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CFPB releases annual adjustments to HMDA, TILA, and FCRA; agencies release CRA asset-size threshold adjustments
On December 31, the CFPB published final rules adjusting both the asset-size thresholds under HMDA (Regulation C) and TILA (Regulation Z), and the maximum amount consumer reporting agencies may charge consumers for providing the consumer the consumer’s credit file under FCRA. All rules take effect on January 1, 2019.
Under HMDA, institutions with assets below certain dollar thresholds are exempt from the collection and reporting requirements. The final rule increases the asset-size exemption threshold for banks, savings associations, and credit unions from $45 million to $46 million, thereby exempting institutions with assets of $46 million or less as of December 31, 2018, from collecting and reporting HMDA data in 2019.
TILA exempts certain entities from the requirement to establish escrow accounts when originating higher-priced mortgage loans (HPMLs), including entities with assets below the asset-size threshold established by the CFPB. The final rule increases this asset-size exemption threshold from $2.112 billion to $2.167 billion, thereby exempting creditors with assets of $2.167 billion or less as of December 31, 2018, from the requirement to establish escrow accounts for HPMLs in 2019.
Lastly, the FCRA permits consumer reporting agencies to impose a reasonable charge on a consumer when disclosing the consumer’s credit file in certain circumstances. Where the annual adjustment to this maximum charge had historically been announced via regulatory notice, the Bureau is now codifying the maximum charge in Regulation V. For 2019, the Bureau increased the maximum amount consumer reporting agencies may charge for making a file disclosure to a consumer from $12.00 to $12.50.
Separately, on December 20, the Federal Reserve Board, the OCC, and the FDIC (collectively, the “Agencies”) jointly announced the adjusted asset-size thresholds used to define “small” and “intermediate small” banks and savings associations under the Community Reinvestment Act (CRA). Effective January 1, 2019, a “small” bank or savings association will be defined as an institution that, as of December 31 of either of the past two calendar years, had assets of less than $1.284 billion. An “intermediate small” bank or savings association will be defined as an institution with assets of at least $321 million as of December 31 of both of the past two calendar years, but less than $1.284 billion in assets as of December 31 of either of the past two calendar years. The Agencies published the annual adjustments in the Federal Register on December 27.
On October 15, Federal Reserve Governor Lael Brainard spoke during a community investment meeting hosted by the Federal Reserve Bank of Kansas City’s Denver Branch to discuss the role of the Community Reinvestment Act (CRA) in strengthening community investment. She noted that the OCC recently published an Advance Notice of Proposed Rulemaking (ANPR), and encouraged the public to submit comments by November 19. As previously covered by InfoBytes, the ANPR seeks input from stakeholders on ways to modernize the CRA regulatory framework. Brainard noted there was confusion about commenting on the ANPR because it was not published on an interagency basis. She clarified that although the Federal Reserve did not join in the publication of the ANPR, the Federal Reserve will read comment letters in anticipation of working with the OCC and FDIC on a joint proposal. Brainard emphasized that the “CRA is too important to the financial well-being of communities across this country for banks and community members to disengage in any part of this process.”
On October 10, the FDIC issued FIL-58-2018 which summarizes guidance provided by the CFPB on the implementation of partial exemptions from certain of HMDA’s reporting requirements for specific insured depository institutions and insured credit unions pursuant to Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act. On August 31, as previously covered in InfoBytes here, the Bureau issued an interpretive and procedural rule to implement and clarify recent HMDA amendments and outline exemption qualification requirements. FIL-58-2018 reminds FDIC-supervised institutions subject to HMDA and Regulation C of the following clarifications made by the Bureau: (i) there are 26 data points covered by the partial exemptions and 22 other data points that all HMDA reporters must collect, record, and report”; (ii) loans counted towards partial exemption thresholds must otherwise be reportable under Regulation C; (iii) exception based on Community Reinvestment Act examination reports will be determined by the two most recent CRA ratings as of December 31 of the preceding calendar year; (iv) if an institution eligible for a partial exemption chooses not to report a universal loan identifier, it must report a non-universal loan identifier unique within the institution; and (v) institutions exempt from certain reporting requirements may still report exempt data fields so long as they “report all data fields associated with that data point.”
Federal, state financial regulatory agencies issue guidance for institutions affected by Hurricane Michael
On October 10, the OCC, Federal Reserve Board, FDIC, NCUA, and the Conference of State Bank Supervisors (collectively, the “agencies”) issued a joint statement providing guidance to financial institutions impacted by Hurricane Michael. The agencies encouraged lenders to work with borrowers in impacted communities to modify loans as appropriate based on the facts and circumstances of each borrower and loan. In addition, the agencies assured lenders that they would (i) expedite any request to operate temporary facilities to provide more convenient services to those affected by Hurricane Michael; (ii) not generally assess penalties for institutions who take prudent steps to satisfy any publishing or reporting requirements, including by contacting their state or federal regulator to discuss satisfaction of such requirements; and (iii) consider granting institutions favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.
On the same day the joint statement was issued, the FDIC issued a statement encouraging depository institutions to assist affected customers (see FIL-59-2018), which may include “waiving fees, increasing ATM cash limits, easing credit card limits, allowing loan customers to defer or skip payments, and delaying the submission of delinquency notices to credit bureaus.” The FDIC also encouraged depository institutions to use Bank Secrecy Act-permitted “non-documentary verification methods” for customers unable to provide standard identification documents and stated that prudent efforts taken to meet customers’ cash and financial needs “generally will not be subject to examiner criticism.”
Find continuing InfoBytes coverage on disaster relief here.
On August 28, the OCC issued an advance notice of proposed rulemaking (ANPR) seeking input from stakeholders on ways to transform or modernize the Community Reinvestment Act (CRA) regulatory framework. According to OCC Bulletin 2018-24, the ANPR seeks comments on several issues including:
- encouraging more lending and services in areas where there is the most need, such as low- and moderate-income areas;
- clarifying and expanding the types of activities eligible for CRA consideration;
- reviewing and updating how assessment areas are delineated and used;
- establishing measurable CRA rating metric-based thresholds;
- increasing the transparency of a bank’s CRA performance;
- improving the timeliness of CRA regulatory decisions; and
- reducing the cost and regulatory burden associated with CRA evaluations.
In its press release, the OCC stated that modernizing CRA regulations will “better achieve the statute’s original purpose, increase lending and investment where it is needed most, and reduce the burden associated with reporting and assessing CRA performance.” Additionally, the OCC noted in the ANPR that many stakeholders believe that aspects of current CRA regulations may only be “sufficient for certain locally focused and less complex banks,” as banking practices and the financial services industry continue to evolve.
As previously covered by InfoBytes, in April the Treasury Department released a memorandum of recommendations addressing findings from Treasury’s comprehensive assessment of the CRA framework. The memorandum focused on four key areas: assessment areas, examination clarity and flexibility, the examination process, and bank performance. According to the OCC, comments on the ANPR “may inform the development of more specific policy proposals or future rulemakings.” The OCC will accept comments for 75 days following publication in the Federal Register.
On July 26, the Federal Reserve Board released its inaugural Consumer Compliance Supervision Bulletin (Bulletin) to share information about the agency’s supervisory observations and other noteworthy developments related to consumer protection, and provide practical steps for banking organizations to consider when addressing consumer compliance risk. The first Bulletin focuses on fair lending issues related to the practice of redlining and outlines key risk factors the Fed considers in its review, such as (i) whether a bank’s Community Reinvestment Act (CRA) assessment areas inappropriately exclude minority census tracts; (ii) whether a bank’s Home Mortgage Disclosure Act or CRA lending data show “statistically significant disparities in majority minority census tracts when compared with similar lenders”; or (iii) whether the bank’s branches, loan production offices, or marketing strategies appear to exclude majority minority census tracts. Practical steps for mitigating redlining risk are also provided. The Bulletin also discusses fair lending risk related to mortgage pricing discrimination against minority borrowers, small dollar loan pricing that discriminates against minorities and women, disability discrimination, and maternity leave discrimination.
The Bulletin additionally addresses unfair or deceptive acts or practices risks related to overdrafts, misrepresentations made by loan officers, and the marketing of student financial products and services. The Bulletin also highlights regulatory and policy developments related to the Federal Financial Institutions Examination Council’s updated Uniform Interagency Consumer Compliance Rating System along with recent changes to the Military Lending Act.
On June 25, the OCC, together with the Federal Reserve and the FDIC, released the 2018 list of distressed or underserved communities where revitalization or stabilization efforts by financial institutions are eligible for Community Reinvestment Act (CRA) consideration. According to the joint release from the agencies, the list of distressed nonmetropolitan middle-income geographies and underserved nonmetropolitan middle-income geographies are designated by the agencies pursuant to their CRA regulations and reflect local economic conditions, including changes in unemployment, poverty, and population. For any geographies that were designated by the agencies in 2017 but not in 2018, the agencies apply a one-year lag period, so such geographies remain eligible for CRA consideration for another 12 months.
On June 13 and 14, Comptroller of Currency Joseph Otting appeared before the House Financial Services Committee and the Senate Committee on Banking, Housing, and Urban Affairs to discuss his priorities as Comptroller. As highlighted in the identical press releases for both House and Senate hearings, Otting testified about the OCC’s achievements and efforts since being sworn in as Comptroller in November 2017. Among other things, Otting discussed the agency’s efforts to (i) modernize the Community Reinvestment Act (CRA); (ii) promote compliance with the Bank Secrecy Act and anti-money laundering regulations (BSA/AML); and (iii) simplify the Volcker Rule, particularly for small and mid-size banks. Otting emphasized in his written testimony that his priority is to reduce the regulatory burden on financial institutions, specifying that the CRA requirements have become "too complex, outdated, cumbersome, and subjective." To that end, Otting stated that the OCC, in coordination with other federal agencies, is preparing an advance notice of proposed rulemaking to gather information on potential CRA updates, which, in Otting’s view, should include (i) expanding the types of activities that are eligible for CRA credit; (ii) changing assessment areas so they are not based solely on where the bank has a physical presence; and (iii) providing clearer metrics. As for BSA/AML, Otting noted this was his “number two issue” behind reforming the CRA and the working group—the OCC, FinCEN, the FDIC, the Federal Reserve, and NCUA— will likely address key issues like de-risking and improvement of transparency over the next three to six months. Otting noted his pleasure with the Volcker Rule changes in the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155/ P.L. 115-174) but cautioned that fine-tuning may be necessary as the OCC proceeds with implementation.
On June 15, the OCC issued Bulletin 2018-17, which clarifies the agency’s supervisory policies and processes regarding how examiners evaluate and communicate the performance of national banks, federal savings associations, and federal branches and agencies under the Community Reinvestment Act (CRA). The OCC issued these clarifications as part of its ongoing modernization efforts and explained that they are intended to promote the consistency and effectiveness of CRA performance evaluations. The Bulletin addresses policy clarifications for several areas of CRA evaluations, which are effective immediately, such as (i) implementation of full-scope and limited-scope reviews; (ii) consideration of activities that promote economic development; (iii) use of demographic, aggregate, and market share data; and (iv) evaluation frequency and timing. The Bulletin also provides clarifications on standard processes which became effective in May 2017, including, among other things, (i) factors considered when evaluating bank performance under small- and large-bank lending tests; and (ii) information considered and included in the written performance evaluation. The OCC noted that “[t]hese policies and processes apply to the evaluations of all OCC-supervised banks subject to the CRA, regardless of the bank’s asset size or CRA evaluation type.”
On May 18, Federal Reserve Board Governor Lael Brainard spoke before a community development conference in New York City to discuss the Community Reinvestment Act’s (CRA) role in supporting low- and moderate-income (LMI) neighborhoods and the importance of “refreshing” CRA regulations to accommodate for, among other things, technology-driven changes that have made banking accessible via online and mobile platforms. Brainard covered five principles for CRA modernization, including (i) updating CRA regulations to accommodate different business models that serve the needs of LMI communities while still sustaining branches; (ii) clarifying performance measures for productive CRA investment activities and finding ways to “reduce the distortions that lead to some areas becoming credit ‘hot spots’ and others credit deserts”; (iii) tailoring CRA regulations and evaluation methods to take into account banks of different sizes and business models; (iv) improving and promoting consistency and predictability across and within agencies; and (v) ensuring that the revised CRA regulations continue to “mutually reinforce[e] laws designed to promote an inclusive financial services industry” as well as “fair access to credit.”
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