a court or by the Bureau, or an appealable order issued by a court or by the Bureau as to which the time for filing an appeal has expired and no appeals are pending. The Bureau's proposed rule, however, states that it is considering whether it should revise the final rule to allow payments to victims of any "type" of activity for which civil penalties have been imposed, even if no enforcement action has imposed penalties for the "particular" activity that harmed the victims.

    Under the final rule, victims will be compensated from the Fund to the extent of their uncompensated harm. Uncompensated harm is defined as the victim's compensable harm minus any compensation for that harm that the victim has received or is reasonably expected to receive. The final rule describes three categories of compensation that a victim has received or may be reasonably expected to receive: (i) a previous allocation from the Civil Penalty Fund to the victim's class; (ii) any redress that a final order in a Bureau enforcement action orders paid to the victim that has not been suspended, waived, or determined by the Chief Financial Officer to be uncollectible; and (iii) other redress that the Bureau knows has been paid to the victim. In determining whether a victim's harm is compensable, the final rules states that the CFPB will look to the objective terms of the order imposing the civil penalty, or if the order does not set forth such objective terms, the victim's out-of-pocket loss that resulted from the violation. The Bureau's proposed rule, however, seeks comment on (i) what should qualify as compensable harm. (ii) whether, when the amount of harm cannot be determined based on the terms of a final order, the Fund Administrator should determine what amount of harm is "practicable," as opposed to using the victim's out-of-pocket loss, and (iii) whether, instead of paying victims for their uncompensated harm, the Bureau instead should pay victims a share of the civil penalties collected for the particular violations that harmed them.  

    The CFPB has stated that it will only make payments to victims to the extent practicable. In the final rule's interpretative commentary, the CFPB explained that it believes that for payments to be "practicable," it must be feasible to carry out all of the steps involved in making the payments, and to do so efficiently and without excessive administrative cost. The final rule identifies scenarios where distribution may be impracticable, including when the amount of the payment is so small the victim is unlikely to redeem it, the cost of distribution is not justified, the victim cannot be located with reasonable effort, the victim does not timely submit information required by the distribution plan, or the victim does not redeem the payment within a reasonable time.

    With respect to fund allocation procedures, the final rule establishes a Civil Penalty Fund Administrator who will manage the Fund and report to the CFPB's Chief Financial Officer. The Fund Administrator also must follow written direction provided by the Civil Penalty Fund Governance Board, which will be established by the Director of the CFPB. The Administrator will designate a payment administrator-who may be a CFPB employee or a contractor-who will propose a plan for distributing the allocated funds to individual victims. The plan must be approved by the Administrator.

    Under the final rule, funds will be allocated based on six-month periods, which will be published on the CFPB's website by July 8, 2013. The start date for the first period has been established as July 21, 2011. The first two periods, however, need not be exactly six months in order to allow the Bureau to establish a schedule that will be administratively efficient. When there are sufficient funds available to fully compensate all the victims in the six-month period class, the Fund Administrator will allocate to each victim the amount necessary to fully compensate those victims for their uncompensated harm. If there are insufficient funds to fully compensate victims in any six-month period, victims from the most recently concluded six-month period will receive an equal percentage of their uncompensated harm. In the event of a surplusage within a given six-month period, the Fund Administrator next will allocate any remaining funds to classes of victims from preceding six-month periods until no funds remain or the victims are fully compensated. The proposed rule seeks comments regarding (i) how funds should be allocated to classes of victims, particularly when there are insufficient funds in a particular period to fully compensate all victims and (ii) whether funds should be allocated more or less frequently, or whether a different method of timing allocations should be used.

    Under the final rule, any funds that remain after distribution can be allocated to consumer education or financial literacy programs, based on criteria separately adopted by the CFPB. The Fund Administrator, however, does not have the authority to select or allocate funds to particular programs. The proposed rule also seeks comment regarding whether there should be a limit to the amount of funds that may be allocated to such programs.

    The CFPB will issue annual reports that describe how the funds will be allocated, the basis for those allocations, and how the funds have been distributed. The reports will be available on the CFPB's web site.

  • Special Alert: Detailed Analysis of CFPB's Final Escrow Rule
    February 15, 2013

    On January 10, 2013, the Consumer Financial Protection Bureau issued its final rule on escrow account requirements for first-lien higher-priced mortgage loans.  The rule amends existing escrow requirements and exemptions for such loans by, among other things, extending the required period of time during which escrow accounts must be maintained from one to five years, and creating a new exemption for small creditors that operate predominantly in rural or underserved areas.  This Alert provides a detailed summary and analysis of the rule, which becomes effective June 1, 2013 and applies to loans for which creditors receive applications on or after this date. Click here to view our detailed analysis.

  • Special Alert: HUD Issues Final Disparate Impact Rule
    February 8, 2013

    Today, the U.S. Department of Housing and Urban Development (HUD) issued a final rule authorizing so-called "disparate impact" or "effects test" claims under the Fair Housing Act. The rule provides support for private or governmental plaintiffs challenging housing or mortgage lending practices that have a "disparate impact" on protected classes of individuals, even if the practice is facially neutral and non-discriminatory and there is no evidence that the practice was motivated by a discriminatory intent. The rule also will permit practices to be challenged based on claims that the practice improperly creates, increases, reinforces, or perpetuates segregated housing patterns.

    In its final rule, HUD codified a three-step burden-shifting approach to determine liability under a disparate impact claim. Once a practice has been shown by the plaintiff to have a disparate impact on a protected class, the final rule states that the defendant would have the burden of showing that the challenged practice "is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the respondent . . . or defendant . . . . A legally sufficient justification must be supported by evidence and may not be hypothetical or speculative." As proposed, the defendant would have had the burden of proving that the challenged practice "has a necessary and manifest relationship to one or more legitimate, nondiscriminatory interests."

    HUD explained in the rule's preamble that, although it declined to use the term "business necessity" in the second prong of the disparate impact analysis, the phrase "substantial, legitimate, nondiscriminatory interest" is "equivalent to the 'business necessity' standard found in the Joint Policy Statement. The standard set forth in this rule is not to be interpreted as a more lenient standard than 'business necessity.'" HUD also highlighted the removal of the word "manifest," which was replaced by the language "a legally sufficient justification must be supported by evidence and may not be hypothetical or speculative." HUD noted that the revised language is "intended to convey that defendants and respondents . . . must be able to prove with evidence the substantial, legitimate, nondiscriminatory interest supporting the challenged practice and the necessity of the challenged practice to achieve that interest."

    With respect to the less discriminatory alternative prong, HUD clarified in the preamble that the alternative must also serve the specified interest supporting the challenge. However, HUD declined to specify in the rule that the less discriminatory alternative must be "equally effective" as the challenged policy - which would have made the rule consistent with the legal standard set forth in the Supreme Court case Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989).

    Other noteworthy aspects of the final rule include:

    • HUD's decision not to address comments raising objections to the rule based on the fact that the disparate impact standard is inconsistent with that set forth in Smith v. City of Jackson Miss., 544 U.S. 228 (2005) and Wards Cove.
    • HUD's statement that the rule applies to pending and future cases because it is not a change in HUD's position but rather a formal interpretation of the Fair Housing Act that clarifies the appropriate standards for proving a violation under an effects theory. HUD also chose not to conduct a cost/benefit analysis on this basis.
    • HUD's clarification that the Fair Housing Act provides in these cases awards of damages, both actual and punitive.
    • New language in the regulation stating that unlawful discriminatory conduct under the Fair Housing Act includes "servicing of loans or other financial assistance with respect to dwellings in a manner that discriminates, or servicing loans or other financial assistance which are secured by residential real estate in a manner that discriminates, or providing such loans or financial assistance with other terms or conditions that discriminate" on a prohibited basis.
    • Language in the preamble restating HUD's position that the Fair Housing Act applies to homeowner's insurance.

    Notwithstanding HUD's view that the final rule merely clarifies the existing interpretation of the Fair Housing Act, we expect that this rule will pose substantial compliance challenges for financial institutions.

  • Special Alert: Detailed Analysis of CFPB's Mortgage Servicing Rules
    February 5, 2013

    On January 17, the CFPB issued final rules amending Regulation Z (TILA) and Regulation X (RESPA) to implement certain mortgage servicing standards set forth by the Dodd-Frank Act and to address other issues identified by the CFPB.  The rule amending Regulation Z includes changes to (i) periodic billing statement requirements, (ii) notices about adjustable rate mortgage interest rate adjustments, and (iii) rules on payment crediting and payoff statements. The rule amending Regulation X addresses (i) force-placed insurance requirements, (ii) error resolution and information request procedures, (iii) information management policies and procedures, (iv) standards for early intervention with delinquent borrowers, (v) rules for contact with delinquent borrowers, and (vi) enhanced loss mitigation procedures.  This Alert includes a detailed analysis of these nine topics and also provides links to each of the model forms amended or added by the rule.  For ease of reference, this Alert contains a detailed, hyper-linked table of contents.

    Click here to download our detailed analysis of CFPB's Mortgage Servicing Rules.