DOJ and State AGs Announce Settlement with Credit Rating Agency

State Attorney General RMBS DOJ Enforcement Credit Rating Agencies

On February 3, the DOJ announced a settlement agreement with a large credit rating agency and its parent company for $1.375 billion – a record amount according to the DOJ – in connection with the agency’s alleged “scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs).” In 2013, the DOJ, along with 19 states plus the District of Columbia, brought the lawsuit against the agency for misrepresenting the securities’ true credit risks through inflated ratings, which led investors to suffer substantial losses right before the financial crisis. While the agency is neither admitting to nor denying the allegations, it has agreed to (i) “retract an allegation that the United States’ lawsuit was filed in retaliation for the defendant’s decision with regard to the credit of the United States;” (ii) abide by the consumer protection statutes set forth by the settling states and DC; and (iii) answer requests from any of the states and DC regarding information on potential violations of the consumer protection laws.