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  • Fed, FDIC to consider enhancing large bank resolution requirements

    On October 18, the FDIC Board of Directors approved the publication of an advance notice of proposed rulemaking (ANPRM) seeking comments on whether new requirements should be drafted to enhance the regulators’ ability to resolve large banks in an orderly way should they fail. The jointly proposed FDIC/Federal Reserve Board ANPRM seeks feedback on several new possible requirements, including a long-term debt requirement, that could be used for the orderly resolution of domestic large banking organizations in Categories II and III (which generally exceed a threshold of $250 billion in total consolidated assets) to help prevent customer and counterparty disruption. According to a Fed memo, the regulators are exploring whether certain bank resolution standards applicable to global systemically important banks (GSIBs) should be extended to other large banks that, while not as large as GSIBs, “could have very large or complex operations” and have expanded in size due to mergers and “organic growth.” The ANPRM, among other things, also seeks comment on the costs associated with such a proposal, recognizing that “a long-term debt requirement could impact the cost and availability of credit.” The regulators are also evaluating whether they should establish separability requirements, “such as the sale, transfer, or disposal of significant assets, portfolios, legal entities or business lines on a discrete product line or regional basis,” for some or all large banks to aid recovery or resolvability. Comments on the ANPRM are due within 60 days following publication in the Federal Register.

    “As the banking system changes, policymakers must continuously evaluate whether resolution-related standards and prudential standards for large banks keep pace,” Fed Vice Chair for Supervision Michael S. Barr said in an announcement issued by the Fed earlier in the week. He explained that the regulators are evaluating whether capital requirements for large banks (including GSIBs), as well as other elements of the prudential framework, should be updated.

    Expressing support for the joint ANPRM, acting Comptroller of the Currency Michael J. Hsu stressed that “[e]xploring the development of a rule that can ensure the resolvability of large, domestically-systemic banks will promote financial stability by guarding against the rise of non-GSIBs that may become too-big-to-fail, while enabling true competition amongst the largest banks.” CFPB Director and FDIC Board Member Rohit Chopra also expressed his support for the ANPRM. However, Chopra cautioned that if rulemaking is pursued, it “should not serve as a rationale for continuing a lax and opaque merger review process.” Chopra also advised that efforts “to reduce the risk of bailouts or increased concentration upon the failure of domestic systemically important banks should be complemented by efforts to reduce the probability of their failure,” and that the “increased attention on domestic systemically important banks should not be interpreted to mean that it is ‘mission accomplished’ when it comes to” GSIBs. 

    Bank Regulatory Federal Issues Agency Rule-Making & Guidance Federal Reserve FDIC GSIBs OCC CFPB

  • Agencies finalize TILA, CLA 2023 thresholds

    On October 13, the CFPB and Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of TILA (Regulation Z) and the Consumer Leasing Act (Regulation M) (available here and here), as required by the Dodd-Frank Act. The exemption threshold for 2023, based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, will increase from $61,000 to $66,400, except for private education loans and loans secured by real or personal property used or expected to be used as the principal dwelling of a consumer, which are subject to TILA regardless of the amount. The final rules take effect January 1, 2023.

    Bank Regulatory Federal Issues Agency Rule-Making & Guidance Federal Reserve CFPB Regulation Z Regulation M Consumer Finance TILA Consumer Leasing Act Dodd-Frank

  • Agencies finalize 2023 HPML exemption threshold

    On October 13, the CFPB, OCC, and Federal Reserve Board published finalized amendments to the official interpretations for regulations implementing Section 129H of TILA, which establishes special appraisal requirements for “higher-risk mortgages,” otherwise termed as “higher-priced mortgage loans” (HPMLs). The final rule increases TILA’s loan exemption threshold for the special appraisal requirements for HPMLs. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The exemption threshold will increase from $28,500 to $31,000 effective January 1, 2023.

    Bank Regulatory Federal Issues OCC Federal Reserve CFPB Mortgages Appraisal Consumer Finance HPML TILA

  • House subcommittee asks CFPB to review CRAs' handling of consumer disputes

    Federal Issues

    On October 13, Chairman of the Select Subcommittee on the Coronavirus Crisis James E. Clyburn sent a letter to CFPB Director Rohit Chopra addressing reports that nationwide consumer reporting agencies (CRAs) were less responsive to consumer complaints and disputes related to credit report errors during the Covid-19 pandemic. According to Clyburn, investigative reports allegedly revealed that the CRAs, which are legally obligated to address errors contained in consumer credit reports, did not always investigate these disputes and purportedly used “broad and speculative criteria” to determine whether a dispute was submitted by an unauthorized third party. The letter also expressed concerns that the CRAs’ alleged “overreliance on data furnishers” raises questions about the sufficiency of the CRAs’ dispute investigations, and that, moreover, using different levels of automation to resolve disputes and complaints is creating variability in the quality and thoroughness of their investigations. Clyburn expressed concerns that by failing to investigate certain legitimate disputes, identify and correct erroneous information, or provide the Bureau with information on the outcomes of the complaint investigations, the CRAs may be failing to meet their obligations under the FCRA. He asked Chopra to review the CRAs for possible statutory violations and to “consider investigating whether the CRAs have made sufficient revisions to their procedures for identifying and taking corrective action against unreliable furnishers.”

    Federal Issues U.S. House CFPB Consumer Reporting Agency Consumer Finance Dispute Resolution Credit Report Covid-19 FCRA

  • FHFA proposes amendments to help GSEs better serve colonias

    Agency Rule-Making & Guidance

    Recently, FHFA announced a notice of proposed rulemaking (NPRM) to amend its Enterprise Duty to Serve Underserved Markets regulation. Under Section 1129 of the Housing and Economic Recovery Act of 2008, Fannie Mae and Freddie Mac (GSEs) are required to develop loan products and flexible underwriting guidelines for facilitating “a secondary market for mortgages on housing for very low-, low-, and moderate-income families for the manufactured housing, affordable housing preservation, and rural housing markets.” The amendments would add a “colonia census tract” definition, which would serve as a census tract-based proxy for a “colonia” (as generally applied to “unincorporated communities along the U.S.-Mexico border in California, Arizona, New Mexico, and Texas that are characterized by high poverty rates and substandard living conditions”), and would amend the “high-needs rural region” definition by substituting “colonia census tract” for “colonia.” The NPRM would also revise the definition of “rural area” to include all colonia census tracts regardless of their location, in order to make GSE activities in all colonia census tracts eligible for duty to serve credit. “FHFA is committed to promoting affordability, equity, and sustainability in the nation’s housing finance markets, especially in underserved communities,” FHFA Director Sandra L. Thompson said in the announcement. “With this rule, we seek to remove barriers that have hindered the [GSEs’] Duty to Serve activities for people living in colonias.”

    Agency Rule-Making & Guidance Federal Issues FHFA Mortgages Fannie Mae Freddie Mac HERA GSEs Consumer Finance Underserved

  • Biden authorizes borrowers to separate joint consolidation loans

    Federal Issues

    On October 11, President Biden signed S. 1098, which amends the Higher Education Act of 1965 to authorize borrowers to separate joint consolidation loans. According to the bill, borrowers are permitted to split up federally guaranteed student loans held by private lenders into two new federal direct loans. The bill is effective immediately.

    Federal Issues Federal Legislation Student Lending Biden Consumer Finance

  • Senator urges SEC to issue crypto rulemaking

    Federal Issues

    On October 13, Senator John Hickenlooper (D-CO) sent a letter to SEC Chair Gary Gensler urging him to issue regulations on digital asset securities. According to the letter, Hickenlooper urged the agency to publish regulations through a notice-and-comment process, stating that “existing laws and regulations were not designed to deal with how digital assets are being used in the market.” Hickenlooper noted that the SEC has repeatedly mentioned that existing securities regulations do not ‘cleanly apply’ to digital securities and said that retail investors may not always receive proper disclosures for comprehending the risks tied to digital assets. Hickenlooper also commented that “there are some products and investments, such as Initial Coin Offerings (ICOs), where the SEC is well positioned to offer regulatory guidance since ICOs operate similarly to a traditional financial product.” He specifically urged the SEC to, among other things, clarify what types of digital assets are securities, address how digital securities should be issued and listed, determine what disclosures are necessary for investors to be properly informed, and establish a registration regime for digital asset security trading platforms.

    Federal Issues Digital Assets Securities Fintech U.S. Senate Cryptocurrency Initial Coin Offerings SEC

  • FTC, DOJ participate in G-7 digital competition summit

    Federal Issues

    On October 12, the DOJ and FTC announced their participation in a G7 Joint Competition Policy Makers & Enforcers Summit (Summit) as part of the 2022 G7 Digital and Technology Track. The Summit, hosted by the German Bundeskartellamt and Ministry for Economic Affairs and Climate Action, examined how G7 governments approach competition policy and enforcement in digital markets. According to the agencies, the Summit provided “a unique opportunity for competition officials to discuss common areas of interest and consider areas for increased cooperation and coordination to support competitive digital markets.” The participating delegates included G7 competition authorities and economic ministries in Canada, France, Germany, Italy, Japan, the U.K., and the U.S., in addition to the European Commission. The agencies also noted that to prepare for the Summit, the agencies “contributed to the Compendium of Approaches to Improving Competition in Digital Markets, with highlights from G7 competition authority’s work on digital markets," as well as the Policy Makers Inventory of legislative approaches to competition in digital markets within the G7. According to FTC Chair Lina Khan, “international cooperation is especially crucial as enforcers navigate the global challenges posed by dominant digital platforms and work to promote fair competition and the many benefits it delivers.”

    Federal Issues DOJ FTC Digital Assets Fintech Enforcement Of Interest to Non-US Persons

  • CFPB releases annual college credit card report

    Federal Issues

    On October 13, the CFPB released its annual report to Congress on college credit card agreements. The report was prepared pursuant to the CARD Act, which requires card issuers to submit to the CFPB the terms and conditions of any agreements they make with colleges, as well as certain organizations affiliated with colleges. According to the Bureau, the report “raises questions about whether some marketing deals between colleges and financial institutions comply with Department of Education rules.” The report also highlighted the need for transparency in the arrangements schools have with financial institutions. In conjunction with the report, the DOE issued guidance clarifying colleges’ responsibility to ensure that campus financial products are consistent with students’ best financial interests, including by reviewing whether any fees assessed are consistent with or below prevailing market rates. The DOE’s guidance discussed overdraft and NSF fees, given that financial institutions in the general market have increasingly been reducing or eliminating certain fees. The Bureau’s report included data on 11 account providers, including non-bank financial service providers, banks, and credit unions offering more than 650,000 student accounts in partnership with 462 institutions of higher education during the 2020-2021 award year. Key findings of the report include, among other things: (i) financial services providers and their partner schools appear to offer and promote more costly products to students than are otherwise available in the market; (ii) one entity dominates the market for financial aid disbursements, providing nearly 70 percent of the accounts offered in partnership with schools; and (iii) nearly 30 percent of accounts in the Bureau’s sample were subject to arrangements in which the financial services provider made payments to the partner school.

    Federal Issues CFPB Consumer Finance CARD Act Credit Cards Department of Education

  • SEC amends electronic recordkeeping requirements for security-based swap entities

    Agency Rule-Making & Guidance

    On October 12, the SEC adopted final amendments to its rule governing the electronic recordkeeping requirements for security-based swap entities. (See SEC fact sheet here.) The updates are applicable to security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs), and are intended to make the rule adaptable to new technologies in electronic recordkeeping. The amendments will also facilitate examinations of broker-dealers, SBSDs, and MSBSPs by “designating broker-dealer examining authorities as Commission designees for purposes of certain provisions of the broker-dealer record maintenance and preservation rule,” the SEC said. Specifically, the amendments address requirements related to the maintenance and preservation of electronic records, the use of third-party recordkeeping services to hold records, and the prompt production of records. Under the SEC’s broker-dealer electronic recordkeeping rule, broker-dealers are required “to preserve electronic records exclusively in a non-rewriteable, non-erasable format,” known as the “write once, read many format.” The amendments now provide an audit-trail alternative under which broker-dealers “must preserve electronic records in a manner that permits the recreation of an original record if it is altered, over-written, or erased.” According to the SEC’s announcement, the audit-trail alternative is intended to provide broker-dealers greater flexibility when configuring their electronic recordkeeping systems so they more closely align with current electronic recordkeeping practices, while also ensuring that the authenticity and reliability of the original records are protected. The amendments are also applicable to nonbank SBSDs and MSBSPs.

    The final amendments are effective 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Securities SEC Federal Issues Swaps Recordkeeping

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