January 01, 2018

MONTH-IN-BRIEF: Business Regulation & Regulated Industries

Lynette I. Hotchkiss

Banking Law; Consumer Finance

Federal Agencies Revise Community Reinvestment Act Regulations

By Lynette I. Hotchkiss, Rabobank, NA

The Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation published a final rule that revises their respective regulations implementing the Community Reinvestment Act (CRA). The final rule amends the regulations’ definitions of “home mortgage loan” and “consumer loan” to conform to recent changes the Bureau of Consumer Financial Protection (CFPB) made to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The final rule also amends the CRA public file content requirements to provide that an institution required to report HMDA data no longer needs to provide its HMDA disclosure statement directly to the public or to maintain the disclosure statement in its public file, but is required only to provide a notice (required under new 12 CFR 1003.5(b) of Regulation C) that states that the public may obtain a copy of the disclosure statement from the CFPB’s website. In addition, the rule makes technical amendments to remove cross references related to the proposed amended definitions and to remove obsolete references.

Consumer Finance

GAO Finds CFPB Indirect Auto Lending Bulletin a “Rule” Subject to Congressional Review

By Lynette I. Hotchkiss, Rabobank, NA

On December 5, 2017, the U. S. Government Accountability Office (GAO) issued an opinion finding that the Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act Bulletin issued by the Bureau of Consumer Financial Protection (CFPB) on March 21, 2013, constituted a “rule” for purposes of the Congressional Review Act (CRA). In the bulletin, the CFPB addressed certain practices between indirect auto lenders and auto dealers, particularly “dealer mark-ups,” that the CFPB believed could lead to pricing disparities based on a prohibited basis under the Equal Credit Opportunity Act and Regulation B. CRA requires that federal agencies submit each rule to the U.S. Congress and the Comptroller General before the rule can take effect. Based on the GAO’s determination that the CFPB’s Bulletin is a rule under CRA now gives Congress the opportunity, should it choose to do so, to pass a joint resolution of disapproval that would overturn the bulletin.

CFPB Updates TRID Guidance

By Lynette I. Hotchkiss, Rabobank, NA

On December 6, 2017, the Bureau of Consumer Financial Protection (CFPB) updated the TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure Forms. The updated guide incorporates amendments and clarifications made in the final rule the CFPB issued on July 7, 2017 (published August 11, 2017). The rule created tolerances for the total of payments, adjusted a partial exemption affecting housing finance agencies and nonprofits, extended coverage of the TILA-RESPA integrated disclosure requirements to all cooperative units, provided guidance on sharing the integrated disclosures with various parties involved in the mortgage origination process, and memorialized the CFPB’s guidance on a number of issues. The updates in the guide provide clarifications related to these rule changes.

Intellectual Property

Federal Circuit Declares Lanham Act’s Bar on Registration of Scandalous and Immoral Trademarks Unconstitutional

By Joseph F. Marinelli, Fitch, Even, Tabin & Flannery LLP 

In In re Brunetti, the U.S. Court of Appeals for the Federal Circuit ruled that the Lanham Act’s bar on registration of “immoral” or “scandalous” trademarks was an unconstitutional restriction of the First Amendment. Section 2(a) of the Lanham Act provides that the U.S. Patent and Trademark Office may refuse to register a trademark that consists of “immoral” or “scandalous matter” or “matter which may disparage.”  In this case, Erik Brunetti sought to register the mark “FUCT” for use with his clothing brand bearing the same name. The Trademark Office refused to register the mark on the ground that the mark comprised immoral or scandalous matter. Mr. Brunetti appealed, and in a lengthy analysis, the Federal Circuit concluded that Section 2(a)’s bar on immoral or scandalous matter creates an unconstitutional content-based restriction on speech. The court stated that the Trademark Office failed to identify a government interest for policing offensive speech in the context of a trademark registration program, because the program was neither a government subsidy program nor a “limited public forum,” such as a government-funded university, in which the government can more freely restrict speech.

Absent a successful appeal to the U.S. Supreme Court, going forward the Trademark Office will be unable to refuse registration on “immoral” or “scandalous” grounds. This decision comes in the wake of the Supreme Court’s recent ruling in Matal v. Tam, similarly declaring that the Lanham Act’s restriction on the registration of “disparaging” trademarks is unconstitutional.

Employee Benefits

NLRB Loosens Joint-Employer Standard

By Meagan Bainbridge, Weintraub, Tobin, Chediak, Coleman, Grodin Law Corporation

The National Labor Relations Board (NLRB) recently issued a decision significantly loosening the definition of a “joint-employer.” In 2015, the Obama-era NLRB held in Browning-Ferris Industries, 362 NLRB No. 186 (2015), that a joint-employer could be found when an employer merely had the right to control essential terms and conditions of employment of workers employed by another business. The newly comprised NLRB reversed this doctrine, holding that a joint-employer may only be found where there is evidence that one entity has exercised control over essential employment terms of another entity’s employees in a direct an immediate manner. In order to avoid the legal liabilities associated with being a joint-employer, employers should avoid exercising direct control over the employment terms of any individuals for which they do not wish to be a joint-employer.

NLRB Announces New Test for Determining When a Workplace Policy Illegally Interferes with Worker Rights under the NLRA

By Meagan Bainbridge, Weintraub, Tobin, Chediak, Coleman, Grodin Law Corporation

In another tightening of earlier NLRB doctrines, the NLRB recently adopted a new standard for evaluating employers’ workplace policies, which arguably interfere with the exercise of employees’ rights under the National Labor Relations Act (NLRA). The previous standard held that a facially neutral policy violated the NLRA if employees could “reasonably construe” it as prohibiting them from exercising their rights under the NLRA. Under the new standard, the NLRB announced it will evaluate: (1) the nature and extent of the policy’s potential impact on NLRA rights; and (2) the legitimated justifications associated with the rule. Under this test, the NLRB determined that a policy maintained by Boeing restricting the use of camera-enabled devices was lawful, given the company’s highly sensitive and classified work on military and commercial aircrafts. This new test will allow employers to defend their policies before the NLRB, provided they have legitimate justifications for their employment policies, and those justifications outweigh any impact on employees’ NLRA rights.

Lynette Hotchkiss

EVP/General Counsel & Corporate Secretary; Rabobank, N.A

Lynette Hotchkiss is EVP/General Counsel & Corporate Secretary for Rabobank, N.A., where she also previously served as Associate General Counsel. Prior to joining Rabobank, Lynette was with OneWest Bank, N.A, where her responsibilities included monitoring and reporting on regulatory developments impacting the bank’s operations and providing legal support for regulatory compliance matters. Before that, Lynette was an attorney in the Financial Practices Division of the Federal Trade Commission, where she focused on mortgage servicing issues. For much of her career, Lynette used her knowledge and experience in consumer finance laws and regulations to build compliance tools to help financial institutions comply with the complex array of federal and state requirements, first acting as the lead compliance attorney at CFI ProServices Inc. (now Finastra) to develop the Laser Pro® loan documentation system and later leading the legal team at Mavent Inc. (now part of Ellie Mae) to develop the Mavent Expert System, an automated compliance system for mortgage origination.