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  • 9th Circuit holds California's interest on escrow requirements is not preempted by federal law


    On March 2, the U.S. Court of Appeals for the 9th Circuit held that a national bank must comply with a California law that requires mortgage lenders to pay interest on the funds held in a consumer’s escrow account because the law does not “prevent or significantly interfere” with the national bank’s exercise of its power. The case results from a 2014 lawsuit in which a consumer sued the national bank for refusing to pay interest on the funds in his mortgage escrow account as required by a California state law. The district court dismissed the action, holding that the California state law interfered with the bank’s ability to perform its business making mortgage loans and therefore, was preempted by the National Bank Act (NBA).

    In reversing the district court’s decision, the 9th Circuit held that the Dodd-Frank Act of 2011 (Dodd-Frank) essentially codified the existing NBA preemption standard from the 1996 Supreme Court decision in Barnett Bank of Marion County v. Nelson. The panel cited to Section 1639d(g)(3) of Dodd-Frank (“if prescribed by applicable State or Federal law, each creditor shall pay interest to the consumer on the amount held in any . . . escrow account that is subject to this section in the manner as prescribed by that applicable State or Federal law”), which, according to the opinion, expresses Congress’ view that the type of law at issue does not “prevent or significantly interfere with a national bank’s operations.” Moreover, the panel disagreed with the national bank’s reliance on the OCC’s 2004 preemption regulation, which interpreted the standard more broadly, by concluding that the regulation had no effect on the preemption standard. This decision could have significant implications for the rise of preemption by federally chartered banks.

    Courts U.S. Supreme Court Appellate Ninth Circuit Mortgages Escrow Preemption National Bank Act Dodd-Frank OCC

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  • FTC announces resolution of an action against the final defendant in a debt collection operation

    Consumer Finance

    On March 5, the FTC announced that the U.S. District Court for the Middle District of Florida entered a default judgment against the final defendant of a debt collection operation accused of violating the FTC Act and Fair Debt Collections Practices Act by allegedly posing as lawyers and threating individuals with lawsuits or prison time if they failed to pay debt they did not actually owe. (See InfoBytes coverage here on previously issued order against three other co-defendants.) Under the terms of the January 23 order, the defendant is prohibited from, among other things, (i) engaging in debt collection activities; (ii) buying or selling consumer or commercial debt; (iii) misrepresenting material facts regarding financial-related products or services; (iv) misrepresenting an affiliation with an attorney or law firm; (v) disclosing, using, or benefiting from consumers’ personal information; and (vi) improperly disposing of consumers’ information. In addition, the court assessed a $702,059 fine, jointly and severally with the co-defendants.

    Consumer Finance FTC Debt Collection Settlement FTC Act FDCPA

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  • OFAC reissues North Korean Sanctions Regulations

    Financial Crimes

    On March 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a final rule in the Federal Register to amend and reissue the North Korea Sanctions Regulations in their entirety. The final rule implements Executive Orders 13687, 13722, and 13810, references the North Korea Sanctions and Policy Enhancement Act of 2016 and the Countering America’s Adversaries Through Sanctions Act of 2017, and provides the Treasury Secretary, “in consultation with the Secretary of State, additional tools to disrupt North Korea’s ability to fund its weapons of mass destruction and ballistic missile programs.” All property and interests in property of the Government of North Korea and the Workers’ Party of Korea are blocked, transactions by U.S. persons involving the sanctioned entities are generally prohibited, and “all transactions within the United States, including all financial transactions that transit the U.S. financial system, must comply with OFAC regulations.” Among other things, the final rule (i) incorporates several general licenses previously only available on OFAC’s North Korea Sanctions page; (ii) adds several new general licenses; (iii) adds and expands provisions to provide the public with a more comprehensive set of regulations; (iv) updates certain regulatory provisions; and (v) makes other technical and conforming changes. The final rule takes effect March 5, 2018. Also released the same day were updates to OFAC’s North Korea-related FAQs.

    See here for previous InfoBytes coverage on North Korean sanctions.

    Financial Crimes OFAC Sanctions International Department of Treasury CAATSA

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  • OCC announces enforcement action against Washington-based bank citing BSA/AML compliance deficiencies

    Financial Crimes

    On February 28, the OCC issued a consent order against a Washington-based bank for deficiencies related to its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program. The consent order requires the bank to, among other things, (i) maintain a Compliance Committee responsible for ensuring the bank adheres to the consent order’s provisions; (ii) appoint a BSA officer who will ensure compliance with the requirements of the BSA and the Office of Foreign Assets Control’s rules and regulations; (iii) implement an enhanced BSA/AML Risk Assessment Program, including the adoption of written policies to ensure the timely review of BSA/AML suspicious activity alerts and the implementation of an automated suspicious activity monitoring system; (iv) conduct a risk-based “Look-Back” to determine whether suspicious activity was timely identified and reported by the bank; (v) develop policies and procedures for enhanced customer due diligence to monitor information for risk; (vi) implement an independent BSA/AML audit program; and (vii) create a comprehensive training program for appropriate bank personnel. The bank did not admit to any wrongdoing in the consent order.

    Financial Crimes OCC Bank Secrecy Act Anti-Money Laundering Enforcement OFAC SARs

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  • Superior Court denies student loan servicer’s motion to dismiss Massachusetts Attorney General’s lawsuit


    On February 28, a Suffolk County Superior Court denied a Pennsylvania-based student loan servicing agency’s (defendant) motion to dismiss a lawsuit filed by the Massachusetts Attorney General, which alleged the defendant overcharged borrowers and improperly processed claims for public service loan forgiveness. (See previous InfoBytes coverage here.) According to the court, the loan servicer’s argument that it is “an arm of the Commonwealth of Pennsylvania” and therefore entitled to sovereign immunity from lawsuits was not convincing; it noted that not only had the defendant failed to qualify as a state entity but it demonstrated “substantial financial and operational independence” from the state.

    Furthermore, the court also rejected the defendant’s arguments that the action was not permitted because the Department of Education is an indispensable party to the suit and that the Massachusetts Attorney General’s claims “are preempted ‘to the extent’ that they ‘conflict with the requirements of federal law.’” The judge opined that the Department of Education is not an indispensable party even though some of the injunctive relief sought may conflict with the Department of Education’s rights under its loan servicing contract or regulatory requirements. 

    Lending State Attorney General Department of Education Student Lending UDAP

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  • Judge says overdraft fees are not usurious, removes claim from lawsuit


    On February 28, the U.S. District Court for the District of South Carolina dismissed a complaint from a consolidated class action against a national bank, which alleged that the bank’s $20 overdraft fee is an interest charge on credit and therefore exceeds usury limits under the National Bank Act (NBA). The plaintiffs in the consolidated class action challenged the bank’s methods for assessing overdraft fees, posting debit transactions, and assessing “sustained” overdraft fees, claiming they violated federal law. In granting the dismissal, the court noted that it had previously rejected a materially identical usury claim in December 2015 and that no new evidence or authority had been brought to light that would change its decision. In addition, the court concluded that “the law is still clear that sustained overdraft fees are not interest, and that assessing such fees cannot violate the usury provision of the NBA.” 

    Courts Usury Overdraft National Bank Act Class Action

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  • FHA and VA extend foreclosure moratoriums on certain disaster areas

    Federal Issues

    On March 1, the Federal Housing Administration (FHA) released Mortgagee Letter ML 2018-02 (ML 2018-02), which extends the 180-day foreclosure moratorium on FHA-insured properties in Puerto Rico & the U.S. Virgin Islands affected by Hurricane Maria for an additional 60-days. The foreclosure moratorium is now in effect until May 18.

    The Department of Veterans Affairs (VA) also released updates to VA circulars 26-17-23, 26-17-27, and 26-17-28, extending the foreclosure moratorium on VA-insured properties affected by Hurricanes Harvey, Irma, and Maria from 180 days to 270 days.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues Disaster Relief Foreclosure Mortgages Department of Veterans Affairs FHA

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  • Fannie Mae updates Selling Guide with HomeStyle Renovation policy changes

    Federal Issues

    On February 27, Fannie Mae updated its Selling Guide including changes to its HomeStyle Renovation (Renovation) policy. According to Fannie Mae SEL-2018-02, the updates to the Selling Guide include, among other changes, the following: (i) sellers/servicers no longer need to be approved for the Renovation loan through Fannie Mae if they choose to wait to deliver all Renovation loans until after renovations are complete; (ii) fixed-rate mortgages for one-unit, principle residences now have a maximum allowable LTV ratio of 97% if the loan is underwritten through Desktop Underwriter; (iii) manufactured homes that do not require structural changes are eligible for Renovation loans; and (iv) removal of the requirement that the renovation must add value to the property. Lenders are required to be in compliance with the Renovation policy changes by September 1, 2018.

    The Selling Guide also (i) added flexibilities in the HomeStyle Energy policy to allow for increased utilization of the program; (ii) added definitions and requirements for business continuity and disaster recovery procedures; and (iii) updated age of document requirements for loans securing properties impacted by a natural disaster. 

    Federal Issues Fannie Mae Selling Guide Disaster Relief Mortgages

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  • Buckley Sandler Special Alert: Mulvaney says the CFPB will depend heavily on state Attorneys General for enforcement of consumer protection laws

    Federal Issues

    Buckley Sandler Special Alert

    Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau, in a February 28 speech, outlined the Bureau’s overall direction and strategic priorities, and described plans to coordinate with state Attorneys General in enforcing federal consumer financial protection law. Mulvaney made the remarks in Washington, D.C., at the winter meeting of the National Association of Attorneys General (NAAG).

    * * *

    Click here to read the full special alert.


    If you have questions about the remarks or other related issues, please visit our State Attorneys General and Consumer Financial Protection Bureau practice pages, or contact a Buckley Sandler attorney with whom you have worked in the past.

    Federal Issues CFPB Succession State Attorney General Enforcement Special Alerts

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  • CFPB releases RFI on complaint reporting

    Federal Issues

    On March 1, the CFPB released its sixth Request for Information (RFI) in a series seeking feedback on the bureau’s operations. This RFI solicits public comment regarding “potential changes that can be implemented to the Bureau’s public reporting practices of consumer complaint information.” Under the Dodd-Frank Act (Dodd-Frank), one of the Bureau’s primary functions is “collecting, investigating, and responding to consumer complaints.” Dodd-Frank requires the Bureau to annually report to Congress information and analysis of the consumer complaints it receives, and to include an analysis of complaints in its semi-annual reports to the president and certain congressional committees. In addition to its specific statutory obligations, the Bureau also produces monthly complaint reports, special edition complaint reports, and a variety of reports from the Bureau’s special population offices relating to consumer complaints.

    The RFI broadly requests feedback on all aspects of consumer complaint reporting and publication practices but also highlights specific topics on which comment is requested, including suggestions consistent with the Bureau’s statutory obligations on (i) the frequency of complaint reporting; (ii) the data fields provided in the Consumer Complaint Database; (iii) whether the Bureau should supplement consumer complaints with observations of company responses to complaints; (iv) the inclusion of information related to product and service size and company share; and (v) whether companies should be notified of their inclusion in a public report prior to publication. The RFI is expected to be published in the Federal Register on March 7. Comments will be due 90 days from publication.

    Federal Issues RFI CFPB Succession Consumer Complaints

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