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Consumer Financial Services Watch

News and developments related to consumer financial products and services

Justices Sotomayor and Scalia Lead the Way as the Supreme Court Hears Argument on the Fair Housing Act Disparate-Impact Question

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending

By: Paul F. Hancock, Andrew C. Glass, Roger L. Smerage, and Olivia Kelman

On January 21, 2015, the United States Supreme Court heard oral argument in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc. (the “Texas DHCA case”). The case presents the question whether the Fair Housing Act recognizes a disparate-impact theory of liability. See Tex. Dep’t of Hous. & Cmty. Affairs v. The Inclusive Cmtys. Project, Inc., — S. Ct. —, 2014 WL 4916193 (Oct. 2, 2014) (No. 13-1371) (granting petition for writ of certiorari). Under that theory, a plaintiff may challenge a defendant’s policies or practices that are neutral on their face (that is, do not reflect any intent to discriminate) but that purportedly have a disproportionate effect on groups sharing certain statutorily-defined characteristics such as race or national origin. The Supreme Court has expressed strong interest in the issue, granting certiorari three times in the last four terms to decide the question, only to have the parties settle just before oral argument in the previous two matters. See Magner v. Gallagher, S. Ct. No. 10-1032, and Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., S. Ct. No. 11-1507. At argument in the Texas DHCA case, the public was finally able to hear the nature of the Court’s interest in the issue. Continue Reading

United States Supreme Court: TILA Does Not Require Consumers To File A Lawsuit Within Three Years In Order To Assert A Right To Rescind

Posted in Litigation & Enforcement Actions, Mortgage Servicing

By: Brian M. Forbes and Gregory N. Blase

For several years, federal courts have struggled with the question of whether a consumer who wishes to rescind a loan pursuant to the federal Truth in Lending Act (“TILA”) may do so by sending a notice of rescission within three years after the closing date, or whether the statute also requires the consumer to file a lawsuit within that three-year time period. On January 13, 2015, the United States Supreme Court, in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, slip op. (U.S. Jan. 13, 2015), resolved that question and held that sending a written notice of rescission within three years after closing is sufficient to exercise the right of rescission under TILA; the statute does not require a consumer to also file a lawsuit within that timeframe.

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Cybersecurity: The Obama Administration Proposes Legislation Proposals Would Standardize Breach Notification Requirements, Enhance Cybersecurity-Related Information Sharing, and Toughen Cybercrime Prosecution

Posted in Privacy & Information Security

By: R. Paul Stimers, András P. Teleki, Bruce J. Heiman, Michael J. O’Neil

On January 13, 2015, in response to the continuing onslaught of cyber attacks, including the recent cybersecurity attack and data loss at Sony Pictures Entertainment, the Obama Administration sent to Congress three legislative proposals to improve cybersecurity. The proposals would:

  • Establish a single federal breach notification standard preempting a patchwork of state notification laws;
  • Encourage cyber threat information sharing within the private sector and between the private sector and the federal government; and
  • Enhance law enforcement’s ability to investigate and prosecute cyber crimes.

The President has been highlighting the cybersecurity proposals in a series of speeches leading up to the State of the Union Address.

To read the full alert, click here.

State Enforcement of the Consumer Financial Protection Act: State Lawsuits Offer a Sign of What’s to Come

Posted in UDAAP

By: Melanie Brody and Anjali Garg

At the end of 2014, the New York Department of Financial Services (“DFS”) became the first state regulator to settle a case using its authority to enforce the federal Consumer Financial Protection Act (“CFPA”).[1] In Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York v. Condor Capital Corporation and Stephen Baron,[2] the DFS claimed that indirect auto lender Condor Capital Corporation (“Condor”) and its sole shareholder, Stephen Baron, violated both New York State law and the CFPA’s prohibition on unfair, deceptive, or abusive acts or practices (“UDAAP”) by, among other matters, overcharging consumers and deceptively retaining credit balances due to them. The settlement requires Condor and Baron to admit to New York and federal violations, pay an estimated $8-9 million in restitution and pay a $3 million penalty, and surrender all of Condor’s state lending licenses.

To read the full alert, click here.

Webinar: Doing Business in Poland

Posted in Bureau of Consumer Financial Protection (CFPB)

24 February 2015

9:00 – 10:15 a.m. PST

12:00 – 1:15 p.m. EST

6:00 – 7:15 p.m. CET

Is your company planning on doing business in Poland? If so, you will need to know the latest legal, political, and regulatory issues that span a range of challenges and opportunities when entering the market in the CEE largest national economy.

In this complimentary webinar, a panel of partners from our Warsaw office will address a range of legal issues to give you a comprehensive grasp on the business operating environment in Poland.



To RSVP, click here.


Webinar: Navigating the New HUD Origination Handbook

Posted in FHA/VA

27 January 2015

2:00 – 3:30 p.m. EST

With the New Year comes impending changes to FHA origination, underwriting, and closing guidelines in the form of HUD’s updated FHA’s Single Family Housing Policy Handbook 4000.1. As announced on September 30, 2014, FHA’s origination through post-closing and endorsement sections of its new Single Family Housing Policy Handbook will be effective for FHA-insured loans with FHA Case Numbers assigned on and after June 15, 2015. With less than six months until these new requirements go into effect, mortgagees need to focus on these important requirements that will govern origination through post-closing and endorsement. It is imperative that mortgagees familiarize themselves with the new lending guidelines and ensure that their systems, procedures, underwriting practices, and personnel will be ready to go by June 15, 2015. Quality Control departments would also benefit from a review of these requirements, as they may need to amend their review processes to identify and resolve any findings of noncompliance with the amended guidelines.

On Tuesday, January 27, 2015, from 2 p.m. to 3:30 p.m. EST K&L Gates will sponsor a webinar in which we will discuss the most significant changes to HUD origination and underwriting requirements included in the new Handbook. We will leave time at the end of the webinar to answer your questions. We hope you will be able to join us.



Phillip L. Schulman, Partner, Washington, D.C.

Krista Cooley, Partner, Washington, D.C.

Holly Spencer Bunting, Partner, Washington, D.C.

Emily J. Booth-Dornfeld, Counsel, Washington, D.C.

To RSVP, click here.

Massachusetts Supreme Judicial Court Rejects Municipal Foreclosure Ordinances

Posted in Mortgage Servicing

By: Gregory N. Blase, David D. Christensen, Matthew N. Lowe

Can a Massachusetts municipality impose ordinances on banks that are more onerous than existing statewide law? In a recent landmark decision, the Massachusetts Supreme Judicial Court (“SJC”) answered “no.” In Easthampton Savings Bank v. City of Springfield,[1] the SJC held that two ordinances, through which the City of Springfield (“Springfield”) sought to make foreclosures more difficult, were preempted by the Massachusetts Constitution. The Easthampton Savings Bank decision should serve to curtail municipalities’ attempts to impose regulations that are more stringent than those imposed by statewide law and—in welcome news to banks and investors—restore a degree of consistency in conducting foreclosures in Massachusetts.

To read the full alert, click here.

FHA Announces Annual Mortgage Insurance Premium Reductions

Posted in FHA/VA

By: Krista Cooley, Kara M. Ward

Last week, President Barack Obama announced that, at the end of this month, the U.S. Department of Housing and Urban Development (“HUD” or “Department”) will implement a 50-basis-point reduction in the annual mortgage insurance premium (“MIP”) borrowers pay to obtain a Federal Housing Administration (“FHA”) insured loan. On Friday, HUD released Mortgagee Letter 2015-01, as well as instructions on FHA Case Number assignments, which include details about the timing and scope of the annual MIP reduction. Below, we summarize these events.

FHA Annual Premium Reduction

In Mortgagee Letter 2015-01, HUD announced revised annual MIP rates for most FHA-insured, Title II forward mortgages. Specifically, for FHA-insured loans with terms greater than 15 years, the Department will reduce the annual MIP rate by 50 basis points. Depending on the loan amount and loan-to-value (“LTV”) ratio, the new annual MIP rates will range from 80–105 basis points. For example, for an FHA-insured loan with a term greater than 15 years, a base loan amount less than or equal to $625,500, and an LTV ratio greater than 95%, the annual MIP rate will be reduced from 135 to 85 basis points. The reduced annual MIP rates will apply to FHA-insured purchase-money loans, as well as FHA-insured refinance loans with loan terms greater than 15 years. The annual MIP rates for FHA-insured loans with terms of 15 years or less remain unchanged. HUD also did not make any changes to the upfront MIP paid by borrowers at the closing of FHA-insured loans at this time.

Mortgagee Letter 2015-01 contains a notable exclusion from the annual MIP rate reduction announcement. Pursuant to a policy implemented in 2012 that was designed to encourage borrowers with existing FHA-insured loans to refinance into a lower rate loan without incurring a higher annual MIP rate, the annual MIP rate for single-family streamlined refinance transactions that refinance existing FHA-insured loans that were endorsed on or before May 31, 2009, has remained at 55 basis points. When HUD increased annual MIP rates in 2013, it excluded this specific subset of FHA streamlined refinance transactions from those increases. Similarly, Mortgagee Letter 2015-01 excludes this limited subset of streamlined refinance transactions from the Department’s most recent announcement, to provide borrowers with existing FHA-insured loans endorsed on or before May 31, 2009, the continued opportunity to refinance into another FHA-insured loan while maintaining an annual MIP rate of 55 basis points. Mortgagee Letter 2015-01 also excludes loans insured under Section 247 of the National Housing Act from the most recent annual MIP reduction announcement.

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“Start Spreading the News”: Recent New York Regulations Impact Debt Collection and Default Servicing

Posted in Bureau of Consumer Financial Protection (CFPB)

By: Steven M. Kaplan, Gregory N. Blase, Christopher E. Shelton

Last month, the New York Department of Financial Services (“DFS”) finalized a regulation with a number of novel requirements affecting debt collection (including servicing delinquent loans) in New York. Previously, debt collection in New York was subject to (1) relatively limited requirements set by New York statute and several municipal ordinances, and (2) the federal Fair Debt Collection Practices Act (“FDCPA”). While parts of the new DFS regulation are modeled on the FDCPA, other requirements depart drastically from the federal framework. Areas of novel regulation include disclosures to consumers regarding statutes of limitations and charged-off debts, as well as restrictions on sending emails to consumers. The Consumer Financial Protection Bureau (“CFPB”) is drafting a debt collection regulation to supplement the FDCPA, and it remains to be seen whether the New York regulation becomes a bellwether of changes at the federal level or by other states.

To read the full alert, click here.

K&L Gates Launches Global Employer Solutions

Posted in Bureau of Consumer Financial Protection (CFPB)

With more than 200 million people throughout the world now employed by multinational enterprises and their affiliates, law firm K&L Gates LLP has established Global Employer Solutions, a comprehensive cross-disciplinary team of lawyers helping entities with operations and staff across numerous countries and wide-ranging jurisdictions meet the challenges of their global business needs and comply with an array of local laws and regulations. Global Employer Solutions includes more than 200 lawyers throughout K&L Gates’ global platform collaborating across borders and practices and drawing from deep experience in areas such as employment, workplace safety, immigration, benefits, tax, executive compensation, compliance, and investigations.

Global Employer Solutions will assist clients in identifying and mitigating risks, ensuring compliance, and coordinating personnel policies focusing on global employment strategies, including downsizing, acquisitions, and integrations; transactional due diligence and post-merger integration; protection of confidential information; global contracts, employee handbooks, and safety standards and policies; and cross-border compliance issues, as well as a variety of relocation and immigration matters, including visa applications, document transfers, and temporary and permanent employment visa options. Continue Reading