Consumer Financial Services Watch – Page 21 – News and developments related to consumer financial services, litigation, and enforcement.

Are Public Companies Required to Disclose that the Government is Investigating Them?

Jul 13 2015

For many public companies, the first issue they have to confront after they receive a government subpoena or Civil Investigative Demand (“CID”) is whether to disclose publicly that they are under investigation. Curiously, the standards for disclosure of investigations are more muddled than one would expect. As a result, disclosure practices vary—investigations are sometimes disclosed upon receipt of a subpoena or CID, sometimes when the staff advises a company that it has tentatively decided to recommend an enforcement action, sometimes not until the end of the process, and sometimes at other intermediate stages along the way. In many cases, differences in the timing of disclosure may reflect different approaches to disclosure. We discuss below the standards that govern the disclosure decision and practical considerations. We then provide five representative examples of language that companies used when they disclosed investigations at an early stage.

To read the full alert, click here.

Connecticut Mandates Identity Theft Services for SSN Data Breaches

Jul 07 2015

By: Holly K. Towle

On June 30, 2015, Connecticut’s governor signed into law an amendment to the state’s data-security-breach-notice statute to mandate “appropriate” identity theft prevention services for breaches involving social security numbers. Identity theft mitigation services are also required “if applicable” (e.g., if identify theft actually occurs). The services must be provided at no cost and for at least 12 months. The statute does not explain which identity theft “prevention” or “mitigation” services are mandated or which are “appropriate.”

Advisory Rules Committee Adopts Amendments to Bankruptcy Rule 3002.1

Jul 06 2015

By: Phoebe S. Winder, Ryan M. Tosi, Mary L. Thibadeau

Recently, the Advisory Committee on Bankruptcy Rules voted unanimously in favor of adopting the proposed changes to Bankruptcy Rule 3002.1 as originally published August 2014 and as discussed in our alert entitled “Have You Noticed Your Payment Change? Advisory Rules Committee Proposes Amendments to Bankruptcy Rule 3002.1” (available here). The Advisory Committee now seeks the Standing Committee’s final approval of the amended rule.

Although the rule amendments unfortunately do not address the difficulties surrounding the filing of timely and accurate payment change notices for home equity lines of credit or daily simple interest accounts, the report notes that the rule’s applicability to these accounts was discussed, and that “publication of a proposed amendment to address that issue will be sought later as part of a larger package of related amendments.” Thus, while it appears that the Committee is open to the idea of further amending Rule 3002.1 to address home equity lines of credit and daily simple interest accounts, the amendments will not be made in the near term.

The rule changes adopted by the Advisory Committee are not anticipated to go into effect until December 1, 2016; however, certain new “modernized” forms, including the proof of claim form and mortgage attachment, payment change notice form, and post-petition fee notice form, are scheduled to go into effect on December 1, 2015, pending approval by the Judicial Conference. K&L Gates will continue to monitor the proposed changes to the rule and will report on significant developments.

New Flood Insurance Coverage and Escrow Requirements

Jul 01 2015

By: Kerri M. Smith, Christopher G. Smith

Last week, federal regulators issued long-awaited flood regulations implementing the Biggert-Waters Flood Insurance Reform Act of 2012 (“Biggert-Waters”) and Homeowner Flood Insurance Affordability Act of 2014 (“HFIAA”). To those following the legislative and regulatory developments for federally mandated flood insurance, there won’t be any big surprises in the final rule. Indeed, in both Biggert-Waters and HFIAA, Congress prescribed relatively clear and specific requirements; thus, in responding to comments, the agencies were largely able to rely on statutory language to shape the new obligations. In a few instances, the agencies added clarity through new definitions or additional explanations, but largely the agencies followed the statutes’ road map.

Recent Developments in State Mortgage Servicing Laws

Jun 30 2015

By: Costas A. Avrakotos, Kerri M. Smith, Francis L. Doorley

New laws in Hawaii, Louisiana, Nevada, and Rhode Island will have consequences for mortgage servicers operating in those states. Recently enacted legislation in Hawaii and Nevada imposes new licensing and compliance obligations on servicers. In addition, legislation in Louisiana and Rhode Island set to go into effect has licensing implications for those entities that are mere holders of mortgage servicing rights (“MSRs”), but that do not actually service the loans.

6 Critical Issues When Responding to Government Subpoenas

Jun 30 2015

By: Shanda Hastings, Noam Kutler

Partner Shanda Hastings and Associate Noam Kutler, members of the K&L Gates Government Enforcement group, co-authored the article titled “6 Critical Issues When Responding to Government Subpoenas” appearing in the June 16 edition of Corporate Counsel magazine. In their article, they discuss six critical issues that could cause significant problems for a bank or financial institution if overlooked when responding to a government subpoena for documents.

To read the full article, click here.

Sixth Circuit Limits Scope of “Unsolicited Advertisement” under the TCPA

Jun 26 2015

By: Joseph C. Wylie II, Molly K. McGinley, Nicole C. Mueller

The Sixth Circuit recently held that a facsimile which lacks commercial components on its face does not constitute an advertisement under the Telephone Consumer Protection Act and ruled that the possibility of remote economic benefit to a defendant is “legally irrelevant” to determining whether the fax violates the TCPA. The Sixth Circuit’s narrow rule stands out among decisions from other courts that have adopted an expansive interpretation of “advertisement” under the TCPA, and demonstrates that the scope of the TCPA is indeed subject to limitations.

New York DFS Provides Further Clarifications on New Debt Collection Regs

Jun 25 2015

By: Steven M. Kaplan, Gregory N. Blase, Christopher E. Shelton

The New York Department of Financial Services (“DFS”) has updated its FAQ on the debt collection regulations that took effect on March 3, 2015. We analyzed the regulations in a client alert and covered an earlier version of the FAQ in a previous blog post.

Webinar: Is Your Institution Ready for Federal Scrutiny of Diversity Practices?

Jun 25 2015

Section 342 of the Dodd-Frank Act – which established additional federal oversight over the diversity policies and practices at financial services institutions – has become a reality for regulated institutions with the release on June 9th of an interagency policy statement establishing the final standards. The standards impact a broad swathe of business activity and focus on self-assessment and voluntary disclosure of diversity practices. What do legal, compliance and risk management leaders at regulated financial services institutions need to do to comply?

STATEMENT OF PAUL F. HANCOCK, K&L GATES LLP, ON DECISION OF U.S. SUPREME COURT UPHOLDING ‘DISPARATE-IMPACT LIABILITY’ UNDER THE FAIR HOUSING ACT

Jun 25 2015

By: Paul F. Hancock

The Court’s decision today resolves an important legal issue about which there has been principled disagreement among White House administrations, as well as among advocacy and industry groups, for decades. While the Court, by a razor thin margin, upheld the application of disparate impact under the Fair Housing Act, the Court also imposed important limitations on the application of the legal theory. For example, the Court held that a racial imbalance, without more, does not establish a case of discrimination, and directed lower courts to “examine with care” the claims presented at the pleading stage. The Court further directed that remedial orders in disparate impact cases must “concentrate on the elimination of the offending practice” and employ “race-neutral [remedial] means.” The limitations that were announced were believed necessary by the Court to “avoid serious constitutional questions that might arise” and “to protect potential defendants against abusive disparate-impact claims.”