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MoFo Reenforcement

The Enforcement Blog

Joint and Several Liability for Payment Processor That Facilitated Fraud

Posted in Credit Cards

On December 13, the Eleventh Circuit Court of Appeals affirmed the decision of the U.S. District Court for the Middle District of Florida finding a credit card payment processor jointly and severally liable, under a theory of aiding and abetting, for the full judgment entered against fraudulent telemarketers. While some courts have rejected efforts by the Consumer Financial Protection Bureau to establish vicarious liability for the acts of payment processors, the decision provides useful guidance to payment processors as to the appropriate steps required at the merchant underwriting and monitoring phases.

Read our client alert.

Financial Services Report – Winter 2017

Posted in Arbitration, Auto Lending, CFPB, Credit Cards, Enforcement Actions, Fair Lending, Foreclosure, Indirect Auto Lending, Mobile Payments, Mortgage, Payday Lending, Preemption, Privacy, Regulatory Developments, State Regulators

The holidays came early for the financial services industry. First, the Senate voted to repeal the CFPB’s rule banning class waivers in arbitration agreements in consumer financial contracts. Then, Richard Cordray stepped down as CFPB Director. Former Director Cordray’s attempt to name his interim successor hours before submitting his formal resignation created dueling interim directors when President Trump appointed OMB Director Mick Mulvaney to the same position. Now it’s up to a federal judge to decide, with the first round going to President Trump in a denial of a request for an emergency TRO blocking Mulvaney’s appointment. The next day, Mr. Mulvaney showed up to work anyway with a box of donuts. After the TRO was denied on November 28, he implemented a freeze on hiring and issuance of new regulations.

There’s more to come (a hearing is set for December 22), but for now, the two-ring circus just adds to the joy of the season. Read on for all the latest on privacy, mortgage, preemption, operations, TCPA, and the goings-on in Washington, D.C. And all the best in the New Year!

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EVENT: Complimentary Teleconference – Financing Fintech: State Regulation of Marketplace Lenders as Loan Brokers or Arrangers of Credit

Posted in Events

Thursday, December 7, 2017
5:00 p.m. – 5:45 p.m. EDT

Join us for one of our upcoming monthly telephone briefings led by members of our Fintech team.

Topic: State Regulation of Marketplace Lenders as Loan Brokers or Arrangers of Credit

This call will be an operator-assisted call of approximately 45 minutes in duration, and will be followed by a brief Q&A opportunity. We also invite you to submit questions before the start of the call. A replay will be available upon request.

In order to RSVP for the December call, and to submit questions, please click here.

CFPB Encourages Financial Institutions to Provide Consumers with Greater Control over Payment Methods

Posted in CFPB, Credit Cards, Electronic Payments

On November 20, 2017, the CFPB released a November 17, 2017 letter that Director Richard Cordray sent to “the CEO’s of several banks, credit unions, and financial companies” asking that they consider “enabl[ing] consumers to exert greater control over their credit cards, debit cards, and other payment methods.”

Read our client alert.

Are You a Money Transmitter in Connecticut? In Hawaii?

Posted in Electronic Payments, Regulatory Developments, State Regulators

One of the defining aspects of the payments revolution of the past few years—at least from a regulatory perspective—has been the question of whether a particular payments service is subject to regulation as money transmission. A number of states have determined that under certain conditions, state money transmission licensing laws do not apply to services provided as an agent of the payee. The most recent states to affirm this are Hawaii and Connecticut.

Read our client alert.

EVENT: Toronto Seminar Series

Posted in Events

Monday, November 20, 2017
10:30 a.m. – 2:00 p.m.

The Fairmont Royal York
100 Front Street West
Toronto, ON M5J 1E3

Please join us for one (or both) of our sessions.

During the first session, our speakers will provide an overview of debt capital market trends in 2017 and what to expect in the months ahead. We will discuss some of the regulatory developments that are, and will continue to, impact issuances by financial institutions, including the Canadian banks. In particular, we will discuss issuance trends for financial institutions in the United States, the prospects for regulatory burden relief and tax reform, and related matters. We will also discuss the bail-in regime in Canada and the proposed TLAC requirement. Lastly, we will discuss recent NVCC issuances in the United States by Canadian banks, as well as other funding activity, including covered bonds.

During the second session, our speakers will discuss the application of blockchain in financial services, payments and financial products with a focus on use cases. In particular, we will discuss the applicable regulatory and tax considerations in the United States and conclude with some tips to assist the audience in navigating these regimes.

Session 1: Debt Capital Markets, Regulatory Developments & Market Outlook
10:30 a.m. – 12:00 p.m.

  • Overview of the debt capital markets;
  • Issuance levels and trends;
  • What to expect in the months ahead;
  • U.S. regulatory developments;
  • Canadian regulatory developments;
  • NVCC issuances; and
  • Modifying issuance programs for the bail-in regime.


  • Tom Connell
    Managing Director, Standard & Poor’s
  • Bryan Farris
    Associate Director, UBS Investment Bank
  • Ahmet Yetis
    Americas Head of Capital Solutions, UBS Investment Bank
  • Oliver Ireland
    Partner, Morrison & Foerster LLP
  • Anna Pinedo
    Partner, Morrison & Foerster LLP

Lunch: 12:00 p.m. – 12:30 p.m.

Session 2: Blocked? Navigating the U.S. Regulatory and Tax Regimes Applicable to Blockchain
12:30 p.m. – 2:00 p.m.

  • What is blockchain and how does it work?;
  • Which laws apply?;
  • Timing, finality, and enforceability;
  • System accountability and responsibility;
  • Use cases;
  • Digital tokens, token sales, and U.S. regulation;
  • IRS Notice 2014-21;
  • Case study: Department of Justice Coinbase summons; and
  • Interesting issues relating to taxation of financial instruments and crypto.


To register for this program, or for more information, please click here.

EVENT: Blockchain for Bankers: Regulatory Considerations

Posted in Events

Wednesday, November 15, 2017
8:30 a.m. – 10:30 a.m.

Registration & Breakfast:
8:30 a.m. – 9:00 a.m.

9:00 a.m. – 10:30 a.m.

Morrison & Foerster LLP
250 West 55th Street
21st Floor
New York, NY 10019-9601

Please join us for an interactive panel on the application of blockchain in financial services and payments, with a focus on related regulatory considerations and use cases.

Topics will include:

  • What is blockchain and how does it work?
  • What laws apply?
  • Timing, finality, and enforceability
  • System accountability and responsibility
  • Use cases


Click here to register.

Financing Fintech: ILC Charters

Posted in Regulatory Developments

An ILC, or industrial loan company, is a form of bank that can be chartered in Utah, Nevada, and a few other states. ILCs are insured by the FDIC and have most traditional banking powers, but they cannot hold corporate checking accounts. Significantly, an ILC is not a bank under the Bank Holding Company Act, and therefore the parent company of an ILC is not a bank holding company subject to supervision and regulation by the Fed or to consolidated capital requirements or to the activity limitations in the Bank Holding Company Act. Consequently, at law a commercial company engaged in manufacturing, retail sales, or other nonfinancial activities can own an ILC.

Because of their exemption from the Bank Holding Company Act, ILCs are controversial. No new ILCs have been established in over a decade and the commercial companies that sought to establish or buy ILCs a decade ago withdrew their applications due to the controversy. Opponents of ILCs argue that ILCs mix banking and commerce in a way that is unsafe or at least unfair to regulated bank holding companies, and that ILCs extend the deposit insurance subsidy to commercial companies. Proponents of ILCs argue that ILCs bring new capital, competition, and innovation to the banking system and that the alleged harms are addressed by Sections 23A and 23B of the Federal Reserve Act, which limit transactions between insured banks and their affiliates.

Recent applications by Fintech companies to form ILCs have rekindled the ILC debate. Some Fintech companies may be more focused on financial activities, such as payments or lending, than on commercial activities. How to address new ILC applications will be up to the FDIC in the first instance. Possible courses of action include: 1) withholding insurance for new ILCs altogether; 2) providing insurance under conditions designed to address the safety and soundness and banking and commerce issues, such as requiring the parent company to guarantee the capital and liquidity of the ILC and limiting ILC ownership to companies that are 85% financial in terms of income or assets, or both; or 3) opening up ILC ownership to commercial companies subject to guarantees of capital and liquidity.

Morrison & Foerster’s Oliver Ireland and Sean Ruff recently discussed ILC charters in this Financing Fintech teleconference. Presentation materials can be accessed here.

CFPB Outlines Principles for Consumer-Authorized Financial Data Sharing and Aggregation

Posted in CFPB, Privacy

On October 18, the CFPB released a set of guiding principles for participants in the financial data sharing and aggregation industry. The publication of the consumer protection principles follows a November 2016 Request for Information in which the CFPB asked stakeholders in the data sharing and aggregation market to comment on consumer benefits and risks associated with developments that rely on financial account information. The publication of the principles was accompanied by a press release and a 12-page summary of issues raised by stakeholders that informed the development of the principles.

The stakeholder report emphasizes that aggregation market participants generally called for “[consumer protection] practices that are based on a shared set of standards and expectations.” The principles reflect a response to this desire for uniformity.

Read our client alert.

Treasury Report, Part II: Regulation of the Capital Markets

Posted in Regulatory Developments

The U.S. Department of the Treasury (“Treasury Department” or “Treasury”) issued its second report (of four reports), titled “A Financial System that Creates Economic Opportunities, Capital Markets” (the “Report”). The Report was issued in response to Presidential Order 137772 setting forth the Core Principles that should guide regulation of the U.S. financial system. The Report addresses various elements of the capital markets, from the equity and debt markets, to the U.S. Treasury securities market, and to derivatives and securitization. The Report also addresses the role and regulation of financial market utilities and clearinghouses. Like many movie sequels, which are somehow less compelling than the original, this second installment is less cohesive than the first Treasury report, which focused on the regulation of depositary institutions. The Report notes that certain aspects of the capital markets regulatory framework are working well, but other elements would benefit from better “calibration.” To that end, the Report recommends various measures, most of which would not require legislation, that would promote capital formation. There are few novel recommendations included in the Report. In this alert, we discuss many of the recommendations in the principal areas of interest to our clients.

Read our client alert.