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Speaking Engagements + Events

  • 15th AFSA State Government Affairs and Legal Issues Forum
    June 13, 2013

    John Redding will participate on a panel at the 15th AFSA State Government Affairs and Legal Issues Forum on June 13, 2013 in San Antonio, TX. Mr. Redding’s panel, which will cover auto finance lending products and CFPB concerns on fair lending and dealer participation, also will include Rebecca Gelfond, Deputy Fair Lending Director, CFPB; Will Lund, Superintendent, Maine Bureau of Consumer Credit Protection; and Deborah Robertson, Managing Counsel, Toyota Financial Services.

    Click here to learn more about this conference.

  • RESPA Defined in 2013: What's New, What's the Same, and Where Do Compliance Issues Lurk?
    June 12, 2013

    Jonathan Cannon will speak at the National Settlement Services Summit in Cleveland, Ohio on June 12, 2013. Mr. Cannon's session is entitled "RESPA Defined in 2013: What's New, What's the Same and Where Do Compliance Issues Lurk?"

    Program description: In this unique RESPA training, regulatory compliance attorneys will instruct on specific sections of RESPA you should be tuned into to avoid legal trouble down the road. This session will highlight important areas of RESPA title companies should be addressing in their operational platforms.

    Speakers:

    • Jonathan Cannon, associate, BuckleySandler LLP
    • David Tallman, partner, K&L Gates

    Click here to learn more about this conference.

  • American Bankers Association's 2013 Regulatory Compliance Conference
    June 11, 2013

    BuckleySandler is hosting a “Power Breakfast” session in connection with the American Bankers Association’s Regulatory Compliance Conference in Chicago, IL, taking place from June 9 - 12, 2013. During the June 12 Power Breakfast BuckleySandler Partners Andrew Sandler, Jeffrey Naimon, Kirk Jensen, and Andrea Mitchell will be joined by BuckleySandler Counsel and former Deputy Assistant Director for the Office of Regulations at the CFPB Ben Olson, to provide practical guidance for institutions facing compliance examinations.

    Also at the same conference, Andrea Mitchell will speak at pre-conference Fair Lending Workshop on June 8. The Fair Lending Workshop will review current fair lending hot topics and how institutions can manage or mitigate fair lending obstacles and demonstrate compliance with fair lending laws and regulations. Kirk Jensen will participate on June 10 on panel that will review the latest enforcement actions involving SCRA, the most common SCRA compliance errors in mortgage and consumer lending and will discuss how institutions have successfully implemented SCRA compliance programs that help them effectively and fairly serve service member communities. Jeffrey Naimon will participate in a panel that will take a close look at various mortgage servicing topics on June 11. Andrew Sandler will speak on a panel titled “Fair and Responsible Banking: Beyond Mortgages,” which will review recent non-mortgage fair lending examinations, especially direct and indirect auto lending.

    Click here to learn more about this conference.

  • ABA Fair Lending Workshop
    June 8, 2013

    Andrea Mitchell will be speaking at the ABA Fair Lending Workshop, a pre-conference for the ABA Regulatory Compliance Conference, on June 8, 2013 in Chicago. Ms. Mitchell's panel is titlted, "Board Management/Risk Areas for Common Violations," which will include:

    • Understanding common violations and where your risk profile fits
    • Understanding the SMAART process
    • Managing discretion
    • Exceptions policy
    • Business development issues
    • Third party risk

    Click here to learn more about this workshop.

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FCPA Score Card

  • International Bribery Charges against Broker-Dealer Employees Result from SEC Exam
    May 7, 2013

    On May 7, the DOJ charged two employees of a U.S. broker-dealer and a senior official in Venezuela’s state economic development bank for their alleged roles in what the DOJ describes as a “massive international bribery scheme.” According to an unsealed criminal complaint, the DOJ accuses the broker-dealer employees and the foreign official of violating the FCPA by conspiring to pay $5 million in bribes to the foreign official in exchange for her directing the economic development bank’s trading business to the broker-dealer, which yielded millions more in mark-ups and mark-downs for the broker-dealer. The government alleges that commissions paid on the directed trades were split with the foreign official through monthly kickbacks and that some of the trades executed for the bank had no discernible business purpose. To further conceal the scheme, the government claims, the kickbacks often were paid using intermediary corporations and offshore accounts, the assets of which the government is pursuing through a separate civil forfeiture action. On the same day, the SEC announced a parallel civil action against the two broker-dealer employees and two other individuals who allegedly participated in and profited from the scheme. The investigations and subsequent criminal and civil charges stemmed from a routine periodic SEC examination of the broker-dealer. The DOJ warned others in the financial services industry, particularly brokers, about engaging in similar activities, and the SEC’s conduct in this case suggests its examiners are focused on conduct that potentially violates the FCPA.

  • Federal Authorities Announce FCPA Action Against Ralph Lauren, First SEC Non-Prosecution Agreement
    April 26, 2013

    On April 22, the DOJ and the SEC announced parallel actions against Ralph Lauren to resolve allegations that a subsidiary of the company paid bribes to Argentine officials over a several-year period to obtain improper customs clearance of merchandise. The SEC action included the agency’s first non-prosecution agreement related to FCPA misconduct, which the SEC determined was appropriate given “Ralph Lauren’s prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC’s investigation.” According to the SEC’s NPA, Ralph Lauren’s cooperation involved (i) reporting preliminary findings of its internal investigation to the staff within two weeks of discovering the illegal payments and gifts, (ii) voluntarily and expeditiously producing documents, (iii) providing English language translations of documents to the staff, (iv) summarizing witness interviews that the company’s investigators conducted overseas, and (v) making overseas witnesses available for staff interviews and bringing witnesses to the U.S. The SEC agreement also required Ralph Lauren to pay over $700,000 in disgorgement and prejudgment interest, while the DOJ required the company to pay a nearly $900,000 penalty.

  • Another Medical Device Case: Philips Settles SEC Administrative Proceeding for $4.5 Million
    April 5, 2013

    On April 5, 2013, Koninklijke Philips Electronics, N.V., the Dutch parent of the Philips group of companies, settled an SEC administrative proceeding for more than $4.5 million.  The SEC alleged that Philips violated the internal controls and books and records provisions of the FCPA based on improper payments by employees of its Polish subsidiary to Polish government officials from 1999-2007 in connection with contracts for medical equipment.  The SEC cited Philips’s voluntary disclosure of the improprieties and subsequent remedial measures in deciding to accept the settlement.

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Publications

  • HAMP Risk on the Rise: A Complicated Regulatory Scheme Under the Spotlight
    June 5, 2013
    Benjamin B. Klubes, Michelle L. Rogers & Katherine L. Halliday

    The Home Affordable Modification Program (“HAMP”) has had a rocky history in the three short years since its inception. Although participation in the Treasury Department’s HAMP program is voluntary, loan investors, including Fannie Mae and Freddie Mac, require their mortgage servicers to participate in their respective HAMP programs. As a result, nearly every servicer has been affected by HAMP. Initially, servicers struggled to implement a new, far-reaching program, and the government struggled to define the program’s contours and requirements. As the program matured, servicers have contended with increased regulatory scrutiny while the government has faced public and congressional criticism because it has failed to deliver the full scope of its promised improvements. All the while, litigation and government enforcement actions relating to HAMP have increased, signaling that issues surrounding HAMP compliance are not likely to end anytime soon.

    Click here to read the full article at Bloomberg Law.

  • Spotlight on the SCRA (3 of 3): Federal vs. State
    May 21, 2013

    Thus far SCRA enforcement activity has focused on the federal act, leaving the states overlooked. “Most states have an SCRA equivalent,” explains Kirk Jensen, Partner in BuckleySandler’s Washington, DC office. “One of the biggest differences is the populations they protect.”

    State SCRA equivalents are designed to protect state guard members acting on behalf of the state; for example, when the state guard is called upon in the situation of Katrina, the wildfires, or the flooding in the Midwest. In each of the situations, the state’s SCRA equivalent would provide protections to servicemembers.

    Often state SCRA equivalents provide similar benefits similar to the federal act, but they frequently provide additional benefits as well. One state provides for deferral of mortgage payments once a servicemember is activated. Another state provides benefits to the surviving spouse if the servicemember is killed in service.

    As institutions develop their SCRA compliance programs, they need to keep state laws in mind. An institution must comply with applicable state laws in addition to the federal act. Jensen highlights the following challenges institutions need to be aware of:

    • States do not have an equivalent to the Defense Manpower Data Center (DMDC). This is probably the biggest challenge and increases the importance of procedures checking other information within then institution.
    • Procedures for determining when someone is eligible for benefits under the state’s SCRA equivalent. Which documentation will be used determine eligibility should also be clarified in the procedures along with any additional benefits the institution provides based on their business model.
    • Imperative for customer facing personnel to recognize borrowers under state SCRA statutes. Personnel need to know how to address the servicemember’s concerns or understand the institution’s procedures so they can be transferred to the appropriate individual.

    Click here to learn more about BuckleySandler’s SCRA practice.

  • Private Student Lenders and Servicers Face CFPB Scrutiny
    May 20, 2013
    Benjamin P. Saul

    Regulators and congressional leaders have identified similarities between the lending practices that led to the subprime mortgage crisis and an escalating default rate in the burgeoning level of student loan debt. Rather than wait for a student loan crisis, they appear poised to act to prevent one by various means, including by the reform of student loan servicing practices. To this end, in 2012 the Consumer Financial Protection Bureau released two major reports aimed at curbing purported violations of law. In addition, in March, partly to address the complaints  of student loan debtors, the CFPB announced its intention to supervise and examine the larger non-bank education loan servicers.

    This commentary reviews the 2012 CFPB student loan ombudsman’s annual report, the CFPB’s December 2012 release of examination procedures for student lenders and the proposed regulation on the supervision of non-bank student loan servicers. Taken together, these initiatives leave no doubt that education lending and servicing and the regulation of education lenders and servicers are a top priority for the CFPB.

    Originally published in the Westlaw Journal of Bank & Lender Liability. Reprinted with permission.

  • Spotlight on the SCRA (Part 2 of 3): Ensuring Compliance
    May 14, 2013

    Recent enforcement activity has demonstrated the agencies have taken to viewing the SCRA as a strict liability statute. This shift in interpretation makes financial institutions legally responsible for compliance with the SCRA. According to Kirk Jensen, Partner in BuckleySandler’s Washington, DC office, “this is a big game changer in how financial institutions react to the SCRA.”

    The Department of Justice has had some success in bringing litigation in these matters against the smaller, unsophisticated companies. However, it is important to note that the court is not hearing all the relevant arguments. There has been an uptick in private litigation and some of the issues raised in the enforcement matters may also be raised in court. It is our hope that the defendants will make the relevant arguments to resolve some of the outstanding issues.

    Consent orders do not equal the act and the industry will not have concrete answers until the courts resolve the relevant arguments. In the meantime, Jensen recommends the following steps to ensure compliance:

    1. Develop a procedure for confirming if a customer is in the service or reserve who has received notice. The agencies expect institutions to use the Defense Manpower Data Center (DMDC). Given the DMDC has proven to be notoriously inaccurate, institutions will also want to check other information within the institution such as customer service call logs.
    2. Implement consistent procedures for determining when someone is eligible for benefits under the SCRA. Institutions will also want to determine what documentation qualifies.
    3. Design a system to ensure outside counsel is following all requirements, to include completion of all background research and proper notice as expected by the agencies.
    4. Ensure eviction procedures are compliant. To the extent the institution is relying on waivers, make sure the waivers are satisfying the statute and agency expectations.

    Jensen points out those additional benefits to communicate and provide information is not an agency expectation. Your institution will need to determine what is appropriate based on your business model.

    Bottom line: Institutions need compliance procedures that take into account the specifications of the statute as well as agency expectations.

    Click here to learn more about BuckleySandler’s SCRA practice.

  • Help the Fed Get Out of the Mortgage Business
    May 7, 2013
    Jeremiah S. Buckley

    In 2008, when our nation's housing finance system imploded, the Federal Reserve was forced to step in as "lender of last resort" to America's homeowners. Five years later, the Fed remains the principal source of funding for home mortgages, buying mortgage backed bonds issued by Fannie Mae and Freddie Mac (both now in conservatorship) and in the process adding trillions of dollars in mortgage securities to the central bank's balance sheet.

    Click here to read the full article at AmericanBanker.com.

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Knowledge + Insights

  • Special Alert: CFPB Finalizes Amendments to the Ability-to-Repay/Qualified Mortgage Rule
    May 30, 2013

    Yesterday afternoon, the Consumer Financial Protection Bureau ("Bureau") finalized important amendments (the "Amendments") to its ability-to-repay / qualified mortgage rule (the "Rule") concerning the extent to which loan originator compensation must be included as "points and fees" under the Rule.  The calculation of points and fees is a critical aspect of the Rule because a loan generally cannot be a "qualified mortgage" ("QM") - a designation that provides the lender with a degree of protection against asserted violations of the ability-to-repay requirements - if points and fees exceed 3% of the loan balance.  Furthermore, the same calculation method is used to determine whether points and fees exceed 5% of the loan balance for purposes of coverage under the Home Ownership and Equity Protection Act ("HOEPA").  The Amendments, which had been proposed concurrently with the Rule itself in January of this year (the "Concurrent Proposal"), address instances in which the Rule would have required lenders to "double count" payments of loan originator compensation as points and fees.

    Benjamin K. Olson, who joined BuckleySandler on May 28 after serving as the Bureau's Deputy Assistant Director for the Office of Regulations, observed that:  "By excluding from the points and fees calculation compensation paid by creditors and mortgage brokers to their employees, the Bureau prevents some double counting and avoids the significant practical difficulty involved in determining the amount of compensation paid to individual loan officers and mortgage brokers by their employers, which may vary based on factors that are unrelated to the specific transaction.  As the Bureau acknowledges, however, the Amendments do not prevent the double counting that may occur when both payments from the consumer to the creditor and payments from the creditor to the mortgage broker are included in points and fees."  (The press release announcing Olson's start with BuckleySandler may be found here.)

    Despite industry requests, the Amendments make no changes to the provision in the Rule requiring that many payments to creditor affiliates be included in points and fees.  In addition to points and fees, the Amendments address how "small creditors" can make QMs, and contain narrow exemptions from the Rule for certain types of creditors and for extensions of credit made pursuant to certain lending programs.  Like the Rule itself, the Amendments will take effect on January 10, 2014.  Concurrent with the Amendments, the Bureau delayed the effective date of a separate provision, which generally prohibits creditors from financing credit insurance premiums, from June 1, 2013 to January 10, 2014.

    Click here to read our analysis of the CFPB's amendments to the Ability-to-Repay/Qualified Mortgage Rule.

  • Special Alert: CFPB Issues Final Civil Penalty Fund Rule with Request for Comment
    May 9, 2013

    On April 26, the Consumer Financial Protection Bureau (CFPB or the Bureau) issued a final rule, effective immediately, that sets forth procedures for the administration of the Consumer Financial Civil Penalty Fund (Civil Penalty Fund or Fund). Under Dodd-Frank, all civil penalties obtained by the CFPB are deposited into the Civil Penalty Fund, which may be used to compensate victims and, to the extent any funds remain, to fund consumer education and financial literacy programs. The final rule identifies categories of victims who may receive payments from the Civil Penalty Fund and articulates the Bureau's interpretation of the types of payments that may be appropriate for these victims. It also establishes procedures for allocating funds for such payments to victims and for consumer education and financial literacy programs. The CFPB simultaneously issued a proposed rule, seeking comment on possible revisions to the final rule. The CFPB is accepting comments on the proposed rule through July 8, 2013.

    Pursuant to the final rule, victims are eligible for compensation from the Fund if a final order in a Bureau enforcement action imposed a civil penalty for the particular violation that harmed the victim. A final order is defined as a consent order or settlement issued by a court or by the Bureau, or an appealable order issued by a court or by the Bureau as to which the time for filing an appeal has expired and no appeals are pending. The Bureau's proposed rule, however, states that it is considering whether it should revise the final rule to allow payments to victims of any "type" of activity for which civil penalties have been imposed, even if no enforcement action has imposed penalties for the "particular" activity that harmed the victims.

    Under the final rule, victims will be compensated from the Fund to the extent of their uncompensated harm. Uncompensated harm is defined as the victim's compensable harm minus any compensation for that harm that the victim has received or is reasonably expected to receive. The final rule describes three categories of compensation that a victim has received or may be reasonably expected to receive: (i) a previous allocation from the Civil Penalty Fund to the victim's class; (ii) any redress that a final order in a Bureau enforcement action orders paid to the victim that has not been suspended, waived, or determined by the Chief Financial Officer to be uncollectible; and (iii) other redress that the Bureau knows has been paid to the victim. In determining whether a victim's harm is compensable, the final rules states that the CFPB will look to the objective terms of the order imposing the civil penalty, or if the order does not set forth such objective terms, the victim's out-of-pocket loss that resulted from the violation. The Bureau's proposed rule, however, seeks comment on (i) what should qualify as compensable harm. (ii) whether, when the amount of harm cannot be determined based on the terms of a final order, the Fund Administrator should determine what amount of harm is "practicable," as opposed to using the victim's out-of-pocket loss, and (iii) whether, instead of paying victims for their uncompensated harm, the Bureau instead should pay victims a share of the civil penalties collected for the particular violations that harmed them.  

    The CFPB has stated that it will only make payments to victims to the extent practicable. In the final rule's interpretative commentary, the CFPB explained that it believes that for payments to be "practicable," it must be feasible to carry out all of the steps involved in making the payments, and to do so efficiently and without excessive administrative cost. The final rule identifies scenarios where distribution may be impracticable, including when the amount of the payment is so small the victim is unlikely to redeem it, the cost of distribution is not justified, the victim cannot be located with reasonable effort, the victim does not timely submit information required by the distribution plan, or the victim does not redeem the payment within a reasonable time.

    With respect to fund allocation procedures, the final rule establishes a Civil Penalty Fund Administrator who will manage the Fund and report to the CFPB's Chief Financial Officer. The Fund Administrator also must follow written direction provided by the Civil Penalty Fund Governance Board, which will be established by the Director of the CFPB. The Administrator will designate a payment administrator-who may be a CFPB employee or a contractor-who will propose a plan for distributing the allocated funds to individual victims. The plan must be approved by the Administrator.

    Under the final rule, funds will be allocated based on six-month periods, which will be published on the CFPB's website by July 8, 2013. The start date for the first period has been established as July 21, 2011. The first two periods, however, need not be exactly six months in order to allow the Bureau to establish a schedule that will be administratively efficient. When there are sufficient funds available to fully compensate all the victims in the six-month period class, the Fund Administrator will allocate to each victim the amount necessary to fully compensate those victims for their uncompensated harm. If there are insufficient funds to fully compensate victims in any six-month period, victims from the most recently concluded six-month period will receive an equal percentage of their uncompensated harm. In the event of a surplusage within a given six-month period, the Fund Administrator next will allocate any remaining funds to classes of victims from preceding six-month periods until no funds remain or the victims are fully compensated. The proposed rule seeks comments regarding (i) how funds should be allocated to classes of victims, particularly when there are insufficient funds in a particular period to fully compensate all victims and (ii) whether funds should be allocated more or less frequently, or whether a different method of timing allocations should be used.

    Under the final rule, any funds that remain after distribution can be allocated to consumer education or financial literacy programs, based on criteria separately adopted by the CFPB. The Fund Administrator, however, does not have the authority to select or allocate funds to particular programs. The proposed rule also seeks comment regarding whether there should be a limit to the amount of funds that may be allocated to such programs.

    The CFPB will issue annual reports that describe how the funds will be allocated, the basis for those allocations, and how the funds have been distributed. The reports will be available on the CFPB's web site.

  • Special Alert: Detailed Analysis of CFPB's Final Escrow Rule
    February 15, 2013

    On January 10, 2013, the Consumer Financial Protection Bureau issued its final rule on escrow account requirements for first-lien higher-priced mortgage loans.  The rule amends existing escrow requirements and exemptions for such loans by, among other things, extending the required period of time during which escrow accounts must be maintained from one to five years, and creating a new exemption for small creditors that operate predominantly in rural or underserved areas.  This Alert provides a detailed summary and analysis of the rule, which becomes effective June 1, 2013 and applies to loans for which creditors receive applications on or after this date. Click here to view our detailed analysis.

  • Special Alert: HUD Issues Final Disparate Impact Rule
    February 8, 2013

    Today, the U.S. Department of Housing and Urban Development (HUD) issued a final rule authorizing so-called "disparate impact" or "effects test" claims under the Fair Housing Act. The rule provides support for private or governmental plaintiffs challenging housing or mortgage lending practices that have a "disparate impact" on protected classes of individuals, even if the practice is facially neutral and non-discriminatory and there is no evidence that the practice was motivated by a discriminatory intent. The rule also will permit practices to be challenged based on claims that the practice improperly creates, increases, reinforces, or perpetuates segregated housing patterns.

    In its final rule, HUD codified a three-step burden-shifting approach to determine liability under a disparate impact claim. Once a practice has been shown by the plaintiff to have a disparate impact on a protected class, the final rule states that the defendant would have the burden of showing that the challenged practice "is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the respondent . . . or defendant . . . . A legally sufficient justification must be supported by evidence and may not be hypothetical or speculative." As proposed, the defendant would have had the burden of proving that the challenged practice "has a necessary and manifest relationship to one or more legitimate, nondiscriminatory interests."

    HUD explained in the rule's preamble that, although it declined to use the term "business necessity" in the second prong of the disparate impact analysis, the phrase "substantial, legitimate, nondiscriminatory interest" is "equivalent to the 'business necessity' standard found in the Joint Policy Statement. The standard set forth in this rule is not to be interpreted as a more lenient standard than 'business necessity.'" HUD also highlighted the removal of the word "manifest," which was replaced by the language "a legally sufficient justification must be supported by evidence and may not be hypothetical or speculative." HUD noted that the revised language is "intended to convey that defendants and respondents . . . must be able to prove with evidence the substantial, legitimate, nondiscriminatory interest supporting the challenged practice and the necessity of the challenged practice to achieve that interest."

    With respect to the less discriminatory alternative prong, HUD clarified in the preamble that the alternative must also serve the specified interest supporting the challenge. However, HUD declined to specify in the rule that the less discriminatory alternative must be "equally effective" as the challenged policy - which would have made the rule consistent with the legal standard set forth in the Supreme Court case Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989).

    Other noteworthy aspects of the final rule include:

    • HUD's decision not to address comments raising objections to the rule based on the fact that the disparate impact standard is inconsistent with that set forth in Smith v. City of Jackson Miss., 544 U.S. 228 (2005) and Wards Cove.
    • HUD's statement that the rule applies to pending and future cases because it is not a change in HUD's position but rather a formal interpretation of the Fair Housing Act that clarifies the appropriate standards for proving a violation under an effects theory. HUD also chose not to conduct a cost/benefit analysis on this basis.
    • HUD's clarification that the Fair Housing Act provides in these cases awards of damages, both actual and punitive.
    • New language in the regulation stating that unlawful discriminatory conduct under the Fair Housing Act includes "servicing of loans or other financial assistance with respect to dwellings in a manner that discriminates, or servicing loans or other financial assistance which are secured by residential real estate in a manner that discriminates, or providing such loans or financial assistance with other terms or conditions that discriminate" on a prohibited basis.
    • Language in the preamble restating HUD's position that the Fair Housing Act applies to homeowner's insurance.

    Notwithstanding HUD's view that the final rule merely clarifies the existing interpretation of the Fair Housing Act, we expect that this rule will pose substantial compliance challenges for financial institutions.