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On June 20, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a final interim rule amending its Reporting, Procedures and Penalties Regulations, which set forth the standard reporting and recordkeeping requirements, license application, and other procedures relevant to the economic sanctions programs administered by OFAC. Among other things, the final interim rule: (i) expands the information that must be included in reports on blocked property and rejected transactions; (ii) includes details on the information that must be included when OFAC requires a report that property has been unblocked; (iii) revises procedures for (a) reporting on rejected transactions; (b) licensing of otherwise prohibited transactions; and (c) releasing blocked funds; and (iv) clarifies rules governing the availability of information under the Freedom of Information Act. The final interim rule will take effect upon publication in the Federal Register, which is scheduled for June 21.
On June 19, the OCC issued Bulletin 2019-28, which highlights “core lending principles” for banks offering higher loan-to-value (LTV) loans. The Bulletin rescinds 2017 guidance from the OCC—Bulletin 2017-28, “Mortgage Lending: Risk Management Guidance for Higher-Loan-to-Value Lending Programs in Communities Targeted for Revitalization”— noting that “banks have engaged in responsible, innovative lending strategies that are different from [the previous bulletin’s] specific program parameters while being consistent with its goals.” The new guidance instead covers core lending principles that banks should consider when offering higher-LTV loans in an effort revitalize communities. Among other things, the OCC states that higher-LTV loans (i) should be consistent with safe and sound banking and comply with applicable laws and regulations; (ii) performance is effectively monitored, tracked, and managed; (iii) should be underwritten consistent with the Interagency Guidelines for Real Estate Lending and the bank’s standards for review and approval of exception loans. The Bulletin notes examples of sound policies and processes for higher-LTV loans, including underwriting standards and portfolio limits for the aggregate amount of higher-LTV loans. Lastly, the Bulletin emphasizes that marketing and consumer disclosures should describe the potential financial impacts and marketability of a higher-LTV loan where the value of the property is and could remain less than the loan amount.
On June 17, the FDIC, the OCC, and Federal Reserve issued the final rule to streamline regulatory reporting for qualifying small institutions to implement Section 205 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The agencies adopted the final rule as proposed in November 2018 (covered by InfoBytes here). The final rule permits depository institutions with less than $5 billion in assets—previously set at $1 billion—that do not engage in certain complex or international activities to file the FFIEC 051 Call Report, the most streamlined version of the Call Reports. Additionally, the rule reduces the existing reportable data items in the FFIEC 051 Call Report by approximately 37 percent for the first and third calendar quarters. The rule also includes similar provisions for uninsured institutions with less than $5 billion in total consolidated assets that are supervised by the Federal Reserve and the OCC. The rule notes that the agencies are also committed to “exploring further burden reduction and are actively evaluating further revisions to the FFIEC 051 Call Report, consistent with guiding principles developed by the FFIEC.” The rule will take effect 30 days after it is published in the Federal Register.
On June 11, the CFPB announced that its first symposium, regarding the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act, will be held on June 25. As previously covered by InfoBytes, the CFPB announced a symposia series that will convene to discuss consumer protections in “today’s dynamic financial services marketplace.” The June 25 symposium will be a public forum with two panels of experts discussing unfair, deceptive, or abusive acts and practices (UDAAP). The first panel will be a policy discussion, moderated by Tom Pahl, CFPB’s Policy Associate Director, Research, Markets and Regulation. The second panel will examine how the “abusive” standard has been used in practice in the field and will be moderated by David Bleicken, CFPB Deputy Associate Director, Supervision, Enforcement and Fair Lending.
In addition to the June 25 symposium, the series will have future events discussing behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer authorized financial data sharing.
On June 3, the Federal Reserve Board issued supervisory letter SR 19-9 to provide guidance on its enhanced process for determining the scope of safety-and-soundness examinations of community and regional state member banks (SMB). Under the “Bank Exams Tailored to Risk” (BETR) process, the Fed intends to “gauge the risk of a bank’s various activities [and] facilitate a more data-driven approach to the risk tailoring of supervisory work.” A SMB’s level of risk within individual risk dimensions—such as credit, liquidity, and operational risk—will be derived from a combination of surveillance metrics and examiner judgment.
Among other things, BETR’s objectives are to (i) apply appropriately streamlined examination work programs to identified low-risk activities, in order to conserve supervisory staff resources and minimize regulatory burden; (ii) direct enhanced supervisory resources and attention to identified high-risk activities; and (iii) implement average intensity examination work programs to moderate-risk activities. Examiners are to tailor examination procedures to the size, complexity, and risk profile of an SMB, with examiners focusing on “developing an appropriate assessment of bank management’s ability to identify, measure, monitor, and control risk.”
On June 4, the OCC extended the deadline for national banks and federal savings associations (FSAs) with consolidated assets between $100 billion and $250 billion to comply with the Dodd-Frank stress test (DFAST) requirements to November 25. In December 2018, the OCC issued a letter noting that prior DFAST exams and OCC supervision have indicated that qualifying banks with consolidated assets within these thresholds have adopted effective stress testing programs and integrated them into their general risk management tools, and as such, “requiring DFAST submissions for these banks in 2019 would provide limited supervisory value.” According to the OCC, the extension is consistent with the Economic Growth, Regulatory Relief, and Consumer Protection Act’s goal of reducing regulatory burden for applicable national banks and FSAs.
On June 6, the CFPB released a final rule to delay the August 19, 2019 compliance date for the mandatory underwriting provisions of the agency’s 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the Rule). Compliance with these provisions of the Rule is now due by November 19, 2020.
As previously covered by InfoBytes, in February, when the CFPB released two notices of proposed rulemaking (NPRM) related to certain lending requirements under the Rule—one proposing the delay to the compliance date for mandatory underwriting provisions, and the other proposing to rescind the underwriting portion of the Rule that would make it an unfair and abusive practice for a lender to make covered high-interest rate, short-term loans, or covered longer-term balloon payment loans without reasonably determining that the consumer has the ability to repay—the Bureau emphasized that the NPRM extending the compliance date for mandatory underwriting provisions did not extend the effective date for the Rule’s provisions governing payments.
Notably, on May 30, the U.S. District Court for the Western District of Texas entered an order continuing the stay of the original compliance date for both the underwriting provisions and the payment provisions of the Rule in a payday loan trade group’s litigation challenging the Rule. (Previous InfoBytes coverage on the litigation is available here.) The order requires the parties to file a joint status report no later than August 2.
On June 6, the FCC approved a Declaratory Ruling and Notice of Proposed Rulemaking to address unwanted robocalls to consumers. The Declaratory Ruling affirms that voice service providers may block unwanted robocalls “based on reasonable call analytics, as long as their customers are informed and have the opportunity to opt out of the blocking.” Among other things, the Declaratory Ruling clarifies that voice providers (i) may offer call blocking tools to their customers as a default, as opposed to an opt-in basis; and (ii) may offer customers tools that would allow customers to block calls from any number that is not listed in the customer’s contact list or other “white lists.” The FCC notes that a “white list” could be based on a customer’s contact list and would be updated as customers add and remove contacts from their phone. According to reports, the FCC also adopted language that was added to the May proposal, which encourages voice providers to devise a system for addressing complaints made by legitimate companies whose calls to customers are being blocked. The final Declaratory Ruling is effective upon its publication on the FCC’s website.
The FCC also adopted a Notice of Proposed Rulemaking (NPRM) (available in the May proposal) requiring voice providers to implement the “SHAKEN/STIR” caller ID authentication framework—an “industry-developed system to authenticate Caller ID and address unlawful spoofing by confirming that a call actually comes from the number indicated in the Caller ID, or at least that the call entered the US network through a particular voice service provider or gateway.” The FCC asserts that once the “SHAKEN/STIR” is implemented, it would “reduce the effectiveness of illegal spoofing and allow bad actors to be identified more easily.” The deadline for comments in response to the NPRM will be established upon publication in the Federal Register.
On May 31, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID) compliance. The two new FAQs relate to the application of TRID to construction loans. Highlights include:
- Most construction-only and construction-permanent loans are covered by TRID as long as such a loan: (i) is made by a creditor as defined in Regulation Z; (ii) is a closed-end, consumer credit transaction; (iii) is secured in full or in part by real property or cooperative unit; (iii) is not a reverse mortgage; and (iv) is not exempt for any reason under Regulation Z.
- There are three special disclosure provisions for construction-only or construction-permanent loans under TRID: (i) Section 1026.17(c)(6) permits a creditor to issue separate or combined disclosures for construction-permanent loans based on whether each phase is treated as a separate transaction; (ii) Appendix D provides methods that may be used for estimating construction phase financing disclosures; and (iii) Section 1026.19(e)(3)(iv)(F) permits creditors, in certain instances involving new construction, to use a revised estimate of a charge for good faith tolerance purposes when settlement will occur more than 60 days after the original Loan Estimate. The Bureau notes that these provisions apply “even if the creditor does not necessarily label the product as construction-only or construction-permanent, so long as the product meets the requirements discussed in each provision.”
On May 29, the Department of Treasury announced the establishment of a Financial Innovation Partnership (FIP) between the U.S. and the UK. The FIP will focus on expanding bilateral financial services collaborative efforts to study emerging fintech innovation trends and share information and expertise on regulatory practices. Specifically, the FIP will focus on (i) regulatory engagement, including building upon “existing regulatory cooperation by discussing regulatory developments and sharing experiences on technical issues related to innovation in financial services,” and (ii) commercial engagement, such as providing cross-border opportunities for private sector companies to engage with industry associations as well as market participants. The FIP was announced during a meeting of the U.S.-UK Regulatory Working Group, which, a week earlier, held discussions in Washington, D.C. on the outlook for financial regulatory reforms, future priorities, regulatory cooperation, and possible implications of the UK’s exit from the EU on financial stability and cross-border financial regulation.
- Buckley Webcast: Hot topics in debt collection — An analysis of recent federal FDCPA litigation
- Jonice Gray Tucker to discuss "How to succeed in law school" at the SEO Law DC Panel Discussions
- 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
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Summer Regulatory Compliance School
- Warren W. Traiger to discuss "CRA modernization" at the National Association of Industrial Bankers and the Utah Association of Financial Services Annual Convention
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Henry Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates an Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- 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