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On November 13, the U.S. District Court for the District of Columbia temporarily stayed the U.S. Small Business Administration's (SBA) mandatory release of the names, addresses, and precise loan amounts of all Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) borrowers until the court rules on the motion to stay filed by the SBA. As previously covered by InfoBytes, the court ordered the SBA to supplement their July disclosure and release the “names, addresses, and precise loan amounts of all individuals and entities that obtained PPP and EIDL COVID-related loans by November 19, 2020,” concluding that the SBA’s claimed Freedom of Information Act (FOIA) exemptions do not cover the requested information disclosures. The SBA moved to stay the order to “preserve [the] SBA’s right to appeal and to avoid irreparable harm to [the] SBA and to privacy and business confidentiality interests of the millions of individuals and businesses….” The SBA requested the order be stayed until December 7 or pending appeal, if filed by that date. In response, the court issued a minute order, granting a temporary stay until it rules on the motion.
On November 16, the OCC announced a final rule to update and clarify certain licensing policies and procedures for national banks and federal savings associations. (See also Bulletin 2020-100.) The final rule makes various changes to 12 CFR Part 5, “Rules, Policies, and Procedures for Corporate Activities,” to eliminate unnecessary requirements consistent with safe, sound, and fair operation of the federal banking system. The OCC originally proposed the changes in March (covered by InfoBytes here). The final rule’s changes will, among other things, (i) allow national and federal savings associations to follow the procedures applicable to state banks or state savings associations for certain business combinations; (ii) expand operating subsidiary notice and expedited review processes to include activities that are substantively the same as activities previously approved by the OCC; (iii) allow non-controlling investments and pass-through investments in non-OCC supervised entities and permit certain other investments without a filing; (iv) create procedures for citizenship and residency waivers for national bank directors; (v) redefine “troubled condition” in relation to director and senior executive officer changes “to specify that an enforcement action must require the national bank or savings association to improve its financial condition for it to be considered in ‘troubled condition’ solely as a result of the enforcement action”; and (vi) add chief risk officer to the list of positions for which a bank in troubled condition must provide notice when making a personnel change. The final rule will take effect January 1, 2021, with certain exceptions that becomes effective upon publication in the Federal Register.
On November 16, the CFPB and Colorado attorney general announced that they will host joint, virtual office hours on December 2, as part of the American Consumer Financial Innovation Network (covered by InfoBytes here). The office hours will provide innovators the opportunity to discuss issues related to financial technology, innovative products or services, and other matters related to financial innovation. Those interested need to request a virtual session by November 23 and should include details on what they would like to discuss at the meeting.
On November 16, the FDIC issued FIL-105-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Puerto Rico affected by severe storms and flooding starting on September 13. The guidance notes that the FDIC will consider the unusual circumstances faced by institutions affected by the hurricane. The guidance suggests that institutions work with impacted borrowers to, among other things: (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain reporting and publishing requirements.
On November 13, the SEC announced charges against a national bank’s former CEO and Chairman, as well as against the former head of the national bank’s community bank (community bank) for their roles in allegedly misleading investors in connection with the bank’s incentive compensation sales program. As previously covered by InfoBytes, in connection with the same misconduct, the SEC announced a Cease and Desist order with the bank for allegedly violating the antifraud provisions of the Securities Exchange Act of 1934. The bank agreed to cease and desist from committing any future violations of the antifraud provisions and to a civil penalty of $500 million.
According to the complaint filed in the U.S. District Court for Northern District of California against the former head of the community bank, from mid-2014 through mid-2016, the former head publicly endorsed the bank’s incentive compensation program as a measurement of the bank’s success, when in reality, the metrics were allegedly inflated by unused and unauthorized accounts. Moreover, the complaint alleges that the former head signed sub-certifications that attested to the accuracy of the bank’s public disclosures, when she “knew or was reckless in not knowing” that the incentive compensation program depicted in the disclosures were materially false or misleading. The complaint seeks a permanent injunction, disgorgement, and civil penalties.
Additionally, the SEC issued a cease and desist order against the bank’s former CEO and Chairman, alleging that in 2015 and 2016 he certified statements filed with the SEC regarding the community bank’s incentive compensation program, after being put on notice that the bank was misleading the public about the program. The order issues a $2.5 million civil penalty against the former CEO and Chairman.
On November 18, Fannie Mae updated Lender Letter 2020-07 to clarify the requirement for reporting a delinquency status code for a Covid-19 payment deferral. Specifically, the lender letter states that in the month the Covid-19 payment deferral is completed and the mortgage loan is reflected as current, the servicer is not required to report delinquency status information to Fannie Mae so long as no other delinquency status code is applicable.
On November 13, the FHFA announced the extension of several loan origination guidelines put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA extended until December 31 existing guidelines related to: (i) alternative appraisal requirements on purchase and rate term refinance loans; (ii) alternative methods for documenting income and verifying employment before loan closing; and (iii) expanding the use of power of attorney to assist with loan closings. The extensions are implemented in updates to Fannie Mae Lender Letters LL-2020-03, LL 2020-04, and Freddie Mac Guide Bulletin 2020-44.
On November 13, the SEC announced a whistleblower award of over $1.1 million in connection with a successful enforcement action. According to the redacted order, the whistleblower provided information to the agency during an active investigation that led the SEC to inquire into different conduct. Additionally, the whistleblower “provided exemplary and continuing assistance” to the SEC, saving the agency time and resources. Lastly, the information and assistance was “critical” in order for the SEC to “bring an emergency action before assets could be dissipated.”
The SEC has now paid approximately $720 million to 113 individuals since the inception of the program.
On November 12, the CFPB announced a settlement with an Illinois-based non-bank debt collector, resolving allegations that the company violated the Fair Credit Reporting Act (FCRA), Regulation V, and the Consumer Financial Protection Act when providing information to consumer reporting agencies (CRAs). According to the Bureau, the company allegedly (i) “furnished information to CRAs that it knew or had reasonable cause to believe was inaccurate and failed to report to CRAs an appropriate first date of delinquency on certain accounts”; (ii) failed to conduct reasonable investigations into disputes reported to the company and to the CRAs; (iii) failed to send required notices about the results of investigations; and (iv) “failed to establish, implement, and update its policies and procedures regarding its furnishing of consumer information to CRAs.” According to the consent order, the company, among other things, allegedly furnished actual payment amounts as $0.00 on roughly 165,000 accounts even though consumers had made payments. For about 72,000 accounts, the company allegedly furnished current balances and amounts past due in amounts other than $0.00 even though the accounts were settled in full.
The consent order requires the company to pay a $500,000 civil money penalty and to (i) regularly review samples of furnished account information for accuracy and integrity; (ii) review samples of consumer disputes to ensure they are handled in compliance with the FCRA; (iii) update its policies and procedures to ensure compliance and continued effectiveness; and (iv) secure at least one independent consultant who specializes in FCRA and Regulation V compliance to conduct a review of the company’s activities, policies, and procedures related to furnishing and credit reporting.
President Trump issues Executive Order prohibiting securities investments that finance Chinese military companies
On November 12, President Trump issued an Executive Order (E.O.) on “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.” The E.O. generally prohibits “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Chinese military company. . .by any US person.” The E.O. establishes the deadlines for divestment of investments in companies currently listed as Chinese military companies as well as companies that later may be added to the list of Chinese military companies pursuant to Section 1237, or those that the Secretary of the Treasury publicly lists as meeting the criteria set forth in Section 1237(b).
Among other things, the prohibitions apply “except to the extent provided by statutes, or in regulations, order, directives, or licenses that may be issued pursuant to the order, and not withstanding any contract entered into or any license or permit granted before the date of the order.” The E.O. also prohibits any transactions by U.S. persons or within the United States that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate the provisions set forth in the order, as well as any conspiracy to violate any of these prohibitions. Additionally, the Secretary of Treasury—after consulting with heads of other executive departments as deemed appropriate—is authorized to take actions, including promulgating rules and regulations, to carry out the purposes of the E.O.
- Hank Asbill to discuss "The federal fraud sentencing guidelines: It's time to stop the madness" at a New York Criminal Bar Association webinar
- Daniel P Stipano to moderate "Digital identity: The next gen of CIP" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference