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  • OCC Issues New Comptroller’s Licensing Manual Booklet to Provide Guidance on Articles of Association Amendments, Charters, and Bylaws

    Agency Rule-Making & Guidance

    On June 19, the Office of the Comptroller of the Currency (OCC) released Bulletin OCC 2017-23 announcing a new booklet designed to provide consolidated guidance on several policies and procedures impacting national banks and federal savings associations when forming the framework of articles of association or charter documents. The “Articles of Association, Charter, and Bylaw Amendments” booklet, which is a part of the Comptroller’s Licensing Manual, covers:

    • regulatory requirements for articles of association, charters, and bylaws;
    • an overview of the process required to notify the OCC or obtain OCC approval of an amendment;
    • requirements for the content of the articles of association, charters, and bylaws;
    • actions a national bank or federal savings association should take during the amendment process; and
    • references and links to informational resources and sample documents that national banks or federal savings associations may use during the amendment process.

    Agency Rule-Making & Guidance OCC Enforcement

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  • OCC Announces May 2017 Enforcement Actions

    Federal Issues

    On June 16, the OCC released a list of new enforcement actions taken against national banks, federal savings associations, and former institution-affiliated parties as well as a list of existing enforcement actions that were terminated in May. The actions include cease and desist, civil money penalties (CMP), and removal/prohibition orders. Among the actions, a senior loan originator of an Illinois bank was ordered to cease and desist and pay a CMP of $8,000 due to breaches of fiduciary duty and unsafe or unsound practices involving the transfer via unencrypted email of confidential consumer financial information.

    Federal Issues OCC Enforcement

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  • Fed Assesses $1.8 Million Civil Money Penalty Against Florida-Based Holding Company, Terminates Enforcement Action

    Lending

    On June 8, the Board of Governors of the Federal Reserve (Board) announced the termination of an enforcement action brought against a Florida-based holding company in April 2011 relating to deficiencies in its residential mortgage loan servicing, loss mitigation, and foreclosure processing activities found in an Office of Thrift Supervision (OTS) review of the company. Additionally, the OTS review found inadequate procedures to assess potential risks associated with such activities. Under the terms of the 2011 enforcement action, the holding company was required to enhance its oversight of its thrift subsidiary and improve its internal risk management, audit, and compliance programs to address deficiencies in these areas. The decision to terminate the action was based on a review conducted by the Board’s supervisory team, which determined the holding company made “sustainable improvement” in its mortgage servicing oversight practices. Furthermore, the mortgage servicer has agreed to pay a $1.8 million civil money penalty.

    Lending Federal Reserve Mortgages Enforcement Mortgage Servicing

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  • FTC Announces Settlement with Operators of Tech Support Scam

    Privacy, Cyber Risk & Data Security

    On June 7, the FTC announced two settlements in a pending action brought against defendants who allegedly used pop-up internet ads to deceive consumers into believing their computers were infected and then sold unnecessary technical support services to fix the issues. Under the terms of the settlements (available here and here), the defendants (i) will relinquish assets combined at nearly $6 million to provide restitution to victims, and (ii) are banned from marketing, promoting, or misrepresenting technical support products or services in the future. The settlement is part of the FTC’s ongoing efforts to pursue tech support scams through its Operation Tech Trap initiative. (See previous InfoBytes coverage here.)

    Privacy/Cyber Risk & Data Security FTC Enforcement Settlement Securities Litigation

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  • OFAC Updates: New Sanction Designations and Additions to Specially Designated Nationals List

    Financial Crimes

    Recently, OFAC announced implementation of sanctions against several entities and individuals designated for, among others, materially assisting, sponsoring, or providing financial support to certain foreign entities. In addition, OFAC updated its list of Specially Designed Nations (SDN) and announced a settlement agreement with a Canadian-based motor vehicle finance company.

    North Korea Suppliers of Weapons Proliferation Programs. On June 1, OFAC announced it was taking action against six entities and three individuals in response to their involvement in North Korea’s continued efforts to develop weapons of mass destruction (WMD). The announcement targets the country’s military, nuclear, and WMD programs, in addition to its overseas financial operations. The sanctions prohibit any U.S. individual from dealing with the designees, and further states that “any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked.” John E. Smith, the Director of OFAC, stated, “Treasury is working with our allies to counter networks that enable North Korea’s destabilizing activities, and we urge our partners to take parallel steps to cut off their funding sources.” These sanctions are in addition to those imposed earlier in April on eleven North Koreans and one associated entity (see previous InfoBytes coverage here).

    Iraq-Based Chemical Weapons Developers. On June 12, OFAC announced, for the first time, designations against individuals involved in the development of ISIS’ chemical weapons. The sanctions were pursuant to Executive Order 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations by authorizing the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism.” The property and interests in property of the two individuals identified in the designations, subject to U.S. jurisdiction, are blocked, and “U.S. persons are generally prohibited from engaging in transactions with them.”

    Settlement Agreement with Motor Vehicle Finance Company. On June 8, OFAC announced it had reached a settlement with a motor vehicle finance company as a result of transactions by its Canadian based subsidiary. The enforcement action claims the majority-owned subsidiary, which “specializes in various forms of financing in the [U.S.] for purchasers, lessees, and authorized independent [auto] dealers,”—between 2011 and 2014—allegedly violated 13 Cuban Assets Control Regulations by leasing vehicles to the Cuban Embassy in violation of OFAC’s Blocked Persons and SDN list, which prohibited transactions with Cuban government entities. The company voluntarily self-disclosed the alleged violations and agreed to remit $87,255 to settle its potential civil liability.

    Foreign Narcotics Kingpin Sanctions. On May 24 and 25, OFAC made additions to the SDN list, which designates individuals and companies who are prohibited from dealing with the U.S. and whose assets are blocked. Transactions are prohibited if they involve transferring, paying, exporting, or otherwise dealing in the property or interest in property of an entity or individual on the SDN list. Additions to the list were made under the Foreign Narcotics Kingpin Sanctions Regulations against several Mexican and Colombian individuals and entities.

    Financial Crimes Sanctions OFAC Treasury Department Enforcement Auto Finance

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  • CFPB Fines Mortgage Servicer for RESPA Violations

    Consumer Finance

    On June 7, the CFPB ordered a mortgage servicer to pay up to $1.15 million in restitution for failing to provide borrowers with required foreclosure protections when handling loss-mitigation applications. The consent order alleges the servicer violated RESPA by failing to send critical information to consumers who were applying for foreclosure relief, and, in some circumstances, beginning foreclosure proceedings on borrowers who had submitted completed applications. Pursuant to the consent order, in addition to restitution, the servicer is required to provide borrowers the opportunity to pursue foreclosure relief, must cease its illegal practices, and develop policies and procedures to ensure compliance with mortgage servicing rules.

    Consumer Finance CFPB Enforcement Mortgages Foreclosure RESPA Mortgage Servicing

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  • FTC Obtains Multiple Judgments Against California and Florida-Based Robocall Operations

    Consumer Finance

    The FTC recently entered judgments against robocalling operations based in California and Florida who engaged in activities that violated, among other things, the Telemarketing Sales Rule (TSR) and the Telemarketing Consumer Fraud and Abuse Prevention Act.

    California Default Judgments. On June 2, the FTC announced a California federal district court judge approved default judgments against an individual and each of the nine corporations for which he was an “actual or de facto owner, officer or manager” (Defendants). According to the FTC’s complaint, over a period spanning approximately seven years, the Defendants allegedly initiated—or helped to initiate—“billions” of illegal robocalls without receiving written permission from consumers. Many of the calls made were to numbers on the Do Not Call (DNC) Registry to “induce the purchase of goods or services” such as auto warranties, home security systems, or search engine optimization services. Violations of the TSR cited include knowingly assisting and facilitating telemarketers engaged in abusive practices. According to the terms of the default judgments, the individual has been assessed a $2.7 million penalty, and the Defendants are permanently banned from all telemarketing activities.

    Florida Consent Order. On June 5, the FTC and the Florida Attorney General entered eight stipulated orders against Orlando-based individuals and companies—18 Defendants in total—who violated the TSR, Telemarketing and Consumer Fraud and Abuse Prevention Act, and Florida’s Telemarketing and Consumer Fraud and Abuse Act for, among others things, using robocalls to sell credit card interest rate reduction programs, in addition to calling numbers on the DNC Registry. According to the joint complaint, the Defendants allegedly engaged in the following violations: (i) offered debt relief programs but failed to provide promised services; (ii) misrepresented their affiliations with consumers’ banks or credit card companies; (iii) unfairly authorized charges without obtaining consent; (iv) received fees prior to providing debt relief services; (v) failed to transmit telemarketer information; (vi) used prerecorded messages to “induce the purchase of goods or services”; and (vii) failed to make oral disclosures. The stipulated orders settle charges against all Defendants and require that they stop the “allegedly illegal conduct.” Some of the Defendants have also been issued financial penalties. Furthermore, the FTC entered a $4.8 million judgment against 12 Defendants identified as the primarily parties for the scam. This amount represents the full amount of consumer harm caused. All stipulated orders can be accessed through the FTC press release.

    Consumer Finance FTC Privacy/Cyber Risk & Data Security State AG UDAAP Enforcement Telemarketing Sales Rule Fraud

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  • FDIC Releases List of Enforcement Actions Taken Against Banks and Individuals in April 2017

    Courts

    On May 26, the FDIC released its list of 18 administrative enforcement actions taken against banks and individuals in April. Among the consent orders on the list are civil money penalties for violations of the Flood Disaster Protection Act of 1973 and its flood insurance requirements. Also on the list are a cease and desist order and a civil money penalty assessment issued to a Louisiana-based bank (Bank) for violations of the Bank Secrecy Act (BSA), EFTA, RESPA, TILA, HMDA, and the National Flood Insurance Program. According to the cease and desist order, the FDIC Board of Directors agreed with the Administrative Law Judge’s recommended decision that the Bank engaged in unsafe or unsound practices, which warranted a cease and desist order and civil money penalty. The order also addressed a number of shortcomings identified by the Bank’s examiners, including the following: (i) the Bank’s BSA program lacked adequate internal controls to ensure compliance; (ii) it failed to provide correct and compete electronic funds transfer disclosures to consumers; (iii) borrowers were provided “untimely and improperly completed” good faith estimates; and (iv) the Bank repeatedly failed to accurately report required HMDA information to federal agencies.

    An additional eight actions listed by the FDIC related to unsafe or unsound banking practices and breaches of fiduciary duty, including five removal and prohibition orders. There are no administrative hearings scheduled for June 2017. The FDIC database containing all of its enforcement decisions and orders may be accessed here.

    Courts Consumer Finance Enforcement FDIC Litigation National Flood Insurance Program Bank Secrecy Act EFTA RESPA TILA HMDA

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  • NYDFS Fines Global Bank $350 Million for Alleged Foreign Exchange Trading Violations

    Securities

    On May 24, the New York Department of Financial Services (NYDFS) announced that it had assessed a $350 million fine against a global bank and its New York branch (Bank) as part of a consent order addressing allegations that the Bank’s foreign-exchange business had engaged in long-term violations of New York banking law. According to the announcement, NYDFS investigated alleged misconduct occurring between 2007 to 2013 and found the improper conduct “included collusive activity by foreign exchange traders to manipulate foreign exchange currency prices and foreign exchange benchmark rates; executing fake trades to influence the exchange rates of emerging market currencies; and improperly sharing confidential customer information with traders at other large banks.” Specifically, the violations include the following:

    • collusion through on-line chat rooms to manipulate securities prices and artificially increase profits;
    • improperly exchanging information about past and impending customer trades, including sharing confidential customer information via personal email, in order to maximize profits at customers’ expense;
    • manipulating “the price at which daily benchmark rates were set—both from collusive market activity and improper submissions to benchmark-fixing bodies”; and
    • “misleading customers by hiding markups on executed trades, including by using secretive hand signals when customers were on the phone; or by deliberately ‘underfilling’ a customer trades, in order to keep part of a profitable trade for the Bank’s own book.”

    In addition to the $350 million monetary penalty, the Bank must, within 90 days of the consent order, submit written plans to (i) improve senior management’s oversight of the Bank’s compliance with New York laws and regulations governing its foreign exchange trading business; (iii) enhance internal controls and compliance to adhere to state and federal laws and regulations; and (iii) improve its compliance risk management and internal audit programs. Additionally, the Bank terminated certain employees involved in the misconduct and has agreed it will not—directly or indirectly—re-hire these individuals in the future. As part of this process, the Bank conducted an “employee accountability review” and disciplined other employees “for misconduct or supervisory failures.”

    Securities Enforcement NYDFS

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  • FTC Submits Annual Report on 2016 Enforcement Actions to CFPB

    Consumer Finance

    On June 1, the FTC announced that it submitted its 2016 Annual Financial Acts Enforcement Report to the CFPB. The report—requested by the Bureau for its use in preparing its 2016 Annual Report to Congress—covers the FTC’s enforcement activities related to compliance with Regulation Z (Truth in Lending Act or TILA), Regulation M (Consumer Leasing Act), and Regulation E (Electronic Funds Transfer Act or EFTA), as well as its initiatives to engage in research and consumer education.

    According to the report, the FTC’s enforcement actions in 2016 concerning TILA involved automobile purchasing and financing, payday loans, and financing of consumer electronics. Regarding mortgage-related credit activity, the report highlights continued litigation in two cases involving mortgage assistance relief services involving “forensic audit scams.” Furthermore, the FTC continued its consumer and business education efforts on issues related to consumer credit transactions in the following areas: military lending, auto sales and financing, payday lending, marketplace lending, and consumer disclosures and testing.

    Regarding the Consumer Leasing Act, the report noted the FTC had issued a final administrative consent order for deceptive advertising practices and failure to disclose key lease offer terms. The FTC also filed two federal court actions against automobile dealers. The FTC also engaged in research and policy development and educational activities in this area.

    Concerning the EFTA, the FTC reported six new or ongoing cases, including four cases alleging violations in the context of “negative option” plans, in which a consumer agrees to “receive various goods or services from a company for a trial period at no charge or at a reduced price” but later incurs unauthorized recurring charges after the end of the trial period, in violation of the EFTA. The remaining two cases involved payday lending and consumer electronics financing. The FTC also engaged in rulemaking, research, policy development, and educational activities involving the EFTA.

    Consumer Finance CFPB FTC Enforcement Litigation Marketplace Lending TILA Consumer Leasing Act EFTA Mortgages

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