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  • OCC allows institutions affected by severe winter weather to close

    Federal Issues

    On January 30, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by severe winter weather in the Midwest and Northeast regions of the United States “for as long as deemed necessary for bank operation or public safety.” In issuing the proclamation, the OCC noted that it expects that only those bank offices directly affected by potentially unsafe conditions will close and that institutions should make every effort to reopen as quickly as possible to address the banking needs of their customers. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on natural disasters and other emergency conditions.

    Federal Issues Disaster Relief OCC

  • CFPB releases RFI on consumer credit card market

    Federal Issues

    On January 31, the CFPB published a request for information (RFI) on the consumer credit card market. Section 502 of the Credit Card Accountability and Responsibility Disclosure Act (CARD Act) of 2009 requires the Bureau to conduct a review of the consumer credit card market every two years and to seek public comment to assist in that review. While the Bureau seeks feedback on all aspects of the consumer credit card market, the RFI specifically seeks comments related to, among other things, (i) the terms of credit card agreements and the practices, such as collection efforts, of credit card issuers; (ii) the effectiveness of disclosures related to rates, fees, and other cost terms; (iii) prevalence of unfair, deceptive, or abusive acts or practices in the market; and (iv) credit card product innovation. Comments must be received by May 1, 2019.

    Federal Issues CFPB RFI Credit Cards CARD Act

  • Senate Banking Committee agenda released

    Federal Issues

    On January 29, the Chairman of the Senate Banking, Housing, and Urban Affairs Committee, Mike Crapo (R-ID), outlined his upcoming committee agenda, which prioritized housing finance. Specifically, Crapo stated “housing finance reform is the last piece of unaddressed business from the financial crisis,” emphasizing that the continued conservatorship of Fannie Mae and Freddie Mac should be addressed with bipartisan legislation to establish better taxpayer protection and increase competition among mortgage guarantors. Crapo also highlighted, among other things, potential legislative needs for (i) capital markets, specifically legislation that would encourage capital formation and reduce burdens for smaller businesses; (ii) data breaches and solutions to provide consumers greater control over their financial data; (iii) credit bureau reform to make it easier for consumers to interface with credit bureaus generally and dispute inaccuracies; and (iv) improvements in the regulatory landscape covering fintech innovation. Crapo also acknowledged the upcoming expiration of the National Flood Insurance Program in May, noting that the program was extended ten times last Congress, and any significant reforms need to balance taxpayer interest with the assistance of consumers.

    The Committee will continue to provide ongoing oversight over the federal financial regulatory agencies, including whether the regulations, guidance and supervisory expectations are consistent with the intent of the sponsors of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Additionally, the Committee will (i) continue its review of the “benefits of agencies that have a bipartisan commission, rather than a single director; a Congressional funding mechanism; and a safety and soundness focus,” and (ii) conduct oversight into financial companies’ actions with regard to access to credit, including whether companies withhold access to customers and industries they disfavor.

    Federal Issues Senate Banking Committee Fintech GSE Fannie Mae EGRRCPA

  • FDIC fines banks for flood insurance violations, releases December enforcement actions

    Federal Issues

    On January 25, the FDIC announced a list of administrative enforcement actions taken against banks and individuals in December. The 15 orders include “two Section 19 orders; one civil money penalty; three removal and prohibition orders; four consent orders; one prompt corrective order; three terminations of consent orders; and one notice.” The FDIC assessed a civil money penalty against an Illinois-based bank for alleged violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act (NFIA) including failing to (i) obtain flood insurance coverage on loans at origination; (ii) maintain flood insurance; and (iii) “properly force place flood insurance.”

    A second civil money penalty was assessed against a Wisconsin-based bank for allegedly engaging in a pattern of violating the FDPA and the NFIA, including failing to (i) follow force placed flood insurance procedures, including notifying a borrower of a lapse in flood insurance coverage and force placing the necessary insurance in a timely fashion; (ii) obtain adequate flood insurance coverage on a loan at origination; and (iii) provide notice to a borrower concerning whether flood insurance under the NFIA was available for the collateral securing a loan.

    There are no administrative hearings scheduled for February 2019. The FDIC database containing all 15 enforcement decisions and orders may be accessed here.

    Federal Issues FDIC Enforcement Flood Disaster Protection Act National Flood Insurance Act Mortgages

  • Waters announces subcommittee chairs, including newly formed Subcommittee on Diversity and Inclusion

    Federal Issues

    On January 24, Chair of the House Financial Services Committee, Maxine Waters, announced that Joyce Beatty (D-OH) will serve as the first Chair of the newly formed Subcommittee on Diversity and Inclusion. According to Waters’ policy speech on January 17, the new Subcommittee will be “dedicated to looking at diversity and inclusion issues under the Committee’s jurisdiction.” Specifically, Waters cited to low representation of minorities and women in the financial services industry, particularly at the management level, as a reason for the creation of the subcommittee. Using the Offices of Minority and Women Inclusion of the federal financial services regulators as an example, Waters suggested that the subcommittee be responsible for overseeing diversity in management, employment, and business activities in the financial industry. In addition to diversity and inclusion, Waters noted that, among other things, fair housing, including conducting “robust oversight” of HUD, and fintech would be top priorities for the subcommittee.

    Federal Issues Diversity House Financial Services Committee Congressional Oversight Congressional Inquiry HUD Fintech

  • Democrats request Otting explain comments about ending the GSEs conservatorship

    Federal Issues

    On January 25, top Democratic Congressional leaders, Maxine Waters and Sherrod Brown, wrote to acting Director of the FHFA, Joseph Otting, requesting that he clarify and expand on his reported remarks concerning the administration’s plan to move Fannie Mae and Freddie Mac (collectively, “GSEs”) out of conservatorship. Specifically, Otting reportedly told FHFA employees that he would soon announce a plan to move the GSEs out from under government control and that he was given a “clear mission” outlined by Treasury and the White House of “what they want to accomplish” with the agency. Waters and Brown expressed concern about Otting’s ability to lead the agency independently based on these comments, as well as a recent filing of the agency with the U.S. Court of Appeals for the 5th Circuit stating that the agency would no longer defend the constitutionality of the FHFA’s structure. (Covered by InfoBytes here.) Waters and Brown also requested that Otting submit by February 1 a copy of the “mission that Treasury and the White House have outlined.” In response, Otting stated that he appreciated the Democratic leaders’ interest in housing finance, outlined the statutory duties of the FHFA, and welcomed input as they “begin the journey of evaluating the Enterprises and developing a framework for ending conservatorship.”

    As previously covered by InfoBytes, in June 2018, the White House announced a government reorganization plan titled, “Delivering Government Solutions in the 21st Century: Reform Plan and Reorganization Recommendations.” The plan covers a wide-range of government reorganization proposals, including a proposal to end the conservatorship of the GSEs and fully privatize the companies.

    Federal Issues FHFA GSE Fannie Mae Freddie Mac House Financial Services Committee Senate Banking Committee

  • Final rule subject to approval will require federally regulated lending institutions to accept private flood insurance

    Federal Issues

    Recently, the FDIC and OCC approved a joint final rule governing the acceptance of private flood insurance policies. (The final rule must also be approved by—and is still under review with—the other agencies jointly issuing the rule: the Federal Reserve Board, Farm Credit Administration, and National Credit Union Association.) The final rule amends 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 (Biggert Waters) concerning private flood insurance (see previous InfoBytes coverage of the proposed rule here). The National Flood Insurance Act and the Flood Disaster Protection Act require flood insurance on improved property that secures a loan made, increased, extended, or renewed by a federally regulated lending institution (lending institution) if the property is in a special flood hazard area for which flood insurance is available under the National Flood Insurance Program (NFIP). Biggert Waters required the Agencies to adopt regulations directing lending institutions to accept insurance that meets the definition of “private flood insurance” in lieu of NFIP flood insurance.

    The final rule, once approved by all five regulators, will institute the following provisions to take effect July 1:

    • Lending institutions must accept private flood insurance policies meeting the definition of “private flood insurance.”
    • Lending institutions may rely on a “streamlined compliance aid provision” to determine, without further review, that a policy meet the definition of “private flood insurance” if the policy (or an endorsement to the policy) contains the following language: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.”
    • Lending institutions may choose to accept private policies that do not meet the statutory criteria for “private flood insurance” as long as 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.”
    • Lending institutions may exercise discretion when accepting non-traditional flood coverage issued by “mutual aid societies,” subject to certain conditions including that the lending institutions’ primary federal supervisory agency has determined that the plans qualify as flood insurance. However, the final rule does not require lending institutions to accept coverage issued by mutual aid societies.

    Federal Issues Federal Reserve OCC FDIC NCUA Farm Credit Administration Flood Insurance National Flood Insurance Act Flood Disaster Protection Act National Flood Insurance Program

  • OCC releases recent enforcement actions

    Federal Issues

    On January 18, 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 civil money penalties, a formal agreement, and removal/prohibition orders.

    Formal Agreement. On December 31, the OCC entered into an agreement with a San Francisco bank to address alleged unsafe or unsound practices related to the bank’s enterprise governance, concentrations of credit, and credit risk management. Among other conditions, the agreement requires the bank to (i) establish a three-year strategic plan outlining goals and objectives related to the bank’s risk profile and liability structure, among other concerns; (ii) receive a “written determination of no supervisory objection” prior to increasing concentrations in unguaranteed portions of Small Business Administration (SBA) loans, and establish a concentration risk management program; (iii) engage an independent consultant to conduct quarterly asset quality reviews of the bank’s loan portfolio to, among other things, identify and stratify risk; (iv) establish and maintain a credit risk rating system; (v) revise its loan policies and procedures, including changes to its SBA lending program; (vi) submit revised policies and procedures concerning the maintenance and documentation of appropriate allowances for loan and lease losses; and (vii) prepare an employee compensation plan, which establishes criteria used when determining compensation levels, including those involving the bank’s SBA managers, business development officers, underwriters, and loan officers.

    Federal Issues OCC Enforcement Credit Risk

  • State Attorneys General weigh in on small-dollar lending RFI

    Federal Issues

    On January 22, a coalition of 14 state Attorneys General submitted a comment letter responding to the FDIC’s Request for Information (RFI) on small-dollar lending. (See previous InfoBytes coverage on the RFI here.) According to the letter, while the coalition welcomes the FDIC’s interest in encouraging FDIC-supervised financial institutions to offer responsibly underwritten and prudently structured small-dollar credit products that are economically viable and address consumer credit needs, the coalition simultaneously raises several legal risks affecting state-chartered banks seeking to enter this space.

    • Banks face challenges when entering into relationships with “fringe lenders,” specifically with respect to the potential evasion of state restrictions related to state usury laws, “rent-a-bank” lending, and tribal sovereign immunity. The coalition recommends that the FDIC discourage banks from entering into such relationships.
    • State-chartered banks are still subject to state unfair or deceptive acts or practices laws and state-law unconscionability claims. The coalition recommends that the FDIC encourage banks to evaluate consumers’ ability to repay, factoring in conditions such as consumers’ monthly expenses, their ability to repay a loan’s entire balance without re-borrowing, and their “capacity to absorb an unanticipated financial event. . .and, nonetheless, still be able to meet the payments as they become due.” The coalition recommends that the FDIC include the factors banks should consider before extending small-dollar loans to consumers in any guidance that it issues.

    Federal Issues State Issues State Attorney General Small Dollar Lending FDIC RFI

  • CFPB settles with loan broker over veteran pension loans

    Federal Issues

    On January 23, the CFPB announced a settlement with an online loan broker resolving allegations that the broker violated the Consumer Financial Protection Act by operating a website that connected veterans with companies offering high-interest loans in exchange for the assignment of some or all of their military pension payments. Specifically, the CFPB alleges the broker (i) misrepresented the contracts he facilitated as valid, when, in fact, under federal law veterans’ pension payments are unassignable; (ii) misrepresented to consumers that the offer was a “sale” of a product not a high-interest credit offer; (iii) misrepresented to consumers when they would receive their loan funds; and (v) failed to disclose the applicable interest rate on the loans. Under the program, veterans were also required to obtain life insurance policies in order to ensure the outstanding amount would be repaid even if the veteran died. Under the terms of the consent order, the broker is prohibited from engaging in the specified conduct in the future and is required to assist the Bureau in identifying and locating the veterans who were harmed. The Bureau required the broker to pay $1 in civil money penalties, based on his financial statements.

    Federal Issues CFPB Settlement Enforcement Military Lending CFPA

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