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Financial Services Law Insights and Observations

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  • OCC to Consider Fintech Charter Applications; Seeks Comment

    Federal Issues

    On December 2, the OCC announced that it would move forward with considering applications from financial technology (Fintech) companies to become special-purpose national banks. In prepared remarks delivered at the Georgetown University Law Center, Comptroller of the Currency Thomas Curry explained, among other things, that “having a clear process, criteria, and standards for Fintechs to become national banks ensures regulators and companies openly vet risks and that the institutions that receive charters have a reasonable chance of success.”

    Accompanying his decision, the OCC published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters. According to the paper, in order to apply for a special-purpose charter, a company must engage in fiduciary activities, or one of the three core banking functions: lending money, paying checks or receiving deposits. The paper is available on the agency’s website at www.occ.gov and comments may be submitted through January 15, 2017.

    Federal Issues Digital Commerce OCC Fintech Privacy/Cyber Risk & Data Security

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  • FCC Denies Petition by MBA to Exempt Certain Mortgage Servicing Calls from Prior Express Consent Requirement

    Federal Issues

    In an order dated November 15, the FCC’s Consumer and Governmental Affairs Bureau denied a petition by the Mortgage Bankers Association (MBA) that sought an exemption from the FCC’s prior express consent requirement for non-telemarketing residential mortgage servicing auto-dialer calls to wireless numbers. In its order, the Bureau concluded that MBA had failed to show (1) that the calls in question would be free of charge to consumers; and (2) that the parties seeking relief should be able to send non-time-sensitive calls to consumers without their consent.

    Among other things, the Order explained that the Telephone Consumer Protection Act (TCPA) “reflects Congress’ recognition of the potential costs and privacy risks imposed on wireless consumers from the use of auto-dialer equipment, which can generate large numbers of unwanted calls” and accordingly, the FCC has generally attempted to balance and accommodate the legitimate business interests of callers in addition to recognized consumer privacy interests.

    Federal Issues Consumer Finance TCPA FCC U.S. Senate U.S. House Privacy/Cyber Risk & Data Security

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  • CFPB Issues Advisory Bulletin on Detecting and Preventing Consumer Harm from Production Incentives

    Federal Issues

    In a November 28 advisory bulletin entitled Detecting and Preventing Consumer Harm from Production Incentives, the CFPB highlights examples from its supervisory and enforcement experience in which incentives contributed to substantial consumer harm. The bulletin also describes compliance management steps that supervised entities should take to mitigate risks posed by incentives. Among other things, the CFPB clarifies that it is not outlawing sales incentives or other similar programs, but rather is cautioning companies that such programs can lead to abuse. As explained in the bulletin, “[t]ying bonuses or employment status to unrealistic sales goals or to the terms of transactions may intentionally or unintentionally encourage illegal practices such as unauthorized account openings, unauthorized opt-ins to overdraft services, deceptive sales tactics, and steering consumers into less favorable products.”

    Federal Issues Consumer Finance CFPB Compliance Sales Incentive Compensation

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  • FHFA Increases Conforming Loan Limits for 2017

    Federal Issues

    Last week, on November 23, the FHFA announced that it will raise the maximum conforming loan limits for mortgages purchased by Fannie Mae and Freddie Mac in 2017 from $417,000 to $424,000. The announcement marks the first time FHFA has increased the baseline loan limit since 2006. In high-cost areas, such as Los Angeles, New York, San Francisco, and Washington, D.C., the maximum loan limit will be $636,150. Meanwhile, limits rose in all but 87 counties in the country. View the list of counties seeing increases here.

    Federal Issues Mortgages FHFA Mortgage Lenders

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  • Comptroller Curry Discusses Importance of Effective Supervision Before Clearing House Annual Conference

    Federal Issues

    In prepared remarks delivered on November 30 before The Clearing House Annual Conference in New York City, Comptroller of the Currency Thomas J. Curry discussed lessons from the 2008 financial crisis. Curry noted that he was “often disappointed how quickly some forget the lessons of more recent events, particularly what brought the financial system to the cliff in 2008 and what has put our banks and our economy on much firmer ground since.” His remarks emphasized the value of strong capital, the need for ample liquidity, and the importance of effective supervision.

    In discussing capital, Curry noted that since the beginning of 2009, there has been a $700 billion increase in common equity capital. Such levels would allow the 33 largest bank holding companies to be well capitalized and continue lending even under the most severe scenario used by the banking agencies’ stress tests. He cautioned, however, that “[w]eakening the ratio through special exclusions only undermines our original intent and weakens the protection against excessive leverage.” Comptroller Curry similarly noted that the Liquidity Coverage Ratio and the proposed Net Stable Funding Ratio complement each other to push covered banks to hold ready resources to meet short-term cash outflows and to shift to more stable, longer-term funding.

    On the subject of supervision, Curry noted the importance of “holistic supervision based on the CAMELS rating system.” He also added that while a periodic reassessment of banking laws and regulations is appropriate, “we must never settle for ‘light-touch’ supervision.” And, in concluding, Curry stressed that community banks and their examiners, in order to “remain strong and healthy,” need to “focus on strategic risk, rising credit risk from stretching for yield while relaxing underwriting standards, expansion of new technologies, and compliance issues.”

    Federal Issues Banking OCC Bank Supervision

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  • OCC Issues Updated Guidance for Managing Bank Premises and Equipment

    Federal Issues

    On November 29, the OCC announced the release of a revised Bank Premises and Equipment booklet of the Comptroller’s Handbook. The revised booklet, which replaces the booklet of the same title issued in March 1990, applies to examinations of all national banks and federal savings associations engaged in the acquisition, management, and disposal of bank premises and equipment. According to the accompanying OCC Bulletin, the revised booklet incorporates updated statutory and regulatory citations and revised examination procedures since the integration of the Office of Thrift Supervision into the OCC in 2011. The bulletin explains that the booklet also replaces the "Investment in Bank Premises" booklet of the Comptroller’s Licensing Manual and the "Fixed Assets" section of the former Office of Thrift Supervision Examination Handbook.

    Federal Issues Banking Consumer Finance OCC OTS Licensing Comptroller's Licensing Manual

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  • CFPB Monthly Complaint Snapshot Spotlights Debt Settlement, Check Cashing, and Other Financial Services Complaints

    Federal Issues

    On November 29, the CFPB released Volume 17 of its monthly complaint snapshot reports on consumer complaints stemming from financial services that fall outside of the Bureau’s major complaint categories. The “other financial services” covered in the report include debt settlement, check cashing, money orders, and credit repair. To date, the CFPB has handled approximately 1,035,200 complaints nationally across all products. As reported in the current snapshot: (i) Debt collection was the most-complained-about financial product or service in October; (ii) Student loan complaints showed the greatest increase—108 percent—of any product or service over the three-month period of August to October; and (iii) Alaska, New Mexico, and Missouri experienced the greatest year-to-year complaint volume increases from August to October 2016 period versus the same time period 12 months before. The current report also highlighted a trend in complaints coming from Oklahoma and the Oklahoma City metro area.

    Federal Issues Consumer Finance CFPB Student Lending Debt Collection Check Cashing

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  • CFPB Publishes Updated Version of its Mortgage Servicing Small Entity Compliance Guide

    Federal Issues

    On December 1, the CFPB published an updated version of the Mortgage Servicing Small Entity Compliance Guide on its "Mortgage Servicing Implementation & Guidance" webpage. The updated guide incorporates amendments made to mortgage servicing provisions in Regulation X and Regulation Z by the 2016 Mortgage Servicing final rule. Most provisions of the 2016 Mortgage Serving final rule take effect on October 19, 2017. However, the provisions relating to successors in interest and the provisions relating to periodic statements for borrowers in bankruptcy will not take effect until April 19, 2018.

    Federal Issues Consumer Finance CFPB Mortgage Servicing Regulation Z Regulation X

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  • Fed Report Provides Information on Debit Card Transactions in 2015

    Federal Issues

    On November 30, the Fed announced the release of its annual report on debit card transactions in 2015. The report is the fourth in a series to be published every two years pursuant to Section 920 of the Electronic Fund Transfer Act (EFTA). As in prior years, the 2015 report reflected that issuers’ costs of authorizing, clearing, and settling debit card transactions (excluding issuer fraud losses) varied greatly across respondents. Data compiled in the report estimates that debit-card fraud losses to all parties (merchants, cardholders, and issuers) increased by 44 percent from 2013 to an estimated total of $2.41 billion in 2015. The median covered issuer had average fraud prevention and data security costs of 1.9 cents per transaction.

    Federal Issues Federal Reserve Debit Cards EFTA Payments Data Collection / Aggregation

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  • FCPA Charges Added Against Macau Real Estate Developer and His Assistant

    Federal Issues

    On November 22, the U.S. government filed a superseding indictment against a Macau real estate developer and his assistant in connection with their alleged involvement in an international bribery scheme. The superseding indictment included new charges that both men violated the FCPA in connection with alleged payments to then-UN ambassadors from Antigua and the Dominican Republic in exchange for official actions to benefit the defendants’ real estate company. The bribery charges contained in the original October 2015 indictment concerned only domestic bribery charges brought under 18 U.S.C. §  666, and not the FCPA.

    It is not clear why the U.S. government chose to add the FCPA charges now as opposed to bringing them in the original indictment. First, there did not appear to be any FCPA jurisdictional hurdles in the original indictment.  Moreover, one of the alleged bribe recipients named in both the original indictment and superseding indictment – the then-UN ambassador from Antigua – is and always was a “foreign official” under the FCPA. The UN has been designated a public international organization, and individuals associated with these organizations are “foreign officials” under the FCPA.

    Federal Issues Criminal Enforcement FCPA Bribery

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