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On April 19, the U.S. Treasury Department announced a new coordinated climate policy strategy focusing on domestic and international policymaking to “leverag[e] finance and financial risk mitigation to confront the threat of climate change.” Efforts will focus on issues related to climate transition finance, climate-related economic and tax policy, and climate-related financial risks, and will support engagement with other stakeholders, agencies, and regulators. Additionally, Treasury plans to create a new Climate Hub to coordinate existing climate-related efforts.
On April 13, SEC Commissioner Hester M. Pierce released an updated version of her proposal for a three-year safe harbor rule applicable to companies developing digital assets and networks. As previously covered by InfoBytes, last year Pierce suggested that not only would the rule provide regulatory flexibility “that allows innovation to flourish,” but it would also protect investors by “requiring disclosures tailored to their needs” while still maintaining anti-fraud safeguards, allowing investors to participate in token networks of their choice. The three-year grace period for qualifying companies, Pierce suggested, would allow time for the development of decentralized or functional networks, adding that at the end of the three years, a successful network’s tokens would not be regulated as securities.
The updates to the proposal reflect feedback from the cryptocurrency community, securities lawyers, and the pubic, and include, among other things:
- A requirement for companies to provide semi-annual updates to the plan of development disclosure and a block explorer;
- An exit report requirement, which would include either (i) an outside counsel analysis explaining why the network is decentralized or functional; or (ii) an announcement that the company will register the tokens under the Securities Exchange Act; and
- Enhancements to the exit report requirement to address what the outside counsel’s analysis should address when explaining why a network is decentralized.
The public is encouraged to provide feedback on the updated proposal.
On April 12, the Federal Reserve Board issued a notice of proposed rulemaking to extend TILA recordkeeping and disclosure requirements implemented under Regulation Z. The Board proposes to revise FR Z (OMB No. 7100-0199) to: (i) include burden connected to disclosure requirements in “rules issued by the Bureau since the Board’s last Paperwork Reduction Act (PRA) submission, as well as for one information collection for which the Bureau estimates burden” but the Board formerly did not; (ii) break out and clarify “burden estimates” that were formerly consolidated; and (iii) eliminate burden associated with some requirements due to the Bureau accounting for burden for the entire industry, or because the burden is now deemed a part of an institution’s usual and customary business practices. The notice also mentions that the “disclosures, records, policies and procedures required by Regulation Z are not required to be submitted to the Board.”
On April 19, the CFPB issued an interim final rule (IFR) to amend Regulation F, which implements the FDCPA, that will require debt collectors to provide tenants written notice alerting them of their rights under the CDC’s moratorium on evictions in response to the Covid-19 pandemic. Failure to provide notice will be considered a violation of the FDCPA, which may result in a private right of action as well as actual damages, statutory damages, and attorney’s fees. The Bureau noted in its press release that the IFR does not preempt more protective state laws. Additionally, debt collectors are prohibited from misrepresenting renters’ eligibility for temporary protection under the CDC’s moratorium. Sample disclosure language and a summary of the IFR have been provided by the Bureau as well.
The IFR will take effect May 3. Comments are due 15 days after publication in the Federal Register.
On April 19, FHA issued an update to Section III of the Single Family Housing Policy Handbook 4000.1, which streamlines many standard mortgage servicing operational requirements. The updates also incorporate FHA actions taken to support borrowers experiencing Covid-19-related financial hardships. The changes/updates include:
- A revised loss mitigation home retention “waterfall” to help servicers quickly review borrowers in danger of foreclosure for a permanent FHA Home Affordable Modification Program option without a lengthy forbearance. FHA noted in its announcement that this process “has been proven to be highly effective at helping borrowers avoid redefault and foreclosure.”
- Streamlined documentation requirements designed “to avoid unnecessary delays” and be more closely aligned “with standard industry servicing practices.” One example includes removing signature requirements on trial payment plans.
- A revised structure for certain allowable costs and fees corresponding with other industry participants’ fee structures.
The changes take effect August 17.
On April 14, the CFPB issued its annual fair lending report to Congress, which outlines the Bureau’s efforts in 2020 to fulfill its fair lending mandate, while protecting consumers against the resulting economic consequences of the Covid-19 pandemic. According to the report, the Bureau continued to focus on promoting fair, equitable, and nondiscriminatory access to credit, highlighting several fair lending priorities that continued from years past such as mortgage origination, small business lending, and student loan origination. The report also discusses new policy areas and programs for fair lending examinations or investigations, including (i) the Fair Lending Help Desks; (ii) amendments concerning Regulation C, which will increase the permanent threshold for collecting, recording, and reporting data about open-end lines of credit from 100 to 200; and (iii) two HMDA data point articles. Additionally, the report discusses the Bureau’s efforts in expanding access to credit for underserved or underbanked populations, including: (i) hosting the first “Tech Sprint” (covered by InfoBytes here) to encourage regulatory innovation and stakeholder collaboration; (ii) continuing to examine and investigate institutions for compliance with HMDA and ECOA; (iii) engaging with stakeholders to discuss fair lending compliance, issues related to credit access, and policy decisions; and (iv) issuing Supervisory Recommendations relating to weak or nonexistent fair lending policies and procedures, risk assessments, and fair lending training. The report also provides information related to regulation, supervision, enforcement, and education efforts.
On April 14, the FTC issued a note correcting prior staff guidelines on the FTC’s Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, commonly known as the Holder Rule. The Holder Rule “protects consumers who enter into credit contracts by preserving their right to assert claims and defenses against any holder of the contract,” including those later assigned to a third party. The note corrects the statement in a 1976 pamphlet by FTC staff that the Holder Rule “did not apply to transactions larger than $25,000.” Those staff guidelines stated that “the Rule incorporates the transaction cap that was present in the Truth in Lending Act (TILA).” However, the recent note points out that the language of the Rule includes no such incorporation nor does it contain any exemption based on transaction amount. Additionally, the note clarifies that the previous “erroneous guidance contradicts a statement by the Commission that the application of the Rule does not depend on the amount of the transaction.”
On April 13, the FCC took several actions associated with blocking illegal and unsolicited robocalls, including sending cease and desist letters (see here and here) to two carriers that “appear to be transmitting multiple unlawful robocall campaigns” and seeking updated information from all carriers and developers of call-blocking tools to learn more about the tools available to consumers and their effectiveness. Key questions include:
- Whether the companies are offering call blocking tools to consumers at no charge.
- How the companies measure the effectiveness of blocking tools.
- What protections the companies have put in place to ensure that call blocking does not interfere with emergency services.
In addition to seeking input from the industry, the FCC sent cease and desist letters to two carriers regarding the transmission of illegal robocalls through their networks. The letters warn the carriers that downstream carriers will be authorized to block all of their traffic if they do not take steps within 48 hours to “effectively mitigate illegal traffic.”
On April 9, the Federal Reserve Board, FDIC, and OCC, in consultation with FinCEN and the NCUA, issued a joint statement on the use of risk management principles outlined in the agencies’ “Supervisory Guidance on Model Risk Management” (known as the “model risk management guidance” or MRMG) as it relates to financial institutions’ compliance with Bank Secrecy Act/anti-money laundering (BSA/AML) rules. While the joint statement is “intended to clarify how the MRMG may be a useful resource to guide a bank’s [model risk management] framework, whether formal or informal, and assist with BSA/AML compliance,” the agencies emphasized that the MRMG is nonbinding and does not alter existing BSA/AML legal or regulatory requirements or establish new supervisory expectations. In conjunction with the release of the joint statement, the agencies also issued a request for information (RFI) on the extent to which the principles discussed in the MRMG support compliance by financial institutions with BSA/AML and Office of Foreign Assets Control requirements. The agencies seek comments and information to better understand bank practices in these specific areas and to determine whether additional explanation or clarification may be helpful in increasing transparency, effectiveness, or efficiency. Comments on the RFI are due within 60 days of publication in the Federal Register.
On April 7, the CFPB proposed to extend the effective date of two recent debt collection rules to allow affected parties additional time to comply due to the ongoing Covid-19 pandemic. The Notice of Proposed Rulemaking (NPRM) delays the effective date by 60 days of the two final rules issued under the FDCPA, which were scheduled to take effect on November 30 but are now proposed to take effect January 29, 2022. The proposed delay would give stakeholders affected by the pandemic more time to examine and implement the rules. As previously covered by InfoBytes, the first debt collection rule, issued in October 2020, addressed debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The second debt collection rule, issued in December 2020, clarified the information debt collectors must provide to consumers at the outset of collection communications and provided a model validation notice containing such information (covered by InfoBytes here).
- Garylene D. Javier to discuss “How to ensure customer and workforce equality in consumer financial services” at the American Bar Association Business Law Section Spring Meeting
- Jeffrey P. Naimon to discuss “The bureau in transition” at the American Bar Association Business Law Section Spring Meeting
- Kari K. Hall to discuss “Fair lending and artificial intelligence” at the American Bar Association Business Law Section Spring Meeting
- Jonice Gray Tucker to discuss "Reading the tea leaves of President Biden’s initial financial appointees" at LendIt Fintech
- APPROVED Webcast: Staying in the know with Buckley regtech solutions
- Moorari K. Shah to discuss “CA, NY, federal licensing and disclosure” at the Equipment Leasing & Finance Association Legal Forum
- Jonice Gray Tucker to discuss "Compliance under Biden" at the WSJ Risk & Compliance Forum
- Sherry-Maria Safchuk to discuss UDAAP at an American Bar Association webinar
- Jeffrey P. Naimon to discuss "What to expect: The new administration and regulatory changes" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Steven R. vonBerg to discuss "LO comp challenges" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss “The False Claims Act today” at the Federal Bar Association Qui Tam Section Roundtable