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Financial Services Law Insights and Observations

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  • CFPB updates status on Section 1071 NPRM

    Federal Issues

    On November 22, the CFPB filed its seventh status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February 2020 with a group of plaintiffs, including the California Reinvestment Coalition, related to the collection of small business lending data. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses. The newest status report states that the Bureau has met its deadlines under the stipulated settlement, which included issuing its long-awaited proposed rule (NPRM) in September. As covered by a Buckley Special Alert, the NPRM would require a broad swath of lenders to collect data on loans they make to small businesses, including information about the loans themselves, the characteristics of the borrower, and demographic information regarding the borrower’s principal owners. This information would be reported annually to the Bureau and published by the Bureau on its website. Comments on the NPRM are due January 6, 2022. Among other things, the Bureau notes in its status report that once the Section 1071 NPRM comment period concludes, it will meet and confer with plaintiffs to discuss an “appropriate deadline” for issuing the final rule, consistent with the stipulated settlement.

    Find continuing Section 1071 coverage here.

    Federal Issues CFPB Section 1071 Small Business Lending Dodd-Frank

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  • FDIC releases October enforcement actions

    Federal Issues

    On November 26, the FDIC released a list of administrative enforcement actions taken against banks and individuals in October. During the month, the FDIC issued three orders consisting of “one Order to Pay Civil Money Penalty, one Consent Order, and one Section 19 Order.” Among the orders is a civil money penalty imposed against an Arkansas-based bank based on allegations of deceptive practices related to misrepresenting the availability of Veterans Administration refinance loan terms. The bank, which did not admit or deny the violations, agreed to pay a $129,800 civil money penalty.

    Federal Issues FDIC Enforcement Bank Regulatory

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  • Biden nominates Powell and Brainard to serve as chair and vice chair

    Federal Issues

    On November 22, President Biden selected Jerome Powell to serve a second term as Chair of the Federal Reserve Board and nominated Fed Governor Lael Brainard to serve as Vice Chair of the Board of Governors, replacing current Vice Chair Richard Clarida. The White House highlighted Powell’s “steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve,” and applauded Powell and Brainard’s shared “focus on ensuring that economic growth broadly benefits all workers.” The White House noted that both nominees are advancing key Biden administration priorities, including addressing climate-related financial risks and staying ahead of emerging risks to the country’s financial system. Powell issued a statement on his nomination, thanking President Biden for the opportunity to continue to serve as Chair and highlighting several key priorities, including “vigilantly guarding the resilience and stability of the financial system, addressing evolving risks from climate change and cyber attacks, and facilitating the modernization of the payments system while protecting consumers.” Brainard also released a statement affirming her commitment to serving all Americans and ensuring the Fed reflects the diversity of the communities it serves. President Biden still needs to fill three open seats on the Board, including the position of Vice Chair for Supervision. The White House stated that President Biden intends to announce the additional nominations in early December.

    Federal Issues Biden Federal Reserve Bank Regulatory

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  • FTC expands criminal referral program

    Federal Issues

    On November 18, the FTC announced the expansion of its criminal referral program as part of its effort to cease and deter corporate crime, which enhances the agency’s work in combating criminal misconduct in consumer protection and antitrust. According to the announcement, the new measures highlighted in the policy statement guarantee that cases are promptly referred to local, state, federal, and international criminal law enforcement agencies so that corporations and their executives partaking in criminal behavior are held accountable. According to the policy statement, the agency intends to refine its collaboration with its criminal law enforcement partners to stop and deter consumer protection and competition criminal violations, including by, among other things: (i) publicly and regularly reporting on the FTC’s criminal referral efforts; (ii) developing guidelines to ensure criminal law violations, specifically by major corporations and their executives, are identified; and (iii) “convening regular meetings with federal, state, and local criminal authorities to facilitate the coordination that will enable the appropriate law enforcement partners to take up cases referred by the FTC and develop best practices to enhance this coordination.” The policy statement builds on the agency’s continuing partnerships with criminal authorities to decrease misconduct. According to FTC Chair Lina M. Khan, the FTC “is redoubling its commitment and improving its processes to expeditiously refer criminal behavior to criminal authorities, promoting accountability and deterrence.”

    Federal Issues FTC Criminal Enforcement

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  • FinCEN issues environmental crimes notice

    Federal Issues

    On November 18, the Financial Crimes Enforcement Network (FinCEN) issued a notice calling attention to the increase of environmental crimes and associated illicit financial activity. FinCEN emphasized that this trend is due to: (i) its strong association with corruption and transnational criminal organizations, two of FinCEN’s national anti-money laundering and countering the financing of terrorism priorities; (ii) a need to enhance reporting and analysis of related illicit financial flows; and (iii) environmental crimes’ contribution to the climate crisis, including threatening ecosystems, decreasing biodiversity, and increasing carbon dioxide in the atmosphere. The notice also provided financial institutions with specific suspicious activity report filing instructions and outlined the likelihood of illicit financial activity associated with several types of environmental crimes.

    Federal Issues FinCEN Financial Crimes Anti-Money Laundering Combating the Financing of Terrorism SARs Climate-Related Financial Risks

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  • CFPB releases ethics guidance

    Federal Issues

    On November 19, the CFPB released a blog post providing guidance regarding revolving door misconduct and reminding Bureau staff to report suspicious communications and activity committed by former employees to agency officials. According to CFPB Director Rohit Chopra, the reminder will permit the Bureau to detect activity by former employees and other government agencies who may be in violation of existing ethics and confidential information disclosure laws and regulations. Chopra noted that parties using services of a former Bureau employee will be subject to “heightened scrutiny to matters and decisions where a party has employed or retained the services of a former employee to ensure that the CFPB is meeting the highest standards of ethics and integrity implemented nearly a decade ago." Among other things, the guidance disclosed areas to foster the CFPB’s standard of exemplary integrity, safeguard confidential information, and protect the Bureau’s decision-making process through: (i) protecting supervisory, confidential, and non-public CFPB information; (ii) reporting potentially unlawful communications by former federal employees; and (iii) reporting any communications with the Bureau during a former employee's first year.

    Federal Issues CFPB Consumer Finance

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  • SBA releases updated Covid-19 EIDL program guidance

    Federal Issues

    On November 19, the Small Business Administration (SBA) announced updated guidance for Covid-19 Economic Injury Disaster Loan (EIDL) program applicants while funding remains available. The updated guidance provided that (i) the deadline to submit EIDL loans and targeted advance applications will be December 31 (loans will continued to be processed after this date until funds are depleted); (ii) supplemental targeted advance applications will also be accepted through December 31, however SBA noted that it may not be able to process applications submitted near the deadline due to legal requirements (SBA encouraged applicants to apply by December 10 to allow for adequate processing time); (iii) borrowers may request increases “up to their maximum eligible loan amount for up to two years after their loan origination date, or until the funds are exhausted, whichever is soonest”; and (iv) appeal requests for Covid-19 EIDL applications that are received on or before December 31 will be accepted and reviewed provided they are received within the regulation’s timeframes (i.e., “six months from the date of decline for reconsiderations and 30 days from the date of reconsideration decline for appeals—unless funding is no longer available”). SBA further directed applicants to review enhancements made to the EIDL program in September.

    Federal Issues SBA Small Business Lending EIDL Covid-19

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  • HUD updates appraisal fair housing compliance

    Federal Issues

    On November 17, HUD issued Mortgagee Letter 2021-27, which provides updates on appraisal fair housing compliance and general appraiser requirements. According to HUD, the letter clarifies FHA’s existing requirements for appraisers and mortgagees on compliance with fair housing laws related to appraisal of properties that will serve as security for FHA-insured mortgages, and applies to all FHA Single Family Title II Forward and Reverse Mortgage Programs. Among other things, the changes include: (i) revising the Appraisers Post-Approval Requirements section to emphasize compliance with applicable laws, including the Fair Housing Act and all other federal, state, and local antidiscrimination laws; (ii) clarifying language in the Quality of Appraisal section to emphasize the requirement that mortgagees ensure the appraisal complies with applicable laws, including the Fair Housing Act and other federal, state, and local antidiscrimination laws; and (iii) restructuring a section of the General Appraiser Requirements into subsections, which clarifies guidance to the nondiscrimination policy and compliance with FHA guidelines and appraiser conduct. The mortgagee letter is effective immediately.

    Federal Issues HUD Mortgages FHA Consumer Finance Appraisal Fair Housing Act

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  • CFPB issues FDCPA reminder on text messaging

    Federal Issues

    On November 18, the CFPB issued a reminder that “debt collectors who adopt and follow certain procedures can obtain a bona fide error defense from civil liability for unintentional violations of the prohibition against third-party communications when communicating by email or text message,” as determined by the Bureau’s debt collection rule. As previously covered by InfoBytes, in October 2020 the CFPB issued its final rule amending Regulation F, which implements the FDCPA, addressing debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The reminder emphasizes that for text message communications, a provision in the rule includes utilizing a “complete and accurate database” to ensure that a consumer’s telephone number has not been re-assigned. Additionally, the reminder notes that the rule’s commentary identifies the FCC’s Reassigned Numbers Database as a “complete and accurate database,” which the FCC has published.

    Federal Issues FCC CFPB Debt Collection FDCPA Agency Rule-Making & Guidance

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  • OCC calls for modernization of financial regulatory perimeter as fintechs/crypto firms increase

    Federal Issues

    On November 16, acting Comptroller of the Currency Michael J. Hsu told attendees at the Federal Reserve Bank of Philadelphia’s Fifth Annual Fintech Conference that the federal banking agencies are “approaching crypto activities very carefully and with a high degree of caution” and “expect banks to do the same.” Hsu pointed out what while changes to the financial regulatory perimeter generally occur as a response to crises and failures, regulatory agencies need to take proactive modernization measures given the astounding growth and expansion of fintechs and cryptocurrencies. Hsu highlighted several important questions that agencies must consider, including whether fintech and crypto firms will start to function like banks and whether bringing them into the bank regulatory perimeter would be the proper solution. He also stated that regulatory agencies must consider whether the risks faced by banks and fintech/crypto firms are the same and, subsequently, whether agencies need to modernize or maintain their status quo. Hsu focused on two specific areas of concern: (i) synthetic banking, or fintechs, operating outside the bank regulatory perimeter but that offer a range of services, including extending various forms of credit and offering interest on cash held in accounts (emphasizing the importance of fintech-bank partnerships); and (ii) the fragmented supervision of universal crypto firms, where Hsu asserted that gaps in supervision are driven by the fact that crypto firms are not subject to comprehensive consolidated supervision.

    Hsu announced that the agencies will soon issue a statement conveying results from a recent interagency “crypto sprint,” and that the OCC will also provide clarity on its recently concluded review of crypto-related interpretive letters. Hsu explained that “safety and soundness is paramount” when banks engage in crypto activities and that the agencies’ clarifications “should not be interpreted as a green light or a solid red light, but rather as reflective of a disciplined, deliberative, and diligent approach to a novel and risky area.”

    Federal Issues OCC Fintech Cryptocurrency Bank Regulatory Bank Supervision

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