D.C. Circuit Court of Appeals’ TCPA Ruling Is a Mixed Bag

D.C. Circuit Court of Appeals' TCPA Ruling Is a Mixed BagOn March 16, 2018, the D.C. Circuit Court of Appeals issued its long-awaited Telephone Consumer Protection Act (TCPA) opinion in ACA International v. Federal Communications Commission, a consolidated appeal of the FCC’s July 10, 2015, TCPA Declaratory Ruling and Order. While the D.C. Circuit Court of Appeals upheld the FCC’s approach to revocation of consent for autodialed calls and exemption for time-sensitive healthcare calls, the opinion sets aside the FCC’s interpretation of the type of telephone equipment that constitutes an “autodialer” and vacates the FCC’s approach to calls to reassigned numbers.

The opinion should have major implications for TCPA litigation concerning the definition of an autodialer and provides some clarification for compliance with the TCPA’s revocation of consent scheme. The opinion, however, creates more uncertainty regarding calls to reassigned numbers.

The petitioners in ACA International challenged four aspects of the FCC’s 2015 TCPA Declaratory Ruling and Order:

  • The types of telephone equipment that constitute an autodialer for purposes of the TCPA;
  • Whether a call to a reassigned number violates the TCPA;
  • How a party who previously consented to autodialed calls can revoke consent; and
  • The scope of the FCC’s narrow exemption for certain healthcare-related calls.

In its opinion, the D.C. Circuit Court of Appeals struck down the FCC’s expansive definition of what types of telephone equipment constitutes an autodialer for purposes of the TCPA. Citing current FCC Chairman Ajit Pai’s dissenting opinion to the FCC’s 2015 Declaratory Ruling and Order, the court noted that the FCC’s interpretation encompassed any and all smartphones—which are now nearly ubiquitous.  The court stated that the “TCPA cannot reasonably be read to render every smartphone an [autodialer] subject to the Act’s restrictions,” and accordingly found that the FCC’s interpretation was arbitrary and capricious.

In addressing calls to reassigned numbers, the court also set aside the FCC’s one-call, post-reassignment safe harbor and the FCC’s treatment of reassigned numbers more generally.

The TCPA does not prohibit autodialed calls to cells phones “made with the prior express consent of the called party” (47 U.S.C. § 227 (b)(1)(A)(iii)). While the FCC interpreted “called party” to refer to the person actually reached, the petitioners in ACA International contended that the “called party” actually means the person the caller expected to reach—an interpretation which would limit liability for calls to reassigned numbers.  The court sided with the FCC, finding that the FCC could permissibly interpret “called party” to mean the person subscribing to the called number at the time the call is made.  While the opinion appears to further limit what is not an autodialer, it does very little to define what is an autodialer.  Accordingly, this issue will likely continue to be the subject of litigation, as the courts work through the uncertainty over what is and is not an autodialer.

The court, however, went further, striking down as arbitrary the FCC’s safe harbor for just one call to a reassigned number before TCPA liability is imposed. The court noted that the FCC could not justify why a caller’s reasonable reliance on a previous subscriber’s express consent only extended to one call, making the rule arbitrary. Because striking down the one call safe harbor would result in a more severe and strict liability regime for calls to reassigned numbers—which the court did not think the FCC would have intended—the court set aside the FCC’s treatment of reassigned numbers as a whole.

Next, the court upheld the FCC’s approach to revocation of consent, which allows a called party to revoke consent at any time and through any reasonable means (rejecting industry requests for an interpretation that would allow callers to prescribe an exclusive means for revocation of consent). The court’s opinion, however, appears to support the caller’s creation of clearly defined and easy-to-use revocation processes as a means to limit some of the uncertainty of what methods of revocation are considered reasonable. To this end, the court noted that the FCC’s ruling absolves callers of any responsibility to adopt revocation procedures and systems that would entail “undue burdens,” but does not go so far as to define what might constitute an “undue burden.”

The court also noted that the FCC’s ruling does not address revocation procedures contractually agreed upon by the parties. Accordingly, the court stated that nothing in the FCC’s ruling “should be understood to speak to parties’ ability to agree upon revocation procedures.”

Lastly, the court upheld the scope of the FCC’s exemption of certain healthcare-related calls from the TCPA’s prior-consent requirement for calls to wireless numbers. Rite Aid challenged the scope of the FCC’s exemption on the grounds that it conflicted with the Health Insurance Portability and Accountability Act (HIPAA) and was arbitrary and capricious. The court held that HIPPA does not conflict with or supersede the TCPA and that the FCC’s interpretation was reasonable.

Is a Foreclosure Crisis Looming in Our Nation’s Capital?

Is a Foreclosure Crisis Looming in Our Nation’s Capital?The District of Columbia Court of Appeals recently sent a new set of shockwaves through the mortgage industry in the nation’s capital when it released its decision in Andrea Liu v. U.S. Bank National Association. Having held over three years ago that condominium associations have “super-priority” liens for unpaid assessments and can wipe out first mortgages by foreclosing on those liens, the Liu decision went an unexpected step farther: An association’s foreclosure would wipe out the first mortgage even if the association expressly stated that it intended for the foreclosure to be held subject to that mortgage. Secured lenders who thought they might have dodged the bullet now find themselves fighting for the validity of their security interests.

In 2014, the D.C. Court of Appeals issued its decision in Chase Plaza Condominium Ass’n v. JPMorgan Chase Bank, N.A., which addressed the effect of a condominium association’s foreclosure sale in the District of Columbia. The Chase Plaza court explained that D.C. Code § 42-1903.13 entitled a condominium association to foreclose and then apply the sale proceeds first to the six months of assessments considered a “super-priority” lien under D.C. law. Moreover, the court reasoned that because the super-priority lien had seniority over a lender’s first mortgage on the same property, the association’s foreclosure would wipe out that mortgage. If the sales proceeds were insufficient to pay the outstanding balance of the mortgage, then the secured lender would be left with a potentially hefty unsecured debt.

In light of the uncertainty regarding the interpretation of D.C. Code § 42-1903.13, condominium associations wishing to foreclose on a unit had developed a practice of expressly indicating that the property would be sold at a foreclosure sale subject to the lender’s mortgage. In Liu, for example, the advertisements of sale, the memorandum of sale to Ms. Liu, and the deed of trust all specified that the condominium association sale was made subject to the first deed of trust. Thus, the secured lender argued that it was “abundantly clear” that Ms. Liu purchased the property subject to its lien.

The Court of Appeals rejected that argument based on a somewhat surprising reading of D.C. Code § 42-1903.13. The court explained that D.C. Code § 42-1901.07 prevented parties from varying the terms of a condominium association super-priority lien sale by agreement. Based on that reasoning, the Liu court held that notwithstanding the repeated, express representations made by the association indicating that the first mortgage would survive the association’s foreclosure sale, Ms. Liu bought the property free and clear of the first mortgage (for a sales price representing a tiny fraction of the property’s market value).

The practical impact of the Liu court’s holding is that a condominium association’s sale, even if made explicitly subject to a first deed of trust, might not be actually subject to that deed of trust. Secured lenders who have reasonably relied on express representations made by an association that their lien interests would remain intact have suddenly learned that their reliance might have been misplaced.

The D.C. condominium association sale statute was amended in April 2017 to require parties to specify at the outset whether a sale would be a super-priority sale that extinguished all other liens, or a sale for more than the super-priority amount that would be subject to a first deed of trust. For sales prior to that date, however, the Liu decision adds a significant amount of uncertainty. It appears that pre-2017 condominium association sales might now be treated as extinguishing first deeds of trust, even if all parties thought otherwise.

The Liu decision creates an enormous amount of uncertainty as to the enforceability of pre-foreclosure mortgages and whether such mortgages survived condominium association foreclosure sales. It is certainly within the realm of possibility that condominium sale purchasers will now claim that they own their property outright, causing a new wave of litigation in the District of Columbia. Lenders with security interests on D.C. condominiums will be closely watching to see if the D.C. Court of Appeals accepts en banc review of the Liu decision, hopefully to prevent a new wave of uncertainty and litigation.

Federal Reserve Proposes Modifications to Its Supervisory Appeals Process and Ombudsman Policy

On Tuesday, February 27, 2018, the Federal Reserve proposed to modify its guidelines and processes that institutions may rely upon to appeal an adverse material supervisory determination. The proposal also seeks to modify the Federal Reserve’s policy for its Ombudsman. Comments regarding the proposals will be accepted through April 30, 2018.

Federal Reserve Proposes Modifications to Its Supervisory Appeals Process and Ombudsman PolicyAppeals Process

The Federal Reserve’s proposal is “designed to improve and expedite the appeals process.” Specifically, the proposal would remove one of the existing three levels of appeal. The proposed two-tiered framework would require that an initial review panel first consider an entity’s appeal request, and, if the entity continues to have concerns, a final review could be requested.

The initial review panel would be comprised of three Reserve Bank employees and an attorney that would advise the panel on its responsibilities. Those four individuals (1) must not have been substantively involved in any matter at issue in the appeal, (2) cannot report directly or indirectly to anyone who made the initial supervisory determination, (3) must not be employed by the Reserve Bank that made the initial supervisory determination, and (4) must have experience relevant to the issue at hand in the review. The initial review panel would be required to approach the review as if no determination had previously been made, and would be permitted to consider any relevant materials submitted by the institution and the Federal Reserve staff.

The final review panel would be comprised primarily of Federal Reserve Board staff. It would include at least two Federal Reserve Board employees, at least one of whom must be an associate director or hold a higher position. The Federal Reserve Board’s general counsel would also appoint an attorney to advise the panel on its responsibilities. The four individuals (1) must not be employed by the Reserve Bank that made the initial supervisory determination, (2) cannot report directly or indirectly to anyone who made the initial supervisory determination, (3) must not have been members of the initial review panel, and (4) must not have been personally consulted on the issue being appealed or provided guidance on how the issue should be resolved during a prior review. The final review panel would consider whether the initial review panel’s determination was “reasonable and supported by a preponderance of the evidence in the record,” and would not be permitted to review new information that was not in the record. The final review panel’s decision would be made public “[i]n order to maximize transparency.”

The Federal Reserve notes that it welcomes comments on all aspects of the proposal related to the appeals process, but specifically notes that it is seeking comments on:

  • The proposed standards of review for the initial and final review panels;
  • The nature and composition of the initial and final review panels;
  • The record that each of the review panels may consider during an appeal; and
  • The proposed appeal timelines.

Ombudsman Policy

The Federal Reserve’s release notes that the Ombudsman currently “is the initial recipient of all complaints pertaining to the supervisory process, which may include an appeal request.” The proposal would formalize that and would also allow the Ombudsman to attend an appeal hearing or deliberation if requested by the appealing institution or the Federal Reserve staff. The Ombudsman’s role at a hearing or deliberation would be as an observer.

The Federal Reserve is also proposing to make the Ombudsman the decision-maker with respect to claims of retaliation resulting from a supervisory appeal. Finally, the proposal would emphasize within the Ombudsman policy that the Ombudsman is available to facilitate the informal resolution of concerns related to supervisory determinations so as to avoid having to utilize the formal appeals process.

The Federal Reserve is seeking comment on all aspects of the proposed Ombudsman policy modifications.

Five Privacy Practices Every Company Should Address in the Wake of the FTC’s Enforcement Action against PayPal

Five Privacy Practices Every Company Should Address in the Wake of the FTC’s Enforcement Action against PayPalPrivacy is serious business. This was made clear in the Federal Trade Commission’s (FTC) recent announcement that it had settled its complaint against Venmo, PayPal’s peer-to-peer payment service, for misrepresentations to consumers regarding privacy and security settings. Although the terms of the settlement do not become final until approval by the FTC on or about March 29 (after the conclusion of a public comment period), there are at least five important lessons and practices that every company should take stock of now.

1. Review Your Security Safeguards

The FTC focused on representations made by Venmo that it utilized “bank grade security systems and data encryption” to protect transactions and safeguard against unauthorized access to financial information. To highlight how far Venmo’s security was from “bank grade,” the FTC singled out specific safeguards that Venmo did not undertake. For example, the FTC cited Venmo’s failure to provide consumers with security notifications regarding changes to account settings (i.e. changes to password or email address or addition of new device), Venmo’s failure to maintain adequate customer support capabilities, and Venmo’s lack of urgency in responding to reports of unauthorized transactions.

It is clear that the FTC considers notifications to consumers when there is a change to their account settings or potential unauthorized access a basic security measure. As a result, companies would be well suited to review their privacy practices to ensure that these notifications are included as part of their security program safeguards. Additionally, companies should consider reviewing their customer support capabilities and employee training to appropriately respond to consumer inquiries and timely escalate reports of unauthorized transactions or access to information.

2. Fully Compliant Privacy Notices Are Mandatory

The FTC also found that Venmo was in violation of the Gramm-Leach-Bliley Act (GLBA) by failing to implement safeguards to protect consumer data and failing to deliver adequate privacy notices. The FTC focused on Venmo’s failure to adequately disclose the steps required to make a transaction private (rather than publicly available on Venmo’s news feed), failure to notify users of security changes to customer accounts resulting in fraudulent activity being missed as explained above, a failure to have a written information security program prior to August 2014, and failure to implement safeguards to protect the security, confidentiality, and integrity of consumer data until March 2015. In settling with the FTC, PayPal has consented to incurring the cost of biennial third-party assessments of Venmo for the next 10 years to ensure that Venmo is no longer misrepresenting, and is, in fact, affirmatively disclosing its privacy and security settings to consumers.

The FTC expects companies to be privacy compliant and transparent with customers. Even where companies have basic GBLA notices, if the form of the notice is less than clear, the notice is inadequate. For example, the FTC cited Venmo for failing to have a “clear and conspicuous” initial privacy notice because Venmo used “grey text on a light grey background.” Likewise, the FTC alleged that Venmo failed to deliver the initial privacy notice because Venmo did not require customers to acknowledge receipt of an initial privacy notice as a necessary step to obtaining a particular financial product or service. These costly issues could be avoided by a privacy-focused “best practices” review.

3. Privacy and Security Practices Must Address Reasonably Foreseeable Risks

Another takeaway from the Venmo settlement is a recent list of consumer tips issued by the FTC that relates to the overlap between consumer expectation and regulator focus. Consumers expect transactions in the digital age to be both instant and private. As companies jockey to meet these expectations and beat their competitors out for business and market share, regulators are watching closely to make sure companies are not cutting corners. The rise of social network advertising and the development of new ways to provide services can be beneficial to profits and open the market up to new types of consumers and transactions. However, in the race to innovatively meet consumer service expectations, companies should not lose sight of how terms of use and privacy and security settings are portrayed. Consumers truly want it all, and omissions and misrepresentations by companies won’t be tolerated.

Not only did the FTC broadly condemn Venmo for failing to comply with GLBA, but it raised specific examples of non-compliance that make clear that the FTC expects companies to have a thoughtful and well-reasoned privacy notice. The FTC cited Venmo for failing to “assess reasonably foreseeable internal and external risks to the security, confidentiality, and integrity of consumer information.” It is clear from the FTC’s complaint against, and settlement with, Venmo that companies must thoroughly assess their security practices, strategize reasonably foreseeable risks, implement appropriate security measures, and be transparent with consumers on security practices and processes. As a result, it is prudent that companies conduct an assessment of their privacy and security practices, identify gaps, and create corrective action plans to comply with regulatory obligations and expectations.

4. Privacy Settings and Opt-Out Options Must Be Clearly Disclosed to Consumers

In line with its focus on enforcing consumer expectations, the FTC further targeted Venmo over its confusing opt-out settings. In its complaint, the FTC alleges that Venmo required consumers change not one but two default settings under two different menus in order to keep information private. Even if the consumer set one setting to the highest level of privacy, failure to change both settings would ‘override’ the consumer’s clear request to keep information private, and the dual opt-out requirement was not made clear to consumers. The FTC took issue with Venmo’s failure to clearly inform consumers on the existence of these privacy settings, failure to provide clear instructions on how to use the settings, and Venmo’s policy relating to treatment of private information when the two settings had a discrepancy.

Given the FTC’s focus on clear disclosures and consumer education, companies should consider reviewing their practices to ensure that the least sophisticated consumer can (1) easily determine how to protect his personal information and (2) still meaningfully utilize the requisite technology to receive the desired product or service.

5. Technology Can Increase Privacy, but Its Use Comes with an Obligation to Inform the Consumer of the Benefits and Risks of the Technology Used

Increasing privacy protections by incorporating multi-factor authentication, fingerprint recognition, and the ability to opt-out of and modify data sharing is one step in the right direction of increasing privacy. Nonetheless, one of the easiest ways a company can run afoul of regulators is by failing to understand or acknowledge not only the benefits of innovative services and technology, but most importantly, the areas which are still developing. Only by informing themselves can companies adequately inform consumers.

The FTC clearly advises companies: “Customers appreciate choices, but they need to understand what they are choosing. If you provide privacy options, make it straightforward for consumers to select options that best match their privacy preferences—and then honor their choices.”

In seeking to avoid similar regulatory actions, and increasingly common data privacy litigation, companies should take a clear look at these five privacy areas and implement appropriate compliance measures.

Supreme Court Narrowly Interprets “Whistleblower” under Dodd-Frank, Foreclosing Protections for Those Who Fail to Report Issues to SEC

Supreme Court Narrowly Interprets “Whistleblower” under Dodd-Frank, Foreclosing Protections for Those Who Fail to Report Issues to SECThe Supreme Court has resolved a circuit split on whether Dodd-Frank’s whistleblower protections apply only to employees who report their concerns to the Securities and Exchange Commission (SEC). On Wednesday, in Digital Realty Trust, Inc. v. Somers, the Supreme Court ruled 9-0 in favor of limiting the Dodd-Frank Act’s definition of whistleblower to those who report their allegations to the SEC, thus excluding from whistleblower protection individuals who report their complaints internally. The issue before the Supreme Court was the language of Dodd-Frank, which defines “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established . . . by the Commission” (15 U.S.C. § 78u-6(a)(6)).

The refrain of the opinion is that a would-be whistleblower must “tell the SEC” in order to benefit from Dodd-Frank’s anti-retaliation provision. It’s always notable when all nine justices agree, and here the Supreme Court relied on the unambiguous, clear, and conclusive language of the statute to hold that anti-retaliation protection does not apply unless and until the SEC is notified of alleged securities law violations. Despite urging from the Solicitor General to expand the whistleblower definition for anti-retaliation purposes, the Supreme Court held that anti-retaliation protection does not extend to an individual who has not reported a violation of securities law to the SEC. The decision reversed the Ninth Circuit and resolved a circuit split. The Fifth Circuit had previously held that employees are required to provide information to the SEC to take advantage of Dodd-Frank’s anti-retaliation safeguard, while the Second and Ninth Circuits extended Dodd-Frank remedies to employees who reported alleged wrongdoing only to their employers.

The Supreme Court emphasized that the holding is consistent with the purpose of Dodd-Frank, the “core objective” of which is to motivate people to tell the SEC about violations of securities laws. The Supreme Court acknowledged that giving the statute its plain-text reading “shields fewer individuals from retaliation than the alternative,” but again emphasized that Dodd-Frank’s main goal is to incentivize reporting alleged violations to the SEC.

Time will tell whether the Supreme Court’s ruling will affect the number of whistleblower actions. The decision is limited to the Dodd-Frank whistleblower statute involving securities laws and does not affect the numerous other whistleblower protection statutes. As an illustration, the Supreme Court distinguished actions under the Consumer Financial Protection Bureau’s (CFPB) jurisdiction and noted that the CFPB whistleblower-protection statute permits a covered employee to provide information to an employer, the CFPB, or a local, state, or federal government authority or law enforcement agency.  Accordingly, in the CFPB context, whistleblower protection still applies when a covered employee reports alleged misconduct solely to their employer.

Fourth Circuit Asked to Rule on Whether Mortgage Retroactively Incorporates Federal Servicing Requirements

Fourth Circuit Asked to Rule on Whether Mortgage Retroactively Incorporates Federal Servicing RequirementsA recent appeal to the Fourth Circuit may shed light on whether Virginia borrowers can assert federal mortgage servicing requirements as a defense to foreclosure when the mortgage instrument pre-dates the federal requirement. In Stansbury v. Federal National Mortgage Association, borrower Hollie Stansbury argues that a 2011 consent order between her mortgage servicer and the Office of the Comptroller of Currency was incorporated into the mortgage contract as a condition precedent to foreclosure. The lender has contested this claim in part by arguing that because the 2006 deed of trust predates the consent order, the parties to the mortgage could not have intended to incorporate the consent order’s requirements as a limitation to foreclosure. A decision on these competing arguments may bring clarity to the effect of a 2016 decision by the Virginia Supreme Court addressing the potential for incorporation arguments similar to Stansbury’s.

In Parrish v. Federal National Mortgage Association, the Virginia Supreme Court held that the trial court lacked jurisdiction to hear a post-foreclosure eviction action where the borrower raised a bona fide dispute as to the validity of the foreclosure. The borrowers in Parrish alleged that their deed of trust incorporated federal loss mitigation rules as a condition precedent to foreclosure and asserted that the loan servicer violated those regulations. Without addressing the merits of these allegations, the Supreme Court found that they were sufficient to raise a bona fide question as to the lender’s title to the foreclosed property.

After Parrish, some borrowers have argued that federal servicing standards are incorporated as a condition precedent to foreclosure through provisions in many deeds of trust stating that the parties’ rights are subject to federal law. In Stansbury, the U.S. District Court rejected the borrower’s claim that a 2011 consent order was so incorporated. In its August 31, 2017, ruling, the District Court held that the deed of trust’s governing law provision applied only to laws in existence at the time of the contract and did not incorporate a future consent order. The borrower has appealed the case to the Fourth Circuit.

The Stansbury appeal places the issue of retroactive incorporation before the Fourth Circuit. In her brief, Stansbury argues that the governing law provision must be applied to the law in existence at the time of foreclosure. In contrast, the lender’s brief argues that the provision applies only to the laws contemplated by the parties at the time they entered the mortgage contract. Because a substantial number of foreclosures involve deeds of trust executed prior to Dodd-Frank and other significant regulatory changes, lenders and servicers may be expected to keep a close watch on the outcome.

Two Opportunities for Student Loan Companies to Speak Up

Two Opportunities for Student Loan Companies to Speak UpTwo recent requests from lawmakers have provided student loan servicers and originators the opportunity to comment on hot-button issues for the industry:

  • The CFPB issued a Request for Information last week, seeking comments and information “to assist in assessing the overall efficiency and effectiveness of its supervision program and whether any changes to the program would be appropriate.” The comment period will open when the RFI is published in the Federal Register, expected February 20. In light of the supervision program’s past involvement with the industry, student loan servicers and industry groups should consider taking this opportunity to speak up.

    This RFI is the most recent in a series of RFIs from the Bureau, with more to come in the next couple of months. Stay tuned for RFIs related to complaint reporting, rulemaking processes, consumer inquiries, and more.

  • Also last week, Chairman Lamar Alexander and Ranking Member Patty Murray of the Senate Health, Education, Labor, and Pensions (HELP) Committee requested comments and suggestions on the Committee’s reauthorization of the Higher Education Act (HEA). While it is by no means certain that we will see an HEA reauthorization passed this year, HELP Committee leadership remains focused on the issue. Senator Alexander released a white paper on his vision for the HEA earlier this month, expressing concern about taxpayer exposure to defaults on federal student loans. The HEA reauthorization will have a potentially huge effect on the student loan industry. Comments to the Committee may be submitted to HigherEducation2018@help.senate.gov by Friday, February 23.

SEC Encourages Advisors to Self-Report Fiduciary Violations by June 12, 2018

SEC Encourages Advisors to Self-Report Fiduciary Violations by June 12, 2018The SEC announced a self-reporting initiative for investment advisors who admit violations of the federal securities laws relating to certain mutual fund share class election issues while promptly returning money to harmed investors. The initiative is entitled the “Share Class Selection Disclosure Initiative” and is focused on those advisors who have put clients into high-fee mutual fund classes when a less expensive share class for the same fund was available and appropriate. If the advisor self-reports and returns money to the harmed investor, the SEC’s enforcement division will not recommend civil penalties against the advisor.

The initiative highlights the SEC’s focus on the conflict of interest that is created when an advisor receives compensation for selecting a more expensive fund share class when a less expensive share class for the same fund is available. The SEC notes this conflict of interest must be disclosed to the investor. To be eligible for the self-reporting initiative, investment advisors must notify the division of enforcement of their intent to self-report no later than June 12, 2018.

Small Lenders May Get Relief from New Home Mortgage Disclosure Act Reporting Requirements

Small Lenders May Get Relief from New Home Mortgage Disclosure Act Reporting Requirements

On January 18, 2018, the House gave small lenders a late Christmas present when it passed H.R. 2954 known as the Home Mortgage Disclosure Adjustment Act. The act amends the existing Home Mortgage Disclosure Act (HMDA) by easing the regulatory burden on small lenders. By way of background, HMDA imposes additional reporting requirements on regulated entities that became effective this month. More specifically, HMDA requires banks and credit unions to collect 48 additional data fields on any mortgage loan they originate and to report that data to the CFPB. This additional regulatory burden will increase transaction costs and processing time for obtaining a home mortgage and impose unique burdens on small lenders that lack the existing infrastructure and processes to effectively capture and communicate the additional data sets.

The Home Mortgage Disclosure Adjustment Act attempts to ameliorate this disproportionate impact by exempting (a) small lenders, such as community banks and credit unions, which originate less than 500 closed-end mortgage loans in each of the two preceding calendar years, and (b) those that originate less than 500 open-end lines of credit in each of the two preceding calendar years. Bradley will continue to monitor the progress of the act as it moves through the Senate.

In Case You Missed It: Justice Department Banks on False Claims Act Enforcement Again in 2017

In Case You Missed It: Justice Department Banks on False Claims Act Enforcement Again in 2017The Justice Department and a veritable army of whistleblowers’ counsel continue to use the False Claims Act (FCA) to bring suits against banks and mortgage companies. In 2017 alone, the Department of Justice obtained $543 million in FCA settlements and judgments from the financial services industry.

To keep you informed on the status of the law, Bradley’s Government Enforcement and Investigations Practice Group is pleased to present the 2017 FCA Year in Review, our annual review of significant FCA cases, developments, and trends. Longtime readers of our Year in Review will notice that it has a new look and improved functionality, making it an easy-to-read, printable resource, as well as a convenient and searchable digital tool.