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Current Events - 08/21/2000

It’s Contemptible! — Well, actually it’s wonderful. We won our contempt hearing against the City of Santa Monica in front of Judge Walker on Thursday. His ruling was simple. If the City does not enact an ordinance, with all the formalities of an ordinance, that suspends their ATM access-fee ban in its entirety then they will be hauled back into court on October 12 to face contempt sanctions. The entire ordinance must be suspended, not just the private enforcement provisions. As we told the judge at the hearing, the banking industry is not looking to collect money from the City Of Santa Monica. What we are looking for is certainty as we once again provide ATM-access convenience to the citizens and visitors to Santa Monica. If the City complies with the Judge’s ruling this time it looks like we will have that certainty. If they do not, it appears we will get their money. Sounds like a win-win situation to me. As always, however, check with your own counsel before changing any policies you have with respect to ATMs located in Santa Monica. Here is our understanding of the logistics: the ordinance will require two readings in front of the city counsel and two affirmative votes to be enacted. After that, the ordinance becomes effective after thirty days have passed without any further action required by the city. The next city counsel meeting is scheduled for September 5. At that point we will have a pretty clear idea whether they intend to comply or not.

I am well aware that all of this is taking time, but it is instructive to see how the legal process operates. We have won repeatedly and methodically every step of the way. This is the opposite of a death by a thousand cuts. Or, as our Associate General Counsel Leland Chan says, with victory after victory it is the exact opposite of the situation we faced with the credit unions in front of Congress several years ago. Sorry to bring up a sore memory, but it is nice to be on the consistently winning side for a change, isn’t it?  The law is once again our friend!

EDD Announcement on Independent Contractors — The Employment Development Department has sought our assistance in getting information out to California banks and other businesses about a new reporting requirement that becomes effective January 1, 2001. The article and fact sheet included with today’s Monday Courier provide information about the new requirements and where you can go to get more information. The EDD will supply an additional article with more details on the new law and its implementation in the fall and we will forward that on to you as well. For more information on the enclosed material, please check the EDD’s Web site at www.edd.ca.gov/txicr.htm or call 916/657-0529.

OCC Warning — National banks and their subsidiaries are being warned by the OCC to review their sub-prime lending activities for “abusive” or “predatory” practices. Such practices could violate fair lending laws and expose the banks to increased credit, legal, and reputational risk according to the OCC. Examiners have been told to be on the lookout for several practices, including the following:
 

• making loans in reliance on the value of collateral rather than the borrowers ability to repay

• targeting individuals who are less financially sophisticated (and how, I ask, does this policy fit in with the bank’s obligation to seek out the financially under-served portion of its community under CRA?)

• using loan terms that make it more difficult for borrowers to reduce indebtedness

• engaging in frequent or multiple refinancings.

The OCC also identified three signs they look for to identify fair lending violations:
 

• referrals by a prime lender to a sub-prime lender subsidiary without reciprocal referrals of applicants who qualify for lower prime rates.

• significant differences in the percentage of minority and female applicants between a prime lender and a sub-prime subsidiary.

• significant differences in the percentage of loans in a predominantly minority area between a prime lender and a sub-prime subsidiary.

You need to know what they are looking for and the heads up ought to apply to state chartered banks as well.

There are only a few weeks left before Labor Day and the traditional end of the vacation season. I hope your summer months have been as nice as mine, but the pace of work at the CBA has certainly not let up!  See you next week.