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Financial Services Law Insights and Observations


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  • Tenth Circuit Permits Trade Group Challenge to New Mexico Fair Credit Reporting Act

    State Issues

    On May 7, the U.S. Court of Appeals for the Tenth Circuit published an opinion that a trade group has standing to sue the Attorney General of New Mexico over that state’s credit reporting and identify theft requirements. Consumer Data Industry Assoc. v. King, No. 11-2085, 2012 WL 1573563 (10th Cir. May 7, 2012). In 2010, New Mexico enacted the Fair Credit Reporting and Identity Security Act, which, among other things, requires consumer reporting agencies (CRAs) to oblige a consumer’s request to remove credit report information resulting from identify theft until told otherwise by a court or the requesting consumer. The Consumer Data Industry Association challenged the law on behalf of its members, arguing that the state law is preempted by the federal Fair Credit Reporting Act (FCRA). Under FCRA, a CRA can deny a consumer request to remove information based on identify theft if the CRA reasonably determines that the request is fraudulent or erroneous. The district court held that the CDIA failed to prove redressability and therefore lacked constitutional standing to sue. The Tenth Circuit vacated the district court holding and ordered further proceedings. It found that federal courts consistently have found a case or controversy in suits between private parties subject to enforcement and the state entity responsible for enforcement and that if a plaintiff faces a credible threat of enforcement, redressability is established. Here, the court held, the threat of enforcement faced by the CDIA members is sufficient to provide standing to sue for both injunctive and declaratory relief.

    FCRA Consumer Reporting Privacy/Cyber Risk & Data Security

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  • FTC Affirms Holder in Due Course Rule

    Consumer Finance

    On February 10, 2016, Dutch oilfield company SBM Offshore announced that the U.S. DOJ has now re-opened its investigation into allegations that SBM paid bribes to secure contracts in various countries around the world.   SBM stated that the DOJ has made “information requests” in connection with the bribery investigation and that SBM is “seeking further clarification about the scope of the inquiry.”

    SBM previously had reached a $240 million settlement with Dutch authorities in November 2014 to resolve allegations involving bribes to government officials in Angola, Brazil, and Equatorial Guinea between 2007 and 2011.  At the time, SBM announced that the DOJ had simultaneously closed its investigation into the same matter.  Its most recent announcement, however, shows that the U.S. government has rekindled its inquiry.

    SBM also announced that it has reserved $245 million to cover a possible settlement with Brazilian authorities.  This announcement comes on the heels of a January 2016 settlement between the Ministerio Publico Federal (MPF), Brazil’s Public Prosecutor’s Office, and SBM’s CEO and a member of SBM’s supervisory board apparently tied to the ongoing Petrobras scandal in Brazil.

    Click here to view previous FCPA Scorecard coverage of the SBM investigation.

    FTC Auto Finance

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  • New York Federal Court Denies Motion to Dismiss FHFA Mortgage-Backed Securities Case


    On May 4, the U.S. District Court for the Southern District of New York denied, in large part, a motion to dismiss one of the many pending mortgage-backed securities (MBS) cases brought by the Federal Housing Finance Agency (FHFA). Federal Housing Finance Agency v. UBS Americas, Inc., No. 11-5201, 2012 WL 1570856 (S.D.N.Y. May 4, 2012). The court’s decision allows FHFA’s federal securities action to proceed while dismissing related state law negligent misrepresentation claims. In July 2011, as conservator for Fannie Mae and Freddie Mac (the GSEs), FHFA initiated multiple lawsuits alleging that billions of dollars of MBS purchased by the GSEs were based on offering documents that “contained materially false statements and omissions.” Defendants in the instant case argued that these claims were time-barred. FHFA countered that the Housing and Economic Recovery Act of 2008 (HERA) controlled questions of timeliness, a point on which the court agreed in refusing to dismiss related federal claims. In this regard, the court concluded that a reasonably diligent plaintiff (here, the FHFA) could not have “discovered” the underlying federal claim within the year before the GSEs were placed into conservatorship. Rather, such a plaintiff could only have “discovered” this claim when the securities were “downgraded from investment grade to near-junk status,” which was less than a year before conservatorship.

    Freddie Mac Fannie Mae RMBS

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  • Fannie Mae Announces New Document Custodian Requirements


    On February 4, 2016, the SEC announced a settlement with the CEO of Chile-based LAN Airlines S.A. and its holding company Latam Airlines Group SA, Ignacio Cueto Plaza, regarding his approval of the payment of over $1.15 million to an Argentinian consultant in connection with LAN Airline’s attempts to settle disputes over wages and work conditions with employees in Argentina.  According to the SEC, Cueto knew that a portion of these payments might be passed on to union officials in Argentina and that the actual services agreed to in the underlying consulting agreement would not be performed.  Without admitting or denying the SEC’s findings, Cueto agreed to pay a $75,000 penalty and "certify his compliance with his airline’s policies and procedures by attending anti-corruption training among other undertakings." In its administrative cease and desist order, the SEC found that Cueto violated both the FCPA’s internal accounting controls and books and records provisions.

    The company has said that this was an isolated matter, that it cooperated with the SEC’s investigation, and strengthened its accounting controls since the incident took place.

    Fannie Mae Mortgage Servicing

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  • Fourth Circuit Reverses Dismissal of TILA Claim


    On February 4, 2016, the SEC settled FCPA allegations with California-based SciClone Pharmaceuticals with a cease and desist order finding that SciClone violated the FCPA’s anti-bribery, books and records, and internal controls provisions related to activities in China.  The SEC found that from at least 2007 to 2012, employees of SciClone subsidiaries gave money and gifts to Chinese officials (including employees of state-owned hospitals) in order to boost sales.  The SEC further found that SciClone failed to devise and implement a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program.

    SciClone consented to the SEC’s order without admitting or denying the charges and agreed to pay $12.8 million to resolve the charges, including a $2.5 million penalty, the disgorgement of $9.426 million in profits, and $900,000 in prejudgment interest.  SciClone will also provide status reports to the SEC for the next three years regarding remediation efforts and new anti-corruption compliance measures.  SciClone simultaneously announced that the DOJ had declined to pursue any additional action.

    CFPB TILA Mortgage Servicing

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  • State Courts Requiring More Proof to Obtain Affidavit Judgments in Debt Collection Cases

    State Issues

    On February 1, 2016, the SEC agreed to a $3.7 million settlement with software company SAP SE regarding allegations that it violated the FCPA regarding the payment and offer of bribes to senior Panamanian government officials.  The settlement, stemming from the actions of former SAP executive Vincente Garcia who pleaded guilty last August to one count of conspiracy to violate the FCPA, found that SAP lacked appropriate internal controls to detect the illegal activity.  According to the SEC, Garcia arranged the sale of heavily discounted software licenses and used the savings to create a “slush fund.”  The money in this fund was then used to pay bribes and kickbacks.

    The SEC order also found that SAP lacked sufficient internal controls to prevent the violations.  While SAP did not admit or deny the findings, it consented to the cease-and-desist order and agreed to disgorge $3.7 million in profits plus prejudgment interest of $188,896.

    Debt Collection

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  • FTC Settles Privacy Claims Against Myspace


    On January 22, 2016, the Ministerio Publico Federal (MPF), Brazil’s Public Prosecutor’s Office, reportedly entered into a settlement with Dutch drilling company SBM Offshore’s CEO and a member of its supervisory board, resolving misdemeanor allegations apparently tied to the ongoing Petrobras probe in Brazil.  If the settlement is approved by the Brazilian judge handling the case, both individuals will be fined approximately $60,000 each, with no admission of guilt.

    SBM Offshore stated in response that while it “believes that accepting the settlement offers a pragmatic opportunity to expeditiously resolve this matter that avoids long and costly legal proceedings,” it remains of the opinion that the accusations are without merit and that it stands behind both individuals.  While SBM Offshore declined to comment on the specific accusations of misconduct in this case, the settlement comes a little over a year after SBM Offshore resolved an enforcement action in the Netherlands involving alleged bribes in Angola, Brazil, and Equatorial Guinea between 2007 and 2011.

    Click here to view previous FCPA Scorecard coverage of SBM Offshore and Brazil’s Petrobras investigation.

    FTC Privacy/Cyber Risk & Data Security

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  • FinCEN Extends Proposed Customer Due Diligence Program Comment Period, Issues Electronic Filing Reminder

    Consumer Finance

    On May 4, FinCEN extended the comment period for its proposal to establish a customer due diligence regulation that would require covered financial institutions to institute defined programs to identify the real or beneficial owners of customer accounts. The proposed regulation is designed to enhance federal anti-money laundering and counterterrorism efforts. Interested parties will have an additional thirty days to comment from the time the extension is published in the Federal Register.  On May 7, FinCEN reminded financial institutions subject to the Bank Secrecy Act that certain BSA-required filings must be filed electronically beginning July 1, 2012.

    FinCEN Bank Secrecy Act

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  • HUD Announces Another Mortgage False Claims Act Settlement


    On May 10, HUD and the U.S. Attorney for the Southern District of New York announced the settlement of a lawsuit alleging violation of the False Claims Act by a mortgage originator and affiliated entities. The government alleged that, for nearly a decade, MortgageIT, Inc. certified falsely that the mortgages it originated complied with HUD rules. MortgageIT and its affiliates agreed to pay $202.3 million to resolve the suit. After the Bank of America and Countrywide FCA claims settled in February, this marks the third mortgage-FCA lawsuit settled to date. A fourth case remains pending in the Southern District of New York.

    Mortgage Origination HUD False Claims Act / FIRREA

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  • Freddie Mac Appoints New CEO, OCC Names Senior Deputy Comptroller


    On May 10, Freddie Mac announced that Donald Layton will serve as the organization’s Chief Executive Officer. Mr. Layton will join the firm on May 21, 2012. Mr. Layton has served as chairman & CEO of E*TRADE Financial and worked for nearly 30 years at JP Morgan Chase and its predecessors.

    On May 7, the Office of Comptroller of the Currency announced the hiring of Paul Nash to succeed John Walsh as Senior Deputy Comptroller and Chief of Staff. Mr. Nash comes from the FDIC, where he served for two years as the Deputy to the Chairman for External Affairs.

    Freddie Mac OCC

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