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August 2016 - Monthly Update

The following are some of the more important state attorney general actions impacting the financial services industry:

New York DFS Fines MegaBank $180m for Violating Anti-Money Laundering Laws

On August 19, Superintendent Maria Vullo of the New York Department of Financial Services announced that Mega International Commercial Bank, a Taiwanese bank with a New York branch, was fined $180m and will be required to install an independent monitor for failure to comply with the State's anti-money laundering laws. A recent DFS examination determined that the bank's compliance program "was a hollow shell."

Illinois AG Endorses the Bank on Students Emergency Loan Refinancing Act

On August 15, Illinois Attorney General Lisa Madigan joined U.S. Senator Dick Durbin (D-Ill.) in calling for the passage of legislation to alleviate student debt repayment at the federal level. The Bank on Students Emergency Loan Refinancing Act, sponsored by Sen. Durbin, would allow current federal borrowers to refinance their loans at lower interest rates and allow private borrowers to refinance into federal loans. It also calls for more transparency by student loan servicers.

18 States Join CFPB In Calling for Limits on Mandatory Arbitration Clauses

Virginia Attorney General Mark Herring joined 17 other State AGs on August 12 in submitting a letter to the Consumer Financial Protection Bureau in support of its proposed rule to limit the use of mandatory pre-dispute arbitration clauses in contracts for financial products and services. AG Herring said the rule would "prohibit financial institutions from barring class actions through arbitration clauses and restore to consumers their right to form or join a class action in a court case."

44 States Enter $100m Settlement with Barclays over LIBOR Manipulation

On August 8, New York Attorney General Eric Schneiderman announced that Barclays Bank PLC and Barclays Capital Inc. reached a $100m settlement with 44 states for manipulating the U.S. Dollar LIBOR. Several other USD LIBOR-setting banks are under investigation by the State AGs for similar conduct, and Barclays is the first among them to settle.

AGs from 18 States Seek More Relief for Student Loan Borrowers

California Attorney General Kamala Harris and 17 other State AGs wrote the U.S. Department of Education on August 1 about the proposed defense-to-repayment rules intended to protect students harmed by predatory for-profit colleges. The State AGs asked that, among other improvements, the proposed rules (i) continue to recognize violations of State law as a basis to assert borrower defense claims without the need to obtain a final judgment, and (ii) restore referrals from Stage AGs and legal aid organizations. The Department will publish its final rules by November 1.

Massachusetts AG and Division of Banks Seek Public Comment on Regulation of Debt Collection

The Massachusetts Attorney General's Office and Division of Banks are seeking public input to assist in determining "whether changes to the statutory and regulatory framework regarding debt collection may be warranted." The agencies will host a joint informational session on September 22 and are accepting written comments through October 21.

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For more information on these and other issues impacting financial services providers, please contact:

Jeremiah S. Buckley
Douglas F. Gansler
Heather L. Jones
BuckleySandler LLP
(202) 349-8010

Bradley J. Bondi
Sean P. Tonolli
Cahill Gordon & Reindel LLP
(202) 862-8910

Doyle Bartlett
ERIS Group
(202) 546-1765