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Waters releases expansive credit reporting legislation
On February 21, Maxine Waters released a discussion draft version of the “Comprehensive Consumer Credit Reporting Reform Act of 2019,” which would significantly amend the FCRA. The draft legislative proposal was released as supporting material for the February 26 House Financial Services Committee hearing titled, “Who's Keeping Score? Holding Credit Bureaus Accountable and Repairing a Broken System.” The CEOs of the three major credit reporting agencies and a panel of officials from major consumer groups testified at the hearing.
The draft bill— versions of which Waters has also introduced in previous Congressional sessions—includes (i) significant changes to the dispute process, such as allowing consumers to appeal determinations; (ii) banning the use of credit information for certain employment decisions; (iii) removing adverse information for certain private education loan borrowers who demonstrate positive payment history; (iv) shortening the time period that most adverse credit information stays on a credit report from seven to four years; and (v) establishing federal oversight over the development of credit scoring models.
FDIC fines banks for flood insurance, BSA violations; releases January enforcement actions
On February 22, the FDIC announced a list of administrative enforcement actions taken against banks and individuals in January 2019. The 25 orders include “10 Section 19 orders; two civil money penalty; six prohibition orders; three consent orders; one prompt corrective order; three terminations of consent orders; and one notice.” The FDIC assessed a civil money penalty against a Texas-based bank for alleged violations of the Flood Disaster Protection Act including failing to either (i) obtain flood insurance coverage on loans at or before origination; or (ii) increase, renew, or extend flood insurance coverage on several loans secured by collateral located or to be located in special flood hazard areas.
The FDIC assessed a second civil money penalty against an Oklahoma-based bank related to alleged weaknesses in its programs concerning Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance, information technology (IT), and internal audits. Among other things, the bank was ordered to (i) grant the board full responsibility for the approval of bank policies and objectives related to the identified programs, as well as supervision of bank management; (ii) retain qualified personnel responsible for managing the BSA/AML and IT programs; (iii) revise its internal control programs to correct the identified deficiencies; (iv) obtain an independent public accounting firm to conduct an external financial statements audit and internal controls review; and (v) implement comprehensive written BSA/AML compliance programs.
Waters reminds CFPB staff of whistleblower protections
On February 21, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, sent a letter to CFPB employees, reminding Bureau staff of the protections under The Whistleblower Protection Act and encouraged anyone who witnesses “waste, fraud, abuse or gross mismanagement” to reach out to her or her staff. Waters cited to the recent reports of a significant drop in Bureau staff morale and reiterated her concern with the changes that took place at the agency during acting Director Mick Mulvaney’s tenure. Waters emphasized the importance of the Bureau’s work to protect consumers and stated that she will conduct careful oversight of the agency as part of her Chairwoman duties.
OCC issues cease and desist order against Japanese bank for BSA/AML issues
On February 22, the OCC announced a cease and desist order against three U.S. branches of a Japanese bank for allegedly violating the Bank Secrecy Act (BSA). According to the order, after an examination of the branches’ BSA/Anti-Money Laundering and OFAC compliance programs, the OCC identified alleged deficiencies in the branches’ BSA compliance program, including (i) internal controls; (ii) suspicious activity monitoring, which resulted in untimely suspicious activity report filings; (iii) foreign correspondent due diligence program; and (iv) trade finance monitoring. The OCC did not issue a monetary penalty against the branches and noted in the order’s announcement that the branches have already begun corrective actions. This action demonstrates U.S. banking regulators’ continued scrutiny of the BSA compliance programs of U.S. branches and subsidiaries of non-U.S. banks that provide international access to the U.S. financial system.
As previously covered by InfoBytes, in November 2017, the OCC issued a consent order with the branches that required corrective actions related to OFAC compliance. The branches continue to operate under this order.
HUD permits use of third-party verification services
On February 15, HUD released Mortgagee Letter 2019-01, which provides guidance on the use of third-party verification (TPV) services for FHA-insured mortgages. Effective immediately, FHA now allows mortgagees to use TPV services for verification of a borrower’s employment, income, and asset information. The Letter provides specific requirements for each category of information but, in all circumstances, a borrower must authorize the mortgagee’s use of a TPV vendor for the verification (whether direct or electronic).
OCC releases February 2019 enforcement actions
On February 15, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. The new enforcement actions include a civil money penalty order against an individual, a notice of prohibition against an individual, and three removal and prohibition consent orders against individuals, and a cease and desist consent order described below.
On January 7, the OCC entered into a consent order with a federal savings bank related to allegations of unsafe or unsound banking practices. The OCC alleges the bank failed to implement and maintain an effective compliance management system, risk governance framework, and information technology (IT) program. Among other provisions, the order requires the bank to develop written plans to strengthen the compliance, risk governance, and IT programs, and requires the Board to ensure the bank has adopted and implemented all the corrective actions required by the order. The bank neither admits nor denies the allegations and the OCC did not assess any monetary penalties against the bank.
FDIC issues 2018 annual report
On February 14, the FDIC released its 2018 Annual Report, which includes, among other things, the audited financial statements of the Deposit Insurance Fund and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund. The report also provides an overview of key FDIC initiatives, performance results, and other aspects of FDIC operations, supervision developments, and regulatory enforcement. Highlights of the report include: (i) the FDIC’s efforts to adopt and issue proposed rules on key regulations under the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA); (ii) efforts to strengthen cybersecurity oversight and help financial institutions mitigate cyber risk; (iii) supervision focus on Bank Secrecy Act/Anti-Money Laundering compliance; and (iv) financial institution letters providing regulatory relief to institutions affected by natural disasters. The report also highlights the FDIC’s monitoring of financial technology developments through its various research groups and committees to better understand how technological efforts may affect the financial market. Lastly, the report covers the agency’s efforts to encourage de novo bank applications, including the December 2018 request for information soliciting comments on the deposit insurance applications process (covered by InfoBytes here).
Mortgage lender settles FCA allegations
On February 13, the U.S. Attorney for the Eastern District of California announced a $3.67 million joint settlement with HUD and the Fair Housing Administration (FHA) to resolve allegations that a mortgage lender violated the False Claims Act by falsely certifying compliance with FHA mortgage insurance requirements. According to the settlement agreement, between 2007 and 2009, the mortgage lender, a participant in HUD’s Direct Endorsement Lender program, allegedly knowingly submitted false claims to the FHA loan insurance program by failing to ensure the loans qualified for FHA insurance when they were originated. The announcement notes that the settlement relates solely to allegations, and that there has been no determination of actual liability by the mortgage lender, which did not admit to liability in the settlement.
CFPB releases semi-annual report to Congress
On February 12, the CFPB issued its semi-annual report to Congress covering the Bureau’s work from April 1, 2018, through September 30, 2018. The report, which is required by the Dodd-Frank Act, addresses issues including problems faced by consumers with regard to consumer financial products or services; significant rules and orders adopted by the Bureau; and various supervisory and enforcement actions taken by the Bureau when acting Director Mick Mulvaney was still in office. The report is the first to be released under Kathy Kraninger, who was confirmed as Director in December 2018. In her opening letter, Kraninger emphasized that during her tenure the Bureau will “vigorously and even-handedly enforce the law,” and will make sure the financial marketplace “is innovating in ways that enhance consumer choice.” Among other things, the report focuses on credit invisibility and mortgage shopping as two significant problems faced by consumers, noting that credit invisibility among adults tends to be concentrated in rural and highly urban areas and, based on recent studies, more than 75 percent of borrowers report applying for a mortgage with only one lender.
The report also includes an analysis of the efforts of the Bureau to fulfill its fair lending mission. The report highlights the most frequently cited violations of Regulation B (ECOA) and Regulation C (HMDA) in fair lending exams during the reporting period and emphasizes that during the reporting period the Bureau did not initiate or complete any fair lending public enforcement actions or refer any matters to the DOJ with regard to discrimination.
Banking agencies issue final rule on private flood insurance
On February 12, the Federal Reserve Board, Farm Credit Administration, FDIC, National Credit Union Administration, and the OCC issued a joint final rule amending regulations governing loans secured by properties in special flood hazard areas to implement the provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 concerning private flood insurance. As previously covered by InfoBytes, the provisions, among other things, require regulated lending institutions to accept policies that meet the statutory definition of “private flood insurance,” and clarify that lending institutions may choose to accept private policies that do not meet the statutory criteria for “private flood insurance,” provided the policies meet certain criteria and the lending institutions document that the policies offer “sufficient protection for a designated loan, consistent with general safety and soundness principles.” The final rule takes effect July 1.
(See also FDIC FIL-8-2019, NCUA press release, and OCC press release.)