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3 Takeaways (a Litigator’s Perspective) from CFPB Supervisory Highlights

The CFPB recently issued its newest edition of Supervisory Highlights Mortgage Serving Special Edition, Issue 11 (June 2016).

From a litigator’s perspective, the Supervisory Highlights do more than summarize recent supervisory findings, they also shine a light on future examination and putative class action risks that are emerging. The CFPB is providing key insights into what it believes should be industry standards. Banks and mortgage servicers should read carefully both the specific findings summarized and slightly more subtle clues to evolving future CFPB requirements.  Here are three takeaways on the Highlights from a financial services class action litigator’s perspective:

  1. ECOA & Special Servicing Populations Continue to be a Strong CFPB focus.

In section 2, “Our approach to mortgage servicing examinations,” the CFPB uses a fair amount of real estate to highlight ECOA requirements. In fact, the report states clearly “…Supervision will be conducting more comprehensive ECOA Targeted Reviews of mortgage servicers in 2016.” (See Supervisory Highlights, p.5).  The report specifically indicates that the ECOA Baseline Modules in the CFPB Supervision and Examination Manual will be a tool used by CFPB examination teams. Banks and servicers would do well, if you are not already, to consider the modules and how your data may be viewed. The CFPB specifically flags Module IV fair lending risks related to servicing including staff training, monitoring and “servicing those customers with Limited English Proficiency.” (See Supervisory Highlights, p.5, and ECOA Examination Modules). Among the module’s areas of inquiry are: whether personnel who are available for limited English speaking customers receive the same training and have the same authority as do other personnel, and the level(s) of discretion that servicing personnel may have in making loss mitigation decisions and referrals for customers with limited English (including controls to monitor such discretion usage).  The Highlights appear to signal that the CFPB will increase focus on these areas in the coming months. Banks and servicers may wish to re-evaluate their progress and operations capabilities in these areas. As always, the plaintiff’s consumer bar may be watching CFPB pronouncements and enforcement, and may initiate consumer class action(s) asserting such claims.

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Georgia Banks Targeted for Alleged ATM Patent Infringement – Bryan Cave Mounts a Joint Response

We have learned that a company, Automated Transactions, LLC, is now targeting banks throughout Georgia alleging patent infringement with respect to ATM technology.  This entity has also targeted banks in other states, including several New England states. Automated Transactions claims that it has exclusive rights to certain ATM technologies and that banks, through the use of their ATMs, are infringing upon those rights. A number of banks in Georgia have received a demand letter from Automated Transactions, and we understand that more banks in Georgia will be targeted. We want banks to understand the issue being raised and be prepared to respond.  Please click here for a Bryan Cave memo that analyzes the allegations being made. 

In order to respond to these allegations effectively, we believe Georgia banks should undertake a concerted response.  If attacking the merits of the patents, we expect that there would be numerous issues on which banks would share a position. If licensing discussions were to be pursued, Georgia banks will have more bargaining leverage working as a group. In any event, the more banks involved, the greater the impact they can have in any discussions and the smaller the cost per bank.

To that end, we are currently working with approximately two dozen Georgia banks in responding to these patent infringement allegations. If you are contacted by this claimant and/or want to obtain more information about joining the group, please contact Walt Moeling (404-572-6629), Jonathan Hightower  (404-572-6669), or Ryan Pumpian (404-572-6851).


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