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The Murky Waters of Dodd-Frank and the Penalties for Non-Compliance, Or “When a Bargain Basement LPO Provider is a Bad Idea”
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The Murky Waters of Dodd-Frank and the Penalties for Non-Compliance, Or “When a Bargain Basement LPO Provider is a Bad Idea”

Over the last few years, the combination of tighter corporate belts, faster global communication, and cheap labor overseas led to moderate growth in the thorny world of legal process outsourcing (LPO).  Hoping to shave legal budgets, large companies shopped online for common, low-risk legal services such as legal research and contract reviews.

Reports indicate that companies are beginning to test the LPO waters with more complicated tasks such as due diligence in mergers and acquisitions, contract drafting, and compliance with various state and federal laws.  While legal research and contract review might be suitable tasks to send overseas, the prudent choice is to leave more complicated issues such as compliance to established firms who deal with such issues regularly.

The banking industry, in particular, will be working to wrap its arms around Dodd-Frank for some time.  The Consumer Financial Protection Bureau (CFPB) promises to make life even more interesting for general counsel across the range of financial service providers for at least the next four years.  Some of the topics we’ve reviewed related to the massive Dodd-Frank financial reform act and other banking regulations include the following:

  • The Consumer Financial Protection Bureau (CFPB) issued its final remittance rule on August 20, 2012 to implement another facet of the Dodd-Frank Act. The rule was directed to companies who send money abroad for consumers, as well as other organizations which work with or represent consumers who send money abroad, including agents, software providers, foreign banks and others involved in international fund transfers from the United States.  The remittance rule is scheduled to take effect on February 7, 2013. (Read more in our article posted on October 19, 2012.)
  • Non-depository mortgage lenders and originators had a deadline of August 13, 2012 to ensure compliance with Federal Anti-Money Laundering (AML) regulations, as mandated by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).  (Read more in our article posted on August 13, 2012.)
  • Section 1071 of the massive Dodd-Frank Act could burden bankers with suffocating regulatory requirements that threaten to stifle lending to small businesses.  Essentially, Section 1071 sets out reporting requirements that would force all banks and credit unions to inquire of every applicant for a commercial loan whether they are woman-owned, minority-owned or a small business. Section 1071 will require banks to track race and gender of applicants and report them annually.  If implemented, Section 1071 would also require banks to establish safeguards to shield loan decision makers from the potentially discriminatory information. Implementation of this rule is on hold for now. (Read more in our article posted on July 3, 2012.)
  • The chilling effect of the onslaught of “disparate impact theory” cases against lending institutions could lead the banking industry to assume a defensive posture. Rather than credit becoming more available, Justice’s rash of disparate impact in lending claims is likely to have the opposite effect, at a time when our teetering economy can ill afford it.  In addition to Justice’s imaginative disparate impact claims, and beyond the mountain of regulations already in effect, another federal agency, the Consumer Financial Protection Bureau, has the banking industry in its crosshairs. (Read more in our article posted on September 4, 2012.)

These are some of the topics we believe are important to our clients, and which should be handled with a manner of care and expertise our clients deserve to protect their best interests and mitigate risks.  Sending such complicated issues to a cube farm overseas is only recommended for those with unlimited resources to pay the fines at the end of the day.

If you are a bank or another business facing compliance requirements or other matters requiring an in-depth knowledge of financial law and regulations, consult with legal counsel to develop a plan to minimize your risks.  The attorneys at Glass & Goldberg provide high quality, cost-effective legal services and advice for clients in all aspects of business litigation and transactional law. Call us at (818) 888-2220, email us at info@glassgoldberg.com, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

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