Duane Morris lawyers and FTI Consulting professionals will discuss strategies that can help banks maximize recoveries under the FDIC Loss-Share Program. Generally, the FDIC will reimburse 80 percent of losses for a covered asset, while the acquiring bank absorbs 20 percent of the loss, provided certain conditions and reporting requirements are met. Our program will outline the common challenges that banks face with the FDIC Loss-Share Program and provide practical solutions that increase loss-sharing recoveries.
The OCC, Federal Reserve, and FDIC have published an interagency final rule amending the regulations governing eligibility for the 18-month on-site examination cycle which will take effect on January 17, 2017. 1 and 2 rated national banks, federal savings associations, and federal branches and agencies with less than $1 billion in total assets will now be eligible for an 18-month rather than a 12-month examination cycle.
Section 10(d) of the Federal Deposit Insurance Act generally requires that each insured depository institution undergo a full scope, on-site examination at least once during each 12-month period. This can be a time consuming, expensive and disruptive process for community banks and other institutions. In 2015, the FAST Act was enacted, Public Law 114-94, 129 Stat. 1312 (2015), which authorized bank regulatory authorities to extend the on-site examination cycle for certain insured depository institutions. Prior to the FAST Act and impending rules changes examination cycles were available only to qualifying 1 and 2 rated banks with less than $500 million in total assets. The FAST Act amendments and rules changes are intended to reduce regulatory burdens on small, well capitalized, and well managed institutions and allow the agencies to better focus their supervisory resources on those insured depository institutions and domestic branches and agencies of foreign banks that may present capital, managerial, or other issues of supervisory concern.
According to the final interagency rule, the FDIC analyzed the frequency with which institutions rated a composite CAMELS rating of 1 or 2 failed within five years, versus the frequency with which institutions rated a composite CAMELS rating of 3, 4, or 5 failed within five years. That analysis indicated that between 1985 and 2011, insured depository institutions with assets less than $1 billion and a composite CAMELS rating of 1 or 2 had a five-year failure rate that was one-seventh as high as institutions with a CAMELS rating of 3, 4, or 5. The analysis did not change when restricted to institutions with assets between $200 million and $500 million versus institutions with $500 million to $1 billion in assets.
For more information or to discuss legal concerns about your institution’s examination process contact Mark Bradford (email@example.com) or Mark Belongia (firstname.lastname@example.org). Mark Belongia and Mark Bradford of Duane Morris LLP routinely advise insured depository institutions about regulatory compliance and related matters.
As we head into autumn, many of us change our seasonal wardrobes, replace the filters in our home heating/cooling systems, swap our summer screens for winter’s storm windows and ready our vehicles for winter. Bankers participating in a Federal Deposit Insurance Corporation (FDIC) shared-loss program should consider adding one more seasonal item to their list—a check-up on the status of your shared-loss participation, particularly your commercial shared-loss program. Many banks acquired assets and deposit accounts of failed institutions in the years following the Great Recession via purchase and assumption agreements entered into with the FDIC. Those agreements included an eight-year commercial shared-loss component, whereby the acquiring bank shares losses with the FDIC during the first five years and then shares recoveries for the remaining three years of the term.
Duane Morris LLP, CleanFund and California MBA will present “What’s Shaking? A Conversation About Real Estate Finance, Mortgage Banking and Earthquakes!” on Thursday, September 22, 2016, from 5:00 p.m. to 8:00 p.m. in the Duane Morris San Francisco office. This California MBA MCLE networking reception offers a ground-moving educational event featuring a discussion on financing solutions for mandatory seismic compliance. The panel will also discuss the latest developments in real estate financing in the Bay Area and recent case law and regulatory issues impacting the mortgage banking industry in California. Attendees will have the opportunity to network with banking executives, real estate developers, property owners, lenders and in-house counsel from all over Northern California. One hour of General MCLE credit is pending.
A few years ago, many banks found themselves to be the targets of class action lawyers for alleged failure to comply with ADA standards regarding access to ATMs. We believe that it is likely that we will soon see a new spate of cases directed at banks and retailers relating to accessibility to their websites by persons with visual, hearing, and hand disabilities. To read more on the subject, please read the recent article Web accessibility: What e-retailers need to know by Duane Morris partner Colin Knisely .
Many states have enacted consumer collection practices laws that impose addition hurdles for lenders in their efforts to collect debts and foreclose mortgages. A Florida appellate court has just addressed what it considers may be a case of first impression in Florida: whether a collection practices statute can impose a condition precedent to provide written notice of the assignment of a mortgage loan to the borrower, and bar commencing foreclosure notwithstanding the lender’s compliance with its contractual obligations to assign the mortgage and provide notice of acceleration. Although Florida’s Second District Court of Appeal held in Brindise v. U.S. Bank National Association that the notice of assignment required by the Florida Consumer Collection Practices Act (“FCCPA”) is not a condition precedent to foreclosure, “because innumerable foreclosure cases are pending in the trial and district courts where defendants have raised section 559.715 as a bar to foreclosure,” it certified the question to the Florida Supreme Court as one of great public importance. Brindise v. U.S. Bank National Association, __ So. 3d __, 41 Fla. L. Weekly D223a (Fla. 2d DCA January 20, 2016).
The Consumer Finance Protection Bureau (“CFPB”) recently announced that it was considering a rule that would ban consumer financial companies from using arbitration clauses in their customer agreements to block class action lawsuits. According to a study by the CFPB, financial institutions often rely on arbitration clauses to block group lawsuits. The CFPB took issue with this practice because it claims that very few consumers were aware of the arbitration clauses or understood what they meant. As a result, either because of ignorance or an unwillingness to pursue individual grievances, the CFPB found that even though millions of consumers would be entitled to relief through group settlements, very few individual customers actually seek relief through arbitration.
With these findings in mind, the CFPB initiated the process to implement a regulation that would prohibit finance companies from including arbitration clauses that would preclude class action lawsuits in their consumer agreements. The new rule would encompass most of the consumer financial products the CFPB regulates, including credit cards, checking and deposit accounts, prepaid cards, money transfer services, some auto loans, auto title loans, payday loans, private student loans and installment loans. Arbitration clauses are already prohibited in consumer mortgages under the Dodd-Frank Act.
The CFPB does not propose banning arbitration clauses from consumer finance agreements all together. Rather, arbitration clauses would be permissible as long as they explicitly allow cases to be filed as class actions unless and until the class certification is denied by the court, or the class claims are dismissed in court. Financial companies would also have to submit any initial arbitration claim filings and awards issued to the CFPB to “ensure” the fairness of the arbitration process.
Although the CFPB is still in the early stages of considering this rule change, our clients should carefully monitor the progress of this new rule and, if appropriate, voice any concerns they may have with the new rule when the CFPB solicits public comments.
In the consumer loan context, one issue that frequently arises between creditors and debtors is whether the debtor has made a timely payment on his or her account. Both the Truth in Lending Act (“TILA”) and Regulation Z, which implements TILA, speak to this issue, but appear to contradict each other when it comes to credit card accounts.
As reported in the Wall Street Journal on December 21, banks are spending enormous sums on cybersecurity (Wells Fargo’s CEO John Stumpf says ‘It is the only expense where I ask if it’s enough’), and much of that is directed towards reducing risks from employees who unwittingly make it easier for hackers to breach a bank’s defenses. Employee error results in approximately 30% of data breaches, according to a survey released last month by the Association of Corporate Counsel. Banks in particular face substantial risk because they possess so much customer information, as well as huge sums of money.
Among the ways that cybercriminals gain access to protected data are out of office messages on work computers and phones , and vacation photos posted on social media ( which signal unmonitored computers ). A significant risk is posed by employees opening phishing emails, especially the increasingly sophisticated “spear phishing” emails, that appear to be requests from high-ranking bank officials. Many banks send employees simulated phishing attacks . The opening of one of these fake phishing emails may, for example, start a video to educate the employee on how they should have handled the situation.
These efforts are another indication that fighting cyber crime involves virtually all parts of an organization, not just the IT department.
Duane Morris received the first TD Bank “U.S. Legal Champion” Award, recognizing TD Bank’s strategic law firms that provide valued work and high performance in the categories of innovation, service, TD value investment and billing management.
TD Bank deputy general counsel Leo Doyle presented the award to Duane Morris partner Alexander Bono at the trial practice group session at Duane Morris’ annual firm meeting.
To learn more about this honor, which was reported on in the November 12, 2015, issue of The Legal Intelligencer, please visit the Duane Morris website.