Topline Q3 2015

General information

Submitted comments on the FDIC’s deposit insurance proposal. The proposal seeks greater alignment between insurance premiums and risk and to reduce “cross-subsidization” where less risky banks subsidize the activities of more risky banks. While CBA supported better alignment between taking undue risks and paying higher premiums, CBA argued against setting in stone the kind of loans that are favored or disfavored (the FDIC’s “loan mix” risk measure), against an overly-broad bar on asset growth, and against treatment of reciprocal deposits as brokered deposits.

The enforceability of credit by an assignee under the terms that it was made by the originator is at risk under the federal court decision of Madden v. Midland Funding. The decision means, among other things, that any assignee of a national bank’s loans that itself is not a national bank (or its subsidiary or agent) might not necessarily be able to enforce the loans as contracted. CBA filed an amicus brief seeking reconsideration by the full Second Circuit Court. That request was denied, and Supreme Court review is being considered.

Filed a friend-of-the-court letter to the California Supreme Court seeking review of a decision that significantly extends the time that plaintiffs can sue California businesses. In Falk v. Children’s Hospital Los Angeles, the court of appeal allowed tolling (extending) the relevant statute of limitations after a trial court decision on the merits in favor of the defendant hospital. Since plaintiffs’ merits of the claim were in fact heard and adjudicated, there is no justification for tolling. 

Provided amicus support in favor of OneWest Bank in a case that addresses whether a lender is liable for tort liability such as negligence even though it is exercising its rights under the loan agreement and stays in its role as lender. In Banayan v. OneWest Bank CBA asked the California Supreme Court to rule that parties in contract only have contract remedies.

The U.S. Supreme Court accepted for review a case addressing the Fair Credit Reporting Act that will affect whether companies can be sued by plaintiffs who are unable to show that they suffered actual harm. This is an issue of great importance because companies can be exposed to massive damage awards any time a plaintiff (more likely a class action plaintiffs’ attorney) can establish any technical violation of a law even if no one has been harmed. The hearing will be in November.

Published Regulatory Compliance Bulletins on:

  • New merchant category codes (MCCs) are issued to help issuers and others comply with the Unlawful Internet Gambling Enforcement Act of 2006 and Regulation GG.
  • City of San Francisco issues FAQs on its two new labor ordinances protecting part-time workers and requiring certain employers to give advance notice of work schedules and changes. 
  • The CFPB, OCC and FDIC announced a consent order against a Pennsylvania bank for not accurately reconciling discrepancies between the amount that customers deposit as indicated on deposit slips and the amount actually deposited. 
  • Analysis of CBA-sponsored bill on local agency deposits. The bill expands the type of reciprocal deposits that can be used to hold agency deposits without the bank having to pledge securities.  
  • AB 304 clarifies that an employer that offers more generous paid sick leave or paid time off is not required to change its accrual method.
  • CBA analyzes the Supreme Court’s disparate impact decision, Texas Department of Housing v. Inclusive Communities Project, which has a silver lining as it cautions courts against allowing inappropriate discrimination claims based solely on statistical disparities. A plaintiff must also show a causal relationship between the disparity and the defendant’s policies.  
  • Analysis of Peterson v. Wells Fargo Bank highlighting the risks of making a loan to a borrower who holds something less than fee simple interest in the secured property.
  • Discussion of Madden v. Midland Funding, a case where a court disallowed a non-bank assignee of a national bank’s credit card portfolio from invoking the National Bank Act and thus enforcing the credits as is.
  • Discussion of a U.S. Supreme Court decision, Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc., that lowers the bar on religious discrimination claims. 
  • Discussion of a case where a bank was found to have violated the “Coogan Act” by charging account fees. The act protects accounts of child actors from unscrupulous guardians and agents.
  • Discussion of a court decision holding that a mortgage servicer violated the Truth in Lending Act by failing to credit an online mortgage payment on time and then charging a late fee.
  • New San Francisco ordinance protects part time workers by requiring employers, before hiring new staff, to offer similar work first to existing part-time employees.
  • New San Francisco ordinance requires employers to give employees advance notice of work schedules and any changes.