Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
On August 5, President Biden signed the Paycheck Protection Program and Bank Fraud Enforcement Harmonization Act (see H.R. 7352) and the COVID-19 Economic Injury Disaster Loan Fraud Statute of Limitations Act (see H.R. 7334). H.R. 7352 provides a 10-year statute of limitations for fraud by borrowers under the SBA’s Paycheck Protection Program, while H.R. 7334 establishes a 10-year statute of limitations for fraud by borrowers under the SBA’s Covid-19 Economic Injury Disaster Loan programs.
On July 12, the U.S. Treasury Department released a notice seeking public comment regarding potential opportunities and risks presented by digital assets. According to the announcement, Treasury is requesting input that will inform its work in carrying out its mandate under Executive Order 14067, Ensuring Responsible Development of Digital Assets, which directs Treasury, in consultation with the Secretary of Labor and other relevant agencies, to report to President Biden on the implications of development and adoption of digital assets and changes in financial market and payment infrastructures. The notice also seeks feedback from the public on potential risks associated with digital asset markets and how digital assets may benefit or pose risk to vulnerable populations. Comments must be received by August 8.
On June 13, the White House announced that the U.S. and UK governments are developing privacy-enhancing technology prize challenges to help address cross-border money laundering. The White House highlighted that the estimated $2 trillion of cross-border money laundering which happens annually could be better detected if improvements were made to information sharing and collaborative analytic efforts. However, research shows that this process “is hindered by the legal, technical and ethical challenges involved in jointly analyzing sensitive information,” the White House said. Privacy-enhancing technologies (PETs) could play a transformative role in addressing the global challenges of financial crime, the White House explained, noting that PETs can allow “machine learning models to be trained on high quality datasets collaboratively among organizations, without the data leaving safe environments.” Moreover, “[s]uch technologies have the potential to help facilitate privacy-preserving financial information sharing and analytics,” thus “allowing suspicious types of behavior to be identified without compromising the privacy of individuals, or requiring the transfer of data between institutions or across borders.”
Opening this summer, the challenges (developed between the White House Office of Science and Technology Policy, the U.S. National Institute of Standards and Technology, the U.S. National Science Foundation, the UK’s Center for Data Ethics and Innovation, and Innovate UK) will allow innovators to develop state-of-the-art privacy-preserving federated learning solutions to help combat barriers to the wider use of these technologies without the uncertainty of potential regulatory implications. Innovators will engage with the U.K.’s Financial Conduct Authority and Information Commissioner’s Office and the Financial Crimes Enforcement Network. Acting FinCEN Director Himamauli Das announced that the agency “is pleased to support this important initiative to advance the development of a building block for protecting the U.S. financial system from illicit finance.”
On June 1, the Department of Education announced the “largest single loan discharge the Department has made in history,” which includes discharging all remaining federal student loans borrowed to attend any campus owned or operated by a specific large for-profit post-secondary education company from its founding in 1995 through April 2015. The action will result in 560,000 borrowers receiving $5.8 billion in full loan discharges. According to the Department, the post-secondary education company engaged in “widespread and pervasive misrepresentations,” including guarantees that students would find a job. Additionally, the company “made pervasive misstatements to prospective students about the ability to transfer credits and falsified their public job placement rates.” The Department noted that the California AG’s investigation alleged that the company engaged in deceptive and false advertising and recruitment practices, as well as lied to its students about job placement. The Department noted it has approved $25 billion in loan relief to individuals since President Biden took office.
On June 2, CFPB Director Rohit Chopra released a statement regarding the discharge, referring to the company as a “ notorious repeat offender that defrauded its students and the public over many years.” Chopra also noted that the CFPB and state attorneys general actively pursued the company for its misconduct. Chopra pointed to when the Bureau “filed a lawsuit in 2014, obtained a default judgment and secured $480 million in private student loan cancellation in 2015, and won another $183 million in loan cancellation in 2017.” Chopra further noted that “[i]n 2016, then-California Attorney General Kamala Harris won a $1.1 billion judgment against [the company].”
On May 25, the U.S. Senate voted along party lines to confirm Sandra L. Thompson as Director of the FHFA. Thompson has served as acting Director since June following the U.S. Supreme Court’s split decision in Collins v. Yellen, which held that it was unconstitutional for FHFA’s leadership structure to allow the President to fire the FHFA director only for cause. (Covered by InfoBytes here.) According to President Biden’s nomination announcement, Thompson brings “over four decades of government experience in financial regulation, risk management, and consumer protection,” including previously serving as Deputy Director of FHFA’s Division of Housing Mission and Goals where she oversaw the agency’s housing and regulatory policy, capital policy, financial analysis, and fair lending space, as well as all mission activities for the GSEs and the Federal Home Loan Banks. Thompson also worked for more than 23 years at the FDIC where she served in a variety of leadership positions. Her most recent position at the FDIC was Director of the Division of Risk Management Supervision. Thompson also led the FDIC’s “examination and enforcement program for risk management and consumer protection at the height of the financial crisis” and “the FDIC’s outreach initiatives in response to a crisis of consumer confidence in the banking system.”
On May 16, President Biden released a plan intended to “help close” the housing supply gap and lower housing costs. The White House’s Housing Supply Action Plan is structured to ease the burden of housing costs over five years by increasing the supply of quality, affordable housing units in the next three years. “When aligned with other policies to reduce housing costs and ensure affordability, such as rental assistance and down payment assistance, closing the gap will mean more affordable rents and more attainable homeownership for Americans in every community,” the Administration said in a statement. “This is the most comprehensive all of government effort to close the housing supply shortfall in history.”
Under the Plan, the Administration would:
- Reward jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes, including by immediately leveraging transportation funding to encourage state and local governments to boost housing supply (where consistent with current statutory requirements), integrating affordable housing into Department of Transportation programs, and including land use within the U.S. Economic Development Administration’s investment priorities. These actions build on strategies that the Administration has called on Congress to pass such as establishing a grant program to “help states and localities eliminate needless barriers to affordable housing production” and creating a mandatory spending proposal to provide billions of dollars in grants to reward states and localities that have taken action to reduce affordable housing barriers.
- Pilot new financing mechanisms for housing production and preservation where financing gaps currently exist. Immediate action will include supporting production and availability of manufactured housing (including with chattel loans that the majority of manufactured housing purchasers rely on), accessory dwelling units, 2-4 unit properties, and smaller multifamily buildings.
- Expand and improve existing forms of federal financing, including for affordable multifamily development and preservation. Immediate actions include strengthening Fannie Mae and Freddie Mac financing for multifamily development and rehabilitation by “making Construction to Permanent loans (where one loan finances the construction but is also a long-term mortgage) more widely available by exploring the feasibility of Fannie Mae purchase of these loans.” The Administration also plans to promote the use of state, local, and Tribal government American Rescue Plan recovery funds to increase affordable housing supply; finalize the Low Income Housing Tax Credit “Income Averaging” proposed rule, whereby developers commit to creating affordable housing for households that meet specific income thresholds; reauthorize and update guidance for the HOME Investment Partnerships Program, which provides grants to states and localities that communities use to fund a range of housing activities; and improve “the alignment of federal funds to reduce transaction costs and duplications and accelerate development” by having the White House, HUD, Treasury, and USDA “convene state housing agencies to discuss best practices on the alignment of applications, reviews, and funding.”
- Preserve the availability of affordable single-family homes for owner-occupants by ensuring that more government-owned homes and other housing goes to owners who will live in them or mission-driven entities instead of large investors. The Administration will also encourage the use of CDBG for local acquisition and local sales to owner-occupants and mission-driven entities.
- Address supply chain disruptions by working with the private sector to address challenges. The Administration will also promote modular, panelized, and manufactured housing, as well as construction research and development to increase housing productivity and supply.
“Rising housing costs have burdened families of all incomes, with a particular impact on low- and moderate-income families, and people and communities of color,” the Administration stressed, noting that it has urged Congress to pass investments in housing production and preservation. The Administration’s 2023 budget includes investments that would lead to production or rehabilitation of another 500,000 homes.
On May 11, the U.S. Senate voted along party lines to confirm Alvaro Bedoya as an FTC Commissioner. Bedoya, who brings a background in privacy and data security, fills the FTC commissioner seat vacated by current CFPB Director Rohit Chopra. A Georgetown University visiting professor of law, Bedoya also founded the law school’s Center on Privacy & Technology. According to the administration’s announcement, Bedoya previously “co-led a coalition that successfully pressed an Internet giant to drop ads for online payday loans” and served as the first chief counsel to the Senate Judiciary Subcommittee on Privacy, Technology and the Law. (Covered by InfoBytes here.) FTC Chair Lina M. Khan praised Bedoya’s “expertise on surveillance and data security,” and, following his confirmation, stated that his “knowledge, experience, and energy will be a great asset to the FTC.”
The Senate also confirmed Jerome Powell by a vote of 80-19 to serve a second four-year term as Federal Reserve Chair, and confirmed Lisa Cook and Philip Jefferson to serve as Board Governors (see here and here). Still pending is President Biden’s nomination of Michael Barr to serve as Vice Chair for Supervision of the Federal Reserve.
On May 2, a coalition of state attorneys general, led by New York Attorney General Letitia James, announced that they are urging President Biden to cancel all outstanding federal student loan debt. In the letter, the AGs argue that full cancellation of student debt is necessary to address: the (i) enormity of the debt owed; (ii) effects of the Covid-19 pandemic; (iii) “systemically flawed repayment and forgiveness system”; and (vi) disproportionate impact on the borrowers’ debt burden, among other things. The AGs further noted that using resources to help individuals who have been “tricked” into forbearance plans, suing contractors who “bungle critical processes,” and protecting consumers from “aggressive” and “predatory” for-profit colleges have provided the AGs with a “deep understanding of the systemic challenges” facing federal student loan borrowers. The AGs stated that President Biden has authority to act under the Higher Education Act, and that such action “would benefit millions of borrowers and be one of the most impactful racial and economic justice initiatives in recent memory.”
On April 28, the DOJ issued a fact sheet outlining legislative proposals to strengthen kleptocracy asset recovery as part of the Biden administration’s efforts “to isolate and target the crimes of Russian officials, government-aligned elites, and those who aid or conceal their unlawful conduct.” The proposed measures would “streamline asset forfeiture proceedings in certain circumstances” and also:
- Enable the DOJ and Treasury and State Departments to work together to return forfeited kleptocrat funds to remediate harms caused to Ukraine;
- Expand forfeiture authorities under the International Emergency Economic Powers Act (IEEPA) to include property used to facilitate the violations of sanctions and “amend IEEPA’s penalty provision to extend the existing forfeiture authorities to facilitating property, not just to proceeds of the offenses”;
- Expand the definition of “racketeering activity” in the Racketeer Influenced and Corrupt Organizations Act to include criminal violations of IEEP and the Export Control Reform Act to improve the U.S.’s ability to investigate and prosecute sanctions evasion and export control violations;
- Extend the statute of limitations for prosecuting sanctions violations and the statute of limitations for seeking forfeitures based on foreign offenses from five years to 10 years; and
- Improve the U.S.’s ability to work with international partners to facilitate enforcement of foreign restraint and forfeiture orders for criminal property and improve the ability to take these actions in the U.S.
As previously covered by InfoBytes, the DOJ launched “Task Force KleptoCapture,” an “interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners,” in order to “isolate Russia from global markets” in March. The task force has since engaged in numerous transatlantic efforts to sanction numerous Russian elites, Russia’s largest privately-owned aircraft, and one of the world’s largest superyachts (covered by InfoBytes here), and has “seized approximately $625,000 associated with sanctioned parties held at nine U.S. financial institutions.”
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
On April 14, HUD released its first ever Equity Action Plan (the Plan) to address procurement and resources for the agency’s Office of Fair Housing and Equal Opportunity in coordination with President Biden’s 2021 Executive Order 13985 on “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” Among other things, the Plan requests funding increases to process, investigate, and resolve fair housing complaints and “to improve capacity to pursue Secretary-initiated investigations and compliance reviews” that do not necessarily stem from public complaints. The Plan also outlines HUD’s approach to reducing the racial homeownership gap, including future rulemakings to implement the Fair Housing Act’s mandate to Affirmatively Further Fair Housing (covered by InfoBytes here) as well as other actions to promote equity. HUD also plans to engage in a range of actions in partnership with federal and non-federal organization to maximize homeownership for creditworthy first-time homebuyers and preserve homeownership for existing homeowners. This includes (i) “improving the efficiency of the [Federal Housing Administration] program by leveraging technologies and removing perceived bias of the program so individuals, lenders, and others can use it more with first time, lower income home buyers”; (ii) increasing outreach to non-traditional lenders; and (iii) considering ways “to increase the availability of small-dollar mortgage loans by addressing the financial and operational barriers limiting origination of these loans.” HUD intends to continue to monitor data on borrowers to determine statistical changes in Black and Hispanic households that access FHA-insured loans and the rest of the mortgage market, and will track FHA lending activity in underserved markets.
- Kathryn L. Ryan and Jedd R. Bellman to discuss “Risk and compliance management: Are you covered?” at a Mortgage Bankers Association webinar
- John R. Coleman to participate in a roundtable on current topics in administrative law at the C. Boyden Gray Center for the Study of the Administrative State at George Mason University
- Melissa Klimkiewicz and Daniel A. Bellovin to discuss “Things to know about flood insurance” at a NAFCU webinar
- Hank Asbill to discuss “Ethical issues at sentencing” at the 31st Annual National Seminar on Federal Sentencing
- Max Bonici will moderate a panel on “Enforcement risk and other regulatory and compliance issues related to crypto and digital assets” at the American Bar Association’s 2022 Annual Meeting
- John R. Coleman to provide a “CFPB Update” at MBA’s 2022 Regulatory Compliance Conference
- Amanda R. Lawrence to discuss “The shifting data privacy and data protection landscape” at MBA’s 2022 Regulatory Compliance Conference
- Jeffrey P. Naimon to provide an “Update on key fair lending cases and the CRA and UDAAP rules” at MBA’s 2022 Regulatory Compliance Conference
- Benjamin W. Hutten to discuss “Fundamentals of financial crime compliance” at the Practicing Law Institute
- Benjamin W. Hutten to discuss “Ongoing CDD: Operational considerations” at NAFCU’s Regulatory Compliance & BSA Seminar
- James C. Chou to discuss ransomware at NAFCU’s Regulatory Compliance & BSA seminar
- Elizabeth E. McGinn, Benjamin W. Hutten, and James C. Chou to discuss “The Evolving Regulatory Landscape: Third-party and cyber risk management” at the 2022 mWISE Conference
- James T. Parkinson to present a “Global anti-corruption update” at IBA’s annual conference