Federal Issues

President Obama Appoints Richard Cordray CFPB Director; CFPB Fills Other Top Positions. On January 4, President Obama invoked his office's recess appointment authority and appointed former Ohio Attorney General Richard Cordray as Director of the Consumer Financial Protection Bureau (CFPB). Mr. Cordray had been serving as Assistant Director for Enforcement at the CFPB while his nomination for Director was pending in the Senate. Although approved by the Senate Banking Committee, Mr. Cordray's confirmation had been blocked by lawmakers seeking to make substantive changes to the CFPB, such as replacing the director structure with a five-member commission. Republican senators objected to Cordray's appointment on constitutional grounds. They have argued that because the Senate has been holding "pro forma" sessions during its recess, President Obama lacked the authority to make a recess appointment. 

On January 6, Mr. Cordray appointed Raj Date as Deputy Director of the CFPB. Most recently, Mr. Date, as Special Advisor to the Treasury Secretary, was responsible for operation of the CFPB pending confirmation of a director. Additionally, Mr. Cordray elevated Kent Markus to Assistant Director of the Office of Enforcement. Mr. Markus had been the CFPB Deputy Assistant Director of the Office of Enforcement. Click here to review the full text of the President's remarks; click here for additional explanation from the White House; click here for the CFPB announcement

CFPB Launches Nonbank Supervision Program. On January 5, the CFPB announced the launch of its nonbank supervision program. With a Director now in place, the Obama Administration believes that the CFPB can now exercise authority granted to it by the Dodd-Frank Act to supervise companies that offer or provide consumer financial products or services, but that do not have a bank, thrift, or credit union charter. (Republican senators have expressed disagreement; in their view, the Dodd-Frank Act grants that authority only when a CFPB Director has been confirmed by the Senate.) Nonbank supervision will proceed in two phases, with immediate focus on nonbank mortgage, payday lending, and private education companies, regardless of such a company's size. A second phase will expand supervision to large debt collection, consumer reporting, auto financing, and money-service businesses. The CFPB expects soon to propose a rule defining "larger participants" in those second-phase markets, a predicate to exercising its supervisory authority over such institutions. The CFPB also noted that it may supervise any nonbank whose conduct poses risks to consumers with regard to consumer financial products or services. Rules describing procedural guidelines for exercising that authority will be published in the future. Click here for a copy of the CFPB's announcement

CFPB Issues Guidance Regarding Treatment of Confidential Supervisory Information. On January 4, the CFPB issued Bulletin 12-01 regarding treatment of privileged and confidential information collected during CFPB's supervisory processes. The Bulletin addresses the concern of supervised institutions that providing attorney-client privileged or work product documents during the supervisory process will waive such privileges with respect to third parties. The CFPB contends in the Bulletin that any privilege would not be waived by obligatory production to the CFPB, and that the CFPB "will not consider waiver concerns to be a valid basis for the withholding of privileged information responsive to a supervisory request." Nonetheless, the Bulletin indicates that the CFPB will give "due consideration" to requests to limit the scope of requests for privileged information, and invites institutions to "memorialize privilege claims when conveying privileged documents" to the CFPB. The Bulletin also clarifies all information obtained in the supervisory process will be exempt from production in response to Freedom of Information Act requests, but that sharing of information between federal and state supervisory and enforcement authorities may be required or appropriate in certain circumstances. Click here for a copy of the Bulletin

Treasury Publishes Proposed Rule Establishing Assessment Schedule for Large Bank Holding Companies and Certain Nonbank Financial Firms. On January 3, the Treasury Department published a proposed rule to implement Section 155 of the Dodd-Frank Act, which requires Treasury to establish an assessment schedule to cover expenses of the Office of Financial Research and the Financial Stability Oversight Council, as well as the costs of implementing the Federal Deposit Insurance Corporation's orderly liquidation authority. Under the proposal, Treasury would collect assessments twice each year from (i) domestic bank holding companies with total consolidated assets of $50 billion or more, (ii) foreign banking organizations with at least $50 billion in total consolidated assets in U.S. operations, and (iii) nonbank financial companies supervised by the Federal Reserve Board. Treasury proposes to establish a flat rate one month prior to each collection date, and to apply that rate to the total consolidated assets of each covered firm to determine each's assessment. For foreign firms, only total U.S. operations would be considered in calculating the assessment. Treasury expects to (i) finalize the rule before the end of May 2012, (ii) announce the first assessment rate in June 2012, and (iii) collect the first assessment on July 20, 2012. Click here for a copy of the proposed rule

OCC Supports Independent Foreclosure Review Program with Public Service Adds. On January 4, the Office of the Comptroller of the Currency (OCC) announced that it placed print and radio public service advertisements to inform mortgage borrowers of the Independent Foreclosure Review (IFR) program launched by the OCC in November 2011. The print feature explains that borrowers foreclosed upon between January 1, 2009 and December 31, 2010 are eligible to have their foreclosures independently reviewed to determine if the borrowers suffered financial injury as a result of any errors by certain large, federally regulated mortgage servicers. The ads will run in Spanish and English in 7,000 small newspapers and on 6,500 small radio stations. Click here for a copy of the OCC announcement with links to the ads.

Fannie Mae and Freddie Mac Announce Guaranty Fee Increase. On December 30, Fannie Mae and Freddie Mac announced a 10 basis point increase of the guaranty fee charged for all mortgages delivered for securitization on or after April 1, 2012. The credit fee on whole loans will also increase by the same amount. The increases are required by the Temporary Payroll Tax Cut Continuation Act enacted on December 23, 2011, and a subsequent directive from the Federal Housing Finance Agency. The Act uses the increase in fees to cover fiscal costs associated with a two-month extension of a payroll tax reduction. Click here for a copy of the Freddie Mac announcement; click here for the Fannie Mae announcement

Freddie Mac Revises Guide to Reflect Changes to Relief Refinance Mortgage Requirements. On January 5, Freddie Mac issued Bulletin 2012-1, which revises the Freddie Mac Relief Refinance Mortgage - Same Servicer program requirements for mortgages with loan-to-value (LTV) ratios less than or equal to 80 percent. Effective immediately, the minimum Indicator Score requirement for such loans is eliminated, provided the principal and interest payment does not increase by more than 20 percent. Freddie Mac also eliminated the maximum total LTV and Home Equity Line of Credit total LTV ratio requirement of 105 percent for Relief Refinance Mortgages - Same Servicer and Relief Refinance Mortgages - Open Access with LTV ratios of less than or equal to 80 percent. Click here for a copy of the Bulletin

SEC Announces Change to Settlement Policy in Securities Fraud Cases. On January 6, multiple media outlets reported that the Securities and Exchange Commission (SEC) announced a policy change related to settlement of securities fraud cases. Under the new policy, settling defendants no longer will be permitted to neither admit nor deny civil liability, while concurrently being convicted of, or admitting guilt with regard to, criminal charges. The policy change also will apply to civil cases in which a defendant has entered into a deferred or non-prosecution agreement in a parallel criminal matter. Under the traditional SEC approach, a defendant found guilty of criminal conduct still could settle civil claims brought by the SEC without admitting or denying those civil charges. Going forward, in cases with parallel criminal actions, the SEC will (i) remove the "neither admit nor deny" language from its settlement agreements, (ii) recite the fact and nature of the criminal conviction, and (iii) allow staff to determine whether to include in the settlement facts obtained from the criminal conviction. The SEC's current prohibition on defendants denying the SEC's allegations or making statements those allegations are without merit will be retained. The new policy will not alter the "neither admit nor deny" approach used when settling cases that involve neither a criminal conviction nor allegations of criminal law violations. Click here for a copy of one media report on the policy change

FFIEC Approves Revised Regulation Z Interagency Examination Procedures. In late December, The Federal Financial Institutions Examination Council's (FFIEC) Consumer Compliance Task Force approved revised interagency examination procedures for Regulation Z, Truth in Lending. The new procedures reflect changes to rules implementing the Credit Card Accountability Responsibility and Disclosure Act, as well as revisions required by the Dodd-Frank Act, including an increased threshold for exempt consumer credit transactions. Click here for a copy of the Federal Reserve Board letter with a link to the revised procedures.

State Issues

Michigan Enacts Several Foreclosure-Related Bills. In late December, Michigan enacted several bills related to certain of the state's foreclosure rules. HB 4542 and 4543 alter and extend through the end of 2012 Michigan's pre-foreclosure notice and mediation procedures. Among the changes is a shift from mandatory to optional filing of a one-time pre-foreclosure notice publication. The new laws also (i) make clear that a borrower's housing counselor may initiate a pre-foreclosure mediation on the borrower's behalf, (ii) extend to thirty days the time for a borrower or housing counselor to respond to a pre-foreclosure notice, and (iii) allow foreclosure by advertisement before the end of the 90-day stay period if a borrower fails to return a completed financial package within sixty days of the pre-foreclosure notice. Additionally, pre-foreclosure notices mailed on or after February 1, 2012 must (i) provide certain detailed contact information related to scheduling mediation, (ii) state the length of the redemption period, and (iii) include certain statements regarding responsibility for property damaged during the redemption period. Finally, HB 4544, among other things, reduces to six months the redemption period on non-agricultural properties over three acres when the amount claimed due exceeds two-thirds of the original mortgage balance. To view these recently passed bills, use the following links: HB 4542; HB 4543; and HB 4544.

New York Limits Exemptions for Mortgage Licensing and Registration Requirements. On January 4, the New York Department of Financial Services (DFS) published a final rule eliminating certain exemptions to the state's mortgage licensing and registration requirements. The rule narrows the definition of "exempt organization" by excluding nonbanking subsidiaries of bank holding companies, including, for example, subsidiaries acting as insurance, escrow, or title companies. Such subsidiaries now will be required to either register or become licensed with the DFS before soliciting, negotiating, placing, processing or making mortgage loans. Newly covered entities must file an application for licensure or registration by April 3, 2012 and complete such processes by July 2, 2012. The rule allows the DFS Superintendent to adjust the compliance dates. Click here for a copy of the rule as published

Texas Finance Commission Adopts New Rules Regarding Mortgages and Consumer Credit. On December 30, the Finance Commission of Texas published two sets of rules impacting (i) mortgage lenders and servicers, (ii) credit access businesses, and (iii) debt management companies. The first set of rules reorganizes mortgage-related regulations to republish as Chapter 76 all regulations previously published as Chapter 79 of the Texas Administrative Code. This set of rules also establishes certain new regulations as Chapter 79 to implement SB 17 regarding residential mortgage loan servicers. Among the new rules are those to establish registration and bonding requirements for servicers.

The second set of rules includes two that implement HB 2594 and HB 2592, which require the Commission to establish licensing for credit access businesses that provide payday loans or title loans, and to design new consumer notice disclosure and notice requirements for such firms. These regulations, among other things, set up a process for provisional licenses and a transition period to allow businesses to continue operating while obtaining a full license. Another rule sets new requirements related to standard payoff statement forms for mortgage servicers responding to requests from title insurance companies. Finally, this set of rules revises credit counseling standards for debt management service providers to remove certain obsolete language. Click here for a copy of the adopted rules; click here for the rules as proposed.

Courts

FTC Obtains Agreement from Payment Processor to Prohibit Use of New Payment Method. On January 5, the Federal Trade Commission (FTC) announced a settlement with a payment processor and two of its principals that will prohibit the company from using a new payment method, through which accounts were debited without account-holder consent. The FTC alleged that the company actively promoted the method as a way to avoid scrutiny associated with other payment methods, and ignored red flags - such as payment-rejection rates exceeding 80 percent - that its merchant customers were seeking to defraud account-holders. As a result, according to the FTC, consumers incurred significant costs, including for overdraft fees. In addition to banning the use of this payment process, the settlement requires, among other things, that the company monitor client return rates and investigate rates exceeding 2.5 percent. Click here for a copy of the FTC release

Final FCPA Enforcement Action for 2011 Provides Useful Benchmarks for Anti-corruption Compliance Program Reviews. On December 29, Deutsche Telecom and Magyar Telekom settled FCPA enforcement matters with the US DOJ and SEC for a combined sanction exceeding $95 million. Part of the resolution recited specified minimum compliance program elements that Magyar Telekom is required to institute. BuckleySandler's most recent FCPA Update describes the settlement fully and links to a list of these anti-corruption program elements, which are useful for counsel structuring a corruption risk assessment or compliance program review.

Florida AG Seeks to Advance Unfair and Deceptive Foreclosure Case. On December 30, Florida Attorney General Pam Bondi (AG) filed a motion in the Fourth District Court of Appeal seeking to advance the state's investigation into whether certain law firms engaged in misconduct while foreclosing on Florida homeowners. In April, the appeals court ruled that the AG did not have authority to subpoena records from one of the law firms under investigation. The state cannot appeal that decision to the Florida Supreme Court unless it is certified as an issue of great public importance. Therefore, the AG has asked the Fourth District to certify to the state supreme court as such an issue the question of whether the creation of invalid assignments of mortgages by a law firm and subsequent use of such documents to foreclose constitutes an unfair and deceptive practice under Florida law that may be investigated by the AG. Click here for a copy of the AG's press release with a link to the motion

Tenth Circuit Confirms MERS Has Authority to Foreclose. Recently, the U.S. Court of Appeals for the Tenth Circuit affirmed separate lower court rulings that Mortgage Electronic Registration Systems, Inc. (MERS) had authority to foreclose under Utah law even though the notes at issue had been sold by the original lenders and securitized. Commonwealth Property Advocates v. Mortgage Elec. Reg. Sys, Inc., Nos. 10-4182, 10-4193, 10-4215, 2011 WL 6739431 (10th Cir. Dec. 23, 2011). In each of the underlying cases, the deed of trust contained the usual language naming MERS as the "nominee" for both the original lender and the lender's "successors and assigns," and providing MERS with authority "to foreclose and sell the Property" on behalf of those entities. The plaintiff (a firm that acquired title to each of the properties from delinquent borrowers) based its challenge to MERS' authority to foreclose on a Utah statute providing that the "transfer of any debt secured by a trust deed shall operate as a transfer of the security therefor." Utah Code Ann. § 57-1-35. According to the Plaintiff, the statute meant that sale and securitization of the notes deprived "original 'nominees,' such as MERS," of any right to exercise any power under the deeds of trust absent authorization by the new owners of the debt, i.e., the security-holders. The Tenth Circuit, relying on prior Utah and federal-court decisions, rejected that argument. It held that the statute merely codifies the well-established rule that a lender's transfer of a note also transfers that lender's interest in the associated security instrument. The statute in no way impacted MERS' explicit authority under the deeds of trust to continue to act as the "nominee" of each successive buyer of the note and to foreclose on each such buyer's behalf. Click here for a copy of the court's opinion.

Firm News

Donna Wilson will be participating as a panelist at the Round Table on 2011-2012 Legal Developments and Trends for the Retail and Fashion Industries on January 19, 2012 in New York, New York.

James Parkinson will be speaking at the Activist Investor Conference on January 23-24, 2012 in New York, on a panel entitled "Activism in China: Understanding Foreign Corrupt Practices Act (FCPA) Enforcement."

Benjamin Klubes will be participating on a panel addressing fair lending enforcement legal theories at the Mortgage Bankers Association Fair Lending Workshop on January 24, 2012 in Washington, DC.

James Parkinson will be speaking on a panel at the ACI Latin America Summit on Anti-Corruption held in Sao Paulo, Brazil on February 8, 2012. The panel is entitled: "Assessing the Risk of Personal Liability in Bribery Investigations."

David Krakoff will be participating in a panel at the International Association of Defense Counsel program on worldwide anti-corruption laws in Palm Springs in February 2012.

Donna Wilson will be speaking at the ABA Section of Litigation Insurance Coverage CLE Seminar held at the Loews Ventana Canyon Resort in Tucson, Arizona from March 1-3, 2012. Ms. Wilson will be representing the defense counsel perspective in a plenary session panel entitled "The Credit Crisis and D&O Insurance Coverage: Challenges facing Insureds, Insurers, and Regulators" on March 1 from 1:00 PM to 2:10 PM.

Andrew Sandler will be speaking at PLI's A Guide to Financial Institutions 2012 Program in New York on March 6, 2012 at 4:00 PM in a session entitled "The New Era of Consumer Protection & Enforcement: The CFPB & Other Initiatives."

James Parkinson will be chairing a panel at the International Bar Association's 10th Annual Anti-Corruption Conference in Paris, France on March 13 and 14, 2012. The panel is entitled: "The Privileged Profession: Risks faced by legal professionals advising in international transactions."

James Parkinson will be speaking at a PLI program seminar entitled "Foreign Corrupt Practices Act 2012" in San Francisco, California on April 17, 2012 and in New York, New York on May 4, 2012.

Mortgages

OCC Supports Independent Foreclosure Review Program with Public Service Adds. On January 4, the Office of the Comptroller of the Currency (OCC) announced that it placed print and radio public service advertisements to inform mortgage borrowers of the Independent Foreclosure Review (IFR) program launched by the OCC in November 2011. The print feature explains that borrowers foreclosed upon between January 1, 2009 and December 31, 2010 are eligible to have their foreclosures independently reviewed to determine if the borrowers suffered financial injury as a result of any errors by certain large, federally regulated mortgage servicers. The ads will run in Spanish and English in 7,000 small newspapers and on 6,500 small radio stations. Click here for a copy of the OCC announcement with links to the ads.

Fannie Mae and Freddie Mac Announce Guaranty Fee Increase. On December 30, Fannie Mae and Freddie Mac announced a 10 basis point increase of the guaranty fee charged for all mortgages delivered for securitization on or after April 1, 2012. The credit fee on whole loans will also increase by the same amount. The increases are required by the Temporary Payroll Tax Cut Continuation Act enacted on December 23, 2011, and a subsequent directive from the Federal Housing Finance Agency. The Act uses the increase in fees to cover fiscal costs associated with a two-month extension of a payroll tax reduction. Click here for a copy of the Freddie Mac announcement; click here for the Fannie Mae announcement

Freddie Mac Revises Guide to Reflect Changes to Relief Refinance Mortgage Requirements. On January 5, Freddie Mac issued Bulletin 2012-1, which revises the Freddie Mac Relief Refinance Mortgage - Same Servicer program requirements for mortgages with loan-to-value (LTV) ratios less than or equal to 80 percent. Effective immediately, the minimum Indicator Score requirement for such loans is eliminated, provided the principal and interest payment does not increase by more than 20 percent. Freddie Mac also eliminated the maximum total LTV and Home Equity Line of Credit total LTV ratio requirement of 105 percent for Relief Refinance Mortgages - Same Servicer and Relief Refinance Mortgages - Open Access with LTV ratios of less than or equal to 80 percent. Click here for a copy of the Bulletin

Michigan Enacts Several Foreclosure-Related Bills. In late December, Michigan enacted several bills related to certain of the state's foreclosure rules. HB 4542 and 4543 alter and extend through the end of 2012 Michigan's pre-foreclosure notice and mediation procedures. Among the changes is a shift from mandatory to optional filing of a one-time pre-foreclosure notice publication. The new laws also (i) make clear that a borrower's housing counselor may initiate a pre-foreclosure mediation on the borrower's behalf, (ii) extend to thirty days the time for a borrower or housing counselor to respond to a pre-foreclosure notice, and (iii) allow foreclosure by advertisement before the end of the 90-day stay period if a borrower fails to return a completed financial package within sixty days of the pre-foreclosure notice. Additionally, pre-foreclosure notices mailed on or after February 1, 2012 must (i) provide certain detailed contact information related to scheduling mediation, (ii) state the length of the redemption period, and (iii) include certain statements regarding responsibility for property damaged during the redemption period. Finally, HB 4544, among other things, reduces to six months the redemption period on non-agricultural properties over three acres when the amount claimed due exceeds two-thirds of the original mortgage balance. To view these recently passed bills, use the following links: HB 4542; HB 4543; and HB 4544.

New York Limits Exemptions for Mortgage Licensing and Registration Requirements. On January 4, the New York Department of Financial Services (DFS) published a final rule eliminating certain exemptions to the state's mortgage licensing and registration requirements. The rule narrows the definition of "exempt organization" by excluding nonbanking subsidiaries of bank holding companies, including, for example, subsidiaries acting as insurance, escrow, or title companies. Such subsidiaries now will be required to either register or become licensed with the DFS before soliciting, negotiating, placing, processing or making mortgage loans. Newly covered entities must file an application for licensure or registration by April 3, 2012 and complete such processes by July 2, 2012. The rule allows the DFS Superintendent to adjust the compliance dates. Click here for a copy of the rule as published

Texas Finance Commission Adopts New Rules Regarding Mortgages and Consumer Credit. On December 30, the Finance Commission of Texas published two sets of rules impacting (i) mortgage lenders and servicers, (ii) credit access businesses, and (iii) debt management companies. The first set of rules reorganizes mortgage-related regulations to republish as Chapter 76 all regulations previously published as Chapter 79 of the Texas Administrative Code. This set of rules also establishes certain new regulations as Chapter 79 to implement SB 17 regarding residential mortgage loan servicers. Among the new rules are those to establish registration and bonding requirements for servicers.

The second set of rules includes two that implement HB 2594 and HB 2592, which require the Commission to establish licensing for credit access businesses that provide payday loans or title loans, and to design new consumer notice disclosure and notice requirements for such firms. These regulations, among other things, set up a process for provisional licenses and a transition period to allow businesses to continue operating while obtaining a full license. Another rule sets new requirements related to standard payoff statement forms for mortgage servicers responding to requests from title insurance companies. Finally, this set of rules revises credit counseling standards for debt management service providers to remove certain obsolete language. Click here for a copy of the adopted rules; click here for the rules as proposed.

Florida AG Seeks to Advance Unfair and Deceptive Foreclosure Case. On December 30, Florida Attorney General Pam Bondi (AG) filed a motion in the Fourth District Court of Appeal seeking to advance the state's investigation into whether certain law firms engaged in misconduct while foreclosing on Florida homeowners. In April, the appeals court ruled that the AG did not have authority to subpoena records from one of the law firms under investigation. The state cannot appeal that decision to the Florida Supreme Court unless it is certified as an issue of great public importance. Therefore, the AG has asked the Fourth District to certify to the state supreme court as such an issue the question of whether the creation of invalid assignments of mortgages by a law firm and subsequent use of such documents to foreclose constitutes an unfair and deceptive practice under Florida law that may be investigated by the AG. Click here for a copy of the AG's press release with a link to the motion

Tenth Circuit Confirms MERS Has Authority to Foreclose. Recently, the U.S. Court of Appeals for the Tenth Circuit affirmed separate lower court rulings that Mortgage Electronic Registration Systems, Inc. (MERS) had authority to foreclose under Utah law even though the notes at issue had been sold by the original lenders and securitized. Commonwealth Property Advocates v. Mortgage Elec. Reg. Sys, Inc., Nos. 10-4182, 10-4193, 10-4215, 2011 WL 6739431 (10th Cir. Dec. 23, 2011). In each of the underlying cases, the deed of trust contained the usual language naming MERS as the "nominee" for both the original lender and the lender's "successors and assigns," and providing MERS with authority "to foreclose and sell the Property" on behalf of those entities. The plaintiff (a firm that acquired title to each of the properties from delinquent borrowers) based its challenge to MERS' authority to foreclose on a Utah statute providing that the "transfer of any debt secured by a trust deed shall operate as a transfer of the security therefor." Utah Code Ann. § 57-1-35. According to the Plaintiff, the statute meant that sale and securitization of the notes deprived "original 'nominees,' such as MERS," of any right to exercise any power under the deeds of trust absent authorization by the new owners of the debt, i.e., the security-holders. The Tenth Circuit, relying on prior Utah and federal-court decisions, rejected that argument. It held that the statute merely codifies the well-established rule that a lender's transfer of a note also transfers that lender's interest in the associated security instrument. The statute in no way impacted MERS' explicit authority under the deeds of trust to continue to act as the "nominee" of each successive buyer of the note and to foreclose on each such buyer's behalf. Click here for a copy of the court's opinion.

Banking

Treasury Publishes Proposed Rule Establishing Assessment Schedule for Large Bank Holding Companies and Certain Nonbank Financial Firms. On January 3, the Treasury Department published a proposed rule to implement Section 155 of the Dodd-Frank Act, which requires Treasury to establish an assessment schedule to cover expenses of the Office of Financial Research and the Financial Stability Oversight Council, as well as the costs of implementing the Federal Deposit Insurance Corporation's orderly liquidation authority. Under the proposal, Treasury would collect assessments twice each year from (i) domestic bank holding companies with total consolidated assets of $50 billion or more, (ii) foreign banking organizations with at least $50 billion in total consolidated assets in U.S. operations, and (iii) nonbank financial companies supervised by the Federal Reserve Board. Treasury proposes to establish a flat rate one month prior to each collection date, and to apply that rate to the total consolidated assets of each covered firm to determine each's assessment. For foreign firms, only total U.S. operations would be considered in calculating the assessment. Treasury expects to (i) finalize the rule before the end of May 2012, (ii) announce the first assessment rate in June 2012, and (iii) collect the first assessment on July 20, 2012. Click here for a copy of the proposed rule.

Consumer Finance

President Obama Appoints Richard Cordray CFPB Director; CFPB Fills Other Top Positions. On January 4, President Obama invoked his office's recess appointment authority and appointed former Ohio Attorney General Richard Cordray as Director of the Consumer Financial Protection Bureau (CFPB). Mr. Cordray had been serving as Assistant Director for Enforcement at the CFPB while his nomination for Director was pending in the Senate. Although approved by the Senate Banking Committee, Mr. Cordray's confirmation had been blocked by lawmakers seeking to make substantive changes to the CFPB, such as replacing the director structure with a five-member commission. Republican senators objected to Cordray's appointment on constitutional grounds. They have argued that because the Senate has been holding "pro forma" sessions during its recess, President Obama lacked the authority to make a recess appointment. 

On January 6, Mr. Cordray appointed Raj Date as Deputy Director of the CFPB. Most recently, Mr. Date, as Special Advisor to the Treasury Secretary, was responsible for operation of the CFPB pending confirmation of a director. Additionally, Mr. Cordray elevated Kent Markus to Assistant Director of the Office of Enforcement. Mr. Markus had been the CFPB Deputy Assistant Director of the Office of Enforcement. Click here to review the full text of the President's remarks; click here for additional explanation from the White House; click here for the CFPB announcement

CFPB Launches Nonbank Supervision Program. On January 5, the CFPB announced the launch of its nonbank supervision program. With a Director now in place, the Obama Administration believes that the CFPB can now exercise authority granted to it by the Dodd-Frank Act to supervise companies that offer or provide consumer financial products or services, but that do not have a bank, thrift, or credit union charter. (Republican senators have expressed disagreement; in their view, the Dodd-Frank Act grants that authority only when a CFPB Director has been confirmed by the Senate.) Nonbank supervision will proceed in two phases, with immediate focus on nonbank mortgage, payday lending, and private education companies, regardless of such a company's size. A second phase will expand supervision to large debt collection, consumer reporting, auto financing, and money-service businesses. The CFPB expects soon to propose a rule defining "larger participants" in those second-phase markets, a predicate to exercising its supervisory authority over such institutions. The CFPB also noted that it may supervise any nonbank whose conduct poses risks to consumers with regard to consumer financial products or services. Rules describing procedural guidelines for exercising that authority will be published in the future. Click here for a copy of the CFPB's announcement

CFPB Issues Guidance Regarding Treatment of Confidential Supervisory Information. On January 4, the CFPB issued Bulletin 12-01 regarding treatment of privileged and confidential information collected during CFPB's supervisory processes. The Bulletin addresses the concern of supervised institutions that providing attorney-client privileged or work product documents during the supervisory process will waive such privileges with respect to third parties. The CFPB contends in the Bulletin that any privilege would not be waived by obligatory production to the CFPB, and that the CFPB "will not consider waiver concerns to be a valid basis for the withholding of privileged information responsive to a supervisory request." Nonetheless, the Bulletin indicates that the CFPB will give "due consideration" to requests to limit the scope of requests for privileged information, and invites institutions to "memorialize privilege claims when conveying privileged documents" to the CFPB. The Bulletin also clarifies all information obtained in the supervisory process will be exempt from production in response to Freedom of Information Act requests, but that sharing of information between federal and state supervisory and enforcement authorities may be required or appropriate in certain circumstances. Click here for a copy of the Bulletin

FFIEC Approves Revised Regulation Z Interagency Examination Procedures. In late December, The Federal Financial Institutions Examination Council's (FFIEC) Consumer Compliance Task Force approved revised interagency examination procedures for Regulation Z, Truth in Lending. The new procedures reflect changes to rules implementing the Credit Card Accountability Responsibility and Disclosure Act, as well as revisions required by the Dodd-Frank Act, including an increased threshold for exempt consumer credit transactions. Click here for a copy of the Federal Reserve Board letter with a link to the revised procedures.

Texas Finance Commission Adopts New Rules Regarding Mortgages and Consumer Credit. On December 30, the Finance Commission of Texas published two sets of rules impacting (i) mortgage lenders and servicers, (ii) credit access businesses, and (iii) debt management companies. The first set of rules reorganizes mortgage-related regulations to republish as Chapter 76 all regulations previously published as Chapter 79 of the Texas Administrative Code. This set of rules also establishes certain new regulations as Chapter 79 to implement SB 17 regarding residential mortgage loan servicers. Among the new rules are those to establish registration and bonding requirements for servicers.

The second set of rules includes two that implement HB 2594 and HB 2592, which require the Commission to establish licensing for credit access businesses that provide payday loans or title loans, and to design new consumer notice disclosure and notice requirements for such firms. These regulations, among other things, set up a process for provisional licenses and a transition period to allow businesses to continue operating while obtaining a full license. Another rule sets new requirements related to standard payoff statement forms for mortgage servicers responding to requests from title insurance companies. Finally, this set of rules revises credit counseling standards for debt management service providers to remove certain obsolete language. Click here for a copy of the adopted rules; click here for the rules as proposed.

Securities

SEC Announces Change to Settlement Policy in Securities Fraud Cases. On January 6, multiple media outlets reported that the Securities and Exchange Commission (SEC) announced a policy change related to settlement of securities fraud cases. Under the new policy, settling defendants no longer will be permitted to neither admit nor deny civil liability, while concurrently being convicted of, or admitting guilt with regard to, criminal charges. The policy change also will apply to civil cases in which a defendant has entered into a deferred or non-prosecution agreement in a parallel criminal matter. Under the traditional SEC approach, a defendant found guilty of criminal conduct still could settle civil claims brought by the SEC without admitting or denying those civil charges. Going forward, in cases with parallel criminal actions, the SEC will (i) remove the "neither admit nor deny" language from its settlement agreements, (ii) recite the fact and nature of the criminal conviction, and (iii) allow staff to determine whether to include in the settlement facts obtained from the criminal conviction. The SEC's current prohibition on defendants denying the SEC's allegations or making statements those allegations are without merit will be retained. The new policy will not alter the "neither admit nor deny" approach used when settling cases that involve neither a criminal conviction nor allegations of criminal law violations. Click here for a copy of one media report on the policy change.

E-Commerce

FTC Obtains Agreement from Payment Processor to Prohibit Use of New Payment Method. On January 5, the Federal Trade Commission (FTC) announced a settlement with a payment processor and two of its principals that will prohibit the company from using a new payment method, through which accounts were debited without account-holder consent. The FTC alleged that the company actively promoted the method as a way to avoid scrutiny associated with other payment methods, and ignored red flags - such as payment-rejection rates exceeding 80 percent - that its merchant customers were seeking to defraud account-holders. As a result, according to the FTC, consumers incurred significant costs, including for overdraft fees. In addition to banning the use of this payment process, the settlement requires, among other things, that the company monitor client return rates and investigate rates exceeding 2.5 percent. Click here for a copy of the FTC release.

Criminal Enforcement Action

Final FCPA Enforcement Action for 2011 Provides Useful Benchmarks for Anti-corruption Compliance Program Reviews. On December 29, Deutsche Telecom and Magyar Telekom settled FCPA enforcement matters with the US DOJ and SEC for a combined sanction exceeding $95 million. Part of the resolution recited specified minimum compliance program elements that Magyar Telekom is required to institute. BuckleySandler's most recent FCPA Update describes the settlement fully and links to a list of these anti-corruption program elements, which are useful for counsel structuring a corruption risk assessment or compliance program review.