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  • CFPB revises its supervisory appeals process

    Federal Issues

    On February 16, the CFPB issued a procedural rule updating its process for financial institutions that appeal the Bureau’s supervisory findings. The CFPB examined financial institutions to ensure they followed federal consumer financial law. After an examination or targeted review, supervised entities may appeal their compliance rating or any other findings.

    First, the procedural rule expanded the pool of potential members for the appeals committee within the CFPB. Now, any CFPB manager with relevant expertise who did not participate in the original matter being appealed can be considered, rather than previously only managers from the Supervision department. The CFPB’s General Counsel will assign three CFPB managers and legal counsel to advise them. Second, the revised process introduced a new option for resolving appeals—in addition to upholding or rescinding the original finding, matters can now be remanded back to supervision staff for further consideration, potentially resulting in a modified finding. The Bureau also recommended in its procedural rule that entities engage in “open dialogue” with supervisory staff to discuss their preliminary findings to attempt to resolve disputes before an examination is final.

    Third, institutions now can appeal any compliance rating issued to them, not just negative ratings, as was the case previously. Fourth, the updated process included additional clarifications and specifies that it applied to pending appeals at the time of its publication. 

    Federal Issues CFPB Agency Rule-Making & Guidance Bank Supervision

  • Agencies issue 2023 Shared National Credit Program Report

    Federal Issues

    On February 16, the FDIC, Fed, and OCC issued the 2023 Shared National Credit (SNC) Report, which found that while large, syndicated bank loans generally have moderate credit quality, there appears to be a trend of declining credit quality stemming from higher interest rates and tighter profit margins in certain industries. The report found that credit risk remains high in leveraged loans and specific sectors like technology, telecom, healthcare, and transportation. Also, the real estate and construction sector showed mixed trends. 

    Federal Issues OCC FDIC Federal Reserve Loans

  • FTC encourages potential defendants to sign tolling agreements to avoid "undue delay"

    Federal Issues

    On February 20, Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, said in an FTC blog post, that although the FTC welcomes open dialogue with parties in open investigations, the Commission is prepared to quickly pivot to litigation in cases should companies cause “undue delay” to redress for consumers. In light of a 2021 Supreme Court ruling in AMG Capital Management, LLC v. FTC, the FTC can no longer pursue monetary relief under Section 13(b) of the FTC Act, which lacks a statute of limitations. Instead, the FTC said, it frequently turns to Section 19, 15 U.S.C. § 57b, which allows courts to order defendants to provide redress only if violations occurred within three years of the Commission’s action. To facilitate timely productive discussions, the FTC Bureau of Consumer Protection often requests tolling agreements from potential defendants to provide time for information gathering and dialogue while preserving the possibility of a pre-litigation settlement or closing the investigation in appropriate cases. Parties are encouraged to sign these agreements, as refusal may impact extension requests and meeting opportunities. If necessary, the FTC will recommend litigation to protect consumer interests.

    Federal Issues FTC FTC Act Litigation Enforcement

  • CFPB reports larger banks charge higher interest rates on credit cards than smaller banks

    Federal Issues

    On February 16, the CFPB published the results of a report that found, on average, larger banks charged higher credit card interest rates than smaller banks and credit unions. The CFPB’s data suggested larger banks charge interest rates eight to 10 points higher than non-large banks. If a consumer were to pick a large bank credit card over a smaller bank, the consumer would see an estimated difference of “$400 to $500” in additional annual interest.

    Other findings from the report suggested that large issuers offered higher rates across credit scores: e.g., the median interest rate for people with scores between 620 and 719 was 28.20 percent for large banks and 18.15 percent for small ones. The CFPB also found that 15 bank-issued credit cards with interest rates above 30 percent: nine of the largest issuers reported at least one product over that rate. Lastly, the report found that large banks were more likely to charge annual fees, with 27 percent of large banks charging an annual fee, compared to 9.5 percent of small banks. The CFPB published a table between large and small banks that showed median purchase APR by credit tier.

    Federal Issues CFPB Banking Credit Union Interest

  • FTC proposes two actions to combat AI impersonation fraud

    Agency Rule-Making & Guidance

    On February 15, the FTC announced its supplemental notice of proposed rulemaking relating to the protection of consumers from impersonation fraud, especially from any impersonations of government entities. The first action from the FTC was a final rule that prohibited the impersonation of government, business, and their officials or agents in interstate commerce. The second action was a notice seeking public comment on a supplemental proposed rulemaking that would revise the first action and add a prohibition on, and penalties for, the impersonation of individuals for entities who provide goods and services (with the knowledge or reason to know that those goods or services will be used in impersonations) that are unlawful. In tandem, these actions sought to prohibit the impersonation of government and business officials.

    The FTC notes that these two actions come from “surging complaints” on impersonation fraud, specifically from artificial intelligence-generated deep fakes. The final rule will expand the remedies and provide monetary relief, whereas the FTC stated this rule will provide a “shorter, faster and more efficient path” for injured consumers to recover money. The rule would enable the FTC to seek monetary relief from scammers that use government seals or business logos, spoof government and business emails, and impersonate a government official or falsely imply a business affiliation.

    Agency Rule-Making & Guidance FTC Artificial Intelligence Fraud NPR

  • FCC adopts rule on robocalls and robotexts, includes NPR on TCPA applicability

    Agency Rule-Making & Guidance

    On February 15, the FCC adopted a rule to protect consumers from robocalls and robotexts. According to the rule, robocallers and robotexters must honor do-not-call and consent revocation requests within 10 business days from receipt. In addition, the rule will allow consumers to revoke consent under the TCPA through any unreasonable means and will clarify that the TCPA would not be violated when a one-time text message is sent confirming a consumer’s request that no further text messages be sent if the confirmation text only confirms the opt-out request and does not include marketing information.

    The new rule clarified that revocation of consent can be made via automated methods such as interactive voice responses, key press activation on robocalls, responding with “stop” or similar messages to text messages, or using designated website or phone numbers provided by the caller all will constitute reasonable means to revoke consent. If a called party uses any of these designated methods to revoke consent, it will be considered definitively revoked, and future robocalls and robotexts from that caller must cease. The caller cannot claim that the use of such a mechanism by the called party is unreasonable. Any revocation request made through these specified means will be considered “absolute proof” of the called party's reasonable intent to revoke consent. Furthermore, when a consumer uses a method other than those discussed in the rule to revoke consent, “doing so creates a rebuttable presumption that the consumer has revoked consent when the called party satisfies their obligation to produce evidence that such a request has been made, absent evidence to the contrary.”

    The Commission also included a notice of proposed rulemaking, seeking comment on “whether the TCPA applies to robocalls and robotexts from wireless providers to their own subscribers and whether consumers should have the ability to revoke consent and stop such communications.” The rule will go into effect 30 days after publication in the Federal Register, except for certain amendments that will not be effective until six months following OMB review. 

    Agency Rule-Making & Guidance Federal Issues NPR TCPA FCC Robocalls Opt-Out Consumer Protection

  • California Attorney General settles with food delivery company for allegedly violating two state privacy acts

    Privacy, Cyber Risk & Data Security

    On February 21, the California State Attorney General Office announced its complaint against a food delivery company for allegedly violating the California Consumer Privacy Act of 2018 (CCPA) and the California Online Privacy Protection Act of 2003 (CalOPPA) for failing to provide consumers notice or an opportunity to opt-out of the sale.

    The CCPA requires businesses that sell personal information to make specific disclosures and give consumers the right to opt out of the sale. Under the CCPA, a company must disclose a privacy policy and post an “easy-to-find ‘Do Not Sell My Personal Information’ link.” The California AG alleged that the company provided neither notice. The AG also alleged that the company violated CalOPPA by not making required privacy policy disclosures. The company’s existing disclosures indicated that the company could only use customer data to present someone with advertisements, but not give that information to other businesses to use.

    The proposed stipulated judgment, if approved by a court, will require the company to pay a $375,000 civil money penalty, and to (i) comply with CCPA and CalOPPA requirements; (ii) review contracts with vendors to evaluate how the company is sharing personal information; and (iii) provide annual reports to the AG on potential sales or sharing personal information.

    Privacy, Cyber Risk & Data Security California State Attorney General CCPA CalOPPA Enforcement Data

  • New York AB 2672 goes into effect and establishes credit card surcharge provisions

    State Issues

    Recently, New York AB 2672 (the "Act") was enacted, and went into effect on February 11. The Act requires merchants that impose a credit surcharge fee to clearly and conspicuously post prices inclusive of a surcharge fee. The Act allows merchants to use a two-tier pricing system, in which two different prices display whether a consumer uses a credit card or another form of payment on a transaction. The Act also establishes a civil penalty not to exceed $500 for each violation. 

    State Issues Credit Cards New York Surcharge State Legislation

  • Hsu notes a “trip wire approach” for FSOC review of payments, private equity systemic risk

    On February 21, Acting Comptroller of the Currency Michael Hsu delivered remarks at Vanderbilt University, discussing banking and commerce, regulatory effectiveness, and financial stability. Hsu further discussed the “blurring of the line” between banking and private credit/equity, its relevance to different market crashes, and how it can create risk. Hsu mentioned the potential to fill a regulatory gap regarding payments.

    Hsu highlighted that the FSOC’s recent analytic framework indicated vulnerable points that can commonly contribute to financial stability risks and discussed how FSOC may address the risks. The framework also established how the council determines whether a given nonbank should be under the Fed’s supervision and prudential standards (covered by InfoBytes here). In his speech, Hsu defines banking as “institutions that take deposits, make loans, and facilitate payments” and commerce as “everything else” including nonbank finance. 

    He added that the FSOC should use its macro-prudential tools to address risk and develop metrics and thresholds to identify when a payments or private equity firm may need an assessment of systemic risk. This “trip wire approach” would leverage the FSOC’s framework, moving a firm from the identification phase to the assessment phase of the FSOC’s analytic framework, and the assessment would inform if there was a need for FSOC response. Because of the rise in cash managed by nonbanks on behalf of consumers, Hsu said that could serve as a metric for the trip wire for payments-focused fintechs and other nonbank companies. “The standardization, scalars, and level at which an FSOC assessment would be triggered would be informed by public comment,” he added. Finally, Hsu highlighted how the trip wire approach offered a transparent and proactive method for identifying and addressing systemic risks before they escalate. 

    Bank Regulatory Federal Issues FSOC OCC Payments Nonbank Risk Management

  • House Democrats urge agencies to finalize Basel III Endgame rule

    Federal Issues

    On February 16, the Ranking Member for the House Committee on Financial Services, Maxine Waters (D-CA), and 41 other House Democrats sent a letter to the FDIC, Fed, and OCC regarding the Basel III Endgame and the proposed rule which would impose higher capital requirements. The letter urged the agencies to finalize the rule, highlighting the purpose of capital requirements “to shield banks from unexpected losses, preventing their failure, while serving as a source of funding that banks use…” The letter commended the agencies for providing the public with almost six months to comment and argued the endgame rule’s impact on access to credit is low. The letter also noted that the expected funding impact on a large bank’s average lending portfolio is expected to increase by just 0.03 percent, which it describes as “insignificant” compared to Fed interest rate increases. The letter specifically urged the heads of the agencies to finalize the rules this year “to ensure we have a banking system that will promote stable economic growth.”

    Federal Issues U.S. House Basel Capital Requirements OCC FDIC Federal Reserve

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