The Growth of Fintech as a Regional Economic Driver

Georgia is often lauded as a top state in the nation for business. One of the primary industries supporting this tremendous growth is financial technology (colloquially referred to as “fintech”), with small and large (Fortune 1000) technology-based companies calling the region home. At Parker Poe, we understand the importance of fintech to the overall growth of metro Atlanta and the State of Georgia.

Fintech companies are perhaps uniquely prepared to take advantage of certain Georgia-specific opportunities. In and around the state’s urban centers, they enjoy relatively inexpensive locations. The state’s strong system of higher education provides a pipeline to millennial talent looking to change the world via technology. Moreover, state and local governments have helped advance Georgia’s fintech industry in many ways, from helping companies eliminate restrictions on raising funds, to historically allowing credit card companies to charge competitive rates to customers. Continue Reading

Should N.C. Restrictive Covenants Prohibit Solicitation of Prospective Customers?

We routinely encounter language in North Carolina employment contracts that prohibits the employee from soliciting the company’s customers or prospective customers for a period of time following separation from employment, which can be a big issue in the banking industry. In many cases, this language appears to have been lifted from old contracts or from agreements written for use in other states. Attempts to broadly prohibit solicitation of prospective customers in North Carolina can risk invalidation of the agreement’s non-solicitation prohibitions.

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After Congress Kills CFPB Arbitration Rule, What’s Next?

Congress has passed – and the Trump administration has signaled that the president will sign – a bill to roll back the Consumer Financial Protection Bureau’s sweeping arbitration rule, which the White House has called “uninformed and ineffective policy.” As we explained in our previous blog post, the rule would have banned many financial service companies from using mandatory arbitration clauses in contracts with consumers, opening the door to class action lawsuits against banks, mortgage lenders and servicers, credit card companies, and others who extend credit.

The rule’s opponents criticized it as being more favorable to class action plaintiffs’ attorneys than consumers. Or as the White House put it:

“Under the rule, consumers would have fewer options for quickly and efficiently resolving financial disputes. Further, the rule would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers.” Continue Reading

What Financial Firms, Fintech Companies Need to Know About New CFPB Guidance

As more consumers are choosing to share their financial data to take advantage of innovative fintech products, the financial services industry faces critical questions: Who gets to decide whether financial data is shared? How should that sharing occur? And who is responsible for keeping the information safe?

After soliciting industry comments almost a year ago, the Consumer Financial Protection Bureau has given its initial answers to those questions. It released a set of nine “Consumer Protection Principles” last week designed to help banks, fintech companies, credit unions, credit card companies, and other financial service providers navigate the sharing of consumers’ financial data when consumers request it. Continue Reading

The Practical Effects of LIBOR’s Phase Out

Trillions of dollars’ worth of financial documents use the London Interbank Offered Rate, or LIBOR, to set the interest rate of a transaction. The ICE Benchmark Administration currently maintains a reference for LIBOR by averaging banks’ estimates of how much it costs to borrow from another bank for term periods of one day up to a few months. But the rate that has served as a global benchmark for nearly half a century is now on its way out.

At the end of 2021, the U.K. Financial Conduct Authority (FCA) will no longer require banks to submit their quotes for LIBOR rates. The question – “What will replace LIBOR?” – allows for much speculation at this point, though work has been done to pick a replacement. In the United States, the Alternative Reference Rates Committee (ARRC) has chosen a broad Treasuries repo financing rate as its preferred LIBOR alternative, which is tied to the cost of overnight borrowing collateralized by U.S. Treasury securities. In the U.K., the Risk-Free Rate Working Group (RFRWG) has chosen the Sterling Overnight Index Average (SONIA) as its preferred alternative to LIBOR, which is based on actual transactions in the U.K. overnight unsecured lending and borrowing market. Continue Reading

Faulty Foreclosure Service Results in Lienholder Having to Pay Property Owner

When a lienholder starts a foreclosure, it usually is focused on getting money into its pocket. Yet a recent opinion from the North Carolina Court of Appeals (In re: Ackah – Sept. 5, 2017) should provide a warning to all lienholders – make sure you get proper service in the foreclosure or you may end up with significant money going out of your pocket instead. And if you have an email address for the property owner, make sure to use it to send notice of the foreclosure.

The Facts

Gina Ackah owned residential property in an HOA community near Raleigh. Ms. Ackah moved to Africa and leased the residential property to a tenant while she was gone but did not tell the HOA of her move. Her mail was forwarded to her uncle in South Carolina. In 2014, Ms. Ackah failed to pay her HOA dues and the HOA commenced a foreclosure. The HOA made numerous attempts to send certified mail notices of the foreclosure to Ms. Ackah at her mother’s and uncle’s addresses, but these notices were all unclaimed. The HOA then posted the foreclosure notice on the front door of the property. Even though the HOA had Ms. Ackah’s email address, it never sent the foreclosure notice to her via email. Continue Reading

CFPB’s New Arbitration Rule and How It’ll Likely Be Challenged

On July 10, 2017, the Consumer Financial Protection Bureau (CFPB) announced a new rule that may have significant ramifications for the financial industry. The rule aims to stop a now common feature in financial services contracts: provisions directing customers to private, individual arbitration rather than the courts to settle disputes.

The sweeping rule would ban many financial service companies from using mandatory arbitration clauses in contracts with consumers. The rule does not prohibit such clauses outright, but instead will prevent companies from relying on any arbitration agreement to block a consumer from joining or initiating a class action. The result would be to open the door to class action lawsuits against the vast majority of businesses that extend credit to consumers, including banks, mortgage lenders and servicers, and credit card companies.

In addition, companies will face reporting requirements under the rule for any arbitrations that still happen, either under agreements entered into before the rule becomes effective or for non-class disputes. Parties may then lose the benefit of confidentiality that arbitration can provide. Under the rule, the CFPB would begin posting arbitration data to its public website, starting in July 2019. Continue Reading

The Debt Buying Industry Breathes a Sigh of Relief: Supreme Court Rules for Debt Buyer on FDCPA Claim

Here we are nearing the end of another U.S. Supreme Court term, and it has been a busy one in the creditors’ rights arena – and a particularly good one for debt buyers. Yesterday (June 12, 2017), the Supreme Court issued its second Fair Debt Collection Practices Act (FDCPA) decision of the term: Henson v. Santander Consumer USA Inc. (See our previous blog post about this case after the Fourth Circuit ruled on it in 2016.)

The Supreme Court’s opinion is noteworthy as the first opinion from the newest member of the court, Justice Neil Gorsuch, and for its opening alliterative lines:

“Disruptive dinnertime calls, downright deceit, and more besides drew Congress’s eye to the debt collection industry. From that scrutiny emerged the Fair Debt Collection Practices Act …”

But most memorable for debt buyers is the ruling that the FDCPA does not apply to companies that purchase debt from others and then collect that debt on their own behalf.  Continue Reading

Late Charges on Balloon Payments: How Big Can They Be?

Getting charged extra for a late payment is standard protocol in lending practices. Judges, lawmakers and regulators have long agreed there’s an administrative hassle lenders should be compensated for when having to recover money past its due date. But in the commercial real estate industry, there’s a new question related to maturing loans originated before the financial crisis: Can a lender charge a late fee on the full amount of a balloon payment due at maturity?

In the world of commercial real estate finance, the answer to that question can mean a six or seven figure swing in your loan payoff depending on how the loan documents are interpreted. But so far, courts in New York, Michigan, Arizona and elsewhere have split on what the answer is.  Continue Reading

U.S. Supreme Court Weighs in on Bankruptcy Claims, Fair Debt Collection Practices Act

The United States Supreme Court issued a ruling Monday resolving the question of whether filing a proof of claim for a debt that is time-barred by the statute of limitations is a violation of the Fair Debt Collection Practices Act (FDCPA). In Midland Funding, LLC v. Johnson, Justice Stephen Breyer, writing for the majority, held that filing a proof of claim for a debt that is barred by the applicable state statute of limitations is NOT a violation of the FDCPA.

The case arose out of a Chapter 13 bankruptcy case in which Midland filed a proof of claim for a credit card debt that, on its face, showed that the credit card had not been used in more than 10 years. Such a claim was barred by the six-year statute of limitations in Alabama. After successfully objecting to the claim, the debtor then sued Midland, claiming that the filing of the proof of claim on an obviously time-barred debt was “false,” “deceptive,” “misleading,” “unconscionable” and “unfair” under the FDCPA. The district court held that the FDCPA did not apply and dismissed the lawsuit. The Eleventh Circuit reversed.

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