Regulators: Forcing Firms to Admit Guilt Could Endanger Lenders

Requiring defendants to admit guilt in a settlement or consent order could delay remediation, spur more litigation and threaten safety and soundness, financial regulators told a House panel this week.

Enforcement officials from the Securities and Exchange Commission, Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency said the policy of allowing institutions to “neither admit nor deny” guilt encourages faster corrective action from institutions, and provides relief to borrowers or investors much quicker than a drawn-out court case would.

“Requiring an admission of guilt as a condition of entering into a consent action we believe would have a deleterious effect on our supervisory efforts by causing more institutions and individuals to contest the requested relief in formal administrative proceedings, which typically would take years to reach resolution,” Scott Alvarez, the Fed’s general counsel, told the House Financial Services Committee. “That would substantially impede and delay implementation of corrective action and potentially harm the financial institutions and the financial system.”

Still, Democrats raised concerns about the frequent use of “neither admit nor deny” clauses in recent settlements, and whether the clauses limit the ability of regulators to discourage bad acts in the future.

“Settlements should never be viewed as just another cost of doing business,” Rep. Maxine Waters, D-Calif., said. “And I fear that could be the case—when no wrongdoing is admitted, [it] encourages repeat offenses.”

 

 

 

Article source: http://www.nationalmortgagenews.com/dailybriefing/banking-lawsuits-admission-of-guilt-1030509-1.html

Leave a Reply

WP2FB Auto Publish Powered By : XYZScripts.com
Bunk Beds