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CFPB amends Regulation P, provides exemptions for annual privacy notice requirement
On August 10, the CFPB issued final amendments to Regulation P, which implements the Gramm-Leach-Bliley Act and provides, among other things, exemptions for financial institutions from sending annual privacy notices to consumers provided they meet certain conditions. The final rule—originally proposed in July 2016 (as previously covered in InfoBytes here)—implements a December 2015 statutory change in Section 75001 of the “Fixing America’s Surface Transportation Act,” which permits certain exemptions provided a qualifying financial institution (i) has not changed its privacy notice from the one previously delivered to its customer, and (ii) limits its sharing of a customer’s nonpublic personal information with nonaffiliated third parties so that a customer does not have the right to opt out, as otherwise afforded under the statute and Regulation P. The final rule will not affect the collection or use of a customer’s nonpublic personal information, and all financial institutions are still required to deliver initial privacy notices to customers. Moreover, the final rule establishes requirements for alternative delivery methods and provides deadlines for financial institutions that lose the exception and are required to resume delivery of annual privacy notices.
The amendments to Regulation P will take effect 30 days after publication in the Federal Register.
CFPB announces HMDA File Format Verification Tool and new 2017 data reports and datasets
On August 9, the CFPB released the 2018 File Format Verification Tool (FFVT). The FFVT tests whether HMDA reporters’ files meet formatting requirements, specifically whether the file (i) is pipe-delimited; (ii) has the proper number of data fields; and (iii) has data fields formatted as integers, where necessary. It does not include any data validation or consistency tests. Because the tool has no login functions, no federal agency will receive or review the files tested. Additionally, earlier in the week, the Bureau announced the release of the 2017 HMDA Dynamic National Loan-Level Dataset and the Aggregate & Disclosure reports. The Dynamic National Loan-Level Dataset contains the raw HMDA data reported by all HMDA reporters, redacted by the Bureau to protect applicant and borrower privacy. The Disclosure Reports summarize lending activity for individual institutions by MSA or MD and nationwide and the National Aggregate Reports summarize aggregate lending activity of all institutions, tabulated by a variety of loan, borrower, and geographical characteristics.
CFPB updates “workpapers” section of Supervision and Examination Manual
In August, the CFPB released an updated version of the Supervision and Examination Manual, which includes minor changes to the workpapers section of the examination process and an updated scope summary template. According to the manual, workpapers are the records documenting the review conducted by examiners to reach conclusions about the financial institution’s compliance with federal consumer protection laws. The manual emphasizes that “[a]ll information collected and all records created during the review that are used to support findings and conclusions could potentially be included in the workpapers” and all workpapers must be reviewed and signed off by the examiner in charge. The Bureau requires all workpapers and related documentation to be maintained in electronic form.
Federal Reserve requests comments on proposal to include omitted items from capital assessments and stress testing information collection
On August 8, the Federal Reserve Board published a notice and request for comment in the Federal Register seeking to revise, without extension, the existing information collection “Capital Assessments and Stress Testing.” The information collection is applicable to bank holding companies with total consolidated assets of $100 billion or more and U.S. intermediate holding companies established by foreign banking organizations that are subject to enhanced testing in order to mitigate risks to the financial stability of the United States. Last December, the Fed published modifications to the FR Y-14Q, Schedule L, which took effect as of the March 31, 2018, report date. However, following the adoption of the proposed changes, the Fed became aware of items mistakenly omitted from the report forms and instructions for the FR Y-14Q, which require respondents to report “total stressed net current exposure under the two supervisory stressed scenarios.” The proposal will revise sub-schedule L.5 (Derivatives and SFT Profile) for the FR Y-14Q report by adding the missing items. Comments on the proposal must be received by October 9.
OCC updates Comptroller’s Licensing Manual to revise public comment period calculation for business combination applicants
On July 30, the OCC released Bulletin 2018-22 announcing an updated version of its “Business Combinations” booklet of the Comptroller’s Licensing Manual. As previously covered in InfoBytes, the OCC released a revised version of the booklet last November, which included updates related to regulations addressing applications for national banks and federal savings associations proposing to execute a business combination. Current version 1.1 of the booklet incorporates minor technical corrections and includes a change in the public comment period calculation, which is “generally 30 days after the newspaper publication.” Among other things, the booklet provides a requirement that a notice “must be published three times in a newspaper of general circulation in the community or communities where the main or home offices of the banks involved in the transaction are located.” The OCC further advises applicants to consider the possibility of a processing delay in the event “significant or adverse comments” are received, and stresses potential delays should be a factored in when planning target dates for consummating a business combination.
Federal Reserve Board launches inaugural Consumer Compliance Supervision Bulletin
On July 26, the Federal Reserve Board released its inaugural Consumer Compliance Supervision Bulletin (Bulletin) to share information about the agency’s supervisory observations and other noteworthy developments related to consumer protection, and provide practical steps for banking organizations to consider when addressing consumer compliance risk. The first Bulletin focuses on fair lending issues related to the practice of redlining and outlines key risk factors the Fed considers in its review, such as (i) whether a bank’s Community Reinvestment Act (CRA) assessment areas inappropriately exclude minority census tracts; (ii) whether a bank’s Home Mortgage Disclosure Act or CRA lending data show “statistically significant disparities in majority minority census tracts when compared with similar lenders”; or (iii) whether the bank’s branches, loan production offices, or marketing strategies appear to exclude majority minority census tracts. Practical steps for mitigating redlining risk are also provided. The Bulletin also discusses fair lending risk related to mortgage pricing discrimination against minority borrowers, small dollar loan pricing that discriminates against minorities and women, disability discrimination, and maternity leave discrimination.
The Bulletin additionally addresses unfair or deceptive acts or practices risks related to overdrafts, misrepresentations made by loan officers, and the marketing of student financial products and services. The Bulletin also highlights regulatory and policy developments related to the Federal Financial Institutions Examination Council’s updated Uniform Interagency Consumer Compliance Rating System along with recent changes to the Military Lending Act.
OCC releases additional guidance on state loan-to-deposit ratios
On July 25, the OCC issued Bulletin 2018-21 to provide additional guidance for covered national banks on how state loan-to-deposit ratios are used to determine compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. On June 21, the Federal Reserve, the FDIC, and the OCC released the host state loan-to-deposit ratios for each state or U.S. territory. Section 109, which prohibits banks from establishing or acquiring interstate branches for the primary purpose of deposit production, requires a comparison of a bank’s statewide loan-to-deposit ratio to the yearly host state loan-to-deposit ratios. If a bank’s statewide ratio is less than one-half the yearly published host state ratio, an additional review is required by the appropriate agency.
OCC issues update to Comptroller’s Handbook
On July 23, the OCC issued Bulletin 2018-20, which announced revisions to the “Capital and Dividends” booklet of the Comptroller’s Handbook as mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The revised booklet—which applies to all OCC-supervised bank examinations—includes changes to the regulatory capital rule, reflects the integration of the OTS into the OCC, and includes expanded examination procedures for capital, dividends, and capital adequacy.
FHFA pauses credit score initiative, will use formal rulemaking to create new credit score model
On July 23, the Federal Housing Finance Agency (FHFA) announced that it will not decide this year whether to update the credit score model used by Fannie Mae and Freddie Mac (the Enterprises), as previously announced. Instead, FHFA will focus on implementing Section 310: Credit Score Competition, of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Public Law 115-174) (the Act). Section 310 requires FHFA to establish, through the rulemaking process, standards and criteria to govern the verification and validation of credit score models used by the Enterprises. According to the press release, prior to Section 310 becoming law, FHFA and the Enterprises had been engaged in an ongoing initiative to evaluate a new credit score model’s potential impact on “access to credit, safety and soundness, operations in the mortgage finance industry, and competition in the credit score market.” However, after Section 310 was enacted in May, FHFA “determined that proceeding with efforts to reach a decision based on our [initiative] and timetable would be duplicative of, and in some respects inconsistent with, the work we are mandated to do under Section 310 of the Act. In light of that, we are communicating to Congress that we are transferring our full efforts to working with the Enterprises to implement the steps required under Section 310.” FHFA will release a proposed rule open for public comment in the future to govern the verification of credit score models.
FDIC's FILs address Call Report burden reductions, EGRRCPA statutory amendment changes
On July 17, the FDIC issued Financial Institution Letter FIL-40-2018 reminding FDIC-supervised banks, savings associations, and community institutions that revisions to all three versions of the Consolidated Reports of Condition and Income (Call Reports) are effective as of the June 30 reporting date. The finalized changes modified Call Reports FFIEC 031, FFIEC 041, and FFIEC 051. Starting this quarter, institutions with consolidated total assets of at least $100 billion with no foreign offices are now required to use FFIEC 031 instead of FFIEC 041. In addition, the FDIC released supplemental submission instructions for institutions (see FIL-39-2018) and also addressed two reporting requirement changes made by the enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act S.2155/P.L. 115-174 that took effect immediately: (i) acquisition, development, or construction loans considered high volatility commercial real estate loans are subject to risk weighting with certain exemptions; and (ii) qualifying institutions may exclude a capped amount of reciprocal deposits from being treated as brokered deposits. Second quarter Call Reports are due July 30.