Top Story Compliance Related

The Bureau has announced the results of a Project Catalyst research project, which found that offering a small incentive to prepaid card users to put some of their money into a savings “wallet” doubled uptake of the wallet. The study also found that the consumers who chose to save using the wallet continued to save after the pilot ended. The research also found that participants who were offered an incentive to open the savings wallet reported significantly less payday loan use than those who were not offered the incentive.

The Federal Trade Commission has announced it filed a complaint charging nine Los Angeles-area auto dealerships and their owners with using a wide range of deceptive and unfair sales and financing practices. This is the Commission's first action against an auto dealer for “yo-yo” financing tactics — using deception or other unlawful pressure tactics to coerce consumers who have signed contracts and driven off the dealership lots into accepting a different deal. The FTC also alleges that the defendants packed extra, unauthorized charges for “add-ons,” or aftermarket products and services, into car deals financed by consumers.

The FFIEC has announced the availability of the 2015 data on mortgage lending transactions at 6,913 U.S. financial institutions covered by the Home Mortgage Disclosure Act (HMDA). Covered institutions include banks, savings associations, credit unions, and mortgage companies. The CFPB also issued a press release on the data.

Federal Reserve Board Consumer Affairs Letter CA 16-6, issued September 29, introduces the recently developed interagency Military Lending Act (MLA) examination procedures. The MLA and its implementing Department of Defense regulation contain limitations on and requirements for certain types of consumer credit extended to active duty service members and their spouses, children, and other dependents. These revised examination procedures supersede the interagency MLA examination procedures transmitted with CA 08-4. The compliance date for the final rule is October 3, 2016, but for credit card accounts the compliance date is October 3, 2017.

The Federal Reserve Board has issued a Consent Cease and Desist Order to Agricultural Bank of China, Beijing ("Bank"), and Agricultural Bank of China, New York Branch ("Branch"), following a recent examination of the Branch, during which the Federal Reserve Bank of New York identified "significant deficiencies in the Branch’s risk management and compliance with applicable federal and state laws, rules, and regulations relating to anti-money laundering compliance, including the Bank Secrecy Act …; the rules and regulations issued thereunder by the U.S. Department of the Treasury …; and the requirements of Regulation K of the Board of Governors to report suspicious activity and to maintain an adequate BSA/AML compliance program …."

The order requires the Bank's board of directors and the Branch's management to take steps to improve, with regard to BSA/AML and OFAC compliance, their corporate governance and management oversight, their BSA/AML compliance program, the Branch's customer due diligence program, and their program for monitoring and reporting of suspicious activity. The Bank and Branch are to engage an independent third party to conduct a review of the Branch's U.S. dollar clearing transaction activity from October 1, 2014, to March 31, 2015, to determine whether suspicious activity involving high risk customers or transactions at, by, or through the Branch was properly identified and reported. The Bank and the Branch must also enhance the Bank's compliance with OFAC regulations and the internal audit program for the Branch.

OFAC has designated German Muñoz Hoyos as a Specially Designated Narcotics Trafficker (SDNT) under the Kingpin Act for playing a significant role in international narcotics trafficking. OFAC also designated five individuals for acting for or behalf of Muñoz, and six entities that are owned, controlled, or directed by him and/or his associates. Several entries were also removed from OFAC's Specially Designated Nationals List. See our OFAC Update for additional information.

The Office of the Comptroller of the Currency has issued a $20 million Civil Money Penalty order to Wells Fargo Bank, N.A., along with an order to make restitution to servicemembers harmed by the bank's violations of the Servicemembers Civil Relief Act (SCRA). The OCC found that between approximately 2006 and 2016, the bank violated three separate provisions of the SCRA. The bank failed to:

• provide the 6-percent interest rate limit to servicemember obligations or liabilities incurred before military service;
• accurately disclose servicemembers’ active duty status to the court via affidavits prior to evicting those servicemembers; and
• obtain court orders prior to repossessing servicemembers’ automobiles.

The OCC said that the $20 million penalty reflects "the duration and frequency of violations, the financial harm to the servicemembers, deficiencies and weaknesses in the bank’s SCRA compliance program and ineffective compliance risk management."

The OCC took this action in coordination with the Department of Justice’s Civil Rights Division, which issued a separate order for restitution and a $60,000 civil penalty, related to the bank’s repossession-related SCRA violations.

See "Wells Fargo pays $20M for SCRA infractions," in our Penalties pages, for more information on these enforcement actions.

The CFPB has posted an article with information for eligible borrowers who were overcharged by Provident Funding Associates. As part of a settlement agreement with the CFPB and the Department of Justice, Provident Funding Associates, L.P. agreed to pay $9 million in relief to minority borrowers whom Provident overcharged between 2006 and 2011. Over the next few days, African-American and Hispanic borrowers harmed by these actions will receive packets with instructions on how to participate in the settlement.

The OCC has issued Bulletin 2016-29 to announce the revision of the “Charters” booklet of the Comptroller’s Licensing Manual (last revised in February 2009).

In testimony before the House Committee on Financial Services, Federal Reserve Board Chair Yellen discussed the Federal Reserve’s supervision of financial institutions. She said, ”One of the Federal Reserve's fundamental goals is to make sure that our regulatory and supervisory program is tailored to the risk that different financial institutions pose to the system as a whole. As we saw in 2007-08, the failure of systemically important financial institutions can destabilize the financial system and undermine the real economy. The largest, most complicated firms must therefore be subject to prudential standards that are more stringent than the standards that apply to other firms. Small and medium-sized banking organizations--whose failure would generally pose much less risk to the system--should be subject to standards that are materially less stringent.” Yellen reviewed the Federal Reserve’s efforts to strengthen the regulation and supervision of the largest financial institutions, large and regional banking organizations, and community bank supervision, She also remarked about the current state of the firms the Federal Reserve regulates. She concluded, “our post-crisis approach to regulation and supervision is both forward-looking and tailored to the level of risk that firms pose to financial stability and the broader economy. Standards for the largest, most complex banking organizations are now significantly more stringent than standards for small and medium-sized banks, which is appropriate given the impact that the failure or distress of those firms could have on the economy…. We must carefully monitor the impact of the regulatory changes we have made and remain vigilant regarding the potential emergence of new risks to financial stability. We must stand ready to adjust our regulatory approach where changes are warranted. The work we do to ensure the financial system remains strong and stable is designed to protect and support the real economy that sustains the businesses and jobs on which American households rely.”