Infobytes - A Weekly In-depth review of news & developments in the financial services industry, October 5 2012


In This Issue:







Excerpt From Federal Issues:

CFPB Continues Credit Card Enforcement Activity. On October 1, the CFPB announced a coordinated enforcement action taken by federal regulators against a major credit card company and several of its subsidiaries alleged to have violated multiple consumer financial protection laws. According to the CFPB, the investigations conducted by it and other federal regulators and a state regulator revealed that the companies (i) charged illegal late fees, (ii) discriminated on the basis of age in the offering of credit, (iii) engaged in deceptive marketing, and (iv) failed to properly report consumer credit disputes. To resolve the allegations, the companies agreed to enter into several different consent orders. Two orders obtained by the CFPB and a joint CFPB/FDIC order require three of the subsidiaries collectively to refund approximately $85 million to approximately 250,000 customers and pay a cumulative $18 million in civil money penalties. Likewise, the OCC issued a consent order that includes an additional $500,000 penalty, and provides for restitution that overlaps with the broader restitution ordered by the CFPB. Finally, an order obtained by the Federal Reserve Board, requires the company, and certain of its subsidiaries, to pay an additional $9 million penalty. Furthermore, pursuant to the various orders, the companies agreed to undergo an independent audit and implement enhanced compliance systems to address the alleged illegal practices. This is the third public CFPB-led enforcement action aimed at credit card companies, and the first to go beyond allegations regarding ancillary products and resolve alleged violations of the CARD Act, the Fair Credit Reporting Act, and the Equal Credit Opportunity Act.

CFPB Announces First Determination Of A Petition to Modify Or Set Aside A Civil Investigative Demand. On September 20, the CFPB issued its first Decision and Order on a petition to modify or set aside a civil investigative demand (CID). The petition challenged a CID issued to a non-bank mortgage seeking responses to twenty-one interrogatories and thirty-three document requests. CFPB Director Richard Cordray denied the petition in its entirety and ordered the Company to comply with the CID within twenty-one days. In addition to ruling on the substantive issues relevant to the petition, the Decision and Order demonstrates the importance of including detailed and specific objections in any petition to modify or set aside a CID and the crucial role of the meet-and-confer sessions. In a Special Alert BuckleySandler analyzes Director Cordray's decision and its implications for institutions that are facing or could face a CFPB investigation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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