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Top Story Compliance Related

10/26/2021

Arizona housing providers settle discrimination claims

HUD has announced that it has reached a Conciliation and Voluntary Compliance Agreement with MGM Investment Company, the owner of Roosevelt Plaza Apartments in Phoenix, Arizona, as well as its property manager, resolving allegations that they violated the Fair Housing Act and Title VI of the Civil Rights Act of 1964 when they failed to provide adequate language services for a resident with limited English proficiency (LEP). Roosevelt Plaza Apartments is a recipient of HUD funding.

10/26/2021

Chopra speaks out on 'digital redlining'

At the joint Justice Department, OCC, and CFPB news conference on the Trustmark National Bank enforcement action on Friday, CFPB Director Rohit Chopra said that the Bureau will be watching for "digital redlining, disguised through so-called neutral algorithms, that may reinforce the biases that have long existed." He continued, "Technology companies and financial institutions are amassing massive amounts of data and using it to make more and more decisions about our lives, including loan underwriting and advertising. While machines crunching numbers might seem capable of taking human bias out of the equation, that’s not what is happening....When consumers and regulators do not know how decisions are made by the algorithms, consumers are unable to participate in a fair and competitive market free from bias. Algorithms can help remove bias, but black box underwriting algorithms are not creating a more equal playing field and only exacerbate the biases fed into them."

Chopra added, "Given what we have seen in other contexts, the speed with which banks and lenders are turning lending and advertising decisions over to algorithms is concerning. Too many families were victimized by the robo-signing scandals from the last crisis, and we must not allow robo-discrimination to proliferate in a new crisis.

"We should never assume that algorithms will be free of bias. If we want to move toward a society where each of us has equal opportunities, we need to investigate whether discriminatory black box models are undermining that goal."

10/26/2021

Justice announces new initiative to combat redlining

The Department of Justice announced the launch on Friday of the department’s new Combatting Redlining Initiative. Redlining is an illegal practice in which lenders avoid providing services to individuals living in communities because of the race or national origin of the people who live in those communities. The new Initiative represents the department’s most aggressive and coordinated enforcement effort to address redlining, which is prohibited by the Fair Housing Act and the Equal Credit Opportunity Act.

This Initiative, which will be led by the Civil Rights Division’s Housing and Civil Enforcement Section in partnership with U.S. Attorney’s Offices, will build on the longstanding work by the division that seeks to make mortgage credit and homeownership accessible to all Americans on the same terms, regardless of race or national origin and regardless of the neighborhood where they live. The Initiative will:

  • Utilize U.S. Attorneys’ Offices as force multipliers to ensure that fair lending enforcement is informed by local expertise on housing markets and the credit needs of local communities of color.
  • Expand the department’s analyses of potential redlining to both depository and non-depository institutions. Non-depository lenders are not traditional banks and do not provide typical banking services, but engage in mortgage lending and now make the majority of mortgages in this country.
  • Strengthen DOJ's partnership with financial regulatory agencies to ensure the identification and referrals of fair lending violations to the Department of Justice.
  • Increase coordination with State Attorneys General on potential fair lending violations.

10/25/2021

Real estate lending guidelines amended

The FDIC has announced in FIL-71-2021 that the FDIC Board has adopted a final rule to amend the Interagency Guidelines for Real Estate Lending Policies to incorporate consideration of the capital framework established in the community bank leverage ratio (CBLR) rule into the method for calculating the ratio of loans in excess of the supervisory loan-to-value limits (LTV limits). The amendment provides a consistent approach for calculating the ratio of loans in excess of the supervisory LTV limits at all FDIC-supervised institutions without requiring the computation of total capital.

The final rule was adopted without any changes from the notice of proposed rulemaking published on June 25, 2021.

The final rule will become effective 30 days after publication in the Federal Register.

10/25/2021

Regulators take action against Mississippi Bank

The Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ), in cooperation with the Office of the Comptroller of the Currency (OCC), took action on Friday to put an end to alleged redlining by Trustmark National Bank. The CFPB and DOJ complaint alleges that Trustmark discriminated against Black and Hispanic neighborhoods by deliberately not marketing, offering, or originating home loans to consumers in majority-Black and Hispanic neighborhoods in the Memphis, Tennessee, metropolitan area. The CFPB and DOJ also allege that Trustmark discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit.

If entered by the court, the settlement would require Trustmark to put $3.85 million into a loan subsidy program for impacted neighborhoods, increase its lending presence there, and implement proper fair lending procedures. The order would also impose a $5 million civil money penalty against the bank, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.

See "Trustmark to pay $5 million for alleged redlining" in BankersOnline's Penalty Pages for additional information.

10/22/2021

OCC updates Payment Systems booklet

The OCC has issued a revised “Payment Systems” booklet of the Comptroller’s Handbook. The booklet:

  • provides examiners with information regarding payment systems, types of payments, risks associated with payment systems, and associated risk management practices
  • discusses requirements of 12 CFR 7.1026 regarding payment systems memberships
  • includes expanded examination procedures for examiners to use when assessing payment products and services
  • includes supplemental procedures for deeper review of certain payment activities

10/22/2021

OCC September enforcement actions released

The OCC has released a list of new enforcement actions taken in the month of September. Included were:

  • The previously announced cease-and-desist order against MUFG Union Bank, National Association, of San Francisco
  • A civil money penalty of $2.5 million was assessed against Washington Federal Bank, National Association, Seattle, for BSA/AML compliance failures
  • A consent order of prohibition and for a $140,000 civil money penalty was issued to Jared P. Schultz, former senior vice president, First National Bank in Fairfield, Fairfield, Iowa, upon a finding that he failed to comply with the bank's loan policies; authorized loans from which he personally benefited, in violation of Regulation O; and otherwise engaged in violations of policy and law, reckless unsafe or unsound practices, and breaches of his fiduciary duty to the bank
  • A consent order for a $16,000 civil money penalty and to cease-and-desist was issued to Patrick Hurley, former president, CEO and director of First National Bank in Fairfield, Fairfield, Iowa, upon a finding that he failed to adequately supervise Jared P. Schultz; failed to adequately review the banks problem loan and exception reports to detect unsafe or unsound lending activities that Schultz engaged in; and failed to ensure the bank's internal controls were sufficient

    10/22/2021

    New investment restrictions on Fed policymakers and staff

    The Federal Reserve Board has announced a broad set of new rules that will prohibit the purchase of individual securities, restrict active trading, and increase the timeliness of reporting and public disclosure by Federal Reserve policymakers and senior staff.

    As a result of the new policies, senior Federal Reserve officials will be limited to purchasing diversified investment vehicles, like mutual funds. The new restrictions will apply to both Reserve Bank and Board policymakers and senior staff and prohibit them from purchasing individual stocks, holding investments in individual bonds, holding investments in agency securities (directly or indirectly), or entering into derivatives. The new rules are expansive and are designed to place the Federal Reserve's investment and trading rules at the forefront among major federal agencies.

    To help guard against even the appearance of any conflict of interest in the timing of investment decisions, policymakers and senior staff generally will be required to provide 45 days' advance notice for purchases and sales of securities, obtain prior approval for purchases and sales of securities, and hold investments for at least one year. Further, no purchases or sales will be allowed during periods of heightened financial market stress.

    Reserve Bank presidents will now be required to publicly disclose financial transactions within 30 days, as Fed Board members and senior staff currently do.

    The Board and the Reserve Banks will incorporate these new restrictions into the appropriate Federal Reserve rules and policies over the coming months.

    10/21/2021

    Purchasers of phony pain treatments to get refunds

    The Federal Trade Commission has announced it is sending refund payments totaling more than $1.1 million to 84,847 consumers who bought three supplements deceptively marketed as treatments for pain and other health conditions related to aging. According to the FTC's complaint, the marketers of Neurocet, Regenify, and Resetigen-D deceptively promoted their products using false or unsubstantiated claims that the supplements could stop pain and treat age-related ailments. The pitches were made primarily through direct mail campaigns.

    The final order settling the FTC’s complaint bars the defendants—five related companies called Mile High Madison Group, Inc., Nordic Clinical, Inc., Encore Plus Solutions, Inc., Le Groupe Mile High Madison, Inc., and Clinique Nordique, Inc. and their principals, Vittorio DiCriscio and Vito Proietti—from making any claims about the health benefits of their products unless they are true and supported by scientific evidence. It also requires them to pay for the consumer refunds.

    10/21/2021

    NCUA issues ECIP action guidance

    The NCUA yesterday announced it has sent a letter to credit unions announcing that eligible low-income credit unions (LICUs) may accept 30-year subordinated debt investments from the U.S. Department of the Treasury’s Emergency Capital Investment Program (ECIP). Additionally, a LICU may treat this ECIP funding as secondary capital in accordance with the NCUA’s regulations, provided that any LICU receiving secondary capital treatment has an NCUA-approved secondary capital plan by December 31, 2021.

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