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Special Alert: CARES Act places significant burdens on servicers of consumer debt but provides some relief to depositories
President Trump late last week signed the Coronavirus Aid, Relief, and Economic Security Act that attempts to soften the negative economic effects of the Covid-19 pandemic on consumers, including by suspending payments for certain student loan borrowers and enabling mortgage loan borrowers to easily obtain temporary forbearances. The act also provides certain limited regulated relief for banks and credit unions.
This Special Alert summarizes the provisions providing relief to borrowers with federal student loans and the provisions of Title IV that dictate the manner in which servicers and collectors report borrowers to consumer reporting bureaus; provide forbearance, foreclosure, and eviction relief throughout the housing market; and provide limited regulatory relief to depository institutions.
Buckley issued a separate Special Alert on the Small Business Administration-related provisions contained in Title I of the act and will be covering separately the new Special Inspector General’s office created by the act, False Claims Act considerations, and other liability risks that we expect to arise.
Special Alert: CARES Act “Paycheck Protection Program” offers relief and opportunities for small businesses and lenders
On March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). The legislation’s first title, the “Keeping American Workers Paid and Employed Act,” provides a host of relief measures for small businesses, including $349 billion for Small Business Administration (SBA) loan forgiveness, guarantees, and subsidies. This Special Alert summarizes pertinent SBA-related provisions of the Paycheck Protection Program (PPP) and potential opportunities for both (i) small businesses, and (ii) existing and new SBA lenders to grow their small business lending portfolios. We will provide an update on the relief measures following the Treasury Department’s (Treasury) release of additional program details, which is expected imminently.
We will provide timely updates regarding any guidance published on this topic on our dedicated SBA page, which includes additional SBA resources you may find helpful. If you have any questions regarding the matters discussed in this Alert, please contact a Buckley attorney with whom you have worked in the past.
On March 27, the FDIC issued a Financial Institution Letter providing additional information and guidance to insured depository institutions (IDIs) subject to Part 363 of the FDIC regulations that have been affected by Covid-19. The FDIC will not take supervisory action against an IDI for submitting its Part 363 Annual Report or its written notification of late filing as long as the annual report or notification of late filing is submitted within 45 days of the 90- or 120-day report filing deadline. IDIs are encouraged to contact the FDIC in advance of the official filing date if the IDI anticipates delayed submission. This letter applies to all insured depository institutions with $500 million or more in total assets.
In March, FINRA announced that Prometric is closing its centers in the United States and Canada for a period of 30 days, starting March 18, 2020. Candidates for taking FINRA-administered exams who have an existing appointment may reschedule their appointment to a future date without incurring a rescheduling fee. In addition, FINRA will extend all enrollment windows that are currently open and scheduled to expire by the end of May.
On March 27, the CFPB issued guidance on the student loan provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Pursuant to the Act, borrowers with federally held student loans will automatically have their loan principal and interest payments paused until September 30. Borrowers do not need to take any action to have their payments suspended and interest will not accrue during this period. The CFPB also provided additional guidance on the impact on privately held student loans and federal loans held by commercial lenders, and provided information to help borrowers avoid student loan debt relief scams.
On March 27, the FDIC announced an update to guidance it issued on March 16 regarding “steps to protect banks and consumers and to continue operations.” Among the updates, the agency (i) extended telework for all FDIC employees from March 30 until at least April 12; (ii) expanded the period of time the agency will conduct “[s]upervisory and other FDIC activities” off-site through April 12; and (iii) encouraged institutions to communicate with their “Examiner-in-Charge or Regional Director” if they anticipate delays in responding to “normal supervisory requests.”
On March 26, the OCC, Federal Reserve System, and FDIC issued a notice permitting depository institutions and depository institution holding companies to implement the final rule titled Standardized Approach for Calculating the Exposure Amount of Derivative Contracts (SA-CCR rule) for the first quarter of 2020, on a best efforts basis. A banking organization that elects to adopt the SA-CCR methodology must adopt the methodology for all derivative contracts; a banking organization cannot implement the SA-CCR methodology for a subset of its derivative contracts. A banking organization may adopt some of the technical amendments described in the rule regardless of whether the banking organization chooses to early adopt the SA-CCR methodology. The SA-CCR rule effective date remains April 1, 2020, and the mandatory compliance date remains January 1, 2022.
SEC provides additional temporary regulatory relief and assistance to market participants affected by Covid-19
On March 26, the SEC issued a press release announcing an order and a temporary final rule providing temporary relief and assistance to market participants affected by Covid-19. The statement notes that the SEC is providing (i) temporary relief from notarization requirements from March 26 through July 1 to filers in the EDGAR system, subject to certain conditions; (ii) for Regulation A and Regulation Crowdfunding issuers, a temporary extension of 45 additional days to file certain disclosure reports that would otherwise have been due between March 26 and May 31, subject to certain conditions; and (iii) a temporary conditional exemptive order that provides affected municipal advisors with an additional 45 days to file annual updates to Form MA that would have otherwise been due between March 26 and June 30, subject to certain conditions.
On March 26, the FTC Chairman issued a statement reiterating that the FTC is working closely with federal and state law enforcers and other stakeholders and is “devoting significant resources to tackling scammers and unfair and deceptive business practices” particularly with respect to the Covid-19 outbreak. The FTC notes that while it will remain flexible and reasonable in enforcing compliance requirements that may hinder the provision of important goods and services to customers, it will not “tolerate companies deceiving consumers, using tactics that violate well-established consumer protections, or taking unfair advantage of these uniquely challenging times.”
FINRA provides cybersecurity alert containing measures firms should consider in adjusting to Covid-19
On March 26, FINRA released a cybersecurity alert providing FINRA firms and associated persons with measures they can take to help strengthen their cybersecurity controls in areas where risks may increase in the current environment. The alert contains recommendations concerning the security of office and home networks, computers, and mobile devices. It also addresses common methods of scams and attacks during Covid-19. The alert recommends that firms provide staff with training regarding cybersecurity.
- Benjamin W. Hutten to discuss "Understanding OFAC sanctions" at a NAFCU webinar
- Warren W. Traiger to discuss "Key takeaways from proposed CRA modernization" at the New York Bankers Association Technology, Compliance & Risk Management Forum
- Garylene D. Javier to discuss "Navigating workplace culture in 2020" at the DC Bar Conference