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On January 15, the CFPB issued a small entity compliance guide summarizing the Bureau’s debt collection rule. As previously covered by InfoBytes, the Bureau issued a final rule last October amending Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA), to address debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The guide provides a detailed summary of the October final rule’s substantive prohibitions and requirements, as well as a summary of key interpretations and clarifications of the FDCPA. The Bureau noted, however, that the current small entity compliance guide does not discuss (unless specifically noted otherwise) the CFPB’s final rule issued in December (covered by InfoBytes here), which clarified consumer disclosure requirements, provided a model validation notice, and addressed required actions prior to furnishing and prohibitions concerning the collection of time-barred debt. Updates will be made to the small entity compliance guide at a later date to include provisions related to the December final rule.
On January 14, the OCC released a final rule to ensure that covered national banks, federal savings associations, and federal branches and agencies of foreign bank organizations provide fair access to financial services. The final rule is largely unchanged from the notice of proposed rulemaking (NPRM) issued last November (covered by InfoBytes here). Among other things, the final rule codifies more than a decade of OCC guidance stating that fair access to financial services, capital, and credit should be based on the risk assessment of individual customers, rather than broad-based decisions affecting whole categories or classes of customers. Building upon the principle of nondiscrimination and implementing language included in Title III of Dodd-Frank—“which charged the OCC with ‘assuring the safety and soundness of, and compliance with laws and regulations, fair access to financial services, and fair treatment of customers by, the institutions and other persons subject to its jurisdiction’”—the OCC stressed that the final rule establishes that “a covered bank’s decision to deny services based on an objective assessment would not violate the bank’s obligation to provide fair access.” While banks are still free to make “legitimate business decisions about what and whom to serve” and may still determine their product lines and geographic markets, they are required to make the “products and services they choose to offer available to all customers in the communities they serve, based on consideration of quantitative, impartial, risk-based standards established by the bank.”
In finalizing the rule, the OCC considered stakeholder comments received in response to the NPRM. In response, the OCC stated that the final rule will not prevent banks from denying or limiting services in an effort to (i) prevent a person from entering or competing in a particular market; or (ii) disadvantage a person in order to benefit another person in which the bank has a financial interest. According to the OCC, this requirement would have created a regulatory burden outside of the primary objectives of the final rule. The final rule affects banks with more than $100 billion in assets and will take effect April 1.
Separately, the OCC announced the departure of Acting Comptroller of the Currency Brian P. Brooks. Brooks stepped down on January 14, and was replaced by Chief Operating Officer Blake Paulson.
On January 13, the CFPB released fair-lending guidance for financial institutions that provide services to borrowers with limited English proficiency (LEP). As previously covered by InfoBytes, last July the Bureau issued a request for information that sought, among other things, information on ways to provide clarity under the Equal Credit Opportunity Act (ECOA) and/or Regulation B related to meeting the credit needs of LEP borrowers. During a 2020 roundtable focusing on LEP issues, the Bureau was also urged to publish additional guidance to assist financial institutions in expanding products and services to LEP consumers while also maintaining compliance with statutes and regulations. The Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency (Statement) incorporates feedback received from stakeholder groups, advocacy organizations, financial institutions, financial regulators, and trade associations. The Statement addresses, among other challenges, issues “related to balancing legal requirements and practical considerations” and potential UDAAP risks associated with offering support in certain non-English languages but not in others. The Statement further provides principles and guidance to assist financial institutions when making decisions related to assisting LEP consumers. Additionally, the Statement also includes key considerations and guidelines for institutions to use when developing compliance solutions for providing products and services in non-English languages to LEP consumers, while at the same time complying with Dodd-Frank, ECOA, and other applicable laws and regulations.
On January 12, the FDIC published a final rule amending 12 CFR Part 308 to codify the agency’s “practice of having certain adjudicative functions performed by an inferior officer of the United States appointed by the FDIC’s Board of Directors.” The clarification follows a 2018 U.S. Supreme Court decision in Lucia v. SEC, which held that SEC administrative law judges (ALJs) are “inferior officers” subject to the Appointments Clause (Clause) of the Constitution (covered by InfoBytes here). The FDIC notes that while the Lucia decision did not directly affect the agency or FDIC ALJs, the Board has chosen to “formally appoint the ALJs that preside over FDIC enforcement proceedings.” The final rule, which also makes other technical edits to the agency’s rules of practice and procedure to update outdated references to certain position titles, becomes effective immediately.
On January 5, the CFPB Taskforce on Federal Consumer Financial Law released a two volume report with approximately 100 recommendations on ways the CFPB, Congress, and state and federal regulators can improve and modernize the legal and regulatory environment for the consumer financial services market. The report is the end-product of a request for information issued by the taskforce last March (covered by InfoBytes here). The report’s first volume provides a historical and economic overview of the legal and regulatory landscape for consumer finance, and explores issues related to consumer financial protection, competition, innovation, and financial inclusion. The second volume outlines more than 100 proposed recommendations for strengthening consumer protections and maintaining competition in the financial marketplace. Among these are recommendations related to the regulation of non-banks and fintech companies, including:
- Recommending that Congress either (i) “authorize the Bureau to issue licenses to non-depository institutions that provide lending, money transmission, and payments services,” with licenses “provid[ing] that these institutions are governed by the regulations of their home states, even when providing services to consumers located in other states,” or (ii) “clarify that the OCC has the authority to issue charters to non-depositories engaged in lending, money transmissions, or payment services.” Acting Comptroller of the Currency, Brian P. Brooks released a statement the next day endorsing the need for federal charters for fintech companies, but stressed that the OCC, not the Bureau, should be responsible for granting national charters;
- Identifying and addressing competitive barriers and making appropriate recommendations to policymakers and regulators for expanding access to the payments systems by non-bank providers;
- Recommending that the Bureau weigh the costs and benefits of preempting state law where potential conflicts “can impede provision of valuable products and services, such as the regulation of [fintech] companies engaged in money transmission”; and
- Ensuring that fintech companies with multistate operations are subject to a single set of laws to promote consistency, reducing unnecessary regulatory costs, and promoting competition.
The taskforce further recommends that the Bureau establish an independent review of its regulatory cost-benefit analyses, and calls for increased regulatory coordination between the Bureau and other federal and state regulators. Other recommendations address, among other things, the use of alternative data; suggested changes to the Bureau’s internal organization; competition in the consumer financial marketplace, including with respect to the cost of credit, the effect and burden of state licensure requirements, and settlement servicing prices; consumer credit reporting, including clarifying the obligations of credit reporting agencies and furnishers with respect to dispute investigations; consumer empowerment and education; equal access to credit and financial inclusion; disclosure requirements; electronic signatures and document requirements; disparate impact; privacy; small dollar credit; and enforcement and supervision.
On January 4, the OCC published an interpretive letter addressing the legal permissibility of certain payment-related activities involving the use of new technologies, including using independent node verification networks (INVN) and related stablecoins to conduct payment activities and other bank-permissible functions. Specifically, the letter clarifies that a national bank or federal savings association “may validate, store, and record payments transactions by serving as a node on an INVN,” and may also “use INVNs and related stablecoins to carry out other permissible payment activities” provided the bank or federal savings association complies with applicable laws and safe, sound, and fair banking practices. Due to the decentralized nature of INVNs—which not only “allows a comparatively large number of nodes to verify transactions in a trusted manner” but also “limits tampering or adding inaccurate information to the database because information is only added to the network after consensus is reached among the nodes validating the information”—the OCC believes that INVNs may enhance payment activities’ efficiency, effectiveness, and stability within the federal banking system. The letter also outlines potential risks associated with INVN-related activities, such as operational and compliance risks and fraud related to the possibility of money laundering and terrorist financing, and warns banks and federal savings associations to expand their programs to ensure compliance with Bank Secrecy Act reporting and recordkeeping requirements and to address cryptocurrency transaction risks.
On December 28, the Financial Crimes Enforcement Network (FinCEN) issued a notice to financial institutions concerning the potential for Covid-19 vaccine-related fraud, ransomware attacks, and other types of criminal activity. Specifically, FinCEN warns financial institutions to be aware of the potential sale of unapproved and illegally marketed vaccines, as well as fraudsters offering vaccines sooner than allowed for a fee. Financial institutions should also look out for ransomware targeting vaccine delivery operations and supply chains. The notice provides instructions for filing suspicious activity reports regarding the aforementioned activity.
On December 18, the Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking (NPRM) that would require financial institutions and money service businesses (MSBs) to maintain records and submit reports to verify customer identities for certain transactions involving convertible virtual currency (CVC) or digital assets with legal tender status (LTDA). Under the NPRM, the requirements would apply to transactions involving CVC and LTDA that are held in certain “hosted” wallets at financial institutions, as well as in “unhosted” wallets, which are not held in an exchange or bank. Banks and MSBs would be required to file transaction reports within 15 days with FinCEN verifying the identity of customers if a counterparty to the transaction is using an unhosted or otherwise covered wallet and the transaction is greater than $10,000. Banks and MSBs would also be required to maintain records of customers’ CVC or LTDA transactions and counterparties—“including verifying the identity of their customers, if a counterparty uses an unhosted or otherwise covered wallet and the transaction is greater than $3,000.” According to Treasury Secretary Steven T. Mnuchin, the proposed rule “is intended to protect national security, assist law enforcement, and increase transparency while minimizing impact on responsible innovation” by “closing loopholes that malign actors may exploit.” FinCEN notes that, while the NPRM “proposes to prescribe by regulation that CVC and LTDA are ‘monetary instruments’ for purposes of the” Bank Secrecy Act (BSA), it does not “modify the regulatory definition of ‘monetary instruments’ or otherwise alter existing BSA regulatory requirements applicable to ‘monetary instruments’ in FinCEN’s regulations.” Comments on the NPRM were due January 4.
On December 23, the OCC issued a final rule to amend 12 CFR part 7 to update or eliminate outdated regulatory requirements and clarify and codify recent OCC interpretations related to the modern financial system. Among other things, the final rule (i) codifies interpretations which permit covered institutions to engage in certain tax equity finance transactions; (ii) clarifies permissible anti-takeover provisions; and (iii) expands the ability of national banks to choose corporate governance provisions under state law. InfoBytes coverage of the proposed rule and a related advance notice of proposed rulemaking are available here. The amendments are effective April 1, 2021.
On December 21, the CFPB issued an advisory opinion addressing ECOA’s implementing regulation, Regulation B, as it applies to certain aspects of special purpose credit programs (SPCPs). The CFPB issued the advisory opinion in response to feedback from the Bureau’s request for information (RFI) covering ECOA and Regulation B issued in July (covered by InfoBytes here). The Bureau notes that, while Regulation B provides creditors guidance for developing SPCPs that comply with ECOA, stakeholders were interested in additional guidance to ensure the development of compliant SPCPs. To address this, the advisory opinion clarifies (i) the content that a for-profit organization must include in an SPCP written plan, including details regarding the class of persons designed to benefit from the program and the procedures for extending credit pursuant to the program; and (ii) the type of research and data that may be appropriate to inform a for-profit organization’s determination that a SPCP would benefit a certain class of people, which can include external sources such as HMDA data.
For more details on the CFPB’s advisory opinion program, please see InfoBytes coverage here.
- Steven R. vonBerg to discuss "Non-QM market overview & the impact of QM 2.0" at the IMN Non-QM Virtual Conference
- Buckley Webcast: Looking ahead — Tighter scrutiny of deposit and payment practices
- Jeffrey P. Naimon to discuss "What have you bought non-QM post-Covid?" at the IMN Non-QM Virtual Conference
- Magda Gathani to discuss "Cryptocurrency meets banks" at the Women in Housing & Finance Partner Series
- Garylene D. Javier to moderate "Innovation in an evolving privacy landscape" at the American Bar Association Business Law Section Consumer Financial Services Committee Winter Meeting
- Buckley Webcast: What’s next for privacy and data security in 2021 and beyond?