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NYDFS counters OCC’s arguments in fintech charter challenge appeal
On July 23, NYDFS filed its opening brief in the appeal of its challenge to the OCC’s decision to allow non-depository fintech companies to apply for Special Purpose National Bank charters (SPNB charter). The OCC filed its opening brief with the U.S Court of Appeals for the Second Circuit in April (covered by InfoBytes here), appealing the district court’s final judgment in favor of NYDFS, which ruled that the SPNB regulation should be “set aside with respect to all fintech applicants seeking a national bank charter that do not accept deposits,” rather than only those that have a nexus to New York State.
In its brief, NYDFS argued that the district court was “correct to hold that the OCC had exceeded its statutory authority. . .in deciding to issue federal bank charters to nondepository fintech companies.” In response to the OCC’s arguments that NYDFS lacked standing and that the claims were not ripe, NYDFS first stated that “standing and ripeness exist not only when injury has already occurred, but also when it is imminent or when there is a substantial risk of harm.” Specifically, NYDFS asserted that its claims are ripe because (i) the OCC has actively solicited charter applications from the fintech industry and has indicated that companies had started the application process; and (ii) “one of the OCC’s stated objectives in the Fintech Charter Decision is to allow fintech companies that receive [an SPNB charter] to escape state regulation.” NYDFS also argued that because nondepository institutions are not engaged in the “business of banking” within the meaning of the National Bank Act (NBA), they cannot receive federal bank charters. Moreover, it contended that “when Congress did intend to extend OCC’s regulatory jurisdiction over such institutions, it expressly amended the NBA to do so.” Among other arguments, NYDFS claimed it is entitled to nationwide relief, stating that the district court merely granted the relief afforded under the Administrative Procedure Act, which specifies that the proper remedy for when an agency’s actions are contrary to law and “‘in excess of statutory jurisdiction, authority, or limitations” is to set aside the regulation.
Additionally, several parties, including the Conference of State Bank Supervisors and the Independent Community Bankers of America, filed separate amicus briefs (see here and here) in support of NYDFS, arguing that the OCC lacks the authority to grant SPNB charters.
Consumer groups sue CFPB over HMDA threshold increase
On July 30, a group of consumer fair housing associations (collectively, “plaintiffs”) filed suit against the CFPB, challenging the Bureau’s final rule permanently raising coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under HMDA. As previously covered by InfoBytes, the final rule, which amends Regulation C, permanently increases the reporting threshold from the origination of at least 25 closed-end mortgage loans in each of the two preceding calendar years to 100, and permanently increases the threshold for collecting and reporting data about open-end lines of credit from the origination of 100 lines of credit in each of the two preceding calendar years to 200. In the complaint, the plaintiffs argue that the Bureau, among other things, (i) failed to provide a “reasoned explanation” for the changes to the original threshold requirements; (ii) conducted a “flawed analysis of the costs and benefits” of the final rule; and (iii) failed to “adequately consider comments” that were submitted in response to the rule’s proposal. According to the complaint, the final rule “exempts about 40 percent of depository institutions that were previously required to report.” The plaintiffs assert this result “undermines the purpose[]” of HMDA by allowing potential violations of fair lending laws to go undetected. The plaintiffs argue that because the CFPB allegedly violated to the Administrative Procedures Act, the final rule should be vacated and set aside.
6th Circuit affirms expansive autodialer definition
On July 29, the U.S. Court of Appeals for the 6th Circuit affirmed summary judgment in favor of the plaintiffs in a TCPA action, holding that a device used by a student loan servicer that only dials from a stored list of numbers qualifies as an automatic telephone dialing system (“autodialer”). According to the opinion, a borrower and co-signer sued the student loan servicer alleging the servicer violated the TCPA by using an autodialer to place calls to their cell phones without consent. The district court granted summary judgment in favor of the plaintiffs and awarded over $176,000 in damages. On appeal, the servicer argued that the equipment used did not qualify as an autodialer under the TCPA’s definition, because the calls are placed from a stored list of numbers and are not “randomly or sequentially” generated. The 6th Circuit rejected this argument, joining the 2nd and 9th Circuits, holding that under the TCPA, an autodialer is defined as “equipment which has the capacity—(A) to store [telephone numbers to be called]; or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” This decision is in conflict with holdings by the 3rd, 7th, and 11th Circuits, which have held that autodialers require the use of randomly or sequentially generated phone numbers, consistent with the D.C. Circuit’s holding that struck down the FCC’s definition of an autodialer in ACA International v. FCC (covered by a Buckley Special Alert).
As previously covered by InfoBytes, the U.S. Supreme Court recently agreed to address the definition of an autodialer under the TCPA, which will resolve the split among the circuits.
CFPB updates HMDA FAQs
On July 28, the CFPB updated its HMDA FAQs to include new guidance covering the reporting of certain data points related to the credit decision. Specifically, the FAQs state that credit underwriting data such as credit score, debt-to-income ratio, and combined loan-to-value ratio must be reported if it was “relied on in making the credit decision—even if the data was not the dispositive factor.” Similarly, the FAQs emphasize that income and property value should also be reported if they were relied on in making the credit decision.
OCC allows extensions of CIF withdrawal period due to Covid-19
On August 4, the OCC issued an interim final rule, which clarifies the rules regarding account withdrawals from collective investment funds (CIF) in response to the Covid-19 pandemic. Specifically, under the OCC’s fiduciary activities regulation (12 CFR 9.18), a bank that is administering a CIF invested “primarily in real estate or other assets that are not readily marketable” may require a prior notice period of up to one year for withdrawals. The interim final rule codifies the OCC’s interpretation of the notice requirement as “requiring the bank to withdraw an account within the prior notice period or, if permissible under the CIF’s written plan, within one year after prior notice was required,” which is known as “the standard withdrawal period.”
In addition to codifying the standard withdrawal period, the interim final rule creates an exception that allows banks to extend the withdrawal period (with opportunities for further extensions) under certain conditions and with OCC approval. The OCC notes that the extension is intended help “preserve the value of the CIF’s assets for the benefit of fund participants during unanticipated and severe market conditions,” such as those resulting from the Covid-19 pandemic.
The interim final rule will be effective upon publication in the Federal Register.
SBA issues new FAQs on forgiving PPP loans
On August 4, the Small Business Administration (SBA) issued new FAQs on Paycheck Protection Program (PPP) loan forgiveness. The FAQs note that borrowers and lenders may rely on the FAQs as the SBA’s interpretation of the CARES Act, the Paycheck Protection Program Flexibility Act (Flexibility Act), and all of the Paycheck Protection Program Interim Final Rules (available here). The FAQs cover various topics including (i) general loan forgiveness; (ii) loan forgiveness of payroll and nonpayroll costs, and types of costs that constitute payroll and nonpayroll costs; and (iii) loan forgiveness reductions. For continued InfoBytes coverage on PPP loan forgiveness see here.
New Jersey permits electronic applications for temporary resident insurance producer licenses
On August 3, the New Jersey issued Bulletin No. 20-28, which permits qualified individual applicants seeking a temporary resident insurance producer license in New Jersey to submit the application for licensure electronically through the National Insurance Producer Registry (NIPR). Applicants also have the option of submitting paper applications in lieu of filing an application electronically. The guidance sets forth the qualifications for licensure and procedures to apply for a temporary insurance producer license. It also specifies the electronic application procedures through NIPR and the applicable timelines.
FFIEC discusses additional Covid-19 loan accommodations
On August 3, the member agencies of the Federal Financial Institutions Examinations Council (FFIEC) issued a joint statement on managing loan accommodations granted to borrowers pursuant to federal, state, and local law to address Covid-19 related hardships. Specifically, the statement provides risk management and consumer protection principles to financial institutions working with borrowers that are near the end of their initial loan accommodation period. Among other things, the statement outlines:
- Risk Management Practices. The statement encourages financial institutions to institute sound credit risk management practices following an accommodation period, such as “reassess[ing] risk ratings for each loan based on a borrower’s current debt level, current financial condition, repayment ability, and collateral.” Additionally, the statement encourages institutions to provide “clear, accurate, and timely information to borrowers and guarantors regarding the accommodation” being granted.
- Sustainable Accommodations. The statement notes that the Covid-19 pandemic may have “long-term adverse impact[s] on borrower’s future earnings” and financial institutions should consider additional accommodation options to mitigate losses for the borrower and institutions by assessing “each loan based upon the fundamental risk characteristics affecting the collectability of that particular credit.”
- Consumer Protection. The statement encourages financial institutions to provide consumers with options to support repayment at the end of accommodations to avoid delinquencies and to consider offering credit product term changes to “support sustainable and affordable payments for the long term.”
- Accounting and Regulatory Reporting. The statement emphasizes that financial institutions should consider the effects of the Covid-19 pandemic in its allowance for loan and lease losses, or credit losses, estimation processes, consistent with generally accepted accounting principles.
- Internal Control Systems. The statement notes that internal control functions for the end of initial accommodation periods and for additional accommodations typically “include appropriate targeted testing of the process for managing each stage of the accommodation.” Additionally, the statement reminds financial institutions of their responsibility for ensuring service providers in charge of these functions act consistently with the institution’s policies and all applicable laws and regulations.
HUD issues mortgagee letter extending interim procedures relating to FHA Section 232 approved mortgages
On July 31, 2020, the U.S. Department of Housing and Urban Development issued Mortgagee Letter 2020-25, which extends interim procedures regarding site access issues related to Section 232 mortgage insurance applications during the Covid-19 pandemic (previously covered here). The guidance provides temporary modifications pertaining to third-party site inspections for Section 232 FHA-insured healthcare facilities with effective dates within 60 days of the issuance of the mortgagee letter. The letter also provides guidance on other aspects relating to Section 232 properties, including regarding Property Capital Needs Assessments, appraisals, Section 232 Phase 1 Environmental Site Assessments, asbestos surveys, and radon testing, among other things.
Nevada extends directives promulgated pursuant to Declaration of Emergency
On July 31, 2020, the Nevada governor issued Executive Directive 029, which extends all directives promulgated pursuant to the March 12, 2020 declaration of emergency that were set to expire on July 31, 2020, for the duration of the current state of emergency, unless terminated earlier by a subsequent directive or operation of law associated with the lifting of the declaration of emergency.