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The CFPB on Thursday morning announced it is launching a public inquiry into fees that are increasing mortgage closing costs. The CFPB wants to understand why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered. According to a CFPB analysis, the closing costs borrowers pay in connection with a mortgage have risen steeply in recent years. From 2021 to 2023, median total loan costs for home mortgages increased by over 36%. The unavoidable fees borrowers must pay at closing can strain household budgets and families’ ability to afford a down payment. The fees may also limit the ability of lenders to offer competitive mortgages because they have to absorb the higher costs or pass them on to borrowers.

The CFPB noted that, in 2022, median closing costs were $6,000, including substantial increases in the cost of credit reports.

The CFPB’s request for information seeks input from the public, including borrowers and lenders, about how mortgage closing costs may be inflated and constraining the mortgage lending market. Specifically, the CFPB asks for information about:

• Which fees are subject to competition: The CFPB is interested in the extent to which consumers or lenders currently apply competitive pressure on third-party closing costs. The CFPB also wants to learn about market barriers that limit competition.
• How fees are set and who profits from them: The CFPB wants to learn about who benefits from required services and whether lenders have oversight or leverage over third-party costs that are passed onto consumers.
• How fees are changing and how they affect consumers: The CFPB wants information about which costs have increased most in recent years and the reasons for such increases, including the rise in cost for credit reports and credit scores. The CFPB is also interested in data on the impact of closing costs on housing affordability, access to homeownership, or home equity.

Comments must be received within 60 days of the request for information being published in the Federal Register.

In a CFPB Blog article ("Banks' responsibility for scams")posted yesterday, CFPB General Counsel Seth Frotman described an ongoing case in which Citibank has been sued by the state of New York for failing to respond adequately when people promptly told the bank that scammers had stolen money by initiating wire transfers from the consumers’ accounts online. The losses New York alleges people have suffered are serious: for example, New York alleges that one person discovered that a scammer had changed her online banking password, transferred money from her savings to her checking account, and then stole $40,000 via wire transfer—all through Citibank’s online banking platform. And New York alleges that instead of complying with the Electronic Fund Transfer Act’s protections in circumstances like these, Citibank looked to a law that was intended to govern transactions between commercial entities which does not provide the same level of consumer protection to victims of scams.

Mr. Frotman reports that, in response to New York’s allegations, Citibank has argued that the Electronic Fund Transfer Act doesn’t apply because the scammers ultimately used a wire transfer to take the money, and the Act contains an exemption for transfers made by banks “by means of” a wire service. But the CFPB disagrees with Citibank's stance, as it explained in a Statement of Interest (amicus brief) submitted to the court. The Bureau's position is that when a bank connects wire transfer capabilities to its online consumer banking platform and a person authorizes (or a scammer purports to authorize) a transfer online, the Electronic Fund Transfer Act applies to the transaction except for the bank-to-bank portion of it.

Editor's Note: CFPB Blog articles are not official interpretations of law or regulations.

The OCC has issued its Alert 2024-1 indicating that consumers have reported receiving various forms of fictitious correspondence via email, Google Chat, and the U.S. Postal Service related to up-front fee scams involving fictitious inheritance or beneficiary payouts. The notifications appear to be initiated by senior officials of the Office of the Comptroller of the Currency (OCC) regarding funds purportedly held by the OCC. Scam correspondence may include the names of other governmental agencies who are purportedly involved in the fake transaction.

In all instances, victims are initially contacted regarding funds being held on their behalf by the OCC and are asked to provide the scammers general personal information including name, address, and telephone number. Follow-up correspondence from the scammers includes requests for more specific personal information including, but not limited to Social Security number, bank account details, and copies of driver’s licenses and passports. Correspondence is generally poorly written with typographical and grammatical errors and may include instructions for the victim to pay thousands of dollars in required fees or taxes for the release of the supposedly held funds.

These scams not only involve the theft of victim funds, but also their identities. There are at least four known variations of this scam. Refer to the OCC's Alert for details and other information.

The OCC has announced the launch of REACh 2.0 at its Project REACh Financial Inclusion Summit.

Project REACh, the Roundtable for Economic Access and Change, brings together leaders from the banking industry, national civil rights organizations, business, and technology to identify and reduce barriers that prevent full, equal, and fair participation in the nation’s economy. Under REACh 2.0, working groups will replace workstreams and focus on place-based initiatives; underserved and disadvantaged populations; technology; and tools, products, and services. Existing REACh projects will transition to the new working groups.

The Treasury Department yesterday announced it has published a 2024 Non-fungible Token (NFT) Illicit Finance Risk Assessment. The risk assessment explores how vulnerabilities associated with NFTs and NFT platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.

The assessment finds that NFTs are highly susceptible to use in fraud and scams and are subject to theft. The report determines that illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime. It also found little evidence of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters, to date. The assessment finds that inadequate cybersecurity protections, challenges related to copyright and trademark protections, and the hype and fluctuating pricing of NFTs can enable criminals to perpetrate fraud and theft related to NFTs and NFT platforms. Moreover, some NFT firms and platforms lack appropriate controls to mitigate risks to market integrity and to combat money laundering and terrorist financing, and sanctions evasion. The assessment recognizes that mitigation measures, such as industry tools, law enforcement authorities, and analysis of public blockchain data, can partially mitigate such risks.

To address outstanding risks, the risk assessment recommends several U.S. government actions, including:

• Raising awareness within industry of existing obligations
• Continuing to enforce existing laws and regulations related to NFTs and NFT platforms; and
• Considering further application of regulations to NFTs and NFT platforms

The Federal Housing Finance Agency yesterday announced that Fannie Mae and Freddie Mac (the Enterprises) will enhance their Flex Modification policies to allow more borrowers facing longer-term hardships to achieve meaningful payment reductions. The updated Flex Modification policies will promote sustainable homeownership and the safety and soundness of the Enterprises.

Flex Modification is the Enterprises’ loan modification offering that provides a home retention solution for eligible borrowers facing a permanent hardship who can no longer afford to make their regular monthly mortgage payments. ​The enhanced Flex Modification policies lower a borrower’s monthly payment by incrementally applying the steps below to achieve a 20 percent Principal and Interest payment reduction:

• Reducing the borrower’s interest rate (if eligible); 
• ​Extending the mortgage term; and
• Forbearing principal for borrowers with mark-to-market loan-to-value ratios greater than 50 percent.

Borrowers facing financial hardship should contact their servicer to discuss their unique circumstances to determine their eligibility. Servicers may offer borrowers one of several solutions to resolve a delinquency, including the updated Flex Modification, payment deferral, or a repayment plan depending on borrowers’ individual circumstances. The enhanced Flex Modification policies will become effective on December 1, 2024. ​

• ​Fannie Mae's Flex Mod Announcement
• Freddie Mac​'s Flex Mod Announcement

The Federal Reserve Board on Tuesday released the minutes from its recent meetings to review and determine the discount rates provided to depository institutions through the discount window. Today's minutes cover the Board meetings that occurred on April 8 through May 1, 2024.

Acting Comptroller of the Currency Michael J. Hsu discussed recovery planning via livestream in remarks May 27 at the Entrepreneurship, Markets and Technology: Regulation's Challenges in a Changing World Conference in Zurich, Switzerland.

In his remarks, Mr. Hsu discussed the importance of recovery planning and how it can mitigate the too-big-to-fail problem. He highlighted the importance of recovery planning at large banks in the context of the bank failures in March 2023 and offered thoughts on expanding recovery planning guidelines to apply to banks with at least $100 billion in assets.

The Office of Foreign Assets Control (OFAC) has amended the Cuban Assets Control Regulations, 31 C.F.R. Part 515 (CACR) to further implement portions of the president’s foreign policy toward Cuba. Among other things, these amendments increase support for internet freedom for the Cuban people and independent Cuban private sector entrepreneurs by expanding authorizations for internet-based services and a range of financial transactions. The rule was published in the Federal Register and became effective today.

OFAC also issued six new, Cuba-related Frequently Asked Questions (FAQs 1174-1179) and amended eight Cuba-related Frequently Asked Questions (FAQs 732, 736, 745, 748, 757, 769, 770, and 785).

The Department of the Treasury announced yesterday that OFAC has designated three individuals, Yunhe Wang, Jingping Liu, and Yanni Zheng, for their activities associated with the malicious botnet tied to the residential proxy service known as 911 S5. OFAC also sanctioned three entities—Spicy Code Company Limited, Tulip Biz Pattaya Group Company Limited, and Lily Suites Company Limited—for being owned or controlled by Yunhe Wang.

For identity information on the designated individuals and entities, see the BankersOnline May 28, 2024, OFAC Update.

The staff of the Federal Trade Commission has provided its annual report to the Consumer Financial Protection Bureau on its enforcement and related activities in 2023 on the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA).

The report highlights the FTC’s enforcement actions and initiatives under these laws and their implementing regulations, including in the areas of automobile financing and leasing, payday lending, other credit and leasing, and electronic fund transfers.

• Press release

The FDIC on Friday issued FIL-27-2024 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Texas affected by severe storms, straight-line winds, tornadoes, and flooding on April 26, 2024, and continuing.

The affected areas are Harris, Liberty, Montgomery, Polk, San Jacinto, Trinity, and Walker Counties.

The Federal Housing Administration's Mortgagee Letter 2024-10, issued yesterday, requires FHA-approved mortgagees to notify HUD when a cyber incident occurs. The letter, effective immediately, applies to all FHA insurance programs.

The mortgagee letter adds a new section, Significant Cybersecurity Incident, which requires FHA-approved mortgagees to report cyber incidents to HUD within 12 hours of detection. Reports will be made to HUD's FHA Resource Center and to HUDs Security Operations Center.

The FDIC yesterday issued FIL-26-2024 announcing revisions to Call Reports and the FFIEC 002 Report as published [89 FR 45046] on May 22, 2024, in the Federal Register.

Proposed changes were issued on September 28, 2023 (FIL-52-2023) and December 27, 2023 (FIL-68-2023). After considering the comments received on these notices, the agencies are moving forward with certain proposed revisions related to replacing references to “troubled debt restructurings” with “modifications to borrowers experiencing financial difficulty” consistent with ASU 2022-02, the reporting on the internet website addresses of depository institution trade names, and the adoption of the standards for electronic signatures. These updates to the Call Report and FFIEC 002 report forms and instructions will be effective as of the June 30, 2024, report date.

The agencies are implementing revisions related to reporting of loans to NDFIs as of the December 31, 2024, report date. The agencies are also adding a new Memorandum item that would identify the amounts reported as a structured financial product that are guaranteed by U.S. Government agencies or sponsored agencies, which would be effective as of the December 31, 2024, report date.

The agencies are continuing to review comment letters related to loan modifications to borrowers experiencing financial difficulty under ASU 2022-02, as well as the proposed clarification on the reporting of past due loans and proposed reporting of long-term debt requirements, for further changes to the Call Report and the FFIEC 002. Comments on the May 22, 2024, Federal Register notice will be accepted through June 21, 2024.

The OCC yesterday reported recent enforcement actions against two national banks and five institution-affiliated parties to OCC-supervised institutions.

• A formal agreement with Comerica Bank & Trust, National Association, Ann Arbor, Michigan, for unsafe or unsound practices, including those relating to the bank’s risk governance framework and internal controls
• A formal agreement with Lemont National Bank, Lemont, Illinois, for unsafe or unsound practices, including those relating to capital planning, strategic planning, succession planning, and liquidity risk management
• An order of prohibition against Stanley Acosta, a former senior specialist relationship banker at a Dartmouth, Massachusetts, branch of Santander Bank, N.A., Wilmington, Delaware, for stealing approximately $27,449 from cash deposit bags that customers provided to the bank via the night deposit vault
• An order of prohibition against Bahtia Greene, a former associate operations processor at the Philadelphia, Pennsylvania, lockbox facility for Wells Fargo Bank, N.A., Sioux Falls, South Dakota, for misappropriating confidential information of bank customers and selling the information to a third party, resulting in fraudulent transactions and a loss to the bank of approximately $688,000
• An order of prohibition against Sabina Prince, former teller at a Mountain Brook, Alabama, branch of PNC Bank, National Association, Wilmington, Delaware, for taking $15,000 in cash from the bank and manipulating cash shipment processing receipts to hide her actions
• An order of prohibition against Stephanie Sanders, former relationship banker at NBT Bank, N.A., Norwich, New York, for misappropriating approximately $30,650 from the bank by crediting her checking and savings accounts over 100 times
• A notice of charges for Gerald E. Milligan, II, a former teller at a Royal Palm, Florida, branch of PNC Bank, N.A., Wilmington, Delaware. The Notice of Charges alleges, among other things, that Milligan knowingly made false attestations and provided false supporting documentation for a Paycheck Protection Plan (PPP) loan application, received PPP loan proceeds in the amount of $141,530, and used the funds for personal gain.

The Federal Reserve has posted the Minutes of the Federal Open Market Committee held on April 30 and May 1, 2024.

The FDIC yesterday published its 2024 Risk Review, which provides an overview of banking conditions in 2023 in five broad categories: market risks, credit risks, operational risks, crypto-asset risks, and climate-related financial risks. The market risks areas discussed are liquidity, deposits and funding, and net interest margins and interest rate risk. The credit risks areas discussed are commercial real estate, residential real estate, consumer, agriculture, small business, corporate debt and leveraged lending, nonbanks, and energy.

The discussion of operational risks examines the potential negative impact to banks from cyber threats and illicit activity. The crypto-asset risks section discusses the FDIC’s approach to understanding and evaluating crypto-asset-related markets and activities. The discussion of climate-related financial risks focuses on the physical risk of severe weather and climate events to the banking system.

Monitoring these risks is among the FDIC's top priorities.

The National Credit Union Administration has published [89 FR 45602] in this morning's Federal Register a notice of regulatory review and request for comments.

The NCUA Board is voluntarily reviewing agency regulations to identify rules that are outdated, unnecessary, or unduly burdensome on federally insured credit unions. The NCUA is not statutorily required to undertake the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) review; however, the Board has elected to participate in the decennial review process.

The NCUA divided its regulations into 10 categories. Over the next 2 years, the NCUA will publish four Federal Register documents each requesting comment on multiple categories of regulations. This first document requests comment by August 21, 2024, on regulations concerning the following two categories: “Applications and Reporting,” and “Powers and Activities.”

The Securities and Exchange Commission this morning announced that The Intercontinental Exchange, Inc. (ICE) agreed to pay a $10 million penalty to settle charges that it caused the failure of nine wholly-owned subsidiaries, including the New York Stock Exchange, to timely inform the SEC of a cyber intrusion as required by Regulation Systems Compliance and Integrity (Regulation SCI).

According to the SEC's Order, in April 2021, a third party informed ICE that ICE was potentially impacted by a system intrusion involving a previously unknown vulnerability in ICE’s virtual private network (VPN). ICE investigated and was immediately able to determine that a threat actor had inserted malicious code into a VPN device used to remotely access ICE’s corporate network. However, the SEC’s order finds that ICE personnel did not notify the legal and compliance officials at ICE’s subsidiaries of the intrusion for several days in violation of ICE’s own internal cyber incident reporting procedures. As a result of ICE’s failures, those subsidiaries did not properly assess the intrusion to fulfill their independent regulatory disclosure obligations under Regulation SCI, which required them to immediately contact SEC staff about the intrusion and provide an update within 24 hours unless they immediately concluded or reasonably estimated that the intrusion had or would have no or a de minimis impact on their operations or on market participants.

The Federal Reserve Board has issued its report on Economic Well-Being of U.S. Households in 2023, which examines the financial circumstances of U.S. adults and their families. Overall, the report shows that financial well-being was nearly unchanged from 2022 as higher prices remained a challenge for most households and workers continued to benefit from a strong labor market.

During 2023, 72 percent of adults reported either doing okay or living comfortably financially, similar to the 73 percent seen in 2022 but down 6 percentage points from the recent high of 78 percent in 2021. Despite the moderating pace of inflation, higher prices continued to be a top financial concern. Sixty-five percent of adults said that changes in the prices they paid compared with the prior year had made their financial situation worse, including 19 percent who said price changes made their financial situation much worse.

Some groups continued to experience financial stress at higher rates than others. In particular, low-income adults were more likely to face material hardships, including not paying all bills in full, sometimes or often not having enough to eat, and skipping medical care because of cost. Seventeen percent of adults said they did not pay all their bills in full in the month prior to the survey.

This year's report also discusses topics new to the survey including homeowners' insurance, caring for aging or disabled adults, and childcare. For example, childcare was reported as a significant cost in family budgets. Parents using paid childcare typically spent 50 to 70 percent as much per month on childcare as they did on their housing payment, which is most people's single largest monthly expense.

The report, a fact sheet, downloadable data, data visualizations, and a video summarizing the report's findings are available on the Federal Reserve's website.

The CFPB this morning issued a proposed interpretive rule that confirms that Buy Now, Pay Later (BNPL) lenders are credit card providers. Accordingly, BNPL lenders must provide consumers some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a BNPL loan. The CFPB launched its inquiry into the rapidly expanding BNPL market more than two years ago and continues to see consumer complaints related to refunds and disputed transactions.

Under the proposed rule, BNPL lenders would be required to:

• Investigate disputes
• Refund returned products or canceled services
• Provide periodic billing statements

The interpretive rule is applicable 60 days after publication in the Federal Register. While the CFPB states that Administrative Procedures Act does not require it, the Bureau is opting to collect comments on the rule and may make revisions after reviewing any feedback. Comments will be accepted on the proposed rule through August 1, 2024.

The CFPB on Monday reported it had taken action against Western Benefits Group for charging illegal advance fees for student loan debt relief and misrepresenting to consumers that advance fees would go toward paying down their loans. The CFPB found Western Benefits also misrepresented that it was affiliated with and endorsed by the Department of Education, and that the company would help consumers consolidate student loans, lower consumers’ monthly student loan payments, or obtain loan cancellation.

The Bureau found that since 2016, Western Benefits Group’s practices caused approximately 5,970 consumers a total of approximately $974,590 in harm, reflecting the total fees they paid, less any refunds.

The CFPB is ordering Western Benefits to permanently cease operations and pay a $400,000 penalty to be deposited in the CFPB’s victims relief fund. The order also rescinds all existing agreements with consumers.

Western Benefits Group is reportedly a nonbank telemarketer headquartered in Pleasanton, California, that has offered debt relief services since at least 2016.

In January 2016, Western Benefits began to market, sell, and administer student loan debt relief services to consumers. Western Benefits used lead generators to increase its inbound telemarketing calls. The lead generators marketed debt relief services to consumers through email marketing campaigns and web campaigns.

• Consent Order against Western Benefits Group, LLC

The Conference of State Bank Supervisors, which owns and operates the NMLS, is inviting comments on proposed 2025 NMLS fee changes affecting both state licensing and federal registration of mortgage loan originators. Comments are due by Monday, July 22, 2024, at 5 p.m. EDT.

The NMLS will conduct a virtual town hall discussion on the proposal on Thursday, June 13, at 1 p.m. EDT. Registration in now open for the event. Webinar space is limited, but a recording will be made available.

FDIC FIL-25-2024, issued yesterday, provides guidance to help financial institutions and facilitate recovery in areas of Massachusetts affected by severe storms and flooding September 11–13, 2023. The areas included in the declared disaster include Worcester and Bristol counties in Massachusetts.

Yesterday, FDIC Chairman Martin J. Gruenberg issued a statement that, in light of recent events, he is prepared to step down from his responsibilities once a successor is nominated and confirmed. He said that, until that time, he will continue to fulfill his responsibilities as chairman, including the transformation of the FDIC's workplace culture.

On Monday, as part of the Treasury Department's Counter Fentanyl Strike Force, FinCEN, in partnership with the IRS Criminal Investigation (CI), announced a new initiative to combat the illicit trafficking of fentanyl into the United States. The “Promoting Regional Outreach to Educate Communities on the Threat of Fentanyl” (or PROTECT) series of FinCEN Exchange sessions will be held through the remainder of 2024 in U.S. cities that are highly impacted by the opioid epidemic.

The series is specifically designed to work with regional and local banks who are deeply connected to their communities and offer unique perspectives on the opioid crisis, and will focus on how law enforcement can best support their efforts to monitor activity that may be tied to the illicit trafficking of fentanyl. At these exchanges, federal officials brief on information critical to tracking these illicit financial flows, including typologies and red-flag indicators of fentanyl-related activity, and discuss what types of information are particularly valuable when financial institutions report suspicious activity.

The PROTECT series is being launched in collaboration with other government partners, including the Drug Enforcement Administration, Homeland Security Investigations, Customs and Border Protection, the U.S. Secret Service, the Federal Bureau of Investigation, the Department of Justice Money Laundering and Asset Recovery Section, various U.S. Attorney’s Offices, and local law enforcement agencies.

The Boston event in the PROTECT series was conducted on Monday, bringing federal agencies and law enforcement authorities from the Boston area together with representatives from the financial industry for a discussion on ways to deepen collaboration and enhance the value of suspicious activity reporting to counter illicit fentanyl trafficking. FinCEN and law enforcement representatives highlighted the significant value that Suspicious Activity Reports contribute to law enforcement efforts to combat fentanyl trafficking, and financial institutions shared their observations on money laundering flows and tactics used by narcotraffickers and their enablers.

The OCC has posted a list and schedule of workshops designed to meet the needs of new directors, experienced directors, and senior management of national community banks and federal savings associations wishing to review fundamentals or get critical updates. Two series of workshops have been scheduled throughout the year:

• Basic Series, which includes Building Blocks (1.5 days in person or 3 hour virtual workshop)
• Risk Management Series, which comprises:
  • Risk Governance (1 day in person or 3 hours virtually)
  • Credit Risk (1 day in person or 3 hours virtually)
  • Operational Risk (1 day in person or 3 hours virtually)
  • Compliance Risk (1 day in person or 3 hours virtually)
  • Capital Markets (1/2 day in person)

The schedule of the workshops and online registration are available on the OCC's website.

The CFPB has posted an update on its Small Business Lending rule under section 1071 of the Dodd-Frank Act. The rule, which amends Regulation B to require the collection and reporting of certain small business lending data on applications for credit for women-owned, minority-owned, and small businesses, was to have become effective on August 23, 2023. However, some lenders filed challenges against the rule in a federal court in Texas.

The court, on July 31, 2023, stayed the rule for certain lenders pending the Supreme Court's decision in CFPB v. CFSA [see Friday's Top Story]; on October 26, 2023, the court extended the stay to all lenders covered by the rule. In the event of a reversal in the CFSA case, the Texas court ordered the CFPB to extend the rule's compliance deadlines to compensate for the period stayed.

The CFPB now plans to issue an interim final rule to extend compliance deadlines. As 290 days have elapsed between the July 31 order and the CFSA decision on May 16, the interim final rule will extend compliance dates as follows:

• For Tier 1 institutions (highest volume lenders), the original compliance date of October 1, 2024, will be extended to July 18, 2025, and the first filing deadline will be June 1, 2026.
• For Tier 2 institutions (moderate volume lenders), the April 1, 2025, compliance date will be extended to January 16, 2026, with a first filing deadline on June 1, 2027.
• For Tier 3 institutions (smallest volume lenders), the January 1, 2026, compliance date will be extended to October 18, 2026, with a first filing deadline on June 1, 2027.

UPDATE: Updated to correct an incorrect date.

The FDIC has issued FIL-24-2024 with guidance to help financial institutions and facilitate recovery in areas of Iowa affected by severe storms and tornadoes from April 26–27, 2024.

The CFPB has announced is has sued SoLo Funds, Inc., a fintech company that operates a nationwide website and mobile-application based peer-to-peer lending platform through which consumers can obtain small-dollar, short-term loans. SoLo markets its lending platform to consumers as a consumer-friendly alternative to high-cost, short-term loans.

The Bureau sued SoLo for deceiving borrowers about the total cost of loans. Despite advertising zero-interest loans or 0% APR loans, SoLo’s use of dark patterns ensures that almost every borrower pays a fee, in the form of a “tip” or “donation.” The CFPB is seeking, among other things, injunctions against SoLo to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains, and a civil money penalty.

According to the Bureau's complaint, Since at least 2018, SoLo has operated a digital lending platform through which consumers can obtain short-term loans. The maximum SoLo loan amount is $575, and the minimum is $20. SoLo brokers loans between consumer borrowers and investors. SoLo requests consumers pay fees to lenders and to SoLo, which the company refers to as “tips” and “donations,” respectively. SoLo services and collects on loans brokered through its platform. While SoLo claims fees paid to lenders and the company are voluntary, the CFPB alleges that is not the case. When consumers reach the part of the application that asks them to pay a fee to SoLo, consumers only see options for what percentage to give—none of the options is zero. SoLo also informs prospective lenders of the fee they will receive from a consumer to fund a loan. The result is that consumers who do not pay a fee to lenders are unlikely to get their loans funded. In fact, as of December 31, 2022, only 0.5% of funded loans did not include a fee paid to the lender by the borrower.

The CFPB alleges that SoLo has violated the Consumer Financial Protection Act and the Fair Credit Reporting Act. The company deceives borrowers about the cost of credit, uses dark patterns to trick borrowers, services and collects on loans that are void and uncollectible, and does not have procedures to assure the maximum possible accuracy of its consumer reports. The CFPB’s lawsuit against SoLo seeks a stop to alleged unlawful conduct, forfeiture of ill-gotten gains, redress payments to harmed consumers, and imposition of a civil money penalty

The Federal Reserve Board on Friday announced its denial of two rulemaking petitions due to legal and policy considerations. The first petition asked the Board to develop a framework requiring Board-supervised firms to disclose promised financial commitments to certain corporate initiatives, and the second asked for revisions to the Uniform Financial Institution Rating System framework and adjustments to the framework for financial holding company eligibility.

• Statement of Governor Michelle W. Bowman

The FDIC on Friday announced a settlement with Bank of England, England, Arkansas, for violations of Section 5 of the Federal Trade Commission Act (Section 5), the Real Estate Settlement Procedures Act (RESPA), the Fair Credit Reporting Act (FCRA), and the Home Mortgage Disclosure Act (HMDA). The bank has stipulated to the issuance of an Order to Pay Civil Money Penalty (CMP) in the amount of $1.5 million. In addition, nine former employees of the Bank of England have stipulated to individual enforcement actions. Based on the FDIC’s findings, the bank made $1.9 million in remediation to over 900 harmed consumers.

Section 5 prohibits banks from engaging in unfair or deceptive acts or practices. The FDIC determined that the bank, through one of its loan production offices (LPOs), violated Section 5 by misrepresenting to consumers that they would be able to skip multiple loan payments when refinancing a Department of Veterans Affairs (VA) mortgage loan. The FDIC also determined that loan officers’ or LPO’s misrepresented to consumers their relationship with the VA. Bank of England was also fined $129,800 in October 2021 for similar deceptive activity alleging a relationship with the VA.

The FDIC also determined that the bank failed to provide consumers with firm offers of credit and required disclosures as required by the FCRA, and the bank failed to report accurate data on its 2021 loan application register in violation of HMDA.

The nine enforcement actions against former Bank of England employees were announced in January.

The Treasury Department has announced that OFAC has imposed sanctions on two Russian individuals and three Russia-based entities for facilitating weapons transfers between Russia and the Democratic People’s Republic of Korea (DPRK) to promote U.S. government objectives to disrupt and expose arms transfers between the DPRK and Russia and to build upon sanctions imposed by the Department of the Treasury and the Department of State related to DPRK-Russia arms transfers, including the transfer and testing of DPRK-origin ballistic missiles for Russia’s use against Ukraine.

For identification information on the designated individuals and entities, see BankersOnline’s May 16, 2024, OFAC Update.

The Associated Press reports the U.S. Supreme Court on Thursday rejected an attack on the constitutionality of the CFPB's funding mechanism. The justices ruled 7 to 2 that the funding method prescribed in the Dodd-Frank Act does not violate the Constitution, reversing a lower court. Justice Clarence Thomas wrote the majority opinion; justices Samuel Alito and Neil Gorsuch dissented.

The case was brought by payday lenders who object to a Bureau rule that limits their ability to withdraw funds directly from borrowers’ bank accounts. It’s among several major challenges to federal regulatory agencies on the docket this term for a court that has for more than a decade been open to limits on their operations.

Unlike most federal agencies, the consumer bureau does not rely on the annual budget process in Congress. Instead, it is funded directly by the Federal Reserve, with a current annual limit of around $600 million. The federal appeals court in New Orleans, in a novel ruling, held that the funding violated the Constitution’s appropriations clause because it improperly shields the CFPB from congressional supervision. Thomas reached back to the earliest days of the Constitution in his majority opinion to note that “the Bureau’s funding mechanism fits comfortably with the First Congress’ appropriations practice.”

The SCOTUS decision reverses the judgment of the Court of Appeals for the Fifth Circuit and remands the case for further proceedings consistent with SCOTUS's opinion.

Yesterday, the Department of the Treasury reported that OFAC targeted the Ortega-Murillo regime’s repression of the Nicaraguan people and its ability to manipulate the gold sector and profit from corrupt operations. OFAC imposed sanctions on three Nicaragua-based entities, the Training Center of the Russian Ministry of Internal Affairs in Managua (RTC); Compania Minera Internacional, Sociedad Anónima (COMINTSA); and Capital Mining Investment Nicaragua, Sociedad Anónima (Capital Mining), pursuant to Executive Order (E.O.) 13851, as amended.

Treasury also reported that OFAC sanctioned Ali Yagoub Gibril and Osman Mohamed Hamid Mohamed, pursuant to Executive Order (E.O.) 14098, for leading the Rapid Support Forces’ (RSF) war campaign in the Darfur region of Sudan, which has caused civilian casualties, including children.

For identification information on the designated entities and individuals, see BankersOnline’s May 15, 2024, OFAC Update.

The Securities and Exchange Commission this morning announced its adoption of amendments to Regulation S-P to modernize and enhance the rules that govern the treatment of consumers’ nonpublic personal information by certain financial institutions. The amendments update the rules’ requirements for broker-dealers (including funding portals), investment companies, registered investment advisers, and transfer agents (collectively, “covered institutions”) to address the expanded use of technology and corresponding risks that have emerged since the Commission originally adopted Regulation S-P in 2000.

The rule will become effective 60 days after publication in the Federal Register, with compliance dates detailed in the rule.

• Fact sheet

FDIC Chairman Martin J. Gruenberg testified yesterday before the Senate Committee on Banking, Housing, and Urban Affairs. In his remarks, Gruenberg said his top priority is addressing workplace culture issues at the FDIC, and listed several actions that are being taken to address recommendations in a third-party review of the agency's culture, the results of which were released last week.

Those remarks were followed by discussions of the state of the banking industry, condition of the Deposit Insurance Fund, bank receiverships, resolutions under Title II of the Dodd-Frank Act, efforts to strengthen the regulation and supervision of banks, and other regulatory initiatives.

The OCC has reported that Acting Comptroller of the Currency Michael J. Hsu testified yesterday on the OCC's priorities before the House Committee on Financial Services.

In his testimony, Hsu discussed the OCC’s work to guard against complacency, adapt to digitalization, manage climate-related financial risk, and promote fairness in banking. He also provided an overview of the state of the federal banking system and recent key regulatory developments.

• Oral statement
• Written testimony

The FFIEC has made the 2024 edition of A Guide to HMDA Reporting: Getting it Right! available for download.

The Federal Trade Commission has released its 2023 Annual Report outlining the agency’s work to protect consumers and promote competition.

The CFPB yesterday announced it has distributed more than $384 million to about 191,000 consumers harmed by Think Finance, a Texas-based online lender that deceived borrowers into repaying loans they did not owe.

The funds came from the CFPB's victims relief fund, which has now distributed more than $1 billion to consumers harmed by scams, fraud, and other illegal practices. The fund is a unique tool that helps the CFPB make harmed consumer whole when lawbreakers are unable to fully compensate their victims.

In November 2017, the CFPB filed suit against Think Finance, alleging that the company deceived consumers into repaying loans they did not owe. Think Finance illegally collected on loans that were void under state laws governing interest rate caps and lender licensing requirements. The company misrepresented to consumers that they owed money on these loans, made electronic withdrawals from consumers’ bank accounts, and sent letters demanding payment.

The Treasury Department reports that OFAC has designated one Russian individual and three Russia-based companies involved in an attempted sanctions evasion scheme in which an opaque and complex supposed divestment could have unfrozen more than $1.5 billion worth of shares belonging to U.S.-designated Russian oligarch Oleg Vladimirovich Deripaska.

In June 2023, Deripaska coordinated with Russian national Dmitrii Aleksandrovich Beloglazov, the owner of Russia-based financial services firm Obshchestvo S Ogranichennoi Otvetstvennostiu Titul (Titul), on a planned transaction to sell Deripaska’s frozen shares in a European company. Within weeks of this coordination, Russia-based financial services firm Aktsionernoe Obshchestvo Iliadis (Iliadis) was established as a subsidiary of Titul. In early 2024, Iliadis acquired Russia-based investment holding company International Company Joint Stock Company Rasperia Trading Limited (Rasperia), which holds Deripaska’s frozen shares.

Yesterday, Beloglazov, Titul, and Iliadis were designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy. Rasperia was designated pursuant to E.O. 14024 for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Iliadis.

For identification information on Beloglazov, Titul, Iliadis, and Rasperia, see BankersOnline’s May 14, 2024, OFAC Update.

The OCC and the Federal Reserve Board have announced a joint public meeting on the proposal by Capital One Financial Corporation, of McLean, Virginia, to acquire Discover Financial Services, of Riverwoods, Illinois. The proposal includes the merger of Discover Bank, of Greenwood, Delaware, into Capital One, National Association, of McLean, Virginia.

The purpose of the public meeting is to collect information from a wide range of stakeholders as the agencies evaluate the applications. By law, the agencies are required to evaluate:

• the convenience and needs of the communities to be served by the combined organization;
• each insured depository institution’s performance under the Community Reinvestment Act;
• competition in the relevant markets;
• the effects of the proposal on the stability of the U.S. banking or financial system;
• the financial and managerial resources and future prospects of the companies and banks involved in the proposal; and
• the effectiveness of the companies and banks in combating money laundering activities.

The public meeting will be held virtually on July 19, 2024, at 9:00 a.m. EDT. Members of the public seeking to present oral comments must register by 12:00 p.m. EDT on June 28, 2024, through the online registration webpage, which will be posted on the Board’s Capital One-Discover Application Reading Room by May 28, 2024. Further information and requirements to present, as well as registration information to view the public meeting, are available HERE.

The agencies also announced that they are extending the public comment period for the applications to give interested parties additional time to comment. Comments on the applications will now be accepted through July 24, 2024.

The Department of Housing and Urban Development yesterday announced it has entered into a Conciliation Agreement with Rocket Mortgage, LLC, resolving allegations that Rocket Mortgage denied a mortgage loan application based on race because the home being purchased was located within the Tribal boundaries of a federally recognized reservation.

The agreement stems from a complaint filed by a couple applying for a mortgage to purchase a single-family home within the boundaries of the Flathead Indian Reservation in St. Ignatius, Montana. Rocket Mortgage denied the loan application. As a result, complainants allege they were forced to pay a higher interest rate and accept a loan from another lender on less-favorable terms. The agreement resolves the complaint with Rocket Mortgage. It secures $65,000 compensation for complainants, requires Rocket Mortgage to provide fair lending training to its employees, and requires Rocket Mortgage to abide by fair lending requirements for applicants seeking residential mortgage credit located within the boundaries of a Native American reservation. Additionally, Rocket Mortgage will invest at least $30,000 to provide financial support for programs that improve housing conditions, consumer financial literacy and education, outreach and homeownership education or counseling for Native Americans. Rocket Mortgage also agreed to conduct outreach through its website and social media platforms describing the company’s broad range of financing options available to eligible applicants whose loans are secured by property located within the boundaries of Native American reservations.

Has it really been five years since the first set of inflation adjusted thresholds for Regulation CC funds availability? It must be true, because the Federal Reserve Board and the Consumer Financial Protection Bureau yesterday issued the second quinquennial set of adjustments, with a compliance date of July 1, 2025, a little over 14.5 months from now. Here are the new amounts, based on the regulatory formula for adjustments and a 21.8 percent increase in the CPI-W between July 2018 and July 2023:

• The "next day" minimum availability amount will increase from $225 to $275
• The cash withdrawal amount in § 229.12(d) will increase from $450 to $550
• The new account, large deposit threshold, and repeatedly overdrawn thresholds in § 229.13 will increase from $5,525 to $6,725
• The civil liability minimum and maximum for individuals actions in § 229.21(a)(2)(i) will increase from $100 and $1,100 to $125 and $1,350
• The civil liability maximum for class action in § 229.21(a)(2)(ii)(B) will increase from $552,500 to $672,950 or 1 percent of the bank's worth, whichever is less.

Will we still be using checks five years from now? The next 5-year adjustment announcement is scheduled for the spring of 2029, with a compliance date of July 1, 2030. Will the rest of Regulation CC be updated by then?

Compliance and operations officers who recall the first such announcement that increased the Regulation CC dollar amounts as of July 1, 2020, should also remember that § 229.18(e) requires that changes to funds availability policies that are favorable to consumers (all of these dollar amount changes are favorable) require a notice to affected consumer account holders no later than 30 days after the changes are effective, even if mandated by the regulation.

FinCEN has announced it has joined the Securities and Exchange Commission (SEC) in jointly proposing a new rule that would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish, document, and maintain written customer identification programs (CIPs). The proposal is designed to prevent illicit finance activity involving the customers of investment advisers by strengthening the anti-money laundering and countering the financing of terrorism (AML/CFT) framework for the investment adviser sector.

This proposed rulemaking complements a separate FinCEN proposal in February 2024 to designate RIAs and ERAs as “financial institutions” under the Bank Secrecy Act (BSA) and subject them to AML/CFT program requirements and suspicious activity report (SAR) filing obligations, among other requirements. That proposal cites a Treasury risk assessment that identified that the investment adviser industry has served as an entry point into the U.S. market for illicit proceeds associated with foreign corruption, fraud, tax evasion, and other criminal activities. Together, these proposals aim to prevent illicit finance activity in the investment adviser sector and further safeguard the U.S. financial system.

The rule, if adopted, would require RIAs and ERAs to, among other things, implement a CIP that includes procedures for verifying the identity of each customer to the extent reasonable and practicable and maintaining records of the information used to verify a customer’s identity, among other requirements. The proposal is generally consistent with the CIP requirements for other financial institutions, such as brokers or dealers in securities and mutual funds. Comments on the proposal will be accepted for 60 days following publication in the Federal Register.

• Fact Sheet on proposal
• Publication and comment period update: Scheduled for publication in the 5/21/2024 Federal Register, with comments accepted through 7/22/2024.

The FDIC has sent email notices announcing that it will host four seminars in 2024 (the first on May 30, from 2:00 to 3:30 pm ET) on the final rule governing use of Official Signs and Advertising Statement, Misrepresentations of Insured Status, and Misuse of FDIC’s Name or Logo for bank staff, bank officers, and other stakeholders. The first seminar will be held via Microsoft (MS) Teams on May 30, 2024. The dates for the remaining three seminars will be announced at a later date.

The sessions will offer a broad overview of the final rule that amended Part 328 of the FDIC’s regulations. The FDIC amended its regulations governing use of the official FDIC sign and advertisement statements to reflect how depositors do business with banks today, including through digital and mobile channels. The rule also clarified the FDIC’s regulations on misrepresentations of deposit insurance coverage. The final rule is intended to help consumers understand when they are interacting with an FDIC-insured bank and when their funds are protected by the FDIC’s deposit insurance coverage.

The rule became effective on April 1, 2024, and has a compliance date of January 1, 2025. The sessions are ideal for bank employees and other Part 328 stakeholders looking for further information and guidance on the new final rule.

During the presentation on the final rule, FDIC staff will cover:

• Requirements for all FDIC-insured institutions’ use of FDIC official signs. This includes a new FDIC official digital sign for bank websites, apps, and ATMs, as well as updates to the advertising statement.
• Clarifications on the prohibitions against misrepresentations of deposit insurance coverage and misuse of the FDIC’s name and logo, which apply to any person, including banks and non-bank entities.

During the seminar, FDIC staff will also discuss some of the questions that have been raised by bankers, trade associations, technology companies, vendors, and others.

Federal Reserve Financial Services reported yesterday that a new study has revealed consumers made more payments in 2023 than in previous years, continuing the trend of rising payment transactions since 2020. The 2024 Diary of Consumer Payment Choice (Diary), now in its eighth consecutive year, is a survey conducted to understand the evolving role of cash in the U.S. economy. Findings show amid increased payments, cash’s share decreased in favor of credit and debit cards, but overall cash use has remained stable as consumers continued to hold more cash than they did before 2020 as both a store-of-value (up 53 percent) and in their pockets, purses or wallets as a backup payment instrument (up 23 percent).

The findings also show a growing generational divide among those using cash versus electronic payments. Consumers younger than age 55 used cash for just 12 percent of payments in 2023, compared to 22 percent for those age 55 and older. Notably, for the first time in Diary history, cash was not the most-used instrument for smaller-value payments of $25 or less. Prior to the pandemic, consumers aged 18 to 24 used cash for about one in three payments. Starting in 2020, the ratio shifted to about one in seven payments as this population opted instead for credit and debit cards. This change in cash usage among younger demographics may carry significant long-term implications as the U.S. population continues to age.

ABC News has reported a federal judge in Texas has issued a temporary nationwide injunction delaying the effective date of the CFPB's rule reducing the maximum late fee on credit card accounts.

The CFPB's rule would have become effective May 14, 2024, had the temporary injunction not been issued.

The FDIC has issued two Financial Institution Letters to help financial institutions and facilitate recovery in areas affected by tornadoes and other severe weather.

• FIL-23-2024: Guidance in areas of Nebraska affected by severe storms, straight-line winds, and tornadoes
• FIL-22-2024: Guidance in areas of Ohio affected by tornadoes