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Mortgage Compliance News | Mortgage Compliance Newsletter | Mortgage Regulations
News about complying with mortgage laws, rules and regulations.

Orders Fly as New Regulator Proposed

Recent regulatory activity

July 6, 2009

By staff

The response from at least one mortgage-related group to the Obama administration's proposal for a powerful new consumer regulator is 'no thanks.' Meanwhile, nearly two dozen cease-and-desist orders were among more than 50 orders recently lobbed by federal regulators at noncompliant financial institutions.

The new consumer regulator proposed by the U.S. Department of the Treasury on June 30 is "notable more for the sweeping scope of its powers than for any specific provisions impacting the various sectors of the financial market," the Consumer Mortgage Coalition said in a statement. The group called the proposed regulator's rule-writing authority "sweeping" and noted it would be empowered to consolidate disclosures for the Real Estate Settlement Procedures Act and the Truth-in-Lending Act.

"On the one hand, the Consumer Financial Protection Agency for the first time offers the prospect of a truly level playing field -- the proposal covers all products and providers with the same standards and the same examination and enforcement authorities," the group wrote. "However, there is no federal preemption and a rollback of preemption for national banks and thrifts."

The issue of preemption, however, has become a moot point with the U.S. Supreme Court's decision that a federally regulated institution can be investigated and regulated by state regulators.

American Bankers Association President and Chief Executive Officer Edward L. Yingling testified before the House Financial Services Committee on June 24 that there are already too many consumer protection laws and called for a repair of the existing network of regulations and improvements to regulation of nonbank lenders, according to a transcript of his prepared statement. He blamed unregulated nonbanks for the current economic situations and said it would be a mistake to separate the regulation of an institution from the regulation of its products.

"To be remotely effective, this new agency will have to be very large," Yingling added. "Where is this agency's budget to come from?"

The Federal Deposit Insurance Corporation reported last month that it processed 43 orders in May. During the same month, cease-and-desist orders were terminated against Muskegon Commerce Bank in Muskegon, Mich., and The Gary State Bank in Gary, Minn.

Among the FDIC's actions was a May 18 Order Modifying Order of Prohibition From Further Participation against Joel B Burdell (FDIC- 05-148e). Removal-and-prohibition orders were issued against Alex C. Yan of United Commercial Bank in San Francisco (FDIC-09-030e May 18); Philip William Coon of Coast Bank of Florida, now known as First Bank, in Creve Coeur, Mo. (FDIC-08-17e May 15); and Jeremy R. Bryant of The Bank of Waynesboro in Waynesboro, Tenn. (FDIC-08-304e May 18).

A July 1 FDIC news release indicated that Advanta Bank Corp. agreed to a cease-and-desist order, a $150,000 civil money penalty and $35 million in restitution to account holders and businesses that used its cash-back reward program. Business cardholders' interest rates were unfairly increased, while advertisements for the program allegedly promoted rewards that were impossible to obtain.

"The bank engaged in a pattern of deceptive acts or practices in violation of Section 5 of the Federal Trade Commission Act," the FDIC stated.

American Express Centurion Bank agreed to a cease-and-desist order and a $250,000 civil money penalty over unfair practices in a Section 5 violation, the FDIC announced. The Salt Lake City-based bank allegedly returned 14,000 convenience checks in violation of Section 5. But in December 2008, it improved disclosures about dishonored checks in December 2008 and subsequently discontinued the program.

An Office of Thrift Supervision notice indicated that another cease-and-desist order was issued against American Express Bank, FSB, of Salt Lake City, and noted that the company agreed to establish a $1.5 million reserve for customer reimbursement. The agreement involved a $250,000 civil money penalty.

A cease-and-desist order was issued by the FDIC and the State of Washington Department of Financial Institutions against Lynnwood, Wash.-based City Bank, a press release last week said. Failed banks often face such orders before being taken over by regulators.

The FDIC said it issued the following cease-and-desist orders.

Order No.
AmericanWest Bank Spokane, Wash. FDIC-09-144b May 11
The Bank of Commerce Wood Dale, Ill. FDIC-09-055b May 27
Capital Community Bank Provo, Utah FDIC-09-236b May 20
Coffee County Bank Manchester, Tenn. FDIC-09-094b May 1
Community Bank & Trust Cornelia, Ga. FDIC-09-068b May 11
Crescent Bank and Trust Co. Jasper, Ga. FDIC-09-087b May 11
Darien Rowayton Bank Darien, Conn. FDIC-09-178b May 7
Farmers & Merchants Bank Lakeland, Ga. FDIC-09-091b May 19
First Commercial Bank of Tampa Bay Tampa , Fla. FDIC-08-347b May 11
First State Bank Flagstaff, Ariz. FDIC-09-171b May 1
Golden Security Bank Rosemead, Calif. FDIC-09-108b May 8
The Gordon Bank Gordon, Ga. FDIC-09-109b May 11
Homestreet Bank Seattle FDIC-09-121b May 8
Liberty Bank Salt Lake City FDIC-09-122b May 26
Millennium State Bank of Texas Dallas FDIC-09-138b May 19
Peoples Bank of Kentucky Inc. Flemingsburg , Ky. FDIC-09-020b May 8
Premier American Bank Miami, Fla. FDIC-09-061b May 18
The Royal Palm Bank of Florida Naples, Fla. FDIC-09-113b May 20
Town & Country Bank Leawood, Kan. FDIC-09-166b May 29
Westernbank Puerto Rico Mayaguez, P.R. FDIC-08-275b May 22

The following civil money penalties were issued by the FDIC.

Order No.
The Bank of Herrin Herrin, Ill. FDIC-08-227k $1,600 May 18
Bank of Lake Mills Lake Mills, Wis. FDIC-08-377k $3,100 May 18
The Bank of Waynesboro against Jeremy R. Bryant Waynesboro, Tenn. FDIC-08-305k $2,500 May 18
BNA Bank New Albany, Miss. FDIC-09-190k $3,300 May 26
Citizens Bank Hartsville, Tenn. FDIC-09-054k $4,000 May 1
Citizens Bank Hartsville, Tenn. FDIC-09-056k $3,000 April 30
Coulee Bank La Crosse, Wis. FDIC-08-300k $5,270 May 15
The Dart Bank Mason, Mich. FDIC-08-273k $1,950 May 12
Fidelity Savings Bank Pittsburgh, Penn. FDIC-09-032k $17,000 May 28
First Guaranty Bank Hammond, La. FDIC-09-101k $17,000 May 29
First Service Bank Greenbrier, Ark. FDIC-09-159k $8,000 May 26
Grabill Bank Grabill, Ind. FDIC-08-137k $10,000 May 15
Marion Center Bank Marion Center, Penn. FDIC-09-110k $12,000 May 11
Republic Bank & Trust Co. Louisville, Ken. FDIC-08-290k $22,000 May 6
Seattle Bank Seattle FDIC-09-131k $15,050 May 27
State Bank Wonder Lake, Ill. FDIC-08-157k $4,000 May 15
United Bank Zebulon, Ga. FDIC-09-189k $8,470 May 28

A prompt corrective action was issued against Bankfirst of Sioux Falls, S.D., according to the Board of Governors of the Federal Reserve System (Docket No. 09-079-PCA-SM, June 15, 2009).

The Fed said it terminated an Oct. 10, 2008, written agreement with Bank of Canton in Canton, Penn., on June 1. But the following institutions entered new written agreements with the fed.

Institution Location Regulator Docket No. Date
Amcore Financial Inc. Rockford, Ill. Federal Reserve Bank of Chicago 09-070-WA/RB-HC June 26
CCB Financial Corp. Jonesboro, Ga. Federal Reserve Bank of Atlanta 09-069-WA/RB-HC June 17
First Dupage Bancorp Inc. Westmont, Ill. Federal Reserve Bank of Chicago 09-077--WA/RB-HC June 19
IT & S of Iowa Inc. Oskaloosa, Iowa Federal Reserve Bank of Chicago 09-076-WA/RB-HC June 16

In the Matter of Advanta Bank Corp., Draper, Utah (Insured State Nonmember Bank).
FDIC-09-259b, FDIC-08-403k, June 30, 2009.

In the Matter of American Express Centurion Bank, Salt Lake City, Utah (Insured State Nonmember Bank).
Docket FDIC-09-251b, June 30, 2009.

In the Matter of American Express Bank, FSB, Salt Lake City, Utah, OTS Docket No. 15648
Order No. WN-09-016, June 29, 2009.

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