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I am serving on an American Bar Association, Senior Lawyers Division, Task Force in connection with setting up ABA approved guidelines to identify elder financial abuse with respect to retirement accounts. The relevant statute and the definition of Monitors, are hereinafter described. A broker-dealer who is a member [“Member”] of the Financial Industry Regulatory Authority (“FINRA”) shall permit each owner [“Investor”] of an account described in sections 408(a), 408(k) or 408A of the Internal Revenue Code [“IRA account”] to designate up to three trusted contact persons as defined in, and consistent with the procedures and requirements of, FINRA’s Rule 4512(a)(1)(F) (such persons hereinafter called “Monitors”) . The Member, at its discretion, may permit the designation of more than three Monitors. An Investor who designates one or more Monitors shall be able to withdraw or cancel those designations at any time, substitute other individuals to replace one or more prior Monitors or, if there are less than three Monitors, add additional individuals to serve as Monitors. There are various, notice events that are suggested to could indicate the account owner is the subject of financial abuse. The Task Force needs to collect and/or review data relating to how the industry is implementing the rules relating to Monitors and the use of “Notice Events”. If anyone in my network has any data or first-hand knowledge of these rules and their implementation, please contact me.
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Financial Institution Letter (FIL-29-2017) applies to all FDIC-supervised institutions.
Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (Title XI) requires the Agencies to adopt regulations prescribing standards for appraisals used in connection with federally related transactions within the jurisdiction of each agency, including that they be performed by certified or licensed appraisers.
The Agencies’ appraisal regulations identify categories of real estate-related financial transactions that do not require appraisals. In particular, Title XI authorizes the Agencies to establish a threshold level below which an appraisal is not required.
Under current thresholds, all real estate-related financial transactions with a value of $250,000 or less, as well as qualifying business loans secured by real estate that are $1 million or less, do not require appraisals. Qualifying business loans are business loans that are not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment.
For real estate-related financial transactions at or below the applicable thresholds, the interagency appraisal regulations require financial institutions to obtain an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices. This evaluation does not need to be performed by a licensed or certified appraiser or meet the other appraisal standards.
The Appraisal NPR creates a new definition of, and separate category for, commercial real estate transactions and proposes to raise the threshold for requiring an appraisal from $250,000 to $400,000 for those transactions.
No increase in the qualifying business loan threshold is being proposed, but the Agencies are requesting data and information about this threshold.
No increase in the residential real estate transaction threshold is being proposed, but the Appraisal NPR requests comment on whether other factors should be considered in evaluating this threshold. For further examples, you can visit the FDIC website.
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There are a number of issues that should be considered when structuring an equity infusion and/or a strategic alliance. The first question is always, what is the regulatory issue associated with the business or new business plan? When setting up the business structure for the equity infusion, are there limitation on what type of entity must hold the license? We also need to ask whether the investors will want governing responsibilities. Do we need to set up a new company, or subsidiaries to effectuate our business plan? Are there already bank loans? If so, we will need the consent of the lender to our new investment structure. If the company is a public company, are there any reporting issues?
As legal counsel, it is essential to be aware of the legal and regulatory benefits that may be available. For example, certain commercial developments may offer incentives to the developer, thus offering an easier path to approval and fewer transactional costs. Also, if we are setting up an advertising partnership in, for example, the fintech lending space, are there any advertising guidelines we need to address? Please contact us to explore our innovative strategic alliance and/or Regulation D packages.
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The Federal Trade Commission (the “FTC”) filed a complaint against Lending Club in the district court for the Northern District of California, in April, 2018. The complaint alleges that Lending Club’s online advertising “lures prospective borrowers by promising ‘no hidden fees,’ but when the loan funds arrive in a consumer’s bank account, the “hidden fees” have been deducted from the consumers’ loan proceeds.” The complaint discuses other advertising practices, such as, a paid blog post, stating “once you’re approved, your money goes straight into your account, with no hidden fees,” along with online, mail and television advertising that direct consumers to Lending Club’s website. In addition to hidden fees, the complaint states that Lending Club: (a) misled consumers into believing they were approved for a loan, which discouraged them from seeking credit elsewhere; (b) withdrew double payments from consumers’ accounts; and (c) continued to collect electronic payments from consumers after they had canceled their automatic payments or completely paid off their loans. Lending Club has denied the FTC’s complaint allegations.
Based upon these allegations, I would advise fintech clients to have policies and procedures to document consumer complaints, how such complaints will be resolved and to have appropriate audit and review procedures in place. Also, it should be noted that Lending Club loans are made by Web Bank but the FTC’s complaint makes no mention of that fact. Thus, for purposes of this non-usury lawsuit, it is clear that the FTC views Lending Club as the lender. This fact goes back to the structuring issues we have discussed in the past. Since the FTC does not have jurisdiction over depository institutions, banks that present false and misleading advertising may have similar suits brought against them by their primary regulators.
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