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SBA Rebrands Core Business Loan Programs
In a November 1 memorandum, the Small Business Administration (SBA) announced that the names of the popular 7(a) and 504 loan programs have been changed. The “7(a) program” will now be rebranded as the “SBA Advantage Loan Program,” while “504 loans” will be known going forward as the “SBA Grow Loan Program.” The SBA’s memo did not announce any substantive changes to the loan programs.
OCC Updates Community Bank Supervision Comptroller's Handbook
On November 3, the OCC announced an update to the “asset quality core assessment procedures” in its Community Bank Supervision Comptroller’s Handbook (Handbook). Among other things, the revised Handbook: (i) updates concentration risk management procedures and stress testing guidance for community banks; (ii) incorporates procedures for credit underwriting assessments; (iii) enhances appraisal, evaluation, allowance, and credit review examination procedures; and (iv) updates the asset quality references and standard request letter.
FDIC Releases Second Volume in its Affordable Mortgage Lending Guide
On November 3, the FDIC released the second volume of its recently-introduced Affordable Mortgage Lending Guide (Guide). The Guide is designed to help bankers learn about, and make comparisons of, available affordable mortgage-related programs, as well as their Community Reinvestment Act implications. This second installment of the Guide focuses on programs offered by and/or through state housing-related finance agencies across the country including, for instance, down payment and closing assistance, mortgage tax credit certificates, and homeownership education or counseling. The first volume in the series, released earlier this year, covered federal and GSE programs, and a third installment is expected to cover programs available through Federal Home Loan Banks.
CFPB Releases Financial Literacy Annual Report for 2016
On October 31, the CFPB released its Financial Literacy Annual Report for 2016. The report describes what the Bureau is doing to “help consumers navigate the financial marketplace and build financial well-being” per its mandate under Dodd-Frank to improve the “financial literacy” of consumers in America. The 2016 edition of the report is broken down into three sections: (i) why there is a need for financial literacy amongst consumers; (ii) the Bureau’s approach to increasing financial literacy; and (iii) research initiatives designed to “understand consumers and the financial market place,” “effective financial education practices,” and “how best to prepare youth for financial capability in adulthood.”
CFPB Releases Supervisory Highlights Report for Fall 2016
On October 31, the CFPB released the 13th Edition of its Supervisory Highlights Report, covering the period May through August of this year. The report shares recent supervisory observations in the areas of automobile loan origination, automobile loan servicing, debt collection, mortgage origination, mortgage servicing, student loan servicing, and fair lending. The report found that the CFPB’s recent supervisory actions returned more than $11 million to approximately 225,000 consumers. The Bureau also set forth new examination procedures for reverse mortgage servicing, student loan servicing, and the Military Lending Act.
CFPB Clarifies "Flexibility" in Third-Party Risk Management
On November 1, the CFPB issued an update to its previous guidance on risk management for third-party service providers. The update is substantially similar to the Bureau’s previous guidance on third-party risk management, but clarifies that the depth and formality of an entity’s risk management program for service providers may vary depending upon (i) the service being performed, and (ii) the service provider’s compliance with federal consumer financial laws and regulations. With this update, the CFPB emphasized that supervised entities have flexibility to allow appropriate risk management of these relationships.
OCC Promotes Morris Morgan to Oversee Large Bank Supervision
In a press release, issued on November 1, the OCC announced that Morris Morgan, a senior OCC official, will take on a new role as Senior Deputy Comptroller for Large Bank Supervision on December 24. Morgan, a 31-year veteran of the OCC, has served as Examiner-in-Charge of a major bank, and PNC and Deputy Comptroller for Large Bank Supervision. In his new role, Morgan will serve as a member of the OCC's Executive Committee and the Committee on Bank Supervision. He also will oversee operations of the OCC’s International Banking Supervision group and its London Office.
FDIC Proposed Rule to Consolidate Regulations
On November 1, the FDIC published a proposed rule that would rescind and remove Part 391 subpart A (Security Procedures, transferred from the former OTS) from the Code of Federal Regulations and to amend FDIC regulations at Part 326 to make the removed OTS regulations applicable to state savings associations. Comments on the proposal are due by January 3, 2017.
Former Oil Company Employee Admits to Paying Bribe for Libyan Government Contract
As a follow up to its March 2016 reporting involving a Monaco oil company’s bribery scandal, the Huffington Post recently published an interview with a former employee of the Monaco-based company who has admitted to paying bribes to a manager in Libya’s state-owned oil company in order to win a government contract. The individual, a former manager at the Monaco-based company, told the Huffington Post and the Australian newspaper, The Age,that in the summer of 2009 he was summoned to a meeting with a production manager from a subsidiary company of the Libyan National Oil Company. At the meeting, the Libyan company's production manager provided the individual with details relating to an upcoming bid for a $45 million Libyan government contract. Huffington Post reports that the individual contacted the father and two sons who ran the Monaco-based oil company. That afternoon, another manager from the Monaco-based company met with the individual at a company staffhouse, to deliver an envelope full of cash, which the individual delivered to the manager of the Libyan subsidiary company. A few days later, the individual who had delivered the cash resigned. It is unclear whether the Monaco-based company ever won the contract though the manager told the individual that “he expected a 5-10 percent kickback ― about $2-4 million ― if the [Monaco-based company] won the contract.” According to the interview, the individual who resigned has recently been cooperating with U.S., U.K., Australian, and Canadian law enforcement authorities. The individual’s former employer has denied his allegations and denies paying bribes to foreign officials in order to win deals for its multinational clients. For further coverage of this story, visit FCPA Scorecard Blog.
Department of Education Releases Final Regulations Creating Additional Protections for Student Borrowers and Establishing New Federal Standard for Borrower Defense to Repayment of Student Loans
On October 28, the Department of Education announced new Final Regulations (81 FR 75926) to protect student borrowers against misleading and predatory practices by postsecondary institutions and clarify a process for loan forgiveness in cases of institutional misconduct. The new regulations establish the conditions under and process through which a borrower may assert a defense to repayment, also referred to as a “borrower defense,” of a Federal Direct Loan. Specifically, a borrower may now be eligible for discharge of Federal loans whenever a postsecondary institution: (i) makes false and misleading statements about school or career outcomes, (ii) makes false and misleading statements about financing needed to pay for those programs; or (iii) the institution fails to fulfill specific contractual promises regarding program offerings or educational services. By contrast, the current standard allows borrowers to assert a borrower defense only where a cause of action would arise under applicable state law.
Under the new regulations, a school participating in the Direct Loan program is also prohibited from obtaining any form of pre-dispute arbitration agreement or waiver of a borrower’s right to initiate or participate in a class action lawsuit. Further, participating schools may no longer require that students engage in internal dispute processes before seeking relief under the new “borrower defense” provisions. The final regulations also impose certain notification and disclosure requirements on any school that is the subject of a lawsuit filed in court or that are voluntarily submitted to arbitration after a dispute has arisen. The new regulations are effective July 1, 2017.