Links in “Fines, Penalties, Suits, and Settlements”

Several years ago, NCUA took over and settled a suit filed by seven credit unions that claimed that Western Corporate Credit Union (Wescorp) and its senior management had been negligent and breached their fiduciary duty when they engaged in risky investment practices. Now the NCUA has been ensnared in a case brought by the US government against Standard and Poor’s that claims the ratings agency deliberately manipulated risk ratings on mortgage-backed securities. The government’s case cites Wescorp and three other failed corporates and has subpoenaed documents from the NCUA to support its case. To date, NCUA has refused to comply. [7/31/14]

Countrywide's lending program "High Speed Swim Lane," nicknamed "Hustle," emphasized quantity over quality, rewarded employees for producing more loans, and eliminated checkpoints designed to ensure loan quality. Bank of America, which purchased Countrywide in 2008, has been ordered to pay $1.3 billion for those defective loans. A former mid-level Countrywide exec was individually ordered to pay $1 million for her part in the program. [7/31/14]

What Rome Financial did to servicemembers that put it in hot water (to the tune of $92 million), ranged from masking 100% APR loans as 16% APR loans to billing statements that didn't include required information such as the APR, closing date of the billing cycle, and account balance on the closing date. [7/30/14]

Bankers are reporting that the statutes and regulations no longer tell the whole story. They're having to look into the most recent enforcement action against their peers, and then try to plug those holes, as described in this aptly named post, "We Won't Tell What To Do Until After We Punish You For Not Doing It." [7/30/14]

Another institution, Flagstar Bank, is being sued for allegedly participating in an illegal “kickback” scheme. This scheme dealt with private mortgage insurers, violated RESPA, and has been granted a summary judgment motion. [7/24/14]

Yes, ACE Cash Express is a payday lender, not a bank. But the $10 million settlement the CFPB came to with ACE portends some troubling trends that banks should keep an eye on, such as how the CFPB is using its UDAAP authority to apply the Fair Debt Collection Practices Act to all first-party debt collectors and how the CFPB continues to use enforcement actions to impose requirements rather than the "notice and comment" rulemaking process. [7/24/14]

Not surprisingly, the Federal Housing Administration is finding banks apprehensive about continuing to do business with it after several major industry players were hit with big penalties to settle allegations of faulty underwriting. The agency is instituting greater sampling and early reviews of newly originated loans. Will it be enough? [7/24/14]

July’s issue of The NCUA Report describes the process that NCUA is using to determine when a credit union will be assessed a civil money penalty for filing a late 5300 Call Report and includes measures the agency will take to consider extenuating circumstances before penalties are imposed. The names of the credit unions that are assessed penalties will be made public and all penalties collected will go to the U.S. Treasury and not to NCUA. [7/23/14]

FinCEN issues a notice of proposed rulemaking on FBME (Federal Bank of the Middle East) citing money laundering concerns as its primary issue. [7/22/14]

FinCEN has taken action against FBME Bank Ltd, citing the foreign bank for weak anti-money laundering controls. FinCEN’s director states, “the United States will not stand by while financial institutions help those who intend to harm or threaten Americans.” [7/18/14]