Bank Law Monitor

Bank Law Monitor

A Legal Blog for the Financial Services Industry

Reg CC Goes “Paperless”: New Amendments Address Electronic Checks, Remote Deposit Capture, and Other Modern Banking Trends

Posted in Banking, Mobile Banking, Regulatory Developments

Regulation CC first became law back in 1992. Yes, that was when Sir Mix-a-Lot was “back” on the top of the charts, audiences were eating up Silence of the Lambs, and bowl cuts were a thing. Times have changed, but oddly Reg CC hasn’t. Since 1992, Reg CC—which governs funds availability and how financial institutions handle check collection and return processes—has stayed mostly the same. But think about how much banking has evolved over the last quarter century, especially in light of the widespread use of electronic items, checks, and processing systems.

You might be surprised to learn that a large chunk of Reg CC still applies only to paper checks. Thankfully, the law is getting a modern makeover to acknowledge the fact that today’s check collection world is now virtually entirely electronic. In June 2017, the Federal Reserve issued final amendments to Reg CC to get with the times, and the CFPB is expected to do the same shortly. These amendments will take effect on July 1, 2018, and they aim to recognize current collection practices.

Here are the highlights of a few of the Federal Reserve’s amendments to Reg CC: Continue Reading

Update: The CFPB’s Proposed Arbitration Rule—Dead or Alive?

Posted in CFPB

Update (August 28, 2017): A lot has happened since our original post on the CFPB’s arbitration rule, and more is on the way. The CFPB’s arbitration rule is definitely alive and breathing, for the time being:

  • The CFPB published its long-awaited arbitration rule on July 19, which, as discussed in more depth below, regulates arbitration agreements in contracts for certain consumer financial products or services (such as contracts involving deposit and savings accounts, credit cards, student loans, automobile leases, etc.).
  • In response – and only six (6) days after the rule’s publication – the House of Representatives voted to disapprove the CFPB’s rule, using its authority under the Congressional Review Act. The House’s vote to repeal passed by a 231-190 vote.
  • The vote to stop the CFPB’s rule now moves its way to the Senate. While a resolution to disapprove the CFPB’s rule has been introduced in the Senate, it is not expected that a vote will occur until at least September 5 when the Senate returns from recess. Under the Congressional Review Act, the Senate has 60 days from the CFPB rule’s publication date (July 19, 2017) to pass its disapproval resolution.
  • If the Senate also votes to disapprove the CFPB’s rule, the fate of the CFPB’s rule would lie in the hands of President Trump. Interestingly, on July 24, the White House issued a statement indicating that the Administration strongly supports disapproval of the CFPB’s rule. In fact, the Statement indicated that “if [the House’s disapproval resolution] were presented to the President in its current form, his advisors would recommend that he sign it into law.” Frankly, if the resolution to disapprove the CFPB’s arbitration rule makes it to President Trump’s desk, it seems likely that he will side with both chambers of Congress and also disapprove the CFPB’s arbitration rule.

Financial institutions should keep an eye on the status of the CFPB’s arbitration rule and act accordingly when the dust settles. More to come. Continue Reading

Hold the Phone! The Telephone Consumer Protection Act May Regulate—and Expose You to Liability For—Routine Contact With Customers.

Posted in Banking

The ATM celebrated its golden birthday yesterday. The first one opened on June 27, 1967, at a Barclay’s branch in London, and it’s since become a cornerstone of modern retail banking.

Fifty years later, the ATM isn’t the only way that consumers “withdraw” cash from their banks and credit unions. In the United States, plaintiffs’ consumer lawsuits cost the financial services industry billions of dollars each year. And the Telephone Consumer Protection Act is fast becoming a cornerstone of modern plaintiffs’ lawsuits. Continue Reading

Even Lawyers Have to Pay Their Debts: Washington Court Sides with Bank on Successor Liability Claim

Posted in Banking

It turns out that even lawyers sometimes have to pay their debts. In a recent Washington appellate case, a bank successfully sued an attorney to recover on a loan made to his law firm. Typically the owner of a law firm wouldn’t be held responsible for the corporate debts of a firm (except under a separate personal guaranty). But after the firm ceased operations, the lawyer continued to operate the firm in a manner that was determined to be a “mere continuation” of the prior business. As a result, he was held personally liable as a successor on the firm’s loan.

The result is particularly interesting because the lawyer, who had signed a personal guaranty of the law firm’s debts, declared bankruptcy on the day that he ceased operations of his law firm. The lawyer’s personal guaranty was ultimately discharged in the bankruptcy proceeding, and that ordinarily would have ended collection efforts against the lawyer individually. Continue Reading