The Office of the Comptroller of the Currency (OCC) announced its intention to accept special-purpose national bank (SPNB) charters from nondepository financial technology (fintechs) companies in 2018 pursuant to the powers afforded to it under the National Bank Act (NBA). Judicial challenges followed almost immediately.
If a security interest in a piece of equipment becomes unperfected because of Secured Lender #1’s failure to file a continuation statement, does a competing secured lender who had filed later (Secured Lender #2) suddenly gain priority, even though #2 had actual knowledge of #1’s unperfected security interest? What if #1’s competitor is not another secured lender, but a lien creditor? Or an outright buyer of the equipment? In short, what role does #2’s knowledge of # 1 ’s unperfected security interest play in determining priority? A notable case from Massachusetts nicely frames the issue.
On June 25, 2021, the United States Supreme Court released its opinion in TransUnion LLC v. Ramirez, 2021 U.S. LEXIS 3401 (TransUnion). At issue was whether several thousand putative class members who had information added to their credit report indicating that they might be terrorists, drug traffickers, or other serious criminals, even though they were none of these things, had standing to assert claims for statutory damages under the Fair Credit Reporting Act (FCRA). Building upon and extending the logic of Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) (Spokeo), the Supreme Court held that Article III standing requires a federal court plaintiff to demonstrate that they have suffered a concrete harm: “No concrete harm, no standing.”
The healthcare industry has struggled for some time with solving operational weaknesses and cutting expenses to become profitable on Medicare rates. This has created instability and put significant pressure on hospital margins. As lenders evaluate loans made in the healthcare industry, one of the main sources of revenue—and repayment of debts—are reimbursements that healthcare providers receive from the Center for Medicare and Medicaid Services ("CMS"). Many healthcare borrowers include healthcare insurance receivables and accounts in their borrowing bases. This article explores best practices and potential pitfalls for enforcing—not just perfecting—a security interest in these receivables.
The prior story discusses the damages award in the KLS Diversified Master Fund litigation recently issued by the Southern District of New York. KLS Diversified Master Fund, L.P. v. McDevitt, No. 19-cv-3774 (LJL), 2021 U.S. Dist. LEXIS 64871 (S.D.N.Y. Apr. 2, 2021) (KLS Fund II). An interesting twist to the plaintiff’s request for damages involved the request by plaintiff’s counsel for attorney’s fees based on “fees on fees”.
By definition, guarantors in financing transactions are risk takers. But the degree of risk assumed can be controlled depending on the terms of the guaranty. Attempts at dodging the obligations in a guaranty titled “conditional” are likely to be futile when the terms create an “unconditional” guaranty.
Regulation E implements protections for persons who send remittances to individuals and businesses in foreign countries (Remittance Rule). The most recent amendments to the Remittance Rule promulgated by the Consumer Financial Protection Bureau (CFPB or Bureau) raised the safe harbor compliance exemption threshold (2020 Safe Harbor Exemption).The consequences are most important for smaller players in the marketplace.
Is a transaction purporting to be a lease actually a “true lease” or a “disguised security interest”? This is one of the quintessential questions governed by the Uniform Commercial Code (UCC). A recent bankruptcy decision from New Mexico explores the issue.
On June 30th, President Biden signed into law three joint resolutions under the Congressional Review Act (“CRA”). One of those resolutions, S.J.Res. 15, disapproved of and nullified the Office of the Comptroller of the Currency’s rule titled “National Banks and Federal Savings Associations as Lenders,” more commonly known as the true-lender rule. The resolution passed Congress with essentially unanimous Democratic approval but with only one Republican House member and 3 Republican Senators signing on.
The Consumer Financial Protection Bureau (CFPB or Bureau) recently rescinded an earlier Trump-era policy statement effectively dismantling the “abusive” prong of the “unfair, deceptive, or abusive act or practices” prohibition added to the federal consumer protection law by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act or Dodd Frank).
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.
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.
The following story explains in greater depth how possession of the promissory note is the key to establishing standing in judicial proceedings where execution on the note and foreclosure on the underlying mortgage are the subjects of the lawsuit. The story reviews the role of the long-standing principle that the “mortgage follows the note,” codified in UCC § 9- 203(g), central to a 2020 decision by a New Mexico state court.
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.
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.
In the coming months, millions of mortgage loan borrowers are expected to exit forbearance programs enacted early during the Covid-19 emergency by certain government agencies, according to the press release dated April 5, 2021, issued by the Consumer Financial Protection Bureau (CFPB).
A recent battle between economically stretched lenders and defaulting borrowers which played out before a New York lower court provides a good case study of how the changing COVID-19 pandemic is influencing the exercise of UCC foreclosure remedies involving mezzanine financing.
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.
For years, 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.
For the second time since 2017, a federal appeals court has weighed in on whether special statutory lien provisions designed to help ensure that owners of oil and gas interests receive payment from the first purchasers of the hydrocarbons actually provide interest owners with the protection they hope for. This time, an appeal from an adversary proceeding related to the First River Energy, L.L.C. bankruptcy provided the Fifth Circuit Court of Appeals with the opportunity to consider the oil and gas lien provisions. As anticipated, the Fifth Circuit ruled that Oklahoma’s Oil and Gas Owners’ Lien Act of 2010 provided solid protection to interest owners in Oklahoma, while Texas’s non-standard UCC 9.343 once again failed to provide the automatic protection that Texas interest owners undoubtedly wish it did. The case is Deutsche Bank Trust Co. Ams. v. U.S. Energy Dev. Corp. (In re Fist River Energy, L.L.C.), ___ F.3d ___, 2021 U.S. App. LEXIS 3032.