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Oklahoma extends working from home guidance
On December 7, the Oklahoma Department of Consumer Credit extended, for the sixth time, its interim guidance to regulated entities on working from home (see here, here, here, here, here, and here for previous coverage). The guidance sets forth data security standards required for regulated entities with employees working from home and also provides that the department will expedite and waive fees for change of address applications in the event that a licensed location is compromised by Covid-19 or is undergoing decontamination. The guidance was extended through March 31, 2021.
DFPI: Certain Bitcoin ATMs not subject to MTA licensure
Recently, California’s Department of Financial Protection and Innovation (DFPI) released new opinion letters covering aspects of the Money Transmission Act (MTA) related to Bitcoin automated teller machines (ATMs). Each of the three letters (available here, here, and here), which contain slightly different fact patterns, explain that the Bitcoin ATMs described by the applicant companies are not subject to licensure under the MTA because they are not considered to be engaging in the business of money transmission. In each instance, the transaction would only be between the consumer using the kiosk and the company, the transaction would be completed instantly, and no third parties would be involved in the transmission of the Bitcoin to the customer’s virtual wallets. DFPI reminded each company that while it was not a subject of their inquiry, if they choose to offer virtual currency other than Bitcoin, they may have obligations under California’s broker-dealer laws to the extent that any of those virtual currencies are securities.
Nebraska Dept. of Banking and Finance updates guidance on temporary branch relocations
The Nebraska Department of Banking and Finance recently updated its March 12, 2020 guidance regarding temporary branch relocations (previously discussed here). The Department will continue to temporarily allow licensed and sponsored mortgage loan originators (MLOs), loan processors, underwriters, and other staff to work from an unlicensed branch upon notification by the sponsor, and approval by the department. Licensed mortgage bankers who have staff working from unlicensed locations must submit an updated list of those employees to the Department through the NMLS on, or before, March 1, June 1, September 1, and at renewal, in 2021. In addition, licensed MLOs must take certain data security measures and not allow customers to come to the unlicensed location. The guidance is effective January 1, 2021.
OCC fines bank $250 million for inadequate fiduciary controls
On November 24, the OCC assessed a $250 million civil money penalty against a national bank for allegedly failing to maintain adequate internal controls for its fiduciary activities. According to the consent order, the bank—which neither admits nor denies the agency’s findings—allegedly had deficient risk-management practices and lacked appropriate checks for avoiding conflicts of interest. The OCC states that the bank has since remediated the alleged deficiencies leading to this action.
CFPB charges debt-settlement company with TSR and CFPA violations
On December 1, the CFPB announced it filed a complaint in the U.S. District Court for the District of Massachusetts against a Massachusetts-based debt-settlement company alleging violations of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA). According to the complaint, the company violated the TSR and/or the CFPA by, among other things, (i) requesting and receiving payment of fees for their services before they renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to an agreement or before a consumer had made a payment under their agreement; (ii) misrepresenting to consumers that it would not charge fees for its services until it settled a debt and consumers made payments under the settlement to the creditor; (iii) charging fees based on the amount of debt after enrollment instead of the amount of debt at the time of enrollment; and (iv) failing to disclose the amount of time it would take the company to make a settlement offer or the amount of debt the consumer would need to accumulate to make a settlement offer to each creditor. The complaint seeks an injunction against the company as well as damages, redress, disgorgement of ill-gotten gains, and the imposition of civil money penalties.
OCC releases 2021 fees and assessments schedule
On December 1, the OCC issued Bulletin 2020-106, which informs all national banks, federal savings associations, and federal branches and agencies of foreign banks of the agency’s 2021 fees and assessment rates. For 2021, the OCC is reducing the rates in all fee schedules by 3 percent, which “reflects cost savings in the OCC’s operations and projections of the OCC’s revenues and expenses.” Additionally, the OCC notes that for the 2021 assessment year, among other things, (i) there will be no inflation adjustment to assessment rates; (ii) new entrants to the federal banking system will be assessed on a prorated basis using call report information as of December 31 or June 30, depending on the entrance date; and (iii) the hourly fee for special examinations and investigations will increase from $140 to $150. The bulletin takes effect January 1, 2021.
9th Circuit vacates summary judgment in bankruptcy, FDCPA action
On November 25, the U.S. Court of Appeals vacated summary judgment in favor of defendants in an action alleging the defendants violated the FDCPA by attempting to collect a debt that was discharged in a bankruptcy proceeding and no longer owed. According to the opinion, after the plaintiff fell behind on dues that were owed to his homeownership association (HOA), a law firm acting as a debt collector on behalf of the HOA obtained a lien for the unpaid debt and initiated nonjudicial foreclosure proceedings. The plaintiff filed and received approval for Chapter 13 bankruptcy protection. A separate collection agency that received the plaintiff’s HOA arrearage payments eventually informed the bankruptcy trustee that the HOA debt was “paid in full,” with a notice issued to that effect. An order of discharge was entered in the case by the bankruptcy court after the completion of payment was verified. Following the bankruptcy discharge order, the law firm—whose records still showed an unpaid balance—undertook collection efforts again. The plaintiff informed the law firm that the debt had been paid, and—after further review—the law firm acknowledged a communication from the collection agency that stated the debt had been paid in full. The plaintiff filed suit, but the defendants argued that the claims were precluded under Walls v. Wells Fargo Bank, N.A. because the debt was discharged in bankruptcy. The district court granted the defendant’s motion for summary judgment, ruling that the plaintiff’s “FDCPA claims were precluded ‘because they are premised upon violations of the bankruptcy post-discharge injunction.’”
On appeal, the 9th Circuit concluded that the plaintiff’s claims were not precluded by the Bankruptcy Code. The appellate court observed that while its 2002 decision in Walls generally indicates that the Bankruptcy Code precludes FDCPA claims premised on a violation of a bankruptcy discharge order, it did not apply in this case. Among other things, the panel determined that the plaintiff’s FDCPA claims were not premised on an issuance or violation of the discharge order in the bankruptcy proceeding. Rather, the plaintiff’s FDCPA claims were based on a debt that was fully satisfied through arrearage payments as part of a Chapter 13 plan before a discharge order was entered. As such, the appellate court determined that “just because [the plaintiff] made his arrearage payments through operation of a bankruptcy plan” it “does not render his FDCPA claims inextricably intertwined with bankruptcy issues.”
District court advances CFPB action against bank for alleged TILA, CFPA violations
On December 1, the U.S. District Court for the District of Rhode Island denied a national bank’s motion to dismiss a CFPB lawsuit alleging violations of the Consumer Financial Protection Act (CFPA) and TILA, rejecting the bank’s arguments that, among other things, the CFPB’s claims were time-barred and that the case cannot proceed because the CFPB’s structure violates constitutional separation-of-powers identified in Seila Law LLC v. CFPB. As previously covered by InfoBytes, the CFPB filed suit in January against the bank alleging, among other things, that when servicing credit card accounts, the bank failed to properly (i) manage consumer billing disputes for unauthorized card use and billing errors; (ii) credit refunds to consumer accounts resulting from such disputes; or (iii) provide credit counseling disclosures to consumers. According to the CFPB, the alleged conduct “began in 2010 or earlier and ended, depending on the violation, sometime in 2015 or 2016.” The CFPB also noted that the parties signed agreements tolling all relevant statutes of limitations from February 23, 2017, until January 31, 2020. The bank argued that the CFPB’s claims are governed by section 1640 of TILA with its one-year statute of limitations, but the CFPB countered that its claims were brought pursuant to section 1607 of TILA, which provides a “three-year discovery period.”
In denying the bank’s motion to dismiss, the court concluded that the tolling agreements were valid and that the three-year limit under section 1607 applied because “plain language indicates that § 1640 only governs cases brought by individuals or state attorneys general,” whereas § 1607 “provides the cause of action for federal enforcement agencies such as the CFPB.” Furthermore, the court determined that because § 1607 “does not contain a statute of limitations,” and “instead stat[es] that cases brought by the CFPB ‘shall be enforced under. . . subtitle E of the [CFPA],’ the action is governed by subtitle E’s requirement that cases be brought within three years of discovery by the CFPB.” The court also dismissed the bank’s constitutional claims, ruling, among other things, that the argument is moot following the U.S. Supreme Court’s decision in Seila, which held that the director’s for-cause removal provision was unconstitutional but was severable from the statute establishing the CFPB (covered by a Buckley Special Alert).
SEC announces whistleblower awards totaling over $6.9 million
On December 1, the SEC announced a joint award of over $6 million to two whistleblowers whose information and assistance led to a successful SEC enforcement and related actions. According to the redacted order, the information led to “actions related to a complex [redacted] scheme involving multiple individuals and tens of millions of dollars in ill-gotten gains.” Moreover, the whistleblowers “substantially assisted” the SEC and another agency by “submitting information and documents, participating in interviews, and identifying key individuals involved in the misconduct.”
Earlier on November 19, the SEC announced a whistleblower award of over $900,000 in connection with an ongoing overseas securities investigation. According to the redacted order, the whistleblower provided “significant and timely information” to the Commission, which expanded and expedited the investigation and resulted in Commission charges. Additionally, the whistleblower “identified alleged violations that were occurring overseas, some of which would have been difficult to detect in the absence of [the whistleblower’s] information.”
The SEC has now paid a total of $728 million to 118 individuals since the inception of the program.
OFAC sanctions Chinese tech company for supporting Maduro regime
On November 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against a Chinese technology company for allegedly “having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, actions or policies that undermine democratic processes or institutions.” The sanctions, issued pursuant to Executive Order (E.O.) 13692, reflect Treasury’s continued efforts to hold persons who offer support to the Maduro regime accountable. As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by the designated individuals, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.
Concurrently, OFAC issued Venezuela-related General License (GL) 38 and a related frequently asked question. GL 38 authorizes the wind down of transactions and activities involving the sanctioned company or any entity owned—directly or indirectly at a 50 percent or greater interest—through January 14, 2021, which would otherwise be prohibited by E.O. 13692. According to OFAC, GL 38 does not authorize (i) any debit to the sanctioned entity’s accounts on a U.S. financial institution’s books; or (ii) any transactions otherwise prohibited by the Venezuela Sanctions Regulations.