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Ohio Amends the Good Funds Law Effective on September 29, 2017

By Tami Hart Kirby on

The Good Funds Law went into effect on April 6, 2017 amending Section 1349.21 of the Ohio Revised Code to require stricter controls for all residential real estate transactions involving the sale, purchase, or refinance of such real estate. The law was passed as an attempt to combat and thwart fraudulent activities associated with the closings of such residential real estate transactions.  While the Good Funds Law only applies to residential real estate, some title companies have elected to also apply the law to commercial real estate transactions.  The law applies to buyers, sellers, and lenders.

The basic purpose of the law is to eliminate the use of checks and instead to require, with limited exceptions, the transfer of funds to purchase the property at closing to the title company by electronic transfer. While the law initially required that any funds for more than $1,000.00 be electronically wired to the title company prior to the closing, the Ohio legislature has increased this amount to be effective on September 29, 2017 from $1,000.00 to $10,000.00.  Cash, personal checks, certified checks, official checks, or money orders are still acceptable for expenses up to $1,000.00 or $10,000.00 (after September 29, 2017).  This threshold …

New CFPB Rule Limiting Arbitration Clauses Faces Possible Congressional Veto

By Steven Hoying on

The enforceability of arbitration clauses in financial contracts took a hit from the Consumer Financial Protection Bureau (the “CFPB”) this week, but threatened congressional action may undo the effects of the CFPB’s newest regulation before it takes effect.

The CFPB Rule

 On Monday, July 10, the CFPB issued its final rule limiting pre-dispute arbitration agreements in certain financial contracts, in an effort to strengthen financial consumers’ access to class actions. The rule, codified at 12 CFR part 1040, imposes several requirements on providers of certain financial services, including extensions of consumer credit, participating in credit decisions, and referring applicants for consumer credit to creditors:

(1) The provider is prevented from relying on pre-dispute arbitration agreements with respect to class actions until the presiding court in the dispute has ruled that the case may not proceed as a class action;

(2) The provider must include language in its pre-dispute arbitration agreement preserving the consumer’s rights to a class action and notifying the consumer of the same; and…

The Ohio Legislature Creates an Alternative to the Judicial Foreclosure Process for Certain Owners of Residential Property

By Tami Hart Kirby on

The D.O.L.L.A.R. Deed Program for Ohio (the “Program”) was created following the passage of Substitute House Bill 303, and went into effect on September 28, 2016 in order to provide an additional loss mitigation option for homeowners in default of their residential mortgage obligations. The acronym “D.O.L.L.A.R.” stands for Deed Over, Lender Leaseback, Agreed Finance.  Substitute House Bill 303 was unanimously passed by the Ohio legislature as a cost effective and efficient way for borrowers to avoid incurring the expense of defending a foreclosure action while trying to refinance their property and stay in their homes.  As an alternative to the judicial foreclosure process, the law is meant to combat neighborhood blight and preserve home ownership by keeping borrowers in their homes while they try to refinance their defaulted mortgage obligations.  If the refinance is unsuccessful, the property can be transferred to the lender.  This affords Borrower with the opportunity to maintain and reclaim rights and possession of their real property while they try to address their outstanding mortgage obligations.

In order to qualify for the Program, a borrower does not have to be eligible for alternative mortgage loss mitigation, but his or her front-end and back-end debt-to-income ratios must …

Website Accessibility Regulations Delayed Until 2018 but Banks Should Not Table the Issue

By Porter Wright on

Long awaited Guidelines from the federal Department of Justice (DOJ) for website accessibility under the Americans with Disabilities Act (ADA) are now expected sometime in 2018. But, as discussed below, that does not mean that financial institutions transacting business with the public through websites and mobile applications should ignore web-based accessibility entirely until 2018. Law firms and the DOJ are attempting to enforce the ADA on website owners in the absence of mandatory regulatory guidelines.

The ADA and public accommodation

By way of background, the ADA requires that “places of public accommodation” be accessible to the disabled. Most financial institutions operating some form of physical facility open to the public understand their obligations to make those physical facilities accessible. Public accommodations are generally businesses that are open to the public and fall into one of 12 categories listed in the ADA, including “service establishments” which includes banking and financial institutions. Disabled persons can sue under the ADA alleging that they were denied full and equal access to the goods and services at a “place of public accommodation.” The DOJ also can bring suit for alleged ADA violations. There is a set of very specific and largely objective criteria for accessibility …

Disclosure Requirements for Consumer and Business Deposit Accounts, as recently republished by the Consumer Financial Protection Bureau

By Porter Wright on

A variety of federal laws and regulations require banks and financial institutions to make certain disclosures to holders of deposit accounts. Many of these disclosures are designed for consumer protection and accordingly, are only required to be made to those "consumer" deposit accountholders who hold deposit accounts primarily for personal, family, or household purposes.

Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") transferred the rulemaking authority for some of these consumer regulations from other federal regulators to the Consumer Financial Protection Bureau ("CFPB") on July 21, 2011. To reflect this change in authority, the CFPB has republished certain previously existing regulations to Title 12, Chapter X of the Code of Federal Regulations ("C.F.R."), effective December 30, 2011. (It is unclear when the older versions of these regulations will be removed from the CFPB’s predecessors’ sections of the C.F.R.) This recent republication included regulations requiring financial institutions to provide account disclosures, thus providing an excellent opportunity to review the newly republished regulations and take note of how disclosures required to be made to consumer deposit accountholders differ from those required to be made to business deposit accountholders.…

CFPB Releases Examination Manual

By Grant Stephenson on

In October, the Consumer Financial Protection Bureau published its first supervision examination manual which will be of interest to bankers and other financial service executives.

On one level, the manual is fairly pedestrian and may contain little surprising in that most bankers have a fairly extensive appreciation of (and experience with) an examination process. And, of course, the Bureau has direct supervisory authority only over the roughly 100 large banks, thrifts, and credit unions that have assets more than $10 billion.

What should be interesting to many bankers, however, is the insight the Manual provides into the examination approach of the Bureau, an approach that will doubtlessly influence and inform the practices and procedures of all other financial institution regulators, large and small. Essentially, the Manual describes the Bureau’s process for risk assessment: first there will be the establishment of the inherent risk of a particular "product" line for consumers and then there will be an assessment of an entity’s set of quality controls to manage and mitigate the risks.…

SUPREME COURT UPHOLDS ARBITRATION CLAUSES THAT DO NOT PERMIT CLASS ARBITRATION

By Jay Yurkiw on

The United States Supreme Court held yesterday that the Federal Arbitration Act preempted California state contract law which courts had applied to find arbitration agreements invalid if they did not permit class arbitration. The Supreme Court’s decision appears to clear the way for consumer contracts to require the individual arbitration of disputes and prohibit consumers’ use of class action in litigation or arbitration. Some commentators are even saying the decision “could spell the death-knell of consumer class actions.” 

In AT&T Mobility LLC v. Concepcion, the Concepcions brought an action in federal court alleging that AT&T had engaged in false advertising and fraud by charging sales tax on mobile phones it advertised as free. Their action was later consolidated with a putative class action. AT&T tried to compel arbitration because the Concepcions had entered into a contract that contained an arbitration clause. Both the District Court and the Ninth Circuit Court of Appeals denied AT&T’s motion to compel arbitration. The lower courts relied on the California Supreme Court’s decision in Discover Bank v. Superior Court to invalidate the arbitration clause in the contract as “unconscionable” under state law because the provision did not allow for class action arbitration. The Ninth Circuit rejected the argument that …

Consumer Privacy After Dodd-Frank: What Bankers Need to Know

By Porter Wright on

Bankers and other financial product and service providers should expect to provide their consumer customers with far greater access to information than ever before.

The financial reform law adopted last year, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, established a new financial regulatory agency known as the Consumer Financial Protection Bureau. Under Dodd-Frank, the CFPB has the authority to promulgate regulations governing the credit agency reporting practices of financial institutions, including community banks. Also, under Dodd-Frank, banks must make available to each consumer all information regarding a financial product or service such consumer has purchased, including transaction history, cost, and usage information. All of this must be made available in an electronic, usable format, which will be prescribed and overseen by the CFPB.

The CFPB will now have authority to promulgate rules related to privacy and data security under the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Right to Financial Privacy Act and the Financial Privacy Act. Under Dodd-Frank, the CFPB is authorized to promulgate rules “identifying as unlawful, unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service.” The portion of CFPB …

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