Banking Law Prof Blog

Summary of SEC Enforcement Actions

The law firm of Dorsey & Whitney provides this excellent of recent SEC Enforcement Actions relating to the financial crisis.

Link:  http://www.lexology.com/library/detail.aspx?g=94cd120c-1e15-40da-881a-23f52e24eef3&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+federal+section&utm_campaign=lexology+subscriber+daily+feed&utm_content=lexology+daily+newsfeed+2011-11-17&utm_term=

(ag) November 17, 2011, in Securities Law, SEC, Enforcement 

CFPB Examination Manual

In October, the Consumer Financial Protection Bureau (CFPB) made its Supervision and Examination Manual available online. 

Here's what the manual has to say about the new Dodd-Frank Act standard "abusive" acts or practices:

The Dodd-Frank Act makes it unlawful for any covered person or service provider to engage in an “abusive act or practice.” An abusive act or practice:

•Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service or

•Takes unreasonable advantage of –

•A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;

•The inability of the consumer to protect its interests in selecting or using a consumer financial product or service; or

•The reasonable reliance by the consumer on a covered person to act in the interests of the consumer.

Although abusive acts also may be unfair or deceptive, examiners should be aware that the legal standards for abusive, unfair, and deceptive each are separate."

As we can see, the term "abusive" is more subjective and more extensive than the previously established standards of "unfair or deceptive." The CFPB manual provides no concrete examples.  A full understanding of what CFPB will find to be a violation of this standard can only be gained as we observe examination findings.

Link to CFPB examination manual:  http://www.consumerfinance.gov/guidance/supervision/manual/

(ag) Nov. 16, 2011, in Consumer Financial Protection Bureau

 

Curbing Executive Compensation at Fannie Mae and Freddie Mac

By vote of 52 to 4, the House Financial Services Committee approved legislation to curb executive compensation at the two secondary mortgage market GSEs.

The CEO of Fannie Mae received $5.6 million in compensation and the CEO of Freddie Mac received $5.4 million.  H.R. 1221, the Equity in Government Compensation Act, ensures that executives and employees of Fannie Mae and Freddie Mac will receive compensation that is in line with pay practices at federal financial regulatory agencies.  Under this bill, CEO compensation at the GSEs could not exceed $218,978 this year.

Link to press release:  http://financialservices.house.gov/News/DocumentSingle.aspx?DocumentID=269004

(ag) Nov. 15, 2011, in Fannie Mae and Freddie Mac, Secondary Mortgage Market

Curious About Cocos?

"Cocos" or bank-issued contingent-convertible capital instruments have been suggested as a means of shoring up bank capital if a "triggering event" occurs indicating the need for more capital. 

Here's a link to an article discussing cocos and the risk that they could destroy confidence in banks rather than enhancing confidence as intended:

"Cocos Can Drive Markets Cuckoo" by Hilary J. Allen, Assistant Professor, Loyola University New Orleans College of Law:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1917760

(ag) Nov. 14, 2011, in Bank Capital, Global Markets

Partnership Banks

Dēmos and the Center for State Innovation are hosting a conference in Washington, D.C., on Friday, November 18, 2011.  “Banking on America: A Conversation about State Partnership Banks” will explore questions about whether a state-owned bank such as Bank of North Dakota could be a model for other states to encourage small business lending and to partner with community banks to increase loan availability.

Bank of North Dakota is the only state-owned bank in the nation.  Link to Bank of North Dakota:  http://banknd.nd.gov/

(ag) Nov. 12, 2011, in Banking

Veterans Day: A Good Time to Review the Servicemembers Civil Relief Act

Today, we honor all our veterans and servicemembers.

The OCC website contains helpful resources for understand the provisions of the Servicemembers Civil Relief Act (SCRA).

The Act contains special provisions addressing:

Outstanding credit card debt
Mortgage payments
Pending trials
Taxes
Termination of lease
Eviction from housing
Life insurance protection

Link: http://www.occ.gov/topics/consumer-protection/servicemembers-civil-relief-act/index-service-members-civil-relief-act.html

(ag) Nov. 11, 2011, in Consumer Protection

Fair Housing Act: Is Disparate Impact Enough to Show Violation?

The United States Supreme Court will consider the case of Gallagher v. Magner, on appeal from an Eighth Circuit decision.  

The issue is whether disparate impact claims can be established under the Fair Housing Act OR whether intent to discriminate is required.

The case arose when a group of landlords claimed that officials in St. Paul, Minn., targeted rental properties for housing code violations,with a disparate impact on African-American tenants. Despite the lack of evidence showing intent, the Eighth Circuit Court of Appeals upheld a finding of Fair Housing Act violations.

Link:  http://www.scotusblog.com/case-files/cases/magner-v-gallagher/

(ag) Nov. 10, 2011, in Consumer Protection, U.S. Supreme Court 

Thanks for Your Thoughts and Concern!

I'm back after a second round of surgery and appreciate all your thoughts and concerns.