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FOMC adopts investment and trading activity rules
On February 18, the Federal Reserve Board announced that the Federal Open Market Committee (FOMC) adopted new comprehensive rules for the investment and trading activity of senior officials that were first announced in October 2021. The rules aim to enhance public confidence in the impartiality and integrity of the Committee's work. The new rules prohibit senior Federal Reserve officials from: (i) purchasing individual stocks or sector funds; (ii) holding investments in individual bonds, agency securities, cryptocurrencies, commodities, or foreign currencies; (iii) entering into derivatives contracts; or (iv) engaging in short sales or purchasing securities on margin. The new rules also require senior Federal Reserve officials “to provide 45 days’ non-retractable notice for purchases and sales of securities, obtain prior approval for such transactions, and hold investments for at least one year.” Purchases and sales will be prohibited during periods of heightened financial market stress. The rules become effective on May 1, except that the requirements for advance notice and pre-clearance of transactions will take effect on July 1.
OCC releases enforcement actions
On February 17, 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 in the release is a formal agreement between OCC and an Alabama-based bank on January 31 in connection with alleged unsafe or unsound practices relating to strategic planning, loan portfolio management, and internal audits. The agreement requires the bank to (i) establish a compliance committee to monitor the bank’s progress in complying with the agreement’s provisions; (ii) report such progress to the bank’s board on a quarterly basis; and (iii) develop, implement, and adhere to a written risk-based internal audit program.
CFPB scrutinizes student loan servicers’ PSLF compliance
On February 18, the CFPB released a compliance bulletin warning student loan servicers to make sure they provide complete and accurate information to eligible borrowers about Public Service Loan Forgiveness (PSLF) benefits. The Bureau indicated that it will be paying close attention to servicers’ compliance with Dodd-Frank’s prohibition on unfair, deceptive, or abusive acts or practices. Last October, the Department of Education changed its PSLF program to now provide qualifying borrowers with a time-limited PSLF waiver that allows all payments to count towards PSLF regardless of loan program or payment plan. The waiver covers payments made on loans under the Federal Family Education Loan Program or Perkins Loan Program. (Covered by InfoBytes here.) However, Bureau supervisory findings revealed unfair or deceptive practices taken by servicers that have prevented many borrowers from making progress towards forgiveness. The Bureau emphasized that it expects servicers to comply with federal consumer financial protection laws when administering the new PSLF waiver and providing assistance to borrowers. The Bureau “will pay particular attention” to whether (i) servicers of any federal loan type provide complete and accurate information about the PSLF waiver in communications related to PSLF or loan consolidation; (ii) servicers have adequate policies and procedures to recognize when borrowers express interest in PSLF or the PSLF waiver (or where borrowers’ files otherwise demonstrate their eligibility), in order to direct borrowers to appropriate resources; and (iii) servicers take measures “to promote the benefits of the PSLF Waiver to borrowers who express interest or whose files otherwise demonstrate their eligibility.” The Bureau advised servicers to consider enhancing their compliance management systems to ensure borrowers receive accurate and complete information about the PSLF waiver and that their enrollment is facilitated.
Financial Stability Board informs G20 of 2022 priorities
On February 14, the Financial Stability Board (FSB) sent a letter to the G20 finance ministers and central bank governors outlining several priorities for 2022 and setting the groundwork for promoting global financial resilience during the upcoming year. The FSB stated that the “transition path to a post-pandemic economy remains highly uncertain,” and warned that Covid-19 continues to weigh on the global economy with “[n]ew waves of infections … contribut[ing] to an uneven recovery across regions, higher inflation, and record-high debt levels globally.” The FSB also observed that, while banks and financial market infrastructures were able to absorb the macroeconomic shock of the pandemic, the nonbank financial intermediation sector (NBFI), which currently represents nearly half of global financial assets, experienced acute stress and needs to be strengthened. A resilient NBFI sector would reduce the need for extraordinary central bank intervention, the FSB stated. The FSB’s plans include prioritizing its work in this space in coordination with other standard-setting bodies to address any shortcomings and develop a systemic approach to the NBFI sector. Another priority is addressing potential financial stability risks associated with rapidly developing crypto-assets and digital innovation. The FSB observed that “[c]rypto-asset markets are fast-evolving and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system.” Financial risks resulting from climate change are another critical area of concern for the FSB. The FSB’s work this year will include ensuring these risks are properly reflected in all financial decisions related to disclosures, data, vulnerabilities analysis, and regulatory and supervisory approaches.
FIO joins global green initiative
On February 17, the U.S. Treasury Department’s Federal Insurance Office (FIO) announced that it joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). As previously covered by InfoBytes, Treasury announced in August 2021 a request for information seeking public comments on the FIO’s future work related to the insurance sector and climate-related financial risks. This was in response to an executive order issued by President Biden instructing financial regulators to mitigate climate-related risk related to the financial system (covered by InfoBytes here). According to the recent announcement, the FIO “intends to publish a climate report by the year’s end focusing on insurance supervision and regulation, with an assessment of climate-related issues or gaps in the supervision and regulation of insurers, including their potential impacts on U.S. financial stability.” The same day, the Federal Advisory Committee on Insurance (FACI), which provides advice and recommendations to assist the FIO in carrying out its statutory authorities, launched the Climate Related Financial Risk Subcommittee to support the FACI provision of information relevant to the FIO’s work on climate-related risks in the insurance sector.
Education Dept. to forgive $72 million of student loans after FTC action
On February 16, the FTC announced that the Department of Education (Department) will forgive $71.7 million in federal loans for approximately 1,800 former students deceived by a for-profit university. In 2016, the FTC sued university operators for allegedly advertising that 90 percent of graduates found jobs in their fields within six months of graduation, and that graduates had a 15 percent higher income on average than graduates of all other colleges or universities one year after graduation. The announcement expands on a prior FTC settlement, which required the university to pay $49.4 million in partial refunds to qualifying students and $50.6 million in debt relief. The forgiven debt included the full balance owned on all private unpaid student loans issued by the university to students as well as debts for items such as tuition, books, and lab fees. According to the Department’s announcement, these are the first approved borrower defense claims associated with a currently operating institution. The Department noted that it intends to recoup discharge costs from the university and anticipates an increase in the number of approved claims related to the university as it continues to review pending applications.
The Department stated in total it is cancelling $415 million in student loan debt under the borrower defense to repayment program, noting that several other actions will provide borrower defense discharges to nearly 14,000 borrowers attending other colleges and universities. “The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards,” said U.S. Secretary of Education Miguel Cardona. The Department further noted that it is working on new regulations to improve the borrower defense to repayment program, as well as other discharge programs to provide more protections for students and taxpayers. “This includes writing a new borrower defense regulation, proposing to re-establish a gainful employment regulation to hold career training programs accountable for unaffordable debt, and proposing to create financial triggers so that the Department has monetary protection against potential losses, including borrower defense liabilities,” the Department said in its announcement.
FTC hits investment scheme with $111 million judgment
On February 16, the FTC and the Utah Division of Consumer Protection reached a settlement in an action taken against a Utah-based company and its affiliates (collectively, “defendants”) for allegedly using deceptive marketing to persuade consumers to attend real estate events costing thousands of dollars. As previously covered by InfoBytes, the FTC and the Utah Division of Consumer Protection claimed that the defendants violated the FTC Act, the Consumer Review Fairness Act (CRFA), and Utah state law by marketing real estate events with false claims and using celebrity endorsements. The defendants allegedly promised consumers they would (i) earn thousands of dollars in profits from real estate investment “flips” by using the defendants’ products; (ii) receive 100 percent funding for their real estate investments, regardless of credit history; and (iii) receive a full refund if they do not make “a minimum of three times” the price of the workshop within six months. Additionally, consumers who received refunds were allegedly required to sign agreements preventing them from speaking with the FTC, state attorneys general, and other regulators; submitting complaints to the Better Business Bureau; or posting negative reviews. Under the terms of the settlement, the defendants are, among other things, permanently banned from marketing or selling any real estate or business coaching programs, and are restrained from making misleading earnings claims or misrepresenting any material aspect of the performance or nature of goods or services that are the subject of a sales offer. Additionally, the defendants are permanently banned from using contract terms to suppress customers’ ability to review their products or speak to law enforcement agencies, and may not release customer information in connection with any activity related to the subject matter of the order. The settlement also includes monetary judgments totaling more than $111 million.
FTC sues weight-loss companies alleging COPPA and FTC Act violations
On February 16, the FTC filed a complaint for permanent injunction in the U.S. District Court for the Northern District of California against an international weight loss service organization and its subsidy (collectively, “defendants”) for allegedly using unfair and deceptive practices to obtain personal information of underage users without parental consent. According to the complaint, the defendants violated the Children’s Online Privacy Protection Act and Section 5 of the FTC Act by collecting and keeping personal information from children under 13 without providing notice to or obtaining consent from their parents. The complaint alleges that the defendants, among other things, failed to: (i) “provide through the App and website a clear, understandable, and complete direct notice to parents of [the] Defendants’ practices”; (ii) “make reasonable efforts, taking into account available technology, to ensure that parents receive the direct notice”; and (iii) “obtain verifiable parental consent before any collection, use, or disclosure of personal information from children.” The proposed settlement is pending court approval.
HUD announces Hawaii and Kansas disaster relief
On February 16, HUD announced disaster assistance for certain areas in Hawaii impacted by severe storms, flooding, and landslides. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 15. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows 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 also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.
On February 18, HUD announced disaster assistance for certain areas in Kansas impacted by severe storms and straight-line winds. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 17. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows 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 also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.
CFPB opens rulemaking petition to public
On February 16, the CFPB announced the launch of a new process for the public to submit petitions for rulemaking directly to the Bureau. According to the announcement, the public will have the ability to request that the Bureau pursue a new rule, amend an existing one, or repeal a rule. By allowing the public to make rulemaking suggestions, the Bureau is hoping to “identify consumer protection issues worthy of reform, rulemaking, or in need of further clarification.” The Bureau also noted that “[f]ormer government employees and other individuals who are paid to influence the agency’s rulemaking agenda behind the scenes will be asked to submit their petition for public inspection instead.” The initiative “is part of a series of steps the CFPB is taking to ensure high standards of transparency and ethics, particularly when it comes to addressing the corrosive effects of the ‘revolving door.’” According to CFPB Director Rohit Chopra, the program “will broaden access to the agency’s rulemaking process.”