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Department of Homeland Security Publishes CISA Procedures and Guidance
On February 16, the DHS published guidance for both private and federal entities on the sharing of cyber threat indicators with the federal government. As required by the Cybersecurity Information Sharing Act of 2015 (CISA), the DHS and the DOJ jointly released the following four documents: (i) Sharing of Cyber Threat Indicators and Defensive Measures by the Federal Government; (ii) Guidance to Assist Non-Federal Entities to Share Cyber Threat Indicators and Defensive Measures with the Federal Entities; (iii) Interim Procedures Related to the Receipt of Cyber Threat Indicators and Defensive Measures by the Federal Government; and (iv) Privacy and Civil Liberties Interim Guidelines. The first two documents focus on assisting private sector and federal entities identify indicators and defensive measures for cybersecurity threats. The third document establishes procedures relating to the receipt of certain cyber threat indicators and defensive measures by all federal entities under CISA. The fourth document establishes interim privacy and civil liberties guidelines for federal entities on the receipt, retention, use, and dissemination of cyber threat indicators.
Government Accountability Office Issues Report on Proposed AML Legislation
Recently, the GAO published a report regarding the potential illicit use of remittance transfers and how, if at all, the proposed Remittance Status Verification Act (RSVA or Act) would assist federal agencies in their anti-money laundering (AML) requirements under the Bank Secrecy Act. If adopted, the RSVA would, among other things, require that remittance providers verify remittance senders’ legal status under the U.S. immigration laws; those unable to provide proof of immigration status would be subject to a fine. The proposed Act would also lower the $3,000 threshold level at which remittance providers are required to obtain and record data for a funds transfer. According to the GAO’s findings, almost all stakeholders expressed concern over the potential requirement to verify legal immigration status, with IRS officials concluding that “verifying identities and collecting information at a near zero dollar threshold would not be useful and could cause remitters to resort to off-the-book methods.” Most law enforcement officials, however, suggested that a lower threshold would benefit agencies’ AML efforts.
State AGs Urge Senate to Pass Bill Banning Debt Collection Robocalls
On February 10, Indiana Attorney General Greg Zoeller and Missouri Attorney General Chris Koster, along with 23 other state attorneys general, wrote to the Senate Committee on Commerce, Science, and Transportation (Committee) urging it to pass legislation repealing a recent amendment to the Telephone Consumer Protection Act (TCPA) that allows debt collection robocalls to consumers’ cellphones. According to the AGs’ letter, the TCPA currently “permits citizens to be bombarded by unwanted and previously illegal robocalls to their cell phones if the calls are made pursuant to the collection of debt owed to or guaranteed by the United States.” The letter references the FCC’s efforts to slow the proliferation of robocalling and calls the recent amendment to the TCPA a “step backward in our law enforcement efforts” to protect consumers from “unwanted and unwelcome robocalls.”
Federal Register Publishes Correction to CFPB's KBYO Rule
On February 10, the CFPB published a correction to amend the preamble of the Know Before You Owe (KBYO) rule. Under the former RESPA rules, prepaid property taxes, HOA dues, condo fees, and co-op fees were not subject to tolerances, and the CFPB did not intend to modify that standard under KBYO. However, KBYO’s preamble was missing a “not” where it explained applicable tolerance limitations, which reinforced existing dialogue that the aforementioned fees were within the zero tolerance category. The CFPB’s recently issued correction amends KBYO’s preamble to include the formerly missing “not”: “The final rule also mirrors current Regulation X in that property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees are not subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account.” The publication further explains why the CFPB believes those fees are not subject to tolerances, noting “[p]roperty taxes, homeowner’s association dues, condominium fees, and cooperative fees are all ‘[c]harges paid for third-party servicers not required by the creditor.’” The correction is effective February 10, 2016.
FTC Submits Letter to CFPB Regarding ECOA Enforcement and Education Activities
On February 8, the FTC sent the CFPB a letter summarizing the FTC’s enforcement activities related to compliance with the Equal Credit Opportunity Act (ECOA) and implementing Regulation B during 2015. The annual letter reviews the FTC’s responsibilities with regard to ECOA enforcement and education to most non-bank financial service providers. Highlights of the letter include, but are not limited to, (i) the FTC’s public workshop on the growing use of online lead generation in industries such as lending and education; (ii) the FTC’s Federal Register Notice seeking comments on a proposed survey of consumers regarding their experiences in buying and financing automobiles at dealerships, over which the FTC has broad authority to enforce the FTC Act and ECOA; and (iii) updates to the FTC’s Mortgage Discrimination publication, which includes information about ECOA and warns consumers of illegal practices. Finally, the FTC emphasized that, since 2011, it has brought over 25 cases in the auto purchase and financing industry, “including those in a federal-state effort that yielded more than 200 actions for fraud, deception, and other illegal practices.”
Obama Administration's FY 2017 Budget Proposal Makes Room for Small Dollar Loan Program
This week, the Obama Administration released the Fiscal Year 2017 Budget Proposal. President Obama’s proposed budget for the Department of the Treasury would, through the Community Development Financial Institutions (CDFI) Fund, reserve at least $10 million until September 30, 2018 to provide grants for loan loss reserve funds and to provide technical assistance for small dollar loan programs under section 1206 of the Dodd-Frank Act. The Small Dollar Loan Program, according to the budget proposal, “will support broader access to safe and affordable financial products and provide an alternative to predatory lending by encouraging CDFIs to establish and maintain small dollar loan programs.” Earlier this year, Senator Sherrod Brown (D-OH), in a letter to the President, requested that the FY 2017 budget proposal prioritize funding for small dollar loan programs, as outlined in Title XII – Improving Access to Mainstream Financial Institutions – of the Dodd-Frank Act.
On a similar note, the House Financial Services Committee held a hearing titled, “Short-term, Small Dollar Lending: The CFPB’s Assault on Access to Credit and Trampling of State and Tribal Sovereignty,” on February 11, which examined the short-term, small dollar credit marketplace. During the hearing, House members expressed concern that the CFPB and other government agencies are “overextending their efforts” in regulating the industry, thus limiting consumers’ access to credit. Per the CFPB’s 2015 Regulatory Agenda, the agency is “in the process of developing a Notice of Proposed Rulemaking to address concerns in markets for payday, auto title, and similar lending products.” This stimulated conversations on how the potential rule would affect consumers and existing state and tribal law. CFPB Acting Deputy Director David Silberman was present at the hearing; Silberman maintained that the CFPB’s regulatory efforts are to ensure that small dollar loans are affordable and that consumers are not “spiraling into continual debt.”
FY 2017 Budget Proposal: Implications for FHA Down Payment Assistance Programs
As previously noted, the White House released the FY 2017 Budget Proposal this week. President Obama’s proposed HUD budget for FY 2017 would revise the FHA down payment assistance requirements found under Section 203(b)(9) of the National Housing Act (12 U.S.C. 1709) by (i) replacing subparagraph (C) (Prohibited sources), and adding a new subparagraph (D) (Government assistance). The proposed amendment to the National Housing Act “seeks to clarify that down payment assistance from state and local governments and their respective agencies and instrumentalities are not impermissible sources of down payment assistance.”
FHA Publishes Consolidated Multifamily Handbook
Recently, the FHA published a new Multifamily Accelerated Processing Guide (MAP Guide) that consolidates underwriting and program requirements in one document. The revised MAP Guide is intended to “cut the time required to approve loan applications and to assure consistent application of program requirements and credit standards across all HUD processing offices.” The revised MAP Guide comes after the FHA’s February 2015 release of a draft version of the guide and incorporates revisions into four main areas: (i) technical corrections and edits based on operational guidance; (ii) incorporation of previously published policy issued since 2011, including Mortgagee Letters, Housing Notices, and Memos; (iii) inclusion of significant organizational and operational business model changes related to the Multifamily for Tomorrow transformation initiative; and (iv) revisions to policy. The new MAP Guide will become effective for all applications for FHA multifamily mortgage insurance received after May 28, 2016.
OFAC Announces Settlement with London-Based Financial Institution for Alleged Violations of the Zimbabwe Sanctions Regulations
On February 8, OFAC settled with a London-based financial institution for alleged violations of the Zimbabwe Sanctions Regulations, 31 C.F.R. part 541 (ZSR). The financial institution agreed to pay $2,485,890 for processing 159 transactions to or through financial institutions located in the United States for or on behalf of corporate customers of the financial institution’s Zimbabwean subsidiary that were owned, directly or indirectly, 50% or more by a customer identified on OFAC’s SDN List. According to OFAC, the financial institution relied on the subsidiary’s electronic customer records and documentation to perform cross-border transactions screenings and sanctions-related customer screening. Due to deficiencies in the subsidiary’s electronic customer system and its “Know Your Customer” procedures, neither the financial institution nor its subsidiary detected certain customers as blocked persons – under Executive Order 13469 of July 25, 2008 – on the SDN List and “continued to process [U.S. Dollar] transactions for or on their behalf to or through the United States in apparent violation of the ZSR.” OFAC determined that the company did not voluntarily self-disclose the apparent violations, and that the apparent violations constitute a non-egregious case. In determining the settlement amount, OFAC found the following to be mitigating factors: (i) the financial institution had not received a penalty notice or Finding of Violation in five years preceding the earliest date of the transactions giving rise to the apparent violations; (ii) the financial institution took remedial action in response to the apparent violations; and (iii) the financial institution substantially cooperated with OFAC’s investigation. In addition, OFAC “considered the fact that the prohibited entities were not publicly identified or designated and included on the SDN List at the time that Barclays processed transactions for or on their behalf.”
OCC Removes Mortgage Servicing-Related Restrictions on Delaware and Ohio-Incorporated Banks
On February 9, the OCC terminated mortgage servicing-related consent orders against Delaware and Ohio-incorporated banks. The OCC determined that the two banks now comply with the original April 2011 consent orders and lifted business restrictions placed on the banks last year, having amended the orders in February 2013 and June 2015. The OCC simultaneously announced $3.4 million and $10 million civil money penalties, to be paid to the U.S. Treasury, against the Delaware and Ohio-incorporated banks, respectively, for their failure to correct deficiencies in the 2011 consent orders in a “timely fashion.”