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FFIEC releases customer due diligence and beneficial ownership examination procedures
On May 11, the Federal Financial Institutions Examination Council released updated examination procedures for the Financial Crimes Enforcement Network's (FinCEN) final rule, “Customer Due Diligence Requirements for Financial Institutions” (CDD rule). Compliance with the CDD rule became mandatory on May 11. The updated customer due diligence exam procedures were developed in close collaboration with FinCEN and replace those in the current Bank Secrecy Act/Anti-Money Laundering Examination Manual. Additionally, a new set of exam procedures address the CDD rule’s beneficial ownership requirements.
According to an OCC bulletin released the same day, the examination procedures reflect federal and state banking agencies’ “ongoing commitment to examine financial institutions for compliance with the Bank Secrecy Act . . . in accordance with uniform standards and principles.”
See here for continuing InfoBytes coverage of the CDD rule.
OCC updates Comptroller’s Handbook to include Military Lending Act booklet
On May 11, the OCC issued the “Military Lending Act” (MLA) booklet of the Comptroller’s Handbook. According to the announcement, the booklet reflects the 2015 Department of Defense amendments, as well as the interpretive guidance published in 2016 and updated in 2017 (covered by InfoBytes here and here), and applies to the examinations of OCC-supervised institutions that establish consumer credit products covered by the MLA. The booklet includes, among other things, (i) rules for determining fees and charges included in the calculation of the military annual percentage rate (MAPR); (ii) rules for calculating the MAPR; (iii) required disclosures to be provided to covered borrowers; and (iv) consumer credit limitations for covered borrowers.
HUD announces plan to seek public comment on Disparate Impact Regulation
On May 10, the Department of Housing and Urban Development announced its intention to seek public comment on whether the 2013 Disparate Impact Regulation (Regulation), which provides a framework for establishing legal liability for facially neutral practices that have a discriminatory effect under the Fair Housing Act (FHA), is consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Covered by a Buckley Sandler Special Alert.) The Supreme Court upheld the use of a disparate impact theory to establish liability under the Fair Housing Act, but according to HUD’s announcement, the Court only referenced the Regulation in its ruling but did not directly rule upon it.
As previously covered by InfoBytes, in October 2017, the Treasury Department called on HUD to reconsider the Regulation as it relates to the insurance industry – specifically, to homeowner’s insurance.
House approves repeal of CFPB’s 2013 indirect auto guidance
On May 8, the House voted to repeal, under the Congressional Review Act (CRA), CFPB Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). As previously covered by InfoBytes, the Senate approved the resolution on April 18 and the White House issued a Statement of Administrative Policy supporting the Senate resolution; it is expected that President Trump will sign the measure soon.
If the measure is successful, this would be the first time that Congress has used the CRA to repeal a regulatory issuance outside the statute’s general 60-day period. In December 2017, the Government Accountability Office (GAO) issued a letter to Senator Pat Toomey (R-Pa) stating that “the Bulletin is a general statement of policy and a rule” that is subject to override under the CRA, which allowed for the Senate to introduce the resolution measure years after the CFPB released the Bulletin.
VA updates Disaster Loan Modification guidance regarding re-amortization
On May 8, the Department of Veterans Affairs (VA) released clarification of its Disaster Loan Modification guidance in circular 26-17-39. (Previously covered by InfoBytes here.) The revised circular now allows a servicer to re-amortize if necessary to meet investor guidelines, so long as the new monthly payment is the same or less than the current.
Find more InfoBytes disaster relief coverage here.
7th Circuit affirms RESPA requires actual damages under QWR rules
On April 10, the U.S. Court of Appeals for the 7th Circuit affirmed the district court’s dismissal of a RESPA action because the plaintiff did not properly establish actual damages arising out of her non-receipt of a response to her Qualified Written Request (QWR) to the bank. The opinion explains that the plaintiff’s property was vandalized in 2014 and the bank received insurance money to escrow for repairs. In 2015, the bank released funds for the repairs and subsequently, the plaintiff’s contractor abandoned the job; the property was then vandalized twice more. On September 5, 2015, the plaintiff sent the bank a letter asking about the status of her loan, specifically regarding how insurance money was being handled. The bank sent a response to the letter on September 25, 2015, but the plaintiff alleges she never received the bank’s response and contends the bank’s failure to respond to her QWR caused her emotional distress and contributed to her divorce. The 7th Circuit agreed with the district court that the plaintiff failed to establish how a response to her QWR would have resolved her financial inability to make the required repairs since RESPA does not require the bank to pay money in response to a written request. Moreover, the Appeals Court held that some of the plaintiffs asserted injuries, such as her divorce, are outside the scope of RESPA.
OFAC adds Iranians to Specially Designated Nationals List
On May 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) made additions to the Specially Designated Nationals List under the Iranian Financial Sanctions Regulations and Global Terrorism Sanctions Regulations. OFAC’s additions to the designations identify nine individuals and entities that materially assisted in converting millions of U.S. dollars to fund the Islamic Revolutionary Guard Corps-Qods Force’s malignant activities. As a result, all assets belonging to the identified individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC, and U.S. persons are generally prohibited from dealing with them.
Brother of Honduran government official indicated for laundering bribes in New Orleans
On May 1, the Department of Justice announced the indictment of a Honduran national for trying to launder more than $1.3 million in bribes that had been paid to his brother, the former Executive Director of the Honduran Institute of Social Security. The bribes had been paid by two Honduran businessmen for the benefit of the Executive Director. The indictment alleges that he conspired with his brother to launder the funds through international wire transfers and the purchase of real estate in the New Orleans area. The indictment further alleges that he also used his brother’s high-ranking position to profit from lucrative Honduran government contracts and that he impeded an official proceeding by lying to the U.S. government about the source of the funds. He was arrested on the same day the indictment was announced.
DOJ issues new policy against “piling on” in corporate enforcement, FCPA cases
On May 9, the DOJ issued a new policy to discourage “piling on” in corporate enforcement cases, including those involving the FCPA. The new policy directs the DOJ to “consider the totality of fines and penalties” being imposed by the DOJ and other law enforcement agencies on a company for the same misconduct. In a speech delivered to a New York City bar organization, Deputy Attorney General Rod Rosenstein described the new policy as encouraging “coordination among Department components and other enforcement agencies” with the aim of “avoiding unfair duplicative penalties.”
The new policy contains four main elements. First, the DOJ should not threaten criminal prosecution solely to persuade a company to pay a larger settlement in a civil case. Second, DOJ components must coordinate with one another to achieve an overall equitable result. Third, the DOJ should coordinate with other federal, state, local, and foreign enforcement authorities. Finally, the DOJ should consider several factors, including the egregiousness of the wrongdoing and the adequacy of the company’s cooperation with the DOJ, in determining whether multiple penalties serve the interests of justice in a particular case.
Rosenstein specifically noted in his address that the DOJ’s “FCPA Unit [had recently] announced its first coordinated resolution with . . . Singapore.” See FCPA Scorecard post. The new policy does not prohibit the DOJ from considering additional remedies in “appropriate circumstances.”
CFPB Succession: Bureau dismantles Office for Students; no longer plans student loan regulations; and more
On May 9, according to multiple reports, the CFPB internally announced that the Bureau would eliminate the Office of Students & Younger Consumers and move its staff into the Office of Financial Education as part of acting Director Mulvaney’s agency reorganization. The Bureau will continue to have a Student Loan Ombudsman position, which is required by the Dodd-Frank Act. It is also reported that the Bureau intends to create a new “Office of Cost Benefit Analysis” and rename certain existing offices. As previously covered by InfoBytes, acting Director Mulvaney plans to move the Office of Fair Lending and Equal Opportunity from the Division of Supervision, Enforcement and Fair Lending to the Office of the Director, in order to focus on “advocacy, coordination and education.” Day-to-day responsibility for enforcement and supervision oversight will remain in the renamed Division of Supervision and Enforcement (SE).
The Office of Management Budget (OMB) released the CFPB’s Spring 2018 rulemaking agenda, which no longer includes “Student Loan Servicing” as a Long-Term Action. In previous agendas, the Bureau described its plan for Student Loan Servicing as “The CFPB will continue to monitor the student loan servicing market for trends and developments. As this work continues, the Bureau will evaluate possible policy responses, including potential rulemaking. Possible topics for consideration might include specific acts or practices and consumer disclosures.” In addition to dropping Student Loan Servicing, the Spring 2018 agenda also no longer lists plans for Supervision of Larger Participants in Markets for Personal Loans, Overdraft Services, or Submission of Credit Card Agreements under TILA (more information on the CFPB’s previous plans for these rules can be found here).
As expected, the Spring 2018 agenda also included two new additions to the Proposed Rule Stage:
- HMDA. The Bureau has previously announced it intends to engage in a broader rulemaking to (i) re-examine the criteria determining whether institutions are required to report data; (ii) adjust the requirements related to reporting certain types of transactions; and (iii) re-evaluate the required reporting of additional information beyond the data points required by the Dodd-Frank Act (InfoBytes coverage here). The Bureau indicates it expects a Notice of Proposed Rulemaking (NPRM) on any changes to the HMDA rule before 2019.
- Payday, Vehicle Title, and Certain High-Cost Installment Loans. In January, the Bureau announced the intention to reconsider the 2017 payday rule (covered by InfoBytes here). The OMB agenda indicates the Bureau expects a NPRM by February 2019.
Notably, the CFPB continues to include “Debt Collection Rule” in a Proposed Rule Stage, as it has in previous agenda iterations. However, the Bureau has extended the deadline for its NPRM to February 2019.