Financial Institutions and Markets (J)

Financial Institutions and Markets (J)

Contact: Monica Clarke Platt; Schnader Harrison Segal & Lewis LLP (Delaware & Pennsylvania, USA) 

The Consumer Financial Protection Bureau (CFPB) last week issued two proposals aimed at weakening and discouraging arbitration clauses in contracts for consumer financial products. First, the CFPB proposes prohibiting the application of arbitration clauses to class actions proceeding in court. Specifically, the Bureau is considering a requirement that arbitration clauses in covered consumer financial contracts provide that the arbitration agreement is inapplicable to putative class actions filed in court unless and until class certification is denied or the class claims are dismissed. This proposal could significantly increase putative class claims in the consumer finance sector (indeed, increasing access to class litigation appears to be the Bureau’s goal). Second, the Bureau seeks to require entities that use arbitration agreements in their contracts to submit to the Bureau notice of claims filed in arbitration proceedings and arbitration awards, potentially for publication. 

Please click here to read the full Alert.

Contact: Camden R. Webb; Williams Mullen’s (North Carolina & Virginia, USA)

A federal court in Washington DC has ruled that a lawsuit against federal bank regulators challenging “Operation Choke Point” may proceed. Operation Choke Point is a program begun by the United States Department of Justice that was designed to “choke off” banking services to persons who were engaging in illegal activities, such as money laundering. According to the original intent of the program, the DOJ would use the federal banking laws to crack down on banks that, according to the DOJ, knew or should have known that their customers were engaging in unlawful conduct. However, after the program was implemented, some banks severed ties with bank customers of certain industries even where there was no indication that these industry members were engaged in anything but lawful business. Then, evidence surfaced that the federal government was not only attempting to choke off banking services to illegal actors but was also using the federal bank regulatory regime to advise banks that it was too risky to do business with certain industries such as tobacco retailers, firearms and ammunition, and payday lending. Members of these industries lost banking relationships, which adversely affected their businesses.

Read more: Operation Choke Point: Lawsuit Against Federal Bank Regulators Survives Motion to Dismiss,...

Author: Att. Ozgur Kocabasoglu

The Communiqué on the Principles Regarding Security Investment Companies (III-48.5) (“Communiqué”) published in the Official Gazette dated 27.05.2015 and numbered 29368. The Communiqué abolishing the Communiqué on the Principles Regarding Security Investment Companies (III-48.2) sets forth provisions on Investment Companies with Variable Capital (“ICVC”) for the first time in Turkish law.

Read more: Communiqué on the Principles Regarding Security Investment Companies

By: Arnie Spevack

When a borrower requests a commercial loan for a new business or a business acquisition, lenders frequently require the borrower to secure the business loan with a mortgage on a personal residence. The residence may be taken as additional collateral, or because of the insufficiency of other business collateral to secure the loan. Using a residence as additional collateral frequently is the best way to meet a lender's collateral requirements.

Read more: Pledging a Residence to Secure a Commercial Loan

By: Alison Rind

A recent 7th U.S. Circuit Court of Appeals case reminds lenders that it is incumbent upon the lender to verify the income stream before extending credit based on rental income. In Wells Fargo Equipment Finance Inc. v Titan Leasing, Inc., the bank extended non-recourse credit (a loan secured only by collateral) to a manufacturer of locomotives relying on the income stream from a specific lease executed by the borrower and its lessee for a locomotive. The borrower presented a fully executed copy of the lease to the bank as evidence of the income stream. The borrower warranted in the loan documents that the locomotive was delivered and accepted by the lessee and that the lessee acknowledged the locomotive’s receipt and acceptance.

Read more: Lenders, Be Wary When Extending Credit on Rental Income Stream