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  • State Law Update: Oklahoma, Georgia, New York

    Consumer Finance

    Oklahoma Updates Uniform Consumer Credit Code. On May 1, Oklahoma enacted House Bill 2742, which amends the state’s Uniform Consumer Credit Code. The bill increases the dollar threshold for transactions exempt from the Code from $45,000 to $50,000 and requires that the threshold be adjusted annually henceforth. With regard to mortgages particularly, the bill (i) expands the language required to be included in the disclosure statement, (ii) requires that the creditor mail the disclosure statement at least seven business days before the transaction, and (iii) requires the creditor to send a new statement at least three days before closing if the interest rate changes. It further requires that (i) a consumer cannot be charged any fee prior to receipt of the statement, except for a fee to obtain a credit report; and (ii) a consumer can waive the disclosure statement timing requirements. The law also increases the penalties for violations of the mortgage disclosure statement or right to rescind rules and requires that, within 30 days of the sale or transfer of a mortgage loan, the new creditor must notify the borrower that the loan has been transferred and provide contact and other relevant information.

    Georgia Enacts Mortgage-Related Bills. On May 1, Georgia enacted two mortgage-related bills. House Bill 110 permits local jurisdictions to create vacant and foreclosed property registries and establishes uniform requirements for such registries. The law takes effect July 1, 2012. House Bill 237 expands the state’s mortgage fraud law to cover the foreclosure process.

    New York Extends Temporary Mortgage Servicer Rules. On May 2, the New York Department of Financial Services published an extension of its emergency rules to implement the 2008 Mortgage Lending Reform Law. The rules will remain in effect through July 11, 2012, unless further extended or permanently adopted.

    Fraud Foreclosure Mortgage Origination Mortgage Servicing

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  • Tennessee Supreme Court Relies on UETA to Uphold Contract Formed by E-Mail Signatures


    On April 24, the Supreme Court of Tennessee upheld an appellate court decision enforcing a settlement agreed upon by an e-mail exchange between the parties’ attorneys. Waddle v. Elrod, No. M2009-02142-SC-R11CV, 2012 WL 1406451 (Tenn. Apr. 24, 2012). The case involved a family dispute over an interest in real property. After counsel exchanged email setting forth terms of the settlement (which included agreement to transfer a property interest), one party recanted and refused to sign the written settlement documents. In the ensuing litigation, the trial court enforced the settlement agreement, but failed to address arguments that Tennessee’s Statute of Frauds (the Statute) precluded enforcement or that the state’s Uniform Electronic Transactions Act (UETA) satisfied the Statute. In addressing both questions, the Tennessee Supreme Court rejected a lower appellate court’s reasoning that the Statute only applied to land sale contracts, and held that the Statute also applied to agreements to transfer land. The court nonetheless opined that that the exchanged e-mails were sufficiently definite writings for purposes of the Statute, and were validated as such by UETA; the court also found that the parties “through their counsel evidenced an intent to finalize the settlement by electronic means,” that UETA “obviate[d] the need for a handwritten signature[,]” and that counsel’s “typed name at the end of the e-mail constitute[d] an ‘electronic signature[,]’” thereby satisfying the signature requirement of the Statute.

    Electronic Signatures

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  • Spotlight on Auto Finance (Part One of Three): A New Road for Auto Finance Companies

    Consumer Finance

    Auto Finance Attorney John Redding

    Traditionally, non-bank lenders looked to the states and the FTC for industry regulations. But, this has changed with the introduction of the CFPB. Recent reports show that the federal government is stepping up efforts to regulate and review auto finance companies, many of whom have never been subject to bank-style examinations.

    “The CFPB has created a new layer of regulation,” according to John Redding, Counsel in the Southern California office of BuckleySandler. “Auto lenders have to be alert and aware of their fair and responsible lending risks.”

    Redding says one of the ways to minimize these risks is to be proactive when reviewing a company’s policies, procedures, discretionary underwriting and pricing practices.  The CFPB is likely to conduct statistical reviews for loans that the company has made or purchased to ensure there is no unexplained or improper disparity between protected and non-protected classes , so companies should consider performing such analyses in advance of the regulator conducting such an analysis.

    “This will help mitigate risks for the companies by identifying areas that may present risk and allowing them to proactively take steps to modify policies and practices. When the regulators are conducting an exam, companies will have to explain why the business is conducted as it is, including steps taken to ensure fair and responsible lending to all consumers, regardless of status, and address any issues that may arise,” says Redding.

    The bottom line: Recognize that there are new regulators and more scrutiny on the industry and begin taking steps to perform these important reviews now.

    Redding suggests the following steps auto finance companies can take to prepare for the CFPB:

    • Evaluate the institution’s risk profile and prepare an operations and compliance strategy
    • Update policies and procedures (review CFPB exam guidelines)
    • Monitor, address, and retain records regarding consumer complaints
    • Monitor third-party sources of complaints
    • Appoint an ombudsman
    • Conduct internal audits
    • Consider patterns and practices that emerge regarding operations
    • Focus on areas that may lead to consumer harm, as well as technical violations
    • Include the compliance team to monitor, analyze and advise on specific proposals

    CFPB Auto Finance John Redding

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  • Fannie Mae Announces Changes to Pricing Terms


    On May 1, Fannie Mae updated terms pertaining to its ability to change the pricing applicable to lenders’ deliveries of mortgage loans under the standard Selling Guide provisions, as well as under existing Master Agreements and related MBS contracts. In Announcement SEL-2012-03, Fannie Mae stated that it may change the base guarantee fee, loan-level pricing adjustments, and/or guaranty fee adjustments for MBS Express or rapid payment method remittance cycles applicable to mortgages delivered under MBS contracts or as whole loans. Under the change (i) Fannie Mae reserves the right to change the pricing one or more times during the term of a Master Agreement or related MBS contract, (ii) Fannie Mae will provide the lender with written notice of the pricing change prior to it taking effect, and (iii) either party can cancel the affected contract or agreement if the parties are unable to come to terms on the new pricing. The effective date of the changes will be no later than October 1, 2012.

    Fannie Mae RMBS

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  • Buckley Sandler Files Amicus Brief on Behalf of Industry Groups in Tenth Circuit TILA Case


    On May 3, BuckleySandler filed an amicus brief on behalf of three industry trade groups in a Tenth Circuit case addressing the right to rescind a mortgage under the Truth in Lending Act. The CFPB previously filed an amicus brief in Rosenfield v. HSBC Bank, No. 10-1442 (10th Cir.), in which it argued that borrowers who do not receive certain TILA-required disclosures should be permitted to rescind so long as they notify their lenders within three years—even if they did not file suit within TILA’s three-year repose period. The industry amicus brief, filed on behalf of the American Bankers Association, Consumer Bankers Association, and Consumer Mortgage Coalition, urges the Tenth Circuit to hold that TILA’s statute of repose requires that any right of rescission expire three years after origination even if the consumer previously notified the lender. The industry amicus brief argues that holding otherwise contravenes the purpose of TILA's statute of repose and creates unnecessary uncertainty that will negatively affect the industry and consumers alike.


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  • Lawmakers Request CFPB Budget Details

    Consumer Finance

    On May 2, Republican members of the House Financial Services Committee sent a letter to CPFB Director Cordray following up on their initial request and the CFPB’s response, seeking additional details regarding the CFPB’s budget and plans. Although Congress does not appropriate funds to the CFPB, the members argue that the CFPB still must provide the committee with detailed budget information.  The CFPB, according to the letter, cannot act as other non-appropriated federal banking regulators because the CFPB budget impacts the national debt while the others do not. In an attempt to exercise some oversight over CFPB spending, the members seek (i) a financial operating plan for the agency; (ii) a detailed fiscal year 2013 budget justification, (iii) performance measures, (iv) a commitment to notify Congress prior to seeking funds from the Federal Reserve Board, (v) information about the CFPB headquarters design and renovation, and (vi) the process for determining employment needs.


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  • Federal Court Holds Fannie Mae Is Not a Government Entity


    Two former executives of now-defunct Direct Access Partners LLC (DAP) were each sentenced to two years in prison for their roles in a bribery scheme involving Venezuela’s state-owned economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes).  On December 8, Tomas Clarke, the former Miami-based senior vice president of DAP, was sentenced to two years in prison and ordered to forfeit nearly $5.8 million for his role.  On December 4, Ernesto Lujan, the former managing partner at DAP’s Miami office, was sentenced to two years in prison and ordered to forfeit $18.5 million. The pair pleaded guilty in August 2013 in the U.S. District Court for the Southern District of New York to conspiracy to violate the FCPA, the Travel Act, and to commit money laundering, as well as substantive counts of these offenses.

    As described in a prior FCPA Scorecard post, DAP, a New York based broker-dealer, earned more than $60 million in commissions from trades placed by Bandes over a five year period.  To obtain that business, DAP paid millions of dollars in bribes to a Bandes official, Maria De Los Angeles Gonzalez De Hernandez (Gonzalez), often routing them through third parties and offshore bank accounts in Switzerland and elsewhere.  Clarke and Lujan are two of five former DAP executives to plead guilty in connection with this case.  In March, two other former executives, including DAP’s former CEO, were each sentenced to four years in prison.  One other former executive, who pleaded guilty in August 2013, has yet to be sentenced.  Gonzalez, who pleaded guilty in November 2013 in the U.S. District Court for the Southern District of New York to conspiracy to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, also is awaiting sentencing.

    Fannie Mae

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  • CFPB Announces Director of Diversity Office, Outlines Planned Activities

    Consumer Finance

    In a quarterly securities filing made on December 9, Analogic Corp. (Analogic), a Massachusetts-based manufacturer of airport security equipment, disclosed that the SEC and DOJ have made separate proposals to end their FCPA investigations into the company (see pages 26-27) that would include payments totaling approximately $15 million. The company had previously announced in a September 2015 press release that it had offered the SEC $1.6 million to settle the SEC’s FCPA investigation of the company.  Analogic’s 10-Q disclosed that the SEC rejected that offer.  The company stated that it remains in discussion with the SEC and DOJ about settlement and is also discussing a settlement with the Danish government concerning a resolution of these matters.

    As described in a prior FCPA Scorecard post, Analogic previously reported that the DOJ and SEC had “substantially” completed their investigations of potential bribery involving transactions by the company’s Danish subsidiary, BK Medical ApS.  The transactions at issue involved distributors paying BK Medical more than was owed, and BK Medical then allegedly transferring the excess money to third parties identified by the distributors.  At the time of its 2011 disclosure of the potentially problematic transactions, the company stated that it had not ascertained the ultimate beneficiaries or purpose of the transfers.

    CFPB Dodd-Frank

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  • FDIC Issues Statement Regarding Applicability of CFPB Mortgage Compensation Rules


    On April 17, the FDIC issued Financial Institution Letter 2012-02 to apply the recent CFPB guidance on compensation for mortgage originators to FDIC-regulated institutions.  The statement directs covered institutions to ensure that their policies and practices are consistent with the compensation rules as interpreted by the CFPB.

    FDIC CFPB Mortgage Origination

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  • Federal Reserve Releases Interchange Fee Comparison Results


    On May 1, the Federal Reserve Board released a comparison of interchange fees by payment network for 2011. The Federal Reserve Board plans to publish this information annually to assists card issuers and merchants in choosing payment card networks. The results, which also are expected to assist policymakers in evaluating the impact of the interchange fee regulations that took effect in October 2011, show each network provider’s average fee per transaction and the portion of each transaction value attributable to the fee. On an aggregate level, the average interchange fee declined substantially for non-exempt issuers from 43 cents to 24 cents following implementation of the regulation. For exempt issuers, the average fee remained at 43 cents.

    Federal Reserve Debit Cards

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