%1

The Consumer Financial Protection Bureau (CFPB) is preparing restrictions on debt collectors, a loosely regulated industry under increasing scrutiny over complaints of abusive tactics, the Washington Post reported today. The agency issued a notice of proposed rulemaking to modernize the legal framework governing debt collection. The CFPB is seeking public and business comment before formally proposing the rules, which are expected to be finalized by next year. The bureau is asking Americans whether creditors and collection agencies are providing accurate information about their outstanding debts. It also wants to know whether people are receiving threatening calls at all hours of the night or being dragged into court for money they do not owe.

Wells Fargo & Co. is among firms facing federal scrutiny of mortgage-bond sales under a 1989 law the government is using to extend probes of banks’ roles in the credit crisis, Bloomberg News reported yesterday. U.S. attorneys in San Francisco have been examining Wells Fargo, the nation’s largest mortgage lender, for more than a year as authorities are investigating whether the firm violated the Financial Institution Reform and Recovery Act (FIRREA). The law carries a 10-year statute of limitations and allows the government to sue for fraud affecting a federally insured financial institution. President Barack Obama set up a task force last year that’s making use of the law, which stems from the savings-and-loan crisis of the 1980s, while examining mortgage-bond underwriting that fueled investor losses and prompted unprecedented government bailouts of banks in 2008. The task force, comprising state and federal agencies, is focusing on about eight banks. Bank of America Corp., Zurich-based Credit Suisse Group AG, and New York-based JPMorgan Chase & Co. and Citigroup Inc. also are among firms facing FIRREA investigations.

The blockbuster $1.2 billion insider-trading settlement between SAC Capital Advisors LP and the U.S. government has two more court hurdles to clear, the Wall Street Journal reported today. If either of the judges in both the civil and criminal proceedings doesn't approve the settlement, SAC could walk away from its agreement with the federal prosecutors and try to fight the criminal indictment. The plea agreement is a global settlement that would resolve two separate cases, one criminal and one civil. Wednesday morning, U.S. District Judge Richard Sullivan will hold a hearing on the civil piece of the case — a $900 million civil forfeiture reduced to $284 million because SAC received credit for a pending $616 million settlement with the Securities and Exchange Commission. Friday afternoon, Judge Laura Swain will hold a hearing on the $900 million criminal fine.

Bankruptcy Judge Martin Glenn cleared MF Global Inc. to pay back 100 percent of the money owed to its U.S. and overseas commodity customers, a watershed moment in the collapsed brokerage firm's chapter 11 case, Dow Jones Daily Bankruptcy Review reported today. James W. Giddens, the trustee unwinding MF Global 's brokerage, was cleared to allocate about $305 million into an account that would pay back the customers by the end of the year.

U.S. District Judge John G. Koeltl ruled that Bank of America Corp. investors cannot proceed with a lawsuit alleging they should have been warned that American International Group Inc. was preparing its own suit against the bank in 2011 over billions of dollars in mortgage-backed security losses, Bloomberg News reported yesterday. Bank of America “cautioned investors that it faced substantial and rising litigation risks,” Judge Koeltl said in his ruling posted yesterday. The judge also found that the likelihood of AIG litigation and its approximate cost were disclosed in the press and available to investors even though the specifics were allegedly not in the company’s public filings. The Charlotte, N.C.-based bank and its officers “argue correctly that the alleged omissions did not mislead investors because information about BoA’s exposure to MBS litigation generally, and AIG’s claim in particular, was in the public domain,” Koeltl wrote. AIG, the New York-based insurer, sued Bank of America in August 2011 over $10 billion in losses on mortgage-bond investments, saying that it was the victim of a “massive fraud.” The insurer said the bank and businesses it took over — Countrywide Financial Corp. and Merrill Lynch & Co. — misled AIG as they sought to profit from the bundling of mortgages into securities.

The criminal case against the hedge fund SAC Capital Advisors has reached a conclusion, people briefed on the matter said, with the government expected to announce Monday that SAC will plead guilty to insider trading charges and pay a fine of roughly $1.2 billion, the New York Times DealBook blog reported yesterday. However, the agreement does not resolve a separate civil lawsuit that the Securities and Exchange Commission brought against fund manager Steven Cohen in July, accusing him of failing to supervise his employees. Six former SAC traders have pleaded guilty to insider trading crimes. The firm and Cohen will also remain under scrutiny during the coming criminal trials of two other employees, one whose case begins in federal court in Manhattan this month. The trials of the employees, Michael S. Steinberg and Mathew Martoma, are expected to provide the first detailed witness testimony about the inner workings of SAC and Cohen’s role in the trades at the center of those cases.

MF Global Holdings Ltd. is going after $20 million in dividends it paid to private equity firm J.C. Flowers & Co. and other shareholders in the year leading up to its bankruptcy, Dow Jones Daily Bankruptcy Review reported yesterday. In a lawsuit filed in court on Wednesday, MF Global said that it paid $16.1 million in dividends to J.C. Flowers and $3.9 million to another group of preferred stockholders from November 2010 all the way up to August 2011, less than three months before the firm collapsed into bankruptcy. MF Global says that money belongs to its estate, thanks to a provision of the Bankruptcy Code that allows a company to claw back money it paid out in the year before its bankruptcy filing if its financial condition was perilous.

Fannie Mae sued nine banks, alleging that their manipulation of the benchmark London interbank offered rate, which four of them have admitted, cost the mortgage-financing company about $800 million, Bloomberg News reported yesterday. The U.S. government-owned firm alleged that the banks, including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc., acted to suppress the rate through quotes they submitted to the British Bankers Association, according to the complaint filed in court on Wednesday. The alleged suppression of the rate caused Washington, D.C.-based Fannie Mae to lose as much as $332 million on interest-rate swaps with Barclays Plc, UBS AG, Royal Bank of Scotland Plc, Deutsche Bank AG, Credit Suisse Group AG, Bank of America, Citigroup and JPMorgan, according to the complaint.

The Commodity Futures Trading Commission is so cash-starved that the agency is being forced to delay cases, shelve certain probes and decided not to file charges against two former traders over J.P. Morgan Chase & Co.'s "London whale" trading mess, the Wall Street Journal reported yesterday. David Meister, who stepped down this week as the CFTC's enforcement chief, said that the agency is "absolutely undersized" for the sprawling futures and options markets it must police. The former prosecutor's warning came on Wednesday, his last day at the CFTC after a near-three-year enforcement stint.

Five years after JPMorgan Chase & Co. acquired the banking operations of failed thrift Washington Mutual Inc., the bank's lawyers are still tangled with regulators over the wording of the 39-page purchase agreement, the Wall Street Journal reported today. The question of who bears responsibility for Washington Mutual's legal liabilities is taking on increasing urgency as J.P. Morgan negotiates a pact with the Justice Department that would end probes of soured mortgage bonds issued by J.P. Morgan and Washington Mutual during the housing boom. The Justice Department is trying to insert language into the settlement stipulating that none of the costs the bank pays regarding Washington Mutual will be passed to the FDIC. J.P. Morgan wants the ability to recover costs associated with Washington Mutual from the FDIC receivership that liquidated the thrift in 2008. At issue is exactly which liabilities J.P. Morgan assumed when it took control of Washington Mutual in September 2008.