Future of CFPB up in the air amid power struggle

Richard Cordray, the first and only director of the CFPB, resigned on November 24, setting into motion a series of events that have created uncertainty over the agency’s future. Cordray, who developed the CFPB into an aggressive rule-making and enforcement agency, named long-time CFPB employee Leandra English as Deputy Director prior to his departure. In Cordray’s view, this made English the Acting Director of the CFPB upon his resignation. Hours later, however, President Trump appointed OMB Director Mick Mulvaney as Acting Director of the CFPB. This dispute set up a legal battle that is currently pending in court, the result of which will have significant affects on the CFPB’s regulatory activity.

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Federal court calls into question the constitutionality of bank enforcement actions

In a major blow to the bank regulators’ enforcement powers, the Fifth Circuit Court of Appeals has stayed an FDIC order of removal, finding a strong likelihood that the FDIC’s use of administrative law judges (ALJs) violates the Constitution. The case is Burgess v. FDIC and arises from the FDIC’s allegation that Cornelius Campbell Burgess, a director and former officer of Herring Bank, violated bank laws and regulations by charging personal expenses to the Bank. The FDIC sought a civil money penalty and order of removal and prohibition against Burgess. An FDIC ALJ recommended granting the civil money penalty and the order of removal (a decision I wrote about here), and the FDIC Board accepted the recommendation. Burgess appealed the FDIC’s decision to the Fifth Circuit and asked the court to stay the implementation of the order of removal until deciding the merits of the case. On September 7, the Fifth Circuit granted Burgess’s motion to stay.

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TBA Texas Legislative Update

I had the privilege of attending the Texas Bankers Association’s 2017 Legislative Update at the Brook Hollow Country Club in Dallas this morning. This very informative presentation on recent Texas and federal banking legislation was led by Celeste Embrey, John Heasley, and Eric Sandberg of TBA. For those who were not able to attend, below is a brief recap of some of the highlights.

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Supreme Court finds that FDCPA does not apply to banks collecting purchased loans

The Fair Debt Collection Practices Act (FDCPA) prohibits abusive, unfair, and deceptive debt collection practices, but it applies only to debt collectors. Earlier this week, the Supreme Court was asked to determine who qualifies as a “debt collector.” The court unanimously ruled that a bank or financial services company attempting to collect a debt that it owns—even if the debt was purchased from another lender—is not a “debt collector” subject to the requirements of the FDCPA.

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Texas Bankers Hall of Fame and Bank Executives’ & Directors’ Seminar

On April 27 and 28, I had the privilege of attending the Texas Bankers Hall of Fame and Bank Executives’ & Directors’ Seminar hosted by Sam Houston State University. I would like to congratulate the five Hall of Fame honorees: B.A. Donelson, Jack Griggs, George Martinez, Milton McGee, Jr., and the late Milton Payne. I enjoyed hearing about all of their incredible accomplishments and contributions to community banking in Texas. Congratulations on the well-deserved recognition!

Just like last year, the Seminar provided valuable information to the community bankers in attendance. As an attorney representing community banks, I was most interested in the bank regulatory panel. The panel was again moderated by Sam Golden, formerly with the OCC and now a bank consultant with Alvarez & Marsal. The panelists were Bobby Davenport (Texas Department of Banking), Nathan Heizer (FDIC), Bernadette Hernandez (OCC), and Robert Triplett (Federal Reserve). For those who were not able to make it to the Seminar, I have recapped some of the most helpful information that the regulators shared:

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Court of appeals affirms decision limiting CFPB’s UDAAP authority

The Dodd-Frank Act vested the CFPB with extremely broad authority, particularly the power to regulate unfair, deceptive, or abusive acts or practices (UDAAP). The CFPB has wielded this power broadly and arguably strayed into areas beyond what Congress intended in passing Dodd-Frank. Although courts have allowed the CFPB broad discretion, a recent decision from the Court of Appeals for the DC Circuit suggests that the CFPB’s authority is not limitless. In CFPB v. Accrediting Council for Independent Colleges and Schools (ACICS), the DC court rejected the CFPB’s civil investigative demand (CID) for information relating to the accreditation of for-profit colleges, concluding that the CFPB failed to comply with statutory requirements in issuing the CID.

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Federal court opens the door for banks to sue regulators over CAMELS rating

A federal appeals court in Chicago recently ruled that Builders Bank could move forward with a lawsuit against the FDIC challenging the bank’s CAMELS rating. Although the decision noted the uphill battle of challenging regulators’ CAMELS ratings in court, it opens the door to such suits by finding that banks may have the right to challenge all but the capital portion of the CAMELS rating.

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