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Trump Signs Legislation to End Arbitration Rule
On November 1, President Trump signed a resolution repealing the CFPB’s embattled arbitration rule (Rule). The resolution, which passed the Senate two weeks ago, was issued under the Congressional Review Act (previously covered by InfoBytes here). Trump’s signature came two days after Richard Cordray, the Director of the CFPB, wrote to the President requesting he veto the resolution. In his letter, Cordray sought to appeal to the President’s business experience in an attempt to explain the necessity of going to court when “treated unfairly.” With Trump’s signing of the resolution, the Rule is now unenforceable. The Rule has previously come under scrutiny from federal regulators (see previous InfoBytes coverage here and here), as well as from industry trade groups (see previous InfoBytes coverage here). After the President’s signing, Keith A. Noreika, Acting Comptroller of the OCC, praised Congress and the President for vacating the rule, touting it as a “victory for consumers” because upholding the Rule would have “significantly increased the cost of credit.”
CFPB Launches Beta Version of HMDA Platform
On November 3, the CFPB announced the beta release of the new HMDA Platform. The beta version enables financial institutions to become familiar with the platform and permits entities to establish test log-in credentials, upload sample files and validate data, receive edit reports, and confirm test their test submissions. Entities can test and retest throughout the beta period, and any test data will be removed from the system when the 2017 filing period opens on January 1, 2018.
As previously covered by InfoBytes, in November 2016 the Federal Financial Institutions Examination Council (FFIEC) announced that it was discontinuing its HMDA Data Entry Software and instead requiring that financial institutions file HMDA data through a new web-based interface. In August, the CFPB issued the final rule amending the 2015 HMDA Rule, with most of the revisions taking effect January 1, 2018 (see InfoBytes coverage here).
The CFPB is requesting feedback on the platform and test experiences during the beta period time.
OCC Presents First National Bank Charter Since the Financial Crisis
On October 27, Acting Comptroller of Currency, Keith A. Noreika, issued the first full-service national bank charter since the financial crisis to a banking institution in Florida. The institution is also the first de novo national bank and de novo approved for federal deposit insurance in Florida since the financial crisis. While presenting the charter, Noreika commented on the rarity of de novo banks and encouraged better efficiency in the process for their establishment in order to, “create more economic opportunity for consumers, businesses, and communities across the nation.”
As previously covered by InfoBytes, the House Financial Services Committee held a hearing in March related to the “de novo drought” and to examine the impact the Dodd-Frank Act has had on the creation of new financial institutions.
NCUA Issues Final Rules Regarding Appeals Procedures; Proposes Rule Regarding Capital Planning and Stress Testing
On October 30, the National Credit Union Administration (NCUA) issued a final rule expanding the number of material supervisory determinations that can be appealed to the NCUA Supervisory Review Committee (SRC). Under the rule, federally insured credit unions (FICUs) may appeal examination-related determinations that may significantly affect capital, earnings, operating flexibility, or level of supervisory oversight. The effective date for the final rule is January 1, 2018.
On October 30, the NCUA also proposed changes to rules covering capital planning and stress testing requirements for covered credit unions (see previously InfoBytes coverage on proposed changes to stress tests by other federal agencies). The proposal would allow FICUs with over $10 billion in assets to conduct their own stress tests in accordance with NCUA requirements and report the results in their capital plan submissions. The specific testing requirements are tiered and dependent on various asset size and capital planning cycles. Comments about the NCUA proposed rule must be received on or before December 29.
OCC Proposes Changes to Annual Stress Test Rule
On October 27, the Office of the Comptroller of Currency (OCC) issued proposed changes to its “stress test” rules for covered financial institutions required by the Dodd-Frank Act. Specifically, the proposal would, (i) extend the window by three months to allow the OCC to choose an appropriate “as-of” date in the trading and counterparty default component of the stress test (intended to conform with recent rule changes by the Federal Reserve); and (ii) extend the transition process for certain banks and savings associations that cross the $50 billion asset threshold before stress testing requirements are applicable.
Comments for the proposed changes must be received on or before December 26.
In addition to this proposal, on October 6, the Fed, FDIC, and the OCC, issued a joint notice and request for comment, which proposes to combine the agencies’ three separate, identical stress test report forms into a single new Federal Financial Institutional Examination Council (FFIEC) report (FFIEC 016) under the Dodd-Frank Act (previously covered by InfoBytes here).
OCC Issues Updates to Risk Management Principles
On October 20, the OCC released modifications to its risk management principles for new, modified, or expanded financial products and services (collectively, new activities). Bulletin 2017-43 rescinds OCC Bulletin 2004-20 and section 760 of the Office of Thrift Supervision Examination Handbook. The Bulletin provides guidance on risks in the following categories: strategic, reputational, credit, operational, compliance, and liquidity. The Bulletin also outlines the main components of an effective risk management system, such as the need for:
- “adequate due diligence and approvals before introducing a new activity”;
- “policies and procedures to properly identify, measure, monitor, report, and control risks”;
- “effective change management for new activities or affected processes and technologies”; and
- “ongoing performance monitoring and review systems.”
According to the OCC, the sophistication of a bank’s risk management system should be commensurate with the bank’s size, complexity, and risk profile. Further, “bank management and boards of directors should understand the impact of new activities on banks’ financial performance, strategic planning process, risk profiles, traditional banking models, and ability to remain competitive.”
CFPB Publishes Mortgage Servicing Small Entity Compliance Guide and Executive Summary
On October 19, the CFPB released version 3.0 of its mortgage servicing Small Entity Compliance Guide. The updated guide supports implementation of amendments to the Bureau’s mortgage servicing interim final rule issued October 4, which provides servicers, who are subject to a cease in communication request, a 10-day window to provide modified early intervention notices at the end of the 180-day period. The interim final rule takes effect October 19, at the same time the broader amendments to the early intervention requirements take effect. (See previous InfoBytes coverage here.) An updated Executive Summary, which highlights key changes to provisions of the 2016 Mortgage Servicing Rule, the 2016 FDCPA Interpretive Rule, and the October 2017 interim final rule has also been released.
CFPB Updates HMDA Implementation Materials; Federal Regulatory Agencies Release Key Data Fields
On October 17, the CFPB published a new reference chart titled “Reportable HMDA Data: A Regulatory and Reporting Overview Reference” designed to be used as a reference tool for required data points to be collected, recorded, and reported under Regulation C. The chart takes into account HMDA rules issued on August 24, which generally take effect January 1, 2018. (See previous InfoBytes coverage here.) The CFPB noted that the reporting reference chart “does not itself establish any binding obligations” and is not intended to be viewed as a “substitute for the regulation or its official commentary.”
Separately that same day, in a measure to promote efficiency and consistency, the Board of Governors of the Federal Reserve, FDIC, and OCC identified 37 key data fields that examiners will typically use to test and validate the accuracy and reliability of data collected under the new HMDA requirements beginning in 2018. In certain circumstances, however, examiners may find it necessary to review additional HMDA data fields as appropriate. OCC Acting Comptroller of the Currency Keith Noreika noted in a statement that these actions should help ensure the accurate collection of HMDA data without creating “needless burden” on community banks surrounding the full resubmission of data “simply because of a few minor errors.”
OCC Issues Updated List of Permissible Activities for Banks and Federal Savings Associations
On October 13, the OCC issued an update to its list of permissible activities for national banks, federal savings associations, and operating subsidiaries that are engaged in “the business of banking.” Activities Permissible for National Banks and Federal Savings Associations, Cumulative updates the list of permissible activities for banks, reflects precedent not previously included or issued since the last edition, streamlines certain entries for readability, and includes certain OCC interpretive letters and corporate decisions issued after the Dodd-Frank Act transferred responsibility from the Office of Thrift Supervision to the OCC. While the update consolidates existing guidance, the OCC stated that “OCC precedent remains applicable until rescinded, superseded, or revised,” and banks should not rely solely on the update for guidance but “should review the authorities cited and other relevant precedent before engaging in an activity.” Furthermore, according to an OCC-issued press release, “[i]ndividual OCC-regulated institutions may be precluded from engaging in otherwise permissible activities based on safety and soundness or other supervisory reasons.”
OCC Policy Outlines CRA Evaluation Process and Impact of Discriminatory Practices
On October 12, the OCC issued OCC Bulletin 2017-40 announcing the release of its Policies and Procedures Manual 5000-43 (PPM 5000-43), which outlines the OCC’s policy and framework for how the agency determines Community Reinvestment Act (CRA) ratings when there’s evidence of discriminatory or other illegal credit practices directly related to a supervised financial institution’s CRA lending activities. First, PPM 5000-43 requires a “logical nexus” between the assigned ratings and the evidence of discriminatory or other illegal practices to ensure that the CRA evaluation “does not penalize a bank for compliance deficiencies or illegal credit practices unrelated to its CRA lending activities.” Second, the OCC examiners will give “full consideration” to any remedial actions the institution has already taken to address such discriminatory or other illegal credit practices to ensure that the CRA rating “does not penalize a bank for compliance deficiencies or illegal credit practices that have been, or are substantially being, addressed by the bank.”