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Illinois allows notaries to work remotely
On March 27, the Illinois secretary of state announced that Illinois notaries public are temporarily allowed to perform remote, online notarizations during the Covid-19 crisis. The temporary authority will expire when the governor’s disaster proclamation is rescinded.
West Virginia creates regulatory sandbox program
On March 24, the West Virginia governor signed HB 4621, which creates a state fintech regulatory sandbox program through the state’s Division of Financial Institutions (Division) that allows participants to temporarily test innovative financial products or services on a restricted basis without requiring a license under West Virginia law. Under the program, approved applicants will have 24 months from the date an application is approved to test their product or service within the state without being subject to state laws and regulations that normally would regulate such products or services, unless the Division determines otherwise. HB 4621 outlines requirements for participants, which include specific state consumer protection laws, time limitations, and reporting requirements. Additionally, the Division, upon written notice, may end a participant’s participation in the program at any time and for any reason. The program allows participants to request an extension of time up to 12 months after the end of the regulatory sandbox testing period in order to obtain a license or other authorization required by the law to continue to offer the product or service. The act takes effect on June 5.
Alabama governor issues proclamations addressing notary services and remote shareholder meetings
On March 26, the Alabama governor issued a proclamation permitting remote notarization through videoconferencing, provided that certain requirements are met. A subsequent proclamation, issued on April 2, extended permission for remote notarization to unsupervised, non-attorney notaries and added a record-keeping requirement for such notarizations. Additionally, the proclamation permits remote shareholder meetings pursuant to guidelines and procedures adopted by the corporation’s board of directors, provided that certain requirements are met.
New Hampshire issues emergency order authorizing secure remote online notarization
On March 23, the New Hampshire governor issued an emergency order temporarily authorizing secure remote online notarization, with certain specified conditions. If state law requires an individual to appear personally before or be in the physical presence of a notarial officer at the time of a notarization, this requirement is satisfied if the individual and the notarial officer can communicate simultaneously by sight and sound through an electronic device or process at the time of the notarization. The order provides additional guidance on the signature, mailing, official date and time, and validity and recognition of the notarization.
Wisconsin Department of Financial Institutions issues emergency guidance on remote notarization
On March 18, the Wisconsin Department of Financial Institutions (DFI) issued emergency guidance authorizing remote online notarization in response to the Covid-19 crisis. Remote online notarizations must be performed using technology providers that are regulated under standards that meet or exceed the state safeguards. The DFI has approved four remote online notarization providers thus far, two each for remote notary services to the general public, and for title companies and other real-estate transactions.
Wyoming secretary of state announces temporary remote notarization
On March 24, Wyoming’s secretary of state issued guidance on temporary remote notarization as a result of Covid-19. The guidance encourages Wyoming-based notaries that intend to perform remote online notarial acts to undergo training from remote notarization providers approved by contiguous states, and use that provider’s technology standards and security features. Approved contiguous providers include: CSC Global, Figure Technologies, Nexsys, NotaryCam, SafeDocs, Simplifile (for IPEN only), DocVerify, Jetexas Information Technovation, Notarize, Pavaso, SIGNiX, and World Wide Notary.
Iowa issues remote notarization guidance
On March 22, Iowa issued temporary remote notarization guidance and FAQs to assist notaries public in working remotely during the Covid-19 crisis. A set of more-stringent provisions is scheduled to take effect on July 1, 2020.
Proposed CARES Act allows fintechs to make federally backed small business loans
On March 18, Senator Mitch McConnell (R-KY) proposed relief legislation which, among other things, would temporarily allow fintechs to offer “small business interruption loans” for as long as the Covid-19 national emergency is in effect. The “CARES Act” or Corornavirus Aid, Relief and Economic Security Act, would provide nearly $300 trillion in additional funds to the SBA in order to provide emergency government-backed loans. Under the proposal, small businesses eligible for the SBA Section 7(a) loans with 500 or fewer employees, could use the loans to fund, such things as (i) paid sick, medical, or family leave; (ii) group health care benefits; (iii) employee salaries; (iv) mortgage payments; and (v) utilities. In addition, the proposal provides for loan deferment for a year and loan forgiveness for loans used to cover payroll expenses.
OCC updates FAQs on third-party risk management
On March 5, the OCC released Bulletin 2020-10, which provides answers to frequently asked questions (FAQs) concerning its existing guidance on management of third-party relationships, including relationships with fintech firms and data aggregators. This bulletin, issued to supplement Bulletin 2013-29, “Third-Party Relationships: Risk Management Guidance,” rescinds (but incorporates the substance of) OCC Bulletin 2017-21 (covered by InfoBytes here). Key topics addressed in the new FAQs include:
- clarifying the definition of “third-party relationships” and “business arrangements”;
- outlining expectations for banks that have third-party relationships with cloud computing providers or data aggregators;
- addressing a bank’s reliance on and use of third party-provided reports, certificates of compliance, and independent audits;
- discussing risk management when a third party—such as a less established fintech firm, start-up, or other small business—has limited ability to provide the same level of financial information or other due diligence-related information as a more established third party;
- suggesting approaches for due diligence and ongoing monitoring in instances where the bank has limited negotiating power;
- addressing ways banks can offer products or services to underbanked/underserved populations through fintech third-party relationships;
- discussing considerations for banks when entering into a marketplace lending arrangement with a nonbank entity; and
- outlining measures to address risk management when obtaining alternative data from a third party that may be used by or on behalf of a bank.
The bulletin also reiterates that banks are expected “to practice effective risk management regardless of whether the bank performs an activity internally or through a third party,” and that a “bank’s use of third parties does not diminish the bank’s responsibility to perform the activity in a safe and sound manner and in compliance with applicable laws and regulations.”
Fed governor discusses modernizing payment systems for community banks
On February 27, Federal Reserve (Fed) Governor Michelle W. Bowman spoke before the Banking Outlook Conference held at the Federal Reserve Bank of Atlanta on ways the Fed can increase transparency and modernize payment services for community banks. Bowman stated that the Fed is “uniquely positioned as a provider of payment services and as a supervisor of banks to ensure that our nation’s evolving financial system works for community banks.” Bowman discussed how the Fed can achieve this objective by, among other things, (i) adopting an additional same-day automated clearinghouse (ACH) window, which “will allow banks and their customers, particularly those located outside the eastern time zone, to use same-day ACH services during a greater portion of the business day”; (ii) implementing FedNow, which would, as previously covered by InfoBytes, “facilitate end-to-end faster payment services, increase competition, and ensure equitable and ubiquitous access to banks of all sizes nationwide”; and (iii) encouraging partnerships between community banks and fintech firms to “leverage the latest technology to provide customer-first, community-focused financial services and provide customers with efficiencies, such as easy-to-use online applications or rapid loan decisionmaking.” Bowman highlighted the Fed’s fintech innovation office hours, as well as the Fed’s recently launched fintech innovation webpage (covered by InfoBytes here), and emphasized the Fed’s desire to hear directly from banks and fintech companies on innovation challenges.
With respect to third-party service providers, Bowman proposed several important initiatives for the Fed to help community banks effectively manage their third-party relationships and access innovative new technology. These include providing clear, consistent due diligence guidance on third-party relationships to provide uniform standards that are aligned with guidance issued by the OCC and other banking agencies. Bowman also suggested increasing the transparency of its third-party supervisory program by releasing information that may be useful about key service providers to community banks, and tailoring regulatory burdens for community banks with assets under $1 billion.