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  • House discusses lending discrimination, proposed fair lending legislation

    Federal Issues

    On February 24, the House Financial Services Committee’s Subcommittee on Oversight and Investigations held a hearing entitled “How Invidious Discrimination Works and Hurts: An Examination of Lending Discrimination and Its Long-term Economic Impacts on Borrowers of Color.” The subcommittee’s memorandum regarding the hearing discussed the importance of exploring “available tools and potential legislative solutions to detect hidden discrimination and deter discrimination in lending and housing,” and addressed topics such as modern-day redlining, racial wealth gaps, and matched-pair testing (a method for detecting impermissible differences in treatment based on protected classes).

    Subcommittee members also discussed recently introduced H.R. 166, the “Fair Lending for All Act,” which would, among other things: (i) direct the CFPB to establish an Office of Fair Lending Testing charged with testing creditors’ ECOA compliance, and permit the Bureau to refer ECOA violations to the attorney general for appropriate action; (ii) extend the protected classes under the law to sexual orientation, gender identity, and an applicant’s location based on zip code or census tract; (iii) establish criminal penalties under ECOA for knowing and willful violations of prohibited credit discrimination, including personal liability for executive officers and directors; (iv) require the Bureau to review loan applications for compliance with ECOA and other federal consumer laws; and (v) amend HMDA Section 304(b)(4) to add the new prohibited credit discrimination categories.

    Federal Issues Federal Legislation Hearing House Financial Services Committee Fair Lending CFPB ECOA HMDA

  • CFPB, states sue defendants for predatory immigrant-services scam

    Federal Issues

    On February 22, the CFPB and state attorneys general from Massachusetts, New York, and Virginia filed a complaint against a group of defendants that provide immigration bond products or services for non-English speaking U.S. Immigration and Customs Enforcement (ICE) detainees. The Bureau alleges that the defendants engaged in deceptive and abusive acts and practices in violation of the CFPA, while the states bring related claims that the defendants violated their respective consumer-protection laws, by, among other things, (i) representing that they paid the detainees’ bonds and that monthly payments go towards repaying the defendants for doing so (the Bureau and states allege that the monthly payments are actually “rental fees for a GPS device that do not go to repaying consumers’ bonds”); (ii) making false threats that detainees will be re-arrested, detained, or deported if they do not make the monthly payments or remove the defendants’ GPS devices, many of which, the complaint claims, do not actually work; (iii) threatening to send detainees’ accounts to collection, representing that failing to make payments could harm their credit, or threatening to sue detainees or their families for non-payment; (iv) representing that collateral payments would be refunded once the detainees’ proceedings were resolved but in many cases failing to do so; (v) presenting detainees, most of whom cannot read or understand English, with a series of English-only contracts requiring the payment of large upfront fees plus $420 per month to “lease” GPS-tracking ankle monitors until their cases are resolved; (vi) creating the illusion that defendants are affiliated with ICE, even though they have no affiliation with authorities; and (vii) offering financial rewards to employees who sign up new customers and collect payments. The Bureau is seeking an injunction, as well as damages, redress, disgorgement, and civil money penalties.

    Federal Issues CFPB State Issues State Attorney General Enforcement Predatory Lending CFPA Deceptive Abusive

  • Agencies provide Texas winter storm guidance

    Federal Issues

    On February 22, the Federal Reserve Board, OCC, FDIC, NCUA, and the Conference of State Bank Supervisors issued a joint statement covering supervisory practices for financial institutions affected by winter storms in Texas. Among other things, the agencies called on financial institutions to “work constructively” with affected borrowers, noting that “prudent efforts” to adjust or alter loan terms in affected areas “should not be subject to examiner criticism.” Institutions facing difficulties in complying with any publishing and reporting requirements should contact their primary federal and/or state regulator. Additionally, the agencies noted that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services that revitalize or stabilize federally designated disaster areas. Institutions are also encouraged to monitor municipal securities and loans impacted by the winter storms.

    Additionally, HUD announced it will make disaster assistance available to Texas by providing foreclosure relief and other assistance to homeowners living in counties affected by the severe winter storms. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties in the affected counties and is making mortgage insurance available to those victims whose homes were destroyed or severely damaged. Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house along with the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes.

    Federal Issues FDIC Federal Reserve CSBS NCUA OCC Disaster Relief HUD Mortgages FHA Bank Regulatory

  • OCC releases recent enforcement actions

    Federal Issues

    On February 18, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included among the actions is a January 8 civil money penalty order against an Illinois-based bank, which requires the payment of $193,105 for an alleged pattern or practice of violations of the Flood Disaster Protection Act and its implementing regulations.

    Federal Issues OCC Enforcement Flood Disaster Protection Act Bank Regulatory

  • Brainard addresses financial institutions’ role in tackling climate change

    Federal Issues

    On February 18, Federal Reserve Governor Lael Brainard spoke before the 2021 Institute of International Finance U.S. Climate Finance Summit to discuss the role financial institutions play in addressing the challenges of climate change. Noting that both physical risks from climate shifts and transition risks resulting from a shift to a low-carbon economy “create both risks and opportunities for the financial sector,” Brainard stressed that “[f]inancial institutions that do not put in place frameworks to measure, monitor, and manage climate-related risks could face outsized losses on climate-sensitive assets caused by environmental shifts, by a disorderly transition to a low-carbon economy, or by a combination of both.” She emphasized that financial institutions should engage in robust risk management, scenario analyses, and forward planning to ensure they can withstand such climate-related risks and support the transition to a low-carbon economy.  

    Brainard also emphasized that given the uncertainty in estimating climate risks, a scenario analysis that takes into account climate-related physical and transition risks and their potential effects on individual firms and the financial system as a whole “may be a helpful tool to assess the microprudential and macroprudential implications of climate-related risks under a wide range of assumptions.” However, Brainard clarified that a scenario analysis is distinct from a regulatory stress test, adding that “[i]t will be important to. . .consider how stress testing and scenario analysis may complement one another.” While acknowledging that a highly prescriptive approach to model development and scenario analysis may not be the most effective way to ensure financial institutions are prepared for the possible impacts of climate change and that “leverag[ing] a range of complementary approaches being developed in both the private and the public sectors” may produce more robust outcomes, Brainard noted that “we should strive for an appropriate balance that allows for innovation and learning across the public and private sectors, iterating in the most effective way possible.”

    Federal Issues Federal Reserve Climate-Related Financial Risks Bank Regulatory

  • FHA extends Covid-19 origination and 203(k) servicing flexibilities

    Federal Issues

    On February 23, FHA announced the extension of several Covid-19-related flexibilities for single-family lenders and servicers through June 30, generally to continue to limit face-to-face contact as part of the mortgage origination process for FHA loans. Specifically, Mortgagee Letter 2021-06 extends the re-verification of employment guidance and the exterior-only appraisal scope of work option, while Mortgagee Letter 2021-07 will “allow industry partners additional opportunity to utilize flexible guidance related to” self-employment and rental income verification. Both extensions are applicable to Single Family Title II forward and Home Equity Conversion Mortgages. Additionally, FHA is extending temporary flexibilities “for the administration of 203(k) Rehabilitation Mortgage Insurance Program escrow accounts for borrowers in forbearance” for Single Family Title II forward 203(k) rehabilitation mortgages only.

    Federal Issues FHA Covid-19 Mortgages HUD Mortgage Origination Servicing

  • Biden announces measures to ensure PPP loan access to "mom and pop" businesses

    Federal Issues

    On February 22, the Biden administration announced measures to ensure the smallest businesses have access to Paycheck Protection Program (PPP) loans. (See also SBA press release here.) Specifically, the Biden administration has directed the Small Business Administration (SBA) to (i) provide an exclusive 14-day application window, starting Wednesday, February 24, during which only businesses with fewer than 20 employees are eligible to apply; (ii) set aside $1 billion for PPP loans for sole proprietors, independent contractors, and self-employed individuals in low- and moderate-income areas, and revise the loan calculation formula for these applicants to offer more relief; (iii) eliminate an exclusion that prevented small businesses owned at least 20 percent by an individual who was arrested for or convicted of a felony unrelated to financial assistance fraud within the previous year from applying for a PPP loan; (vi) eliminate the student loan delinquency restriction, which currently prevents small businesses owned at least 20 percent by an individual who is delinquent or has defaulted on student debt from receiving PPP loans; and (v) ensure non-citizen small business owners who are lawful U.S. residents may apply for PPP loans using individual taxpayer identification numbers.

    Additionally, the Biden administration stated that SBA “is launching a new initiative to deepen its relationships with lenders” in order to facilitate communication regarding the PPP. The current round of PPP funding expires March 31 (covered by InfoBytes here).

    Federal Issues SBA Covid-19 Small Business Lending Biden

  • OCC says storm-affected banks may close

    Federal Issues

    On February 16, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by Winter Storm Uri “for as long as deemed necessary for bank operation or public safety.” The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions. According to the 2012 Bulletin, only bank offices directly affected by potentially unsafe conditions should close and institutions should make every effort to reopen as quickly as possible to address customers’ banking needs.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues OCC Disaster Relief Bank Regulatory

  • Yellen addresses “digital divide”

    Federal Issues

    On February 9 and 10, the U.S. Treasury Department hosted its U.S. Financial Sector Innovation Policy Roundtable, which convened public and private sector experts “to exchange views for collaborating on policy issues and innovative technologies that support global financial integrity, while fostering economic recovery, competitiveness, and financial inclusion.” Treasury Secretary Yellen delivered the opening remarks touching on the enactment of the Anti-Money Laundering Act, which was included in the National Defense Authorization Act (NDAA) for Fiscal Year 2021 (covered by InfoBytes here), noting that the law is timely as “we’re living amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy.” Moreover, due to the Covid-19 pandemic, the world has seen “more sophisticated” cyberattacks. Yellen asserts that the pandemic has highlighted the “digital divide” in the country and that “millions of people remain disconnected from the financial system.” Similar to broadband deserts, there are “financial services deserts,” as shown the Paycheck Protection Program’s issues with reaching small businesses in communities of color. Yellen concluded that “just as much as we need responsible innovation, we also need equitable innovation; tools that can help bring the benefits of the financial system and modern IT to more people.”

    Federal Issues Financial Crimes Of Interest to Non-US Persons Department of Treasury Fintech Anti-Money Laundering SBA Covid-19

  • FTC settles with payday lender

    Federal Issues

    On February 11, the FTC announced a settlement with the owners and operators of a payday lending enterprise (collectively, “defendants”) for allegedly deceptively overcharging consumers and withdrawing money from consumers’ accounts without permission. The FTC filed a complaint against the defendants last year claiming, among other things, that the defendants violated the FTC Act, the Telemarketing Sales Rule, TILA/Regulation Z, and EFTA/Regulation E, by advertising loans with fixed payback terms and promising consumers that their loans would be repaid after a pre-determined number of payments. However, the FTC claimed that in many cases the payback terms defaulted to debiting the financial fee only, and the U.S. District Court for the District of Nevada granted a temporary restraining order against the defendants (covered by InfoBytes here). Under the terms of the stipulated final order, the FTC ordered that any consumer debt for loans issued and assigned to the defendants are “deemed paid in full to the extent that such [e]xisting [d]ebt exceeds the amount financed plus one finance charge. . . .” The defendants are also (i) permanently banned from the payday lending industry, including making loans or extending credit of any kind; (ii) prohibited from making any misrepresentations related to the collection of any debt; (iii) prohibited from making unauthorized electronic fund transfers from consumers’ bank accounts; and (iv) permanently banned from creating, or causing to be created, any remotely created payment orders. A $114 million monetary judgment will be partially suspended upon completion of asset transfers from all financial institutions holding accounts in the defendants’ names.

    Federal Issues FTC Enforcement Payday Lending FTC Act Deceptive UDAP

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