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OCC issues Comptroller’s Handbook booklet updating sampling methodologies
On May 26, the OCC issued Bulletin 2020-56 announcing the revision of the Sampling Methodologies booklet of the Comptroller’s Handbook. Among other things, the revised booklet (i) discusses the differences between statistical and judgmental sampling; (ii) details the OCC’s statistical sampling methodologies; and (iii) includes look-up tables covering statistical sample sizes and upper confidence bounds. The revised booklet is effective for supervisory activities beginning on or after June 15.
CFTC issues new civil monetary penalty guidance
On May 20, the CFTC’s Division of Enforcement issued new civil monetary penalty guidance—the first such public issuance since 1994. The guidance, which has been incorporated into the Division’s Enforcement Manual, outlines a three-pronged approach enforcement staff will apply when evaluating the appropriate penalty for recommendation to the Commission: (i) “the gravity of the violation,” which may include the nature and scope of a violation, a respondent’s role in the violation, whether the conduct was intentional or willful, and the nature and scope of any consequences resulting from the violations; (ii) “mitigating and aggravating circumstances,” such as a respondent’s post-violation conduct, whether the respondent self-reported the misconduct, the extent of cooperation and remediation, and a respondent’s prior misconduct; and (iii) “other considerations,” including factors such as timely settlements and remedies and monetary relief to be imposed in parallel actions by other criminal authorities or self-regulatory agencies and organizations. “In applying the various factors, staff will be guided by the overarching consideration of ensuring that any proposed penalty achieves the dual goals of specific and general deterrence,” CFTC Director of Enforcement James McDonald stated.
NCUA approves interim final rule regarding corrective action regulations
On May 21, the NCUA approved an interim final rule (IFR) making two temporary changes to its prompt corrective action regulations to provide relief for credit unions that temporarily fall below the well-capitalized level due to the Covid-19 pandemic. The first change will temporarily reduce the earnings retention requirement for “adequately capitalized” credit unions, and will allow these credit union to decrease earnings retention amounts without submitting a written application requesting approval. Credit unions that exhibit material safety and soundness concerns or pose an undue risk to the Share Insurance Fund may be required to submit an earnings transfer waiver request. The second change will temporarily allow undercapitalized credit unions to submit streamlined, “significantly simpler” net worth restoration plans, provided the credit union is able to demonstrate that the reduction in capital was primarily caused by share growth and that such share growth is a temporary condition due to the Covid-19 pandemic. The IFR’s temporary changes will expire December 31, 2020, and take effect upon publication in the Federal Register. Comments will be received for 30 days.
The same day, the NCUA also approved a proposed rule to amend its share insurance regulation, which governs the requirements for a share account to be separately insured as a joint account. Specifically, the proposed rule will provide an alternative method for credit unions to satisfy the membership card or account signature card requirement by “explicitly provid[ing] that the signature-card requirement could be satisfied by information contained in the account records of the insured credit union establishing co-ownership of the share account.” Comments on the proposed rule are due 30 days after publication in the Federal Register.
Special Alert: OCC issues CRA final rule
On May 20, the Office of the Comptroller of the Currency announced a final rule to modernize the regulatory framework implementing the Community Reinvestment Act. The final rule marks the culmination of a three-year effort led by the Treasury Department to revamp the CRA and arrives exactly six weeks after the comment period on the notice of proposed rulemaking (NPR) closed on April 8, 2020.
Significantly, while the Federal Deposit Insurance Corporation joined the OCC in issuing the NPR, the FDIC did not join in promulgating the final rule. The Federal Reserve Board was not party to the NPR or the final rule. Accordingly, banks whose prudential regulator is the FDIC or the Federal Reserve will continue to be subject to the existing CRA regulations.
The OCC’s rule, while technically effective October 1, 2020, provides for at least a 27-month transition period for compliance based on a bank’s size and business model. Large banks and wholesale and limited purpose banks will have until January 1, 2023 to comply, and small and intermediate banks that opt-in to the final rule’s performance standards will have until January 1, 2024. In the interim, a performance evaluation conducted after October 1, 2020, and before January 1, 2023 or 2024, as applicable, would permit banks to rely on the current performance standards and tests or on the final rule.
CFPB further extends comment period for proposed rulemaking on time-barred debt disclosures
On May 19, the CFPB announced a further extension to the comment period on its Supplemental Notice of Proposed Rulemaking (NPRM) related to time-barred debt disclosures (covered by a Buckley Special Alert). The NPRM, issued in February, would amend Regulation F, which implements the FDCPA, to require debt collectors to make certain disclosures when collecting time-barred debts. Due to challenges created by the Covid-19 pandemic, the June 5 deadline has been extended until August 4.
FDIC updates Consumer Compliance Examination Manual
On May 13, the FDIC announced the April updates to its Consumer Compliance Examination Manual (CEM). The CEM includes supervisory policies and examination procedures for FDIC examination staff for evaluating financial institutions’ compliance with federal consumer protection laws and regulations, and is designed to promote consistency and efficiency in the FDIC’s examination process. The recent updates include, among other things, (i) changes to the pre-examination planning process; (ii) incorporation of threshold changes for TILA, HMDA, and the Consumer Leasing Act; and (iii) changes to asset-based definitions for small and intermediate banks for the Community Reinvestment Act.
CFPB issues final remittance rule extending safe harbor and providing compliance exceptions
On May 11, the CFPB issued final amendments to the Remittance Transfer Rule (Final Rule), which implements the Electronic Fund Transfer Act and imposes requirements on insured institutions that handle international money transfers—also known as remittance transfers—on behalf of consumers. The Final Rule follows a notice of proposed rulemaking issued last December (covered by InfoBytes here). Among other things, the Final Rule grants a permanent safe harbor from exact remittance cost disclosures to insured institutions that do fewer than 500 remittances annually in the current and prior calendar years.
The Final Rule also addresses anticipated compliance challenges following the July 21 expiration of an existing exemption that allows certain insured institutions to disclose estimated exchange rates and third-party money transfer fees. Specifically, the Final Rule adopts a new, permanent exception that permits insured institutions to estimate the exchange rate for a remittance transfer to a particular country if, among other things, the remittance payment is made in the local currency of the designated recipient’s country and the insured institution processing the transaction made 1,000 or fewer remittance payments to that country in the previous calendar year. A second permanent exception will allow insured institutions to estimate covered third-party fees for remittance transfers to a recipient’s institution provided, among other things, the insured institution made 500 or fewer remittance transfers to the recipient’s institution in the prior calendar year. While the adopted final amendments will take effect July 21, the Bureau is adopting a transition period for both exceptions that will allow insured institutions that exceed the 1000-transfer or 500-transfer thresholds to “provide estimates for a reasonable period of time while they come into compliance with the requirement to provide exact amounts.”
The Bureau also reminded institutions of its April 10 policy statement (covered by InfoBytes here), which established a temporary exception allowing institutions providing remittance transfers to estimate these fees to consumers in light of the Covid-19 pandemic. From July 1 until January 21, 2021, the Bureau will not cite supervisory violations or initiate enforcement actions against certain institutions for disclosing estimated fees and exchange rates.
Agencies finalize policy changes to CECL
On May 8, the FDIC, Federal Reserve Board, OCC, and NCUA finalized an interagency policy statement on allowances for credit losses and interagency guidance on credit risk review systems. As previously covered by InfoBytes, the proposed policy statement and interagency guidance were released in October 2019.
The final policy statement describes the measurement of expected credit losses under the current expected credit losses (CECL) methodology. The CECL methodology determines allowances for credit losses applicable to financial assets measured at amortized cost, loans held-for-investment, net investments in leases, held-to-maturity debt securities, and certain off-balance-sheet credit exposures. The policy statement also stipulates financial assets for which the CECL methodology is not applicable, and includes supervisory expectations for designing, documenting, and validating expected credit loss estimation processes. The final policy statement becomes applicable to an institution upon that institution’s adoption of a CECL methodology.
The interagency credit risk review systems guidance—which is relevant to all institutions supervised by the agencies—updates the 2006 Interagency Policy Statement on the Allowance for Loan and Lease Losses to reflect the CECL methodology. The guidance “discusses sound management of credit risk, a system of independent, ongoing credit review, and appropriate communication regarding the performance of the institution's loan portfolio to its management and board of directors.” Furthermore, the guidance stresses that financial institution employees involved with assessing credit risk should be independent from an institution’s lending function.
See also FDIC FIL-54-2020 and FIL-55-2020 and OCC 2020-49 Bulletin and 2020-50 Bulletin.
Agencies extend two resolution plan filing deadlines
On May 6, the FDIC and Federal Reserve extended the following two upcoming resolution plan filing deadlines for certain banks in light of recent challenges arising from Covid-19:
- September 29, 2020 (90 day extension). This extension applies to the four institutions required to submit plans to address previously identified shortcomings.
- September 29, 2021 (90 day extension). This extension applies to the targeted resolution plans to be submitted by large foreign and domestic Category II and Category III banks under the agencies’ large bank regulatory framework.
Resolution plans for the eight global systemically important banks are still due July 1, 2021, however the agencies noted that they “will monitor conditions and may adjust this deadline if warranted.”
FCC changes TCPA enforcement under TRACED Act
On May 1, the FCC issued an order announcing the Commission will no longer send entities outside its jurisdiction warnings prior to commencing an enforcement action related to TCPA robocall violations. Specifically, the order, as mandated under Section 3 of the TRACED Act (covered by InfoBytes here), (i) removes provisions that previously required the FCC to issue a warning prior to imposing penalties for making robocalls; (ii) increases the maximum fine that the FCC can assess for robocall violations to $10,000 per intentional unlawful call, in addition to a forfeiture penalty amount; and (iii) extends the statute of limitations to four years for the FCC to investigate and take enforcement action against an entity that violates the TCPA. The order takes effect 30 days after publication in the Federal Register.