Clarks' Bank Deposits and Payments Monthly : Mealey's : Legal News & Analysis

Clarks' Bank Deposits and Payments Monthly

December 18, 2020
Biden Administration Likely To Revisit New Trump CFPB Debt Collection Rule

A favorite guessing game before the Biden administration takes charge is prognostication. The fate of agency rulemaking promulgated by the Trump administration in the area of consumer protection is a hot topic. The Consumer Financial Protection Bureau (CFPB or Bureau) recently released the first of two final rules on debt collection practices (Final Rule). Under a new Bureau head chosen by the Biden team, there is a good chance the CFPB’s rulemaking on debt collection practices is going to be revisited.
December 07, 2020
COVID 19: SBA Revises PPP $50,000 Loan Forgiveness Rules But Confusion Continues To Delay Processing Of Applications

Confusion continues to swirl around PPP loan forgiveness for lenders and borrowers. Lenders are holding back on processing loan forgiveness applications. Small businesses continue to be adversely affected by the pandemic. For small businesses, the need for economic assistance ostensibly coming from loan forgiveness is dire.
December 07, 2020
Only In New York: Depositary Banks Escape Liability From Conversion Claims Based On Forged Indorsements

Only in New York is the rule insulating a depositary bank from a direct conversion claim still good law. The rule is based on an old version of the UCC. A provision found in the Revised UCC, adopted by all the other states, completely overturns the old Code’s barrier. A recent ruling on a motion to dismiss by a New York federal district court illustrates the glaring anomaly.
October 06, 2020
Bank Of America Dodges Nationwide Class Action Lawsuit When Its Customer Overdraws Deposit Account Using Merchant-Issued Debit Card

There is a big difference between a so-called "linked" debit card issued by a bank to an account holder and a so-called "decoupled" debit card issued by a merchant to its retail customer. Many consumers carry both in their wallets and use the cards interchangeably.
October 06, 2020
The Fed Approves Development Of Fednow, Long Overdue "Instant" Payments Settlement Service

[NOTE: BARBARA CLARK, CO-AUTHOR OF THIS NEWSLETTER, SERVED AS A MEMBER OF THE FASTER PAYMENTS TASK FORCE.]
October 06, 2020
Email Check And Wire Fraud Scams: Lessons Learned From A Law Firm's Hasty Handling Of Its IOLTA

In a recent decision, a Massachusetts court ordered a law firm to reimburse its bank over $337,400 after falling victim to a check and wire fraud scam perpetrated by email. The decision highlights the importance of "knowing your client" before distributing funds from a client trust account.
September 15, 2020
The Risky Race To Set Off Against Wire Transfers: When Common Law Fills The Gap Under UCC Article 4A

Article 4A of the Uniform Commercial Code (UCC) does not always occupy the field of loss allocation for wire transfers. When the race to set off is in trouble, common law causes of action such as unjust enrichment, fraud, and conversion may come into play as well. A federal district court order dated March 20, 2020, denying a motion for a judgment on the pleadings, illustrates this point.
September 15, 2020
Adverse Claim Statutes Are Often Forgotten By Depositary Banks Facing Third-Party Fraud Claims But Can Be A First Line Of Defense

Depositary banks are often caught between a rock and a hard place when faced with an adverse claim from a third-party fraud victim. Developments in litigation before the California federal court illustrate how adverse claim statutes afford depositary banks a first line of defense, but are often ignored.
September 15, 2020
NACHA Releases Informal Guidance For $100,000 Same-Day ACH Per-Transaction Limit

The first 100 days are over since Nacha's rule quadrupling the Same Day ACH per transaction entry limit from $25,000 to $100,000 became effective. In keeping with its role as overseer of the ACH network's operating rules and standards, on July 9, 2020, Nacha released "informal" guidance "interpreting" the large-dollar Same Day ACH entry limit. The guidance focuses on evasion.
August 19, 2020
FDIC Releases Interest Rate Transfer Rule For State-Chartered Banks And Insured Branches Of Foreign Banks

The Federal Deposit Insurance Corporation (FDIC) recently issued its Final Rule on the permissibility of interest rate transfers. The Final Rule is the companion rule to the Office of the Comptroller of the Currency's (OCC) rulemaking released a few days earlier. The FDIC's Final Rule is intended to clarify "the law that governs the interest rates State-charted banks and insured branches of foreign banks … may charge."
August 19, 2020
How Far Will Supreme Court Decision Finding CFPB Structure Unconstitutional Reverberate?

Since the Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) in 2008, a shadow has hung over the agency. Dodd-Frank implemented a unique structure for the CFPB consisting of a single director insulated from the executive power of the President because he or she is only removable "for cause." CFPB's critics attacked this single-director structure as unconstitutional. Under the separation of powers doctrine, they argued, the President must retain the unconditional power to remove the director as a matter of discretion, or "at will." For its detractors, disbanding the CFPB became their mission. Under that scenario, the unconstitutional for-cause removal rule for the agency's director would render the whole agency illegitimate.
August 19, 2020
Is Dodd-Frank UDAAP Becoming UDAP?

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act introduced a consumer protection regime that broadly prohibits unfair, deceptive, and abusive acts by financial institutions and other covered entities or persons in connection with consumer transactions regarding financial products or services. While earlier UDAP statutes, such as Section 5(a) of the FTC Act, prohibit unfair and deceptive acts and practices, Dodd-Frank added the "abusive" piece. In the years since the enactment of Dodd-Frank, the Consumer Financial Protection Bureau, which administers Dodd-Frank UDAAP, has struggled to define what constitutes "abusive" behavior and to differentiate abusive acts from unfair or deceptive acts.
July 20, 2020
Closer Look: OCC Final Rule Reacts To The Problematic Madden Decision On Interest Rate Transfers

As his first major policy initiative, on the day he assumed office, acting Comptroller of the Currency Brian Brooks spearheaded the release of the OCC’s final rulemaking on permissible interest rate transfers. The Final Rule is intended to offer comfort to national banks and federal savings associations relying on the “valid-when-made” common law principle, which protects the interest rate on a loan after the loan is transferred.
July 20, 2020
E-Signatures: A Primer For Navigating During COVID-19

Due to the restrictions on social distancing created by the Coronavirus pandemic, the days when closings on big financial deals occurred in person around the board room table seem to be gone, at least until the spread of COVID-19 is arrested. The customary handshake and pat-on-the-back are no longer socially acceptable. E-signatures are becoming more common than wet ones.
June 24, 2020
Federal Reserve Payments Study Shows Card And ACH Payments Up While Checks Down; What About Cash In COVID-19 Times?

Governmental entities, businesses, and consumers are doing their best to stay afloat during the coronavirus pandemic. Before the virus hit, the use of cash as a form of payment was steadily declining in favor of the core noncash payment systems consisting of credit cards, debit cards, the Automated Clearing House System (ACH), and of course, the old standby, checks.
June 24, 2020
Payments Fraud Continues Unabated According To New Survey

The latest report released by the Association of Financial Professionals (AFP) on payments fraud is full of bad news. Eighty-one percent (81%) of the companies surveyed were targets or victims of payment fraud in 2019. Despite stepped-up fraud control, bad actors continued to infiltrate payment systems. The same sophisticated fraud prevention systems assisting in the fraud prevention battle are aiding criminals in their efforts to attack payment systems.
June 24, 2020
COVID-19: Lawsuit Alleges Bait-And-Switch By Treasury, SBA In Loan Elgibility Guidance Adding To The Confusion Over PPP Forgiveness Rules

Loan forgiveness is one of the driving forces attracting borrowers to the Payroll Protection Program (PPP) passed by Congress under the CARES Act. To date, the rules governing loan forgiveness are murky at best.
June 24, 2020
Bank Wins Check Forgery Case Due To Customer’s Fatal Error

Check forgery schemes perpetuated by a fraudster who is an employee of the depository bank’s customer, unfortunately, are commonplace. Usually, there is a trusting employer who entrusts check writing authority to its bookkeeper. Upon discovery of the check forgery scheme, the betrayed employer tries to recoup the stolen funds by shifting the loss to the bank.
June 05, 2020
Wire Transfers & Account Takeovers: Illinois Court Reads “Bank” Broadly To Include Futures Commission Merchants Under UCC 4A

In a case of first impression, the Supreme Court of Illinois (Illinois Supreme Court) held a Futures Commission Merchant (FCM) to be a “bank” under the wire transfer rules found in Article 4A of the Uniform Commercial Code (UCC). The defendant is Wedbush Securities, Inc. (Wedbush Securities). The fraudsters infiltrated the plaintiffs’ email system and successfully tricked Wedbush Securities into honoring fraudulent payment orders.
June 05, 2020
COVID-19: Exercise Due Diligence To Safegaurd Business Interruption Insurance Payments

A hot topic for financial institutions during the COVID-19 crisis is how to protect their right to insurance payments under business interruption insurance policies. In these COVID-19 times, Financial Institutions (FIs) commonly have relationships on both the depository and lending sides with their commercial customers who may be piling up fees on depository accounts and be in arrears on loan payments. Bank customers, on the other hand, may be looking to shield payments from their creditors.
June 05, 2020
COVID-19: Fed Expands Municipal Liquidity Facility; Is Amending The US Bankruptcy Code Another Viable Tool?

The Board of Governors of the Federal Reserve Board (FRB) will offer up to $500 billion in lending to states and municipalities to help manage cash flow shortfalls created by the coronavirus pandemic. This new credit facility extends and expands the Municipal Liquidity Facility (MLF) announced by the FRB in early April 2020.
May 18, 2020
Case Law Stands Firm Granting Priority To Judgment Creditor As “Transferee” Of Funds In The Debtor’s Deposit Account

If a debtor has granted a consensual security interest in the funds in its deposit account to a secured lender, does the lender have priority over the claims of a judgment creditor who later levies against the funds in the deposit account? One leading decision is a 2016 case from a California federal district court. The court gives priority to the judgment creditor under the rules of Article 9. The decision thoughtfully resolves the priority issue based on the language and policies behind UCC 9-332(b). More recent case law stands firmly behind the California case.
May 18, 2020
Challenge To BofA’s Gating Policy On SBA Paycheck Protection Program Pending Before The 4th Circuit

Bank of America successfully defeated a series of judicial maneuvers by a putative class of small businesses. The plaintiffs seek an order mandating the bank to open its lending doors under the Payroll Protection Program of the CARES Act to small businesses who lack preexisting depository and credit borrowing relationships with BofA. Significantly, the Maryland federal district declined to read a private right of action into the CARES Act. An appeal is pending before the United States Court of Appeals for the Fourth Circuit.
May 18, 2020
Set-Off Against Treasury Stimulus Checks Is Lawful But Not All Banks Are Going There: What Are The Basics To Consider?

CARES ACT stimulus payments from the Treasury are reaching deposit accounts at U.S. financial institutions throughout the country. The $2.2 trillion legislation authorized these payments to help mitigate the economic hardships individuals are facing as a result of the coronavirus crisis.
May 05, 2020
COVID-19: NACHA’S Same Day ACH Transaction Limit Raised To $100,000 Just In Time

NACHA’s Same Day ACH per-payment dollar limit is now $100,000. NACHA raised the limit from $25,000 to $100,000 effective March 20, 2020.