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Financial Services Law Insights and Observations


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  • CFPB Issues Largest HMDA Fine in Bureau History Against Nonbank Mortgage Lender


    On March 15, the CFPB announced a consent order assessing a $1.75 million civil money penalty against a national mortgage lender for failing to accurately report mortgage data in violation of the Home Mortgage Disclosure Act (“HMDA”). The Bureau alleged that, during the supervision process, it found the lender’s HMDA compliance systems to be flawed, and that the flaws led to the generation of “significant, preventable” errors in its mortgage lending data. The following violations were also alleged: (i) a failure to “maintain detailed HMDA data collection and validation procedures”; (ii) a failure to “implement adequate compliance procedures”; and (iii) a failure to “consistently define data among its various lines of business,” which resulted in data discrepancies.  As reported by the Bureau, the size of the penalty reflects the lender’s market size, the magnitude of the errors, and its history of violations. The terms of the consent order require the lender to pay a $1.75 million penalty, develop an effective compliance management system to prevent future violations, and review and correct HMDA reporting inaccuracies for the defined time period. Notably, the consent order does not provide for consumer redress.

    Later that day, the mortgage lender issued a statement announcing the resolution of the Bureau’s examination and highlighting the company’s efforts “over the past two years” to “proactively ma[ke] substantial investments in new staff, training and technology to enhance all of [their] HMDA-related processes and controls.”

    Lending CFPB Mortgage Lenders HMDA Data Collection / Aggregation

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  • 30 Organizations Join the 2017 Edition of the CFPB’s “Your Money, Your Goals Cohort”

    Consumer Finance

    On March 10, the CFPB announced the 30 organizations selected to join the Your Money, Your Goals Cohort. These organizations, selected from a pool of respondents to the Bureau’s October invitation to submit letters of interest, will receive training and technical assistance on how to use the program’s “financial empowerment materials” to better serve low-income and economically vulnerable populations.

    Consumer Finance CFPB Consumer Education

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  • FTC Enters Settlement Resolving Investigation into “Bogus Online Investment” Telemarketing Scheme

    Privacy, Cyber Risk & Data Security

    On March 13, the FTC announced a $25 million settlement with the operators of a national telemarketing scheme who allegedly stole millions of dollars from consumers in violation of the FTC Act and the Telemarketing Sales Rule. According to the complaint filed by the FTC in 2016, the defendants allegedly sold “bogus online investment opportunities” to consumers nationwide in the form of schemes such as opportunities to buy or invest in e-commerce related websites or credit card company/e-commerce website profit-sharing programs, and then pocketed the payments—some of which exceeded more than $20,000. The defendants did not admit or deny the facts alleged in the complaint in the stipulated final order with the FTC, which imposed a $25 million monetary judgment that was partially suspended.  The order also prohibits the defendants from telemarketing, marketing investment opportunities, and selling or otherwise benefiting from consumers’ personal information.

    Privacy Cyber Risk & Data Security Consumer Finance FTC Telemarketing Sales Rule

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  • FDIC Announces Enhancements to Financial Education Program for Older Adults

    Consumer Finance

    On March 13, the FDIC announced enhancements to Money Smart for Older Adults, its financial education program geared toward preventing elder financial exploitation. The program, which the FDIC developed in partnership with the CFPB, was designed as a response to the growing concerns about financial abuse of senior citizens, which often goes unreported. Statistics provided by the National Adult Protective Services Association show that “only one in 44 cases of financial abuse comes to the attention of authorities, and 90 percent of victims are exploited by a relative, friend, or trusted acquaintance.” The program, which covers topics such as identity theft and scams that target homeowners, also provides tools to help better educate seniors on money management and financial awareness. The recently-announced enhancements include new information and resources aimed at preventing elder financial exploitation.

    Consumer Finance Consumer Education FDIC Seniors

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  • Illinois-Based Lender, HUD Resolve Fair Housing Act Matter


    On March 10, HUD released a Conciliation Agreement with an Illinois-based lender alleged to have discriminated against African-American and Hispanic borrowers seeking mortgage loans. The complaint, brought by HOPE Fair Housing Center (HOPE), claims the lack of bank branches in majority African-American and Hispanic communities resulted in fewer financial services being offered to applicants based on their race and national origin in violation of the Fair Housing Act. HOPE’s complaint also claims that African-American and Hispanic applicants were more likely to receive less favorable mortgage terms than other races. As part of the settlement, the lender will establish a $1 million loan program to “increase mortgage lending to residents in majority African-American and Hispanic areas” and will pay $75,000 to HOPE. Among other things, the agreement also states the lender will offer consumer education outreach in minority areas and provide fair lending training for its staff.

    Lending Mortgage Lenders Fair Housing HUD Fair Lending

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  • International Trade Organizations Release “Trade Finance Principles”; Quarterly Analysis of Global Financial Market

    Financial Crimes

    On January 24, the Banking Commission of the International Chamber of Commerce (“ICC”) and the Bankers Association for Finance and Trade (“BAFT”) jointly announced the publication of The Wolfsberg Group, ICC and BAFT Trade Finance Principles (“Trade Finance Principles”),  a replacement to the 2011 Wolfsberg Group Trade Finance Principles paper, which now addresses “due diligence required by global and regional financial institutions of all sizes in the financing of international trade.”  The Trade Finance Principles outline the standard for controlling the risks of financial crime, including but not limited to “tax evasion, fraud, human trafficking, bribery and corruption, terrorist financing, the financing of proliferation of weapons of mass destruction, and other related threats to the integrity of the international financial system.” In addition, the Trade Finance Principles require the management processes undertaken by financial institutions to “address the risks of financial crime associated with Trade Finance activities.”

    Separately, on March 6, the Bank for International Settlements released its Quarterly Review—an analysis that examines current global financial market trends and the uncertainty regarding potential fiscal and monetary policy changes in the changing political environment.

    Financial Crimes BAFT Bank for International Settlements International

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  • FinCEN Releases Third Edition of SAR Stats Technical Bulletin

    Financial Crimes

    On March 9, the Financial Crimes Enforcement Network released SAR Stats Issue 3, which is a yearly report of Suspicious Activity Report (SAR) statistics compiled through Dec. 31, 2016.  This report provides nationwide and state/territory-specific suspicious activity data.   Issue 3 covers the following industry types: depository institutions, money services business, securities and futures firms, insurance companies, casinos and card clubs, loan or finance companies, housing government sponsored entities, and other types of financial institutions.

    Financial Crimes FinCEN SARs

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  • CFPB Denies Data Provider’s Petition to Set Aside CID

    Consumer Finance

    In a Decision and Order released last month, the CFPB denied a Petition to set aside or modify a civil investigative demand (CID) directed to a data provider (“Petitioner”). The order also directed Petitioner to produce responsive information within 10 calendar days. 

    The CFPB originally issued the CID on January 5 in connection with its efforts to gather information about Petitioner’s business, products, services, and operations. According to Petitioner, the stated purpose of the CID “purport[ed] to exercise jurisdiction over [Petitioner] under the Fair Credit and Reporting Act (‘FCRA’) or under ‘any other federal consumer financial law.’” On January 25, Petitioner moved to set aside or modify the CID arguing, among other things, that: (i) the Bureau lacks jurisdiction over Petitioner because Petitioner is neither a consumer reporting agency (“CRA”), nor a “covered person” or “service provider” under a “federal consumer financial law”; (ii) the CID’s Notification of Purpose is impermissibly vague in that it fails to adequately state the “nature of the conduct constituting the alleged violation” and/or “the provision of law applicable to such violation”; and (iii) the CID is “impermissibly overbroad and seeks information which cannot possibly be related to or reasonably relevant to the inquiry at hand (which itself remains unclear and undefined).”

    Ultimately, the CFPB determined that none of three objections raised by Petitioner “warrant[ed] setting aside or modifying the CID.” In response to the argument that the CFPB lacks jurisdiction, the Bureau interpreted its authority under the Consumer Financial Protection Act to include investigative authority to issue CIDs to “any person” who may have information “relevant to a violation” of any federal consumer financial law, regardless of whether that person or entity is subject to CFPB authority. In response to Petitioner’s argument regarding the vagueness of the CID’s Notification of Purpose, the Bureau stated that the argument fails because “it is well settled that the boundaries of an agency investigation may be drawn ‘quite generally.’” Finally, as to Petitioner’s objection that the CID was overbroad and/or sought irrelevant information, the Bureau concluded that this was merely a restatement of the jurisdictional argument and fails for the same reasons.  The CFPB explained that the question of whether Petitioner is properly subject to CFPB authority need not be answered at the outset of an investigation, because it is the type of question “the investigation is designed and authorized to illuminate.”

    Consumer Finance CFPB CIDs FCRA Consumer Reporting Agency

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  • PA Department of Banking & Securities Releases Consumer Pamphlet on Credit Reporting

    State Issues

    On March 7, the Pennsylvania Department of Banking and Securities announced it has published a new brochure to help consumers better understand what information should be included in their credit report and what steps to take if there is an issue.

    State Issues Credit Scores PA Department of Banking and Securities Consumer Education Consumer Reporting Agency

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  • FDIC Advisory Committee on Community Banking to Host Open Meeting on March 28


    The Federal Deposit Insurance Corporation’s Advisory Committee on Community Banking will host an open meeting on Tuesday, March 28, 2017, at 9 a.m. The Advisory Committee will provide advice and recommendations on a broad range of policy issues that have particular impact on small community banks and the local communities they serve, with a focus on rural areas.

    Lending Agency Rulemaking & Guidance FDIC Community Banks

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