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ARTICLE · 13 JANUARY 2015

Playing Defense Against Restitution Orders

Duane Morris LLP
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Picture this: the Treasury Department has just ordered you, a banker, to pay back money you never had.

United StatesFinance and Banking
Duane Morris
Duane Morris
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Originally published in American Banker

Picture this: the Treasury Department has just ordered you, a banker, to pay back money you never had. But the multimillion-dollar question is: Can the Treasury legally order you to pay up?

Certainly the Treasury, as well as all bank regulators, can order bankers to pay restitution for violating a law or for conducting an unsound banking practice. That is permitted by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, a statute granting bank regulators broad administrative powers.

Yet broad as this statute is, regulators' restitution power is meant to be limited. Firrea cabins the power to two circumstances: when a banker is unjustly enriched by her actions, or when she acts recklessly.

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