Clarks' Bank Deposits and Payments Monthly

  • May 25, 2021

    Massive Payment Error Litigation Expeditiously Moving Along

    In the March 2021 edition of this newsletter, we reported on the decision of the Southern District of New York in a lawsuit involving a massive wire-transfer mistake. The Second Circuit has entered a briefing schedule, which will see the appeal (Case No. 21-487) fully briefed by late-July, with oral argument set to occur in August or September of 2021. In the meantime, the parties have recently finished briefing in the Southern District related to Citibank’s motion for an injunction that would prohibit the defendants from distributing the erroneously transferred funds in the meantime. The briefing hints at how the issues on appeal may shake out and how the decision is already beginning to impact the wire-transfer industry.

  • May 25, 2021

    Fintech Charters: The Saga Continues

    In March, the Second Circuit Court of Appeals heard oral argument in Lacewell v. Office of the Comptroller of the Currency (Case No. 19-04271). This is the appeal from the Southern District of New York lawsuit in which the New York Department of Financial Services challenged the OCC’s decision to begin accepting special purpose national bank charters (“SPNB charters” or “fintech charters”) from financial technology companies that would participate in certain aspects of the business of banking but which would not receive deposits. (S.D.N.Y. Case No. 18 Civ. 8377) The district court sided with DFS, determining that DFS had standing and that the National Bank Act precluded the OCC from issuing charters to entities that do not receive deposits.

  • April 06, 2021

    Removing The Federal “Sword Of Damocles” From Marijuana-Related Banking

    Federal legislation giving financial institutions the green light to bank marijuana-related-businesses (MRBs) is once again before the 117th Congress. This time around there seems to be bipartisan support in both the House and Senate for passage.

  • April 06, 2021

    $900 Million Payment Error Brings “Discharge For Value” Defense To The Fore

    A blockbuster lawsuit out of the Southern District of New York—involving a nearly $900 million wire-transfer mistake—has raised a host of questions about fairness, equity, and the “discharge for value” affirmative defense. The case, which is already subject to an expedited appeal in the Second Circuit, is certain to be a hot topic for some time to come and promises—one way or another—to have a lasting impact upon the wire transfer industry.

  • April 06, 2021

    Sixth Circuit Allows Class Action Against BB&T To Go Forward, Finding Arbitration Clause Constituted A Contract Of Adhesion

    Common sense suggests that account holders will become disgruntled when their money market investment accounts (MMIAs) are converted into money rates savings account (MRSAs) and subsequently, the bank lowers the interest rate from a guaranteed 6.5% to the then variable market rate of 0.01% per year.

  • March 15, 2021

    Paypal’s Win In DC Federal Court Dismantling Part Of The Prepaid Accounts Rule Likely To Be Tested On Appeal

    For years, the payments giant PayPal wrangled unsuccessfully with the Consumer Financial Protection Bureau (Bureau or CFPB) over its decision to treat certain types of “digital wallets” capable of storing funds as “prepaid accounts” subject to the Bureau’s prepaid accounts rule. After the Bureau finalized its prepaid accounts rule, PayPal brought a lawsuit in the United States District Court for the District of Columbia challenging two key provisions of the final prepaid rulemaking.

  • March 15, 2021

    House Of Cards: Does A Bank Have A Duty To Report A Suspected Check Kite?

    A check kiting scheme is like a house of cards. It takes at least two banks to play. Assume a simple kite structure where the fraudster uses two accounts at separate banks to cover uncollected funds or overdrafts in one bank by writing checks drawn on uncollected funds or overdrafts at the other bank. The fraudster takes advantage of the float period between the moment of deposit at one bank and the moment of payment by the other. The fraudster also takes advantage of both banks’ willingness to pay checks against uncollected funds.

  • February 04, 2021

    CFPB Debt Collection Practices Rule Part II Finalized Creating Challenges For Bankers And Debt Collectors

    In the waning days of the Trump Administration, the Consumer Financial Protection Bureau fulfilled its promise to address the holes left in its first set of rulemaking amending the federal debt collection rule known as Regulation F. The finalizing amendments are now complete, making it possible to gain some preliminary perspective on the 2020 revised regulation in its entirety.

  • February 04, 2021

    New Round Of PPP: Recent Legislative, Regulatory, And Judicial Developments

    The end of 2020 and start of 2021 have been marked by a new round of Paycheck Protection Program legislation and updated regulations, as well as a number of decisions from the courts concerning PPP issues—all of which hopefully provides additional clarity for a program in which clarity has often been sorely lacking.

  • February 02, 2021

    Justice Barrett’s Seventh Circuit Decision On Standing Signals Trouble For Consumers

    Newly minted Supreme Court Justice Amy Coney Barrett authored a significant decision while serving as an appellate judge on the Seventh Circuit. The decision is directly relevant to the financial services industry and consumers. The holding of the case allowed federal standing requirements to close the gateway to federal jurisdiction in a class action lawsuit brought under a consumer protection statute.

  • January 08, 2021

    Sedona Conference Commentary On A Reasonable Security Test: In Synch With Financial Institution Regulation?

    Early in this millennium, the Sedona Conference earned a reputation for providing helpful, workable guidance for emerging and overlooked or underserved areas of the law, particularly e-discovery. Via a series of think-tank-style working groups focused on discrete legal issues, the Sedona Conference tries to create “practical solutions and recommendations” which are then “developed and enhanced through a substantive peer-review process” and ultimately “widely published in conjunction with educational programs for the bench and bar, so that it can swiftly drive the reasoned and just advancement of law and policy in the areas under study.” Many judicial decisions—especially from the district courts that must effectively, efficiently, and justly administer the law and civil rules—rely upon and even praise the principles developed by the Sedona Conference, whose mission “is to move the law forward in a reasoned and just way through the creation and publication of nonpartisan consensus commentaries and through advanced legal education for the bench and bar.”

  • January 08, 2021

    New PPP $2M Loan Necessity Questionnaire Strays From Cares Act

    The banking industry entered the coronavirus pandemic in a position of relative strength—far stronger than it was before the Great Recession. As a result, everyone from bank customers to the federal government has looked to banks to help them weather the COIVD-19 storm. In particular, the CARES Act and its Paycheck Protection Program (“PPP”) created a structure that used banks as conduits for quickly distributing hundreds of billions of dollars of loans to businesses in the hopes that those businesses could continue to pay employees, mortgages and leases, and utilities and thus remain in business.

  • December 18, 2020

    Biden Administration Likely To Revisit New Trump CFPB Debt Collection Rule

    A favorite guessing game before the Biden administration takes charge is prognostication. The fate of agency rulemaking promulgated by the Trump administration in the area of consumer protection is a hot topic. The Consumer Financial Protection Bureau (CFPB or Bureau) recently released the first of two final rules on debt collection practices (Final Rule). Under a new Bureau head chosen by the Biden team, there is a good chance the CFPB’s rulemaking on debt collection practices is going to be revisited.

  • December 18, 2020

    Texas Federal Court Stay Lifted: CFPB Defends Gutted Payday Lending Final Rule While Pandemic Heightens Need For Small Dollar Loans

    After years of regulatory juggling, in July 2020 the Consumer Financial Protection Bureau (CFPB) released its so-called “Final Payday Lending Rule,” revoking the mandatory Underwriting Provisions of the 2017 Final Rule. The CFPB’s revocation of the Underwriting Provisions represents an enormous win for the small dollar lending industry. The latest iteration of the Final Rule leaves the Payment Provisions intact. Long overshadowed by the controversy over the Underwriting Provisions, the Payment Provisions are now the center of attention although the Underwriting Provisions may be resurrected when the new Biden Administration takes control of the CFPB.

  • December 07, 2020

    Only In New York: Depositary Banks Escape Liability From Conversion Claims Based On Forged Indorsements

    Only in New York is the rule insulating a depositary bank from a direct conversion claim still good law. The rule is based on an old version of the UCC. A provision found in the Revised UCC, adopted by all the other states, completely overturns the old Code’s barrier. A recent ruling on a motion to dismiss by a New York federal district court illustrates the glaring anomaly.

  • December 07, 2020

    COVID 19: SBA Revises PPP $50,000 Loan Forgiveness Rules But Confusion Continues To Delay Processing Of Applications

    Confusion continues to swirl around PPP loan forgiveness for lenders and borrowers. Lenders are holding back on processing loan forgiveness applications. Small businesses continue to be adversely affected by the pandemic. For small businesses, the need for economic assistance ostensibly coming from loan forgiveness is dire.

  • October 06, 2020

    The Fed Approves Development Of Fednow, Long Overdue "Instant" Payments Settlement Service


  • October 06, 2020

    Email Check And Wire Fraud Scams: Lessons Learned From A Law Firm's Hasty Handling Of Its IOLTA

    In a recent decision, a Massachusetts court ordered a law firm to reimburse its bank over $337,400 after falling victim to a check and wire fraud scam perpetrated by email. The decision highlights the importance of "knowing your client" before distributing funds from a client trust account.

  • October 06, 2020

    Bank Of America Dodges Nationwide Class Action Lawsuit When Its Customer Overdraws Deposit Account Using Merchant-Issued Debit Card

    There is a big difference between a so-called "linked" debit card issued by a bank to an account holder and a so-called "decoupled" debit card issued by a merchant to its retail customer. Many consumers carry both in their wallets and use the cards interchangeably.

  • September 15, 2020

    The Risky Race To Set Off Against Wire Transfers: When Common Law Fills The Gap Under UCC Article 4A

    Article 4A of the Uniform Commercial Code (UCC) does not always occupy the field of loss allocation for wire transfers. When the race to set off is in trouble, common law causes of action such as unjust enrichment, fraud, and conversion may come into play as well. A federal district court order dated March 20, 2020, denying a motion for a judgment on the pleadings, illustrates this point.