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Top Story Compliance Related


FinCEN amends civil penalties rule

FinCEN has published in today's Federal Register an amendment to its Bank Secrecy Act civil penalty regulations relating to the requirements for reporting foreign financial accounts and for reporting transactions with foreign financial agencies. The amendment removes civil penalty language, which was made obsolete with the enactment of the American Jobs Creation Act of 2004. The amendment became effective on publication.

The BankersOnline Regulations page for 31 CFR 1010.820 has been updated to reflect the amendment.


Interagency statement on community bank leverage ratio

The OCC, Board of Governors, and the FDIC on Tuesday issued an Interagency Statement on the Optional Community Bank Leverage Ratio Framework.

The temporary relief measures affecting the framework will expire on December 31, 2021. Beginning on January 1, 2022, the community bank leverage ratio requirement will revert to greater than 9 percent as established under the 2019 final rule. The community bank leverage ratio framework includes a two-quarter grace period that allows a qualifying community bank to continue reporting under the framework and be considered “well capitalized” as long as its leverage ratio falls no more than 1 percentage point below the applicable community bank leverage ratio requirement.

  • The interagency statement serves as a reminder that a qualifying community bank that elects the community bank leverage ratio framework will be subject to a community bank leverage ratio requirement of greater than 9 percent when it submits its March 31, 2022, call report.
  • on January 1, 2022, a qualifying community bank must report a leverage ratio greater than 8 percent to use the two-quarter grace period. The grace period allows a qualifying community bank additional time to build capital and manage its balance sheet to either remain in the framework or prepare to comply with the generally applicable risk-based and leverage capital requirements.
  • The interagency statement clarifies that a community bank would not be viewed negatively within the examination process due solely to its use of the grace period.

Related links:
OCC Bulletin 2021-66
FDIC FIL-81-2021
Federal Reserve Board SR 21-21


CFPB shuts down venture capital-backed LendUp

The CFPB announced on Tuesday that LendUp Loans has agreed to halt making any new loans and collecting on certain outstanding loans, as well as to pay a penalty, to resolve a September 2021 lawsuit alleging that it continued to engage in illegal and deceptive marketing in violation of a 2016 CFPB order. The lawsuit also accuses LendUp of violating fair lending regulations.

LendUp Loans, headquartered in Oakland, California, offered single-payment and installment loans to consumers online and pitched itself as an alternative to payday lenders. LendUp attracted equity and debt investments from prominent investors, including Google Ventures, Andreessen Horwitz, Kleiner Perkins, PayPal Holdings, and QED Investors.

A central component of LendUp’s marketing and brand identity was the “LendUp Ladder.” LendUp told consumers that by repaying loans on time and taking free courses offered through its website, consumers would move up the “LendUp Ladder” and, in turn, receive lower interest rates on future loans and access to larger loan amounts. As alleged in the complaint, in reality, as tens of thousands of LendUp’s customers climbed the “LendUp Ladder,” they failed to qualify for larger loan amounts and continued to be offered similar or higher interest rates compared to previous loans.

LendUp has been subject to multiple enforcement actions by the CFPB. In addition to ordering LendUp in 2016 to stop misrepresenting the benefits of borrowing from the company, the CFPB sued LendUp in 2020 for allegedly violating the Military Lending Act and obtained a judgment against LendUp in that action. In September 2021, the CFPB filed this third action alleging that LendUp:

  • Deceived consumers about the benefits of repeat borrowing
  • Violated the CFPB’s 2016 order
  • Failed to provide timely and accurate adverse-action notices required by fair lending laws

The CFPB has filed a proposed stipulated final judgment and order that, if entered by the court, would prohibit LendUp from (1) making new loans; (2) collecting on outstanding loans to harmed consumers; (3) selling consumer information; and (4) making misrepresentations when providing loans or collecting debt or helping others that are doing so. The order would also impose a $100,000 civil money penalty based on LendUp’s demonstrated inability to pay. The CFPB will work to provide redress to eligible harmed consumers from the Bureau's Civil Penalty Fund.


Landlords and servicers reminded of servicemembers' and veterans' rights

The Consumer Financial Protection Bureau and U.S. Department of Justice issued two joint letters yesterday regarding important legal housing protections for military families. One letter was sent to landlords and other housing providers regarding protections for military tenants. A second letter was sent to mortgage servicers regarding military borrowers who have already exited or will be exiting COVID-19 mortgage forbearance programs in the coming weeks and months.

The letter to landlords and other housing providers reminds property owners of the important housing protections for military tenants, some of whom may have had to relocate or make other changes to their housing arrangements in response to the crisis. While military families enjoy the same legal protections and privileges afforded to all other homeowners and tenants, they also have additional housing protections under the Servicemembers Civil Relief Act (SCRA), which is enforceable by the DOJ and servicemembers themselves.

The letter to mortgage servicers was sent in response to complaints from military families and veterans on a range of potential mortgage servicing violations, including inaccurate credit reporting, misleading communications to borrowers, and required lump sum payments for reinstating their mortgage loans. These complaints are being reviewed for compliance by the CFPB with the Coronavirus Aid, Relief, and Economic Security (CARES) Act and other applicable requirements.
Related links:
CFPB press release


FinCEN sees upward trend in wildlife trafficking SARs

FinCEN yesterday released a Financial Threat Analysis on wildlife trafficking threat patterns and trend information identified in Bank Secrecy Act data. The report aims to further inform efforts to combat wildlife trafficking and the associated movement of illicit proceeds, which are estimated to be between $7 and $23 billion per year and account for a quarter of all wildlife trade.

FinCEN’s analysis of wildlife trafficking-related Suspicious Activity Reports (SARs) indicates that wildlife trafficking is affecting the U.S. financial sector. Overall, wildlife trafficking-related SARs filed between January 2018 and October 2021 trended significantly up and SARs filed in 2021 are on track to meet or exceed the number of SARs filed in 2020 based on current trends.

FinCEN is calling attention to this threat because of: (1) its strong association with corruption and transnational criminal organizations, two of FinCEN’s national anti-money laundering and countering the financing of terrorism priorities published in June 2021; (2) a need to enhance reporting and analysis of related illicit financial flows; and, (3) wildlife trafficking’s contribution to biodiversity loss, damage to fragile ecosystems, and the increased likelihood of spreading of zoonotic diseases.


OCC updates Comptroller's Handbook

The OCC's Bulletin 2021-65, issued Monday, announced the updated "Other Real Estate Owned" booklet of the Comptroller's Handbook.

The updated booklet —

  • clarifies the definition of physical possession as it pertains to OREO properties
  • updates ownership obligations and actions as they pertain to the Fair Housing Act
  • makes other changes for clarity
  • replaces the booklet of the same title issued in September 2020 and rescinds OCC Bulletin 2020-79


SEC fines JPMorgan $125M

The SEC has announced charges against J.P. Morgan Securities LLC (JPMS), a broker-dealer subsidiary of JPMorgan Chase & Co., for widespread and longstanding failures by the firm and its employees to maintain and preserve written communications. JPMS admitted the facts set forth in the SEC’s order, acknowledged that its conduct violated the federal securities laws, and agreed to pay a $125 million penalty and implement robust improvements to its compliance policies and procedures to settle the matter.


FDIC updates mortgage servicing rules videos

The FDIC has issued FIL-79-2021 announcing its release of updates to its five technical assistance YouTube videos on the mortgage servicing rules. These videos incorporate the 2016 Mortgage Servicing Rule and the 2016 Fair Debt Collection and Practices Act Interpretive Rule and have been updated to match the FDIC’s modernized video style. The video series focuses on the small servicer as defined in Regulation Z; however, video 3 provides an overview of some of the requirements for financial institutions that lose their small servicer status. The videos range in duration from around 8 to 27 minutes.

  • Video 1 provides an overview of mortgage servicing and describes how to determine whether a servicer meets the definition of a small servicer under Regulation Z. (10:12)
  • Video 2 describes key provisions for which small servicers do not have an exception. These are the provisions with which all servicers, small and large, must comply. (27:23)
  • Video 3 provides an overview of some of the requirements that apply to large servicers and from which small servicers are exempt. This video is useful for large servicers. (12:08)
  • Video 4 describes successors in interest, including the definition of successor in interest and a general overview of what to be aware of when working with successors in interest. (8:00)
  • Video 5 provides information and examples related to developing a compliance management system that considers the mortgage servicing rules. (11:41)


OCC issues revised interagency HMDA exam procedures

The OCC has issued Bulletin 2021-63 announcing revised interagency Home Mortgage Disclosure Act examination procedures for determining compliance with HMDA and its implementing regulations. This bulletin rescinds OCC Bulletins 2010-8 and 2019-19.

The revised interagency procedures update the April 19, 2019, FFIEC interagency examination procedures for the Home Mortgage Disclosure Act. The revised procedures address changes to the effective dates for banks that meet or exceed either the closed-end mortgage loans or the open-end lines of credit loan-volume threshold in each of the two preceding calendar years:

  • Effective July 1, 2020, a bank, savings association, or credit union that originated at least 100 closed-end mortgage loans in each of the two preceding calendar years, or originated at least 500 open-end lines of credit in each of the two preceding calendar years meets or exceeds the loan-volume threshold.
  • Effective January 1, 2022, when the temporary threshold of 500 open-end lines of credit expires, a bank, savings association, or credit union that originated at least 100 closed-end mortgage loans in each of the two preceding calendar years, or originated at least 200 open-end lines of credit in each of the two preceding calendar years meets or exceeds the loan-volume threshold.

The revised procedures also address changes to a partial exemption to apply to an application or covered loan (including a purchased covered loan).


OFAC sanctions Central African Republic militia leader

On Friday, Treasury reported that OFAC had designated Ali Darassa for serious human rights abuses stemming from his leadership of the Central African Republic (CAR) based militia group, Union for Peace in the Central African Republic (UPC). UPC’s militants have killed, tortured, raped, and displaced thousands of people since 2014.

Executive Order 13667 authorizes the designation of persons contributing to the conflict in CAR, including those responsible for serious abuse or violation of human rights in CAR, or those threatening the peace, security, or stability of CAR, among other criteria.

BankersOnline's December 17, 2021, OFAC Update has identifying information for Darassa


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