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  • NYDFS encourages virtual currency licensees to use blockchain analytics tools for sanctions and AML compliance

    State Issues

    On April 28, NYDFS announced new guidance on virtual currency entities that are establishing the use of blockchain analytics tools. NYDFS explained that virtual currency activities can involve, among other things, different sources, destinations, and types of funds flows than are found in more traditional, fiat-currency contexts. Such characteristics of virtual currencies can create compliance challenges, but also can present new possibilities for new technology-driven control measures. In the guidance, NYDFS outlined expectations for New York State-regulated virtual currency companies, including: (i) establishing control measures that may leverage blockchain analytics; (ii) augmenting due diligence controls; (iii) conducting transaction monitoring of on-chain activity; and (iv) conducting sanctions screening of on-chain activity. NYDFS also emphasized "the importance of risk-based policies, processes, and procedures to identify transaction activity involving virtual currency addresses or other identifying information associated with sanctioned individuals and entities listed on the SDN List, or located in sanctioned jurisdictions."

    As previously covered by InfoBytes, NYDFS issued a framework outlining industry best practices for state-regulated property/casualty insurers writing cyber insurance, which provided guidance for effectively managing cyber insurance risk. The framework is the first guidance released by a U.S. regulator on cyberinsurance. NYDFS noted it has “engaged with external stakeholders to inform this new guidance and continues to conduct significant outreach to state, federal and international regulators; industry; and other experts in the field to ensure New York maintains a robust regulatory regime and remains a destination for virtual currency companies to operate.”

    State Issues Digital Assets Agency Rule-Making & Guidance NYDFS Privacy/Cyber Risk & Data Security State Regulators Bank Regulatory Fintech OFAC Sanctions Financial Crimes

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  • CFPB invokes dormant authority to examine nonbanks

    Federal Issues

    On April 25, the CFPB announced it was invoking a “dormant authority” under the Dodd-Frank Act to conduct supervisory examinations of fintech firms and other nonbank financial services providers based upon a determination of risk. “This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads,” CFPB Director Rohit Chopra explained. The Bureau has direct supervisory authority over banks and credit unions with more than $10 billion in assets, certain nonbanks regardless of size that offer or provide consumer financial products or services, and the service providers for such entities. With this announcement, the Bureau now plans to use a provision under Section 1024 of Dodd-Frank that allows it to examine nonbank financial entities, upon notice and an opportunity to respond, if it has “reasonable cause” to determine that consumer harm is possible.

    In tandem with the announcement, the Bureau also issued a request for public comment on an updated version of a procedural rule that implements its statutory authority to supervise nonbanks “whose activities the CFPB has reasonable cause to determine pose risks to consumers,” including potentially unfair, deceptive, or abusive acts or practices. The statute requires that the Bureau “base such reasonable cause determinations on complaints collected by the CFPB, or on information from other sources,” which the Bureau stated may include “judicial opinions and administrative decisions, . . . whistleblower complaints, state partners, federal partners, or news reports.” “Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” Chopra stated.

    Among other things, the new rule establishes a disclosure mechanism intended to increase transparency of the Bureau’s risk-determination process. Specifically, the new rule will exempt final decisions and orders by the CFPB director from being considered confidential supervisory information, allowing the Bureau to publish the decisions on their website. Subject companies will be given an opportunity seven days after a final decision is issued to provide input on what information, if any, should be publicly released. According to the Bureau, there “is a public interest in transparency when it comes to these potentially significant rulings by the Director as head of the agency. Also, if a decision or order is publicly released, it would be available as a precedent in future proceedings.”

    The procedural rule is effective upon publication in the Federal Register and has a 30-day comment period.

    Federal Issues Agency Rule-Making & Guidance CFPB Nonbank Examination Dodd-Frank Fintech Consumer Finance UDAAP

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  • Education Dept. rolls out new plan for IDRs

    Agency Rule-Making & Guidance

    On April 19, the Department of Education announced additional changes to the federal student loan program designed to reduce or eliminate federal student loan debt for many borrowers. In particular:

    • To address long-term forbearance steering, Federal Student Aid (FSA) will conduct “a one-time account adjustment that will count forbearances of more than 12 months consecutive and more than 36 months cumulative toward forgiveness” under the income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF) programs.
    • Borrowers “steered” into shorter-term forbearances may file a complaint with the FSA Ombudsman to seek an account review.
    • FSA will also partner with the CFPB to conduct regular audits of servicers’ forbearance use, and will seek to improve oversight of loan servicing activities.
    • Loan servicers’ ability to enroll borrowers in forbearance by text or email will be restricted.
    • FSA will conduct a one-time revision of IDR-qualifying payments for all Direct Student Loans and federally-managed Federal Family Education Loan Program (FFEL) loans, and will count any month in which a borrower made a payment toward IDR, regardless of the payment plan. Borrowers who meet the required number of payments for IDR forgiveness based on the one-time revision will receive automatic loan cancellation. Moreover, months spent in deferment prior to 2013 will count towards IRD forgiveness (with the exception of in-school deferment) to address certain data reliability issues.

    In addition, FSA plans to reform its IDR tracking process. New guidance will be issued to student loan servicers to ensure accurate and uniform payment counting practices. FSA will also track payment counts on its own systems and will display IDR payment counts on StudentAid.gov beginning in 2023 so borrowers can monitor their progress. The Department also plans to issue rulemaking that will revise the terms of IDR and “further simplify payment counting by allowing more loan statuses to count toward IDR forgiveness, including certain types of deferments and forbearances.”

    Agency Rule-Making & Guidance Department of Education CFPB Student Lending Consumer Finance Debt Cancellation Forbearance Student Loan Servicer Income-Driven Repayment

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  • HUD offers 40-year mortgage modification

    Agency Rule-Making & Guidance

    On April 18, HUD issued Mortgagee Letter 2022-07, which establishes a 40-year loan modification as part of the Covid-19 Recovery Loss Mitigation Options. According to HUD, the new option is “designed to help those borrowers who cannot achieve a minimum targeted 25 percent reduction in the Principal and Interest portion of their mortgage payment through FHA’s existing 30-year mortgage modification with a partial claim.” Mortgage servicers may start implementing the new 40-year modification with partial claim option immediately; however, servicers must offer this solution to eligible borrowers with FHA-insured Title II forward mortgages, except those funded through Mortgage Revenue Bonds under certain circumstances, within 90 calendar days. As previously covered by InfoBytes, HUD published a proposed rule to increase the maximum term limit allowable on loan modifications for FHA-insured mortgages from 360 to 480 months. Comments are due by May 31.

    Agency Rule-Making & Guidance Federal Issues HUD FHA Mortgages Federal Register Covid-19 Loss Mitigation Mortgage Servicing Consumer Finance

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  • OCC issues final rule on authority for SAR requirements

    On April 14, the OCC issued a bulletin reminding regulated banks of a final rule amending the agency’s suspicious activity report (SAR) regulations. The final rule takes effect May 1 (covered by InfoBytes here). Generally, the final rule clarifies the processes by which the OCC may issue exemptions from the requirements of the SAR regulations “based on a request … [for an exemption] that meets the criteria specified in the final rule.” The bulletin notes, however, that the final rule does not itself create any exemptions from the SAR regulations.

    Bank Regulatory Federal Issues Financial Crimes OCC Agency Rule-Making & Guidance SARs Of Interest to Non-US Persons Bank Compliance Bank Secrecy Act Anti-Money Laundering

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  • Agencies to update administrative enforcement proceedings

    On April 13, the FDIC, OCC, Federal Reserve Board, and NCUA (collectively, “agencies”) announced they are issuing a notice of proposed rulemaking (NPRM) to modernize the agencies’ Uniform Rules of Practice and Procedure (Uniform Rules) applicable to formal administrative enforcement proceedings for insured depository institutions. As previously covered by InfoBytes, in March, the agencies issued an interagency proposal to update policies and procedures governing administrative proceedings for supervised financial institutions, which accounted for the routine use of electronic presentations in hearings and for use of technology in administrative proceedings, among other things. The proposed rule would recognize the use of electronic communications and technology in all aspects of administrative hearings to increase the accuracy and fairness of administrative adjudications. Among other things, the NPRM would (i) allow electronic signatures and filings; (ii) permit depositions to be held by remote means; (iii) modernize language and definitions; and (iv) extend certain filing time limits. Amended provisions also address additional topics including the authority of administrative law judges, adjudicatory proceedings, good faith certifications, ex parte communications, conflicts of interest, and expenses. The agencies also propose to modify their specific Local Rules of administrative practice and procedure applicable to enforcement actions brought by each agency. The OCC has already proposed to amend its rules on organization and functions to address service of process and to integrate its Uniform Rules and Local Rules so that a single set of rules applies to both national banks and federal savings associations Comments on both the interagency rulemaking and the OCC’s rulemaking are due 60 days after publication in the Federal Register.

    Bank Regulatory Agency Rule-Making & Guidance Federal Issues FDIC OCC NCUA Federal Reserve Federal Register Electronic Records Enforcement

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  • OCC revises Comptroller’s Licensing Manual

    On April 7, the OCC announced an updated version of the “General Policies and Procedures,” “Management Interlocks,” and “Public Notice and Comments” booklets of the Comptroller’s Licensing Manual. According to Bulletin 2022-11, the revised booklets replace booklets of the same title issued between January 2017 and October 2019. Additionally, the revised booklets, among other things: (i) reflect recent updates to 12 CFR 5 and other regulations; (ii) update guidance and references; and (iii) make other minor modifications and corrections throughout.

    Bank Regulatory Federal Issues Agency Rule-Making & Guidance Licensing OCC

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  • CFPB proposal would limit negative credit reporting on human trafficking victims

    Federal Issues

    On April 7, the CFPB released a proposed rule and solicited comments on regulations implementing amendments to the FCRA intended to assist victims of trafficking. The proposed rule would establish a method for a trafficking victim to submit documentation to consumer reporting agencies (CRAs) establishing that they are a survivor of trafficking, and would require CRAs to block adverse information in consumer reports after receiving such documentation.  The proposed rules would amend Regulation V to implement changes to FCRA enacted in the National Defense Authorization Act for Fiscal Year 2022, also referred to as the “Debt Bondage Repair Act,” which was signed into law in December 2021. (Covered by InfoBytes here). Under the law, CRAs are prohibited “from providing consumer reports that contain any negative item of information about a survivor of trafficking from any period the survivor was being trafficked.” In announcing the proposal, the CFPB noted that “Congress required the CFPB to utilize its rulemaking authorities to implement the Debt Bondage Repair Act through rule changes to Regulation V, which ensures consumers’ credit information is fairly reported by CRAs.” According to the CFPB, the proposal “would protect survivors of human trafficking by preventing CRAs from including negative information resulting from abuse.” Comments are due 30 days after publication in the Federal Register.

    Federal Issues Agency Rule-Making & Guidance CFPB Federal Register Consumer Finance Consumer Reporting Agency FCRA Regulation V Consumer Reporting

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  • President Biden extends moratorium on student loan payments

    Federal Issues

    On April 6, President Biden extended the moratorium on collecting student loans until August 31, explaining that the extension “will assist borrowers in achieving greater financial security and support the Department of Education’s efforts to continue improving student loan programs.” The Department of Education released a statement noting that it will continue to assess the financial impacts of the Covid-19 pandemic on student loan borrowers and assist them, which includes “allowing all borrowers with paused loans to receive a ‘fresh start’ on repayment by eliminating the impact of delinquency and default and allowing them to reenter repayment in good standing.” In response to the extension, Secretary of Education Miguel Cardona stated that the Department of Education will continue "to ensure that all borrowers have access to repayment plans that meet their financial situations and needs.”

    Federal Issues Department of Education Covid-19 Agency Rule-Making & Guidance Student Lending Biden Consumer Finance

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  • HUD proposes 40-year term for loan modifications

    Agency Rule-Making & Guidance

    On April 1, HUD published a proposed rule in the Federal Register to increase the maximum term limit allowable on loan modifications for FHA-insured mortgages from 360 to 480 months. According to the proposed rule, the update would allow mortgagees to provide a 40-year loan modification option to borrowers who may not qualify for loss mitigation options and is intended to help borrowers experiencing a financial hardship, including those impacted by the Covid-19 pandemic, obtain affordable monthly payments. The proposed rule noted that “[i]ncreasing the maximum term limit to 480 months would allow mortgagees to further reduce the borrower’s monthly payment as the outstanding balance would be spread over a longer time frame, providing more borrowers with FHA-insured mortgages the ability to retain their homes after default.” Additionally, the proposal would align FHA with Fannie Mae and Freddie Mac, “which both currently provide a 40-year loan modification option.” Comments are due by May 31.

    Agency Rule-Making & Guidance HUD Federal Register FHA Mortgages Fannie Mae Freddie Mac Consumer Finance

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