2013 – Page 6 – Consumer Financial Services Watch

Justice Department Brings Criminal Charges Based On CFPB Referral

May 07 2013

By: Melanie Brody , * Nathan Pysno
Admitted only in Maryland / Not admitted in D.C.

The U.S. Attorney’s Office for the Southern District of New York filed a criminal indictment on May 7, 2013 against Mission Settlement Agency, its owner, and three of its employees. Mission Settlement Agency is a debt settlement company based in New York City. The defendants were charged with mail fraud, wire fraud, and conspiracy to commit mail and wire fraud based on alleged misstatements they made regarding Mission Settlement Agency’s fees, services, and affiliations. The indictment alleged that the fraudulent scheme started in mid-2009 and involved at least 1,200 customers and several million dollars. The defendants allegedly collected millions of dollars in fees from customers who were struggling financially, but did no or little work to manage their clients’ debt or pay their creditors.

This case marks the first time the Justice Department has brought criminal charges based on a referral from the CFPB. Preet Bharara, U.S. Attorney for the Southern District of New York, and CFPB Director Richard Cordray held a joint press conference to discuss the case. This first-ever criminal referral serves as a reminder that the CFPB not only has enforcement powers of its own, but also functions as an industry observer that can, and will, make referrals to other federal and state enforcement agencies.

Insurance Coverage for CFPB Investigations and Enforcement Actions

Apr 25 2013

By: Gregory S. Wright, Stephanie C. Robinson, Nanci L. Weissgold

Many companies and individuals that are facing investigations or subsequent enforcement actions by the Consumer Financial Protection Bureau (“CFPB”) will be forced to incur substantial sums to defend such claims, to settle such claims, and/or to pay any judgments. In many cases, companies and individuals may have insurance coverage to pay for such costs, such as Directors and Officers liability insurance (“D&O Policies”) and Errors and Omissions liability insurance (“E&O Policies”). The availability of coverage will turn on the specific contract language in any insurance policy and the specific nature of the CFPB matter at issue.

To read the full alert, click here.

HUD Clarifies Procedures for Demanding Indemnification from FHA Lenders Participating in the Lender Insurance Program

Apr 15 2013

By: Krista Cooley

On Wednesday, HUD issued Mortgagee Letter 2013-10 to implement the Lender Insurance (“LI”) regulation it finalized in January of 2012. As announced in the final regulation, FHA mortgagees participating in the LI program will be required, as a condition of approval for LI authority, to indemnify HUD for self-endorsed loans that HUD deems ineligible for FHA insurance. Mortgagee Letter 2013-10 provides additional guidance on the Department’s policy changes regarding indemnification, which are effective for all loans insured by LI mortgagees on or after April 9, 2013. The Mortgagee Letter and a revised Lender Insurance Guide released Wednesday provide additional guidance regarding LI changes, including LI eligibility criteria and HUD’s processes to monitor, terminate, and reinstate LI authority. Read More

Consumer Financial Services 2012 Highlights Activities Report

Apr 12 2013

The Consumer Financial Services Group is pleased to share our 2012 Highlights Activities report. The report provides highlights of firm achievements, practice group events, representative matters and client publications. Please click here to view the report.

Uniform State Test – This Is Not a Joke

Apr 01 2013

By: Costas A. Avrakotos , *Jeffrey Prost , *Robin L. Gieseke
Mr. Prost and Ms. Gieseke are not admitted to the practice of law.

April Fools’ Day, a day traditionally reserved for pranks, trickery, and funny escapades, is upon us.

All joking aside, on this April 1, 2013, the Conference of State Bank Supervisors (“CSBS”) will begin to offer the new Uniform State Test (“UST”) for the licensing of state regulated mortgage loan originators (“MLOs”). Read More

Senators Attempt to Chip Away at Housing Reform with “Jumpstart GSE Reform Act” and Budget Amendment

Mar 26 2013

By: Kristie D. Kully, Andrew L. Caplan

Senators Bob Corker (R-TN), Mark Warner (D-VA), David Vitter (R-LA), and Elizabeth Warren (D-MA) have introduced legislation that, if enacted, may make a partial dent in the U.S. housing reform effort. The “Jumpstart GSE Reform Act” (the “Legislation”), introduced on March 14 in the Senate Committee on Banking, Housing and Urban Affairs (the “Senate Banking Committee”), would prevent any increase in guarantee fees (“g-fees”) imposed by Fannie Mae and Freddie Mac (the “GSEs”) from offsetting other government spending. The Legislation would also prohibit the sale of GSE preferred stock by the United States Treasury (the “Treasury”) without Congressional approval and structural housing finance reform. Furthermore, on March 22, Senator Tim Johnson (D-SD), chairman of the Senate Banking Committee, offered a bipartisan amendment (the “Amendment”) to the Senate budget that would prohibit Congress from using g-fee increases to offset additional government spending. The Amendment was agreed to in the Senate by unanimous consent. Although this budget will not become law, the Amendment shows growing support for this issue. Read More

Federal Reserve Staff Offer UDAP Guidance

Mar 26 2013

By: Soyong Cho , David I. Monteiro

On Tuesday, March 5, senior staff with the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of San Francisco presented a webinar on the prohibitions on unfair and deceptive practices under the Dodd-Frank Act and the Federal Trade Commission Act, and presented a number of case studies and compliance pointers, based on the Federal Reserve’s own enforcement and investigatory matters. Read More

CFPB Issues Fair Lending Guidance for Indirect Auto Lenders

Mar 22 2013

By: Melanie Brody , Stephanie C. Robinson

On March 21, 2013, the CFPB issued CFPB Bulletin 2013-02: Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act. In this bulletin, the CFPB describes its understanding of how the indirect auto lending industry works, and describes its view on how ECOA applies to indirect auto lending—including its theory on lender liability for disparities in dealer markups. The guidance offers advice to bank and nonbank indirect auto lenders within the CFPB’s jurisdiction on how they can limit their indirect auto fair lending risk. Read More

CFPB Provides Guidance on Mortgage Servicing Transfers

Mar 04 2013

By: Jonathan D. Jaffe , Amanda D. Gossai

The CFPB recently released a Bulletin directed to residential mortgage servicers and subservicers (servicers). The purpose of the Bulletin is to put servicers on notice that the CFPB intends to focus its supervisory process on mortgage loan servicing transfers. If the CFPB determines that a transferor or transferee servicer has engaged in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate federal consumer financial laws and regulations (including RESPA, FCRA, and FDCPA), the CFPB indicated its intent to take appropriate supervisory and enforcement actions and seek all appropriate corrective measures, including remediation of harm to consumers. Read More

App Lets Users File Discrimination Complaints from Mobile Device

Feb 28 2013

By: Stephanie C. Robinson

In an effort to reach more consumers, HUD’s Office of Fair Housing and Equal Opportunity launched a new mobile app for iPhone and iPad today. The app gives users instant access to HUD’s online housing discrimination complaint form and information about fair housing rights. After downloading the app, consumers and fair housing advocacy groups will have what HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña called “faster and easier” access to the complaint form. This makes sense for repeat complainants like fair housing advocacy organizations. But for the average consumer looking to file a discrimination complaint, downloading an app rather than visiting HUD’s web site seems like an unnecessary extra step. In any case, the app is a valiant attempt by HUD to follow the CFPB’s lead in maximizing technology to reach out to consumers.

Archive:2013