Topline Q3 2016

General information

The industry scored an important victory in court in a case in which a guarantor, organized as a corporation, was able to avoid its guarantee on the questionable theory that the guarantor was not a separate legal entity from the borrower. The trial court’s decision barring the lender from enforcing the guarantee would have had grave consequences to commercial lenders. CBA supported the lender with an amicus brief, the arguments of which the court of appeal adopted. The case is LSREF2 Clover Property 4, LLC v. Festival Retail Fund 1357 North Beverly Drive, LP.

CBA submitted a comment letter to the CFPB regarding its proposal to restrict the use of pre-dispute class arbitration. We argued that while we support allowing arbitration as a means to resolve disputes in consumer financial contracts, requiring companies to open themselves up to class arbitration leaves them open to coercion to settle and pay large legal fees regardless of the merits of the conflict. The proposal thus may have the unintended consequence of companies not using arbitration at all.

Issued the following Regulatory Compliance Bulletins:

A review of the U.S. Department of Labor’s overtime regulation raising the minimum salary threshold for exempt employees to $913 per week or $47,476 per year. Department of Labor’s Increased Salary Threshold For Overtime Pay Presents Challenges, dated July 5, 2016.

An analysis of Sciarratta v. U. S. Bank, N.A., a California court of appeal decision holding that a borrower has standing to claim that a loan assignment is void and thus sue for wrongful foreclosure.  Court Decides That Void Assignment of Loan Blocks Foreclosure dated July 18, 2016.

An analysis of the sham guarantee decision discussed above. Court Lets Commercial Guarantor Off The Hook For Dubious And Troubling Reasons, dated July 18, 2016.

An analysis of the FDIC’s frequently asked questions regarding brokered deposits. Analysis of New FAQs on Brokered Deposits, dated July 25, 2016.

A summary of the CFPB’s proposal to regulate small dollar loans. CFPB Proposed Regulation on Small Dollar Loans dated August 8, 2016.

An analysis of the Financial Accounting Standards Board’s new Current Expected Credit Loss (CECL) standard. FASB Update Will Change How Financial Institutions Account For Estimated Credit Losses dated August 15, 2016.

An analysis of Morris v. Ernst & Young, a federal case holding that an accounting firm’s employment agreement that requires employees to bring claims individually in arbitration against the company violated the National Labor Relations Act, which protects employees’ rights to improve working conditions through concerted actions. Ninth Circuit Decision Conflicts with California Supreme Court on Employment Class Arbitration Waivers, dated August 28, 2016.

An analysis of Yee v. American National Insurance Company, which recognizes a duty by the State Controller’s Office, before it requests an audit to ascertain compliance with the state’s unclaimed property law, to demonstrate a “reason to believe” that a person such as a bank or, in this case, an insurance company, has failed to report reportable property. Just Say No: Grounds to Decline a Demand For Examination of Records By The California State Controller’s Office dated August 29, 2016.

An analysis of 1409 West Diversey Corporation v. JPMorgan Chase Bank, N.A. a federal case holding that a bank owed no duty to a non-customer that was defrauded by its own employee. The employee had negotiated a payroll check multiple times through remote deposit capture. Remote Deposit Capture And Multiple Presentment of Checks: New Learnings from 1409 West Diversey Corporation v. JPMorgan Chase Bank, N.A., dated September 5, 2016.

An analysis of the CFPB’s final amendments to the mortgage servicing provisions of Regulations X and Z. CFPB Finalizes Amendments to Mortgage Servicing Rule dated September 6, 2016. 

A summary of AB 1784, which helps clear the way for banks in California to participate in youth savings programs without having to give notice to the Department of Business Oversight in each instance where a program is established. See CBA Regulatory Compliance Bulletin titled CBA-Sponsored Bill Eases Bank Participation in School-Based Savings Programs dated September 6, 2016.

An analysis of AB 2907, which restores industry-supported language in UCC Section 4406. CBA-Sponsored Bill Restores Account Statement Disclosure Standard dated September 6, 2016.

An analysis of the Department of Defense’s interpretive ruling on the Military Lending Act regulation. Department of Defense Issues Interpretive Ruling to its Military Lending Act Regulation dated September 6, 2016.

A summary of AB 2828, which strengthens the state’s data breach notification law. New California Data Breach Law Pierces The Encryption Safe Harbor, dated September 26, 2016.

Guidance on demand letters based on retail websites  not be compliant with the Americans With Disabilities Act. Regional and Community Banks are the Latest Targets of ADA Cyber Accessibility Attacks, dated September 26, 2016.