On August 12, Massachusetts AG Healey, alongside 17 other state attorneys general, sent a letter to CFPB Director Cordray in support of the agency’s proposed rule seeking to impose restrictions on the use of mandatory pre-dispute arbitration clauses by covered providers of certain consumer financial products and services. Although the letter supports the CFPB’s proposed rule, it encourages the CFPB to consider regulations that would prohibit such clauses outright. According to the letter, class action litigation would provide consumers with “real and meaningful benefits,” such as monetary and injunctive relief through settlements, and may further spur industry-wide reforms as well as regulatory and legislative action. The letter further supports the CFPB’s “effort to increase transparency in the arbitration process by requiring covered entities to submit initial claim filings and written awards in arbitration proceedings to the Bureau,” and encourages the agency to (i) publish the information publicly on its website; (ii) enforce timing obligations for reporting the information; and (iii) establish strict penalties, including fines and loss of arbitration privileges, against entities that do not comply with the reporting requirements.
On September 22, the Massachusetts Division of Banks (the Division) and AG Healey’s office will host an informational session to discuss the current state of debt collection and industry regulation in Massachusetts. The Division and AG Healey seek responses to questions regarding how the debt collection industry has changed in recent years; the industry’s organizational structure; licensing requirements for debt collectors and debt buyers; law firm involvement in debt collection activities; notification requirements regarding whether a debt has been sold; debt collection issues, including litigation-related problems, that consumers and industry members face; and how changes in federal laws and regulations governing debt collection practices should be reflected in Massachusetts’s regulations. Written responses and comments to the Division are due by October 21, 2016.
On August 5, New York AG Schneiderman announced that an online retailer will pay $100,000 in penalties to settle allegations that its weak security practices led to a data breach that potentially exposed more than 25,000 credit card numbers and cardholder data. According to AG Schneiderman, after a third party accessed the retailer’s website on August 7, 2014, a merchant bank notified the retailer on June 5, 2015 that customers’ credit card accounts were showing fraudulent charges. The retailer subsequently hired a company to conduct a forensic investigation, during which malware was found on and subsequently removed from the retailer’s website. AG Schneiderman contends that the retailer violated various sections of the New York State General Business Law by failing to notify its customers or law enforcement of the breach and by misrepresenting the safety and security of its website, also in breach of Executive Law § 63(12). In addition to the $100,000 penalty, the settlement requires that the retailer (i) conduct thorough and efficient investigations of future data security breaches; (ii) promptly notify New York law enforcement and affected customers of data security breaches; (iii) “maintain reasonable security policies and procedures designed to protect the personal information of consumers in accordance with New York State General Business laws”; (iv) remediate security vulnerabilities on its websites; and (v) train its employees with the most current data security practices.
State Attorneys General Settle with London-based Financial Institution over Alleged LIBOR Manipulation
On August 9, Massachusetts AG Healey announced, in coordination with more than 40 state attorneys general, a $100 million settlement with a London-based financial institution and related international investment bank (collectively, defendants) to resolve allegations that the defendants manipulated the U.S. Dollar London InterBank Offered Rate (LIBOR) and defrauded government and non-profit entities across the nation. According to AG Healey, from 2007-2009, defendants’ managers instructed its LIBOR submitters to lower their LIBOR rate setting. LIBOR submitters allegedly agreed to these instructions. State attorneys general further allege that, at various times beginning in 2005 and continuing at least into 2009, the defendants’ traders asked LIBOR submitters “to change their LIBOR submissions in order to benefit their trading positions.” LIBOR submitters allegedly often agreed to the traders’ requests. The defendants are the first of “several USD-LIBOR-setting panel banks under investigation by the state attorneys general to resolve the claims against it.”
On August 2, the CSBS announced that it will co-host with the Federal Reserve System the fourth annual “Community Banking in the 21st Century” research and policy conference on September 28 and 29. The two-day event will take place in St. Louis and will feature, among other things, the release of the 2016 Community Banking in the 21st Century national survey and a panel discussion of its findings. Federal Reserve Governor Jerome Powell and Federal Reserve Bank of Chicago President Charles Evans are among the speakers scheduled to deliver keynote speeches.