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FDIC launches investment vehicle to support MDIs and CDFIs
On September 16, the FDIC announced the launch of a new capital investment vehicle to support insured Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs) that provide capital and financial services to low- and moderate-income, minority, and rural communities. The Mission-Driven Bank Fund supports the FDIC’s commitment to preserving and promoting mission-driven institutions, and provides investors with an opportunity to support these institutions, enabling MDIs and CDFIs to provide affordable financial products and services, stimulate economic and community development, and build opportunity and prosperity. Among other things, the fund’s collaborative investment framework will channel private capital and other resources to allow institutions to (i) raise the necessary capital to better serve their communities; (ii) weather economic downturns and recover faster; (iii) attract technical expertise to grow operations and expand services; (iv) “acquire, deploy, and maintain technology solutions”; and (v) “build capacity and scale.” The FDIC notes that it “will retain an advisory role to support the fund’s mission, but will not contribute capital to, manage, or be involved in investment decisions of, the fund.”
CFPB highlights post-pandemic risks for renters
On September 17, the CFPB released a report revealing that renters and their families may experience “previously avoided economic harms of the Covid-19 pandemic as federal and state relief programs expire.” The report, which compared homeowners and renters using the CFPB’s Making Ends Meet survey and consumer credit data, found that, “on average, renters’ economic conditions were significantly more responsive to relief measures such as stimulus payments and alterations in unemployment benefits”, and are thus more susceptible to financial hardships as programs are ending. In comparing renters and homeowners, the report found, among other things, that: (i) renters are more likely to be Black or Hispanic, younger, and have lower incomes than homeowners; (ii) renters’ credit scores increased by 16 points during the pandemic, compared to 10 points for mortgagors and 7 points for other homeowners; and (iii) delinquency rates of renters with children experienced a considerable decrease after stimulus payments. According to CFPB acting Director Dave Ujeio, the Bureau “is committed to helping renters and their families thrive,” and “the modest gains renters made during the pandemic to ensure this nation’s full and equitable recovery from COVID-19.”
FTC to use CIDs and subpoenas to streamline investigations
On September 14, the FTC voted 3-2, at the recommendation of the Bureau of Consumer Protection and Bureau of Competition, to approve a series of resolutions intended to streamline consumer protection and competition investigations in core FTC-priority areas over the next decade. At the recommendation of the Bureaus, the FTC authorized eight new compulsory process resolutions, which authorize the use of civil investigative demands and subpoenas when investigating the following areas: (i) acts or practices affecting U.S. servicemember and veterans; (ii) acts or practices affecting children under 18; (iii) algorithmic and biometric bias; (iv) deceptive and manipulative online conduct, including matters related to tech support scams, payment processing, marketing of goods and services, and user interface manipulation; (v) repair restrictions; (vi) intellectual property abuse; (vii) common directors and officers and common ownership; and (viii) monopolization offenses. According to the FTC, adopting these resolutions will enhance and streamline the ability of FTC investigators and prosecutors to obtain evidence in critical investigations relating to potential violations of the FTC Act. FTC Commissioner Rohit Chopra issued a statement following the vote, commenting that the adoption “will improve the agency’s ability to order documents and data in investigations and fills a notable gap in the Commission’s long list of enforcement authorizations developed over many years.”
Fed describes landscape of community banks and fintech partnerships
On September 9, the Federal Reserve Board published a paper describing the landscape of community banks and fintech partnerships. The paper, Community Bank Access to Innovation through Partnerships, is not guidance but is intended to promote and support “responsible innovation” through access and understanding to financial technology, as well as appropriate third-party risk management and compliance guardrails. The paper follows interagency guidance released last month by the Fed, OCC, and FDIC, which addressed several key due diligence topics for community banks considering relationships with prospective fintech companies, as well as interagency proposed guidance on third party risk management—signals of the regulators’ continued and increased focus on third-party relationships. (Covered by InfoBytes here and here.) The paper provides anecdotal observations shared with the Fed by outreach participants and discusses the benefits and risks of different broad partnership types (operational technology partnerships, customer-oriented partnerships, and front-end fintech partnerships), and key considerations for engaging in such partnerships. According to the report, outreach participants presented a general belief that “fintech partnerships were most effective when three elements were present: a commitment to innovation across the community bank; alignment of priorities and objectives of the community bank and its fintech partner; and a thoughtful approach to establishing technical connections between key parties, including the bank, fintech, and the bank’s core services provider.”
SBA issues final rule on PPP appeals process
On September 16, the SBA published a final rule in the Federal Register informing Paycheck Protection Program (PPP) borrowers and lenders of the appeal process for certain SBA loan review decisions under the PPP to the SBA Office of Hearings and Appeals. The final rule adopts, with changes, certain portions of an interim final rule published in August 2020 (covered by InfoBytes here). Among other things, the final rule dispenses the 30-day delayed effective date to allow SBA to immediately issue decisions and provide certainty concerning the appeals process to potential appellants without further delay. Because the final rule further “provides increased accessibility to borrowers in response to comments previously received by the public, allowing the borrowers that receive an appealable final SBA loan review decision to immediately appeal under the final rule is in the best interests of the borrowers.” The final rule became effective September 14.
FDIC announces North Carolina disaster relief
On September 13, the FDIC issued FIL-65-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of North Carolina affected by remnants of Tropical Storm Fred. The FDIC acknowledged the unusual circumstances faced by institutions in affected areas, and suggested institutions take certain steps to meet the needs of their communities and keep the FDIC informed of business impacts. These steps include (i) working with borrowers to adjust or alter loan terms in a safe and sound manner; (ii) identifying potential community development activities to revitalize or stabilize the disaster area (which the FDIC noted may receive favorable CRA consideration); (iii) monitoring potentially impacted municipal securities and loans; (iv) notifying the FDIC of delays in meeting filing and publishing requirements, or in the event temporary banking facilities are needed; and (v) processing consumer requests under Regulation Z for a waiver or modification of the three-day rescission period for dwelling-secured loans in the event of a “bona fide personal financial emergency.”
CFPB releases 2018 policy reminder on disaster recovery
On September 14, the CFPB issued an e-mail announcement reminding entities of a 2018 Supervisory Policy Statement regarding the existing flexibility some laws and regulations provide for supervised entities to assist with community and consumer recovery in the wake of major disasters and emergencies. Consumer resources for disasters are available from the CFPB here.
Biden announces key FTC, CFTC nominations
On September 13, President Biden nominated Alvaro Bedoya for Commissioner of the FTC. Bedoya would replace FTC Commissioner Rohit Chopra, who was nominated as the permanent director of the CFPB (covered by InfoBytes here). Chopra currently awaits a Senate confirmation vote on his nomination to serve as the Bureau’s director.
Bedoya, a Georgetown University visiting professor of law, 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. FTC Chair Lina M. Khan issued a statement following Bedoya’s nomination praising his “expertise on surveillance and data security.”
Additionally, Biden announced several CFTC Commissioner nominees: Kristin Johnson, Christy Goldsmith Romero, and Rostin Behnam, who currently serves as the agency’s acting chairman and has been nominated to be the permanent CFTC Chair. Behnam’s priorities include safeguarding customer protections, climate-related financial market risk, and diversity, equity, and inclusion in the financial markets.
OCC issues cease and desist order and $250 million penalty against national bank
On September 9, the OCC announced a cease-and-desist and consent order and a $250 million civil money penalty against a national bank for alleged unsafe or unsound practices related to deficiencies in its home lending loss mitigation program and for violations of a 2018 consent order. According to the OCC, the bank, among other things: (i) failed to fully implement and maintain adequate loss mitigation practices; (ii) had mitigation decisioning tools and operational deficiencies that caused errors in loss mitigation processes; (iii) failed to timely detect, prevent, and quantify inaccurate loan modification decisions, due to inadequate controls, insufficient independent oversight, and ineffective governance related to loss mitigation activities; and (iv) had deficient internal auditing, which failed to consider aspects of previously identified issues. The cease and desist order requires the bank, among other things, to establish significant improvements to its loss mitigation program and cease taking on certain new bulk residential mortgage servicing rights from third parties. The September 9 civil money penalty order, which notes that the bank has taken steps to comply with the 2018 consent order but failed to effectively implement corrective actions, requires the bank to pay a civil penalty of $250 million.
CFPB releases annual college credit card report
On September 9, the CFPB released its annual report to Congress on college credit card agreements. The report was prepared pursuant to the CARD Act, which requires card issuers to submit to the CFPB the terms and conditions of any agreements they make with colleges, as well as certain organizations affiliated with colleges. The CFPB cited data from 2019 and 2020 showing that (i) the number of college card agreements in effect continued to decline; (ii) the total volume of payments by issuers declined; and (iii) agreements with alumni associations continue to dominate the market based on most metrics. The complete set of credit card agreement data collected by the Bureau can be accessed here.