Showing 40 posts in Duties to Customers.
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 ›
A Cautionary Tale for Money Service Businesses: How Violating the Bank Secrecy Act Could Cost Millions
On February 27, 2017, The Financial Crimes Enforcement Network (“FinCEN”) fined Merchants Bank of California (“Merchants”) $7 million for what it called “egregious” violations of the Bank Secrecy Act (“BSA”). The Office of the Comptroller of the Currency simultaneously assessed a $1 million civil monetary penalty against Merchants because it violated two previous consent orders. Merchants is a community bank located in Carson City, California. The Bank had a large portfolio of Money Service Businesses (“MSBs”) customers. MSBs are generally recognized by federal regulators to include: (1) currency dealers or exchangers; (2) check cashers; (3) issuers of traveler’s checks, money orders, or stored value; (4) sellers or redeemers of traveler’s checks, money orders, or stored value; and (5) money transmitters. In Merchants’ case, it had 165 check-cashing and 44 money-transmitter customers, who often operated at great distances from the Bank. Compounding the situation was the fact that Bank insiders owned or managed a number of the MSB customers. Read More ›
Are Prices Free Speech? The Supreme Court is set to weigh in on whether merchant surcharges are protected as free speech
The Supreme Court recently agreed to review a case from the Second Circuit Court of Appeals holding that New York’s anti-surcharge provision was constitutional. Similar cases–with differing outcomes–have been heard in the Fifth and Eleventh Circuits, as well as a District Court in the Ninth Circuit. The issue is this: in each of the states at issue, statutes prohibit “surcharges” but permit discounts to cash purchasers, whether explicitly (California and Florida) or by implication (New York and Texas). For example: Read More ›
Regional and community Banks often serve as Issuer Banks by providing credit and debit cards to their customers. They also can often face losses because of downstream merchant data breaches that expose the credit and debit cards to misuse. The well known data breach of Target in late 2013 and Home Depo in 2014 are but two very public examples. Read More ›
In a relatively unnoticed enactment of the Kentucky General Assembly, KRS § 382.290 and KRS § 382.297 were amended by Senate Bill 148, effective July 1, 2015. The amendment to § 382.290 merely codifies a generally accepted practice to include source deed descriptions within a mortgage. But the amendment to § 382.297 could have unintended consequences, as it prohibits an amended mortgage from altering the parties or the collateral of a recorded mortgage. Read More ›
In an important decision regarding financial institution claims for recovery of losses resulting from data breaches, the United States District Court in Minnesota recently issued an Order denying Target’s attempt to dismiss all claims brought against it by financial institutions. Read More ›
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 ›
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 ›
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 ›
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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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.