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On August 6, the Federal Reserve Board (Board) announced details of its new payment clearing system, the FedNow Service, which the Board plans to implement through a phased approach with a target launch date sometime in 2023 or 2024. As previously covered by InfoBytes, in August 2019, the Board issued a request for information on a “round-the-clock real-time payment and settlement service,” seeking feedback on how the service might be designed in order to support payment system stakeholders and the general functioning of the U.S. payment system. The Board notes that the newly released details are based on the input received from stakeholders. The Federal Register notice discusses the phased released approach, noting that the “approach will ensure the core features and functionality are delivered as quickly as possible,” even if “certain desirable features” are not available in the initial release. Highlights of the core features of the “24x7x365” FedNow Service include, among other things, (i) a payment flow where the receiver’s bank has an opportunity to confirm that it holds a valid account for the receiver and intends to accept the payment message, before interbank settlement occurs; (ii) the use of the “widely accepted ISO 20022 standard and adopt other industry best practices” for payment message format; (iii) a transaction limit that will be “consistent with market practices and needs at the time” of the launch of service; and (iv) a liquidity-management tool that will allow participants to transfer funds to each other to support the liquidity needs of instant payments. After the initial launch, the Board intends to offer additional features related to fraud prevention, error resolution and case management.
On April 30, the Small Business Administration (SBA) issued an Interim Final Rule (IFR) prohibiting a “single corporate group” from receiving more than $20 million in the aggregate from the Paycheck Protection Program (PPP). Businesses are considered to be a part of a single corporate group “if they are majority owned, directly or indirectly, by a common parent.” Small businesses must adhere to this loan cap by withdrawing or cancelling any PPP loan application or approval above $20 million for any loan that is not fully disbursed as of April 30. Failure to follow the IFR, will make such loans ineligible for loan forgiveness. The IFR assures lenders that they are not responsible for a small business’s compliance with this rule, and further, that the IFR does not alter lender obligations required to procure an SBA loan guarantee. In addition, the IFR allows a non-bank lender to be a PPP lender, subject to certain criteria, if the non-bank lender is “either a community development financial institution…or a majority minority, women, or veteran/military owned lender.” The IFR is effective as of May 4, and comments must be received by June 3.
On October 31, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) to credit transactions, as required by the Dodd-Frank Act (published in the Federal Register here and here). Each year the thresholds must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2020, based on the annual percentage increase in the CPI-W, is now $58,300 or less, except for private student loans and loans secured by real property, which are subject to TILA regardless of the amount.
On October 30, the CFPB, OCC, and the Federal Reserve Board published a final rule in the Federal Register, which increases the smaller loan exemption threshold for the special appraisal requirements for higher-priced mortgage loans (HPMLs) under TILA. TILA requires creditors to obtain a written appraisal before making a HPML unless the loan amount is at or below the threshold exemption. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The exemption threshold for 2020 is $27,200, up from $26,700 in 2019. The final rule will take effect January 1, 2020.
On September 27, the OCC, the Federal Reserve Board, and the FDIC announced a final rule increasing the threshold for residential real estate transactions requiring an appraisal from $250,000 to $400,000. As previously covered by InfoBytes, in November 2018, the agencies proposed the threshold increase in response to feedback that the exemption threshold had not increased to keep pace with the price appreciation in the residential real estate market. The final rule also includes the rural residential appraisal exemption included in the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously covered by InfoBytes here), and implements the Dodd-Frank Act mandate that institutions appropriately review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice. The final rule is effective the first day after publication in the Federal Register, except for the evaluation requirement for transactions exempted by the rural residential appraisal exemption and the requirement to review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice, which are effective January 1, 2020.
On September 19, the NCUA announced the approval of a final rule creating a new payday alternative loan product (PAL II). As previously covered by InfoBytes, in June 2018, NCUA proposed the PAL II as an additional offering to the current payday alternative loan product (PAL I), which has been available since 2010. PAL II includes most features of PAL I except that it (i) eliminates a loan minimum and sets the maximum at $2,000; (ii) requires a minimum loan term of one month and a maximum of 12 months; and (iii) does not contain a requirement for the minimum length of a membership. Moreover, federal credit unions are restricted to offering only one type of PAL loan to a member at any given time. All prior requirements of PAL I loans, such as the prohibition against rollovers, the limit on the number of loans a single borrower can take in a given period, and full amortization, remain in effect. The final rule will be effective 60 days after publication in the Federal Register.
On September 18, the CFPB published a notice in the Federal Register seeking comments on the use of Tech Sprints—forums which gather “regulators, technologists, financial institutions, and subject matter experts from key stakeholders for several days to work together to develop innovative solutions to clearly-identified challenges”—as a means to encourage regulatory innovation and collaborate with stakeholders on forming solutions to regulatory compliance challenges. The Bureau notes that Tech Sprints have been successfully used by the U.K.’s Financial Conduct Authority, which has organized seven Tech Sprints since 2016, resulting in a pilot project on digital regulatory reporting. The Bureau is interested in using Tech Sprints to, among other things: (i) leverage cloud solutions and other developments that may reduce or modify the need for regulated entities to transfer data to the Bureau; (ii) continue to innovate the HMDA data submission process; (iii) identify new technologies and approaches that can be used by the Bureau to provide more cost-effective oversight of supervised entities; and (iv) reduce other unwarranted regulatory compliance burdens. Comments must be received by November 8.
On August 2, the CFPB announced that it is extending the comment period on its Notice of Proposed Rulemaking implementing the FDCPA to “facilitate the ability of commenters to consider the issues raised in the NPRM, gather data, and prepare their responses.” The comment period now closes on September 18.
Detailed InfoBytes coverage on the CFPB’s debt collection proposal is available here.
On August 5, the Federal Reserve Board (Board) announced that Federal Reserve Banks will develop a “round-the-clock real-time payment and settlement service” called the “FedNow℠ Service.” According to a notice and request for comment, “the service would support depository institutions’ provision of end-to-end faster payment services and would provide infrastructure to promote, ubiquitous, safe, and efficient faster payments in the United States.” The Board is requesting comments on how the service might be designed in order to support payment system stakeholders and the general functioning of the U.S. payment system. FedNow is anticipated to be available in 2023 or 2024. Comments on the notice will be due 90 days after publication in the Federal Register. The Board also released FAQs associated with faster payments.
In a speech announcing the service, Governor Brainard noted that FedNow will be accessible to all banks and “will permit banks of every size in every community across the country to provide real-time payments to their customers.” Brainard noted that the Board is “uniquely placed to deliver this outcome” given its “long-standing service connections with more than 10,000 banks across the country.”
As previously covered by InfoBytes, the Board issued a request for comments in October 2018 regarding potential actions the Board could take to facilitate real-time interbank settlement of faster payments. The Board reports that it received over 350 comments and over 90 percent supported the Board operating its own, round-the-clock payment service alongside services provided by the private sector.
On June 24, the FTC finalized the “Free Electronic Credit Monitoring for Active Duty Military Rule,” which implements the Economic Growth, Regulatory Relief, and Consumer Protection Act requirement for nationwide consumer reporting agencies (CRAs) to provide free electronic credit monitoring services for active duty military consumers. The proposed rule, issued in November 2018 (covered by InfoBytes here), defined the term “electronic credit monitoring service” as a service through which the CRAs provide, at a minimum, electronic notification of material additions or modifications to a consumer’s file and requires CRAs to notify active duty military consumers within 24 hours of any material change. The proposal noted that CRAs may require that active duty military provide contact information, proof of identity, and proof of active duty status in order to use the free service and outlines how a servicemember may prove active duty status, such as with a copy of active duty orders. Additionally, the proposal prohibited CRAs from requiring active duty military consumers to purchase a product in order to obtain the free service.
In response to comments on the proposal, the final rule refers to the definition of “active duty military consumer” in the FCRA, which requires that the servicemember be assigned to service away from their usual duty station, or be a member of the National Guard, regardless of whether the National Guard member is stationed away from their normal duty station. The FTC noted that commenters requested the requirement that the servicemember be stationed away from their normal duty station be eliminated but “the statutory language limit[ed] the Commission’s discretion on [the] topic.” However, the FCRA does not apply the same duty station requirement to the National Guard. Additionally, the final rule, among other things (i) requires CRAs to provide free access to a credit file when it notifies an active duty military consumer about a material change to the file; (ii) extends the amount of time the CRAs have to notify an active duty military consumer of a material change from 24 hours to 48 hours; and (iii) prohibits CRAs from requiring that active duty military consumers agree to terms or conditions as a requirement to obtain their free credit file, unless the terms or conditions are necessary to comply with certain legal requirements.
While the final rule goes into effect three months after publication in the Federal Register, CRAs will be allowed to comply with certain portions of the final rule by offering existing credit monitoring services to active duty military consumers for free, for a period of up to one year from the effective date.
- Daniel P. Stipano to discuss "High standards: Best practices for banking marijuana-related businesses" at the ACAMS AML & Anti-Financial Crime Conference
- Daniel P. Stipano to discuss "Wait wait ... do tell me! Where the panelists answer to you" at the ACAMS AML & Anti-Financial Crime Conference
- Matthew P. Previn and Walter E. Zalenski to discuss "Is valid when made ... valid?" at the Women in Housing & Finance Partner Series webinar
- Warren W. Traiger and Caroline K. Eisner to discuss "CRA modernization and the OCC final rule" at CBA Live
- Daniel R. Alonso to discuss "Transnational corruption: A chat with former U.S. federal prosecutors in New York" at Marval Live Talks
- Sherry-Maria Safchuk and Lauren Frank to discuss "New CFPB interpretation on UDAAP" at a California Mortgage Bankers Association Mortgage Quality and Compliance Committee webinar
- Thomas A. Sporkin to discuss "Managing internal investigations and advanced government defense" at the Securities Enforcement Forum
- H Joshua Kotin to discuss "Mortgage servicing in a recession: Early intervention, loss mitigation and more" at the NAFCU Virtual Regulatory Compliance Seminar
- Daniel R. Alonso to discuss "Independent monitoring in the United States" at the World Compliance Association Peru Chapter IV International Conference on Compliance and the Fight Against Corruption
- Jonice Gray Tucker to discuss "The future of fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Pandemic fallout – Navigating practical operational challenges" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute