In this issue:
• OCC ANNOUNCES SPECIAL CHARTER FOR FINTECH COMPANIES
• IS YOUR WEBSITE ACCESSIBLE TO INDIVIDUALS WITH DISABILITIES?
• INTENTION TO SURRENDER PRECLUDES OPPOSING FORECLOSURE
• CFPB FILES FOR REHEARING IN PHH CASE
• COMMISSIONER'S NEW ORGANIZATIONAL STRUCTURE
On December 2, 2016, the Office of the Comptroller of the Currency (OCC) announced the creation of a special purpose national bank charter (SPNB Charter) for FinTech companies. The SPNB Charter would allow FinTech companies (such as marketplace lenders) that operate in multiple states to take advantage of the same federal preemption that national banks enjoy, avoiding state lending licensing, surety bonding, and limits on fees/charges. The new SPNB Charter would allow FinTech companies to operate nationally on a uniform basis under federal oversight (including OCC reporting requirements and ongoing supervision). The new SPNB Charter is available for one of three activities: lending money, paying checks, or receiving deposits. Key requirements to apply for a SPNB Charter include: (1) a robust, well-developed business plan; (2) a comprehensive governance and risk management structure; and (3) sufficient capital and liquidity (commensurate with the entity's contemplated activities). Entities that obtain a SPNB Charter would be subject to the same federal laws that apply to national banks, including: the Bank Secrecy Act and other anti-money laundering restrictions; economic sanctions/restrictions imposed by the Office of Foreign Assets Control; and federal unfair/deceptive acts and practices prohibitions (such as the FTC Act and provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act). The OCC's recent announcement concerning the SPNB Charter also seeks public comment on a number of subjects, including several questions concerning how the OCC should ensure that entities seeking a SPNB Charter would be committed to financial inclusion to all individuals, businesses, and communities. Please contact John Morton or Christopher Rahl with questions concerning this topic.
Enforcement actions by the Department of Justice and numerous private lawsuits have been initiated over the past several years claiming that websites of businesses offering goods and services are not compliant with the federal Americans with Disabilities Act (ADA). A search on the internet results in a plethora of information. Even so, there are no federal regulations or established government standards that apply to non-governmental websites, leaving private businesses uncertain about how to comply with ADA's mandate that "[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation …." 42 USC §12182(a). Banks and credit unions are places of public accommodation. Until recently, there were few lawsuits brought against depository institutions for alleged ADA website non-compliance. Unfortunately, this is no longer the case. A wave of demand letters from private law firms alleging depository institutions are not in compliance with the ADA is moving across the country and has hit Maryland. The demand letters identify the law firm's clients/claimants, include a list of prior ADA lawsuits brought by the law firm as examples of what it might initiate against the depository institution, and propose a settlement through which the institution agrees to make its website compliant with the Web Content Accessibility Guidelines (WCAG-2) and agrees to pay attorney fees. If your business receives such a letter, do not ignore it. Even if your business does not receive a demand letter, now is a good time to consider the status of your website's accessibility. For an outline of action steps to improve website accessibility for individuals with disabilities, click here. Please contact Margie Corwin if you have questions or would like to discuss this subject in greater detail.
In a Chapter 7 bankruptcy case, if the debtor lists debts secured by property of the bankruptcy estate, the debtor is required to file a statement of intention stating whether the debtor intends to retain or surrender the property to the secured creditor. In a recent Eleventh Circuit Court of Appeals case, the debtors' real property (their residence) had a value less than the debt owed to the secured creditor and the debtors' statement of intention provided for surrender of the house. Because the property had no equity, the Chapter 7 bankruptcy trustee abandoned the property to the debtors. The debtors continued to live in the house and contested the secured creditor's subsequent foreclosure sale. In the bankruptcy court, the secured creditor filed a motion to compel surrender and requested an order to stop the debtors from contesting the foreclosure sale. The debtors argued that the opposition to the foreclosure sale was not inconsistent with surrendering their house in the bankruptcy case. The Eleventh Circuit rejected the debtors' argument and held that once a debtor issues a statement of intention, the debtor must perform in accordance with that statement. If the bankruptcy trustee does not liquidate the property, the property must then be surrendered to the secured creditor. The Eleventh Circuit held that, because "surrender" is the giving up of a right or a claim to the property, debtors can no longer contest a foreclosure sale. Secured creditors should carefully review any statement of intention filed by debtors in Chapter 7 proceedings. Once relief from a bankruptcy automatic stay has been granted, if the debtor's statement of intention provides for the surrender of property, a secured creditor can argue in state court that the debtor waived any right it would otherwise have to contest the secured creditor's foreclosure sale. Please contact Susan J. Klein for further information concerning this topic.
CFPB FILES FOR REHEARING IN PHH CASE
As we reported in our November Legal Alert, the U.S. Court of Appeals for the District of Columbia held the CFPB's single director structure unconstitutional because it lacked the presidential control or "substitute check" required by Article II of the U.S. Constitution. The D.C. Circuit also rejected the CFPB's argument that statutes of limitation do not apply to CFPB administrative enforcement actions and held that the CFPB violated PHH's due process rights by retroactively applying a new RESPA interpretation to PHH's prior conduct. As anticipated, the CFPB filed a petition for rehearing before an en banc panel of the D.C. Circuit. We will continue to closely monitor this case. In the interim, please contact John Morton with any questions concerning this topic.
The Maryland Commissioner of Financial Regulation has published a new organizational structure for senior management. The new structure can be found here. Let us know if you have any questions about who you might best contact at the Commissioner's office for a particular issue.