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Top Story Compliance Related

01/20/2017

Conversion to federal charter booklet revised

OCC Bulletin 2017-5 announces the issuance of a revision of the “Conversions to Federal Charter” booklet of the Comptroller’s Licensing Manual. The revised booklet replaces the “Conversions” booklet issued in April 2010.

01/20/2017

OCC announces enforcement actions

The Office of the Comptroller of the Currency (OCC) released its January list of new enforcement actions. There were six orders listed, two against banks and four against individuals. The previously announced civil money penalty order against HSBC Bank USA, N.A., McLean, Virginia, was included. The other action against a bank was a formal agreement. The personal orders included previously announced actions brought for removal and prohibition and assessment of civil money penalties against two former foreign exchange traders; and removal and prohibition orders issued against the former Senior Vice President and Commercial Real Estate Loan Office of Superior Bank, Birmingham, Alabama, and a former Business Banker of First National Bank of Pennsylvania, Pittsburgh, Pennsylvania.

01/20/2017

FEMA announces suspensions of Missouri communities

The Federal Emergency Management Agency has published, at 82 FR 7697 in the Monday, January 23, 2017, Federal Register, a final rule identifying communities in Jackson County, Missouri, that are scheduled for suspension from the National Flood Insurance Program as of today, January 20, 2017, for noncompliance with the floodplain management requirements of the program.

01/20/2017

CFPB sues TCF National Bank for overdraft opt-in practices

The Consumer Financial Protection Bureau has announced it brought suit against TCF National Bank, Sioux Falls, South Dakota (per FDIC records -- the CFPB press release lists the headquarters in Wayzata, Minnesota, which is where its holding company is located), for tricking consumers into costly overdraft services. The Bureau alleges that TCF designed its application process to obscure the fees and make overdraft service seem mandatory for new customers to open an account. The CFPB also believes that TCF adopted a loose definition of consent for existing customers in order to opt them into the service and pushed back on any customer who questioned the process. The lawsuit seeks redress for consumers, an injunction to prevent future violations, and a civil money penalty.

As described in the Bureau's complaint, TCF relied on overdraft fee revenue more than most other banks its size and recognized early on that the opt-in rule could negatively impact its business. In late 2009, Bank management estimated that approximately $182 million in annual revenue was “at risk” because of the opt-in rule. Through consumer testing, the bank determined that the less information it gave consumers about opting in, the more likely consumers would opt in.

The Bureau’s complaint alleges that TCF’s strategy also consisted of bonuses to branch staff who got consumers to sign on. For example, in 2010, branch managers at the larger branches could earn up to $7,000 in bonuses for getting a high number of opt-ins on new checking accounts. After the bank phased out the bonuses, certain regional managers instituted opt-in goals for branch employees. Staff had to achieve extremely high opt-in rates of 80 percent or higher for all new accounts. While the bank’s official policy was that an employee could not be terminated for low opt-in rates, many employees still believed they could lose their job if they did not meet their sales goals.

The Bureau alleges that the bank’s strategy worked and that by mid-2014, about 66 percent of the bank’s customers had opted in, a rate more than triple that of other banks. According to the Bureau’s complaint, the chief executive officer of the bank even named his boat the “Overdraft.” TCF’s senior executives were so pleased with the bank’s effectiveness at convincing consumers to opt in that they had parties to celebrate reaching milestones, such as getting 500,000 consumers to sign up.

The Bureau's complaint alleges that TCF violated the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. TCF National Bank reported total assets of $21 billion as of 9/30/16, with 360 retail branches across Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona, and South Dakota.

01/19/2017

FTC halts phony rentals and free credit report scam

The Federal Trade Commission has announced it has has charged Credit Bureau Center LLC and three individuals with luring consumers with fake rental property ads and deceptive promises of “free” credit reports into signing up for a costly credit monitoring service. At the FTC’s request, a federal court temporarily halted the operation, which has raked in millions of dollars. The agency seeks to permanently stop the allegedly illegal practices and return money to consumers. According to the Commission’s complaint, the defendants placed Craigslist ads for rental properties that did not exist or that they were not authorized to offer for rent. When people responded to the ads, the defendants impersonated property owners and sent emails offering property tours if consumers would first obtain their credit reports and scores from the defendants’ websites. These sites claimed to provide “free” credit reports and scores, but then enrolled consumers in a credit monitoring service with continuing $29.95 monthly charges. Many people did not realize they had been enrolled until they noticed unexpected charges on their bank or credit card statements, sometimes after several billing cycles.

01/19/2017

CFPB sues largest student loan servicer

The Consumer Financial Protection Bureau announced yesterday that it has sued Navient Corporation and its subsidiaries, alleging that Navient has failed to provide the most basic functions of adequate student loan servicing at every stage of repayment for both private and federal loans. The Bureau stated that Navient provided bad information in writing and over the phone, processed payments incorrectly, and failed to act when borrowers complained about problems, and that Navient's actions systematically made it harder for borrowers to obtain the important right to pay according to what they can afford. These illegal practices made paying back student loans more difficult and costly for certain borrowers, according to the Bureau's press release.

Formerly part of Sallie Mae, Inc., Navient is the largest student loan servicer in the United States. It services the loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the Department of Education. Altogether, it services more than $300 billion in federal and private student loans. Named in today’s lawsuit are Navient Corporation and two of its subsidiaries: Navient Solutions is a division responsible for loan servicing operations; Pioneer Credit Recovery specializes in the collection of defaulted student loans.

The suit alleges that Naviant:

  • fails to correctly apply or allocate borrower payments to their accounts
  • steers struggling borrowers toward paying more than they have to on loans
  • obscured information consumers needed to maintain their lower payments
  • deceived dprivate student loan borrowers about requirements to release their cosigners from a loan
  • harmed the credit of disabled borrowers, including severely injured veterans
  • made illegal misrepresentations concerning the federal loan rehabilitation program available to defaulted borrowers

The suit alleges violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collections Practices Act. The suit seeks redress for consumers harmed by Navient’s illegal practices. The CFPB is also seeking to keep Navient from continuing the illegal conduct described in the complaint, and to prevent new borrowers from being harmed.

01/19/2017

Fed Board adjusts maximum CMPs

The Federal Reserve Board has announced that it has finalized a rule adjusting the Board's maximum civil money penalties, as required by law. In November 2015, a law was passed that requires all federal agencies to adjust their maximum civil money penalty limits annually for inflation, rather than every four years as previously required. The maximum civil money penalty limits depend on several factors, including the severity and type of violation. Additionally, the law dictates the annual adjustment formula for federal agencies. The new penalty amounts apply as of January 15, 2017.

01/19/2017

Bureau publishes Bulletin on production incentives

The CFPB published in the January 18 Federal Register its November 28, 2016, Compliance Bulletin 2016-03, "Detecting and Preventing Consumer Harm from Production Incentives." The bulletin compiles guidance that has previously been given by the CFPB in other contexts and highlights examples from the CFPB's supervisory and enforcement experience in which incentives contributed to substantial consumer harm. It also describes compliance management steps supervised entities should take to mitigate risks posed by incentives.

01/18/2017

CATS launched at OCC

The OCC has announced the launch of the agency’s Central Application Tracking System (CATS), which is the OCC’s new web-based system for banks to file licensing and public welfare investment applications and notices. CATS replaces e-Corp and CD-1 Invest, the current OCC electronic filing systems. See OCC Bulletin 2016-37 for details.

01/18/2017

OCC will allow closings in DC Friday

The OCC has issued a proclamation allowing national banks and federal savings associations in the District of Columbia to close at their discretion for the Presidential Inauguration. Inauguration Day is a federal holiday within the District.

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