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  • McWilliams highlights upcoming CRA examination updates for MDIs, encourages partnerships between community banks and fintechs

    Federal Issues

    On October 2, FDIC Chairman Jelena McWilliams spoke at the National Bankers Association’s annual convention to discuss the agency’s objectives regarding minority depository institutions (MDIs). McWilliams highlighted recent FDIC initiatives, including past and future roundtable discussions between large and minority banks regarding potential partnership opportunities. McWilliams noted that many large banks are unaware of how these partnerships can count for Community Reinvestment Act (CRA) credit. Therefore, the FDIC is updating its examiner instructions for CRA performance evaluations to identify activities involving MDIs. McWilliams also reminded attendees about the upcoming inaugural meeting of the agency’s new MDI Subcommittee to its Advisory Committee on Community Banking, which will focus on issues, tools, and resources unique to MDIs. One of the subcommittee’s goals, she noted, is to “identify additional opportunities to provide regulatory relief for MDIs with less-complex balance sheets while maintaining safety and soundness.” Concerning the FDIC’s franchise-marketing process for failing MDIs, McWilliams commented that “[g]oing forward, when a new marketing initiative begins, we will provide a two-week window exclusively for MDIs,” and will also contact all qualified MDIs on the bid list and provide technical assistance.

    Earlier, on October 1, McWilliams delivered keynote remarks at the Federal Reserve Bank in St. Louis, in which she warned community banks that their ability to survive and thrive depends on their ability to innovate and adapt to changing technology. Specifically, McWilliams discussed the growth of digitization, open banking, machine learning/artificial intelligence, and personalization, stressing that banking technology is advancing at a “relentless pace.” Consequently, “we all must challenge ourselves to think about what that means for the future of the banking industry, and community banks in particular.” McWilliams noted, however, that community banks’ inability to keep pace with innovation is due to both cost and regulatory uncertainty. “The cost to innovate is in many cases prohibitively high for community banks. They often lack the expertise, the information technology, and research and development budgets to independently develop and deploy their own technology.” She suggested that community banks partner with fintech firms that have already developed, tested, and rolled out new technology, and emphasized that her goal is for the FDIC to lay “the foundation for the next chapter of banking by encouraging innovation that meets consumer demand, promotes community banking, reduces compliance burdens, and modernizes our supervision.”

    Federal Issues Agency Rule-Making & Guidance FDIC CRA Fintech Community Banks

  • OCC outlines fiscal year 2020 supervision priorities

    Agency Rule-Making & Guidance

    On October 1, the OCC’s Committee on Bank Supervision released its bank supervision operation plan (Plan) for fiscal year 2020. The Plan outlines the agency’s supervision priorities and specifically highlights the following supervisory focus areas: (i) cybersecurity and operational resiliency; (ii) Bank Secrecy Act/anti-money laundering compliance; (iii) commercial and retail credit loan underwriting; (iv) effects of changing interest rates on bank activities and risk exposures; (v) preparation necessary for the current expected credit losses accounting standard, as well the potential phase-out of the London Interbank Offering Rate; and (vi) technological innovation and implementation.

    The annual plan guides the development of supervisory strategies for individual national banks, federal savings associations, federal branches, federal agencies, service providers, and agencies of foreign banking organizations. Updates about these priorities will be provided in the OCC’s Semiannual Risk Perspective.

    Agency Rule-Making & Guidance OCC Supervision Of Interest to Non-US Persons

  • OCC updates four booklets in Comptroller’s Handbook

    Agency Rule-Making & Guidance

    On September 30, the OCC issued updates to four booklets of the Comptroller’s Handbook: Bank Supervision Process, Community Bank Supervision, Federal Branches and Agencies Supervision, and Large Bank Supervision. Among other things, the updates include (i) the interim final rule for the expanded 18-month supervisory cycle for certain institutions (covered by InfoBytes here); (ii) a revised OCC report of examination policy based on the revised Federal Financial Institutions Examination Council report of examination policy; (iii) the revisions to the OCC’s enforcement action policies (covered by InfoBytes here); and (iv) changes to the OCC’s credit underwriting assessment.

    Agency Rule-Making & Guidance OCC Bank Supervision Examination Enforcement Comptroller's Handbook

  • Agencies raise residential appraisal requirement to $400,000

    Agency Rule-Making & Guidance

    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.

    The FDIC press release is available here, the Federal Reserve Board press release is available here, and the concurrence letter from the CFPB is available here.

    Agency Rule-Making & Guidance Mortgages Appraisal OCC Federal Register Federal Reserve FDIC EGRRCPA CFPB Dodd-Frank

  • CFPB issues filing guides for 2020 HMDA data

    Agency Rule-Making & Guidance

    On September 25, the CFPB released the Filing Instructions Guide for HMDA data collected in 2020 that must be reported in 2021. The guide references changes to the submission process, and includes a reminder that, starting in 2020, “covered institutions that reported a combined total of at least 60,000 applications and covered loans in the preceding calendar year are required to report HMDA data quarterly. Instructions for quarterly reporting can be found in the Supplemental Quarterly Reporting Guide, which was issued the same day. The file format for submitting the HMDA data, along with the required data fields to be collected and reported, have not changed. 

    Agency Rule-Making & Guidance CFPB HMDA FFIEC Mortgages

  • CFPB issues FAQs on SAFE Act amendments

    Agency Rule-Making & Guidance

    On September 25, the CFPB published four FAQs pertaining to compliance with federal SAFE Act amendments created by the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), which take effect on November 24. According to the Bureau, the Act’s amendments “establish temporary authority, which provides a way for eligible loan originators who have applied for a new state loan originator license to act as a loan originator in the application state while the state considers the application.” Specifically, the FAQs address (i) residential mortgage loan originator categories and requirements; (ii) the temporary authority to act as a loan originator, as added by Section 106 of the Act; (iii) guidance concerning state transitional license availability under the SAFE Act; and (iv) the impact of the Act’s amendments on the permissibility of state transitional licensing under the SAFE Act and Regulation H.

    Agency Rule-Making & Guidance CFPB EGRRCPA Licensing SAFE Act Mortgage Origination

  • 28 state AGs argue CFPB’s debt collection proposal “falls far short”

    Agency Rule-Making & Guidance

    On September 18, 28 state attorneys general filed a comment letter in response to the CFPB’s Notice of Proposed Rulemaking (NPRM) amending Regulation F to implement the Fair Debt Collection Practices Act (FDCPA) (the “Proposed Rule”), urging the Bureau to reconsider the proposal. As previously covered by InfoBytes, on May 7, the CFPB issued the Proposed Rule, which covers debt collection communications and disclosures and addresses related practices by debt collectors. The comment letter argues that, “on the most critical issues, the Proposed Rule falls far short.” Specifically, the AGs assert that the bright-line call limit would not meaningfully reduce calls for the majority of consumers because the limit is placed on the debt, not on the consumer, which “renders any benefits to consumers illusory.” Moreover, because there is no restriction on the number of electronic communications a debt collector can send, the AGs argue that the Proposed Rule would result in a “barrage of emails and texts, and even social media contacts.” In addition to the concerns on contact, the letter, among other things, argues that the Proposed Rule: (i) should require affirmative consent for contact methods outside of phone or mail, as opposed to the opt-out requirements; (ii) should only allow for electronic delivery of validation notices with E-SIGN Act compliance; (iii) should have a strict-liability standard for collections on time-barred debt; and (iv) should apply to first-party creditors, as well as third-party creditors. Lastly, the letter notes the Proposed Rule fails to address a number of other topics, including the substantiation of debt prior to litigation, debt payment allocation, and the additional challenges faced by servicemembers.

    Agency Rule-Making & Guidance CFPB Debt Collection FDCPA State Issues State Attorney General

  • NCUA approves additional payday loan alternative

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance NCUA Payday Lending Federal Register Credit Union

  • FTC supports CFPB on debt collection proposal

    Agency Rule-Making & Guidance

    On September 18, the FTC issued its comment letter to the CFPB’s Notice of Proposed Rulemaking (NPRM) amending Regulation F, to implement the Fair Debt Collection Practices Act (FDCPA) (the “Proposed Rule”). As previously covered by InfoBytes, on May 7, the CFPB issued the Proposed Rule, which covers debt collection communications and disclosures and addresses related practices by debt collectors. The FTC is generally in support of the Proposed Rule, and the Commission voted unanimously to approve the submission of the comment. In addition to summarizing the FTC’s legal authority and efforts to protect consumers from unlawful debt collection practices (such as enforcement actions, workshops, and outreach) the comment letter addresses several topics covered in the Proposed Rule. In particular, the FTC supports the Proposed Rule’s provisions on passive collections, decedent debt, and time and place restrictions. Other highlights of the letter include:

    • Validation notices. The FTC supports the proposed changes to validation notices, which mandate more information to be provided to the consumer about the debt and the rights the consumer has associated with that debt. The comment letter encourages the CFPB to consider the benefits and risks with regard to the safe harbor for emailed validation notices in initial communications, noting it is important that debt collectors use email addresses that are current and also, that the emails are not sent to unauthorized third parties.
    • Time-barred debts. The FTC supports the proposed prohibition on collectors threatening or bringing legal action against consumers to collect on debts that they know or should know are time-barred. However, the comment letter notes that consideration should be given to whether requiring the showing that the collector knew or should have known about the age of the debt is a potential unnecessary additional burden on law enforcement agencies.
    • Prohibitions on the sale or transfer of certain debts. The FTC supports the proposed prohibition on selling, transferring, or placing for collection a debt that the collector knows or should know has been paid or settled, discharged in bankruptcy, or has been the subject of an identity theft report. The comment letter requests that the CFPB consider adding to this prohibition additional categories of debt that are “more squarely associated with phantom debt collection, including, for example, debts that are counterfeit or fictitious.”
    • Communications media. The FTC supports the proposed requirement that a debt collector include—in emails, text messages and other electronic communications—an option for the consumer to opt-out of communications through that particular medium. The comment letter encourages the CFPB to consider requiring collectors to provide a direct, simple, electronic mechanism to quickly exercise this opt-out right.
    • Restrictions on disclosures to third parties. The FTC supports the proposed definition of “limited-content messages” but encourages the CFPB to consider ways to minimize the likelihood that third parties would recognize limited-content messages as being associated with a debt collection and notes that allowing for these messages during live calls poses heightened risk for disclosure of the debt.
    • Telephone call frequency limits. The FTC supports the proposed restrictions on call frequency and notes that these protections should apply to calls that “may not cause a traditional ring,” including ringless voicemail messages. Additionally, the FTC supports the application of the protections to limited-content messages and location information calls to third parties.

    Agency Rule-Making & Guidance CFPB Debt Collection FDCPA FTC Comment Letter

  • SEC, CFTC join other regulators in approving Volcker Rule revisions

    Agency Rule-Making & Guidance

    On September 18, the SEC announced the approval of final revisions to the Volker Rule (the Rule) to simplify and tailor compliance with Section 13 of the Bank Holding Company Act’s restrictions on a bank’s ability to engage in proprietary trading and own certain funds. As previously covered by InfoBytes, the final revisions were approved by the OCC and FDIC at the end of August, and the Federal Reserve Board is expected to adopt the changes in the near future. In approving the revisions, Chairman Jay Clayton stated that the SEC collaborated with the other federal regulatory agencies to ensure the changes would “effectively implement statutory mandates without imposing undue burdens on participants in our markets, including imposing unnecessary costs or reducing access to capital and liquidity.” Chairman Clayton emphasized that the revisions draw on the agencies’ “collective experience in implementing the rule and overseeing compliance in our complex marketplace over a number of years.”

    Earlier, on September 16, the CFTC announced a 3-2 vote to approve the final revisions. Commissioner Tarbert stated that the final revisions would provide banking entities and their affiliates with “greater clarity and certainty about what activities are permitted under” the Rule as well as reduce compliance burdens. In voting against the approval, Commissioner Behnam issued a dissenting statement expressing, among other things, concerns about “narrowing the scope of financial instruments subject to the [] Rule,” which would limit the Rule’s scope “so significantly that it no longer will provide meaningful constraints on speculative proprietary trading by banks.” Commissioner Berkovitz also dissented, arguing that the revisions “will render enforcement of the [R]ule difficult if not impossible by leaving implementation of significant requirements to the discretion of the banking entities, creating presumptions of compliance that would be nearly impossible to overcome, and eliminating numerous reporting requirements.” Commissioner Berkovitz also criticized the rulemaking process that led to the final revisions, arguing that a number of the changes were not adequately discussed in the notice of proposed rulemaking process, including amendments to the “accounting prong” and the rebuttable presumption of proprietary trading.

    Agency Rule-Making & Guidance SEC CFTC OCC FDIC Volcker Rule Bank Holding Company Act

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