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What Businesses and Community Banks Need to Know About the CARES Act, SBA Lending, and Loan Forgiveness

March 26, 2020

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The CARES Act has significant relief for small businesses, including $349 billion in Small Business Administration (SBA) loan guaranties and subsidies and additional funding for SBA programs. Highlights include: 

  • Expansion of SBA’s 7(a) Loan Program to Support New “Paycheck Protection Program” Loans. The SBA’s existing 7(a) program will see:
    • Increase in maximum loan amount to $10 million.
    • Allowable uses expanded to include:
      • Payroll support (including paid sick or medical leave);
      • Employee salaries;
      • Mortgage, rent and utility payments;
      • Insurance premiums; and
      • Other debt obligations. 
  • Loan Forgiveness. Certain borrowers would be eligible for loan forgiveness equal to the amount spent during an eight-week period after the origination date of the loan on:
    • Payroll costs;
    • Interest payment on any mortgage incurred before Feb. 15, 2020;
    • Rent on any lease in force before Feb. 15, 2020; and
    • Utilities for which service began before Feb. 15, 2020.

The amount forgiven would be reduced in proportion to any reduction in employees retained compared to the prior year and to the reduction in pay of any employee beyond 25% of prior year compensation.

  • Subsidies for Certain Existing SBA 7(a) Loans
  • Special Terms for SBA Loans.
    • No personal or collateral guarantee will be required.
    • The eligible recipient does not have to certify that it is unable to obtain credit elsewhere.
    • Eligible borrowers must make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; that funds will be used for a permitted purpose; and that they are not receiving fund from another SBA program for the same uses.
    • Maximum term of loan is 10 years.
    • Interest rate cannot exceed 4% but interest payments are completely deferred for 1 year.
    • No prepayment penalty.

Who Qualifies?

The CARES Act program covers business with 500 or fewer employees, unless the covered industry’s SBA size standard allows more than 500 employees, which were operational on Feb. 15, 2020. The size standards are tested on an affiliate basis—combined with all businesses under common control (50% ownership or contractual control)—counting on an aggregate basis towards the size test, except for hospitality and restaurant businesses, franchises, and recipients of Small Business Investment Company (SBIC) investment.

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Financial Services Regulators Respond to COVID-19

March 21, 2020

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In just a few short weeks, COVID-19 has had far reaching impacts on public health and the global economy. Regulators overseeing banks and non-bank financial services companies are trying to maintain operations, adapt oversight models and promulgate COVID-19 crisis-specific directives and guidance.

As with the crisis itself, these developments are fast-moving. We anticipate facts and details to change from day-to-day. To be clear, this is the first post on COVID-19 on BankBCLP.com, but it will most certainly not be the last. On our firm website, we are tracking regulatory developments that could have a broad impact across the industry.

BCLP Summary of Financial Services COVID-19 Regulatory Response

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2019 Year in Review for Financial Services Class Actions

March 9, 2020

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This Roundup provides a recap of a variety of key developments and summarizes a number of interesting federal case rulings. It is not an exhaustive survey of rulings in state and federal courts nationwide, but should help provide flavor for the current environment as we look forward to 2020. Highlighted in this issue:

  • CFPB Director Kraninger’s 2019 Priorities and 2020 Constitutionality Developments
  • Federal Case Developments of Note
  • 2020 Issues to Watch
  • FTC 2019 Class Notice Study

Access the full 2019 Year in Review here.

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Survey of Banks’ Privacy Practices

March 2, 2020

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To help identify trends in privacy representations, Bryan Cave Leighton Paisner LLP reviewed the websites and privacy notices of Fortune 500 companies identified as primarily engaged in the banking and financial service sectors.

The following summarizes current industry trends: 

  • The vast majority of companies updated their privacy notices to account for the California Consumer Privacy Act (CCPA).
  • Financial institutions are complying with some, but not all, of the enumerated category disclosures required by the CCPA.
  • While only one financial institution stated that they sold personal information, one in five financial institutions failed to clearly articulate whether they did, or did not, sell data.
  • The vast majority of bank and financial institution websites do not include a “Do Not Sell” option.
  • The single financial institution that disclosed that it sold information did comply with the CCPA’s requirement to provide a “Do Not Sell” option.
  • Most banks and financial service companies offered access and deletion rights.
  • The average quantity of behavioral advertising cookies on a bank / financial service company homepage is 10.6.
  • Only one in twelve banks and financial institutions are deploying a cookie notice that seeks opt-in consent.
  • Increased use of adtech cookies negatively correlates to the deployment of an opt-in cookie notice.
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2019 Fintech Legal and Regulatory Discussion

February 5, 2019

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You’re Invited – Join the Atlanta Chapter of the BayPay Forum on February 19 for a 2019 Fintech Legal and Regulatory Panel Discussion

On Tuesday, February 19, from 6-8:30 pm, the Atlanta chapter of the BayPay Forum will meet at Bryan Cave Leighton Paisner’s offices in Midtown Atlanta for a networking reception and panel discussion on the state of fintech regulation.

Start 2019 on solid footing with an engaging panel discussion reflecting on regulatory responses to faster payments, open banking/APIs, blockchain applications and ICOs, and other innovations.  Panelists will include Dick Fraher, Vice President and Counsel to the Retail Payments Office at Federal Reserve Bank of Atlanta; C. Ryan Germany, General Counsel and Assistant Commissioner of Securities & Charities, Office of Georgia Secretary of State Brad Raffensperger; Ben Robey, BSA/AML Compliance Specialist at MSB Compliance, Inc.; and Ken Achenbach, Partner at Bryan Cave Leighton Paisner.  The panel will be moderated by Barry Hester, Counsel at Bryan Cave Leighton Paisner.  Details and free registration are available here using the passcode BRYANCAVE. 

Participants will take away product and service design implications and a better understanding of the consumer protection, safety and soundness, jurisdictional, other policy issues at play.  Discussion will address, among other issues:

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Dutta: The Ninth Circuit Strikes Another Blow to FCRA Plaintiffs

August 17, 2018

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On July 13, 2018, in Dutta v. State Farm Mutual Automobile Insurance Company, 895 F.3d 1166 (9th Cir. 2018), the United States Court of Appeals for the Ninth Circuit affirmed summary judgment against a plaintiff that lacked Article III standing to assert a claim under the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. (“FCRA”).

The Ninth Circuit relied on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), and held that the plaintiff lacked standing because he “failed to establish facts showing that he suffered actual harm or material risk of harm.”

This ruling is significant in the Ninth Circuit and elsewhere because it provides construct under which defendants may successfully challenge a plaintiff’s Article III standing to assert claims under the FCRA or other federal statutes.

Bryan Cave Leighton Paisner’s full client alert on the Dutta decision is available here.

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Restricting Corporate Authority to File Bankruptcy

August 2, 2018

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A dramatic recreation of the fight over corporate authority to file bankruptcy.

The Fifth Circuit recently issued an opinion that federal bankruptcy law does not prohibit a bona fide shareholder from exercising its right to vote against a bankruptcy filing notwithstanding that such shareholder was also an unsecured creditor. This represents the latest successful attempt to preclude bankruptcy through golden shares or bankruptcy blocking provisions in corporate authority documents.

In this post on the Bankruptcy Cave, Bryan Cave Leighton Paisner attorney, Jay Krystinik, analyzes how the Fifth Circuit Affirms Dismissal of Bankruptcy Case Due to Lack of Corporate Authority to File (and potentially provides a blueprint for veto powers over bankruptcy filings).

“There is no prohibition in federal bankruptcy law against granting a preferred shareholder the right to prevent a voluntary bankruptcy filing just because the shareholder also happens to be an unsecured creditor by virtue of an unpaid consulting bill. . . . In sum, there is no compelling federal law rationale for depriving a bona fide equity holder of its voting rights just because it is also a creditor of the corporation.”

The Fifth Circuit was careful to limit its holding to the facts of this case. “A different result might be warranted if a creditor with no stake in the company held the right. So too might a different result be warranted if there were evidence that a creditor took an equity stake simply as a ruse to guarantee a debt. We leave those questions for another day.”

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S Corp Workshop

May 2, 2018

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S Corp Workshop

May 2, 2018

Authored by: Bryan Cave Leighton Paisner

On Monday, May 14, 2018, we will be hosting, with our friends at Porter Keadle Moore, LLC and FIG Partners, an S Corp Workshop exploring issues affecting S Corp banks following adoption of the Jobs and Tax Cuts Act.

Operating as an S Corp has historically been an appealing choice for many financial institutions that have the flexibility to be taxed in a variety of ways. In light of the recent tax reform, however, an S Corp structure may not be as beneficial as it has traditionally been in the past. Whether you’re an existing S Corp considering converting, or just want to learn more about key decision points, join us as we take a deeper dive into the mechanics and calculations as well as discuss case studies on how using this election can help you thrive in today’s dynamic business environment.

Monday, May 14
7:30 am – 5:30 pm
Office of Bryan Cave Leighton Paisner
One Atlantic Center, 14th Floor
1201 W. Peachtree St., N.W.
Atlanta, GA 30309

Click here for Agenda.

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Data Privacy and Security Handbook – 2018 Edition

February 6, 2018

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Bryan Cave Partner David Zetoony has just published the 2018 Edition of the Data Privacy and Security Handbook: A Practical Guide for In House Counsel.

Five years ago few legal departments were concerned with – let alone focused on – data privacy or security. Most of those that were aware of the terms assumed that these were issues being handled by IT, HR, or marketing departments.

The world has changed. Data privacy class action litigation has erupted and data security breaches dominate the headlines. It is now well accepted that data privacy and data security issues threaten the reputation, profitability, and, sometimes, the operational survival of organizations. It is therefore perhaps not surprising to find that in almost every survey conducted of boards and senior management, data issues rank as one of their three top concerns, if not their single greatest concern. With that backdrop, organizations increasingly look to general counsel to manage data privacy and security risks.

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Webinar on Eliminating Bank Holding Companies

October 10, 2017

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On Thursday, October 12, 2017, Atlanta Partner, Robert Klingler, will be presenting a webinar on the Pros and Cons of Bank Holding Companies.  The webinar is hosted by Strafford and will begin 1:00pm Eastern on October 12, 2017.

In April of this year, Bank of the Ozarks, a $20 Billion, NASDAQ-listed, bank holding company, announced its plan to eliminate its holding company, which was completed in June.  In July, BancorpSouth, a $15 billion, NYSE-listed, bank holding company, announced its plan to eliminate its holding company.  With the inclusion of BancorpSouth Bank, only four of the 115 banks with more than $10 billion in assets don’t have a holding company; but that number has doubled in the last six months.

With Jonathan Hightower, Rob previously addressed many of these issues on The Bank Account podcast episode in which they addressed the question “Do Banks Need a Bank Holding Company?

Eliminating a holding company can often be done without limiting the permissible activities of the organization, with the potential for reduced regulatory oversight, simplified financial reporting, and consolidated governance.  However, the holding company structure can also offer significant capital flexibility, particularly for institutions under $15 billion with trust preferred securities or institutions under $1 billion that can take advantage of the Small Bank Holding Company Policy Statement.   Depending on the status of the applicable banking statutes, a holding company structure can also provide significant corporate governance benefits, including facilitating stock repurchases and avoiding super-majority voting thresholds for certain transactions.

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