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  • Ohio Creates Supplier Right to Cure Under State’s Consumer Sales Practices Act

    State Issues

    In May 2015, Transparency International UK (“TI-UK”) released Empowering the UK to Recover Corrupt Assets: Unexplained Wealth Orders and other new approaches to illicit enrichment and asset recovery, a discussion paper that addresses the ongoing problem of the laundering of corrupt wealth through the U.K.  According to TI-UK, a large amount of corrupt wealth, stolen from around the world, is invested in the U.K.  Very few suspicious transactions and assets related to corruption, however, have been frozen by the British government.  TI-UK states that in 2014 alone, U.K. law enforcement authorities were able to act on only seven reports of suspicious financial transactions identified as possibly linked to international corruption.  After assessing the various asset recovery methods available to U.K. law enforcement authorities, TI-UK recommends that they be given the power to serve Unexplained Wealth Orders (UWO), a civil asset recovery tool used by law enforcement authorities in Ireland, Australia, and Columbia.  Suspects issued an UWO would be required to establish that suspicious U.K. assets or transactions had legitimate and legal sources.  An UWO could be issued without the government first alleging a crime against the suspect.  A refusal to respond to an UWO or an inadequate response could be used by law enforcement authorities to facilitate a civil recovery process against the asset.  TI-UK believes that this new power would allow U.K. enforcement authorities to begin acting on corrupt assets immediately and addresses what the organization believes is the most significant weakness in the U.K.’s asset recovery approach, “the over reliance on a conviction in the origin state.”

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  • Federal District Court in Florida Lacks Jurisdiction Over TILA and RESPA Claims After State Court Foreclosure Judgment

    Lending

    On June 30, the DOJ filed a Complaint to forfeit shares of Griffiths Energy International, a Canadian energy company accused of bribing various Republic of Chad diplomats to receive oil development rights in Chad.  The diplomats include the former Chadian Ambassador to the United States and Canada, and Chad’s Deputy Chief of Mission to the United States.  The assets at issue are currently frozen in the U.K.

    The DOJ is seeking roughly $34 million in Griffiths Energy shares, as the cash value amount “traceable to, and involved in the laundering of, bribe payments made to the Chadian diplomats” for the rights to develop oil blocks in Chad. According to the Complaint, the former Ambassador, serving from 2004 to 2012, and the Deputy Chief of Mission, serving from approximately 2007 through the end of 2014, used their official positions to assist Griffiths Energy in securing development rights to oil blocks in Chad. The bribes were allegedly paid in several ways, including through issuance of company shares and payments to companies nominally owned by the wives and associates of the diplomats.  The Complaint highlighted that before the company pursued the shell company avenue, legal counsel had warned the company that a planned consulting agreement directly with the Ambassador was illegal.  This Complaint follows a separate suit by the DOJ in 2014, with sought a “civil forfeiture of over $100,000 in allegedly laundered funds traceable to the $2 million bribe payments.”

    Foreclosure TILA RESPA

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  • Fannie Mae Provides Guidance Regarding Chicago Vacant Property Ordinance and Payment of Homeowners’ Association Dues and Condo Assessments

    Lending

    On June 22, Gold Fields Ltd., a South African mining company, announced that the SEC had concluded its investigation related to a mining license in South Africa and would not recommend that the SEC pursue an enforcement action against the company.  According to Gold Fields, the investigation had been related to a 2010 Black Economic Empowerment (BEE) transaction associated with the granting of a mining license for the company’s South Deep operation — one of the largest gold deposits in the world. The BEE is a program launched by the South African government to give certain historically disadvantaged racial groups special economic privileges, including increased ownership opportunities.  Under South African law, mining companies must sell or cede at least 26% of their operations to non-white citizens.

    The investigation apparently centered on a $210 million BEE transaction involving the transfer of a roughly 10% stake in South Deep, a gold mine located near Johannesburg that is owned and operated by Gold Fields, to a black-owned group.  In September 2013, Gold Fields had revealed that it was being investigated by the SEC following news reports that the company had bribed an African National Congress official, by increasing her “cut” from the BEE deal in order to get a license for the South Deep operation.  The decision not to pursue an FCPA action against Gold Fields comes on the heels of the announcement earlier this month by Net 1 UEPS Technologies, Inc., a South African mobile payments company, that the SEC had closed without charges an FCPA investigation arising out of a contract with the South African Social Security Agency.

    Fannie Mae Mortgage Servicing

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  • West Virginia Revises Mortgage and Consumer Lending Statutes

    Consumer Finance

    West Virginia recently enacted several bills to amend statutes related to mortgage licensing and servicing and consumer lender licensing. House Bill 4271 was enacted March 30 and takes effect June 8, 2012. It amends existing reporting requirements for licensed residential mortgage lenders and brokers to direct lenders and brokers to submit reports through the Nationwide Mortgage Licensing System and Registry (NMLS) for periods established by the NMLS. The law allows the Commissioner of the Division of Banking to require direct reporting, preserves the confidentiality of the reports, and alters certain public reporting obligations of the Commissioner. Also enacted on March 30, House Bill 4274, authorizes the Commissioner of the Division of Banking to fine regulated consumer lenders required to be licensed up to $2,000 for violating applicable statutory and regulatory requirements. Each day that a consumer lender engages in covered conduct without being licensed is considered a separate violation subject to a separate fine. This change takes effect June 7, 2012. On April 2, effectively retroactive to January 1, 2012, Senate Bill 551 creates an exemption to mortgage loan limitations to allow for modification or refinancing loans made between January 1, 2012 and January 15, 2015 as part of the federal Home Affordable Modification Program or any other federal or state program or litigation settlement.

    Mortgage Licensing HAMP / HARP NMLS

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  • Eleventh Circuit Reverses Dismissal of FDCPA Claim Involving MERS

    Lending

    On March 30, the Eleventh Circuit Court of Appeals reversed the dismissal of a FDCPA claim stemming from a communication to the plaintiff that erroneously identified MERS Corp. as the plaintiff’s creditor.  Shoup v. McCurdy & Candler LLC, No. 10-14619, 2012 WL 1071196 (11th Cir. Mar. 30, 2012). The plaintiff obtained a mortgage from America Wholesale Lender.  MERS was the grantee acting as the lender’s nominee under the mortgage contract.  After the plaintiff defaulted, MERS’s law firm sent an initial communication letter described as an attempt to collect a debt and identifying MERS as the “creditor on the above referenced loan.”  The mortgagee filed suit under the FDCPA, alleging that MERS is not a creditor and that by falsely stating so, the law firm committed a FDCPA violation.  The district court granted the defendant law firm’s 12(b)(6) motion to dismiss, concluding that MERS was a creditor and that even if it was not, the purported violation was harmless.  In its reversal, the Eleventh Circuit reasoned that the FDCPA makes clear that (i) “any false representation” in the collection of a debt is a violation of the statute, (ii) a “creditor” under the statute would not include MERS in this instance, because MERS was not owed a debt, and (iii) any failure to comply with the law subjects the violator to actual and statutory damages.

    FDCPA Mortgage Servicing

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  • Federal District Court Holds Allegations of Failure to Protect Data Insufficient to Support Stored Communications Act Claim

    FinTech

    Last month, the U.S. District Court for the Northern District of Illinois held that a company’s failure to protect personal information does not violate the Stored Communications Act (SCA) because the company did not knowingly divulge the personal information. Worix v. MedAssets Inc., No. 11-8088, 2012 WL 787210 (N.D. Ill. Mar. 8, 2012). In this case, a computer hard drive belonging to the defendant, a firm that provides financial services for health care providers and as such handles the personal and confidential information of individuals, was stolen. The plaintiff, one of the individuals whose personal information was stored on the hard drive, alleged on behalf of a putative class that the defendant violated the SCA when it failed to adequately secure the protected personal information. The court held that the plaintiff could only support allegations that the defendant knowingly failed to protect the data and  the plaintiff failed to offer the proof required by the SCA that the defendant knowingly divulged protected information. The court also dismissed the plaintiff’s common law negligence claims and statutory fraud claims, holding that the plaintiff failed to allege actual damages when claiming an increased risk of identity theft and monitoring costs.

    Privacy/Cyber Risk & Data Security

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  • Fair Housing Groups File First REO Complaint

    Lending

    On June 10, Eletrobras, Brazil’s state-run power company, announced that it had hired Hogan Lovells to investigate potential violations of the FCPA and other anti-corruption laws and corporate policies.  The focus of the investigation will be “projects in which Eletrobras Companies take part in a corporate form or as minority shareholder, through special purpose entities.”  According to an earlier Eletrobras filing, the investigation was triggered by testimony taken in conjunction with the Brazilian government’s ongoing investigation of corruption allegations against Petrobras, dubbed “Operation Car Wash.”  That testimony alleged that the CEO of an Eletrobras subsidiary received illicit payments from a consortium of companies bidding for the Angra 3 power plant project.

    Mortgage Servicing Fair Housing

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  • Federal Court Approves Multi-Party Mortgage Servicing Settlement

    Lending

    On June 8, Net 1 UEPS Technologies, Inc., a South Africa-based mobile payments company incorporated in Florida, announced that the SEC had closed a FCPA investigation arising out of a contract with the South African Social Security Agency.  The SEC and the DOJ opened parallel investigations in November 2012, and the DOJ investigation remains ongoing.  Net 1 has asserted that the investigation was instigated by one of the losing bidders on the contract.

    Mortgage Servicing State AG

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  • Federal District Court Enforces Arbitration Clause Included in Clickwrap Terms

    FinTech

    On March 26, the U.S. District Court for the Northern District of Illinois required arbitration of a dispute regarding alleged overcharging by an Internet service provider (ISP) because the consumer had agreed to an arbitration provision included in the ISP’s clickwrap terms of service. Sherman v. AT&T Inc., No. 11-C-5857, 2012 WL 1021823 (N.D.Ill. Mar. 26, 2012). The court held that the plaintiff’s assent to the terms during the online activation process constituted acceptance of those terms, regardless of when he believed the contract was formed. To activate his Internet service, the plaintiff was required to confirm through an online process that he had read and agreed to the ISP’s terms of service. The activation and confirmation page included a link to the terms of service, which included an agreement to arbitrate all disputes. The plaintiff argued (i) that his contract with the ISP was formed during a phone call with an ISP customer service agent pursuant to which he ordered the service, prior to the online activation process, and therefore the terms of service do not apply, and (ii) the terms were not expressly incorporated into the broader conditions of his contract and were procedurally unconscionable. The district court granted the ISP’s motion to compel arbitration of the plaintiff’s allegation (made on behalf of a putative class) that the ISP systematically overcharged consumers for residential Internet service by advertising promotional plans while actually charging standard rates..  The court reasoned that vendors may enclose the full legal terms with their products rather than reciting them prior to purchase, for practical purposes, even if the full terms are not delivered until after the consumer’s order and payment. The court also held that the terms were not procedurally unconscionable, as they were not difficult to find, read or understand, and the plaintiff had a full and fair opportunity to review the terms prior to activation.

    Arbitration

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  • FTC Announces First Actions Against Auto Loan Modification Schemes

    Consumer Finance

    On April 4, the FTC released complaints filed recently against two operations allegedly engaged in deceptive auto loan modification schemes. According to the FTC, the two companies and several related individuals instructed consumers to stop paying their auto loans and promised to lower their monthly payments in exchange for up-front payment of fees, but then did not provide promised refunds when they failed to obtain car loan modifications. The FTC complaints detail the companies’ Internet and other marketing efforts and alleged false promises of lower monthly payments and money-back guarantees. These are the first auto loan modification cases filed by the FTC, which has been actively pursuing allegations of similar mortgage loan modification schemes. Concurrent with these announced cases, the FTC released an alert for consumers seeking assistance in managing their auto loans. The FTC also recently closed out a year of seeking public input on consumer protection issues that arise in auto sales, financing, and leasing.

    FTC Auto Finance

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