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FDIC Releases List of Enforcement Actions Taken Against Banks and Individuals in March 2017
On April 28, the FDIC released its list of 24 administrative enforcement actions taken against banks and individuals in March. Among the consent orders on the list are civil money penalties for violations of the Food Disaster Protection Act of 1973 and its flood insurance requirements. An additional six actions listed relate to unsafe or unsound banking practices and breaches of fiduciary duty, including five removal and prohibition orders. There are no administrative hearings scheduled for May 2017. The FDIC database containing all of its enforcement decisions and orders may be accessed here.
NCUA Collects $445 Million from International Bank Due to Faulty Mortgage-Backed Securities, Recovers Nearly $4.7 Billion to Date
On May 1, the National Credit Union Administration (NCUA) announced it has collected $445 million from a Switzerland-based bank over claims stemming from losses borne by two liquidated credit unions related to faulty mortgage-backed securities they bought from the bank. As part of the settlement, NCUA will dismiss its 2012 lawsuit filed in the U.S. District Court in Kansas on behalf of the credit unions and brought against the bank for violations of federal and state laws through its alleged misrepresentations in the sale of mortgage-backed securities. Notably, the bank is not admitting fault as part of the deal. The $445 million in recoveries will be used to pay claims against the liquidated corporate credit unions, “including those of the Temporary Corporate Credit Union Stabilization Fund.” “This latest recovery . . . provide[s] a measure of accountability for the firms that sold faulty securities to the corporate credit unions,” acting NCUA Chairman Mark McWatters said. “It remains incumbent on NCUA to provide transparency in terms of the settlements, the legal fees and other costs that go with them, and how these affect the Stabilization Fund.” To date, NCUA’s recoveries from financial institutions alleged to have sold faulty securities to five corporate credit unions, leading to their collapse, have reached nearly $4.8 billion.
CFPB Releases “Core Outcomes” for Financial Empowerment Programs
On April 27, the CFPB announced in a blog post its release of a core set of financial outcomes designed to help human services organizations integrate financial empowerment and capability initiatives into their programs. Strategies include implementing financial education tools and financial counseling or coaching. In its April report, Tracking Success in Financial Capability and Empowerment Programs, the Bureau identified the following five core outcomes to help consumers improve their financial capabilities: (i) planning and goals; (ii) savings; (iii) bill payment; (iv) credit profile; and (v) financial well-being. According to the report, which assists the financial empowerment field in encouraging commonality in outcomes, core outcomes are designed to:
- “help inform and guide service delivery organizations and those who design, fund, or evaluate service programs as they assess or document the value of integrating financial capability and empowerment strategies into the delivery of human services programs”;
- “provide a suggested core set of common outcomes to measure for the financial empowerment field”;
- “augment, not displace, current programmatic outcomes and accommodate a broad range of different program types”; and
- “help provide consistency across programs by creating a common framework and language for demonstrating success for the provision of financial empowerment services as an element of other human services programs.”
According to the Bureau’s Office of Financial Empowerment, it began identifying common core outcomes with input from multiple financial empowerment practitioners and researchers to “improve the financial well-being of “lower-income and economically vulnerable consumers.”
CFPB Releases Report on Diversity and Inclusion in the Mortgage Industry, Banking Agencies Attend Roundtable Meeting
On April 27, the Consumer Financial Protection Bureau published its report summarizing strategies intended to promote diversity and inclusion by mortgage industry participants. The report, Diversity and Inclusion in the Mortgage Industry: Readout from an Opening Roundtable, is the result of the Bureau’s collaboration with the financial services industry. The roundtable meeting—led by the Bureau’s Office of Minority and Women Inclusion (OMWI)—convened representatives from the mortgage industry, nonbank financial companies, and OMWI staff from the OCC, FDIC, Federal Reserve, and FHFA. OMWI was a created by Section 342 of the Dodd-Frank Act and charges directors with “increasing diversity in agency programs and contracts, and assessing diversity policies and practices of entities regulated by the agency.” The report highlights issues raised by roundtable participants and stresses the need to develop a “strong business case for diversity and inclusion.” The Bureau’s position on the strategies and practices discussed include the following:
- promoting diversity and inclusion strengthens organizations and improves overall performance;
- building in diversity and inclusion as “fundamental principles” and taking a “tone from the top” approach highlights the importance of leadership buy-in and accountability;
- boosting diversity and inclusion through the recruitment, hiring, retention, and advancement of personnel creates opportunities for more diverse viewpoints;
- promoting a more diverse workforce and tailoring products to the needs of different consumers fosters a greater understanding of the needs of a more diverse customer base; and
- understanding the importance of data collection and analysis supports the business case for diversity.
Treasury Announces FSOC Executive Session on May 8
Earlier this week, the Treasury Department announced that on Monday, May 8, Secretary Mnuchin will preside over an executive session of the Financial Stability Oversight Council (FSOC). According to a Treasury Department press release, the preliminary agenda includes:
- a discussion of the April 21 Presidential Memorandum on Council designations;
- an update on the annual reevaluation of the designation of a nonbank financial company;
- a discussion of interagency regulatory collaboration and the Feb. 3 Executive Order on core principles for financial regulation;
- a discussion of the FSOC’s 2017 Annual Report; and
- an update on bank holding companies’ living wills and resolution planning.
Consistent with FSOC’s transparency policy, the meeting may be made available via live webcast and/or can be viewed after it occurs. Meeting minutes for the most recent Council meeting are generally approved at the next Council meeting and posted online soon afterwards.
Meeting minutes for past Council meetings are available here.
Readouts for past Council meetings are available here.
Former Guinean Mining Minister Convicted on Bribery and Money Laundering Charges
A former Guinean mining minister was found guilty earlier this week on bribery and money laundering charges following a seven-day jury trial in Manhattan federal court. He was charged with receiving and laundering $8.5 million in bribes allegedly for securing mining rights for two Chinese companies.
The conviction came one day after the former minister took the stand in his own defense and admitted to lying to banks about his status as a government official, as well as failing to report the payments on his IRS tax return.
The conviction also follows other notable enforcement actions involving the mining industry in the Republic of Guinea. Earlier this year, the SEC charged former asset management executives with bribing government officials across Africa to secure mining deals, including in Guinea.
Following Hearing, House Financial Services Committee Chairman Formally Introduces Financial CHOICE Act of 2017
On April 26, the House Financial Services Committee held a hearing to discuss The Financial CHOICE Act – a GOP proposal to “reform the financial regulatory system” that was initially introduced and considered, though differing in a number of respects from the current version, but not adopted in the last Congress. The hearing debated the merits of a discussion draft, which was released on April 19 by Committee Chairman Jeb Hensarling (R-TX). Shortly after Wednesday’s hearing, Chairman Hensarling formally introduced H.R. 10, The Financial CHOICE Act of 2017. An Executive Summary of the proposed legislation has also been released.
The April 26 hearing – a video of which can be accessed here – included testimony from the following witnesses:
- Mr. Peter J. Wallison, a Senior Fellow and Arthur F. Burn Fellow, Financial Policy Studies with the American Enterprise Institute
- Dr. Norbert J. Michel, a Senior Research Fellow, Financial Regulations and Monetary Policy, with the Heritage Foundation
- The Honorable Michael S. Barr, a Professor of Law at University of Michigan Law School
- Mr. Alex J. Pollock, a Distinguished Senior Fellow with the R Street Institute
- Dr. Lisa D. Cook, an Associate Professor of Economics and International Relations at Michigan State University
- Ms. Hester Peirce, a Director in the Financial Markets Working Group and Senior Research Fellow at the Mercatus Center at George Mason University
- Mr. John Allison, Former President and Chief Executive Officer with the Cato Institute
On April 28, Democrats held a separate hearing pursuant to Clause (d)(5) of Rule 3 of the Committee rules, which entitles members of the minority party to call its own hearing on any matter that is the subject of a majority hearing. The second hearing day – a video of which can be accessed here – included testimony from the following witnesses:
- The Honorable Elizabeth Warren, United States Senator
- Rohit Chopra, Senior Fellow, Consumer Federation of America
- Corey Klemmer, Corporate Research Analyst, Office of Investment, AFL-CIO
- Rev. Willie Gable, Pastor, National Baptist Convention USA, Inc.
- John C. Coffee Jr., Adolf A. Berle Professor of Law, Columbia University
- Rob Randhava, Senior Counsel, Leadership Conference on Civil and Human Rights
- Melanie Lubin, Maryland Securities Commissioner, North American Securities Administrators Association
- Emily Liner, Senior Policy Advisor, Economic Program, Third Way
- Amanda Jackson, Organizing and Outreach Manager, Americans for Financial Reform
- Ken Bertsch, Executive Director, Council of Institutional Investors
- Sarah Edelman, Director, Housing Policy, Center for American Progress (CAP)
Ranking Minority Member Maxine Waters (D-CA) also used the hearing to express her strong disapproval of what she has dubbed the “Wrong Choice Act.” Among other things, the ranking member alleged that the proposed legislation would “destroy[] Wall Street reform, gut[] the Consumer Financial Protection Bureau, and returns us to the financial system that allowed risky and predatory Wall Street practices and products to crash our economy.”
Fannie Mae to Allow Home Owners to Swap Student Loan Debt for Mortgage Debt
On April 25, Fannie Mae issued updates to its Selling Guide allowing home owners to refinance their mortgages to pay off their student loan debt. The new policies will present opportunities for homeowners to (i) pay down student debt by refinancing their mortgage; (ii) no longer be required to include non-mortgage debt (credit cards, auto loans, and student loans) paid by others on loan applications; and (iii) increase the likelihood of qualifying for a mortgage loan while carrying student debt “by allowing lenders to accept student debt payments included on credit reports.” The updates also allow for debt to be excluded from the debt-to-income ratio if a lender can obtain documents showing that a non-mortgage debt has been paid by another party for at least 12 months. “These new policies provide . . . flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers,” stated Jonathan Lawless, Fannie Mae’s Vice President of Customer Solutions. The policy changes are effective immediately.
CFPB Sues Online Lenders Following Investigation into Debt Collection Practices
On April 27, the CFPB announced that it filed a suit against four online installment lenders for allegedly deceiving customers by collecting debts that were not legally owed. In a complaint filed in the United States District Court for the Northern District of Illinois, the Bureau claims, among other things, that the lenders engaged in unfair, abusive, and deceptive acts—a violation of Dodd-Frank—by collecting on installment loans that are partially or wholly void under state law. The Bureau further claims that lenders violated the TILA for failing to disclose the annual percentage rate for their loans when they were required to do so. The complaint alleges that the lenders originated, serviced, and collected high-cost, small-dollar installment loans. Since at least 2012, consumers could borrow between $300 and $1,200 with annual percentage rates from 440 percent up to 950 percent. These high-cost loans allegedly violate licensing requirements or usury limits in a least 17 states—thus rendering the loans void in whole or in part. The CFPB asserts that the lenders not only misrepresented that consumers were obligated to pay debts that were void, but also reinforced the misrepresentations through actions such as sending letters, making phone calls demanding payment, and originating ACH debit entries from consumers’ bank accounts.The complaint seeks a permanent injunction prohibiting the lenders from committing future violations of federal consumer financial law, as well as other legal and equitable relief including restitution to affected consumers, disgorgement of ill-gotten revenue, and civil money penalties.
Rep. Luetkemeyer Introduces CLEARR Act to Provide Regulatory Relief to Community Banks
On April 26, Rep. Blaine Luetkemeyer (R-Mo.) introduced the Community Lending Enhancement and Regulatory Relief Act of 2017 (CLEARR Act) (H.R. 2133) designed to provide community financial institutions with regulatory relief from certain burdensome federal requirements. Among other things, the CLEARR Act would limit the authority of the CFPB by raising the asset size threshold for CFPB supervision from $10 billion to $50 billion and amend Section 1031 of the Consumer Financial Protection Act of 2010 by removing the term “abusive” from the CFPB’s “unfair, deceptive, or abusive” acts or practices authority. The CLEARR Act would also provide relief in the mortgage lending area by exempting community banks from certain escrow requirements and amend the Truth in Lending Act by adding a safe harbor for qualified mortgage loans held in portfolio. Moreover, the CLEARR Act would repeal all regulations issued to implement the Basel III and NCUA capital requirements. It would also repeal the Dodd-Frank Act provision amending the Equal Credit Opportunity Act to require collection of small business and minority-owned business loan data, as well as prohibit federal banking agencies from requiring depository institutions to terminate a specific account or group of accounts unless the agency has a material reason not based solely on reputational risk.
Rep. Luetkemeyer—who is a senior member on the House Financial Services Committee and the Chairman of the Financial Institutions and Consumer Credit Subcommittee—also issued a statement after President Trump called for the Treasury Secretary to conduct reviews of the Orderly Liquidation Authority and Financial Stability Oversight Council: “As a former bank examiner, community banker, and Chairman of the Financial Institutions Subcommittee, I have long advocated for eliminating the OLA, because it puts taxpayers on the hook for bailouts, instead of putting private companies on the hook for bankruptcy. For years, I have also introduced legislation to change FSOC’s arbitrary designation processes, which lead to higher costs, fewer services, and less available credit for American consumers. The American people deserve financial independence and I look forward to working with President Trump and my colleagues to help them achieve it.”