Banking and Finance Law Daily Wrap Up, WORTH NOTING—Other regulatory, legislative, litigation, and industry developments, (Jul 19, 2024)

By WK Editorial Staff

A weekly roundup of other items of interest to the banking and finance law community.

BANKING OPERATIONS—Institutions have been alerted by the three banking regulatory agencies—Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and the Federal Reserve Board—that materials pertaining to the Consolidated Reports of Condition and Income (Call Reports) for the June 30, 2024, report date are available. The agencies also released Supplemental Instructions for newly implemented revisions. Except for certain institutions with foreign offices, completed Call Reports must be received by July 30. Institutions are encouraged to complete the preparation, editing and review of Call Report data and submission to the Central Data Repository as early as possible.

BANKING OPERATIONS—The Federal Deposit Insurance Corporation provided an additional 30 days for comments on the renewal of a variety of information collections, according to a notice scheduled for publication in the Federal Register July 17. The FDIC invited comments on various aspects of the renewals, including the applicability to purported goals and the estimated changes to the annual burden hours as a result of revisions proposed to the renewals. The notice of the proposed renewal for these information collections was previously published in the Federal Register on May 1, 2024, and May 7, 2024, allowing for a 60-day comment period (see Banking and Finance Law Daily, May 10, 2024). Comments are now due by Aug. 17.

BANK SECRECY ACT—In a recent event, Jimmy Kirby, Deputy Director of the Financial Crimes Enforcement Network, highlighted the significance of the Corporate Transparency Act (CTA) and its beneficial ownership information reporting requirements as critical to U.S. national security and financial integrity. Kirby outlined FinCEN's key role in combating financial crimes through regulations and the analysis of suspicious activities, emphasizing the necessity of peeling back layers of corporate anonymity to thwart criminal exploitation of the financial system. He cited examples from Colorado where shell companies facilitated fraud and money laundering, including a scheme involving counterfeit Denver Broncos merchandise. Kirby reassured small business owners that the CTA is not intended to be punitive for law-abiding entities but is designed to target willful violators such as kleptocrats and money launderers. He urged businesses to comply with the reporting requirements, which are free and relatively simple, to aid law enforcement and protect legitimate commerce. The FinCEN database is operational, and Kirby encouraged businesses not to delay their reporting ahead of the Jan.1, 2025 deadline.

COMMUNITY DEVELOPMENT—The Financial Crimes Enforcement Network (FinCEN) has provided an update on its beneficial ownership information (BOI) reporting outreach activities for June. Among events highlights were gatherings in Chicago, New York and Phoenix, as well as topic-focused events such as TechConnection World Innovation Conference and the American Institute of Certified Public Accountants (AICPA). FinCEN touted direct outreach to over 90,000 stakeholders as part of roughly 135 webinars, roundtables and more since the report rules went into effect at the start of this year.

CONSUMER CREDIT—The Consumer Financial Protection Bureau is seeking the renewal of a data collection related to Regulation M and the Consumer Leasing Act (CLA) in a notice that was scheduled for publication in the Federal Register on July 18. According to the notice, the information provides the primary evidence of law violations in CLA enforcement actions brought by Federal agencies, and the Bureau’s ability to enforce the CLA would be significantly impaired without Regulation M’s recordkeeping requirements. The public is invited to comment on various aspects of the collections as part of the renewal, including the applicability of the collections to purported goals and the estimated annual hourly burdens totaling less than 2,500. Comments on the renewal are due by September 16.

CONSUMER CREDIT—N.J. Sup. Ct.: In connection with claims made by a pair of tenants under the New Jersey Consumer Fraud Act in a proposed class action against the Hamilton Cove Apartments for allegedly not having “around-the-clock security” as represented, the New Jersey Supreme Court determined that: (i) the tenants “knowingly and voluntarily waived their right to bring a class action by assenting to their respective leases” even though the pertinent leases did not contain a “mandatory arbitrary provision;” (ii) the class-action waiver, contained in the lease agreements, was not unconscionable; and (iii) the leases were enforceable. Notably, in reversing the state intermediate appellate court’s rulings and remanding the matter for further proceedings, the New Jersey Supreme Court held that while “class action waivers in consumer contracts are not per se contrary to New Jersey public policy,” they may be found to be unenforceable “if found to be unconscionable or to violate other tenets of state contract law” (Pace v. Hamilton Cove Apartments , A-4 September Term 2023 No. 088302 (N.J. Sup. Ct. July 10, 2024)).

CONSUMER FINANCIAL PROTECTION BUREAU—Democrats in the Senate pushed for a CFPB data protection rule to include users of Electronic Benefits Transfer cards, in a letter publicized June 15. Sens. John Fetterman (D-Pa.), Tina Smith (D-Minn.), Raphael Warnock (D-Ga.) and Ron Wyden (D-Ore.) referred to a rule proposal that would implement, for the first time, protections under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that the CFPB is expected to finalize in the near future. “As the primary federal agency tasked with protecting consumers of financial services, the CFPB should work to protect access to financial information, establish standards for data access, and promote the development of standards for secure data exchange for families who receive nutrition and financial assistance,” letter authors wrote, noting “tens of millions” of users of EBT through programs such as the Supplemental Nutrition Assistance and Women, Infants, and Children programs.

CREDIT, DEBIT AND GIFT CARDS—5th Cir.: As previously reported in June (see Banking and Finance Law Daily, June 20, 2024), the Fifth Circuit decided that the federal district court for the Northern District of Texas abused its discretion when it transferred the litigation to the U.S. District Court for the District of Columbia. The Fifth Circuit concluded that controlling venue and transfer rules precluded sending the case to Washington, D.C. at that juncture. Now in July, in a one-sentence unpublished order, the U.S. Court of Appeals for the Fifth Circuit granted the Consumer Financial Protection Bureau’s motion for issuance of an immediate mandate in connection with the plaintiff banking/business groups’ lawsuit against the CFPB challenging the agency’s CARD Act late-fee rule (In re Chamber of Commerce v. CFPB, No. 24-10463 (5th Cir. July 15, 2024)).

ENFORCEMENT ACTIONS—The Office of the Comptroller of the Currency has announced enforcement actions taken against national banks and federal savings associations, as well as individuals affiliated with these banks. These actions are aimed at correcting deficient practices and violations identified by the OCC. One of the enforcement actions is a cease and desist order against CNB Bank & Trust for violations of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program and unsafe or unsound practices related to BSA/AML compliance. The OCC has also issued a formal agreement with Lincoln FSB of Nebraska for unsafe or unsound practices in areas such as strategic planning, liquidity risk management, and board oversight. Additionally, a cease and desist order has been issued against Summit National Bank for unsafe or unsound practices related to capital and strategic planning, liquidity risk management, and BSA/AML compliance. The OCC also imposed a number of Orders of Prohibition against bank employees that prohibit these individuals from any participation in the affairs of a bank or other institution. The Orders of Prohibition were imposed upon: Cindy M. Flores, formerly of Wells Fargo Bank, for diverting over $47,600 from customer accounts; Randall David Ditzer, previously with BOKF, N.A., for unauthorized withdrawals from an elderly customer's account; Andre Jackson, formerly of Bank of America, for misappropriating at least $8,000; Cordia Shedde McDonald, formerly of JPMorgan Chase, for taking at least $10,000 in cash from the bank; Aaliyah Shaheed, previously with Varo Bank, for fraudulent transfers amounting to approximately $21,700. Kathryn Thomure, a former employee of U.S. Bank, for falsifying Paycheck Protection Program loan applications, resulting in an improper loan of approximately $29,300; and Valeria Martinez Vazquez, formerly of Zions Bancorporation, was prohibited for misappropriating around $11,100 from a customer's account.

EQUAL CREDIT OPPORTUNITY—The U.S. Department of Housing and Urban Development has announced that the agency has charged multiple entities with housing discrimination in violation of the Fair Housing Act “for issuing a biased appraisal and then denying a refinance loan application” in Denver, Colorado. More specifically, HUD alleges that the individual appraiser, the appraisal company (Maverick Appraisal Group), the appraisal management company (Solidifi U.S. Inc.), and the lender (Rocket Mortgage, LLC) were involved in relation to the issuance of an allegedly discriminatory appraisal of a duplex owned by a Black woman in a predominantly white area of Denver. According to HUD, the appraisal was “rife with inaccuracies and unsupportable methodological choices,” resulting in a valuation of $640,000, despite having been appraised at $860,000 only eight months prior, and constituting an undervaluation of the Black homeowner’s property “on the basis of her race.” Further, when the homeowner complained to Rocket Mortgage, with whom she was seeking a refinance loan, the company would only allow the application to proceed based on the purportedly flawed appraisal, HUD asserts.

FEDERAL RESERVE SYSTEM—The Federal Reserve Board looked at the impact of broadband “gaps” to the economy in its eighth edition of its Consumer & Community Context published July 15. In the brief, authors noted only 74 percent of nonmetro households had broadband subscriptions, versus 85 percent in metro areas. Access to broadband disproportionately affected low- and moderate-income households, according to the authors.

FINANCIAL STABILITY—The Treasury Department met with counterparts throughout the Pacific Islands as part of a forum on the “urgent” issue of de-risking in the region, according to a statement released July 15. The forum, held July 8-9 in Australia, explored ways for the Pacific Island economies to address long standing structural issues identified by the World Bank, as well as receiving commitments from finance leaders to the Financial Action Task Force’s (FATF) anti-money laundering and financial terrorism countering regimes. Treasury members planned to host Pacific Finance Ministers, central bank leaders and commissions as guests of the 2024 World Bank and International Monetary Fund (IMF) meetings.

MORTGAGES—The Consumer Financial Protection Bureau is seeking the renewal of a data collection related to its Regulation O governing Mortgage Assistance Relief Services (MARS) in a notice that was scheduled for publication in the Federal Register on July 18. According to the notice, the Bureau and the Federal Trade Commission use the information provided under Regulation O's recordkeeping requirements for enforcement purposes and to ensure compliance with Regulation O by MARS providers. The public is invited to comment on various aspects of the collections as part of the renewal, including the applicability of the collections to purported goals and the estimated annual hourly burdens totaling less than 2,500. Comments on the renewal are due by Sept. 16.

Attorneys: Miriam S. Edelstein (Costello, Mains & Silverman, LLC) for William Pace and Robert Walters. Christopher A. Rojao (McCarter & English, LLP) for Hamilton Cove, Hamilton Cove Apartments, Hamilton Cove UR Holdco, LLC, Greystar, Greystar Management Services, L.P., Greystar Real Estate Partners, LLC, Greystar RS HM, LLC, Greystar RS NE, LLC, Hartz Mountain Industries of New Jersey, Inc., and Hartz Mountain Industries-NJ LLC. Michael F. Murray (Paul Hastings, L.L.P.) for Chamber of Commerce of the U.S., Fort Worth Chamber of Commerce, Longview Chamber of Commerce, Consumer Bankers Association, and Texas Association of Business. Jennifer B. Dickey, U.S. Chamber Litigation Center, for the Chamber of Commerce of the United States. Stephanie Garlock for the Consumer Financial Protection Bureau and Rohit Chopra.

Companies: American Bankers Association; Bank of America N.A.; BOKF, N.A.; Chamber of Commerce of the United States of America; CNB Bank & Trust; Consumer Bankers Association; Fort Worth Chamber of Commerce; Greystar; Greystar Management Services, L.P.; Greystar Real Estate Partners, LLC; Greystar RS HM, LLC; Greystar RS NE, LLC; Hamilton Cove; Hamilton Cove Apartments; Hamilton Cove UR Holdco, LLC; Hartz Mountain Industries of New Jersey, Inc.; Hartz Mountain Industries-NJ LLC; JPMorgan Chase Bank, N.A.; Lincoln FSB of Nebraska; Longview Chamber of Commerce; Maverick Appraisal Group; Rocket Mortgage, LLC; Solidifi U.S. Inc.; Summit National Bank; U.S. Bank, N.A.; Texas Association of Business; Varo Bank N.A.; Wells Fargo Bank, N.A.; Zions Bancorporation, N.A.

IndustryNews: BankingOperations BankSecrecyAct CFPB ChecksElectronicTransfers CommunityDevelopment ConsumerCredit CreditDebitGiftCards CrimesOffenses DepositInsurance DoddFrankAct EqualCreditOpportunity EnforcementActions FederalReserveSystem FinancialStability LouisianaNews MississippiNews Loans Mortgages NewJerseyNews Privacy StateBankingLaws TexasNews TruthInLending UDAAP