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On November 8, the FTC announced that the U.S. District Court for the District of Maryland has granted a temporary restraining order against the operators of an international real estate investment development, which the FTC claims is the “largest overseas real estate investment scam [it] has ever targeted.” According to the FTC’s complaint, the defendants violated the FTC Act and the Telemarketing Sales Rule by advertising and selling parcels of land that were part of a luxury development in Belize through the use of deceptive tactics and claims. The FTC contends that consumers who purchased lots in the development purchased the lots outright or made large down payments and sizeable monthly payments, and paid monthly homeowners association fees, and that defendants used the money received from these payments to fund their “high-end lifestyles,” rather than to invest in the development. In addition, the FTC asserts that, while the defendants falsely promised consumers that their lots would include luxury amenities, be completed soon, and result in property values that would “rapidly appreciate,” “consumers either have lost, or will lose, some or all of their investments.” The FTC’s press release also announces the filing of charges against a Belizean bank for allegedly assisting and facilitating the investment scam, as well as contempt motions against several of the individual defendants. The FTC is seeking information from affected consumers.
On November 8, the FHFA and the CFPB announced the release of a new loan-level dataset that was collected through the National Survey of Mortgage Originations (NSMO). Since 2014, in each quarter, FHFA and the CFPB send the NSMO survey to borrowers who recently obtained a mortgage to gather feedback on their experiences, perceptions, and future expectations of the mortgage market. This is the first public release of the compiled NSMO data. The NSMO is a component of the National Mortgage Database, which the FHFA and the CFPB launched in 2012 to help regulators better understanding mortgage market trends to support policymaking and research efforts and to fulfill the mortgage survey and mortgage market monitoring requirements of the Housing and Economic Recovery Act (HERA) and the Dodd Frank Act.
On November 7, Freddie Mac issued Bulletin 2018-20 (Bulletin) to announce temporary selling requirements for certain mortgages secured by properties that Hurricane Michael impacted, and borrowers whose properties or places of employment Hurricane Michael impacted. For properties located in eligible disaster areas that Hurricane Michael affected on or after October 11, the Bulletin, among other things, provides (i) age of documentation requirements that will remain in effect for six months; (ii) specific collateral requirements and guidance; and (iii) for reimbursement of property inspections completed on and before April 11, 2019, for sellers that meet certain requirements. The Bulletin notes that Freddie Mac will not update the Single-Family Seller/Servicer Guide to include the temporary requirements that the Bulletin announces, and advises sellers to retain a copy of the Bulletin to ensure compliance with these requirements.
Find continuing InfoBytes coverage on disaster relief here.
On November 2, a New York-based financial institution disclosed in its Form 10-Q filing that it had received subpoenas and requests for documents and information from multiple government agencies as part of investigations relating to matters involving a Malaysian development fund. The filing acknowledged the indictments and guilty plea of a former participating managing director of the financial institution, and a former managing director, which indicated that they “knowingly and willfully circumvented” the financial institution’s internal accounting controls. The filing further stated that the financial institution is cooperating with the DOJ and other investigations relating to the company.
On November 6, the FCC announced that it sent letters to voice providers urging them to participate in “traceback” efforts to help the FCC identify the source of illegal spoofed robocalls. The FCC released copies of the letters that it sent to eight voice providers that are not currently assisting with the USTelecom Industry Traceback Group’s program, which seeks to trace the robocalls that pass through the voice providers’ networks to the originating provider.
In the announcement, the FCC notes that: (i) traceback efforts assist the FCC in identifying the source of illegal calls; and (ii) the FCC receives more complaints from consumers regarding unwanted calls—including scam calls that use spoofing to trick consumers—than any other subject. The FCC emphasizes that “consistent participation of all network operators is critical for helping consumers and enforcing the law.”
On November 7, the OCC, FDIC, and Federal Reserve issued a proposal to streamline regulatory reporting for qualifying small institutions to implement Section 205 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Specifically, the joint proposal would permit depository institutions with less than $5 billion in assets—previously set at $1 billion—that do not engage in certain complex or international activities to file the FFIEC 051 Call Report, the most streamlined version of the Call Reports. Additionally, the proposal would reduce the existing reportable data items in the FFIEC 051 Call Report by approximately 37 percent for the first and third calendar quarters. The proposal also includes similar provisions for uninsured institutions with less than $5 billion in total consolidated assets that are supervised by the Federal Reserve and the OCC. Comments on the proposal must be received within 60 days of publication in the Federal Register.
On October 1, the Rhode Island Department of Business Regulation adopted amendments to its regulations relating to mortgage foreclosure disclosure notices and mediation conference obligations. The amendments—which are effective as of September 28—require entities and individuals regulated by the Rhode Island Division of Banking and non-exempt mortgagees to comply with the outlined foreclosure provisions. The provisions, among other items, (i) require use of the notice of pending foreclosure form; (ii) require provision of notice of mediation conferences to all mortgagors prior to initiating a foreclosure, in the specified manner; and (iii) outline qualifications for the mediation coordinator responsible for issuing certificates of compliance.
7th Circuit affirms summary judgment for repossession company, holds property-retrieval fee is not subject to FDCPA
On October 31, the U.S. Court of Appeals for the 7th Circuit affirmed summary judgment for a third-party repossession company and an auto lender, holding that a fee that the repossession company required to process personal items left in a repossessed car did not constitute an impermissible demand for repayment under the FDCPA. According to the opinion, after a consumer fell behind on her auto payments, the third-party company repossessed her vehicle on behalf of the auto lender. The repossession company, according to the consumer, demanded a $100 payment in order to retrieve personal property she had left in the car. The consumer sued the company and the lender arguing that the retrieval fee was an impermissible debt collection in violation of the FDCPA. In response, the repossession company and the lender moved for summary judgment, arguing that the fee was an administrative handling fee that the lender had agreed to pay to the repossession company—not a fee assessed to the consumer. The lower court agreed.
On appeal, the 7th Circuit determined that the documentary evidence showed that the $100 fee was an administrative fee that the lender agreed to pay to the repossession company, stating “[t]here is no way on this record to view the handling fee as some sort of masked demand for principal payment to [the lender].” The appellate court concluded the consumer did not establish a genuine issue of fact as to whether the repossession company demanded the $100 payment on behalf of the lender and, therefore, affirmed summary judgment in favor of the repossession company and the lender.
On October 31, the U.S. District Court for the Eastern District of Pennsylvania granted class certification for a group of debtors in three states who alleged that the debt collection letters they received that were printed on law firm letterhead violated the FDCPA by falsely implying attorneys reviewed the underlying debts. The debt collector argued against certification because not all of the recipients of the letter at issue had consumer debts covered by the FDCPA, arguing “that there is no administratively feasible way to ascertain class members without doing individualized fact-finding.” The court disagreed, finding the plaintiff met the burden of demonstrating class members can be identified. Specifically, the court noted that the plaintiff’s proposed methodology would rely on the business unit that sent the letters, as well as information in the debt collector’s records, to determine which accounts are covered by the FDCPA. Because the plaintiff “demonstrated an administratively feasible and reliable method for identifying class members,” the court granted class certification.
On November 5, the Federal Financial Institutions Examination Council (FFIEC) members issued a joint statement alerting financial institutions to the potential impact that the U.S. Treasury Department’s Office of Foreign Assets Control’s (OFAC) recent actions under its Cyber-Related Sanctions Program may have on financial institutions’ risk management programs. OFAC implemented the Cyber-Related Sanctions Program in response to Executive Order 13694 to address individuals and entities that threaten national security, foreign policy, and the economy of the U.S. by malicious cyber-enabled activities. FFIEC’s press release announcing the joint statement references OFAC’s June action against five Russian entities and three Russian individuals who, through “malign and destabilizing cyber activities,” provided material and technological support to Russia’s Federal Security Service (previously covered by InfoBytes here), noting that these entities may offer services to financial institutions operating in the U.S.
The joint statement reminds financial institutions to ensure that their compliance and risk management processes address possible interactions with an OFAC sanctioned entity. The statement notes that continued use of products or services from a sanctioned entity may cause the financial institution to violate the OFAC sanctions. Additionally, use of software or technical services from a sanctioned entity may increase a financial institution’s cybersecurity risk. The statement encourages financial institutions to take appropriate corrective action, as well as to ensure their third-party service providers comply with OFAC’s requirements.
The OCC also released Bulletin 2018-40, which corresponds with the FFIEC’s joint statement.
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Jeffrey P. Naimon and Jonice Gray Tucker to discuss "Enforcement and litigation trends" at the American Bankers Association General Counsel Meeting
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- David S. Krakoff to discuss "The DOJ corporate enforcement policy and your disclosure calculus one year in: Are companies benefitting?" at the American Conference Institute International Conference on the Foreign Corrupt Practices Act
- Moorari K. Shah to discuss "Legal & regulatory issues" at the Opal Group Marketplace Lending & Alternative Financing Summit
- Jonice Gray Tucker to discuss "Hot topics in consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "New CDD Rule: Pitfalls in compliance" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference
- Daniel P. Stipano to discuss "Anti-money laundering/OFAC compliance" at the Institute of International Bankers U.S. Regulatory/Compliance Orientation Program