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Swedish Telecommunications Company Sets Aside $1.45 Billion for Global FCPA Resolution
A Swedish telecommunications company disclosed in its Third Quarter Interim Report that it has set aside $1.45 billion to settle investigations conducted by Dutch and U.S. authorities regarding alleged bribery in Uzbekistan. The company disclosed that the authorities have proposed a global resolution that includes a financial sanction of $1.45 billion, although the company noted that further discussion and negotiation is necessary; the timing and amount of payment is uncertain at this time.
OCC Establishes Office of Innovation
On October 26, the OCC announced plans to establish an Office of Innovation (Office) with staff located in Washington, New York, and San Francisco. The OCC simultaneously published a paper titled “Recommendations and Decisions for Implementing a Responsible Innovation Framework,” which provides an overview of the financial services landscape and the OCC’s innovation initiatives. With the expectation to begin operations in first quarter 2017, the new Office will implement certain aspects of the OCC’s responsible innovation framework, including: (i) creating an outreach and technical assistance program; (ii) conducting awareness and training activities for OCC staff, such as implementing an “internal web page that provides OCC staff a ‘one-stop-shop’ to access information on industry trends and innovative products, services, and processes”; (iii) encouraging coordination and facilitation among the regulatory community and industry stakeholders; (iv) conducting industry innovation research; and (v) promoting coordination with other agencies, particularly those with overlapping jurisdictions. Beth Knickerbocker will head the Office as acting Chief Innovation Officer.
The OCC noted that its “assessment of granting a special purpose national bank charter to nonbank financial technology companies, and under what conditions, continues.” Later in 2016, the OCC plans to publish a paper to address issues related to a potential special purpose charter.
FinCEN Issues Advisory and Supplemental FAQs on Cyber-Events and Cyber-Enabled Crime
On October 25, FinCEN issued advisory bulletin FIN-2016-A005 reminding financial institutions of their Bank Secrecy Act (BSA) obligations to report certain cyber-events and cyber-enabled crime. The advisory highlights the importance of (i) reporting cyber-events and cyber-enabled crime through Suspicious Activity Reports (SARs); (ii) including cyber-related information such as IP addresses with timestamps, virtual-wallet information, device identifiers, and cyber-event information, in SAR reporting; (iii) collaborating with BSA/AML, cybersecurity, and other in-house units to facilitate “a more comprehensive threat assessment and develop appropriate risk management strategies to identify, report, and mitigate cyber-events and cyber-enabled crime”; and (iv) sharing cyber-related information – including specific malware signatures, IP addresses and device identifiers, and virtual currency addresses that seem anonymous – amongst financial institutions for the “purpose of identifying and, where appropriate, reporting money laundering or terrorist activities.” Importantly, the advisory distinguishes between mandatory SAR reporting of cyber-events, providing three specific examples, and voluntary reporting of cyber-events. Per the advisory, “[c]yber-events targeting financial institutions that could affect a transaction or series of transactions would be reportable as suspicious transactions because they are unauthorized, relevant to a possible violation of law or regulation, and regularly involve efforts to acquire funds through illegal activities.”
FinCEN simultaneously issued FAQs to supplement advisory bulletin FIN-2016-A005. The FAQs, which supersede 2001 FAQs regarding computer intrusion, provide answers to a set of nine questions. The FAQs address, among other things, (i) when cyber-related SAR reports should be filed; (ii) the type of information that should be included in cyber-related SARs; and (iii) cyber-event and cyber-enabled crime information sharing, pursuant to Section 314(b) of the USA PATRIOT Act, between financial institutions.
FHA Eases Owner-Occupancy Requirement on Condominium Financing
On October 26, the FHA released Mortgagee Letter 2016-15 announcing its decision to lower the owner-occupancy requirement on condominiums to as low as 35 percent. The letter follows a September announcement in which the FHA stated that, pursuant to the Housing Opportunity through Modernization Act of 2016, or H.R. 3700, it was required to “issue guidance regarding the percentage of units within an approved condominium development that must be owner occupied.” The guidance outlined in Mortgagee Letter 2016-15 is “effective immediately for all condominium project approval applications, recertification applications, annexation applications or reconsideration applications submitted for review.”
FCC Adopts Privacy Rules for Broadband Providers
On October 27, the FCC adopted privacy rules regulating consumers’ use of broadband internet services. As previously covered in InfoBytes, the FCC issued revised proposed privacy rules for broadband internet service providers (ISPs) in early October to provide consumers with “increased choice, transparency and security online.” Like the proposed rules, the adopted rules (i) require ISPs to obtain confirmative consent to use and share sensitive information; and (ii) permit ISPs to share non-sensitive information unless a customer opts-out.
Because the scope of the rules is limited to broadband service providers and other telecommunication carriers, the FTC maintains its authority over the privacy practices of websites and other “edge services.” In support of the newly adopted FCC rules, FTC Chairwoman commented that “[t]he rules will provide robust privacy protections, including protecting sensitive information such as consumers’ social security numbers, precise geolocation data, and content of communications, and requiring reasonable data security practices.”
State AGs Urge the CFPB to Ensure that States Maintain the Right to Set Usury Caps on High Cost Loans
In October, New York AG Eric T. Schneiderman, along with seven other state AGs (Connecticut, Maryland, Massachusetts, New Hampshire, Pennsylvania, Vermont and the District of Columbia), submitted a letter to the CFPB in response to the agency’s proposed rule addressing payday loans, vehicle title loans, and certain high-cost installment loans. While commending the CFPB for introducing additional consumer protections, the letter urges the CFPB to integrate the following language from the preamble of the proposed rule into the body of the final rule: “The protections imposed by this proposal would operate as a floor across the country, while leaving State and local jurisdictions to adopt additional regulatory requirements (whether a usury limit or another form of protection) above that floor as they judge appropriate to protect consumers in their respective jurisdictions.” The letter explains that because the CFPB does not have the authority to set interest rates – or usury caps – for loans, it is “crucial” that states maintain their right to do so.
Community Groups Submit Letter to OCC on Potential FinTech Charter
On October 25, the National Community Reinvestment Coalition and community groups across the country sent a letter to the OCC explaining that they strongly oppose the consideration of a limited-purpose fintech charter by the bank regulator. The groups explained that they would consider supporting the limited-purpose chartering of a fintech firm "only if the OCC does not preempt strong state law and establishes vigorous supervision and regulation for the newly chartered institutions." Additionally, the groups want chartered fintech firms to be subject to "rigorous Community Reinvestment Act (CRA)-like obligations" and "stringent" safety and soundness reviews. The letter argues that “new charter and receivership authority for uninsured institutions, primarily financial technology companies (fintechs), has the potential to benefit consumers and communities,” but only if accompanied by CRA-like obligations, and supervision and examination to ensure compliance with both fair lending and consumer protection laws.
Special Alert: Summary of CFPB's final prepaid rule
I. Overview of the CFPB's Final Prepaid Rule
On October 5, 2016, the Consumer Financial Protection Bureau (Bureau) issued a final rule (Prepaid Rule) amending Regulations E and Z to extend consumer protections to prepaid card accounts. The new protections include pre-acquisition disclosures, error resolution rights, and periodic statements. In addition, prepaid card accounts that include a separate credit feature are subject to some of Regulation Z’s credit card provisions, including an ability-to-repay requirement. Prepaid card issuers are also required to submit to the Bureau and to post to their websites any new and revised prepaid card account agreements. In this alert we summarize key provisions of the Prepaid Rule except those provisions that apply only to payroll and government benefits prepaid cards, which will be covered in a separate alert.
II. Effective Date
The Prepaid Rule’s effective date is October 1, 2017, however, the effective date for posting prepaid card account agreements is October 1, 2018. Heeding concerns about burden, the Bureau stated that the Prepaid Rule does not require financial institutions to pull and replace prepaid account access devices or packaging materials that were manufactured, printed, or otherwise produced in the normal course of business prior to October 1, 2017. Instead, financial institutions must provide consumers with notice of certain changes in terms and updated initial disclosures, in certain circumstances.
Click here to read full Special Alert
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Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- Manley Williams, (202) 349-8060
CFPB Student Loan Ombudsman's Annual Report Calls on Policymakers to Reform Rehabilitation Programs
On October 17, the CFPB Student Loan Ombudsman (Ombudsman) released a report on student loan complaints related to debt collection and servicing issues submitted to the CFPB between September 1, 2015 and August 31, 2016. During the period covered in the report, the CFPB received approximately 5,500 private student loan - and 2,300 debt collection - related complaints. Following an August 18 CFPB report that focused primarily on student loan complaints regarding income-driven repayment (IDR) plans, the Ombudsman’s recently issued report emphasizes alleged breakdowns in the “rehabilitation” process: “The majority of borrowers who cure a default and seek to enroll in IDR do so by first rehabilitating their defaulted debt. However, these borrowers describe a range of communication, paperwork processing, and customer service breakdowns at every stage of the default-to-IDR transition.” According to the report, borrowers attempting to enroll in IDR plans face issues such as: (i) delays, do-overs, and dead ends when working with debt collectors to establish and verify income-driven rehabilitation payment amounts; (ii) communication gaps between debt collectors and servicers when transferring a borrower out of default and into an IDR plan; and (iii) servicers failing to “proactively take the steps necessary to help them understand how to access IDR and quickly enroll,” in some cases leading to subsequent delinquency and re-default. The report recommends that policy makers and industry stakeholders reform the default-to-IDR transition process by, among other things, (i) streamlining and simplifying its structure; (ii) improving borrower communication; and (iii) reevaluating the economic incentives currently in place for debt collectors and student servicers to encourage long-term borrower success, rather than focusing on short-term borrower outcomes.
FDIC Releases Report on the Unbanked; Captures Movement to Online Banking
On October 20, the FDIC released a report on the use of the traditional banking system in the United States. According to the FDIC’s executive summary of the report, the percentage of U.S. households in which no one had a checking or savings account (the “unbanked”) dropped to 7.0 in 2015. This is the lowest unbanked percentage since 2009, the year the FDIC began conducting an annual survey of unbanked and underbanked households. The FDIC cited several reasons why some households remain unbanked, the most common of which was the cost of maintaining an account, with an estimated 57.4% of respondents citing it as a factor in their decision not to maintain an account, and 37.8% of respondents citing it as the main reason underlying their decision not to maintain an account. Consistent with past survey results, the report notes that unbanked and underbanked rates are higher among lower-income households, less-educated households, younger households, minority households, and working-age disabled households. Additional findings highlighted in the report include: (i) a 1.9% increase from 2013-2015 in the use of prepaid cards; (ii) rapid growth (31.9% of users in 2015 compared to 23.2% in 2013) in the use of mobile and online banking, reflecting “promising opportunities to use the mobile platform to increase economic inclusion”; and (iii) an opportunity for banks to meet the credit needs of some households with an “unmet demand” for credit by “promoting the importance of building credit history, incorporating nontraditional data into underwriting, and increasing households’ awareness of personal credit products.”