Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
On March 25, 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 flooding in the Midwest. In the statement, the agencies encourage lenders to work with borrowers in impacted communities and to consider, among other things (i) modifying existing loans based on the facts and circumstances; and (ii) requesting expedited approval to operate temporary bank facilities if faced with operational difficulties. The agencies ask institutions to contact their appropriate federal and/or state regulator if they experience disaster-related difficulties complying with publishing or regulatory reporting requirements. The agencies further note that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The statement also provides links to previously issued examiner guidance for institutions affected by major disasters.
Find continuing InfoBytes coverage on disaster relief here.
On February 21, the Conference of State Bank Supervisors (CSBS) issued a request for information (RFI) on issues related to state money transmission and payments regulation as state regulators begin coordinating model legislation for all 50 states to adopt in whole or in part. CSBS’ RFI is based upon recommendations made by the Fintech Industry Advisory Panel (a part of CSBS’ Vision 2020 previously covered by InfoBytes here) and seeks feedback on several areas of law and regulation to help states create harmonized definitions and interpretations on a national level. According to the Advisory Panel, “despite the general similarity of state money transmission laws, each state defines and interprets money transmission and its exemptions differently.” The RFI solicits comments framed towards outlined policy standards and risks on the following issues:
(i) The scope of covered money transmission activities and applicable exemptions; (ii) the change in control process, including the personal vetting requirements for individuals deemed new control persons; (iii) prudential regulations—in particular, permissible investment, net worth, and surety bond requirements; (iv) supervision processes; and (v) coordination—in particular, how states can ensure the areas outlined above are implemented consistently without state-by-state policy diversion or needless duplication of effort.
Comments on the RFI are due April 20 and will be made publically available here.
On February 14, the Conference of State Bank Supervisors (CSBS) agreed to implement specific recommendations from the CSBS Fintech Industry Advisory Panel. The Advisory Panel, which was formed in 2017 and consists of 33 fintech companies, works to “identify and remove unnecessary pain points in the multistate experience of fintechs and other nonbanks operating regionally or nationwide while improving financial supervision.” Of the 19 recommended actions by the Advisory Panel, CSBS supported 14, including: (i) creating a 50-state model law to license money services businesses; (ii) creating a standardized call report for consumer finance businesses; (iii) expanding the use of the Nationwide Multistate Licensing System across all license types; and (iv) building an online database of state licensing and fintech guidance. Recommendations related to small business lending were among the items saved for future action or implementation.
Regulators encourage financial institutions to work with borrowers impacted by government shutdown; FHA also issues shutdown guidance
On January 11, the Federal Reserve Board, CSBS, CFPB, FDIC, NCUA, and OCC (together, the “Agencies”) released a joint statement (see also FDIC FIL-1-2019) to encourage financial institutions to work with consumers impacted by the federal government shutdown. According to the Agencies, borrowers may face temporary hardships when making payments on mortgages, student loans, auto loans, business loans, or credit cards. FDIC FIL-1-2019 states that prudent workout arrangements, such as extending new credit, waiving fees, easing limits on credit cards, allowing deferred or skipped payments, modifying existing loan terms, and delaying delinquency notice submissions to credit bureaus, will not be subject to examiner criticism provided the efforts are “consistent with safe-and-sound lending practices.”
Separately, on January 8, Federal Housing Administration (FHA) Commissioner Brian Montgomery issued a letter regarding the shutdown reminding FHA-approved lenders and mortgagees of their ongoing obligation to offer special forbearance to borrowers experiencing loss of income and to evaluate borrowers for available loss mitigation options to prevent foreclosures. In addition, FHA also encourages mortgagees and lenders to waive late fees and suspend credit reporting on affected borrowers.
Federal, state financial regulatory agencies issue guidance for institutions affected by California wildfires; FinCEN encourages financial institutions to communicate BSA filing delays
On November 19, the Financial Crimes Enforcement Network (FinCEN) issued a notice to financial institutions that file Bank Secrecy Act reports encouraging such institutions to communicate with FinCEN and their functional regulators regarding any expected filing delays caused by the California wildfires. FinCEN also reminded financial institutions to review advisory FIN-2017-A007, previously covered by InfoBytes, which discusses potential fraudulent activity related to recent disaster relief schemes.
In a related action, the Federal Reserve Board, California Department of Business Oversight, Conference of State Bank Supervisors, FDIC, NCUA, and OCC (collectively, the “agencies”) issued a joint statement on November 15 providing guidance to financial institutions impacted by the California wildfires. 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 the wildfires; (ii) not generally assess penalties for institutions that 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.
Find continuing InfoBytes coverage on disaster relief here.
CSBS files lawsuit over OCC’s fintech charter decision, arguing agency exceeds it authority under the National Bank Act
On October 25, the Conference of State Bank Supervisors (CSBS) filed a lawsuit against the OCC arguing that the agency exceeded its authority under the National Bank Act (NBA) and other federal banking laws when it allowed non-bank institutions, including fintech companies, to apply for a Special Purpose National Bank Charter (SPNB). As previously covered by InfoBytes, the U.S. District Court for the District of Columbia dismissed CSBS’s challenge last April on ripeness grounds because the OCC had not yet issued a fintech charter to any firm. But CSBS renewed its challenge in light of the OCC’s July announcement welcoming non-depository fintech companies engaging in one or more core-banking functions to apply for a SPNB (previously covered by Buckley Sandler Special Alert here), and statements indicating the OCC is currently vetting several companies and expects to make charter decisions mid-2019.
Among other things, the complaint argues that the SPNB program (i) exceeds the OCC’s statutory authority because the OCC may not “redefine the business of banking” to include non-depository institutions; (ii) is “arbitrary, capricious, and an abuse of discretion” because it inadequately addresses, without explanation, “the myriad policy implications and concerns raised by the public” and the “cost-benefit” tradeoffs; (iii) did not include the proper notice and comment period for preemption interpretations under the NBA; and (iv) is an improper invasion of “state sovereign interests.”
Federal and state financial regulatory agencies issue interagency disaster relief guidance for institutions affected by Hurricane Florence
On September 14, 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 Florence. The agencies encouraged lenders to work with borrowers in impacted communities and to consider, among other things, (i) whether to modify loans based on the facts and circumstances, and (ii) requesting to operate temporary bank facilities if faced with operational difficulties. On the same day, the FDIC also provided guidance for depository institutions assisting affected customers (see FIL-48-2018), 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.” Furthermore, the FDIC encouraged depository institutions to use Bank Secrecy Act-permitted “non-documentary verification methods” for customers unable to provide standard identification documents.
The agencies also reminded institutions to contact their appropriate federal and/or state regulator should they experience disaster-related difficulties when complying with publishing and regulatory reporting requirements, and further noted that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The statement also provides links to previously issued examiner guidance for institutions affected by major disasters.
Find continuing InfoBytes coverage on disaster relief here.
Conference of State Bank Supervisors announces single, national exam for mortgage loan originator licensing
On August 8, the Conference of State Bank Supervisors announced that all states and U.S. territories now use a single, common exam to assess mortgage loan originators (MLOs) in order to simplify the licensing process and streamline the mortgage industry. MLSs who pass the National SAFE MLO Test with Uniform State Content (National Test) will no longer be required to take additional state-specific tests in order to be licensed within any state or U.S. territory. The National Test is part of CSBS’ Vision 2020, which is geared towards streamlining the state regulatory system to support business innovation and harmonize licensing and supervisory practices, while still protecting the rights of consumers.
Find continuing InfoBytes coverage on CSBS’ Vision 2020 here.
Buckley Sandler Special Alert: OCC announces it will accept fintech charter applications, following the release of Treasury report on nonbank financial institutions
On July 31, the OCC announced that nondepository financial technology firms engaged in one or more core banking functions may apply for a special purpose national bank (SPNB) charter. The announcement follows a report released the same day by the Treasury Department, which discusses a number of recommendations for creating a streamlined environment for regulating financial technology, and includes an endorsement of the OCC’s SPNB charter for fintech firms (fintech charter).
If you have questions about the report or other related issues, please visit our Fintech practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.
Conference of State Bank Supervisors supports legislation to coordinate federal and state examinations of third-party service providers
On July 12, the Conference of State Bank Supervisors (CSBS) issued a statement to the Senate Banking Committee, offering support for legislation that would “enhance state and federal regulators’ ability to coordinate examinations of, and share information on, banks’ [third-party technology service providers (TSPs)] in an effective and efficient manner.” H.R. 3626, the Bank Service Company Examination Coordination Act, introduced by Representative Roger Williams, R-Texas, would amend the Bank Service Company Act to provide examination improvements for states by requiring federal banking agencies to (i) consult with the state banking agency in a reasonable and timely fashion, and (ii) take measures to avoid duplicating examination activities, reporting requirements, and requests for information. Currently, 38 states have the authority to examine TSPs, however, according to CSBS, amending the Bank Service Company Act would more appropriately define a state banking agency’s authority and role when it comes to examining potential risks associated with TSP partnerships. In its statement, CSBS also references a recent action taken by eight state regulators against a major credit reporting agency following its 2017 data breach that requires, among other things, a wide range of corrective actions, including improving oversight and ensuring sufficient controls are developed for critical vendors. (See previous InfoBytes coverage here.) The House Financial Services Committee advanced H.R. 3626 on June 24 on a unanimous vote.
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: The CFPB’s proposed debt collection rule
- Buckley Webcast: Trends in e-discovery technology and case law
- Brandy A. Hood to discuss "What the flood? Don’t get washed away by a flood of changes" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Mitigating the risks of banking high risk customers" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano, Kari K. Hall, Brandy A. Hood, and H Joshua Kotin to discuss "Regulations that matter in a deregulatory environment" at the American Bankers Association Regulatory Compliance Conference Power Hour
- Buckley Webcast: Data breach litigation and biometric legislation
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium