All in Regulatory Update

FTC Settles with Payment Processor

Adam Witmer
Regulatory Update

On 5/19/2020, the Federal Trade Commission (FTC) announced a settlement of more than $40.2 million against one of the biggest payment processing companies and its former executive. In their release, the FTC explained that the fine will settle charges that the payment processor and its former executive knowingly processed payments and laundered, or assisted laundering of, credit card transactions for scams that targeted hundreds of thousands of consumers.

According to the FTC’s complaint, First Data Merchant Services, LLC allegedly ignored repeated warnings from employees, banks, and others that a former independent sales agent (ISO -Chi “Vincent” Ko), was laundering payments through First Data for companies that were breaking the law over a number of years. Ko was later hired as an executive at First Data. According to the complaint, Ko, as an ISO, opened hundreds of merchant accounts for at least four scams. The FTC alleges that Ko opened accounts under false names, provided Wells Fargo Bank with deceptive information to open the accounts, and ignored evidence that his clients were engaged in fraud. The complaint also alleges that First Data ignored numerous warnings about Ko’s activity and that the defendants violated the FTC Act and the Telemarketing Sales Rule.

FinCEN Issues Law Enforcement Awards

Adam Witmer
Regulatory Update

On 5/29/2020, FinCEN announced the 2020 recipients of their annual Law Enforcement Awards Program, which recognizes law enforcement agencies that used Bank Secrecy Act (BSA) reporting to successfully pursue and prosecute criminal investigations. These awards can often be beneficial for BSA professionals to review as they often identify trends in money laundering.

CFPB Settles with Mortgage Lender

Adam Witmer
Regulatory Update

On 5/14/20, the CFPB announced a judgement to resolve its allegations against a California mortgage lender (Chou Team Realty, LLC), which does business as Monster Loans, and several individuals and related companies, including Thomas Chou and Sean Cowell. The Bureau alleged that Chou and Cowell were among the leaders of a scheme to use Monster Loans’ account with a major credit bureau to unlawfully obtain consumer reports for their associated student loan debt-relief companies, which in turn used the consumer reports to deceptively market their services nationwide and then charged consumers illegal fees.

CFPB Guidance on Financial Institution Responsibilities

Adam Witmer
Regulatory Update

On May 13, 2020, the CFPB issued a statement regarding the impact the COVID-19 pandemic is having on the financial well-being of many consumers and on the operations of many financial institutions, including creditors subject to Regulation Z. In short, the CFPB explained that they issued this statement to inform creditors of the Bureau’s flexible supervisory and enforcement approach during this pandemic regarding the timeframe within which creditors complete their investigations of consumers’ billing error notices. Specifically, in evaluating a creditor’s compliance with the maximum timeframe for billing error resolution set forth in Regulation Z, the CFPB states that they intend to consider the creditor’s circumstances and do not intend to cite a violation in an examination or bring an enforcement action against a creditor that takes longer than required by the regulation to resolve a billing error notice, so long as the creditor has made good faith efforts to obtain the necessary information and make a determination as quickly as possible (and complies with all other requirements pending resolution of the error).

Fed Updates Reg D FAQs

Adam Witmer
Regulation D, Regulatory Update, Regulation CC

On 5/13/2020, the Federal Reserve updated their Frequently Asked Questions regarding Regulation D and the recent changes to the rule. Among other things, the updates to the FAQs include the following clarifications:

  • Question 3 answers the question of whether or not the recent amendments to Regulation D are temporary or permanent. As explained in the answer, the Federal Reserve does not expect the changes to be “short term” and “does not have plans to re-impose transfer limits,” but could if future conditions warrant it.

  • Question 13 explains what we have been saying the last few weeks: that the recent Reg D changes do not cause savings deposits to be subject to Reg CC hold requirements.

CFPB Releases Final Rule on Remittance Transfers

Adam Witmer
Regulation E, Regulatory Update

On May 11, 2020, the CFPB issued a final rule covering remittances transfers, which imposes requirements on entities that send international money transfers (i.e. remittance transfers) on behalf of consumers. Among its requirements, the Remittance Rule mandates that remittance transfer providers generally must disclose the exact exchange rate, the amount of certain fees, and the amount expected to be delivered to the recipient. The existing Remittance Rule also allows for depository institutions to estimate certain fees and exchange rate information under certain circumstances, but by statute, this provision expires in July 2020.

The new final rule allows certain banks and credit unions to continue to provide estimates of the exchange rate and certain fees under certain conditions. This could preserve consumers’ ability to send remittances from their bank accounts to certain countries or recipient institutions. In addition, the new final rule also increases the threshold that determines whether an entity makes remittance transfers in the normal course of its business and is subject to the Rule. Specifically, entities making 500 or fewer transfers annually in the current and prior calendar years would not be subject to the Rule. In their issuance, the CFPB states that this will reduce the burden on over 400 banks and almost 250 credit unions that send a relatively small number of remittances.

CFPB Releases Settlement with Mortgage Lender

Adam Witmer
RESPA, Regulatory Update

On May 11, 2020, the CFPB issued a consent order with Specialized Loan Servicing, LLC. The consent order requires Specialized Loan Servicing, a mortgage-loan servicer in Colorado, to pay $1.275 million in monetary relief to consumers, pay a $250,000 civil money penalty, and implement procedures to ensure compliance with RESPA.

In their release, the CFPB explains that their investigation found that Specialized “violated RESPA and Regulation X by taking prohibited foreclosure actions against mortgage borrowers who were entitled to protection from foreclosure, and by failing to send or to timely send evaluation notices to mortgage borrowers who were entitled to them.” In addition, the CFPB explained that in some cases, Specialized’s violations of Regulation X short-circuited the protections against foreclosure for consumers whose homes were ultimately foreclosed upon.

Under the settlement, the CFPB states that Specialized must implement policies and procedures that will ensure that borrowers receive the protections from foreclosure to which they are entitled under RESPA and Regulation X, including preventing Specialized from improperly making first filings, from improperly moving for foreclosure judgments or orders of sale, and from conducting foreclosure sales against borrowers who have submitted timely and facially complete or complete loss-mitigation applications. The CFPB also explained that Specialized must also monitor its foreclosure activity to ensure that it complies with the policies and procedures that it must implement.

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