Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • House Committee calls for new quantitative analysis from Basel III “Endgame” original proposal

    Federal Issues

    On January 31, the House Financial Services Committee issued a press release after holding its hearing on “Federal Banking Proposals Under the Biden Administration,” which invited two leaders from trade organizations, a lawyer, and a business school professor. The Committee’s main takeaway was that the Notice of Proposed Rulemaking from July 2023, as released by the OCC, Federal Reserve, and FDIC, provides “little quantitative analysis” of the potential economic impacts (covered by InfoBytes, here). This Notice initially opened the comment period for the Basel III “Endgame” meant to revise the capital requirements for large banking organizations.   

    The Committee took the position, through bipartisan agreement, that the Biden Administration “must withdraw” its Basel III “Endgame” implementing proposal and replace it with one that offers a sound and objective economic analysis that is not skewed by politics but supported by data. The Committee supports its position that the Notice provides a “paltry” economic and regulatory analysis by noting that it devotes only 17 out of 1087 pages to the analysis. The press release cited comments from various congressional members, some of whom raised concerns about the proposal’s potential impact on homebuyers and mortgage lending, and the proposal’s potential to disincentivize financing for renewable energy projects. Finally, the Committee linked several members’ comment letters over the past few months.  

    Federal Issues Basel FDIC OCC Federal Reserve Capital Requirements House Financial Services Committee

  • FTC bans student loan “scammers” from debt relief industry

    Federal Issues

    On February 6, the FTC announced two orders (here and here) that will ban a group of student loan debt relief “scammers” (defendants) from the debt relief industry. As previously covered by InfoBytes, defendants allegedly misled consumers by charging them for services that are free through the Department of Education, claiming consumers needed to pay fees or make payments to access federal student loan forgiveness. As a consequence, the FTC filed a temporary restraining order resulting in an asset freeze, among other things.  

    As a result of the FTC’s action, and subject to court approval, defendants are banned from operating in the debt relief industry, as well as prohibited from making false statements about financial products or services and from using deceptive tactics to gather consumers’ financial information. Moreover, the proposed orders include a monetary judgment of $7.4 million, with a significant portion suspended due to financial constraints. Defendants must surrender personal and business assets, and if any of them materially misrepresent their finances, the entire monetary judgment will become immediately payable.   

    Federal Issues FTC Enforcement Junk Fees Student Loans Consumer Protection FTC Act Department of Education

  • DOJ announces settlement against Pennsylvanian bank for alleged redlining

    Federal Issues

    On February 5, the DOJ, together with the State of North Carolina, announced a settlement with a Pennsylvania-based bank (respondent) to resolve allegations that the bank engaged in a pattern or practice of lending discrimination by engaging in “redlining” in Charlotte and Winston-Salem, North Carolina, in violation of the Fair Housing Act and ECOA. The DOJ’s complaint alleged that from at least 2017 through 2021, the bank failed to provide mortgage lending services to predominantly Black and Hispanic neighborhoods in Charlotte and Winston-Salem and discouraged people seeking credit in those communities from obtaining home loans. The DOJ compared the respondent’s performance with other lenders, noting that other lenders generated applications in predominantly Black and Hispanic neighborhoods at two-and-a-half times the rate of respondents in Charlotte, and four times the rate of respondents in Winston-Salem.  

    Under the two proposed consent orders, the respondent will, among other things (i) invest at least $11.75 million in a loan subsidy fund to increase access to home mortgage, home improvement, and home refinance loans for residents of majority Black and Hispanic neighborhoods; (ii) spend $1 million on community partnerships; (iii) spend $750,000 for advertising, outreach, consumer financial education, and credit counseling focused on the areas at hand; (iv) open three new branches in the areas at hand, with at least one mortgage banker assigned to each branch; (v) hire a director of community lending who will oversee the continued development of lending in communities of color; (vi) retain independent consultants to enhance its fair lending program and better meet communities’ needs for mortgage credit; (vii) conduct a community credit needs assessment and offer a staff training; and (viii) evaluate its fair lending compliance management systems.  

    Federal Issues DOJ Redlining North Carolina Enforcement Pennsylvania Mortgages

  • FTC orders tax filing software company to cease and desist following ALJ decision

    Federal Issues

    On January 22, the FTC issued an opinion and order against the maker of a popular tax filing software.  The FTC found that the company engaged in unfair and deceptive acts or practices by marketing the software as “free” when it was not available as free to more than two-thirds of consumers and ordered the company to “cease and desist making the deceptive claims.”

    The FTC’s opinion and order were issued after its de novo review following the September 2023 ruling from an administrative law judge (“ALJ”), in the FTC’s March 2022 administrative complaint against the company (previously reported by InfoBytes here), in which the ALJ found that the company engaged in deceptive advertising. 

    The company is a publicly traded corporation that offers a variety of software programs. The software in question is a program that assists customers with preparing and filing their taxes. The FTC alleged that since 2016 the company marketed its tax filing software in violation of Section 5 of the FTC Act through television and online ads, stating consumers could file their taxes for free when less than one-third of taxpayers were eligible for the company’s free edition of the software.

    The FTC took issue with the company’s claim that the software was “free” when it restricted its eligibility for the free version to those with “simple tax returns.” While the definition of “simple tax returns” has changed over time, in 2022 it was limited to filed returns that included a Form 1040 with limited attached schedules. However, the FTC alleged most taxpayers do not have “simple tax returns” as defined by the company, including those with mortgage or property income, investment income, or charitable donations over $300.

    According to the FTC, from 2016 to 2022, the company ran “dozens” of unique ads through television, radio, the internet, social media, and other advertising channels, that garnered “billions of impressions.” The company and its ad agency understood that advertising its product as free would be a “powerful” lure to entice new customers, stating “Lead with [f]ree to raise heads and drive traffic and acquisition[.]” Although disclaimers are present in the ads, the FTC alleged the company’s disclaimers are inadequate to “cure the misrepresentations” faced by the consumer.

    The company continued to market its products as free for three years after multiple lawsuits were filed by the Los Angeles City Attorney and the County Counsel for the County of Santa Clara, California, alleging unfair and deceptive marketing of free versions of the software. Various state Attorneys General opened subsequent investigations that led the company to enter into a settlement agreement with all fifty states pursuant to which the company agreed to pay $141 million and submit to restrictions on its advertising and marketing of the software. Among other restrictions, the FTC’s final order prohibits the company from making any misrepresentations of the cost of its products and services, or the requirement that a consumer use its paid products or services in order to accurately file their taxes online or claim a credit or deduction. Additionally, the order imposes record-keeping and reporting requirements that will remain effective for a period of twenty years after the issuance date of the order.

    Federal Issues FTC Cease and Desist ALJ FTC Act

  • FDIC issues December 2023 enforcement actions

    On January 26, the FDIC released a list of administrative enforcement actions taken against banks and individuals in December 2023. During that month, the FDIC made public 12 orders consisting of “four orders of termination of deposit insurance; three orders terminating consent orders; two consent orders; one order terminating supervisory prompt corrective action directive; one order of prohibition from further participation; one order to pay a civil money penalty (CMP); and one Decision and Order to Prohibit from Further Participation and Assessment of Civil Money Penalty.”

    Included is a consent order with a Mississippi-based bank for alleged Bank Secrecy Act violations, along with violations of a previous consent order from 2020, imposing a $600,000 civil money penalty. Also included is a consent order with a Kentucky-based bank, alleging the bank engaged in “unsafe or unsound banking practices and violations of law or regulation” relating to, among other things, the Bank Secrecy Act. The bank neither admitted nor denied the allegations but agreed to create a written plan to recover its losses from the bank’s relationship with a third-party loan program, to reduce the bank’s risk position in the program, and to stop granting any extensions of credit through adversely classified or criticized loans related to the third-party loan program. The consent order additionally requires the bank’s board to assess the sufficiency of the bank’s allowance for credit losses (ACL), ensuring the establishment of an appropriate ACL and to uphold and accurately report it. Specifically, “management shall review updated credit risk metrics and loss data for the third-party loan programs referenced in the ROE and ensure appropriate provisions to the ACL relative to this information.”

    Bank Regulatory Federal Issues FDIC Enforcement Bank Secrecy Act Anti-Money Laundering

  • OCC issues proposed rule for bank merger approvals

    Agency Rule-Making & Guidance

    On January 29, the OCC announced a proposed rule for bank merger approvals under the Bank Merger Act (BMA). The OCC proposed changes to 12 CFR 5.33 to reflect its view that a business combination is a significant corporate transaction.

    The OCC suggested two key changes to its business combination regulation (12 CFR 5.33). First, it proposed removing the expedited review procedures outlined in § 5.33(i). Currently, this provision automatically approves certain filings after the 15th day following the close of the comment period, but the OCC believes that no business combinations subject to § 5.33 should be approved solely based on elapsed time. Additionally, the OCC suggests removing paragraph (d)(3), as it pertains to defining applications eligible for expedited review. Second, the OCC proposes the removal of § 5.33(j), which outlines four scenarios allowing an applicant to use the OCC's streamlined business combination application instead of the full Interagency Bank Merger Act Application. The streamlined application seeks information on similar topics, but only requires detailed information if the applicant answers affirmatively to specific yes-or-no questions. Currently, a transaction eligible for the streamlined application also qualifies for expedited review, a feature the OCC is proposing to eliminate. Additionally, a new policy statement (proposed as Appendix A to 12 CFR part 5, subpart C) is introduced to provide clarity and guidance on general principles used by the OCC in reviewing applications under the BMA. The policy statement also covers considerations for financial stability, resources, prospects, and convenience and needs factors. Criteria for deciding whether to hold a public meeting on a BMA application were also outlined.

    Comments from the public are due 60 days from the date of publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues Bank Regulatory OCC Bank Mergers Bank Merger Act

  • FTC obtains injunction and monetary judgment against telemarketing company

    Federal Issues

    On January 31, the U.S. District Court for the Northern District of Illinois finalized, in actions brought by the FTC, a permanent injunction and monetary judgment against a telemarketing company and certain individuals for violating the FTC Act, 15 U.S.C. § 45, and the Telemarketing and Consumer Fraud and Abuse Prevention Act, specifically the Telemarketing Sales Rule (“TSR”). The FTC’s motion for summary judgment was granted by the court, whereby the defendants were ordered to pay a monetary judgment for a civil penalty of $28,681,863.88 in favor of the FTC, and the defendants were permanently banned from participating in telemarketing or assisting and facilitating others engaged in telemarketing to consumers. The court found that the defendants violated the TSR by “initiating or causing the initiation of outbound telephone calls to consumers whose telephone numbers were on the National Do Not Call Registry… and by assisting and facilitating their inbound transfer partners’ violations of the TSR.”  This final action comes after the FTC was granted its initial order for permanent injunction and other relief in November 2023.

    Federal Issues FTC FTC Act Telemarketing TCPA Do Not Call Registry Telemarketing and Consumer Fraud and Abuse Prevention Act

  • CFPB reflects on 2023 enforcement actions; states upcoming enforcement goals

    Federal Issues

    On January 29, the CFPB released a blog post on its enforcement actions from 2023, as well as its outlook for 2024.  In 2023, the CFPB reportedly filed 29 enforcement actions and resolved six final orders on previously filed lawsuits. Compensation-wise, the Bureau required entities to pay approximately $3.07 billion in compensation to consumers and nearly $500 million in civil money penalties. The CFPB highlights some key enforcement actions from 2023, such as helping protect servicemembers from loan exploitation, as previously covered in Infobytes here, and taking action against the alleged illegal junk advance fees from credit repair services, also covered in Infobytes here.

    Looking forward to 2024, the CFPB stated its intent to increase its capacity. The Bureau’s outlook falls in line with previous comments from a CFPB representative in an FTC panel, covered by InfoBytes here. The blog post provides greater detail, outlining the Bureau’s plans to hire more technology experts to help enforce the law against emerging technologies, as well as expanding its enforcement capacity by adding more attorneys, analysts, paralegals, and economists, among others.

    Federal Issues CFPB Enforcement

  • White House provides three-month update on its AI executive order

    Federal Issues

    On January 29, President Biden released a statement detailing how federal agencies have fared in complying with Executive Order 14110 regarding artificial intelligence (AI) development and safety. As previously covered by InfoBytes, President Biden’s Executive Order from October 30, 2023, outlined how the federal government can promote AI safely and in a secure way to protect U.S. citizens’ rights.

    The statement notes that federal agencies have (i) used the Defense Production Act to have AI developers report vital information to the Department of Commerce; (ii) proposed a draft rule for U.S. cloud companies to provide computing power for foreign AI training, and (iii) completed risk assessments for “vital” aspects of society. The statement further outlines how the NSF (iv) managed a pilot program to ensure that AI resources are equitably accessible to the research and education communities; (v) began the EducateAI initiative to create AI educational opportunities in K-12 through undergraduate institutions; (vi) promoted the funding of a new Regional Innovation Engines to assist in creating breakthrough clinical therapies; (vii) the OPM launched the Tech Talent Task Force to accelerate hiring data scientists in the government, and (viii) the DHHS established an AI Task Force to provide “regulatory clarity” in health care. Lastly, the statement provides additional information on various agency activities that have been completed in response to the Executive Order. More on this can be found at ai.gov.

    Federal Issues Biden White House Artificial Intelligence Executive Order

  • FFIEC publishes proposed extension of reporting obligations

    Agency Rule-Making & Guidance

    On January 26, the Federal Financial Institutions Examination Council (FFIEC) approved the OCC, Fed, and FDIC’s publication for public comment of a proposal to extend several information collection items for three years. As previously covered by InfoBytes, the FFIEC last month put forth a similar three-year proposal on FFIEC 002 which affected the three Call Reports (FFIEC 031, 041, and 051). While this proposal includes those same four items, it adds two more: the Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101), and the Market Risk Regulatory Report for Institutions Subject to the Market Risk Capital Rule (FFIEC 102). The proposed changes include a new confidential report (FFIEC 102a) titled the Market Risk Regulatory Report that would “collect information necessary for the agencies to evaluate [an]… institution’s implementation of the market risk rule and validate a [bank’s] internal models used in preparing the FFIEC 102.” The revisions are related to the agencies’ capital rule proposal published on September 18, 2023. Comments are requested by March 25, 2024, and the revisions are planned to be effective as of September 30, 2025.

    Agency Rule-Making & Guidance Federal Issues FFIEC OCC Federal Reserve Call Report FDIC

Pages

Upcoming Events