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  • CFPB Hosts Webinar on Remittance Transfer Rule

    Consumer Finance

    On October 16, the CFPB hosted a webinar regarding the new remittance transfer rule, set to take effect February 7, 2013. The presentation reviewed (i) the types of transactions covered, (ii) the definition of "remittance transfer provider" and the "normal course of business" safe harbor, (iii) disclosure requirements, including the use of estimates, and (iv) cancellations, refunds, and error resolution. For example, the disclosure requirements discussion covered the timing and form of disclosures, the application of the ESIGN Act in the remittance context, and appropriate reliance on sender representations. The webinar included certain practical compliance tips and the CFPB stated that it will accept email and phone requests for legal compliance guidance. In advance of the webinar the CFPB issued a compliance guide for small businesses.

    CFPB ESIGN Remittance Money Service / Money Transmitters

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  • Federal District Court Allows Data Breach Class Action to Proceed Based On Risk Of Future Harm


    On October 11, the U.S. District Court for the Southern District of California held that the plaintiffs in a consolidated data breach class action have plead sufficient harm to satisfy Article III's injury-in-fact requirement despite having not suffered any actual harm to date. In re Sony Gaming Networks & Customer Data Security Breach Litig., No. 11-md-2258, 2012 WL 4849054 (S.D. Cal. Oct. 11, 2012). The plaintiffs allege on behalf of a putative class that Sony Computer Entertainment America and a group of related entities (collectively Sony) failed to implement industry-standard practices to protect customers' personal information. The plaintiffs claim that as a result of Sony's failings they suffered an increased risk of future harm following a criminal theft of personal information from Sony's PlayStation computer network. The defendants moved to dismiss the plaintiffs' numerous claims, including on the grounds that the plaintiffs have suffered no real injury and therefore do not have standing to pursue the case. The court agreed with the plaintiffs that their claims are analogous to those sustained by the Ninth Circuit in Krottner v. Starbucks Corp., 628 F.3d 1139 (9th Cir. 2010). As in Krottner, the court held that although none of the plaintiffs have suffered any actual loss, the increased threat of future injury is sufficient for standing and the plaintiffs sufficiently allege that such increased risk is causally connected to Sony's actions. However, the court held that plaintiffs' allegations do not show any cognizable injury necessary to sustain their claim of negligence under California law. The court dismissed the plaintiffs' negligence and other claims with leave to amend, and dismissed certain other claims with prejudice.

    Privacy/Cyber Risk & Data Security

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  • Former Florida Attorney General Comments on the Use of Outside Counsel by State AGs

    Consumer Finance

    On October 16, former Florida Attorney General (AG) Bill McCollum was featured during a STAGE Network webinar on the "Use of Outside Counsel by State AGs to Enforce Federal and State Law."AG McCollum referred to his own experiences, including his leadership in Florida's adoption of the innovative Transparency in Private Attorney Contracts (TiPAC) law, to provide a perspective on issues related to state AGs' engagement of outside counsel. AG McCollum also examined the prospect of an increased role for state AGs in the enforcement of federal laws, particularly the consumer protection related aspects of the Dodd-Frank financial reform statute. Finally, he discussed the comparative restrictions on state and federal actors in engaging outside counsel, particularly due to Executive Order 14333 regarding compensation for outside legal services. The archived webcast can be reviewed in its entirety at this link.

    Dodd-Frank State Attorney General

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  • SEC Names New Director for New York Region


    On October 17, the SEC announced Andrew M. Calamari as Director of its New York Regional Office, a position he has held on an acting basis for the past several months. He replaces George Canellos, who earlier this year was appointed Deputy Director of the Division of Enforcement. Mr. Calamari joined the SEC in 2000 and served as Senior Associate Director and co-head of Enforcement for the New York Region. In his new role, Mr. Calamari will oversee 400 SEC employees including enforcement attorneys, accountants, investigators, and compliance examiners.


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  • Freddie Mac Revises ARM Requirements, Updates Home Possible Program


    On October 16, Freddie Mac issued Single-Family Seller/Servicer Guide Bulletin 2012-21, which revises certain requirements for adjustable rate mortgages (ARMs) and provides guidance regarding Home Possible Mortgages. For mortgages with settlement dates on or after July 1, 2013, ARMs with initial periods of five years or less cannot have initial or periodic caps that exceed 2%. In connection with the Home Possible Mortgage program and based on the 2012 area median income estimates, Freddie Mac revised the definition of "underserved area."

    Freddie Mac Mortgage Origination

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  • FDIC Finalizes Rule Regarding Enforcement of Subsidiary and Affiliate Contracts

    Consumer Finance

    On October 16, the FDIC published a final rule regarding the enforcement of subsidiary and affiliate contracts by the FDIC as receiver for failed financial companies. The rule implements authority granted to the FDIC by the Dodd-Frank Act that permits the FDIC, as receiver for a financial company whose failure would pose a significant risk to financial stability, to enforce certain contracts of subsidiaries and affiliates of the covered company. The rule covers contracts that purport to terminate, accelerate, or provide for other remedies based on the insolvency, financial condition, or receivership of the covered company, so long as the FDIC complies with statutory requirements. The rule takes effect November 15, 2012, applies broadly to all contracts, and makes clear that the FDIC's authority as receiver effectively preserves contractual relationships of subsidiaries and affiliates during the liquidation process. In response to industry comments, the final rule clarifies certain aspects of the rule as proposed.


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  • Federal and State Policymakers Comment on Federal Proposed Basel Capital Requirements

    Consumer Finance

    Last week, federal and state policymakers sent letters to federal regulators urging a change in course with regard to proposed regulations to implement the Basel III capital accords. On October 17, U.S. Senators Sherrod Brown (D-OH) and David Vitter (R-LA) expressed concern that the proposed approach would not be sufficient to prevent another financial crisis and urged the federal prudential regulators to simplify and enhance capital rules that will apply to U.S. banks. Specifically, the Senators asserted that Basel III's continued focus on risk-based capital ratios is too complex and opaque; instead the proposal should focus on "pure, loss-absorbing capital." On the same day, the Conference of State Bank Supervisors (CSBS) encouraged the federal agencies to consider the impact of their proposal on the national and local economies. The CSBS argued that Basel III is intended only to apply to large, internationally active banks, and suggested that capital requirements for other U.S. banks should be set through a separate rulemaking. In a second letter, the CSBS commented on a related rulemaking regarding a standardized approach to risk-weighted assets. In that letter, the state supervisors expounded on their recent objection to the proposal as "reactionary" and "overly complex." Earlier in the week, on October 15, Senate Banking Committee Ranking Member Richard Shelby (R-AL) objected to the rulemaking process and challenged the regulators to better explain (i) why the Basel III standards are appropriate for U.S. banks and how the regulators came to their determinations, and (ii) the impact on the U.S. baking system and the economy, including a detailed cost-benefit analysis. Also this week, other federal lawmakers, including Republican members of the House Committee on Financial Services, and the congressional delegations from Arkansas, Colorado, and Mississippi, submitted letters commenting on the proposals.

    Bank Compliance Capital Requirements

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  • NCUA Names New Executive Director

    Consumer Finance

    On October 18, the NCUA announced Mark A. Treichel as its new Executive Director, the agency's most senior career position. Mr. Treichel joined the NCUA as an examiner in 1986 and has served in numerous positions. He most recently served as the Regional Director of NCUA's Region I office in Albany, NY.


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  • GAO Urges Federal Actions to Protect Mobile Device Users' Privacy


    On October 11, the GAO released a report on its examination of how the mobile industry collects location data and the resulting impact on consumers. According to the report, privacy advocates expressed concerns that consumers are generally unaware of how location data is used by third-parties and that consumers could be subject to increased risk of surveillance by law enforcement, identity theft, and threats to personal safety. The GAO examined how companies have applied practices recommended by industry associations and privacy advocates to protect consumers' privacy while using mobile location data. The report reviews actions taken by federal agencies to provide consumer education and develop industry codes of conduct. The GAO recommends, among other things, that NTIA work with stakeholders to develop industry codes of conduct and that the FTC consider issuing guidance on mobile companies' appropriate actions to protect location data privacy.

    FTC Mobile Commerce Privacy/Cyber Risk & Data Security

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  • FTC Settles Charges Related to Sale and Use of Consumer Mortgage Payment Data

    Consumer Finance

    On October 10, the FTC announced that a major consumer reporting agency (CRA) agreed to settle charges that it improperly sold lists of consumers who were late on their mortgage payments. The CRA will pay $393,000 to resolve allegations that it violated the FTC Act by failing to implement procedures to prevent the sale of lists of consumer information to firms that should not have received them. In a separate but related case, which the DOJ pursued under a referral from the FTC, a data reseller and its affiliates settled charges that the companies violated the FTC Act and FCRA by (i) obtaining prescreened lists without having a permissible purpose, (ii) reselling the reports without disclosing to the consumer reporting agency that provided them who the end users would be, (iii) failing to maintain reasonable procedures to ensure that prospective users had a permissible purpose to get them, (iv) to the extent that firm offers of credit were made, failing to maintain a record of the criteria used to select consumers for these offers, and (v) failing to control access to sensitive consumer financial information. The resellers agreed to pay a $1.2 million civil penalty and will be barred from using or selling prescreened lists without a permissible purpose, or in connection with solicitations for debt relief or mortgage assistance relief products or services.

    FTC FCRA Consumer Reporting Privacy/Cyber Risk & Data Security

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