Nutter Bank Report, February 2017

Nutter McClennen & Fish LLP

The Nutter Bank Report is a monthly publication of the firm's Banking and Financial Services Group.

1. CFPB Fines Mortgage Lender for Violating the RESPA Anti-Kickback Rule
2. Customer Cannot Recover Against Bank for Fraudulent Checks After One Year
3. FDIC Inspector General Reports Deficiencies in Banks’ Contracts with TSPs
4. OCC and Federal Reserve Issue Guidance on Swap Margin Rule
5. Other Developments: Trustee Process and Executive Orders

1. CFPB Fines Mortgage Lender for Violating the RESPA Anti-Kickback Rule

The Consumer Financial Protection Bureau (“CFPB”) has taken enforcement action in the form of a consent order against a mortgage lender, including levying $3.5 million in civil money penalties, for the alleged payment of kickbacks in return for the referral of mortgage business in violation of the Real Estate Settlement Procedures Act (“RESPA”) and its implementing rule known as Regulation X. The CFPB also announced on January 31 that it has taken enforcement actions against two real estate brokers and a mortgage servicer that allegedly took illegal kickbacks from the mortgage lender, which will include consumer relief payments, repayment of the alleged kickbacks and civil money penalties. The CFPB alleged that the mortgage lender “used a variety of schemes to pay kickbacks for referrals of mortgage business” in violation of RESPA, such as establishing marketing services agreements with referral sources to disguise payments for referrals as payments for advertising or promotional services. Click here for a copy of the CFPB’s consent order.

     Nutter Notes: The CFPB alleged that the mortgage lender maintained various marketing agreements with over 100 real estate brokers that “served primarily as vehicles to deliver payments for referrals of mortgage business.” A key to the CFPB’s findings was that the mortgage lender allegedly tracked the number of referrals made by each real estate broker and adjusted the payments under the marketing agreement to the brokers accordingly. The CFPB also found that the mortgage lender had a number of informal joint marketing arrangements that allegedly disguised illegal kickbacks for the referral of mortgage business. The CFPB alleged the mortgage lender paid real estate brokers to require any person who sought to buy a property listed with the brokers to obtain prequalification with the mortgage lender, even if the prospective purchaser had prequalified for a mortgage loan with another lender. Section 8(a) of RESPA prohibits any person from making payments or kickbacks to any other person in return for referring a consumer to a particular real estate settlement service provider.

2. Customer Cannot Recover Against Bank for Fraudulent Checks After One Year

A federal court in Massachusetts has held that the so-called One-Year Rule under Article 4 of the Massachusetts Uniform Commercial Code (“UCC”) bars a commercial accountholder from recovering from its bank funds fraudulently taken from the business entity’s account by unauthorized checks. The court’s opinion, which became available earlier this month, involved a bank that had paid nearly 100 checks written on a corporation’s account that the corporation claimed were signed by unauthorized persons who were then associated with the corporation. The bank had provided monthly account statements showing each of the fraudulent checks, but the corporation did not notify the bank of the unauthorized account activity for more than one year after most of the checks had been paid. Although the corporation notified the bank of the fraudulent activity within one year after 21 of the checks had been paid, the court held that the UCC’s so-called Repeater Rule under Article 4 bars claims against a bank for subsequent fraudulent checks signed by the same person unless the accountholder notifies the bank of the fraud within 30 days of the original fraudulent check. In this case, each of the remaining 21 checks had been signed by a person who had signed an earlier fraudulent check that was covered by the One-Year Rule.

     Nutter Notes: The One-Year Rule under Article 4 of the UCC requires that a customer report any unauthorized signatures or endorsements on checks written on his or her account to the bank within one year of the unauthorized account activity. If one year has passed since an unauthorized check has been paid and the bank has provided regular account statements to the customer reporting that account activity, then the customer is “precluded from asserting against the bank the unauthorized signature.” The One-Year Rule applies regardless of whether there was a lack of care by the bank in processing the fraudulent check, and whether or not the accountholder knew or should have known of the fraud. However, under the Repeater Rule, the customer can recover against the bank if the customer can prove that the bank “failed to exercise ordinary care” in processing the check. If the customer claims that the bank failed to exercise ordinary care, the customer bears the burden of both pleading and proving that fact. The court held in this case that the corporation did not adequately plead that the bank “failed to act with the ordinary care normally exhibited by banks in its position,” and therefore could not take advantage of this exception to the Repeater Rule.

3. FDIC Inspector General Reports Deficiencies in Banks’ Contracts with TSPs

The FDIC Inspector General’s office recently reported, in connection with its review of banks’ practices in engaging technology service providers (“TSPs”), that it did not find sufficient evidence that most of the 19 banks it reviewed had performed risk assessments or contract due diligence to fully consider and assess “the potential impact and risk that TSPs may have on the [banks’] ability to manage [their] business continuity planning and incident response and reporting operations.” The report issued on February 14 also found that, generally, banks’ contracts with TSPs “did not clearly address TSP responsibilities and lacked specific contract provisions to protect [bank] interests or preserve [bank] rights.” Other criticisms of banks’ contracts with TSPs leveled by the report include insufficient definition of key terms related to business continuity and incident response, and failure to reflect more recent FDIC and FFIEC guidance on cybersecurity. The report recommends that the FDIC’s Division of Risk Management Supervision emphasize to banks the importance of considering and assessing the risks that TSPs present, ensuring that TSP contracts include detailed provisions that address bank-identified risks and protect bank interests, and ensuring that such contracts define key contract terms that are important to clarify bank and TSP rights and responsibilities. Click here for a copy of the Inspector General’s report.

     Nutter Notes: According to the report, the Inspector General’s review of TSP contracts was undertaken to evaluate how clearly FDIC-supervised banks’ contracts with TSPs address the TSP’s responsibilities for business continuity planning, and reporting and responding to data security breaches. The Inspector General’s office reviewed 48 contracts between 19 banks and their TSPs collected by FDIC examiners. The report noted that the FDIC and the FFIEC have taken a number steps over the past two years to provide insured depository institutions with business continuity, cybersecurity, and vendor management guidance. The report also concedes that some of the contract deficiencies it identified could be attributable to banks needing more time to incorporate the more recent FDIC and FFIEC guidance into TSP contract language and vendor due diligence policies and procedures. According to the report, the FDIC’s Division of Risk Management Supervision does not expect banks to renegotiate current TSP contracts in response to recently issued guidance alone, but does encourage banks to “discuss business continuity and incident response concepts, guidance, and expectations with their service providers.” The report also warns that banks should not attempt to transfer their own responsibilities for continuity and information security to TSPs.

4. OCC and Federal Reserve Issue Guidance on Swap Margin Rule

The Federal Reserve and the OCC have issued examination guidance on compliance with the swap margin rule, which establishes margin requirements for swaps not cleared through a clearinghouse. The guidance released on February 23 explains that the Federal Reserve and the OCC expect banks and bank holding companies they regulate that are registered with the Commodity Futures Trading Commission as swap dealers (known as “covered swap entities”) to prioritize their compliance efforts for the March 1, 2017 variation margin deadline according to the size and risk of their swap counterparties. Examiners will expect a covered swap entity to comply with the variation margin requirements of the swap margin rule with respect to swap entities and financial end user counterparties that present significant exposures as of March 1, 2017. With respect to other counterparties, examiners will focus on a covered swap entity’s good faith efforts to comply with the variation margin requirements as soon as possible, and in any case no later than September 1, 2017, according to the guidance. Click here for a copy of the OCC’s examination guidance, and here for a copy of the Federal Reserve’s examination guidance.

     Nutter Notes: The federal banking agencies adopted rules jointly under Sections 731 and 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants (known as “swap entities”) that are prudentially regulated by one of the agencies that establish initial and variation margin requirements on all swaps that are not cleared by a registered derivatives clearing organization or a registered clearing agency. The final rules establishing initial and variation margin requirements were published in November 2015. The effective date for the final rule was April 1, 2016, but the phase-in of the minimum margin requirements did not begin until September 1, 2016. Under the final rule, only swap market counterparties with more than $3 trillion in outstanding swap activity were required to implement both the initial and variation margin requirements for non-cleared swap trades between those largest swap counterparties by September 1, 2016. On March 1, 2017, the phase-in schedule will begin to require all firms that qualify as covered swap entities, regardless of their volume of outstanding swap activity, to comply with the swap margin rule’s requirements for non-cleared swaps.

5. Other Developments: Trustee Process and Executive Orders

  • Massachusetts Court Interprets Trustee Process Exemption for Joint Accounts

A Massachusetts court recently held that a $2,500 per person exemption from attachment by trustee process applies for each owner of a joint bank account under Massachusetts law. The January 26 decision interprets Section 28A of Chapter 246 of the General Laws of Massachusetts, which exempts $2,500 “of any natural person” in a bank account from attachment by trustee process.

     Nutter Notes: The case involved a home health care business that won a judgment against one of two owners of a joint bank account. Both of the accountholders were natural persons, so the court concluded that the defendant debtor was entitled to a $2,500 exemption and the other joint accountholder was entitled to an additional $2,500 exemption.

  • Executive Orders Issued on DOL Fiduciary Rule, Dodd-Frank Act

President Trump issued a directive on February 3 to the U.S. Department of Labor (“DOL”) to perform a review of the DOL’s conflict of interest rule that defines who is a fiduciary under the Employee Retirement Income Security Act of 1974 (“ERISA”) as a result of providing investment advice. The directive effectively halts the implementation of the DOL’s new fiduciary rule while the agency undertakes the mandatory review to “determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”

     Nutter Notes: The President also signed an executive order on February 3 ordering the Secretary of the Treasury to review the regulation of the U.S. financial system to determine which laws and regulations are inconsistent with certain “core principles” of financial services regulation set forth in the executive order. While the order does not name the Dodd-Frank Act, it has been widely reported that the executive order is aimed at rolling back certain Dodd-Frank Act reforms.

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.

© Nutter McClennen & Fish LLP | Attorney Advertising

Written by:

Nutter McClennen & Fish LLP

Nutter McClennen & Fish LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.