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The Enforcement Blog

House Financial Services Committee Holds Hearing on the Financial CHOICE Act of 2017

Posted in Regulatory Developments

On April 26, 2017, the Financial Services Committee of the U.S. House of Representatives held a hearing entitled “A Legislative Proposal to Create Hope and Opportunity for Investors, Consumers, and Entrepreneurs.” The purpose of the hearing was to examine the discussion draft of the “Financial CHOICE Act of 2017” (or “CHOICE Act 2.0”) which was unveiled by Committee Chairman Rep. Jeb Hensarling (R-TX) on April 19, 2017. CHOICE Act 2.0 repeals and makes fundamental changes to many components of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. It is anticipated that this draft legislation will set the agenda for consideration of financial regulatory reform initiatives in the current Congress.

The release of the draft of CHOICE Act 2.0 was a significant step towards the enactment of financial regulatory reform. In the coming weeks and months, despite Democratic efforts, we expect more movement on financial regulatory reform and anticipate further debate.

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Supreme Court “Expresses” Unanimous View That Credit Card Disclosure Rules Regulate Speech

Posted in Credit Cards, State Regulators

On March 29, 2017, the U.S. Supreme Court held that a New York law restricting the way merchants may communicate prices to their customers regulates speech and, thus, is subject to review under the First Amendment. Specifically, the Court held that New York General Business Law § 518 (“Section 518”) should not be viewed as regulating prices, which is permissible regulation of conduct, because Section 518 does not require merchants to sell products or services at any particular price. Rather, the Court held that Section 518 places restrictions on the manner in which merchants may communicate prices to customers, which amounts to regulation of speech. The unanimous decision, penned by Chief Justice Roberts, overturned the ruling by the Court of Appeals for the Second Circuit in Expressions Hair Design v. Schneiderman and remanded the case for the Second Circuit to decide whether the law violates the First Amendment. Following the decision, questions remain about the meaning of Section 518 and the standard for determining the permissibility of speech regulation under the First Amendment.

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Court Finds CFPB Case Against Payment Processor Lacking

Posted in CFPB, Enforcement Actions, UDAAP

On March 17, 2017 the United States District Court for the District of North Dakota granted the motion of Intercept Corporation and its senior executives to dismiss the complaint filed almost a year ago by the CFPB. Intercept is a payment processor that initiates ACH transactions to consumer accounts on behalf of its merchant-customers. This case is one of the few to go forward where the court is confronted with defining the parameters of the CFPB’s authority under the Dodd-Frank Consumer Financial Protection Act.

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Is it Time to Streamline Financial Regulation?

Posted in Regulatory Developments

A March 13, 2017 presidential order requiring a comprehensive plan to reorganize the executive branch could be the first step toward streamlining the financial regulatory structure.

The Executive Order requires the Director of the Office of Management and Budget to propose a plan within a year to reorganize government functions and eliminate unnecessary agencies, agency components, and programs. The stated goal is to “improve the efficiency, effectiveness and accountability” federal agencies.  It appears that the plan is to address the Fed, the SEC, the CFTC, and other independent agencies even though those agencies are not typically subject to Executive Orders.

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Financial Services Report – Spring 2017

Posted in Arbitration, CFPB, Credit Cards, Credit Reports, Electronic Payments, Enforcement Actions, Fair Lending, Foreclosure, Investigations, Military Issues, Mobile Payments, Mortgage, Payday Lending, Preemption, Privacy, Regulatory Developments, State Regulators, Student Lending

In like a lion, out like a lamb—it works for weather; does it work for new administrations? We’ll have to wait and see. We’ll have to wait and see about the length of CFPB Director Richard Cordray’s tenure and the fate of Dodd-Frank, as it appears the Trump administration is focusing on other priorities. So the focus shifts to the D.C. Circuit, which agreed to reconsider the ruling by the federal trial court that the CFPB’s structure is unconstitutional. Or not, since the circuit court specifically asked the parties to brief whether it can avoid the constitutional question altogether.

In the meantime, CFPB enforcement is at an all-time high—a five-fold increase in cases from January 1, 2017, as compared to the same period last year. Coincidence? You make the call.

You also can make the call on arbitration, privacy, TCPA, what the other federal agencies have been up to over the past few months, and the rest of the financial services news.

Until next time, enjoy the wind, snow, sleet, or sunshine!

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CFPB Initiates Third CARD Act Review

Posted in CFPB, Credit Cards

On March 10, 2017, the CFPB published a Request for Information (RFI) regarding the consumer credit card market. In accordance with Section 502(a) of the Credit Card Accountability Responsibility and Disclosure Act of 2009, the Bureau conducts a biennial review of the consumer credit card market by soliciting public comment and feedback.

The CFPB uses these RFIs to gather feedback from participants in the consumer credit card market, including consumers, credit card issuers, and consumer advocates. The 2017 RFI requests comment on specific topics required by the CARD Act, as well as other areas of interest to the CFPB. The CFPB also encourages commenters to address other issues related to the consumer credit card market they believe are worthy of the CFPB’s attention.

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EVENT: Complimentary Teleconference: Current Practices and Issues for Foreign Broker-Dealers Under Rule 15a-6 in 2017

Posted in Events

In an increasingly globalized securities market, Rule 15a-6 remains the primary avenue for foreign broker-dealers to conduct business in the United States. This presentation will address the requirements for compliance by foreign broker-dealers and their U.S. affiliates.

Tuesday, March 28, 2017, 1:00 p.m. – 2:00 p.m. EDT
To register, e-mail CMG-events@mofo.com.

Topics Will Include:

  • Summary of Rule 15a-6 requirements;
  • Risks and responsibilities of acting as a chaperoning broker;
  • Practical issues in intermediating Rule 144A and other transactions;
  • Benefits of an intermediary agreement; and
  • Dealing with retail customers under Rule 15a-6.


  • Hillel Cohn
    Senior Of Counsel, Morrison & Foerster LLP
  • Francois Cooke
    Managing Director, ACA Compliance Group

CFPB Proposes Delayed Effective Date of Prepaid Accounts Rule, Releases Short-Form Disclosure Guide

Posted in CFPB, Credit Cards, Regulatory Developments

On March 9, the CFPB announced in a blog post a proposal to delay the effective date of the final rule on prepaid accounts (Final Rule) for six months to April 1, 2018. The Bureau also released a guide for preparing the short-form disclosure required under the Final Rule.

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The Madden Saga Continues: On Remand, Madden Survives Summary Judgment and District Court Certifies Class

Posted in Credit Cards, State Regulators

On February 27, 2017, the U.S. District Court for the Southern District of New York in part denied a renewed motion by Midland Funding, LLC (“Midland”) to dispose of claims brought by Saliha Madden (“Madden”) under the Fair Debt Collection Practices Act and the New York General Business Law. The Order also certified two classes of plaintiffs, thereby permitting Madden’s claims to proceed as class actions.

Madden claims that Midland illegally charged Madden and other similarly situated New York debtors a usurious rate of interest on certain defaulted credit card obligations that Midland had purchased from a national bank. On May 22, 2015, the U.S. Court of Appeals for the Second Circuit reversed a June 2, 2014, order of the district court granting summary judgment in favor Midland and remanded the case. The Second Circuit held that Section 85 of the National Bank Act, 12 U.S.C. 85, which preempts state laws governing the interest a national bank may charge on a loan, does not apply after a national bank sells a loan to a non-bank. The U.S. Supreme Court denied Midland’s petition for writ of certiorari on June 27, 2016, leaving the district court to reconsider the litigation in light of the Second Circuit’s holding. In this alert, we briefly summarize the Order and examine certain open questions and potential next steps.

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RESPA Two-Step: CFPB Shows Continued Expansive Interpretation of Section 8

Posted in CFPB, Enforcement Actions, Mortgage

On January 31, 2017, the Consumer Financial Protection Bureau announced a Consent Order with a mortgage lender and certain of its affiliates (“Lender”). The CFPB alleged in the Consent Order widespread violations of Section 8(a) of the Real Estate Settlement Procedures Act, stemming from a host of agreements and arrangements the Lender allegedly had entered into with settlement-side parties such as real estate brokers. In tandem with the Consent Order, the CFPB announced consent orders with each of the real estate brokerage firms identified in the Consent Order. The real estate orders represent repeat versions of the wrongdoing alleged against the Lender, and provide additional factual background on the alleged unlawful acts in the Consent Order.

The breadth of the subject matter of the consent orders, which in one round of settlements covered many common marketing-related arrangements between mortgage lenders and other settlement-side parties such as real estate agents and brokers, is unprecedented. Of course, the consent orders collide with marketing and customer acquisition strategies of mortgage lenders that appear to be on the rise in the increasingly competitive rising-rate environment. This alert summarizes significant points in the Consent Order (as informed by the real estate orders) and outlines possible takeaways for mortgage market participants.

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