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Financial Services Law Insights and Observations

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  • OFAC amends the Reporting, Procedures and Penalties Regulations

    Agency Rule-Making & Guidance

    On June 20, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a final interim rule amending its Reporting, Procedures and Penalties Regulations, which set forth the standard reporting and recordkeeping requirements, license application, and other procedures relevant to the economic sanctions programs administered by OFAC. Among other things, the final interim rule: (i) expands the information that must be included in reports on blocked property and rejected transactions; (ii) includes details on the information that must be included when OFAC requires a report that property has been unblocked; (iii) revises procedures for (a) reporting on rejected transactions; (b) licensing of otherwise prohibited transactions; and (c) releasing blocked funds; and (iv) clarifies rules governing the availability of information under the Freedom of Information Act. The final interim rule will take effect upon publication in the Federal Register, which is scheduled for June 21.

     

    Agency Rule-Making & Guidance OFAC Of Interest to Non-US Persons Department of Treasury

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  • OCC issues new guidance for higher-LTV mortgage loans

    Agency Rule-Making & Guidance

    On June 19, the OCC issued Bulletin 2019-28, which highlights “core lending principles” for banks offering higher loan-to-value (LTV) loans. The Bulletin rescinds 2017 guidance from the OCC—Bulletin 2017-28, “Mortgage Lending: Risk Management Guidance for Higher-Loan-to-Value Lending Programs in Communities Targeted for Revitalization”— noting that “banks have engaged in responsible, innovative lending strategies that are different from [the previous bulletin’s] specific program parameters while being consistent with its goals.” The new guidance instead covers core lending principles that banks should consider when offering higher-LTV loans in an effort revitalize communities. Among other things, the OCC states that higher-LTV loans (i) should be consistent with safe and sound banking and comply with applicable laws and regulations; (ii) performance is effectively monitored, tracked, and managed; (iii) should be underwritten consistent with the Interagency Guidelines for Real Estate Lending and the bank’s standards for review and approval of exception loans. The Bulletin notes examples of sound policies and processes for higher-LTV loans, including underwriting standards and portfolio limits for the aggregate amount of higher-LTV loans. Lastly, the Bulletin emphasizes that marketing and consumer disclosures should describe the potential financial impacts and marketability of a higher-LTV loan where the value of the property is and could remain less than the loan amount.

    Agency Rule-Making & Guidance CFPB FDCPA Debt Collection

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  • HUD: DACA recipients not eligible for FHA loans

    Federal Issues

    On June 11, Len Wolfson, the Assistant Secretary for Congressional and Intergovernmental Relations at HUD sent a letter to Representative Pete Aguilar (D-CA) specifying that Deferred Action for Childhood Arrivals (DACA) recipients are not eligible for FHA loans. According to the letter, HUD has not implemented any new policies changes during the current Administration with respect to FHA eligibility requirements for DACA recipients. Wolfson asserts that, “Since at least October 2003, FHA has maintained published policy that non-U.S. citizens without lawful residency ‘are not eligible for FHA-insured loans,’” and determination of immigration status is not the responsibility of HUD. Therefore, Wolfson argues, “because DACA does not confer lawful status, DACA recipients remain ineligible for FHA loans.”   

    Federal Issues Agency Rule-Making & Guidance HUD FHA U.S. House

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  • Agencies finalize streamlined small-institution reporting

    Agency Rule-Making & Guidance

    On June 17, the FDIC, the OCC, and Federal Reserve issued the final rule to streamline regulatory reporting for qualifying small institutions to implement Section 205 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The agencies adopted the final rule as proposed in November 2018 (covered by InfoBytes here). The final rule permits depository institutions with less than $5 billion in assets—previously set at $1 billion—that do not engage in certain complex or international activities to file the FFIEC 051 Call Report, the most streamlined version of the Call Reports. Additionally, the rule reduces the existing reportable data items in the FFIEC 051 Call Report by approximately 37 percent for the first and third calendar quarters. The rule also includes similar provisions for uninsured institutions with less than $5 billion in total consolidated assets that are supervised by the Federal Reserve and the OCC. The rule notes that the agencies are also committed to “exploring further burden reduction and are actively evaluating further revisions to the FFIEC 051 Call Report, consistent with guiding principles developed by the FFIEC.” The rule will take effect 30 days after it is published in the Federal Register.

    Agency Rule-Making & Guidance OCC FDIC Federal Register Federal Reserve Call Report EGRRCPA

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  • CFPB symposium on “abusive” standard set for June 25

    Agency Rule-Making & Guidance

    On June 11, the CFPB announced that its first symposium, regarding the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act, will be held on June 25. As previously covered by InfoBytes, the CFPB announced a symposia series that will convene to discuss consumer protections in “today’s dynamic financial services marketplace.” The June 25 symposium will be a public forum with two panels of experts discussing unfair, deceptive, or abusive acts and practices (UDAAP). The first panel will be a policy discussion, moderated by Tom Pahl, CFPB’s Policy Associate Director, Research, Markets and Regulation. The second panel will examine how the “abusive” standard has been used in practice in the field and will be moderated by David Bleicken, CFPB Deputy Associate Director, Supervision, Enforcement and Fair Lending.

    In addition to the June 25 symposium, the series will have future events discussing behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer authorized financial data sharing. 

    Agency Rule-Making & Guidance CFPB UDAAP Abusive

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  • Democratic Representatives demand rescission of CFPB’s permanent HMDA threshold proposal

    Federal Issues

    On June 11, House Financial Services Committee Chairwoman Maxine Waters and 64 other Democratic House members sent a letter to the CFPB urging rescission of its May proposal to permanently raise the coverage thresholds for collecting and reporting HMDA data and to retire its HMDA Explorer tool. (Covered by InfoBytes here.) In the letter, members argue that recent data “showed widespread discrimination in bank lending” and that redlining continues to be a pervasive problem. They note that HMDA data is an important tool for public officials to understand access to credit in their communities, and that the Bureau’s proposal would exempt “about half of lending institutions from reporting data about closed-end mortgages … [and] sacrifice information that can make a difference in the lives of creditworthy, lower-income consumers.” The members also ask for information regarding the new Federal Financial Institutions Examination Council (FFIEC) query tool that is to be used as a replacement for the HMDA Explorer tool and Public Data Platform API that the Bureau plans to retire, as previously covered by InfoBytes here.

    Federal Issues Agency Rule-Making & Guidance CFPB HMDA FFIEC U.S. House House Financial Services Committee Mortgages

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  • Democratic Senators ask CFPB to reconsider debt collection rulemaking

    Federal Issues

    On June 6, twenty six Democratic Senators sent a letter to the CFPB requesting that the Bureau reconsider the recent debt collection rulemaking proposal to “pursue more meaningful reforms that put consumers . . . first.” As previously covered by InfoBytes, in May, the CFPB released its highly anticipated debt collection rulemaking, which regulates debt collection communications and disclosures and addresses related practices by debt collectors. Among other things, the proposed rule would (i) require debt collectors to provide consumers with a validation notice containing specific information regarding the debt; (ii) restrict debt collectors from calling consumers regarding a particular debt more than seven times within a seven-day-period and prohibit telephone contact for seven days after the debt collector has had a conversation with the consumer; (iii) allow for consumers to unsubscribe from various communication channels with debt collectors, including text or email; and (iv) prevent debt collectors from contacting consumers on their workplace email addresses or through public-facing social media platforms.

    In the letter, the Senators argue that the proposed rule as currently written “will only exacerbate and increase troubling harassment tactics” by debt collectors. The Senators note that the Bureau received 81,500 consumer debt collection complaints, and the FTC received nearly 458,000 such complaints in 2018, and argue that the proposed rule does not do enough to address the particular abusive practices that those complaints raised. The Senators allege that the proposed rule “permits collectors to overwhelm consumers with intrusive communications” because it allows for unlimited text messages and emails and allows for collectors to call consumers seven times per week, per debt. Additionally, the Senators argue that the proposed rule “could encourage collectors to practice willful ignorance about the status of the debt they collect,” as it only “prohibits filing or threatening to file a lawsuit if the collector ‘knows or should know’ that the debt is not enforceable.” Lastly, the Senators assert that the Bureau should hold attorneys who engage in debt collection to a “higher standard, [they should] not be granted a safe harbor to engage in abusive and deceptive practices.”

    Federal Issues Agency Rule-Making & Guidance CFPB Debt Collection U.S. Senate

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  • Fed tailors state member bank exams to risk

    Agency Rule-Making & Guidance

    On June 3, the Federal Reserve Board issued supervisory letter SR 19-9 to provide guidance on its enhanced process for determining the scope of safety-and-soundness examinations of community and regional state member banks (SMB). Under the “Bank Exams Tailored to Risk” (BETR) process, the Fed intends to “gauge the risk of a bank’s various activities [and] facilitate[] a more data-driven approach to the risk tailoring of supervisory work.” A SMB’s level of risk within individual risk dimensions—such as credit, liquidity, and operational risk—will be derived from a combination of surveillance metrics and examiner judgment.

    Among other things, BETR’s objectives are to (i) apply appropriately streamlined examination work programs to identified low-risk activities, in order to conserve supervisory staff resources and minimize regulatory burden; (ii) direct enhanced supervisory resources and attention to identified high-risk activities; and (iii) implement average intensity examination work programs to moderate-risk activities. Examiners are to tailor examination procedures to the size, complexity, and risk profile of an SMB, with examiners focusing on “developing an appropriate assessment of bank management’s ability to identify, measure, monitor, and control risk.”

    Agency Rule-Making & Guidance Federal Reserve Supervision Examination Risk Management

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  • OCC extends Dodd-Frank stress test compliance date

    Agency Rule-Making & Guidance

    On June 4, the OCC extended the deadline for national banks and federal savings associations (FSAs) with consolidated assets between $100 billion and $250 billion to comply with the Dodd-Frank stress test (DFAST) requirements to November 25. In December 2018, the OCC issued a letter noting that prior DFAST exams and OCC supervision have indicated that qualifying banks with consolidated assets within these thresholds have adopted effective stress testing programs and integrated them into their general risk management tools, and as such, “requiring DFAST submissions for these banks in 2019 would provide limited supervisory value.” According to the OCC, the extension is consistent with the Economic Growth, Regulatory Relief, and Consumer Protection Act’s goal of reducing regulatory burden for applicable national banks and FSAs.

    Agency Rule-Making & Guidance OCC Stress Test Compliance Dodd-Frank EGRRCPA

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  • CFPB delays underwriting compliance of Payday Rule

    Agency Rule-Making & Guidance

    On June 6, the CFPB released a final rule to delay the August 19, 2019 compliance date for the mandatory underwriting provisions of the agency’s 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the Rule). Compliance with these provisions of the Rule is now due by November 19, 2020.

    As previously covered by InfoBytes, in February, when the CFPB released two notices of proposed rulemaking (NPRM) related to certain lending requirements under the Rule—one proposing the delay to the compliance date for mandatory underwriting provisions, and the other proposing to rescind the underwriting portion of the Rule that would make it an unfair and abusive practice for a lender to make covered high-interest rate, short-term loans, or covered longer-term balloon payment loans without reasonably determining that the consumer has the ability to repay—the Bureau emphasized that the NPRM extending the compliance date for mandatory underwriting provisions did not extend the effective date for the Rule’s provisions governing payments. 

    Notably, on May 30, the U.S. District Court for the Western District of Texas entered an order continuing the stay of the original compliance date for both the underwriting provisions and the payment provisions of the Rule in a payday loan trade group’s litigation challenging the Rule. (Previous InfoBytes coverage on the litigation is available here.) The order requires the parties to file a joint status report no later than August 2.

    Agency Rule-Making & Guidance CFPB Payday Rule Courts Payday Lending Underwriting

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