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  • FDIC proposes information collection renewal for appraisal management companies

    Agency Rule-Making & Guidance

    On May 2, the FDIC published a notice and request for comment in the Federal Register regarding the renewal of an existing information collection on the minimum requirements for appraisal management companies (AMCs). According to the notice, there is no significant change in the methodology or substance of the information collection; however, burden estimates for states and AMCs have been revised to include (i) “AMC Written Notice of Appraiser Removal from Network or Panel;” (ii) “Develop and Maintain a State Licensing Program;” (iii) “AMC Reporting Requirements (State and Federal AMCs);” and (iv) “State Reporting Requirements to the Appraisal Subcommittee.” The notice requests comment on, among other things, whether the information collection is necessary and ways to minimize the burden of the information collection on the respondents. Comments are due by July 2.

    Agency Rule-Making & Guidance FDIC Appraisal Federal Register

  • Senators release report on credit reporting agency from data in CFPB’s public complaint database

    Federal Issues

    On April 30, three Democratic Senate Banking Committee members released a report addressing publicly available complaints the CFPB received regarding the 2017 data breach announcement by a national credit reporting agency. In a letter to the CFPB, which accompanied the release of the report, the Senators encouraged the Bureau to “hold [the credit reporting agency] accountable and act quickly and decisively to protection the millions of consumers harmed by the breach.” Additionally, the Senators make a plea for the CFPB to continue to keep consumer complaints public, citing to recent remarks by Mulvaney that the database would soon be removed from public view. According to the report, within six months of the data breach announcement—which reportedly affected 143 million American consumers—the CFPB received over 20,000 complaints against the company. Of the 20,000 complaints, the issues consumers mentioned include (i) “improper use of a credit report after the breach”; (ii) “incorrect information on credit report”; (iii) “[Company]’s inadequate assistance in resolving problems after the breach”; and (iv) “[Company]’s credit monitoring services, fraud alerts, security freezes, and other identity theft protection products.” The report also cites to specific narratives from consumer complaints that were available through the CFPB’s consumer complaint database.

    Federal Issues CFPB Consumer Complaints Data Breach Privacy/Cyber Risk & Data Security Credit Reporting Agency

  • Outdoor advertising company discloses potential FCPA violations

    Financial Crimes

    On April 30, one of the world’s largest outdoor advertising companies, disclosed that it had self-reported potential FCPA violations to the SEC and DOJ. The San Antonio-based company had previously disclosed that Chinese police were investigating “several employees” of its subsidiary for the misappropriation of funds in China. A related internal investigation purportedly found that three unauthorized bank accounts were opened in the name of the subsidiary and “certain transactions were recorded therein.” In the most recent disclosure, the company newly reported that: (i) “discrepancies” related to the misappropriation resulted in more than $10 million in “accounting errors”; (ii) it determined that there was a “material weakness” in the subsidiary’s internal controls over financial reporting, namely “falsification of bank statements and other supporting documentation used to complete bank reconciliations,” “collusion,” and “circumvention of controls”; and (iii) these issues “could implicate the books and records, internal controls and anti-bribery provisions” of the FCPA, making “possible . . . monetary penalties and other sanctions.” The company said it would cooperate with any investigation by the SEC or DOJ.

    Financial Crimes DOJ SEC FCPA China

  • Japanese electronics corporation settles parallel FCPA actions for $280 million

    Financial Crimes

    On April 30, a DOJ deferred prosecution agreement and SEC settlement with Japan-based electronics corporation and a subsidiary were announced, with the company agreeing to pay $280 million in total. The resolutions related to the company’s U.S.-based subsidiary, and allegations that senior management of the subsidiary orchestrated a bribery scheme to help secure over $700 million in business from a state-owned airline, in which the subsidiary paid a Middle East government official nearly $900,000 for a “purported consulting position, which required little to no work,” and concealed the payment “through a third-party vendor that provided unrelated services to [the subsidiary].” The subsidiary is then alleged to have falsely recorded the payments in its books and records, as well as similar payments made to other purported consultants and sales agents in Asia.

    Under the DPA with the subsidiary, they agreed to pay the DOJ a $137.4 million criminal penalty for knowing and willful violations of the FCPA’s accounting provisions. The DOJ gave the subsidiary a 20 percent discount off the low end of the U.S. Sentencing Guidelines fine range because of its cooperation and remediation, which, although untimely in certain respects, did include causing several senior executives who were either involved in or aware of the misconduct to be separated from [the subsidiary] or [the company].” However, because many of the company's remediation efforts were “more recent, and therefore have not been tested,” the deferred prosecution agreement subjects the company to two years of scrutiny by an independent compliance monitor, followed by a year of self-reporting. The SEC‘s simultaneous settlement included violations of the anti-bribery as well as accounting provisions, and the payment of $143 million to the SEC.

    As FCPA Scorecard previously reported, the company disclosed the investigations in February 2017, though they were first reported as early as 2013.

    Financial Crimes DOJ SEC DPA FCPA

  • FHFA issues guidance for assessing mortgage asset credit risk

    Agency Rule-Making & Guidance

    On April 25, the Federal Housing Finance Agency (FHFA) issued advisory bulletin AB 2018-02 to provide guidance for Federal Home Loan Banks (FHL Banks) on the use of models and methodologies when assessing mortgage asset credit risk. The advisory bulletin applies to FHL Banks that acquire Acquired Member Asset loans, mortgage-backed securities (MBS), and collateralized mortgage obligations. Exclusions from application of the guidance include certain mortgage-related assets that are guaranteed by, or operating with the capital support of, the U.S. government, including Fannie Mae and Freddie Mac. When selecting a credit risk model that is “sufficiently robust to produce meaningful loss estimates,” FHFA advises FHL Banks to consider the following when complying with regulatory requirements: (i) mortgage asset credit risk model selection; (ii) macroeconomic stress scenarios; (iii) stress scenario determinations; and (iv) credit enhancements. The guidance permits the exclusion of legacy private label MBS from application of the guidance where the stress loss estimates would be de minimis, and provides methods for determining estimated credit losses associated with securities that cannot be modeled.

    The new guidance supplements general FHFA guidance on model risk management and takes effect January 1, 2019.

    Agency Rule-Making & Guidance FHFA Mortgages FHLB MBS

  • OFAC issues Belarus-related General License 2E

    Financial Crimes

    On April 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License No. 2E (GL 2E) to extend the authorization allowing nine Belarusian entities to enter into transactions otherwise prohibited by Executive Order 13405. GL 2E replaces and supersedes in its entirety General License No. 2D, and authorizes transactions with any entities that are owned 50 percent or more by the nine named entities. All property and interests in property of these entities, if blocked, remain blocked, and U.S. persons must report authorized transactions or any series of transactions exceeding $50,000 to the U.S. Department of State no later than 30 days after execution. The authorization expires on October 30, unless otherwise extended or revoked.

    Visit here for additional InfoBytes coverage on Belarus General Licenses.

    Financial Crimes OFAC Department of Treasury Department of State International Belarus Executive Order

  • Oklahoma law allows lenders to charge convenience fees for electronic payments

    State Issues

    On April 25, the Oklahoma governor signed into law an act that allows lenders to charge borrowers convenience fees for making payments via debit card, electronic funds transfer, electronic checks or other electronic means. SB 1151 provides that the nonrefundable fees shall not exceed the lesser of (i) the actual third party costs incurred by the lender for accepting and processing electronic payments; and (ii) four percent of the electronic payment transaction. Lenders must notify borrowers of the amount of the fee prior to completing a transaction and provide an opportunity to cancel the transaction without a fee. The law takes effect November 1.

    State Issues State Legislation Consumer Lending Electronic Payments Fees

  • District court grants partial summary judgment, rules bank did not violate federal and state fair credit reporting laws

    Courts

    On April 25, the U.S. District Court for the Northern District of California granted a bank’s partial motion for summary judgment, holding that a Fair Credit Reporting Act (FCRA) disclosure and authorization form (disclosure form) completed by the plaintiff as part of the bank’s background check hiring process did not violate federal and state fair credit reporting laws. The plaintiff—who brought the proposed class action suit following the bank’s decision not to hire plaintiff following an offer of employment that was contingent upon a satisfactory background check—asserted claims under the FCRA, the California Investigative Consumer Reporting Agencies Act (ICRA), and the California Consumer Credit Reporting Agencies Act (CCRA), including that (i) the disclosure form was not a standalone document; (ii) the disclosure did not accurately identify the investigative consumer reporting agency; and (iii) the bank failed to comply with CCRA disclosure requirements.

    Addressing whether the disclosure form, which “appeared as a separate and distinct web page separated from the rest of the documents,” violated the FCRA, the court ruled that because it “was a stand-alone document that contained no extraneous information or liability waiver” it was in compliance. The court also determined that the bank did not violate the ICRA because it was only required to disclose the agency it engaged to provide an investigative consumer report, not the various sources the agency itself may have used when conducting its investigation. Finally, the court ruled that the plaintiff’s argument that the disclosure form failed to comply with the CCRA lacked merit because—although the bank could not apply an exemption under state law to the section allegedly violated—the bank’s disclosure form complied with the CCRA’s disclosure requirements, and furthermore, the bank was not required to disclose the reasons for requesting the report nor the “various repositories” of information the disclosed source used when compiling the report.

    Courts State Issues FCRA Credit Reporting Agency Disclosures

  • NCUA issues final rule regarding capital planning and stress testing

    Agency Rule-Making & Guidance

    On April 25, the National Credit Union Administration (NCUA) issued a final rule in the Federal Register amending its capital planning and stress testing regulations for federally insured credit unions with assets of at least $10 billion after considering comments received following a notice for proposed changes last October. (See previous InfoBytes coverage here.) Among other things, the final rule reduces regulatory burden and improves efficiency by allowing covered credit unions to conduct their own stress tests in accordance with NCUA requirements and report the results in their capital plan submissions. The final rule is effective June 1.

    Agency Rule-Making & Guidance NCUA Stress Test

  • Federal Reserve requests comments on proposal addressing capital plan and stress test rules

    Agency Rule-Making & Guidance

    On April 25, the Federal Reserve Board (Fed) published a request for comments in the Federal Register on a proposal to amend the Fed’s capital plan rule, capital rule, and stress testing rules by integrating the rules to simplify the capital regime. Under the proposed rule, a financial institution’s required stress capital buffer and stress leverage buffer would be established by the Fed’s supervisory stress test. The stress capital buffer requirement would replace the existing, static 2.5 percent of risk-weighted assets portion of the capital conservation buffer requirement under the standardized approach of the capital rule. The proposal—which would take effect December 31 with financial institutions’ first set of buffer requirements generally going into effect on October 1, 2019—would apply to bank holding companies with total consolidated assets of $50 billion or more, as well as U.S. intermediate holding companies of foreign banking organizations established pursuant to the Fed’s Regulation YY. Community banks, state member banks or saving and loan companies, and bank holding companies that do not meet the required asset threshold would be exempt. All comments must be received by June 25.

    Agency Rule-Making & Guidance Federal Reserve Federal Register Stress Test

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