Financial Services Blog

Showing 22 posts by Jane Hils Shea.

What Prepaid Accounts Are Subject to the New Prepaid Rules? What you need to know to be ready.

Prepaid cards are increasingly popular—they are frequently used instead of traditional bank accounts to shop, withdraw cash from ATMs, pay for healthcare costs from health savings accounts, distribute natural disaster aid, and pay wages. Read More ›

New York’s DFS Narrows Proposed Cybersecurity Regulations

On September 13, 2016, the New York State Department of Financial Services (“NYDFS”) issued  proposed cybersecurity regulations (“Original Proposed Regulations”) that would impose new, stringent cybersecurity requirements on banks, money transmitters, insurance companies, and other financial service providers regulated by the NYDFS (collectively, “Regulated Institutions”). Read More ›

It’s EZ as 1, 2, 3 . . . Disclosure, limited liability and periodic statements required for prepaid accounts under the CFPB’s new Prepaid Rule amending Regulations E and Z

The Consumer Financial Protection Bureau (CFPB) recently issued a final rule, the “Prepaid Rule,” amending Regulations E and Z. The Prepaid Rule affects issuers of prepaid personal, household or family accounts by expanding the applicability of Regulations E and Z as of October 1, 2017. It brings “prepaid accounts” into Regulation E’s definition of “account” and broadens the reach of Regulation Z’s overdraft credit features. While this rule applies to digital wallets and P2P payments, the CFPB did not extend this rule to virtual currency. Read More ›

Will Sixth Circuit Decision Further Open Doors to Data Breach Recovery Lawsuits?

Defendants in putative class actions suits filed in federal court attempting recovery for data breaches have generally been successful at obtaining dismissal of the claims before their merits can be considered.  This is due to the significant hurdle imposed by the standing requirement under Article III of the U.S. Constitution. Many federal courts have dismissed these claims as lacking Article III standing where the plaintiffs have not alleged a present and ascertainable injury, or an “injury-in-fact”.  But several of the federal appellate courts have indicated a willingness to find standing in these cases, and the recent decision in Galaria  et al. v. Nationwide Mutual Insurance Co. has further strengthened the hand of plaintiffs’ counsel. Read More ›

TD Bank’s Settlement Agreement Provides Insight on State Privacy Concerns

TD Bank recently agreed to pay $850,000 as part of a multi-state settlement agreement with state attorneys from Connecticut, Florida, Maine, Maryland, North Carolina, New Jersey, New York, Pennsylvania, and Vermont. While the assurances in the settlement agreement only bind TD Bank, other companies with electronic records containing consumers’ personal information can benefit from this agreement by interpreting its requirements as minimum standards for their internal security policies and procedures. Read More ›

ECOA AND SPOUSE-GUARANTOR RIGHTS: ANOTHER COURT, ANOTHER VIEW

On the heels of the Sixth Circuit Court of Appeals’ decision in the RL BB Acquisition case that we wrote about a couple of weeks ago comes a contrary decision from the Eighth Circuit on exactly the same issue.  Is a credit guarantor an “applicant” for credit, so that the protections of the Equal Credit Opportunity Act (ECOA) extend directly to a credit guarantor? The Eight Circuit says no. Read More ›

SIXTH CIRCUIT STRENGTHENS SPOUSAL GUARANTY RULE

The Equal Credit Opportunity Act’s ban against credit discrimination on the basis of race, gender, national origin, and the other prohibited bases listed in the law – including marital status - is not terribly complex.  Since its enactment 40 years ago, the ECOA has generated only a small fraction of the lawsuits that the Truth in Lending Act has spawned.  Nevertheless, one ECOA rule in particular has continuously been an Achilles’ heel for creditors – the Spouse Guarantor Rule.  The Rule is particularly difficult to apply because it attempts to address what would seem to be a logical credit request in the structuring of a loan; that is, the personal guaranty of husband and wife business owners, who often hold jointly-owned assets.  A decision last month by the Sixth Circuit Court of Appeals in RL BB Acquisition, LLC v. Bridgemill Commons Development Group, LLC, has now strengthened the Rule by giving it both sword and shield status in the arsenal of a spouse-guarantor defending the enforcement of a guaranty Read More ›

Peeping Tom or Best Practice? Why Regular Employee Account Monitoring May Be Necessary

The news reports of bank losses serve as both cautionary tales and teaching moments: no bank wants to find its name included in headline-grabbing stories of bank employee misconduct.  Monitoring employee accounts for fraud and malfeasance is a regulatory expectation and a best practice for fraud prevention.  While regulators may not have specified particular types of monitoring requirements regarding employee accounts, it is evident that account monitoring parameters targeting high-risk employee transactions can have a greater chance of catching employee fraud than general non-risk based monitoring. Read More ›

OPT-IN OR OPT-OUT? PLAYING DEFENSE AGAINST INTERNET PAYMENT FRAUD

Financial institutions rejoiced last year at the victory won by BancorpSouth Bank in the case brought by its customer, Choice Land Title, LLC, alleging that the Bank must compensate it for $440,000 in fraud losses it suffered arising out of fraudulent wire transfer orders executed by the Bank. (Choice Land Title, LLC v. BancorpSouth Bank, 2013 WL1121339, W.D. Missouri, 2013).  The trial court recognized the validity of the financial institution’s defense that it had acted in accordance with commercially reasonable standards, and enforced the indemnification agreement between the customer and the Bank.  After being confronted with numerous cases finding in favor of the customers who had been the victims of payment fraud, financial institutions finally had a legal precedent for holding firm on refusing to reimburse customers who suffered payment fraud losses as a result of not following the security procedures offered by their financial institutions. Read More ›

From the Dregs to Grand Cru: What a Good Release can Do!

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. 

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Attorney Spotlight

Christopher C. Tieke is an associate in Frost Brown Todd's Louisville office, focusing his practice on business litigation. He graduated from the University of Cincinnati College of Law, with magna cum laude honors; served as an Associate Member of the University of Cincinnati Law Review; and participated in the Entrepreneurship and Community Development Clinic.

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