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Agencies Release CRA Asset-Size Threshold Adjustments
On December 21, the Federal Reserve, the OCC, and the FDIC (collectively, the “Agencies”) jointly announced the adjusted thresholds for asset-size used to define “small” and “intermediate small” banks and savings associations under the Community Reinvestment Act (CRA). Effective January 1, 2018, 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 $1.252 billion. Additionally, an “intermediate small” bank or “intermediate small” savings association will be defined as an institution with at least $313 million and less than $1.252 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.
Federal Reserve Issues Final Rules Reflecting Credit and Interest Rate Increases
On December 20, the Federal Reserve Board (Fed) issued a final rule amending Regulation A (Extensions of Credit by Federal Reserve Banks) to reflect its December 13 approval of a one-quarter percent increase in the primary credit rate at each Federal Reserve Bank. Additionally, because the formula for the secondary credit rate references the primary rate, the secondary credit rate also increased by one-quarter percentage point. The rate changes took effect on December 14, and the final rule became effective on December 20.
The same day, the Fed also issued a final rule amending Regulation D (Reserve Requirements of Depository Institutions) to reflect its December 13 approval of a one-quarter percent increase to the “rate of interest paid on balances maintained to satisfy reserve balance requirements (“IORR”) and the rate of interest paid on excess balances (“IOER”) maintained at Federal Reserve Banks by or on behalf of eligible institutions.” The rate changes took effect on December 14, and the final rule became effective on December 20.
Federal Reserve Repeals Reg C and Amends Reg M to Reflect CFPB Rulemaking Authority
The Federal Reserve Board (Fed) issued a final rule on December 22 to repeal Regulation C, Home Mortgage Disclosure (HMDA), and a proposed rule to amend Regulation M, Consumer Leasing Act (CLA) to reflect the transfer of certain rulemaking authority to the CFPB. Regulation C is being repealed because the CFPB has issued its own final HMDA rules (previously covered by InfoBytes here) that supersede the Fed’s version. The proposed amendments to Regulation M implement the Dodd-Frank Act’s provisions on transferring CLA rulemaking authority to the CFPB, with the exception of retaining the Fed’s authority to issue rules for motor vehicle dealers that are predominantly engaged in the sale/leasing and servicing of motor vehicles and are not otherwise subject to the CFPB’s regulatory authority.
The repeal of Regulation C is effective 30 days after publication in the Federal Register. Comments on the proposed amendments to Regulation M are due by March 5, 2018.
FCC Votes to Overturn Net Neutrality Rules
On December 14, the FCC voted 3-2 to overturn the 2015 Open Internet Order rules (known as, “Net Neutrality” rules) which mandate that internet service providers (ISPs) treat all web content equally. The FCC released a draft order in November, which outlined the new framework for ISPs, including removing the restrictions barring the providers from slowing down or speeding up web traffic based on business relationships. ISPs are now required to publicly disclose information about their practices including any paid or affiliated prioritization of web content. The FCC places the enforcement authority of the new regulatory framework with the FTC. The order is effective upon OMB approval of the new requirements for ISP public disclosures.
Department of Defense Updates MLA Interpretive Guidance; Addresses Timing for Safe Harbor Qualification
The Department of Defense (DoD) published a new interpretive rule (rule) under the Military Lending Act (MLA) on December 14. This interpretive rule takes effect immediately, and it both amends and adds to the interpretive rule issued by DoD in August 2016 (previously covered by a Buckley Special Alert). In general, the rule contains the following updated interpretations:
- Exemption of Credit Secured by a Motor Vehicle or Personal Property. The rule provides additional guidance on the exemption covering purchase money-secured motor vehicle and personal property loans. Specifically, the rule states that additional costs may be added to an extension of credit so long as these costs relate to the object securing the credit, and not the extension of credit itself. For example, the rule explains that credit used to finance “optional leather seats,” “an extended warranty,” or “negative equity” in connection with the purchase of a motor vehicle will not cause the loan to be subject to the MLA. However, the rule also states that, if credit is extended to cover “Guaranteed Auto Protection insurance or a credit insurance premium” or additional “cashout,” the loan is not eligible for the MLA exception.
- Security Interests in Covered Borrowers’ Accounts. The rule addresses the ability of a creditor to take a security interest in a covered borrower’s account. Specifically, the rule states that a covered borrower may “convey security interest for all types of consumer credit” to a creditor, so long as the creditor complies with all other laws and the MLA rule. Similarly, the rule notes that the MLA does not prohibit a creditor from exercising rights to take an otherwise-valid statutory lien on funds that have been deposited into a covered borrower’s account “at any time.” However, the rule also emphasizes methods a creditor may not use to obtain payment from a covered borrower’s account, such as a “remotely created check.”
- Timing for Safe Harbor Qualification. The rule provides additional clarity on when a creditor must check an applicant’s active duty status to obtain the MLA’s safe harbor. The rule states that an applicant’s covered borrower status should be determined when the applicant (i) initiates the transaction, (ii) submits an application to establish an account or during the processing of that application, or (iii) anytime during a 30-day period of time prior to such action. In addition, the rule states that a covered borrower check can qualify for the safe harbor if it is performed “during the course of the creditor’s processing of that application for consumer credit.”
Federal Reserve Requests Comments on Proposals Seeking Transparency Increases in Stress Testing Programs
The Federal Reserve Board (Fed) issued a request for comments on three proposals designed to increase stress testing transparency while also testing the resiliency of large, complex banks. Earlier in June, Fed Chair Janet Yellen underscored the Fed’s understanding of the need to provide transparency in its Comprehensive Capital Analysis and Review (CCAR) process and stress test scenarios. (See previous InfoBytes coverage here.) The first December 7 proposal, “Enhanced Disclosure of the Models Used in the Federal Reserve’s Supervisory Stress Test,” announces the Fed’s plans to publicly release, for the first time, information concerning the models and methodologies used during supervisory stress tests, including those applied in the CCAR, including:
- “enhanced descriptions of supervisory models, including key variables;”
- “modeled loss rates on loans grouped by important risk characteristics and summary statistics associated with the loans in each group;” and,
- “portfolios of hypothetical loans and the estimated loss rates associated with the loans in each portfolio.”
The information will offer banks expanded details as to how the Fed’s models treat different types of loans under stress, along with insight into the determination of annual stress test results.
The second request for comments concerns the “Stress Testing Policy Statement,” which elaborates on prior disclosures and outlines details on the principles and policies that govern the Fed’s development, implementation, and validation of its stress testing models.
Finally, the Fed issued a proposed policy statement to request comments on introduced amendments to the design of its annual hypothetical economic scenarios framework. The “Amendments to Policy Statement on the Scenario Design Framework for Stress Testing” is intended to enhance transparency and provide clarification on hypothetical economic scenarios, including the direction of housing prices, as well as the Fed’s commitment to exploring additional variables to test for funding risks.
All comments must be received by January 22, 2018.
CFPB Updates Guide to TRID Forms
On December 6, the CFPB published an updated version of the TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure Forms. The updated guide reflects the amendments issued by the CFPB on July 7 of this year (previously covered by a Buckley Sandler Special Alert). These include changes resolving a number of significant ambiguities that generated concerns about the liability of lenders and purchasers of mortgage loans.
OCC Releases Schedule of Fees and Assessments for 2018; Rates to Remain Unchanged
On December 1, the OCC issued Bulletin 2017-60 (Bulletin), which informs all national banks, federal savings associations, and federal branches and agencies of foreign banks that the agency’s 2018 fees and assessment rates remain unchanged from last year. The Bulletin provides details concerning, among other things, the assessment schedule, surcharges designed to ensure fees accurately reflect the increased cost of supervision, and general assessment fees. The Bulletin takes effect January 1, 2018.
Federal Banking Agencies Amend CRA Regulations to Conform With HMDA Regulation Changes
On November 24, the Federal Reserve Board, FDIC, and OCC published a joint final rule in the Federal Register, amending their respective Community Reinvestment Act (CRA) regulations. The amended regulations conform with the CFPB’s amendments to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The amendments are designed to reduce the burden associated with CRA performance evaluation reporting requirements. Specifically, the amended regulations (i) modify the definitions of “home mortgage loan” and “consumer loan”; (ii) revise the public file content requirements; and (iii) make technical corrections and remove obsolete references to the Neighborhood Stabilization Program (see previous InfoBytes coverage here).
As previously reported in InfoBytes, amendments to Regulation C generally take effect January 1, 2018, with the agencies’ specific amendments to the CRA regulations taking effect the same day.
OCC Updates Public Comment Policy on Licensing Applications
On November 17, the OCC released Bulletin 2017-55 announcing a revised version of its “Public Notice and Comments” booklet. This revised booklet replaces a May 2017 booklet of the same name, and is part of the Comptroller’s Licensing Manual. The revised booklet reflects updates related to the OCC’s policy regarding review of public comments on licensing filings. Specifically, the OCC will now only consider public comments if they are received before the close of the comment period (typically 30 days following a filing), unless an extension has been granted “in accordance with 12 CFR 5.10(b)(2).” The revised booklet also describes situations in which an extension may be granted.