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Jul

15

2015

Joseph & Cohen Expands Its Banking Practice – Janet Walworth Joins As Of Counsel

SAN FRANCISCO, CA – July 15, 2015. Joseph & Cohen, Professional Corporation, announced today that Janet Walworth has joined the Firm’s banking and transactional group as Of Counsel.  With over 30 years of experience as a commercial lending, transactional and restructuring lawyer, Ms. Walworth deepens Joseph & Cohen’s boutique banking industry group which focuses on regulatory, corporate, transactional and litigation for banks, credit unions and other financial service companies.

Janet Walworth currently represents major money center banks, regional and community banks and other financial service companies.  She is a skilled secured lending lawyer with expertise in real estate and personal property secured loans and factoring. Ms. Walworth has a gift for transactional work premised on her ability to forge relationships with her clients. She brings a genuine interest in and understanding for the business and legal issues involved in every matter and is committed to getting the right results for her clients.

Jonathan Joseph, Joseph & Cohen’s Managing Partner, stated, “I’m thrilled to have Janet Walworth join our banking group.  With her years of experience in the secured lending space, we expect our financial institution clients will be clamoring for her to help them structure and consummate secured loans.  Joseph & Cohen can now offer our banking clients an expanded set of services including corporate, regulatory, secured lending, restructurings and commercial and employment litigation.”

Ms. Walworth added, “I’ve known some of the partners at Joseph & Cohen for years and believe that my secured lending and transactional expertise complements their existing practice extremely well.  I’m excited because my existing clients will benefit from the well-known banking industry attorneys comprising the banking practice group at Joseph & Cohen.”

Prior to joining Joseph & Cohen, Ms. Walworth most recently served as Of Counsel for Greenfield Draa & Harrington LLP in San Jose. She earned her L.L.M in Intellectual Property Law from Santa Clara University School of Law in 2012 and was awarded a J.D. from University of San Francisco School of Law, with Honors, in 1979. She is a Member of the McAuliffe Honor Society and received an A.B from the University of California at Berkeley, Magna Cum Laude, 1975 with a major in Journalism and a minor in English Literature.

Ms. Walworth is a member of the State Bar of California and admitted to practice before the U.S. District Court, Northern District of California and Eastern District of California.

Joseph & Cohen, Professional Corporation, is a Financial Services and Litigation Boutique headquartered in San Francisco that emphasizes complex banking, corporate and financial services matters, regulatory and bank enforcement defense, private equity, bankruptcy and insolvency, employment and commercial litigation services.  Joseph & Cohen is known for sophisticated expertise, extraordinary commitment to clients, relationship-based services, and a range of specialized skills typically found only in the largest American law firms.

For additional information about the Joseph & Cohen, Professional Corporation, please visit our website at http://www.josephandcohen.com or Facebook at www.facebook.com/josephandcohen.

Press Contact:  Jonathan Joseph at Joseph & Cohen, 415-817-9250 or jon@josephandcohen.com.

 

 

Jon Cohen and Kristina Del Vecchio Present at Consumer Financial Services Committee Panel on Consumer Arbitration Clauses

SAN FRANCISCO, CA – October 07, 2014. Joseph & Cohen, Professional Corporation, announced today that two of the firm’s attorneys, Jonathan M. Cohen, Senior Partner, and Kristina Del Vecchio, Of Counsel, were selected by the California Bar Association to speak at their Annual Convention in San Diego.  The Firm’s attorneys participated in the Consumer Financial Services Committee program entitled “New Developments in the Enforcement of Consumer Arbitration Clauses” on September 14, 2014.

Ms. Del Vecchio moderated the panel of speakers that included Jonathan Cohen, Bill Webb of Webb Legal Group, and Scott Pearson of Seyfarth Shaw LLP. The panel discussed the current state of arbitration clauses in consumer financial services contracts and recent developments post-Concepcion (AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011)).

Their discussion, which was videotaped by the California State Bar and will be offered for MCLE credit, focused on class action arbitration and waivers, drafting tips, recent litigation surrounding such clauses and what to expect in the future, particularly given the Consumer Financial Protection Bureau’s authority in this area.  Consumer arbitration has undergone radical change as a result of recent US Supreme Court and California Court of Appeals decisions and every attorney should know how it will affect their clients.

Ms. Del Vecchio, Chair of State Bar Consumer Financial Services Committee, said of her experience, “The panel was outstanding; we also received several excellent questions from our audience.”

Mr. Cohen added, “It was an honor to speak at the Annual Meeting about a topic that may seem esoteric but that can drastically alter the outcome of litigation even before a dispute has arisen.”

In addition, on September 9th, Ms. Del Vecchio delivered a 60-minute webinar titled “Spotlight on CFPB Mortgages: Keys to Keeping Up with Federal Standards.”

Hosted by Progressive Business Executive Education, Ms. Del Vecchio’s presentation focused on the continually changing and complex rules of the Consumer Financial Protection Bureau (CFPB).  She addressed the CFPB’s January 10th, 2014 “final” ruling requiring mortgage lenders to assess the consumer’s ability to repay mortgage loans before extending credit became effective, a ruling that the CFPB is still in the process of amending.

Ms. Del Vecchio gave insight on how mortgage lenders can remain up to speed on the latest rule, how it impacts the industry, issues that may arise, and what to expect in terms of future changes.  A recording of the webinar is available for order.  Click here for further details.

Joseph & Cohen, Professional Corporation, is a Financial Services and Litigation Boutique headquartered in San Francisco that emphasizes complex banking, corporate and financial services matters, regulatory and bank enforcement defense, private equity, bankruptcy and insolvency, employment and commercial litigation services.  Joseph & Cohen is known for sophisticated expertise, extraordinary commitment to clients, relationship-based services, and a range of specialized skills typically found only in the largest American law firms.

For additional information about the Joseph & Cohen, Professional Corporation, please visit our website at http://josephandcohen.com/or Facebook at http://www.facebook.com/josephandcohen.

Press Contact:  Jonathan Joseph at Joseph & Cohen, 415-817-9200, ext. 9 or jon@josephandcohen.com.

Feds Target Payday Lenders: The New Enforcement Reality

By Marie Hogan and Jonathan Joseph

The President of the United States sent a wake-up call to the payday lending industry in his 2012 State of the Union speech that they are a target of federal enforcement action by the new Consumer Protection Financial Bureau or CFPB.   President Obama exclaimed:

“If you’re a mortgage lender or payday lender or a credit card company, the days of signing people up for products they can’t afford with confusing forms and deceptive practices—those days are over.”

Almost a week before the speech, the Consumer Financial Protection Bureau, the newest federal agency whose name describes its mission, published its guidelines for examinations of short-term, small-dollar lenders (aka “payday lenders”). See www.consumerfinance.gov/guidance.  Payday lenders and other non-bank financial service providers that have never been subject to direct federal regulation will now be under the jurisdiction of the CFPB.

The CFPB’s guidelines and the President’s call out indicate the payday lending industry has clearly been targeted due to perceived abuses. The initial guidelines for the payday lending industry consist of 17 pages and are a supplement to the CFBB’s 802 page examination handbook.  The management and boards of directors of payday lenders that desire to comply with the CFPB’s regulations should familiarize themselves with the guidelines and implement expanded compliance systems.

WHAT is the CFPB’s purpose?

The CFPB will implement and enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that the market for consumer financial products and services are fair, transparent, and competitive. They will especially target lenders engaging in unfair, deceptive or abusive acts or practices.

WHY payday lending?

Payday loans are supposed to be short term: 14 days. As the name implies, they’re supposed to provide emergency cash to enable consumers to cover short term necessities until the next pay day, when they theoretically should be able to repay the loan.  Critics say this is typically not the case.  Customers often roll-over their debt when they can’t repay it. They wind up living off that borrowed money at an annual interest rate of 400 to 600 percent or more.

Here’s how it works. Let’s say an individual needs $100 and the interest rate for that two week period is 15 percent. The customer writes a postdated check made out to the lender for $115. If the customer can’t pay that amount when the two weeks is up, the lender keeps $15, the loan is extended and another $15 fee is added on.

The CFPB is still in the fact gathering mode regarding the payday industry, holding hearings earlier this year in Birmingham, Alabama.  However, the industry is number two in its list of priorities (see www.consumerfinance.gov/regulations/fall-2011-statement-of-regulatory-priorities).  Richard Cordray, the CFPB’s executive director, said the agency will examine bank and non-bank institutions offering these short-term, small-dollar loans. At the Birmingham hearing, Cordray expressed this sentiment:

“We recognize that there is a need and a demand in the country for emergency credit. At the same time, it’s important that these products actually help consumers and not harm them. We know that some payday lenders are engaged in practices that present immediate risks to consumers and are illegal. Where we find these practices, we will take immediate steps to eliminate them.”

WHAT is the scope of CFPB’s responsibility?

CFPB has responsibility for specified federal consumer financial laws, such as Truth in Lending and the Fair Credit Reporting Act and certain Federal Trade Commission rules, such as the Credit Practices rule.  The CFPB may also issue rules, and even without a rule, it may examine for unfair, deceptive or abusive acts or practices that cause significant financial injury to consumers, erode consumer confidence, and undermine the financial marketplace.

WHICH payday lenders can the CFPB examine?

Any payday lender, in any state, whether regulated or not, can be examined.  The CFPB has the power to take enforcement actions against any payday lender. The first step for the CFPB is an examination of the company for compliance with federal consumer financial laws and unfair, deceptive or abusive acts or practices.   An important point is that the examination guidelines merely provide a roadmap for what a company needs to do.  The CFBP’s guidelines don’t provide detailed direction to a payday lender but the CFBP will provide notice through the examination process regarding the company’s demerits and legal violations.  The CFPB has a scale of 1-5 (one being the best) that will be awarded in an examination.  In general, all payday lenders should strive to earn 1 or 2 ratings in all sub-categories that are reviewed.

The CFPB may investigate and bring administrative enforcement proceedings or civil actions in Federal district court for violations of federal consumer financial laws.  The CFPB additionally may obtain “any appropriate legal or equitable relief with respect to a violation of Federal consumer financial law” including: 1) rescission or reformation of contracts; 2) refund of money or return of real property; 3)  restitution, disgorgement or compensation for unjust enrichment; 4) payment of damages or other monetary relief; 5) public notification regarding the violation; 6) limits on the activities or functions of the person against whom the action is brought; and 7) civil money penalties (which can go either to victims or to financial education).

The CFPB has no criminal enforcement authority; however, it may refer matters it believes may constitute criminal activity to the Department of Justice.

Payday Lender Examinations:   What should management know?

The examination procedures are very much based on bank/financial institution formats.  Here is our list of how this system works based on years of experience and working with the regulatory agencies:

First, policies and procedures must be in writing.  That means the payday lender’s Board of Directors should establish detailed written procedures covering all significant compliance risks and processes.

Second, procedures must address compliance with federal consumer financial laws, as well as addressing other risks.

Third, the Board must be intimately involved in establishing policy, overseeing management and insisting that management comply with its policies.

Fourth, companies must train and monitor their employees.

Fifth, monitor audit procedures and processes and address all criticisms from internal and external auditors, state regulators and the CFPB.

Sixth, compliance must cover “soup to nuts”, meaning from product development to end of customer relationship and every significant step in between.

Seventh, appoint a compliance officer with real authority and responsibility.  For smaller companies, this may be an employee who has other responsibilities, but take steps to assure that the compliance officer is qualified.

Eighth, the company must monitor any third party service providers for compliance with the above.

The CFBP examination objectives are:

1.            To assess the quality of compliance risk management systems, including internal controls and policies;

2.            To identify acts or practices that materially increases the risk of violations of federal consumer financial laws;

3.            To gather facts that help determine whether the lender is engaged in acts or practices that violate the requirements of federal consumer financial laws;

4.            To determine if a violation of a federal consumer financial law has occurred and whether enforcement actions are appropriate.

Which Federal Laws Are Applicable to Payday Lenders?

  • TILA and Regulation Z—TILA is the Truth in Lending Act and Regulation Z require lenders to disclose loan terms and annual percentage rates.  Regulation Z also covers advertising disclosures, proper crediting of payment, proper crediting of credit balances and periodic disclosures.
  • EFTA and Regulation E—EFTA is the Electronic Funds Transfer Act which protects consumers engaging in electronic transfers, including that lenders may not require, as a condition of loan approval, the customer’s authorization for loan repayment through recurring electronic funds transfers.
  • FDCPA—This is the Fair Debt Collection Practices Act which governs collection activities conducted by (a) third party collection agencies and (b) lenders collecting their own debt under an assumed name.
  • FCRA— This is the Fair Credit Reporting Act which, with its regulations, governs furnishing information to credit agencies and the use of credit reports.
  • GLBA – This is the Gramm-Leach-Bliley Act which, together with implementing regulations, requires that furnishers of information to consumer reporting agencies ensure the accuracy of data furnished to the consumer reporting system.
  • ECOA—This is the Equal Credit Opportunity Act which, together with implementing Regulation B, sets requirements for accepting credit applications and providing notice of any adverse action.  Discrimination against a borrower is prohibited, plus discrimination based on public assistance income or because the applicant has exercised any right under the Consumer Credit Protection Act is prohibited.

Some payday lenders do attempt to comply with applicable law.  However, bad actors in the industry have contributed to the perception that widespread abuses exist.   Companies in the “short term small dollar” lending business that desire to avoid potential CFPB enforcement sanctions should implement compliance systems and procedures modeled after those used in the banking industry designed specifically to comply with the laws listed above.  This may entail adding risk and compliance officers to existing management teams, robust internal controls and better policies and procedures.

For additional information contact:

Jonathan Joseph at jon@josephandcohen.com; or

Marie Hogan at mhogan@josephandcohen.com.