Gil Rudolph, co-chair of the Financial Regulatory and Compliance Practice, and Lori S. Nugent, shareholder, will participate in the Conference on Consumer Finance Law Annual Consumer Financial
Continue Reading Greenberg Traurig’s Gil Rudolph and Lori S. Nugent Participate at CCFL’s Annual Consumer Financial Services Conference

In a 110-page decision issued on Oct. 11, 2016, the United States Court of Appeals for the District of Columbia Circuit declared the Consumer Financial Protection Bureau’s (CFPB) single-director structure unconstitutional and vacated a $103 million fine against PHH.  The Court found that the current structure allows the Commissioner to wield too much power that is unchecked by any other part of government.  To remedy this concern, the Court severed the “for cause” provision from the statute, placing the agency under the direct supervision of the president.  The Court also vacated the Order against PHH, finding that the CFPB’s interpretation of RESPA violated PHH’s due process rights in several respects. First, the Commissioner erred in disregarding long-standing guidance from the Department of Housing and Urban Development (HUD) recognizing that Section 8 of RESPA allows captive reinsurance arrangements so long as the amount paid by the mortgage insurer for the reinsurance does not exceed the reasonable market value of the reinsurance.  The Court declared that Section 8 shall continue to have the meaning ascribed to it by HUD.  Secondly, in calculating the penalty against PHH, the Commissioner had improperly included loans that had closed more than three years prior to the action.  The Court rejected the CFPB argument that it was not subject to any statute of limitations, and ruled that the agency was subject to the three-year limitations period that has traditionally applied to agency actions to enforce RESPA.

As we wrote about previously, this case stems back to a June 2015 CFPB order in which CFPB Director Richard Cordray singlehandedly increased a $6 million fine levied by an administrative law judge against PHH for allegedly referring consumers to mortgage insurers in exchange for kickbacks in violation of the Real Estate Procedures Act (RESPA).  The ALJ’s fine was based upon loans closed on or after July 21, 2008..  PHH appealed that ruling to the Director.  Cordray issued a final order that required PHH to disgorge $109 million – all the reinsurance premiums it received on or after July 21, 2008.On appeal, PHH challenged Cordray’s authority to levy the additional fine and challenged the constitutionality of the CFPB itself.


Continue Reading U.S. Court of Appeals for the District of Columbia Circuit Declared CFPB’s Single-director Structure Unconstitutional

At the end of March, the OCC issued a whitepaper setting out the principles that it will use to guide the development of a framework to analyze innovations in the banking sector of financial technology, or “fintech” for short.  The paper defined and encouraged “responsible innovation,” and discussed both benefits and risks arising from the types of innovations that are developing in that sector. For a more detailed discussion of the paper, see our GT Alert, “Fintech—Moving Toward a Regulatory Framework, The OCC Whitepaper on Responsible Innovation.”

The OCC’s paper, however, did not address a key question facing the industry—will small fintech startup companies be subject to the same regulations and same level of scrutiny that might affect fintech offered by banks?  A recent New York Times article referred to the current regulatory environment, state, and federal rules, as a “bramble” that these fintech startups must face. Fintech startups must confront both the typical challenges of regulatory compliance, as well as questions of whether they are even required to comply.

Consider a scenario in which a startup and a bank release mobile applications with similar utility—the startup could benefit from significant competitive advantage if it were not obligated by the same compliance requirements.  Consequently some traditional banks have urged that fintech should be subject to regulations equal to those applicable to banks because that will keep all competitive parties on equal footing.


Continue Reading Nonbank Fintech: Regulatory Uncertainty as Innovation Flourishes