Banks face a dizzying array of legal and regulatory requirements that affect their daily decisions in all areas of operation. The financial crisis has provoked new legislation and so many changes that virtually every aspect of banking is now under the microscope.

What is the biggest legal challenge facing banks today?

It is incredibly difficult for banks, especially community banks that may not have in-house lawyers, to simply keep up with the continuous and significant changes to law and regulation that have been occurring with rapid-fire pace since the onset of the financial crisis in 2008. Currently, Congress is considering fundamental financial regulatory reform that would create an entirely new agency to regulate consumer protection in financial services and that would change capital requirements for some banks. That means new laws and new regulations on top of the onslaught of new laws and regulations that have already come out in the last two years.

What is the most immediate impact of these changes on the day-to-day business of banking?

Unfortunately, the new laws and regulations make it more likely that banks will see lawsuits from customers and inquiries and investigations from regulators. Last year alone there were significant developments in the law regarding TILA, RESPA, FCRA, FDCPA, Fair Lending, so-called “predatory lending,” overdraft protection on deposit accounts, consumer privacy requirements; the list goes on and on. The direction of change was toward more rights for consumers, and more burdens of disclosure alongside restrictions on fees for banks. Compliance with these changes is a daunting challenge.

What are the document retention requirements on banks?

Regulators and courts expect banks to be able to produce complete and voluminous information with the push of a button. Most banks, however, have complex information systems. There is no single “button” to push when information is demanded. This means that more attention has to be paid long before a document request arrives. Creating document management policies with e-discovery and regulatory inquiries in mind can make it much easier to find what is asked for without having to wade through mountains of irrelevant information that didn’t need to be maintained in the first place.

The financial crisis did more than change the law. How can lawyers help banks with their business in the current economic environment?

The residential mortgage market was at the absolute center of the financial meltdown in 2008. Most experts believe commercial real estate is the next wave. As commercial borrowers face maturity dates and a market in which refinancing is difficult, as banks are encouraged by regulators to take on less and less risk, defaults are inevitable. Lawyers are on the front line, fighting to preserve bank assets in this arena. Foreclosure, receivership, forbearance and modification, and when necessary, suits to collect deficiencies, are the services that lawyers provide to banks in an era when loan assets have been unfortunately degraded.

How should banks manage litigation in this environment?

Laws and regulations change, but the approach to litigation doesn’t. Most disputes that end up in court start out as misunderstandings or mistakes. There is usually an opportunity before things escalate to resolve issues. Bringing legal counsel on board immediately to gather facts and analyze them in light of current laws and regulations can identify situations in which early resolution makes sense. Early resolution costs less money if the resolution is based on correct knowledge of the legal risks involved.

How does the strategy change when a bank’s regulator is involved?

When a bank receives notice from a regulator of an investigation, or when it receives a subpoena or similar request for documents and information, quick and thorough response is the key. Cooperation is key, and speed is required. Additionally, depending on circumstances, the bank may want to conduct a full-fledged investigation of its own even before the regulatory agency does so.