Spring 2014
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Leadership Message

Nikki Munro
Consumer Financial Services Committee

Dear CFSC Members:

Are you working harder than you ever have? Are you struggling to keep up with the constant barrage of information coming rapid fire style in your inbox? Are you overwhelmed by the financial services cases, memos, press releases and regulations bombarding you from all directions? Are you having trouble prioritizing what you need to read? Are you concerned about what you should focus on in your limited free time so that you can grow your practice or help your organization?

I suspect consumer financial services lawyers around the country are feeling just like you. Playing catch up is a way of life for many of us, and not knowing where to start may be a pressing problem. I invite you to start with the Consumer Financial Services Committee (CFSC).

If you need assistance on housing finance reform, listen to the monthly webinars of the Housing Finance Committee. If you've missed any, please visit our website to listen to prior programs and obtain materials. If mortgages aren't on your priority list, but you need to focus on Telephone Consumer Protection Act or disparate impact issues, look for the materials from the winter meeting, which are also accessible on the CFSC website. Read more...

Meeting Promos/Postcards

Join Us in Los Angeles for Fun, Sun and CLE!

There's still time to register for the Business Law Section's Spring Meeting in Los Angeles at L.A. Live and the Los Angeles Convention Center. The Consumer Financial Services Committee (CFSC) has an exciting agenda of CLEs, substantive subcommittee panels and roundtables to get you up to speed on the latest developments in consumer financial services. The CFSC will begin its meetings on Wednesday, April 9th with the ever popular Beer and Basics program, and conclude Saturday, April 12th. For a great way to catch up with old friends and meet new members, don't miss the Welcome Reception sponsored by McGlinchey Stafford on Wednesday at 6:30pm. And of course, there are tickets available for the joint CFSC/Young Lawyers Committee Dinner on Thursday, April 10th at Cicada Restaurant sponsored this year by Morrison Foerster. For information on how to register, see registration information. A draft schedule of the program is available on the CFSC website under Programs, Meetings and Events.

Pro Bono Article

The Consumer Financial Services Committee Presents A Program Of Successful Pro Bono Activities
By Adamma Obele Muise, Nelson Mullins Riley & Scarborough, LLP

ABA Model Rule 6.1 encourages attorneys to provide at least fifty hours of free legal services each year to those who are unable to pay. This is a serious edict, as demonstrated by Rule 6.1's Comment that pro bono is every lawyer's responsibility, "regardless of professional prominence or professional workload."

During the 2014 Business Law Section Fall Meeting in Chicago, IL, the Consumer Financial Services Committee's Pro Bono Subcommittee will host a program where eight to twelve law firms and business legal departments will present short vignettes of their most successful pro bono activities. Pro Bono Subcommittee Chair Leonard Bernstein hopes that these vignettes will encourage and inspire business lawyers to fulfill their ethical obligation of providing legal services to those who cannot afford it, as well as demonstrate that Consumer Financial Services Committee members are particularly well positioned to provide effective services. In addition, attendants will be encouraged to replicate these programs within their own firms and institutions.

Business Law and Consumer Financial Services Committee members interested in attending the Pro Bono Subcommittee's program should look for the date, time, and location of the program in the Business Section Fall Meeting final schedule that will be released in mid-2014. Members interested in presenting during the program should contact Pro Bono Subcommittee Chair Leonard Bernstein to sign up at lbernstein@reedsmith.com.

Subcommittee Spotlight

New Leaders at the Helm of CFSC Young Lawyers
By R. Scott Adams, Spilman Thomas & Battle, PLLC

The current leadership of the Young Lawyers Subcommittee of the Consumer Financial Services Committee ("CFSC") is working to involve the next generation of lawyers in the CFSC programming, networking, and service. The leaders of the Young Lawyers Subcommittee include Daniel McKenna (Chair); Yasamine Christopherson (Vice Chair) and Marci Kawski (Vice Chair).

A major focus of the group is facilitating significant participation in the CFSC through young lawyer liaisons to each subcommittee. This permits the attorneys presently at the helm of the subcommittees to get to know some of the young lawyers in the field, offer mentorship, and collaborate on projects. Additionally, the CFSC Young Lawyers Subcommittee hosts the "Beer and Basics" session at each CFSC meeting, which gives the floor to young lawyers to make substantive presentations. The group works to provide social engagement at the CFSC meetings, as well. This month's constituent feature highlights these leaders in the consumer financial services bar. Read More...

Legal Feature

A Closer Look at the Struggles of TCPA Compliance
By Michael Goodman, Hudson Cook, LLP

Companies who contact their current and prospective customers by phone may be feeling overwhelmed by the surge in Telephone Consumer Protection Act ("TCPA") litigation, the wide range of TCPA issues being litigated, and the lack of favorable - or even consistent - rulings from courts considering similar allegations. While some companies might consider the TCPA obscure, callers ignore this law at their peril. The TCPA's private rights of action, generous statutory damages calculation, low hurdles for surviving motions to dismiss and summary judgment motions, and burden shifting for key elements of causes of action have created a minefield.

The many conflicting court decisions in private TCPA litigation leaves companies struggling to determine how they can ensure their practices are in compliance with the law. At the same time, there are currently eleven petitions pending before the Federal Communications Commission ("FCC") seeking guidance on a variety of TCPA compliance questions. In a world more perfect than ours, the unresolved issues plaguing companies would match up neatly with the issues the FCC will address in these petitions. Unfortunately, there is little overlap here. This article will explore in more detail the array of compliance challenges companies face and the largely distinct issues before the FCC. Read More...

Housing Finance Subcommittee Update: Rise of Mortgage Claims Under the False Claims Act and FIRREA
By Kelly Lipinski, McGlinchey Stafford

The United States Department of Justice ("DOJ") has placed financial fraud as one of its priorities and has done so by initiating civil actions enforcing the False Claims Act ("FCA") and the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"). At the ABA's winter meeting in Park City, Utah, the Housing Finance Subcommittee sponsored a panel with Bill Harrington from Goodwin Procter and Andrew Schilling from Buckley Sandler to discuss the recent rise of claims under the FCA and FIRREA.

Broadening Coverage of the False Claims Act

During the panel presentation, Mr. Schilling provided an overview of the FCA. The FCA establishes civil liability for: 1) knowingly presenting a false claim to the government; 2) knowingly making a false statement; or 3) knowingly avoiding or decreasing an obligation to pay the government. 31 U.S.C. § 3729. Mr. Schilling observed that the FCA has historically been used for fraud upon the government. However, since the passage of the Fraud Enforcement and Recovery Act of 2009, this interpretation has changed so that direct fraud on the government is no longer required. For example, the government may allege that a fraud upon Fannie Mae and Freddie Mac indirectly involves the government due to the government's infusion of funds and thus, could implicate the FCA. Additionally, the FCA requirement that the actor "knowingly" makes a false claim or statement has been broadly defined to include a deliberate ignorance or reckless disregard for truth. 31 U.S.C. § 3729(b)(1)(A). This broad language beyond "actual knowledge" is a key tool for the government to investigate fraud using a lesser standard than a criminal prosecution. Mr. Harrington added that an interesting issue to consider under the FCA is to what extent individual or department "knowledge" can be attributed to the corporation, particularly when separate departments seemingly operate in silos. Finally, the FCA's penalty provision is notable in that it provides for both a penalty and treble damages. Read More...

Legal Considerations in Drafting Closing Instructions for Qualified Mortgages
By Chris Christensen, PeirsonPatterson, LLP

A. Qualified Mortgage Points and Fees Caps add increased importance to finality of closing fees. Under Dodd-Frank and its implementing regulations, "qualified mortgages" may not exceed points-and-fees caps. These points-and-fees caps place additional pressure on the interface between the lending industry and title industry at loan closing. Aside from operational vigilance, the main tool lenders utilize to ensure proper fee calculations for Truth-in-Lending Act purposes is lender closing instructions. Clear and consistent closing instructions are primarily helpful as an operational tool for lenders to ensure fee consistency for running applicable Qualified Mortgage ("QM") points-and-fees caps calculations. In some jurisdictions, lender closing instructions may form the basis of a legal claim. The most common issues with making those types of claims are outlined in this article.

B. The American Land Title Association ("ALTA") Closing Protection Letter. Closing protection letters, issued by title underwriters, support the common industry practice of independent title agents conducting residential loan closings. Generally, closing protection letters cover (via indemnity or merger into the title policy depending on the jurisdiction) compliance of independent title agents with lender closing instructions related to title matters and fraud or theft by the settlement agent. Read More...

Member Spotlight

Kathleen Keest: From the Heartland to the Front Lines of Consumer Protection
By Rachel Marin, Maurice & Needleman, P.C.

Admired for her work as a consumer advocate, attorney Kathleen Keest began her law career in public service by helping individuals at the local level, and over the years she has become a voice for the people on a national scale. At her current position as a Senior Policy Analyst at the Federal Deposit Insurance Corporation ("FDIC"), she has been working with the Consumer Financial Protection Bureau's new residential mortgage rules, training FDIC examiners, implementing exam procedures and manuals, and advising on other pressing issues. Over the course of her career thus far, Keest has represented individual consumers, devised policy, been involved with litigation and enforcement, taught law school classes, and authored books, treatises, manuals, studies and articles on consumer credit. Although she started her law career at a time when the consumer movement was soon to become eclipsed by deregulation initiatives, Keest has fought steadily to keep the consumer movement flame alive.

Growing up in the small town of Middletown, Illinois, Keest had no accessible attorney role model and she describes her mind as a "tabula rasa" in that she had no vision of what a lawyer might want to accomplish with a legal career. An advisor at her college, Eastern Illinois University in Charleston, Illinois, suggested that law school offered a versatile degree that would distinguish her from the many students who were graduating with social science degrees. Following her college graduation in 1970, she proceeded to law school at the University of Iowa in Iowa City, Iowa, and graduated with honors in 1974. Although she lacked a clear vision of the direction she wished to take, Keest was greatly influenced by the civil rights movement and the public interest era that had been exploding around her for the past two decades, and she closely followed the "major public policy issues playing out in the news and on television." This guided her career path by "shading values and concepts of what one could do with a law degree."

Fresh out of law school, in 1975 the young attorney joined the Black Hawk County Legal Aid Society in Waterloo, Iowa to represent clients who otherwise did not have resources to hire an attorney. She then moved to the Legal Services Corporation of Iowa in Des Moines, Iowa for six years where she worked as a Staff Attorney and then transitioned to become the office's Managing Attorney. In 1979 and 1980, Keest took sabbaticals to work in Washington, D.C. as Assistant Counsel with a subcommittee of the United States Senate that had jurisdiction over the Law Enforcement Assistance Administration and the Office of Juvenile Justice and Delinquency Prevention. In 1980 she completed a three-month fellowship with the National Consumer Law Center in Boston. A few years later she said goodbye to the Midwest and moved to Boston to work as a Staff Attorney with the National Consumer Law Center to focus on consumer credit regulation and credit practices that impacted a broad community of consumers throughout the United States.

Armed with increased knowledge about formulating public policy, Keest then returned to the Midwest in 1996 to serve as an Assistant Attorney General in Iowa and as Deputy Administrator of the Iowa Consumer Credit Code until 2004, and she helped lead the effort to change the industry standard for mortgage lending in a multi-state enforcement action against Household International. Prior to accepting her current position with the FDIC, she was a Senior Policy Counsel at the Center for Responsible Lending, in Durham, North Carolina, the research and policy affiliate of the Center for Community Self-Help, where she focused on regulatory reform issues, predatory lending, and preemption. Read More...