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OFAC Updates Cuban Assets Control Regulations
On March 15, OFAC issued a final rule updating the Cuban Assets Control Regulations (CACR), 31 C.F.R. Part 515. The amendments advance policy changes announced by the Obama administration in 2014 by further facilitating travel to Cuba for authorized purposes, expanding the range of authorized financial transactions, and authorizing business and physical presence in Cuba. Regarding financial transactions, the final rule (i) amends section 515.584(d) to authorize certain U-turn payments through the U.S. financial system; (ii) adds new section 515.584(g) to allow U.S. banking institutions to process U.S. dollar monetary instruments presented indirectly by Cuban financial institutions; and (iii) adds new section 515.584(h) to “authorize banking institutions to open and maintain accounts solely in the name of a Cuban national located in Cuba for the purposes only of receiving payments in the United States in connection with transactions authorized pursuant to or exempt from the prohibitions of this part and remitting such payments to Cuba.”
OFAC’s amendments to the CACR were published in the Federal Register on March 16, 2016 and are effective immediately. OFAC simultaneously released a revised set of FAQs and a fact sheet regarding the changes set forth in the CACR.
FCC Releases Broadband Consumer Privacy Proposal Fact Sheet
On March 10, the FCC released a fact sheet regarding consumers’ rights in relation to broadband internet services. Significantly, the fact sheet highlights FCC Chairman Tom Wheeler’s proposed rule, which was recently circulated to the Commission for consideration, to ensure consumers have the tools necessary “to make informed choices about how and whether their data is used and shared by their broadband providers.” According to the fact sheet, Chairman Wheeler’s proposed rule “separates the use and sharing of information into three categories, and proposes adoption of clear guidance for both ISPs and customers about transparency, choice and security requirements for that information.” The Commission will vote on the proposal on March 31; if adopted, a period of public comment will follow the Commission’s approval.
FinCEN Announces Proposed Rule to Amend FBAR Regulations
On March 1, FinCEN announced a Notice of Proposed Rulemaking to revise certain provisions in the rules related to the filing of Reports of Foreign Bank and Financial Accounts (FBAR). The proposed rule would, among other things, (i) remove provisions allowing limited account information to be reported when a filer has at least 25 foreign financial accounts; (ii) clarify and expand exemptions for officers and employees of institutions maintaining signature or other authority over accounts, but have no financial interest in such accounts; (iii) require institutions to maintain a list of the officers and employees with signature authority over accounts; (iv) amend the filing date for FBAR reports due in 2016; and (v) revise the FinCEN Form 114 instructions, which outline the BSA electronic filing requirements. Due to potential regulatory changes, FinCEN previously issued temporary notices to extend reporting deadlines for certain filers submitting FBARs.
California AG Harris: Department of Education Should Revise Regulations to Protect Students Defrauded by For-Profit Colleges
Last week, California AG Kamala Harris requested that the Department of Education revise its proposed regulations regarding debt relief for students allegedly misled by “predatory” and for-profit colleges that advertise inflated job placement rates and asked that the Department “do more” to protect the students affected. Defrauded students have a right under Federal law to have loans discharged when their schools engage in misrepresentations and other unlawful conduct. According to AG Harris, the process for asserting this right is unclear. While the Department has emphasized that it intends to enforce an effective and streamlined loan discharge process to provide students’ relief, in the second of three negotiated rulemaking sessions, the Department “unveiled proposed language that contradicts the intent of previous discussions by narrowing, limiting, and delaying student relief.” In response to the Department’s proposal, Harris called on the Department to revise its regulations in a manner that ensures “fair and effective defense-to-repayment procedures.” Specifically, AG Harris commented that the procedures must (i) refer to state law for a basis to assert a defense; (ii) not include a statute of limitations for borrowers to assert a defense to repayment; (iii) provide procedures for broad and instantaneous relief to student borrowers affected by schools’ deceptive practices; and (iv) ban schools from making the discharge process burdensome and expensive.
CFPB Releases Fact Sheet: Policy Priorities over the Next Two Years
On February 25, the CFPB released a fact sheet outlining its policy priorities over the next two years. The document lists the following nine near-term priority goals: (i) arbitration; (ii) consumer reporting; (iii) debt collection; (iv) demand side consumer behavior; (v) household balance sheets; (vi) mortgages; (vii) open-use credit; (viii) small business lending; and (ix) student lending. Regarding arbitration, the CFPB noted that it “will continue the rulemaking process and propose a rule consistent with its study that will further enable consumers to effectuate their rights and hold institutions accountable for unlawful conduct.” With respect to consumer reporting, the CFPB will focus on issues surrounding the accuracy of consumer reporting and institutions’ dispute resolution processes. In the debt collection space, the CFPB plans to initiate rulemakings on debt collector conduct (including issues relating to the substantiation of consumer debt and the disclosure of information to consumers) while simultaneously pursuing rigorous supervision and enforcement activity to ensure industry compliance. Regarding demand side consumer behavior, the CFPB will focus on financial education for consumers. With respect to household balance sheets, the CFPB will conduct research and data analysis on household financial health and decision making. For mortgages, the CFPB will focus on the implementation of existing rules as well as the supervision and enforcement of issues relating to equal and fair access to credit. In the open-use credit space, the CFPB plans to conduct small-dollar, installment lending, and overdraft market rulemakings while conducting complementary supervision and enforcement work to support its new rules. Regarding small business lending, the CFPB will (i) build a small lending team that will begin conducting research and outreach for a small business lending rulemaking; (ii) employ its consumer response team to build infrastructure to analyze small business complaints; and (iii) examine small business lenders for fair lending compliance. Finally, with respect to student lending, the CFPB will work on servicer alignment as well as supervision and enforcement of servicers’ legal obligations. In addition to these nine priority areas, the CFPB also indicated that it plans to continue to focus on well-established and ongoing work streams, such as fair lending oversight of indirect auto lenders and its rulemaking on prepaid cards.
SEC Adopts Cross-Border Security-Based Swap Rules
On February 10, the SEC released a fact sheet on rules that would require non-U.S. companies using personnel located in a U.S. branch or office “to arrange, negotiate, or execute a security-based swap transaction in connection with its dealing activity to include that transaction in determining whether it is required to register a security-based swap dealer.” The rules, which the SEC voted to adopt in its February 10 open meeting, are intended to ensure that U.S. and foreign dealers engaging in security-based swap dealing activity in the United States are subject to Title VII of the Dodd Frank Act. In addition, the final rules would exempt certain international organizations – those excluded from the definition of U.S. person in Exchange Act rule 3a71-3(a)(4)(iii) – from the requirement that non-U.S. persons include transactions they arranged, negotiated, or executed using personnel located in a U.S. branch or office in their dealer de minimis threshold calculations. Effective 60 days after publication in the Federal Register, but with a later compliance date, the rules should, according to SEC Chair Mary Jo White, “improve transparency and enhance stability and oversight in the security-based swap market, while reducing potential competitive disparities, lessening the likelihood of market fragmentation, and mitigating the risk that may flow into U.S. financial markets.”
OFAC Issues Amendments to Cuba Sanctions Regulations
On January 26, OFAC announced amendments to the Cuban Assets Control Regulations (CACR) to further implement policy changes announced by the Obama Administration on December 17, 2014. The regulatory changes will, among other things, “remove existing restrictions on payment and financing terms for authorized exports and reexports to Cuba of items other than agricultural items and commodities, and establish a case-by-case licensing policy for exports and reexports of items to meet the needs of the Cuban people, including those made to Cuban state-owned enterprises.” Significantly, under the amendments, U.S. depository institutions will be authorized to provide financing for authorized exports and reexports, including issuing a letter of credit. Prior to the amendments, cash-in-advance or third-country financing were the only financing options available for authorized exports.
OFAC issued new FAQs to address the amended CACR, which were published in the Federal Register on January 27, 2016 and are effective immediately.
FDIC Seeks Comments on Revised Proposed Rule That Would Amend How Small Banks are Assessed for Deposit Insurance
On January 21, the FDIC issued a Notice of Proposed Rulemaking that would amend how FDIC-insured banks with less than $10 billion in assets are assessed for deposit insurance. Specifically, the proposed rule would “update the data and revise the methodology that the FDIC uses to determine risk-based assessments for these institutions to better reflect risks and to help ensure that banks that take on greater risks pay more for deposit insurance than their less risky counterparts.” The proposal, which is intended to be revenue neutral, revises an initial June 2015 proposal to, among other things, (i) use a brokered deposit ratio, as opposed to a core deposit ratio, to calculate assessment rates; (ii) remove the existing brokered deposit adjustment for established small banks; and (iii) revise the one-year asset growth measure. The comment period will be open for 30 days upon publication in the Federal Register.
FDIC Announces Final Rule Amending the Filing Requirements and Procedures for Changes in Control
On December 16, the FDIC issued Financial Institution Letter FIL-60-2015 announcing the final rule amending filing requirements and processing procedures for notices filed under the Change in Bank Control Act. The final rule applies to all FDIC-supervised institutions, including those with assets under $1 billion. Some of the changes brought by the rule, effective January 1, 2016, include (i) consolidating and conforming the change-in-control regulation of state savings associations and rescinding prior regulation and guidance transferred from the Office of Thrift Supervision; (ii) adopting presumptions of acting in concert with the other federal banking agencies; (iii) defining terms that were previously undefined, such as “voting securities”; (iii) establishing reporting requirements for stock loans held by foreign banks and their affiliates, and for a CEO and bank director following a change of control; and (iv) subject to waiver, requiring a person who was approved to and has acquired control of a covered institution to file a second notice if that person's ownership, control, or power to vote will increase to 25% or more of any class of voting securities.
CFPB Issues Fall Rulemaking Agenda, Potential Student Loan Servicing Rules on Horizon
On November 20, the CFPB released its fall rulemaking agenda. The CFPB’s notable current initiatives include: (i) addressing arbitration clauses in contracts related to consumer financial products and services and providing an outline of rulemaking ideas such as “whether to propose rules that would prevent companies from using these agreements to foreclose consumers’ ability to bring class action lawsuits”; (ii) developing a Notice of Proposed Rulemaking, with an anticipated release date in the first quarter of 2016, to address concerns relating to payday and auto title lending; (iii) finalizing its December 2014 proposed rule, “Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z),” to address consumer protection concerns relating to reloadable cards and other similar prepaid products; and (iv) considering rules to designate consumer installment loans and vehicle title loans as “larger participants” under the CFPB’s supervisory authority. Looking ahead, the CFPB’s report highlights the potential for rulemaking to address issues related to credit reporting and student loan servicing. Regarding student loan servicing, the CFPB stresses that it “has made it a priority to take action against companies that are engaging in illegal servicing practices,” and that it will “continue to monitor the market for trends and developments and evaluate possible policy responses, including potentially proposing rules.”