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The CFPB has announced it has joined seven state attorneys general in suing Strategic Financial Solutions (SFS) and its web of shell companies for running an illegal debt-relief enterprise. The CFPB and state attorneys general also sued the chief architects of the illegal enterprise, Ryan Sasson and Jason Blust. The CFPB and attorneys general allege the enterprise has collected hundreds of millions of dollars in exorbitant, illegal fees from vulnerable consumers. The CFPB and attorneys general filed the suit under seal on January 10, 2024. They are requesting the court to order a stop to the enterprise’s illegal actions, order redress for consumers, and impose a civil money penalty. The seven states joining with the CFPB are Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin.

The Bureau's announcement says Strategic Financial Solutions markets itself as providing debt relief services. It has offices in New York City and Buffalo, New York. Ryan Sasson is the chief executive officer of SFS. SFS sits at the top of a web of shell companies and façade law firms, which are controlled by Sasson and fellow scheme architect Jason Blust. SFS runs an alleged scheme, involving dozens of entities, to dupe consumers and regulators. The company uses third parties to target financially vulnerable consumers with advertisements. The advertisements lead consumers to believe they may qualify for loans to help pay down debts. SFS employees then discuss these loans with consumers over the phone. Though SFS tells most, if not all, consumers that they do not qualify for the advertised loans, SFS encourages consumers to enroll in its debt-relief services. SFS promises that its network of law firms and lawyers will negotiate lower debt amounts.

In reality, say the CFPB and attorneys general, SFS provides little, if any, debt-relief service. SFS requires customers to make immediate payments into an escrow account. Long before it settles any debts, however, SFS collects the fees from the escrow account. While the illegal fees and false claims of legal assistance leave consumers worse off, Sasson and Blust pad their pockets through their web of shell companies that siphon the fees from the escrow accounts.

The CFPB and seven state attorneys general allege the actions of SFS violate the Telemarketing Sales Rule. The lawsuit also alleges violations of New York and Wisconsin state laws. Specifically, the complaint alleges that SFS harms consumers by charging illegal advance fees before any of a consumer's debts have been settled, and by falsely claiming that contracted law firms will negotiate lower payoff amounts.

• Complaint

On Thursday, January 18, 2024, the National Credit Union Administration Board held its first open meeting of the year and unanimously approved the agency’s 2024 Annual Performance Plan and received a briefing on the Diversity, Equity, Inclusion, and Accessibility Strategic Plan, 2024–2026. The performance plan, which provides specific direction and guidance toward achieving the mission, was approved on a 3-0 vote.

“As I have often said, if you don’t measure it, you can’t manage it. That’s what makes this plan so important,” Chairman Todd M. Harper said. “The NCUA in 2024 will continue to address consumer financial protection on equal footing with safety and soundness, including by increasing the number of fair lending exams. Also, the NCUA will continue to focus on the rising and continuing challenges within the credit union system. Those risks include liquidity, interest rate, credit, and compliance risk, as well as the omnipresent cybersecurity risk.”

On Thursday, the Treasury Department reported that OFAC took its first oil price cap enforcement action of 2024, targeting a shipping company linked to a price cap violation.

United Arab Emirates-based shipping company Hennesea Holdings Limited (Hennesea) is the ultimate owner of 18 vessels, including the HS Atlantica, which OFAC previously identified as having engaged in the transport of crude oil of Russian Federation origin priced above the $60 per barrel price cap while using a covered U.S.-based provider after the price cap policy came into effect. On December 1, 2023, OFAC identified the HS Atlantica as property in which Hennesea’s subsidiary, U.S.-designated HS Atlantica Limited, has an interest. OFAC additionally re-identified the HS Atlantica as property in which Hennesea has an interest. OFAC also designated 17 other vessels in which Hennesea has an interest.

For identification information on Hennesea and the designated vessels, see this January 18, 2024, BankersOnline OFAC Update.

Yesterday, the Federal Reserve Board reported it has issued a consent prohibition order against Andrew M. Ellison, formerly the Graves County market president at Community Financial Services Bank, Benton, Kentucky, after a finding that Ellison had, in or around May 2020 and September 2021, applied for and obtained an SBA economic injury disaster loan (EIDL) of $500,000 for a business in which he was the sole proprietor and used the funds for unauthorized expenses under the terms of the EIDL program. According to the order, Ellison repaid the loan to the SBA in full, with interest.

The Office of the Comptroller of the Currency (OCC) yesterday released enforcement actions taken against national banks and federal savings associations (banks), and individuals currently and formerly affiliated with banks the OCC supervises.

• The previously announced $15 million civil money penalty against U.S. Bank, N.A., for violations of law relating to the bank’s administration of a prepaid card program to distribute public unemployment insurance benefit payments
• Notices of Charges seeking Cease and Desist Orders against three subsidiary banks of Industry Bancshares, Inc., Industry, Texas: The First National Bank of Shiner, Shiner, Texas; Bank of Brenham, N.A., Brenham, Texas; and The First National Bank of Bellville, Bellville, Texas. The Notices of Charges allege, among other things, that each bank engaged in unsafe or unsound practices relating to an investment strategy concentrated in long-term securities that exposed each bank to excessive interest rate risk without sufficient sources of contingency funding and contingency capital, and that each bank failed to timely mitigate such risk.
• A Formal Agreement against EH National Bank, Beverly Hills, California, for unsafe or unsound practices, including those relating to inadequate capital and strategic planning, inadequate interest rate risk management, and failure to maintain adequate levels of liquidity and satisfactory liquidity management practices.
• A Formal Agreement against Jackson Federal Savings and Loan Association, Jackson Minnesota, for unsafe or unsound practices, including those relating to inadequate strategic planning, dereliction of the obligation to maintain adequate levels of liquidity and satisfactory liquidity management practices, and lack of appropriate succession planning.
• A Formal Agreement against North Side Federal Savings and Loan Association of Chicago, Chicago, Illinois, for unsafe or unsound practices, including those relating to Board and management oversight, earnings, information technology management, sensitivity to market risk, consumer compliance, and violation of law, rule or regulation, including those relating to the Truth in Lending Act and the Flood Disaster Protection Act.

The FDIC and Federal Reserve Board have jointly reported that they are extending the resolution plan submission deadline for certain large financial institutions. These companies will be required to submit their resolution plans by March 31, 2025, instead of July 1, 2024.

In August of last year, the agencies invited public comment on proposed guidance for how the resolution plans of certain large financial institutions could address key challenges in resolution. The agencies indicated that they were considering providing an extension of the next resolution plan submission date to provide reasonable time for the proposed guidance, once finalized, to be reflected in the plan submissions. The public comment period closed November 30, 2023, and the agencies continue to develop the final guidance.

Yesterday, the Treasury Department reported that OFAC had sanctioned former Guatemalan Minister of Energy and Mining Alberto Pimentel Mata for his role in exploiting the Guatemalan mining sector through widespread bribery schemes, including schemes related to government contracts and mining licenses. Pimentel was designated under the authority of Executive Order 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of serious human rights abuse and corruption around the world. Yesterday’s action follows the Department of State’s October 2023 announcement of visa restriction on Pimentel and other individuals for their involvement in significant corruption.

As a result of yesterday’s action, all property and interests in property of Pimentel that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or otherwise exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons.

For identification information on Pimentel, see the January 17, 2024, BankersOnline OFAC Update.

The OCC has issued Bulletin 2024-3 reminding OCC-supervised financial institutions they should be preparing for a May 28, 2024, shortening of the standard securities settlement cycle for most U.S. securities transactions. The Securities and Exchange Commission (SEC) has adopted final rules that shorten the standard settlement cycle for most broker-dealer transactions from the second business day after the trade date (T+2) to the first business day after the trade date (T+1), beginning May 28.

The change will affect banks’ securities activities, including activities related to their investment and trading portfolios and securities settlement and servicing provided to banks’ custody and fiduciary accounts. Banks that offer nondeposit investment products through a third-party broker-dealer should assess the broker-dealer’s preparedness for the new settlement time frames.

The Bulletin includes detailed guidance on how banks should be preparing for the change.

The IRS has announced that businesses do not have to report the receipt of digital assets the same way as they must report the receipt of cash until Treasury and IRS issue regulations.

The Infrastructure Investment and Jobs Act revised the rules that require taxpayers that are engaged in a trade or business to report receiving cash of more than $10,000 by considering digital assets to be cash. Announcement 2024-4 provides transitional guidance as Treasury and the IRS implement the new provisions. This particular provision requires Treasury and the IRS to issue regulations before it goes into effect.

Businesses currently report their receipt of cash (and certain other) payments over $10,000 on Form 8300.

The CFPB on Jan. 17, 2024, announced a proposed rule to limit overdraft fees charged by insured financial institutions with more than $10 billion in assets. The proposal would amend Regulation Z to eliminate the exclusion of overdraft fees greater than required to recoup costs at an established benchmark or at a cost the banks calculate, if they show their cost data, from the definition of "finance charge."

Very large financial institutions would be required to treat overdraft loans like credit cards and other loans and to provide clear disclosures and other protections, using a credit account separate from the consumer's deposit account. It would also amend Regulation E to prohibit very large financial institutions from conditioning an extension of overdraft credit to a consumer on the consumer's repayment by preauthorized electronic fund transfers.

Comments on the CFPB’s proposal will be accepted through April 1, 2024. The CFPB proposes that a final rule relating to the proposal would have an October 1 effective date at least 6 months after the final rule is published in the Federal Register.

• Proposed rule
• Unofficial redline of proposed amendments to Regulations E and Z
• Fact Sheet on the proposed rule
• CFPB Director Rohit Chopra’s prepared remarks on the press call for this announcement
• Publication and comment period update: Published at 89 FR 13852 in the Feb. 23, 2024, Federal Register. Comments are due by Apr. 1, 2024.