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On November 20, the Washington governor issued a proclamation extending a previous moratorium on garnishment for consumer debts until the earlier of December 7, 2020 or the termination of Washington’s Covid-19 State of Emergency. See here, here and here for previous coverage. The suspension applies to garnishment of consumer bank accounts, wages and income to satisfy consumer debt judgments.
On November 18, the U.S. Treasury Department and Internal Revenue Service (IRS) clarified the tax treatment of expenses where a Paycheck Protection Program (PPP) loan has not been forgiven by the end of the year the loan was received. According to the IRS revenue ruling, businesses are not taxed on the proceeds of a forgiven PPP loan, thus the business expenses paid from those proceeds are not deductible. The revenue ruling illustrates multiple taxpayer scenarios, which conclude that if the PPP loan has not yet been forgiven by the end of 2020, but the business reasonably believes the loan will be forgiven in the future, the expenses are not deductible. This applies whether the business has filed for forgiveness yet or not. However, if a PPP loan was expected to be forgiven, and was not, the expenses are deductible.
On November 18, the FTC filed a complaint against a mobile banking app operator alleging the defendants violated the FTC Act by deceiving users about their high-interest bank accounts and falsely promising users “24/7” access to their funds. The FTC’s complaint alleges that the defendants represented that users would receive “‘minimum base’ interest rates” of at least 0.2 percent or 1.0 percent, but that users actually received a starting interest rate of 0.04 percent and stopped earning any interest if they requested that their funds be returned. Additionally, the complaint claims that while the defendants promised users 24/7 access to their funds and represented they could make transfers out of their accounts and receive the requested funds within three to five business days, some users waited weeks or months to receive their funds despite submitting repeated complaints to the defendants. Other users claimed they never received their money. Moreover, some users claimed that the defendants blamed the failure to deliver the requested funds on “unspecified issues with unspecified ‘banking partners’ or ‘technology partners’ and promised the delays were temporary.
The FTC seeks an injunction against the defendants, along with monetary relief including “rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief.”
On November 18, the FHFA announced a final rule, which establishes a new regulatory capital framework for Fannie Mae and Freddie Mac (GSEs) to ensure safety and soundness. The final rule is similar to the proposed rule published earlier this year (covered by InfoBytes here), and it generally makes the following notable modifications in response to comments: (i) increases the dollar amount of capital relief for the GSEs’ credit risk transfers; (ii) reduces the credit risk capital requirements for single-family mortgage exposure subject to Covid-19 related forbearance; and (iii) increases the exposure level risk-weight floor for single-family and multifamily mortgage exposures to 20 percent.
According to a fact sheet released in conjunction with the announcement, the final rule preserves key enhancements contained within the proposed rule. These include, among other things, (i) ensuring each GSE “maintains high-quality regulatory capital by including a set of supplemental capital requirements based on the U.S. banking framework’s definitions of [common equity tier 1], tier 1, and total capital”; (ii) strengthening the quality of regulatory capital; (iii) including backstop leverage requirements; and (iv) addressing pro-cyclicality through measures such as capital buffers and single-family mortgage exposure countercyclical adjustments.
The final rule takes effect 60 days after publication in the Federal Register.
On November 18, the CFPB, OCC, and the Federal Reserve Board announced a final rule, which increases the TILA smaller loan exemption threshold for the special appraisal requirements for higher-priced mortgage loans (HPMLs). TILA requires creditors to obtain a written appraisal before making a HPML unless the loan amount is at or below the threshold exemption. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2021 is $27,200, which remains at the same level it was in 2020.
Additionally, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of TILA (Regulation Z) and Consumer Leasing Act (Regulation M) (available here and here), as required by the Dodd-Frank Act. The exemption threshold for 2021, based on the annual percentage increase in the CPI-W, remains unchanged at $58,300 or less, except for private education loans and loans secured by real or personal property used or expected to be used as the principal dwelling of a consumer, which are subject to TILA regardless of the amount.
The final rules take effect on January 1, 2021.
On November 18, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions against “a key patronage network for the Supreme Leader of Iran” (Foundation)—a conglomerate of roughly 160 holdings in key sectors of Iran’s economy, including finance, energy, construction, and mining—along with Iran’s Minister of Intelligence and Security. The Foundation is being designated pursuant to Executive Order (E.O.) 13876, which also targets the Supreme Leader of Iran, the Iranian Supreme Leader’s Office (SLO), as well as their affiliates. According to OFAC, the Foundation, among other things, allegedly transferred large amounts of money to the SLO and made financial contributions to candidates for Iran’s presidential election. The Foundation also allegedly “maintains control of its economic empire through a network of holding companies touching nearly every sector of the Iranian economy.” Seven of these companies have also been designated, “along with dozens of their owned-or-controlled subordinate entities, as well as a number of “independent” Foundation owned-or-controlled subsidiaries and their owned-or-controlled subordinate companies.” The Iranian Minister of Intelligence and Security is being designated pursuant to E.O. 13553 for “having acted or purported to act for or on behalf of, directly or indirectly, the [Ministry of Intelligence and Security],” which plays “a key role in the Iranian regime’s brutal human rights abuses against the Iranian people.”
As a result, all property and interests in property belonging to, or owned by, the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are also generally prohibited from engaging in transactions with them. OFAC further warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated persons may subject them to U.S. correspondent account or payable-through account sanctions.
On November 17, President Trump announced his intention to nominate Brian P. Brooks as Comptroller of the Currency. Brooks has been serving as acting Comptroller since the end of May 2020. Prior to serving as acting Comptroller, Brooks served as Senior Deputy Comptroller and Chief Operating Officer of the OCC. Prior to joining the OCC, Brooks was Chief Legal Officer of a digital currency exchange, and prior to that, he served as Executive Vice President, General Counsel, and Corporate Secretary of Fannie Mae. In a statement, Brooks called the intent to nominate a “great honor” and stated he “will work ceaselessly to ensure the agency continues to fulfill its critical mission.”
On November 16, the Maryland attorney general announced that it obtained over $2.6 million in debt relief from a third-party debt buyer for approximately 1,200 former students of a defunct Maryland-based for-profit college. In its press release, the AG alleged that the for-profit college offered “low-quality programs at a price significantly higher than comparable programs at Maryland’s public institutions.” According to the AG, due to the college’s high tuition, students had little choice but to take out loans issued by the college itself. After the college permanently closed, a court-appointed receiver sold the rights to collect the loans to a third-party debt buyer. The AG took the position that, because the college abruptly closed and failed to provide its students with the services promised, the loans should have been canceled rather than sold. To resolve the dispute, the AG and the third-party debt buyer entered into a settlement. Under the terms of the settlement, the third-party debt buyer agreed to cease collection on any of the outstanding loans and to refund approximately 75 percent of the payments collected from the students after it bought the loan portfolio. Furthermore, the debt buyer agreed to remove trade lines relating to the loans from the student’s credit reports.
On November 17, NYDFS announced a partnership with a non-profit company to provide a free cybersecurity toolkit to small businesses, including those in the financial services sector. The toolkit is intended to help small businesses strengthen their cybersecurity and to protect themselves and their customers from growing cyber threats. Operational tools and educational resources covered in the toolkit address “identifying hardware and software, updating defenses against cyber threats, strengthening passwords and multi-factor authentication, backing up and recovering data, and protecting email systems.” NYDFS’ partnership with the company also includes the development of a set of sample policies based on cybersecurity best practices to help small businesses install necessary governance and procedures. The sample policies include, among other things, a risk assessment and a sample third-party service provider policy. NYDFS advises small businesses to “review the tools and sample policies and to adapt them to their specific business risks and operations, including to comply with any applicable state and federal laws.”
On November 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela General License (GL) 8G, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities.” GL 8G supersedes GL 8F and extends the expiration date for certain authorizations through June 3, 2021 that would otherwise be prohibited under Executive Orders 13850, 13857, or 13884.
Visit here for additional InfoBytes coverage of actions related to Venezuela.
- Hank Asbill to discuss "The federal fraud sentencing guidelines: It's time to stop the madness" at a New York Criminal Bar Association webinar
- Daniel P Stipano to moderate "Digital identity: The next gen of CIP" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference