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NCUA Issues Proposed Rule to Revise Advertising Requirements for Federally Insured Credit Unions
On October 4, the National Credit Union Administration (NCUA) issued proposed changes to the advertising rule requiring federally insured credit unions (FICUs) to use NCUA’s “official advertisement statement” when advertising products and services. The changes will include: (i) adding a fourth advertising option for FICUs, “Insured by NCUA”; (ii) expanding the current advertising statement requirement exemption concerning certain radio and television advertisements; and (iii) eliminating a requirement that NCUA’s official advertising statement must be included on statements of condition required to be published by law. Comments must be received by December 4, 2017.
OFAC Settles Alleged Sudanese Sanction Violations with Connecticut-Based Paper Company
On October 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it had reached a $372,465 settlement with a Connecticut-based paper company for three alleged violations of Sudanese Sanctions. OFAC asserted that the company “facilitated the sale and shipment of . . . Canadian-origin paper from Canada to Sudan” in April and December 2013. OFAC alleged that each instance of this conduct, which the company did not voluntarily self-disclose, violated OFAC’s Sudanese Sanctions Regulations, 31 C.F.R. part 538. Had the company not settled, OFAC determined that civil monetary penalties ranged from approximately $445,000 to $853,746. In establishing the penalty, OFAC considered that the company: (i) “exhibited reckless disregard for U.S. sanctions requirements by failing to exercise a minimal degree of caution or care with regard to the apparent violations”; (ii) “attempted to conceal the ultimate destination of the goods from its bank”; (iii) knew that supervisory or managerial personnel “had actual knowledge of and were actively involved in, or had reason to know of, the conduct that led to the apparent violations”; (iv) is “sophisticated” but had a non-existent, inadequate compliance program; and (v) failed to initially cooperate with OFAC’s investigation by submitting “materially inaccurate, incomplete, and/or misleading information.” As for mitigating factors, OFAC determined that (i) the company has no prior sanctions history with OFAC, and (ii) the company took remedial action by implementing an OFAC compliance program.
OCC Rescinds Guidance on Deposit Advance Products, Cites Overlap With CFPB Payday Rule
On October 5, the OCC rescinded its 2013 Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products and accompanying Bulletin 2013-40, effective immediately. The rescission, announced so as to avoid “potentially inconsistent regulatory direction,” comes as a reaction to the CFPB’s final rule announced October 5 concerning payday loans, vehicle title loans, deposit advance products, and longer-term balloon loans. (See previous InfoBytes coverage here.) Acting Comptroller of the Currency, Keith A. Noreika, acknowledged that the changing regulatory and marketplace landscape has made it difficult for banks to serve the demand for short-term, small-dollar credit, and while the OCC may issue new guidance at a later date, it will continue to ensure that banks that choose to offer these types of products are compliant with the “basic principles of prudent underwriting and risk management as well as fair and inclusive treatment of customers.”
SEC Approves FINRA’s Streamlined Securities Competency Exams for Industry Professionals and Consolidated Registration Rules
On October 5, the Financial Industry Regulatory Authority (FINRA) announced SEC approval of its proposal to consolidate certain registration rules and streamline competency exams for professionals entering or re-entering the securities industry. Under Regulatory Notice 17-30, the NASD and NYSE incorporated registration rules are now consolidated as “FINRA rules” to provide member firms “consistency and uniformity.” The rules will allow member firms to permissively register all associated persons of a firm and establish waiver programs for registered employees who “move to a financial services industry affiliate of a member firm.” Further, as previously discussed in an InfoBytes post concerning the proposed rule, FINRA’s new streamlined examination structure is designed to eliminate duplicative testing and remove outdated categories. The changes include a general knowledge examination that all new representative-level applicants will be required to pass, in addition to a revised qualification examination appropriate to their job functions. Changes to FINRA’s continuing education requirements have also been made. The rule takes effect October 1, 2018.
FDIC Releases October List of CRA Compliance Examinations
On October 5, the FDIC published its monthly list of state nonmember banks recently evaluated for CRA compliance. The list reports CRA evaluation ratings assigned to institutions in July 2017 as required by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Of the 59 banks evaluated, six were rated “Outstanding,” 52 received a “Satisfactory” rating, and one was rated “Needs to Improve.” Monthly lists of all state nonmember banks and their evaluations that have been made publicly available may be accessed through the FDIC’s website.
Buckley Sandler Special Alert: CFPB Issues Rule Regarding Payday, Title, Deposit Advance, and Certain Other Installment Loans
On October 5, 2017, the CFPB published its final rule (the “Rule”) addressing payday loans, vehicle title loans, and certain other extensions of credit (collectively, “covered loans”). Among the Rule’s key provisions, it requires lenders to determine a borrower’s ability to repay for “covered short-term loans” and “covered longer-term balloon-payment loans,” but not other covered loans. Thus, unlike the CFPB’s proposed rule, the Rule does not require an ability to repay determination for longer-term loans that are not balloon loans. For certain covered short-term loans, lenders may provide a principal payoff option in lieu of conducting a full ability-to-repay analysis. Like the CFPB’s proposed rule, the Rule caps at three the number of covered loans that may be made in quick succession. The Rule also limits certain payment collection practices for all covered loans, including non-balloon loans.
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Click here to read full special alert.If you have questions about the rule or other related issues, please visit our Consumer Financial Protection Bureau practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.
DOJ Civil Rights Division Issues Annual Report to Congress
In September, the DOJ Civil Rights Division issued its Annual Report to Congress regarding its 2016 activities related to the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Servicemembers Civil Relief Act (SCRA). Highlights include:
- Fair lending: The DOJ opened 18 fair lending investigations; filed seven lawsuits and settled six of them; and obtained almost $37 million in relief. At the end of 2016, the DOJ had 33 open fair lending investigations.
- Servicemembers Civil Relief Act: In November 2016, the DOJ announced a new pilot program funding additional attorneys and resources to support enforcement efforts related to the SCRA. In addition, the DOJ entered into two SCRA settlements, initiated a new lawsuit (subsequently settled in 2017), and continued to support distribution of compensation under the National Mortgage Settlement.
- ECOA/FHA Referrals: The DOJ received 22 ECOA and FHA referrals in 2016; opened eight investigations from these referrals; and noted that all but one of the lawsuits filed by the Civil Rights Division in 2016 were based in part on referrals.
Fannie Mae Updates Servicing Guidelines for Multifamily Residences
On September 29, Fannie Mae released updates to its servicing guidelines for multifamily residences, effective October 2. Fannie Mae is updating provisions concerning Asset Management and Watchlist Management. Changes include:
- removing color descriptions that previously corresponded to defined Mortgage Loan rating classifications;
- updating the rating classification descriptions and/or characteristics to conform to regulatory definitions for Pass/Watch and Special Mention Assets; and
- requiring Servicers provide an explanation and status of the issues causing an Asset to be reported on the Servicer Watchlist.
Trade Groups Lobby for Exemption of Small Independent Mortgage Lenders from CFPB Examinations
On September 18, the Community Home Lenders Association and the Community Mortgage Lenders of America sent a joint letter to Treasury Secretary Mnuchin urging relief for smaller independent mortgage bankers from CFPB supervision, enforcement, and vender management audits. Specifically, the trade groups requested support for legislation that would help eliminate the risk of enforcement actions from the CFPB for smaller nonbanks. The letter cites the conclusions drawn in the Treasury Report on financial regulations, released in June (this report was a product of the February Executive Order, covered by a Buckley Sandler Special Alert). Of particular interest from the trade groups was the report’s conclusion that Congress should repeal the CFPB’s supervisory authority and return the supervision of nonbanks to state regulators.
FHFA Director Provides Update on GSE Conservatorship to House Financial Services Committee
On October 3, the Director of the Federal Housing Finance Agency (FHFA), Melvin L. Watt, testified at a hearing before the House Financial Services Committee. The testimony provided an update on FHFA’s conservatorship of Fannie Mae and Freddie Mac (GSEs) and Watt’s views on housing financing reform. In his prepared remarks, Watt informed the Committee that the GSEs’ financial performance has improved significantly over the course of the FHA’s conservatorship and that the GSEs continue to provide liquidity to the housing finance market. Nonetheless, Watt stressed that in less than three months, both Fannie Mae and Freddie Mac’s taxpayer-financed capital buffer will run out, and any loss the GSEs experience after that would require additional money from taxpayers. Watt warned that any additional draw of taxpayer support could erode investor confidence in the GSEs, which could result in reduced liquidity in the mortgage-backed securities market and increase the cost of credit for borrowers.