Tag: Regulatory

A Different Kind of Adobe Update: Adobe Announces Data Breach Compromising Information of 2.9 Million Customers

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Adobe Systems Inc.,(ADBE -1.24%) announced earlier today that has been the victim of a cyber attack that has compromised information of 2.9 million of its customers.  In a blog post Thursday morning, Adobe’s Chief Security Officer Brad Arkin referred to such attacks as “one of the unfortunate realities of doing business today” and added that the attack on customer information is believed to be linked to an attack in which hackers obtained source code for certain Adobe products, including its Cold Fusion web application platform and its Acrobat family of products.

Adobe Systems Inc. reported what it called a sophisticated attack on its computer network, involving illegal access to both customer information and source code related its programs

The scope of the breach was first disclosed by security blogger, Brian Krebs in his blog, Krebs on Security.  The customer information accessed by the hackers includes names, encrypted credit or debit card numbers, expiration dates, and other information relating to customer orders.  At this time Adobe does not believe that decrypted credit or debit card numbers were obtained.  Adobe has reset passwords for certain customers and will be notifying customers whose debit or credit card information is believed to have been accessed.  For those customers whose credit or debit card information has been accessed, Adobe will offer a complimentary one-year membership with a credit monitoring service.

This latest incident is a reminder that cyber attacks are not only an “unfortunate reality” of doing business, but are also increasingly common.  If your business collects customer or user information, there is no time like the present to make sure you have a response plan in place.

Read more:

New York Times – Adobe Announces Security Breach

PCWorld – Adobe Reports Massive Security Breach

Wall Street Journal — Hackers Hit Adobe Systems Network 

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Action Steps NOW To Comply With The Affordable Care Act

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Although the one-year delay in the effective date of the pay-or-play provisions of the Affordable Care Act (“ACA”) (until January 1, 2015) gives employer-sponsored health plans more time to prepare for those requirements, many ACA provisions will take effect on January 1, 2014. Employees are asking for information regarding these changes and the Department of Labor is already including ACA requirements in its benefit plan audits. The target keeps moving. Here is what you need to do NOW to ensure that your health plan is in compliance on January 1, 2014 and that you are prepared for what’s coming: 

  • Distribute the required Notice informing your employees about their coverage options by October 1, 2013 and to all new hires after October 1, 2013.
  • Determine if your plan will have “grandfathered” status in 2014.
  • Confirm that required plan design changes are in effect for 2014, including:
  • Elimination of annual limit on essential health benefits.
  • Elimination of pre-existing condition exclusions for new enrollees.
  • Limiting waiting period for enrollment to 90 days.
  • Elimination of restrictions related to participation in clinical trials (non-grandfathered plans only).
  • Conform cost-sharing provisions to ACA requirements (non-grandfathered plans only).
  • Provide coverage for ACA “essential benefit” categories (insured plans in individual and small group markets only).
  • Timely provide updated Summaries of Benefits & Coverage.
  • Develop strategies on how to use the rest of 2013 and 2014 to plan for ACA provisions that will go into effect in 2015, including (1) pay-or-play provisions, such as determination or confirmation of applicable larger-employer status and how to determine full-time employee status; and (2) reporting requirements.
  • Consider alternative options to continuing to provide health care coverage for your various categories of employees.
  • Implement cafeteria plan changes related to ACA and repeal of DOMA.
  • Bring wellness programs into compliance with ACA.
  • Prepare to pay ACA reinsurance fees (self-insured plans only).
  • Make sure you are complying with the final HIPAA rules concerning “protected health information” that went into effect on September 23, 2013.

The Government Shut Down and Its Impact on Public Health

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In the early morning of October 1, 2013, the U.S. federal government officially went dark. The shutdown came in the aftermath of the Senate’s decisive vote to reject a House plan that would have kept the government funded for several more months but delayed implementation of key portions of the Affordable Care Act (ACA) for one year.

The impact of the shutdown will be felt across all healthcare sectors as many federal employees face furloughs of unknown duration. In particular, the Department of Health and Human Services (HHS) announced in its Contingency Staffing Plan that over half of its employees will be furloughed. HHS’s Plan is based upon federal guidance that allows agency programs to continue only if they either do not rely on annual appropriations, or they involve the safety of human life or the protection of property.[1] According to HHS, the following programs and services will continue:

  • Funding for Medicaid and the Child Health Insurance Program will continue uninterrupted because funding has already been set aside for these programs.
  • Funding for Medicare will likewise continue uninterrupted but only in the short term. If the political impasse stretches beyond several weeks, the program could be disrupted by the reduction in HHS staff.
  • The Centers for Medicare & Medicaid Services (CMS) will continue to implement the ACA, “including coordination between Medicaid and the Marketplace, as well as insurance rate reviews, and assessment of a portion of insurance premiums that are used on medical services.”[2]
  • State and federal health insurance exchange programs will open as planned, though it is not clear how the information technology (IT) that underpins the exchanges will function since they are operated by government contractors.[3]
  • The National Institute of Health (NIH) will continue to provide patient care for current NIH Clinical Center[4] patients
  • The Food and Drug Administration (FDA) will be able to operate only for “vital activities” such as high risk recalls and other “critical public health issues.”
  • Substance Abuse and Mental Health Services Administration will continue programs such as the Suicide Prevention Lifeline using the balance of available grants.
  • Other programs supported through mandatory funding such as the Centers for Disease Control and Prevention (CDC) Global HIV/AIDS Program will continue.

However, several programs important to public health will be disrupted if a congressional compromise cannot soon be reached. For example:

  • Outside of matters related to “imminent threats to the safety of human life or protection of property,” CMS, FDA, NIH and other federal agencies will not publish regulations or other guidance during the shutdown.
  • CMS will not fund task forces that work to prevent healthcare fraud and abuse, and will scale back on Medicare provider audits.
  • The CDC seasonal influenza program, which tracks flu outbreaks and certain infectious diseases, will come to a halt.
  • No new patients will be admitted to the NIH Clinical Center. NIH-funded researchers may continue to work for as long as their money holds out but additional funds will not be released during the shutdown.
  • The FDA will not be able to support much of its food safety activities, such as routine inspections and public notification programs. The FDA’s laboratory research and some compliance and enforcement activities will be suspended.
  • No action will be taken on any grants related to medical research, improvement of the healthcare system, and monitoring of substance abuse programs.

Although providers can take comfort in the fact that Medicare and Medicaid program reimbursement will proceed, a government shutdown for any period of time beyond three or four weeks could impede certain critical administrative functions, such as Medicare claims processing, and therefore impact their pocketbooks. Likewise, while substantial ACA implementation will continue, long term furloughs could affect certain components of the law (such as the exchanges) because they depend on government employees to help run the IT component, among other aspects of the program. Thus, the magnitude of the shutdown’s impact will depend on how long it endures.

*Copyright 2013, American Health Lawyers Association, Washington, DC. Reprint permission granted.

[1]/ Opinion of the Office of Legal Counsel, Department of Justice, Government Operations in the Event of a Lapse in Appropriations, 1995 WL 17216091 (Aug.16, 1995) at pp. 3-4: see also, Effect of Appropriations for Other Agencies and Branches on the Authority to Continue Department of Justice Functions During the Lapse in the Department’s Appropriations, 19 Op. O.L.C. 337, 1995 WL 917146 (Dec. 13, 1995).

[2]/ Contingency Staffing Plan, pp.2-3.

[3]/ CMS has not publicly stated whether the IT contracts are already issued and funded.

[4]/ The NIH Clinical Center is the agency’s research hospital.

Shutdown Closes National Labor Relations Board (NLRB) Operations

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As a result of the federal government shutdown, yesterday NLRB operations ground to a halt. Many practitioners and employers during the a.m. hours received contact from Board Agents and Board Lawyers indicating that pending investigations, petition processing and the like were on hold until after the shutdown ends.

The Board’s “Shutdown Plan” indicates that 1,600 of the Board’s 1,611 staff have been furloughed. All regional offices are closed and the only remaining staff are located in the Board’s main office in D.C. Even the Board’s website was shutdown and the resources posted online, including all Board cases, memos, and other guidance, became unavailable. Instead, visitors to the Board’s website were redirected to a landing page explaining “The National Labor Relations Board is currently closed due to a lapse in appropriated funds.”

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The full effect of the shutdown on new and on-going NLRB cases is not completely clear.  The Federal Register Notice on the effect of the closure states that an extension of time to file any documents is granted sua sponte for all affected parties through the end of the shutdown.  However, the Board cannot grant extensions of time to the six-month statute of limitations in Section 10(b) of the National Labor Relations Act that applies to unfair labor practice charges.  The Federal Register Notice states that “the operation of Section 10(b) during an interruption in the Board’s normal operations is uncertain” and encourages effected parties to file their charges via fax, although they will presumably not be processed until after the shutdown concludes.  The Board’s website does provide that actions necessary “to prevent an imminent threat to the safety of human life or the protection of property may be undertaken” during the shutdown, although it is not clear what NLRB actions, if any, would fall into this category.

All ALJ hearings scheduled for this week have been postponed indefinitely, as well as all elections and election hearings scheduled through October 11. The Federal Register Notice provides that if the shutdown continues, additional hearings and elections will be postponed as well. Like the rest of the country affected by the shutdown, all practitioners and employers with business in front of the Board can do now is wait it out.

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2nd Annual FATCA Compliance Conference – November 5-7 2013

The National Law Review is pleased to bring you information about the upcoming 2nd Annual FATCA Compliance Conference.

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When

5-7 November, 2013

Where

New York, NY

The 2nd Annual FATCA Compliance Conference by marcus evans will bring together industry leaders in tax compliance from across the country to sharpen their comprehension of the complexities of FATCA, implement a platform to ensure high-quality, accurate information, develop client management strategies to maintain positive customer experience, and mitigate risks while striving to become fully compliant by July 2014.

This highly anticipated event takes place approximately 8 months prior to the FATCA compliance deadline of July 1, 2014, providing attendees with a unique opportunity to benchmark their practices against their peers and clarify any complexities with which they are still struggling.

Industry leaders attending this conference will benefit from a dynamic presentation format consisting of workshops, panel discussions and industry-specific case studies that provide accurate, real-world knowledge. Attendees will experience highly interactive conference sessions, 10-15 minutes of Q&A time after each presentation, 4+ hours of networking, and exclusive access to speaker presentations post-event.

Federal Government Shutdown

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For the first time in 17 years, the federal government has officially shutdown.  Late last night, the Administration released a memo to all federal agencies advising them to execute their contingency plans (an agency-by-agency list is available here).

Yesterday the Senate passed a bill that would fund the government through November 15, 2013, but would make no changes to the Affordable Care Act (ACA).  (More information on the Senate vote is available here.)  Last night, by a vote of 228-201, the House passed legislation that would keep the government open through December 15, 2013, but would delay the ACA’s individual mandate requirement and would eliminate health insurance subsidies for Members of Congress, Congressional staff, the President, the Vice President, and political appointees.  By a vote of 54-46 the Senate voted to table, or kill, the legislation.

Following the latest Senate action, the House voted to formally request a conference committee with the Senate.  (Conference committees are joint House-Senate committees that are created to resolve disagreements between the House and Senate versions of a given bill.)  House Speaker Boehner (R-OH) appointed the following members to the conference committee:  House Majority Leader Cantor (R-VA-7), Ways and Means Chairman Camp (R-MI-4), House Budget Committee Chairman Ryan (R-WI-1), House Appropriations Chairman Rogers (R-KY-5), Representative Frelinghuysen (R-NJ-11), Representative Crenshaw (R-FL-4), Representative Carter (R-TX-31), and Representative Graves (R-GA-14).  House Democrats have not appointed conferees.  The Senate voted to table the request for conferees.

While the House and Senate cannot seem to agree on terms to fund the entire government, both chambers have passed H.R. 3210, legislation that would provide payment through the government shutdown for members of the Armed Forces (including reserve personnel) and civilian Department of Defense (DoD) employees and contractors whom the DoD Secretary determines are providing support to members of the Armed Forces.  The legislation passed the House by a unanimous vote, the Senate passed the bill by a voice vote, and was signed into law by President Obama last night.

At this point, both the House and the Senate appear at a stalemate.  Until Members of Congress can reach some agreement, the government shutdown will remain in place.  We will continue to update this blog as events unfold.

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U.S. Government Shutdown Will Disrupt Many Immigration Processes

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Programs at the Departments of State and Labor are likely to be affected more than others if partial government shutdown occurs on October 1.

The potential U.S. government shutdown on October 1 could have immigration-related consequences, especially for those immigration functions performed by the U.S. Department of State (State) and the U.S. Department of Labor (DOL). These possible implications are set out below.

State Department

Although no official announcements have been made concerning which services would be affected by a shutdown, it is likely that State, which issues visas to foreign nationals at U.S. consular posts abroad, would operate on a severely limited basis. State’s current policy is for consular operations in the United States and abroad to remain 100% operational as long as there are sufficient fees to support operations. Many visa application processes are fee based, so it is possible that some visa issuance could continue based on this separate funding stream. However, a loss of federal funding will likely impact visa processing as fees cover only a portion of the costs associated with visa processing.

In 2011, when there was a similar prospect of a government shutdown, State issued the following advice:

In the consular area, American citizens’ services, emergency visa services (e.g., those for life/death or medical emergencies, humanitarian cases involving minor children, and diplomatic travel) would continue. Basic visa issuance would be severely curtailed.

State also provided the following information:

The Bureau of Consular Affairs, as well as other areas in [State], undertake a combination of excepted and non-excepted activities related to consular services. For the most part, visa and passport functions are not excepted activities, nor do fees entirely cover them. Instead, [State] relies on a mix of fee-funded and appropriation-funded employees and is dependent on support services that would be scaled back or eliminated during a shutdown. Therefore, [State] will not operate these non-excepted functions in the absence of appropriated funding.

In addition, the shutdown of ancillary consular operations, including building support and the employment of local personnel, may impact the delivery of visa services, resulting in cancellation of visa appointments or delays in the processing of visa applications. Accordingly, foreign nationals should be prepared for delays in consular visa processing and, where feasible, may want to consider postponing travel outside the United States if a new visa would be required to reenter the United States.

Processing of immigration visa applications at the National Visa Center will likely continue, as those functions are funded by contract and not a direct federal appropriation. Issuance of the November 2013 Visa Bulletin, which is expected in mid-October, is uncertain and would likely be impacted by a shutdown.

Department of Labor

On September 30, DOL made the following announcement:

Office of Foreign Labor Certification [(OFLC)] functions are not “excepted” from a shutdown and its employees would be placed in furlough status should a lapse in appropriated funds occur. Consequently, in the event of a government shutdown, OFLC will neither accept nor process any applications or related materials (such as audit responses) it receives, including Labor Condition Applications, Applications for Prevailing Wage Determination, Applications for Temporary Employment Certification, or Applications for Permanent Employment Certification. OFLC’s website, including the iCERT Visa Portal System, would become static and unable to process any requests or allow authorized users to access their online accounts.

PERM applications that need to be filed due to expiring recruitment or the need to preserve H-1B AC21 eligibility could presumably be filed by mail if necessary.

U.S. Citizenship and Immigration Services

U.S. Citizenship and Immigration Services (USCIS) is funded through fee-based petitions and applications and would not likely be affected by the shutdown. In addition, most Customs and Border Protection operations are considered to be essential functions and would not be disrupted. However, if there are staffing cuts, it is possible that there would be some delays in processing applications presented at the U.S. border and at border crossings. There may also be delays in waiver adjudication. We will continue to monitor the situation and will provide updates with any new information.

The E-Verify Program, which is run by USCIS, is not expected to be operational if there is a government shutdown. Employers are advised that a shutdown will not relieve them of their responsibilities; however, as stated in the governing Memorandum of Understanding, “[i]f the automated system to be queried is temporarily unavailable, the 3-day time period is extended until it is again operational in order to accommodate the Employer’s attempting, in good faith, to make inquiries during the period of unavailability.” Should a shutdown occur, the E-Verify public website and the E-Verify log-in page are expected to contain additional guidance for employers.

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Financial Services Legislative and Regulatory Law Update – September 30, 2013

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Leading the Past Week

Working through a rare weekend session, the Congress appeared no closer to being able to avoid a shutdown of the Federal Government.  Early Sunday morning the House sent back to the Senate its version of the spending bill, including two provisions – one delaying Obamacare for one year and the other repeals the medical device tax which helps fund the law.   While there are other differences in the bills – notably how long they keep the government operating, Leader Reid has made it clear that the Senate will strip out these two provisions when it meets at 2pm on Monday.  With the midnight Monday deadline quickly approaching, all sides appear resigned to a shutdown occurring and have turned their attention to positioning for the fallout.

While the political ramifications of a shutdown are unclear – with both sides believing that they will benefit, the practical results were announced late last week as various federal agencies disclosed how they will act starting on Tuesday.  For example on Friday, Treasury announced that a government shutdown would affect some activities, but that “critical functions” would continue. The IRS would have to pull back on some functions, such as fielding taxpayer queries, but other functions like managing the government’s funds, implementing tax policy would continue.  Other offices that are not funded under annual appropriations, such as the Office of the Comptroller of the Currency (OCC) and the Financial Stability Oversight Council (FSOC), or the GSE’s, would continue to operate as normal.   The CFTC also released a shutdown plan, which outlined the “vast bulk” of oversight and surveillance responsibilities would be stopped.   Perhaps most troubling for the economy is the fact that the shutdown will also prevent the FHA from processing mortgages, and with nearly 45% of the market using FHA backed mortgages, the fear of a disruption to the real estate market, and thus potentially the economy as a whole.

Although there are options that both sides have to avert, or at least delay the shutdown, it now seems more likely than not, that the time will run out and the government will shut down for the first time since 1996 later this week.

Legislative Branch

Senate

Senate Banking Examines TRIA Extension

On September 25th, the Senate Banking, Housing, and Urban Affairs Committee held a hearing to examine the reauthorization of the Terrorism Risk Insurance Act (TRIA).  Similar to House hearing on the subject last week, the members of the Senate Banking Committee expressed general support for a reauthorization of the program but acknowledged that there is a need to evaluate and improve the program during an extension. For example, Ranking Member Crapo noted that several changes to the program which have been discussed are modifying the business deductible, changing the aggregate loss threshold, and instituting business co-insurance. Another option considered at the hearing for overhauling TRIA was instituting pre-funding of the government backstop. Lawmakers are also considering whether TRIA’s backstop should be extended to cover chemical, biological, radiological, cyber, and nuclear attacks

Majority of Senators Urge White House to Push for Currency Manipulation Protections in TPP

On September 24th, sixty senators signed onto a letter to the White House requesting the Obama Administration work to negotiate rules against currency manipulation as part of the Trans-Pacific Partnership and other future trade deals. The letter was led by Senators Debbie Stabenow (D-MI) and Lindsey Graham (R-SC) could complicate the Administration’s TPP talks with Japan, Vietnam, Malaysia and other countries. The House, led by Representative Sander Levin (D-MI), sent a similar letter to the White House over the summer. Levin, Ranking Member of the House Ways and Means Committee has said that “there is no point in negotiating a TPP agreement to eliminate import duties if countries are allowed to effectively re-impose those duties by manipulating their currencies.”

Senate Budget Committee Examines the Economic Effects of Political Uncertainty

As Congress continues to debate a final version of the CR to fund the government and with the debt ceiling deadline fast approaching, the Senate Budget Committee met to hear testimony from three economists on the economic effects of political uncertainty. Witnesses included Mark Zandi, chief economist for Moody’s Analytics; Chad Stone, chief economist for the Center of Budget and Policy Priorities; and Allan Meltzer, Professor of Political Economy at Carnegie Mellon University. Witnesses warned that a default would have a large effect on “everyday Americans” as it would become more difficult to get a mortgage, stock prices decline, and unemployment grows.

Senate Banking Subcommittee Explores Economic Conditions in India

On September 25th, the Senate Banking Subcommittee on National Security and International Trade and Finance held a hearing to consider investment and market access in India. Witnesses included Dr. Arvind Subramanian, Senior Fellow with the Peter G. Peterson Institute for International Economics; Mr. Richard Rossow, Director for South Asia with McLarty Associates; and Dr. Reena Aggarwal, Professor of Business Administration and Professor of Finance at Georgetown University. The hearing came ahead of a meeting between Prime Minister Manmohan Singh and President Obama.

House of Representatives

Lawmakers Question Big Banks on Student Debit Cards

On September 26th, Democratic lawmakers on the Education and Workforce Committee, joined by Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA), wrote to the CEOs of several large banks requesting they explain their student debit card agreements with colleges.  Copies of the letter were sent to Wells Fargo, US Bancorp, PNC Financial Services Group, SunTrust Banks, Inc., TCF Bank, Citigroup, Huntington Bancshares Incorporated, Commerce Bancshares, Inc., and Higher One Holdings, Inc.

CBO Briefs House Committee on Budget Outlook

On September 26th, the House Budget Committee met to hear testimony from Director of the Congressional Budget Office (CBO) Doug Elmendorf on the nation’s long-term budget outlook. CBO’s most recent report was released on September 17th and notes that although in the short-term the budget will shrink, deficits are expected to begin to grow again after 2018.

Executive Branch

Federal Reserve

Basel Framework to Be Part of Stress Tests

On September 24th, the Federal Reserve announced two interim final rules clarifying how companies should incorporate Basel III regulatory capital requirements into their capital and business projections submitted as part of stress tests.  The first rule clarifies that during the upcoming stress test cycle, large banks with more than $50 billion in assets will be required to incorporate the Basel framework into their projections. The first interim final rule also directs banks to consider capital adequacy assessed against a minimum 5 percent tier 1 common ratio. The second rule provides a one-year transition period for stress test projections for most banking organizations with between $10 billion and $50 billion in total consolidated assets. The interim final rules are effective immediately but the Fed will accept comments through November 25th.

Banking Regulators Release Joint Guidance About Financial Abuse of Older Adults

On September 24th, regulators released joint guidance to clarify privacy provisions under the Graham-Leach-Bliley Act, saying that it is generally permitted for financial institutions to report suspected elder financial abuse to appropriate authorities. Regulators noted that, as older adults can be attractive targets for financial exploitation, employees of financial institutions that are able to spot irregularities or other signs of financial abuse can help protect against elder financial fraud. The guidance was released by the Federal Reserve, Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corporation (FDIC), Federal Trade Commission (FTC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC).

SEC

White Lays Out Enforcement, Implementation Priorities

On September 26th, speaking at the Council of Institutional Investors fall conference, Chairwoman Mary Jo White laid out the agency’s enforcement plans. White said that the SEC plans to shift its focus, to bring more cases against individuals who are in violation of securities law and to seek more mandatory compliance measures in settlements to prevent future wrongdoings. Earlier in the week, in a speech before the 2013 Bloomberg Markets 50 Summit, White also addressed enforcement, saying she has sought to make improvements to their operations, including by revising the “neither admit nor deny” policies. White also spoke to other items on the SEC’s regulatory agenda, telling summit participants that regulators have made “lots of progress” on finalizing a joint Volcker Rule and noting that the agency’s “highest immediate priority” is finalizing rulemakings under the Dodd-Frank Act and the Jumpstart Our Business Startups (JOBS) Act.

CFTC

CFTC Announces Phase in of Swap Execution Facility (SEF) Rules

On September 27th, the CFTC announced that it would delay enforcement of new rules for Swap Execution Facilities (SEF).  The rules were slated to take effect on October 2nd but the Commission received significant push back from industry stake holders.  For example, on September 23rd the Securities Industry and Financial Markets Association (SIFMA) wrote to the CFTC requesting the agency delay the rules governing swap execution facilities (SEFs).  In addition, it was clear that within the CFTC, there were some who agreed with the industry’s perspective, as on September 26thCommissioner Scott O’Malia said an extension of the SEF effective date would allow market participants time for a smooth transition and then Commissioner Chilton echoed these comments on September 27th, saying that the Commission should extend the compliance date by two months as soon as possible.   Later that day, the CFTC announced that the delay would extend to October 30th for foreign exchange (fx) swaps, and until December 2nd for commodity and equity swaps.

Agriculture Committee Leadership Ask CFTC to Use Caution Crafting Customer Protections

On September 25th, the leadership of the Senate and House Agriculture Committees wrote to the CFTC urging the agency to use caution when drafting futures consumer protection rules which could have a large impact on the agriculture sector. The CFTC proposed rules in October 2012 following the collapse of ML Global and Peregrine Financial that the agriculture sector has warned could prove costly to customers. Chairman Debbie Stabenow (D-MI), Chairman Frank Lucas (R-OK), Ranking Member Thad Cochran (R-MS), and Ranking Member Collin Peterson (D-MN) advised the CFTC that it should “weigh the benefits of these regulations against both the costs to America’s farmers and ranchers and the potential impact on consolidation in the industry.”

CFPB

Bureau and Jackson, Mississippi Begin 311 Line for Financial Issues

On September 20th, the CFPB and the City of Jackson, Mississippi announced a partnership to connect consumers with the CFPB to answer questions and submit complaints about financial products and services using their local 311 service.  Residents who dial 311 with a financial problem or complaint will be transferred directly to the Bureau where the CFPB will work with consumers on financial problems and handle consumer complaints on credit cards, mortgages, bank accounts or services, private student loans, consumer loans, credit reporting, money transfers, and debt collection.

CFPB Denies Petition to Dismiss Investigation of Tribal Lenders

On September 26th the CFPB denied a petition from three tribal payday lenders requesting that the CFPB end their investigation into whether the companies violated consumer laws. The lenders argued that the Bureau lacked the authority to make civil investigative demands to the companies due to sovereignty of the lenders via their affiliation with Native American tribes. In announcing the Bureau’s decision to proceed with the investigation, Director Cordray said that courts have agreed that “Indian tribes, like individual states, do not enjoy immunity from suits by the federal government.”

FHA

FHA to Draw on Treasury Funds to Cover Shortfall

On September 27th, the Federal Housing Administration (FHA) announced that it will need to draw on $1.7 billion from the Treasury in order to cover shortfalls in the mortgage insurance fund. The shortfall, though expected, was larger than the anticipated $942 million estimate that was included in the President’s FY2014 budget proposal. In a letter to Congress on the announcement, FHA Commissioner Carol Galante said that the “required mandatory appropriation is an accounting transfer and does not reflect an up-to-date view” of the long-term fiscal health of the insurance fund.

NCUA

NCUA Sues Firms Over MBS Credit Union Failures

On September 23rd, the National Credit Union Administration (NCUA) filed lawsuits against JPMorgan, Morgan Stanley, Goldman Sachs, Barclays, Credit Suisse, Royal Bank of Scotland, UBS, Ally and Wachovia alleging the firms sold $2.4 billion in faulty mortgage-backed securities to two failed credit unions. Speaking on the suits, NCUA Chairman Debbie Matz said that credit unions the agency supervises are sharing the costs of the losses and “the people who are responsible should be required to shoulder that burden, as well.”

Miscellaneous

CRFP Examines Tax Exempt Status of IRAs

On September 27th, the Committee for a Responsible Federal Budget (CRFB) released an analysis of the preferential tax treatment of the Individual Retirement Account (IRA). The report notes that IRAs hold less than 25 percent of all the nation’s retirement assets and are used by only 5 percent of workers. The analysis notes numbers from the Joint Committee on Taxation which estimates that the subsidy will cost $15 billion in lost income tax revenue in 2013, or more than $250 billion over 10 years.

Upcoming Hearings

**(Schedule subject to change contingent on status of Federal Government)**

On Monday September 30th, in H-313 of The Capitol, the House Rules Committee will meet to consider a rule for H.R. 992, the Swaps Regulatory Improvement Act, and H.R. 2374, the Retail Investor Protection Act.

On Tuesday October 1st at 10am, in 2128 Rayburn, the Financial Institutions and Consumer Credit Subcommittee of House Financial Services Committee will hold a hearing on legislative proposals intended to create more accountability and transparency to the Consumer Financial Protection Bureau.

On Tuesday, October 1st at 10am, in 538 Dirksen, the Senate Banking, Housing, and Urban Affairs Committee will hold a hearing titled “Housing Finance Reform: Fundamentals of a Functioning Private Label Mortgage Backed Securities Market.”

On Wednesday, October 2nd at 10am, in 106 Dirksen, the Joint Economic Committee will hold a hearing on the economic outlook.

On Wednesday, October 2nd at 10am, in 2128 Rayburn, the Housing and Insurance Subcommittee of House Financial Services Committee will hold a hearing on the status of the National Flood Insurance Program (NFIP).

On Wednesday, October 2nd at 2:30pm, in 538 Dirksen, the Economic Policy Subcommittee of Senate Banking, Housing, and Urban Affairs Committee will hold a hearing on rebuilding American manufacturing.

On Wednesday, October 9th at 2pm, in 2128 Rayburn, the Capital Markets and Government Sponsored Enterprises Subcommittee of House Financial Services Committee will hold a hearing on legislation that would attempt to reduce impediments to capital formation.

On Thursday, October 10th at 10am, in 2128 Rayburn, the Monetary Policy and Trade Subcommittee of House Financial Services Committee will hold a hearing to examine international central banking models.

On Thursday, October 10th at 2pm, in 2128 Rayburn, the Financial Institutions and Consumer Credit Subcommittee of House Financial Services Committee will hold a hearing on un-banked and under-banked areas in the United States.

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Centers for Medicare & Medicaid (CMS) Delays Auditing of “Two-Midnight” Rule

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The Centers for Medicare & Medicaid (CMS) announced this week it will delay Recovery Audit Contractor (RAC) audits of the “two-midnight” rule for 90 days. The 2014 Inpatient Prospective Payment System Final Rule, released in August 2013, finalized the “two-midnight” rule, under which hospital inpatient admissions that span at least two midnights presumptively qualify as appropriate under Medicare Part A, and hospital inpatient admissions that span less than two midnights (i.e., less than one Medicare utilization day) are presumptively inappropriate for payment under Part A.  When auditing medical necessity, the RACs would presume that the occurrence of 2 midnights after formal inpatient hospital admission indicates an appropriate in patient status for a medically necessary claim. If the occurrence of 2 midnights after formal inpatient hospital admission does not occur, government recovery auditors do not apply the same presumption and claims for such admissions receive a higher level of scrutiny.

As part of its announcement, CMS stated it will not, for a period of 90 days, permit government recovery auditors to review the medical necessity of inpatient admissions of one midnight or less between October 1, 2013 and December 31, 2013.

CMS’ frequently asked questions with its announcement can be found here.

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Google Must Face Most Claims in Keyword Wiretap Class Action

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If you were on Google’s home page yesterday at the office, you probably spent more time than you care to admit playing the “help the letter ‘g’ hit the piñata” game that Google created for its 15th birthday.

For Google, that might be a welcome distraction from very bad news it received from the Northern District of California.  U.S. District Court Judge Lucy Koh denied in part Google’s motion to dismiss a 2010 claim in which users accuse Google of violating various state and federal laws by scanning the content of user emails for purposes of creating user profiles and directing targeted advertising, thus allowing a putative class action suit against the search (and everything else online) giant to proceed.

Judge Koh’s order (full text can be found here), is significant in its handling of a number of Google’s arguments, but the rejection of a particular line of argument is understandably receiving much of the attention. In its Motion to Dismiss, Google argued that its practice of scanning emails is not a violation of the Federal Wiretap Act because, among other reasons, Gmail users and non-Gmail users have consented to the interception of emails.   Google’s consent argument was two-fold.  First, it argued that Gmail users had “expressly consented” to having their emails scanned by agreeing to its Terms of Service and Privacy Policies, which every Gmail users is required to do.  Second, it argued that non-Gmail users have “impliedly consented” to the practice by sending an email to a Gmail user, because at that time those non-users understood how Gmail services operate.

Judge Koh rejected both of Google’s consent arguments, holding that the Court “cannot conclude that any party – Gmail users or non-Gmail users – has consented to Google’s reading of email for the purposes of creating user profiles or providing targeted advertising.”  The Court dug into the multiple iterations of Google’s Terms of Service and Privacy Policies that have been in place since 2007, and found that the policies did not explicitly notify users that Google would intercept emails for the purposes or creating user profiles and targeting advertisements.  The Court discussed a number of sections of Google’s policies where users allegedly consented to the practice of scanning emails for advertising purposes, and in each case found that the policies either described a different purpose for scanning emails (such as filtering out objectionable content) or were unclear when describing what kind of information would be intercepted (using descriptions like “information stored on the Services” or “information you provide”).  The Court further held that Google’s current policies (which were put in place on March 1, 2012) are equally ineffective at establishing consent.  Finally, the Court rejected the argument that non-Gmail users had impliedly consented to the interception of emails, noting that accepting Google’s theory of implied consent would “eviscerate” laws prohibiting interception of communications.

Judge Koh’s denial of Google’s Motion to Dismiss is the latest reminder that when it comes to privacy policies and terms of use, how you write something can be as important as what you write.  We will have more on the various issues discussed in Judge Koh’s order over the next few days.

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