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FinCEN Warns of Fraudulent Disaster Relief Schemes
On October 31, the Financial Crimes Enforcement Network (FinCEN) issued an advisory to financial institutions to warn of the potential for fraudulent activity related to recent disaster relief efforts. The advisory cautions financial institutions to pay particularly close attention to benefits fraud, charities fraud, and cyber-related fraud. Accordingly, it lists several red flags to assist in spotting these fraudulent schemes, including, among others:
- The cashing or depositing of multiple emergency assistance checks by the same individual;
- The payee organization having a name similar to, but not identical to, a well-known or reputable charity; or
- The use of money transfer services to receive donations.
The advisory also reminds financial institutions to file a Suspicious Activity Report (SAR) if there is reason to believe any fraudulent activity may be taking place.
Find more InfoBytes disaster relief coverage here.
Third Treasury Report Calls on HUD to Reconsider Application of Disparate Impact Rule to the Insurance Industry
On October 26, the U.S. Treasury Department published a report outlining a number of recommendations for ways to manage systemic risk primarily within the asset management and insurance industry. A section of the report, however, also discusses HUD’s potential application of the disparate impact rule to the insurance industry—specifically related to homeowner’s insurance. The report, “A Financial System That Creates Economic Opportunities—Asset Management and Insurance,” is the third in a series of four the Treasury plans to issue in response to President Trump’s Executive Order 13772 (EO), which mandated a review of financial regulations for inconsistencies with promoted “Core Principles.” (See Buckley Sandler Special Alert on the EO here and InfoBytes coverage on the first two reports here.)
HUD is authorized to adjudicate housing discrimination claims and issue rules relating to the Fair Housing Act. According to the report, Treasury recommends that HUD reconsider the use of the disparate impact theory to the insurance industry. The report notes a number of problems and challenges that would arise from applying disparate impact to the insurance industry. In particular, the report identifies potential challenges because (i) “state insurance regulations ordinarily prohibit the consideration of protected characteristics in the evaluation and pooling of risk” and at least one state expressly prohibits the collection of this data; (ii) the rule could impose unnecessary burdens on insurers and lead to actions that are not actuarially sound in an effort to avoid underwriting practices that may result in disparate outcomes; and (iii) it may be inconsistent with the McCarran-Ferguson Act and other existing state laws.
The report also recommends, among other things, that Congress clarify the “business of insurance” exception that generally excludes these services from the CFPB’s jurisdiction. The report recommends clarification to this exception to eliminate uncertainty about the CFPB’s jurisdiction and the potential overlap between the Bureau and state insurance regulators. A fact sheet accompanying the report further highlights Treasury’s recommendations to evaluate systemic risk, streamline regulations, rationalize international engagement, and promote economic growth.
OCC Presents First National Bank Charter Since the Financial Crisis
On October 27, Acting Comptroller of Currency, Keith A. Noreika, issued the first full-service national bank charter since the financial crisis to a banking institution in Florida. The institution is also the first de novo national bank and de novo approved for federal deposit insurance in Florida since the financial crisis. While presenting the charter, Noreika commented on the rarity of de novo banks and encouraged better efficiency in the process for their establishment in order to, “create more economic opportunity for consumers, businesses, and communities across the nation.”
As previously covered by InfoBytes, the House Financial Services Committee held a hearing in March related to the “de novo drought” and to examine the impact the Dodd-Frank Act has had on the creation of new financial institutions.
Alabama AG Announces Permanent Injunction Against Credit Repair Company
On October 30, Alabama Attorney General Steve Marshall announced that a state court granted a permanent injunction against a credit repair company and its owner/operators for allegedly engaging in deceptive and illegal credit repair practices. According to the Office of the Attorney General, defendants allegedly (i) used deceptive advertising that guaranteed improved credit scores and made various false promises; (ii) charged consumers before services were completed or charged rates different from those that were advertised; (iii) failed to allow consumers to cancel the service within three days as required by federal law governing credit repair businesses; and (iv) indiscriminately disputed negative credit report items--a practice known as “jamming”—to create the illusion of improved credit and a temporary rise in credit score. The order permanently closes the company, bans the defendants from engaging in any credit repair or consumer finance activity, and prohibits defendants from owning or managing any business in Alabama or involving Alabama consumers.
NCUA Issues Final Rules Regarding Appeals Procedures; Proposes Rule Regarding Capital Planning and Stress Testing
On October 30, the National Credit Union Administration (NCUA) issued a final rule expanding the number of material supervisory determinations that can be appealed to the NCUA Supervisory Review Committee (SRC). Under the rule, federally insured credit unions (FICUs) may appeal examination-related determinations that may significantly affect capital, earnings, operating flexibility, or level of supervisory oversight. The effective date for the final rule is January 1, 2018.
On October 30, the NCUA also proposed changes to rules covering capital planning and stress testing requirements for covered credit unions (see previously InfoBytes coverage on proposed changes to stress tests by other federal agencies). The proposal would allow FICUs with over $10 billion in assets to conduct their own stress tests in accordance with NCUA requirements and report the results in their capital plan submissions. The specific testing requirements are tiered and dependent on various asset size and capital planning cycles. Comments about the NCUA proposed rule must be received on or before December 29.
CFPB Releases Web-Based Tool to Track Trends in Mortgage Delinquency Rates
On October 30, the CFPB announced the release of a “Mortgage Performance Trends” tool that tracks delinquency rates across the nation. The tool is comprised of data from the National Mortgage Database (jointly launched by the CFPB and the FHFA in 2012) and tracks monthly changes in delinquencies in two categories – borrowers who are 30-89 days delinquent and borrowers who are 90 or more days delinquent. The tool is interactive and contains national-level data as well as data for all 50 states and the District of Columbia. According to the Bureau’s press release, the tool shows that national mortgage rates of serious delinquency rates are at their lowest level since the financial crisis.
New York AG, Credit Card Servicer Enter Into Agreement to Refund Credit Card Fees
On October 30, New York Attorney General Eric T. Schneiderman announced an agreement with a credit card servicer and marketer to resolve allegations that the servicer failed to disclose upfront fees in its direct mail marketing materials. According to Attorney General’s office, the servicer failed to disclose a $125 “off-the-top first year fee” for a low-limit card product, which effectively reduced the card’s credit limit from $500 to $375. Under the terms of the agreement, the servicer is required to improve the disclosures in its direct mail marketing and issue refunds of the $125 fee to affected New York consumers.
CFPB Releases 50-State Snapshots of Student Debt, Servicemember Complaints
On October 27, the CFPB published a blog post highlighting the Bureau’s October 20 “50-state snapshot of student debt,” which illustrates how the “more than $1.4 trillion in student loan debt” is spread across the country. The snapshot also provides data on the more than 50,000 student loan complaints and 10,000 debt collection complaints received by the CFPB through September 2017 (over the course of 5 years). Specifically, for each state, the snapshot provides (i) the “total outstanding student loan debt balance as of 2016”; (ii) the “total student loan complaints handled”; (iii) the “change in volume of student loan complaints handled”; (iv) the “total debt collection complaints handled related to student loans”; and (v) the “change in volume of debt collection complaints handled related to student loans.” The blog post also provides tips and tools intended to assist student loan borrowers navigate problems with their loans.
On October 31, the CFPB published a blog post releasing the Bureau’s “50 state snapshot of servicemember complaints,” which provides state-specific data on the over 91,000 complaints received from servicemembers, veterans, and their families since 2011 (which the CFPB collectively defines as, “servicemember”). Specifically, for each state, the snapshot provides (i) the total number of servicemember complaints handled since 2011, (ii) distribution of complaints by product for both servicemembers and non-servicemembers; (iiI) distribution of complaints by branch of service; and (iv) a visual representation of complaints by zip code.
OCC Updates Guidance on Federal Branch Supervision and Enforcement Action Policies and Procedures
On October 27, the OCC issued Bulletin 2017-46, updating guidance related to federal bank branch supervision and licensing. The OCC issued a revised version of its “Federal Branches and Agencies” booklet, which clarifies the process for reviewing and evaluating license conversion applications by a state-licensed branch or agency operated by a foreign bank to a federal branch or agency. Bulletin 2017-46 also replaced the 2014 agency paper entitled, The OCC’s Approach to Federal Branch and Agency Supervision. The paper outlines the OCC’s framework and considerations related to (i) the regulatory approach and supervision process for large and complex federal branches and agencies (not community banks), and (ii) the general overview of the filing requirements for applications, notices, and licenses, as well as the review and decision process.
On October 31, the OCC issued Bulletin 2017-48 to update its policies and procedures regarding bank enforcement actions. The updates are designed to provide more clarity and consistency in the implementation, communication and monitoring of enforcement actions. In particular, the updates are intended to, among other things, better describe the relationship between violations, concerns identified in matters requiring attention, and enforcement actions, emphasize communication with bank management and personnel and OCC supervisors, and enhance standard processes for tracking and resolving corrective actions. The updates are effective December 1, and are reflected in its “Bank Supervision Process,” “Community Bank Supervision,” “Federal Branches and Agencies Supervision,” and “Large Bank Supervision” booklets of the Comptroller’s Handbook.
District of Columbia Mayor Signs Emergency Legislation Temporarily Prohibiting Credit Freeze Fees
On October 23, District of Columbia Mayor Muriel Bowser signed emergency legislation (Act 22 155) that prohibits credit reporting agencies (CRAs) from charging consumers fees for security credit freezes. The Credit Protection Fee Waiver Emergency Amendment Act of 2017 requires CRAs to provide security freeze services and one-time reissuances of passwords or PINs to consumers for free, but permits charging up to $10 for subsequent instances of password or PIN requests. The Act took effect immediately and will remain in effect for a maximum of 90 days.
As previously covered in InfoBytes, a coalition of state attorneys general recently petitioned two major CRAs to cease charging fees for credit freezes.