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OCC releases September CRA Evaluations
On October 1, the OCC released its CRA performance evaluations for September. The OCC evaluated 21 entities, including national banks, federal savings associations and insured federal branches of foreign banks. The assessment framework has four ratings: Outstanding, Satisfactory, Needs to Improve and Substantial Noncompliance. Of the 21 evaluations reported by the OCC, 16 entities were rated “Satisfactory,” five entities were rated “Outstanding,” and none were rated either “Needs to Improve” or “Substantial Noncompliance.”
Fed’s Cook delivers remarks regarding artificial intelligence
On October 1, Fed Board of Governors Member Lisa D. Cook delivered remarks titled “Artificial Intelligence, Big Data, and the Path Ahead for Productivity” at a conference organized by the Federal Reserve Banks of Atlanta, Boston, and Richmond. She addressed the implications of new technologies on productivity by emphasizing the uncertainty surrounding AI’s impact on labor markets and productivity. While AI adoption is becoming more widespread, Cook stated that its effect on productivity and employment remains unclear.
Cook highlighted that AI and generative AI could drive significant productivity gains across industries. She cited a study from the Federal Reserve Bank of St. Louis finding that generative AI was being adopted faster than previous technologies like the internet and personal computers. Despite its potential, Cook noted that recent productivity gains have been modest. AI productivity improvements depend on firms, workers and policymakers. She mentioned that adapting AI to specific business contexts can be complex and time-consuming, requiring significant investments and organizational changes.
Banks each pay $1M to FDIC for unspecified rewards program issue
Recently, the FDIC ordered two affiliated state nonmember banks to each pay a $1,000,000 civil monetary penalty (orders here and here). These penalties resolve claims of unfair practices related to their rewards programs and the processing of automatic payments. According to the orders, which were devoid of detail, the FDIC determined that the two banks engaged in unfair acts and practices prohibited under the FTC Act when they converted from an internal core system to an external core system that affected the processing of automatic payments related to their respective awards programs.
FDIC releases seven enforcement actions for August 2024
On September 27, the FDIC released a list of eight administrative enforcement actions, like cease and desist orders or stipulated orders, taken against banks and individuals in August. The public orders comprised of seven stipulated orders and written agreements (and one termination of action); three of which assessed civil money penalties, three were removal and prohibition orders, and two were cease and desist orders.
Acting Comptroller discusses financial inclusion and Vital Signs initiative
On September 25, Acting Comptroller of the Currency Michael J. Hsu delivered remarks at the “Inclusive Finance for Development: 15 Years of Impact” event hosted by the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development. Hsu cautioned that financial inclusion alone is insufficient to uplift people noting that access to certain financial products can cause more harm than opportunity. To address this, Hsu advocated for a broader focus on financial health, which encompasses not only access to financial services but also the quality and impact of those services on individuals’ lives.
Hsu promoted the OCC’s Financial Health Vital Signs initiative, which advocated for banks to use financial health measures to assess and support customers in improving their financial health. Hsu then noted that the OCC needs stakeholders to pilot and test these ideas, because “[w]hat gets measured gets managed.”
FHFA reproposes amendments to its Suspended Counterparty Program
On September 18, the FHFA issued a second proposed rule to amend its Suspended Counterparty Program (SCP) regulation, following a review of comments on the initial proposal (covered by InfoBytes here). The SCP requires regulated entities, including Freddie Mac, Fannie Mae and the FHLBanks to report misconduct by individuals or institutions they do business with. The second proposed rule would expand the categories of covered misconduct to include the receipt of prohibition orders and civil monetary penalty orders from specific federal agencies. These changes address concerns that the initial proposal was overly broad and granted “undue discretion” to the FHFA. The proposal also included a $1 million threshold for civil money penalty orders to avoid capturing relatively minor misconduct. The FHFA invited public comments on the second proposed rule 60 days after publication to the Federal Register.
FHFA releases NPRM on capital requirements for FHLBanks
On September 27, the FHFA released its NPRM and request for comment to amend capital requirements for FHLBanks to modify limits on unsecured credit extensions. The proposal seeks to exclude interest-bearing deposit accounts (IBDAs) and other authorized overnight investments from the more restrictive “general limit” on unsecured credit to a single counterparty. This change is aimed at providing greater flexibility and enhancing FHLBanks’ liquidity management capabilities.
The FHFA’s proposed rule would add the term, “authorized overnight investments,” to include investments with a maturity of one day or less, such as deposits in banks or trust companies, but exclude demand accounts in Federal Reserve Banks. This change would allow FHLBanks to manage liquidity effectively by utilizing IBDAs, which offer higher yields and greater intraday liquidity flexibility compared to overnight federal funds. In addition, the proposed rule aims to clarify the measurement of unsecured credit exposure to include intraday exposure and calculation methods for total capital.
By expanding the types of investments subject only to the higher overall limit, the NPRM aims to enhance the FHLBanks’ abilities to meet short-term liquidity needs and reduce the overall cost of holding liquidity assets. Comments on the rule must be received within 60 days following publication in the Federal Register.
CFPB issues advisory opinion on medical debt collection practices
On October 1, the CFPB issued an advisory opinion regarding medical debt collection practices and debt collectors’ obligations under the FDCPA and Regulation F. The advisory opinion identified practices for which debt collectors will be considered strictly liable for, such as (i) collecting amounts not owed because they were already paid, either fully or partially, including when paid by insurance or a government payor; (ii) collecting amounts not owed due to federal or state law, such as where employers or insurers are liable for the debt under state workers’ compensation programs; and (iii) collecting amounts above what can be charged under federal or state law, including limits set by the No Surprises Act or state common law remedies if there is not an express contract.
The CFPB also noted specifically that debt collectors will be liable for attempting to collect amounts for services not received, such as where a medical provider uses a code that entitles the provider to greater compensation than the level of care than what was provided, known as “upcoding.” The advisory opinion also stated that debt collectors must have a “reasonable basis” for asserting the validity and correctness of the debts they collect, which may require obtaining underlying patient agreements, billing history or other contracts.
The advisory opinion provided guidance on how the CFPB interprets “default” under the FDCPA for medical debt, stating that whether a debt will be considered “in default” will be determined by the terms of the agreement between the consumer and the medical provider under applicable law governing the agreement.
CFPB receives first application for open banking standard setter recognition
On September 24, the CFPB received its first application for open banking standard setter recognition under Section 1033 of the Dodd-Frank Act. As previously covered by InfoBytes, the CFPB initiated its public comment period in June for a final rule outlining the qualifications to become a recognized industry standard-setting body to comply with the CFPB’s upcoming Personal Financial Data Rights Rule. A data exchange group for financial data became the first company to submit an application, aiming to ensure fair, open and inclusive financial technical standards.
The company claimed its practices aligned with the CFPB’s requisite attributes. Its program interface specifications are freely available to any individual or organization that passes a know-your-client check, ensuring openness. The data exchange group stated its decision-making power was distributed across diverse groups, including data providers, third parties, and non-commercial entities. The data exchange group’s board had equal representation from data providers and third parties. The data exchange group maintained publicly available policies, provided adequate notice of meetings, and allowed sufficient time for review and comments to practice due process and appeals. The data exchange group followed a structured Request for Comment (RFC) process, where any member can submit an RFC, and all comments are addressed before final approval. The consensus attribute was upheld through a two-thirds majority vote requirement for all significant decisions, ensuring broad support while allowing for diverse opinions. Finally, the company’s transparency practices include publicly available policies and dedicated councils for smaller organizations, ensuring all members can participate actively and have visibility into decision-making processes.
Comments on the company’s application can be found here.
OCC files amicus brief supporting a preliminary injunction on the Illinois’ Interchange Fee Prohibition Act
On October 2, the OCC filed an amicus brief supporting several banking associations’ motion for a preliminary injunction against the Illinois Interchange Fee Prohibition Act (IFPA or the Act) in the U.S. District Court for the Northern District of Illinois. As previously covered by InfoBytes, the Governor of Illinois signed into law the IFPA banning credit or debit card issuers and any other entity that facilitates or processes electronic payments from charging an interchange fee on the tax or gratuity of a transaction. Under the IFPA, the Act prohibits banks and others involved in an electronic payment transaction (except the merchant) from transferring or using data from that transaction except to facilitate or process the transaction, or as required by law. Several bank associations quickly challenged this law to prevent its implementation, seeking a preliminary injunction and asking the court to declare the Act preempted, unconstitutional and invalid (covered by InfoBytes here).
The OCC argued the IFPA’s restrictions on interchange fees and data usage significantly interfere with national banks’ federally authorized powers under the National Bank Act (NBA) to process debit and credit card transactions and charge fees for those services. The OCC emphasized the IFPA’s prohibition on charging interchange fees on tax and gratuity portions of transactions and its limitations on the use of transaction data would impose operational burdens on national banks and could disrupt the national payment system. The OCC contended that such state-level restrictions could lead to increased costs, reduced services and weakened fraud protection for consumers, ultimately fragmenting the nationwide payments system.