InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
FDIC announces West Virginia disaster relief
On June 1, the FDIC issued FIL-38-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of West Virginia affected by severe storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
Agencies extend CRA credit period for certain disaster relief efforts
On May 27, the FDIC, OCC, and the Fed (collectively, “Agencies”) issued an interagency statement on granting a 36-month extension of the original period provided for Community Reinvestment Act (CRA) consideration for bank activities that help to revitalize or stabilize Puerto Rico and the U.S. Virgin Islands in response to Hurricane Maria. As previously covered by Infobytes, the Agencies issued an interagency statement on the availability of CRA credit for financial institution activities that “help revitalize or stabilize the U.S. Virgin Islands and Puerto Rico, which were designated as major disaster areas by the President because of Hurricane Maria” in January 2018. Provided financial institutions continue to be responsive to the community needs of their own CRA assessment areas, the Agencies will now give “favorable consideration” to community development activities, such as assistance to displaced people, in the areas impacted by Hurricane Maria. In addition, the Agencies state that they may give greater weight to activities aimed at assisting the low and moderate income affected areas, but that general consideration will be given regardless of median or personal income. The Agencies have determined that the ongoing impact of Hurricane Maria in Puerto Rico and the U.S. Virgin Islands warrants an extension through September 20, 2023.
Agencies to proceed with Call Report revisions
On May 24, the FDIC, Federal Reserve Board, and the OCC published a joint notice and request for comments on information collections published last December and this February (covered by InfoBytes here). The proposed reporting changes would revise and extend three versions of the Call Report—FFIEC 031, FFIEC 041, and FFIEC 051—as well as FFIEC 002, “Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,” and FFIEC 002S, “Report of Assets and Liabilities of a Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or Agency of a Foreign (Non-U.S.) Bank.” After considering comments received on the information collections, the agencies announced their intention to proceed with the proposed revisions and will submit a request to Office of Management and Budget for approval. The proposed revisions to the reporting forms, along with revised instructions related to FDIC amendments to the deposit insurance assessment system, will be effective with the June 30, 2021, report date. Additionally, the agencies noted that the exclusion of sweep deposits and certain other deposits from reporting as brokered deposits will be effective with the September 30, 2021, report date. Comments on the joint notice must be received by June 23.
OCC reconsiders CRA final rule
On May 18, the OCC announced it will reconsider its 2020 final rule overhauling the Community Reinvestment Act (CRA). As previously covered by a Buckley Special Alert, the 2020 final rule, finalized last year, was intended to modernize the regulatory framework implementing the CRA by, among other things: (i) updating deposit-based assessment areas; (ii) mandating the inclusion of consumer loans in CRA evaluations; (iii) including quantitative metric-based benchmarks for determining a bank’s CRA rating; and (iv) including a non-exhaustive illustrative list of activities that qualify for CRA consideration.
“While this reconsideration is ongoing, the OCC will not object to the suspension of the development of systems for, or other implementation of, provisions with a compliance date of January 1, 2023, or January 1, 2024, under the 2020 CRA rule,” the OCC stated. The agency further stressed that its decision to suspend compliance deadlines for the 2020 final rule “will provide for an orderly reconsideration of the June 2020 rule” and “provide the OCC with the opportunity to consider additional stakeholder input, to evaluate issues and questions that have been raised, to reassess the necessary data, and to take additional regulatory action, as appropriate.” The OCC also added that it does not plan to finalize a December 2020 proposed rule covering evaluation measure benchmarks, retail lending distribution test thresholds, and community development minimums under the new general performance standards outlined in the 2020 final rule (covered by InfoBytes here). Moreover, the agency will discontinue the CRA information collection published in the Federal Register last December.
However, the OCC noted that it will continue to implement certain provisions of the 2020 final rule with a compliance date of October 1, 2020, as outlined in OCC Bulletin 2020-99 (covered by InfoBytes here), and reminded banks to “maintain appropriate documentation for CRA examination purposes” as specified in the bulletin.
Federal regulators discuss Covid-19 responses and priorities
On May 19, the House Financial Services Committee held a hearing entitled “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions.” Committee Chairwoman Maxine Waters (D-CA) opened the hearing by expressing her concerns about the “harmful deregulatory actions” taken by the previous administration’s appointees to “roll back key Dodd-Frank reforms and other consumer protections.” She noted, however, that she was pleased that the Senate is moving forward to reverse the OCC’s true lender rule and commented that she has asked House leadership to address the related Congressional Review Act resolution as soon as possible.
Fed Vice Chair for Supervision Randal K. Quarles provided an update on the Fed’s Covid-19 regulatory and supervisory efforts, noting that the Fed has “worked to align [the Fed’s] emergency actions with other relief efforts as the economic situation improves” and is maintaining or extending some measures to promote continued access to credit. When Congresswoman Velazquez inquired how government programs like the Paycheck Protection Program helped to stabilize businesses and improve the overall economy, Quarles answered, “We would have experienced a much deeper and more durable economic contraction, and would have had more lasting economic scarring with closed businesses and defaulting obligations [] had those programs not been put in place.”
OCC Comptroller Michael Hsu discussed the agency’s increasing coordination with other federal and state regulators on fintech policy, in addition to OCC efforts to strengthen Community Reinvestment Act (CRA) regulations and address climate change. The OCC has been encouraging innovation, Hsu said, but added that his “broader concern is that these initiatives were not done in full coordination with all stakeholders. Nor do they appear to have been part of a broader strategy related to the regulatory perimeter.” In his written testimony, Hsu emphasized his concerns with providing charters to fintechs, noting that in doing so, it would “convey the benefits of banking without its responsibilities,” but also “that refusing to charter fintechs will encourage growth of another shadow banking system outside the reach of regulators.” Hsu expressed in his oral statement the importance of finding “a way to consider how fintechs and payment platforms fit into the banking system” and emphasized that it must be done in coordination with the FDIC, Fed, and the states. He also explained that “the regulatory community is taking a fragmented agency-by-agency approach to the technology-driven changes taking place today. At the OCC, the focus has been on encouraging responsible innovation. For instance, we updated the framework for chartering national banks and trust companies and interpreted crypto custody services as part of the business of banking.” When Congressman Bill Huizenga (R-MI) asked how the OCC planned to address the “true lender” rule, which would soften the regulations for national banks to sell loans to third parties, Hsu stated that the OCC originally intended to review the rule, but that after the Senate passed S.J.Res. 15 to invoke the Congressional Review Act and provide for congressional disapproval and invalidation of the rule (covered by InfoBytes here), the agency decided to leave it up to congressional deliberation and will monitor it instead.
FDIC Chairman Jelena McWilliams discussed, among other things, the FDIC’s policy of granting industrial loan company charters. As previously covered by Infobytes, the agency approved a final rule in December 2020 establishing certain conditions and supervisory standards for the parent companies of industrial banks and ILCs. McWilliams defended the FDIC’s new rule during the hearing, stating it “ensures that the parent company serves as a source of financial strength for the ILC while providing clarity about the FDIC's supervisory expectations of both the ILC and its parent company.”
NCUA Chairman Todd Harper also outlined agency measures taken in response to the pandemic. Among other things, Harper noted that the NCUA is supporting low-income credit unions through the Community Development Revolving Loan Fund and that the agency is working to strengthen its Consumer Financial Protection Program (CFPP) to ensure fair and equitable access to credit. During the hearing, Harper stated, “there is an increased emphasis on fair lending compliance, and agency staff are studying methods for improving consumer financial protection supervision for the largest credit unions not primarily supervised by the CFPP.”
FDIC announces Tennessee disaster relief
On May 14, the FDIC issued FIL-33-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Tennessee affected by severe storms, tornadoes, and flooding. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
FDIC announces Kentucky and Alabama disaster relief
On April 30, the FDIC issued FIL-31-2021 and FIL-32-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Kentucky and Alabama affected by severe storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
Illinois enacts 36 percent rate cap for consumer loans, creates state community reinvestment act
On March 23, the Illinois Governor signed the Predatory Loan Prevention Act, SB 1792, which prohibits lenders from charging more than 36 percent APR on all non-commercial consumer loans under $40,000, including closed-end and open-end credit, retail installment sales contracts, and motor vehicle retail installment sales contracts. For purposes of calculating the APR, the act requires lenders to use the system for calculating a military annual percentage rate under the Military Lending Act. Any loan with an APR exceeding 36 percent will be considered null and void “and no person or entity shall have any right to collect, attempt to collect, receive, or retain any principal, fee, interest, or charges related to the loan.” Additionally, a violation constitutes a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and carries a potential fine up to $10,000. The act also contains an anti-evasion provision that prohibits persons or entities from “making loans disguised as a personal property sale and leaseback transaction; disguising loan proceeds as a cash rebate for the pretextual installment sale of goods or services; or making, offering, assisting, or arranging a debtor to obtain a loan with a greater rate or interest, consideration, or charge than is permitted by this Act through any method including mail, telephone, internet, or any electronic means regardless of whether the person or entity has a physical location in the State.”
The same day, the governor also signed SB 1608, which, among other things, creates a state version of the Community Reinvestment Act. The act will allow the state to assess whether covered financial institutions, including state-chartered banks, credit unions and non-bank mortgage lenders, are meeting the needs of local communities, including low-income and moderate-income neighborhoods. Financial institutions’ lending practices and community development/redevelopment program investments will be examined by the Secretary of Financial and Professional Regulation, who is granted the authority to conduct examinations in compliance with other state and federal fair lending laws including, but not limited to, the Illinois Human Rights Act, ECOA, and HMDA.
Both acts are effective immediately.
FDIC announces Louisiana disaster relief
On March 15, the FDIC issued FIL-18-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Louisiana affected by winter storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the winter storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery,” and that the FDIC will consider institutional relief from certain filing and publishing requirements.
FDIC updates Consumer Compliance Examination Manual
On March 2, the FDIC announced updates to its Consumer Compliance Examination Manual (CEM). The CEM includes supervisory policies and examination procedures for FDIC examination staff evaluating financial institutions’ compliance with federal consumer protection laws and regulations. The recent updates include, among other things, changes to the sections and questions related to (i) fair lending laws and regulations and the Fair Lending Scope and Conclusions Memorandum; (ii) TILA and the Consumer Leasing Act; and (iii) the asset-based definitions for small, intermediate, and large institutions for the Community Reinvestment Act.