After a 10 day jury trial, a jury found U.S. Bancorp liable for almost $3.3 million in damages for infringing upon a patent covering check-processing technology owned by Solutran, Inc. (”Solutran”). Solutran’s U.S. Patent No. 8,311,945 covers a method for processing paper checks whereby data regarding a transaction captured at a merchant’s point of purchase is later matched against a scanned image of a check at a remote location. The jury rejected U.S. Bancorp’s argument that the patent was obvious based on prior art, and found that almost 100 million of the bank’s transactions had infringed on Solutran’s patent.
The U.S. Bancorp case should serve as notice to both service providers and banks. Service providers and banks who process paper checks should confirm they are not infringing on Solutran’s patented method to avoid potentially significant liability. Banks that rely on third parties for check processing should review their contracts with service providers to ensure that proper indemnification language is included in the governing agreements.
On April 10, 2018, the Federal Financial Institutions Examination Council (the “FFIEC”), an interagency body composed of the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency and the State Liaison Committee, issued guidance to assist financial institutions in analyzing the use of cyber insurance in an effective risk management program (the “Guidance”).
On April 3, 2018, the Department of Treasury released recommendations to “modernize” the Community Reinvestment Act of 1977 (“CRA”). Treasury’s recommendations include:
In a recent interview, Comptroller of the Currency Joseph Otting, announced the OCC’s plan to “clarify” its support of bank-offered deposit advance products. “Deposit advance products” are typically defined as small-dollar, short-term loans or lines of credit that are to be repaid from the proceeds of the consumer’s next direct deposit. The WSJ reports that the OCC’s planned announcement will focus on 45-to-90 day loans.
According to the Federal Deposit Insurance Corporation (“FDIC”), from 2000 to 2008 there were 1,042 de novo community banks newly chartered in the United States. From 2011-2017, the FDIC received only 30 de novo applications for deposit insurance. Of those 30 applications received, six have been approved, 10 withdrawn and 14 remain outstanding. At year end 2017, the number of U.S. banks fell below 5,700 – a number the industry hasn’t seen since the 19th century. Recently, the FDIC indicated that it has warmed to the idea of accepting de novo bank applications. Now may be the time for interested investors to assess the possibility of entering the community bank industry.