CFSL Bulletin The latest Consumer Financial Services Litigation news, developments, and legal thinking

Category Archives: Compliance

Arkansas Supreme Court Affirms Change in Maximum Interest Rate

Posted by Timothy S. Crisp on Posted in Compliance; State Consumer Protection Laws

Earlier this Summer, the Arkansas Supreme Court affirmed the effectiveness of the 89th Amendment to the Arkansas Constitution, which was approved by Arkansas voters last November. For consumer credit, the amendment permits creditors other than federally insured depository institutions to charge interest on loans or contracts up to a maximum rate of 17% per annum. 

Previously, the Arkansas Constitution only permitted interest at the lesser of (i) 17% per annum or (ii) 5% per annum in excess of the 90-day commercial paper rate announced by the Federal Reserve Bank of St. Louis. Contracts charging a rate exceeding 17% per annum were void as to both principal and interest; contracts charging a rate exceeding the rate in clause (ii) above were void as to unpaid interest.

Continue reading this entry

Federal Reserve Board and FTC Amend Adverse Action and Risk-Based Pricing Notice Requirements

Posted by Timothy S. Crisp on Posted in Compliance; Consumer Financial Protection Act; Fair and Accurate Credit Transactions Act; Fair Credit Reporting Act

As mandated by Section 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act, new final rules issued by the Federal Reserve Board and the Federal Trade Commission (FTC) require creditors to disclose credit scores and information about credit scores to applicants for credit in adverse action and risk-based pricing notices. 

Creditors who use credit scores in denying applications for credit (or otherwise taking adverse action), and/or in granting or extending credit on material terms that are materially less favorable than the most favorable terms offered by them to a substantial proportion of their consumer customers, will need to modify their forms of adverse action and risk-based pricing notices. The rules prescribe model forms for these notices.

The new rules were issued on July 6, 2011, and modify the Federal Reserve Board’s Regulations B and V (12 CFR Parts 202 and 222) and the FTC’s risk-based pricing and model forms rules (16 CFR Parts 640 and 698). The new rules will become effective 30 days after publication in the Federal Register (which is expected imminently).

FDIC Teams with FBI to Investigate Member-Insured Institutions

Posted by Lisa M. Noller on Posted in Compliance; Consumer Financial Protection Agency

The Federal Deposit Insurance Corporation (“FDIC”) this week announced it is working with the FBI to investigate crime in federally insured financial institutions and to recover more money from persons formerly affiliated with such banks. The FDIC has long held the power to investigate member-insured institutions, as well as individuals, defined by statute as “institution-affiliated parties.” However, the FDIC has laid low for a decade, making some forget that it enjoys a lower standard of proof to recover civil remedies and a wide berth in the criminal arena as well. Current and former bank executives, as well as other individuals with relationships to financial institutions, should be prepared for several years of increased civil and criminal scrutiny.

Areas of particular interest to the investigation would include:

Continue reading this entry

HUD Provides Long-Sought Clarification on Home Warranty Guidelines

Posted by Jay R. Varon on Posted in Compliance

On February 21, 2008, the U.S. Department of Housing and Urban Development (HUD) issued an informal (and non-binding) staff interpretation regarding home warranty companies, which seemed to raise more questions than it answered, primarily on the issues of marketing agreements and the marketing of home warranties. The agency found itself besieged by industry groups demanding clarification. Last week HUD finally provided amplification of its original letter and established clearer guidelines on the circumstances under which home warranty companies may compensate real estate brokers and agents for marketing their products.

Foley & Lardner issued an E-News Alert to clients and contacts detailing the new rules’ likely impact. In it, we note that, although directed at agreements between HWCs and real estate brokers and agents, the rule likely will have a broader impact, affecting many other providers who offer services in the residential real estate market.