During the early stages of the Heartbleed computer bug panic, financial institutions and their customers were justly concerned about the vulnerability of their e-banking systems. It now appears that the nation’s largest banks, including most regional banks, face little direct risk, and that many community banks continue to work with their technology vendors to determine whether their core platforms used the vulnerable version of Open SSL cryptography. On the same day Heartbleed was “publically” announced, April 7th, the FDIC re-issued its guidance “Technology Outsourcing: Informational Tools for Community Banks.” Read More ›
On April 7, 2014, Governor Beshear signed into law HB 78, which caused Kentucky to join twenty-seven other states and the District of Columbia in the adoption of the Uniform Trust Code (the "UTC"). Kentucky's adoption of the UTC makes the rules related to trust administration more similar to those in surrounding states (e.g., Ohio, Tennessee, West Virginia and Indiana, which have adopted various portions of the UTC in recent years), and it represents a substantial change to the trust law in Kentucky. In general, the UTC, among other things, (i) contains specific in-court and out-of-court procedures for terminating/modifying outdated or inflexible irrevocable trusts, (ii) more specifically defines the respective rights and duties of trustees and beneficiaries, (iii) provides statutory authority for the principles of virtual representation, and (iv) provides an extensive list of definitions applicable to the new Chapter 386B of the Kentucky Revised Statutes. Read More ›
An unheralded transformation is occurring in the business of banking. Banking is increasingly a business of outsourcing banking operations, as stretched financial institutions work to meet their customers and their regulators’ demands. Skill in the procurement of third-party vendor services is now a core competency, and the regulatory agencies increasingly recognize it as such. In December of 2013, the Federal Reserve Board issued its updated “Guidance on Managing Outsourcing Risk.” Read More ›
Last year, the Federal Financial Institutions Examination Council (FFIEC) gift-wrapped an early Christmas present for its members, releasing its final guidance on the risks and legal pitfalls associated with banks, savings associations, credit unions, and nonbank entities engaging in social media. The guidance does not create any new legal obligations for financial institutions, but assists in identifying the many compliance and legal risks associated with social media and the FFIEC expectations for managing those risks. Read More ›
Many lenders may agree that one of the thornier consumer protection regulations is the Equal Credit Opportunity Act’s rule that limits the ability of a lender to require a spousal guarantee. Regulation B lays out the rule in 12 CFR §1002.7(d)(1), and makes some effort to clarify the rule in its Official Interpretations. In a nutshell, the rule bars a creditor from requiring the signature of a spouse or other person that is not a joint applicant, on any debt instrument if the applicant qualifies individually for the amount and terms of credit requested under the lender’s standards of creditworthiness.
Financial institutions are generally cognizant of their obligations to protect the confidential information of their customers, and that a failure to do so has legal and reputational consequences. Because this is such an important aspect of the business’ operations, we share the below story. Although it does not directly involve a financial institution or the privacy protection requirements of the Gramm-Leach-Bliley Act, it nevertheless serves as real-world reminder that financial institutions’ security plans should also deal with the disposal of its office equipment. Read More ›
When victims of Ponzi schemes, also referred to as fraudulent investment schemes, cannot collect from the persons who committed the fraud and "stole" their money, they often look to the bank that handled the deposit account used in the fraud as the deep pocket for recovery. After the July 30, 2013 decision in Parlin Fund LLC, et al., v. Citibank N.A., Case No. 1:13-CV-111, 2013 U.S. Dist. LEXIS 106511 (S.D. Ohio, July 30, 2013, J. Beckwith), individuals damaged by investing in Ponzi schemes may find it much harder to pursue banks. Read More ›
In May, the Indiana legislature enacted HB 1081, which, among other things, alters the state’s Uniform Consumer Credit Code (UCCC). The bill includes a variety of changes that will affect financial institutions, such as changes to: (1) the territorial scope, (2) threshold loan amounts, (3) surety bond requirements, and (4) the Department of Financial Institution’s (DFI) administrative powers. Read More ›
In Wallace v. Midwest Fin. & Mortg. Serv., No. 12-5208, 2013 WL 1729587 (6th Cir. April 23, 2013), Harold Wallace, a subprime mortgage borrower, brought suit against, among others, the lender (MortgageIT) and the broker (Midwest Financial), claiming that the defendants fraudulently appraised the value of his home to force him into a high-cost, adjustable rate mortgage. The district court granted summary judgment to the defendants, finding that Wallace had not shown that the fraudulent appraisal proximately caused his injuries. Read More ›
A Warning to Financial Institutions: Failure to Issue a Litigation Hold May Have Serious Consequences
As electronic discovery has become more prevalent and voluminous, national standards for the preservation of evidence have evolved dramatically in the past decade. Through a proliferation of electronic discovery orders involving discovery compliance, courts have addressed when the duty to preserve evidence arises, signifying a party’s duty to issue a “litigation hold.” Courts have not answered, however, whether a party can withhold documents generated before issuing a litigation hold on the basis of work product protection. Both the duty to preserve evidence and the work product doctrine require the “anticipation of litigation.” Thus, can a party anticipate litigation for purposes of asserting work product protection before it anticipates litigation for purposes of issuing a litigation hold? Read More ›
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Kevin T. Shook is a business litigator who counsels clients on a broad range of legal disputes including fraud and contract cases, real estate litigation, creditor’s rights, media law, constitutional law and government regulation.