New York State Temporarily Modifies Regulations Governing Mortgage Payments and Consumer Fees

By: Jason P. Hipp

New York StateAs just one of the many aspects of New York State’s response to the coronavirus outbreak, last month, on March 21, 2020, New York Governor Andrew Cuomo issued Executive Order 202.9 (the Order), which directed institutions regulated by the New York Department of Financial Services (DFS) to provide financial relief to any person or business who has a financial hardship as a result of the COVID-19 pandemic for a period of ninety days. 

To carry out that general mandate, the Order directed DFS to ensure that “licensed or regulated entities”—which includes banks and savings banks, credit unions, investment companies and mortgage loan servicers, among others—provide to consumers in New York State an opportunity to make an application for a forbearance of mortgage payments (including principal and interest) to “any person or entity facing a financial hardship” resulting from the COVID-19 pandemic and grant such applications in “all reasonable and prudent circumstances.”  While the Order does not specify the precise meaning of the “forbearance,” when read in context of the Order as a whole, it appears to refer solely to a forbearance of mortgage payments for a consumer in New York State.  The Order also empowers DFS to issue regulations directing the restriction or modification of ATM fees, overdraft fees and credit card late fees.

The Order took effect on March 21, 2020, and, under a subsequent executive order issued on April 7, 2020, will remain in effect through May 7, 2020.

Days after the Order, on March 24, 2020, DFS issued emergency regulations implementing the Order.  Under the emergency regulations—which remain in effect for the same period of time as the Order— “New York regulated institutions” (which include both banking organizations and mortgage servicers) are required to grant forbearances of payments due on a residential mortgage for property in New York for ninety days for individuals who reside in New York and demonstrate COVID-19-related financial hardship.  3 NYCRR § 119.3(a).  Denial of such forbearance will subject an institution to a review by DFS of whether that activity constituted an unsafe or unsound practice (relying on several factors enumerated by DFS).  3 NYCRR § 119.3(f).  All DFS-regulated institutions are subject to such a review, notwithstanding language in the Order limiting the review to the practices of any “bank.”

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Zoom Video Communication Meets Resistance from Government Regulators and Plaintiff’s Lawyers as it Zooms Toward Virtual Conferencing Domination

By: Madeline Skitzki and Kate T. Spelman

Computer conferenceAs Zoom’s popularity has soared in recent weeks, the company has begun facing increasing scrutiny from both government regulators and consumer advocates.  Much of this scrutiny has focused on privacy and security concerns, including the following:

  • “Zoombombing” incidents in which unauthorized individuals have allegedly hijacked Zoom meetings, often with racist or pornographic imagery;
  • Zoom’s allegedly unauthorized disclosure of user data to third parties; and
  • Zoom’s alleged use of transport encryption, rather than end-to-end encryption, which allegedly allows Zoom to access user video and audio content.

Government regulators at both the state and federal level have expressed concerns regarding these perceived privacy and security deficiencies.  Multiple state attorneys general, including those in New York, Florida, and Connecticut, have sought information on Zoom’s privacy practices.  Further, the Boston office of the FBI issued a warning and related guidance regarding Zoom’s privacy settings in response to reported “zoombombing” incidents.

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Former CFPB Director Releases White Paper Encouraging CFPB to Protect Consumers Amid COVID-19 Crisis

By: Alexander N. Ghantous

New-Development-IconOn April 6, 2020, Richard Cordray, former director of the Consumer Financial Protection Bureau (CFPB), posted a white paper addressed to current CFPB Director Kathy Kraninger, listing 16 actions the agency should take to protect consumers during the COVID-19 pandemic.[1]  Cordray wants the CFPB to ensure that financial institutions continue complying with consumer protection laws.[2]  The recommended actions relate to mortgage servicing, foreclosure and eviction, vehicle repossession, debt collection and credit reporting.[3]  Examples of these recommendations are as follow:   

  • Collect data regarding consumers’ experiences and widely disseminate the findings.[4] Cordray encourages the CFPB to use all of its tools to compile consumer marketplace data, particularly regarding what consumers need at this difficult time.[5]  According to Cordray, the CFPB can only protect consumers if it identifies current issues in the consumer marketplace.[6] 
  • Provide assistance with preventing foreclosure.[7] The CARES Act (Act), recently passed by Congress, offers consumers protection against foreclosure if they are unable to pay their mortgage loans during the COVID-19 crisis.[8]  For mortgage loans that fall within the purview of the Act, the CFPB, with its supervisory power, can ensure that consumers are afforded this protection.[9]  Cordray encourages the CFPB to work alongside servicers and lenders to attempt to establish similar protections for mortgage loans that are not protected by the Act.[10]

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Navigating Enforcement Risks Associated with the Use of Alternative or Sensitive Data - TechGC

Data trackingIn a recent blog post, TechGC highlighted a dinner that Jenner & Block hosted with TechGC in New York to discuss the use of alternative data when making consumer facing decisions.  At their dinner, “Navigating Enforcement Risks Associated with the Use of Alternative or Sensitive Data,” Kali BraceyJoseph L. NogaMichael W. Ross, Damon Y. Smith and Kate T. Spelman discussed what alternative data is, why consumers should care about it, what regulators are focused on and what consumers need to know when it comes to alternative data.

To read the blog post, please click here


COVID-19 / CORONAVIRUS

A key part of the historic $2 trillion package to address the economic fallout from the coronavirus pandemic (the CARES Act or the Act) is the Paycheck Protection Program (PPP), which extends $349 billion in fully forgivable loans to small businesses, generally those with 500 or fewer employees, through the US Small Business Administration (SBA). In the past week, Noun_virus_1772453the SBA and the US Department of Treasury have issued initial guidance for the new program, which they then expanded and revised just hours before the program was officially launched on Friday, April 3, 2020. The preexisting lineup of 1,800 authorized SBA lenders can now distribute the loans, and lenders have reportedly processed over $2 billion in program funds as of Friday afternoon. To read more about this program, please click here. If you have any questions or feel that we can assist, please reach out to our task force.


COVID-19 / Coronavirus

On March 27, 2020, Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), a historic $2 trillion stimulus package to address economic fallout from the COVID-19 pandemic. With the deep experience of Jenner & Block lawyers who served in government, including Noun_virus_1772453former Special Inspector General of the Troubled Asset Relief Program  Neil Barofsky, our COVID-19 Response Team includes members who played key leading roles in the country’s response to the last economic crisis. To read what they have to say, please click here. If you have any questions or feel that we can assist, please reach out to our task force.


COVID-19 / Coronavirus

We are closely tracking and providing information on developments facing companies and organizations arising from the COVID-19 pandemic. In the latest alerts, our lawyers offer guidance on financial and tax relief provisions in Illinois; share observations of how landlords and real estate lenders are Noun_virus_1772453responding to defaulting tenants and borrowers; consider the effects of the crisis on M&A transactions; explore how social distancing affects ongoing environmental investigations and mediation; analyze how state and federal legislation may combat insurance coverage denials for COVID-19; and examine the Department of Labor’s guidance regarding expanded family and medical leave under the Families First Coronavirus Response Act. These alerts and others are available in the library of our COVID-19 / Coronavirus Resource Center

 


The Wait is Over: FDIC Approves Insurance for New Industrial Banks for the First Time in Over a Decade

Evarts_Susanna_COLOR HR

By: Susanna D. Evarts

New UpdateOn March 18, 2020, the Federal Deposit Insurance Corporation (FDIC) approved the deposit insurance applications for industrial bank applicants Square, Inc., a provider of payment services for small businesses, and Nelnet, Inc., a student loan servicer.  The approvals allow Square and Nelnet to create new industrial banks chartered under Utah law.  Obtaining an industrial bank charter allows companies that are not bank holding companies to own banks that are authorized to originate consumer and commercial loans and collect insured deposits.  Square and Nelnet’s applications are the first that the FDIC has approved in over a decade, marking a potentially significant shift in how the FDIC will treat such applications, and reflecting an increase in the number of active Utah industrial banks, which has hovered at fifteen.  These state-chartered financial institutions are generally subject to the same banking laws and regulations as other types of bank charters.

The approvals come one day after the FDIC issued a proposed rule for public comment, which would impose certain conditions on industrial bank applicants.  This marks a change in the FDIC’s position on approving deposit insurance applications for industrial banks, indicating that the long-dormant industrial bank charter may begin to attract attention once more.  The two new approvals and proposed rule may prompt FinTech and other tech companies to consider seeking a charter as a way to expand their market presence.


COVID-19 / Coronavirus Resources

We continue our efforts to do everything we can to support our clients as they navigate these times.  Our lawyers have provided practical insight into the legal and strategic challenges companies are facing.  To stay abreast of the quickly changing landscape, Jenner & Block has assembled a multi-disciplinary team, drawn from a variety of our practice areas and sector gro Noun_virus_1772453ups, to support clients as they navigate these uncharted waters.  We also continue to update our COVID-19 / Coronavirus Resource Center.  It provides helpful and timely information on the legal and strategic challenges companies are facing. Following is a list of some of those pieces.


First COVID-19 Securities Class Action Lawsuits Hit Cruise Line and Pharmaceutical Company

The rapid developments in the spread and economic impact of COVID-19 present particular challenges for officers and directors of public companies trying to manage their businesses while providing timely and truthful information to shareholders.  Over the last few days, shareholders have filed the first suits alleging that public companies materially misrepresented the impact of COVID-19 on their operations.  If history is any guide, derivative litigation alleging director and officer mismanagement is likely to follow.  Directors and officers of public companies should exercise great care in any public statements regarding the impact of COVID-19 on their businesses, and carefully consider and document the steps they are taking to oversee and respond to COVID-19 developments.

To read more, please click here.

COVID-19: "Employer Guidance for Addressing Possible Layoffs and Closures"

As employers grapple with staffing while dealing with the current COVID-19 crisis, they need to be mindful of their obligations under federal and state legislation addressing certain closures and layoffs.

Under the federal Work Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. §2101, covered employers must provide at 60 calendar days written notice of a covered “plant closing” or “mass layoff.”  WARN contains various definitions that establish:

  • Which employers must give notice;
  • When such notice must be given;
  • Who must receive notice;
  • What must the notice contain; and
  • When notice may be excused.

To read more, please click here.

COVID-19: Issues Facing the Airline Industry

As the novel coronavirus / COVID-19 continues to cause economic and social turmoil across the globe, the airline industry is suffering particularly acute hardships.  US carriers, including Delta, American, United and Southwest, have announced plans to cut their international routes by as much as 80% to 90% over the next several months, and domestic capacity is now being reduced by 20%-40%.  Foreign carriers have been impacted even more harshly.  Ryanair has announced it may have to ground its entire fleet, Air France has announced cuts into its flight schedule of up to 90% and British Airways has made similar cuts of up to 75%.  Furthermore, the aircraft that continue to fly are far from full.  Along with these flight reductions, airlines have grounded fleets of their larger aircraft, instituted hiring freezes and in some cases commenced layoffs, and US airlines are actively seeking ways to preserve cash on hand and obtain relief from the federal government.

To read more, please click here.

To stay abreast of developments through this unprecedented situation, continue to monitor the Consumer Law Round-Up blog and visit the resource library for helpful reference materials.


COVID-19 / Coronavirus Resources

When we read the daily news, we see uncharted waters. Industries are being impacted overnight. We continue to do everything we can to support clients as they navigate these times. Our lawyers have provided practical insight into the legal and strategic challenges companies are facing. Jenner & Block has assembled a multi-disciplinary team, drawn from a variety of our practice areas and sector groups, to support clients as they navigate these uncharted waters. We also continue to update our COVID-19 / Coronavirus Resource Center.  It provides helpful and timely information on the legal and strategic challenges companies are facing.  Noun_virus_1772453Following is a list of some of those pieces.

Evaluating Force Majeure Clauses in Connection with the COVID-19 Outbreak

As governments and businesses take action to mitigate the impact of COVID-19, companies must consider whether and to what extent their existing contractual agreements oblige parties to perform while events related to COVID-19 are impacting the performance under those contracts. Many contracts contain force majeure clauses that may excuse performance in the face of COVID-19. These provisions are not uniform, and the scope of relief they afford may vary considerably based upon the language used, the jurisdictions involved, and the unique facts and circumstances of each case. We provide a brief overview here of how a force majeure clause may excuse performance with respect to COVID-19-related events. To read more, please click here.

SEC Reacts to COVID-19 Crisis and Issues Relief Relevant to Public Companies and Regulated Entities

On Friday, March 13, 2020, and over the subsequent weekend, the Securities and Exchange Commission (SEC) and its staff made announcements with guidance and/or relief for public companies and firms experiencing challenges because of COVID-19 / coronavirus. The SEC and its staff appear to have calibrated the guidance and relief to balance investors’ need for information with the practical realities of an unprecedented public health event. The SEC also emphasized that it is continuing to “assess impacts relating to the coronavirus on investors and market participants, and will consider additional relief from other regulatory requirements.” To read more, please click here.

Cybersecurity Concerns with Regard to Work-From-Home Policies

The COVID-19 outbreak is causing many companies to consider work-from-home programs for many of their employees. Any arrangement where employees are permitted to work from home poses a unique set of cybersecurity risks and challenges, but those risks are heightened when a majority of the work force are away from offices that are controlled. Ensuring that appropriate technical and administrative safeguards are in place prior to launching wide-scale work-from-home programs is critical to ensuring the safety of your network and data.  For considerations that businesses should take into account when implementing work from home programs, please click here.

To stay abreast of developments through this unprecedented situation, continue to monitor the Consumer Law Round-Up blog and visit the resource library for helpful reference materials.