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Top Story Compliance Related

07/02/2020

Regulators joint statement on managing LIBOR transition

The members of the Federal Financial Institutions Examination Council (FFIEC) issued a statement yesterday highlighting the risks that will result from the transition away from LIBOR, and encouraged supervised institutions to continue their efforts to transition to alternative reference rates in order to mitigate financial, legal, operational, and consumer protection risks. The financial services industry uses LIBOR as a reference rate for many financial products and instruments that include loans, investments, and deposits to a range of customers, as well as borrowings and derivatives. While some smaller and less complex institutions may have limited exposure to LIBOR- denominated instruments, the transition to alternative reference rates will affect almost every institution.

The statement also highlights:

  • the legal and consumer compliance risks associated with inadequate fallback language, when the contractual language does not contemplate LIBOR’s permanent discontinuance;
  • the need for each financial institution to have risk management processes to identify and mitigate LIBOR transition risks that reflect the size and complexity of their exposure and third-party servicer arrangements; and
  • areas where supervisory staff will focus their reviews of LIBOR transition planning and risk mitigation efforts.

07/02/2020

Info for next large firm resolution plans released

A joint press release posted yesterday by the Fed and the FDIC released a June 29, 2020, letter to the eight largest and most complex domestic banking organizations with information that will guide their next resolution plans, which are due by July 1, 2021. The 2021 plans will be required to include core elements of a firm's resolution plan—such as capital, liquidity, and recapitalization strategies—as well as how each firm has integrated changes to and lessons learned from its response to the coronavirus into its resolution planning process.

07/02/2020

More from CFPB's rulemaking agenda

The CFPB's Spring 2020 Rulemaking Agenda (see yesterday's Top Story) also indicates that the Bureau is participating in an interagency rulemaking to develop regulations to implement Dodd-Frank Act amendments to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) concerning quality control standards for automated valuations models (AVMs).

The Bureau is also conducting an assessment of its TRID Rule (required not later than 5 years after the rule's effective date), with an assessment report due by October 2020. The CFPB also expects to conduct a review under the Regulatory Flexibility Act of Regulation Z rules implementing the Credit CARD Act of 2009 to consider the effect of the rules on small entities.

07/01/2020

CFPB publishes Spring 2020 rulemaking agenda

The Bureau has published its Spring 2020 Rulemaking Agenda, which lists the regulatory matters that it expects to focus on between May 1, 2020 and April 30, 2021. In addition to actions already taken, the Agenda lists several other regulatory activities planned for the remainder of 2020 through the spring of 2021, including—

  • A proposed rule to implement section 108 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCPA), which requires the Bureau to conduct a rulemaking to exempt certain loans from the escrow requirements applicable to higher-priced mortgage loans if they are made by certain creditors with assets of $10 billion or less and that meet other criteria.
  • In the fall of 2020, significant steps toward implementing section 1071 of the Dodd-Frank Act, requiring the collection and reporting of certain information on credit applications made by women-owned, minority-owned, and small businesses.
  • Also in the fall of 2020, two new proposed rules under HMDA relating to data points reported and public disclosure of HMDA data in light of consumer privacy considerations.
  • October 2020 final action on the May 2019 proposed rules under Regulation F to govern the activities of debt collectors under the FDCPA, followed at a later date with final action on the supplemental proposal addressing time-barred debt disclosures.
  • Consideration later in 2020 of a proposed rule with a "seasoning" definition of "qualified mortgage," to provide an alternate pathway to QM safe-harbor status for certain mortgage loans when the borrower has consistently made timely mortgage payments for a period.

07/01/2020

Victims of work-from-home scheme to receive full refunds

The FTC announced yesterday that it is sending full refunds totaling more than $284,000 to people who lost money to a scheme that used misleading spam emails to lure consumers into buying work-from-home services. A complaint filed by the Commission in November 2019 alleged that Effen Ads, LLC and its owners worked with an affiliate marketing network called W4 LLC to promote a work-from-home scheme by sending bulk unsolicited email, or spam, to consumers.

07/01/2020

FATF 31st Plenary Meeting

The Treasury Department has reported that the Financial Action Task Force (FATF) concluded its 31st plenary meeting by calling on its members to tackle new threats and vulnerabilities posed by criminals during the COVID-19 crisis. The FATF also completed a 12-month review of progress made by jurisdictions on implementing the new FATF standards on virtual assets adopted during the U.S. presidency of the FATF. The international task force further agreed upon draft text, on which it will seek public consultation, revising its standards to incorporate measures to counter proliferation financing, and adopted a groundbreaking report on money laundering and illegal wildlife trafficking.

07/01/2020

Labor Department proposes exemption from fiduciary rule

The Department of Labor has issued a Notice of Proposed Class Exemption that would allow investment advice fiduciaries under both ERISA and the Internal Revenue Code to receive compensation, including as a result of advice to roll over assets from a Plan to an IRA, and to engage in principal transactions, that would otherwise violate the prohibited transaction provisions of ERISA and the Code. The exemption would apply to registered investment advisers, broker-dealers, banks, insurance companies, and their employees, agents, and representatives that are fiduciaries, but would include protective conditions designed to safeguard the interests of Plans, participants and beneficiaries, and IRA owners.

Comments on the proposed class exemption will be accepted for 30 days following Federal Register publication. The Department proposes to make a final rule effective 60 days after it is issued and published.

The Department has also issued technical amendments to its regulations at 29 CFR parts 2509 and 2510 to implement the Fifth Circuit Court of Appeals 2018 vacatur [vacating, nullification, or setting aside] of Labor's 2016 final rule ("Conflict of Interest Rule — Retirement Investment Advice" or the "Fiduciary Rule") defining who is a "fiduciary" under ERISA and the Internal Revenue Code. In essence, Labor's new technical amendments remove language from the Code of Federal Regulations that the Fiduciary Rule added, and reinstates the Department's 1975 regulation and an interpretive bulletin. It also removes the two class exemptions Labor granted in connection with the Fiduciary Rule. These technical amendments will be effective on publication in the Federal Register.

07/01/2020

Fed assesses flood penalty on Virginia bank

The Federal Reserve Board has issued an order assessing an $8,500 civil money penalty on Benchmark Community Bank, Kenbridge, Virginia, for unspecified violations of section 208.25 of Regulation H, which implements the National Flood Insurance Act.

06/30/2020

CFPB announces first Tech Sprints

The CFPB yesterday announced its first-ever Tech Sprints to reduce regulatory burden and improve consumer understanding of financial services. The Bureau’s Tech Sprints program will bring together regulators, technologists, software providers, consumer groups, and financial institutions to develop technological solutions to shared compliance challenges. The first Tech Sprint will kick off in October with another in March 2021.

The focus of the October session will be improving upon existing consumer disclosures, the use of digital technology and alternative delivery mechanisms such as online and mobile, for notification of adverse credit actions.

The March 2021 session will focus on the HMDA data submission process.

06/30/2020

New UDAP/UDAAP booklet from OCC

OCC Bulletin 2020-65, issued yesterday, announced a new "Unfair or Deceptive Acts or Practices and Unfair, Deceptive, or Abusive Acts or Practices" booklet for the Comptroller's Handbook. This booklet is part of the Consumer Compliance series of the Handbook.

The booklet contains information for examiners regarding supervision of a bank's practices related to section 5 of the Federal Trade Commission (FTC) Act, which prohibits banks from engaging in unfair or deceptive acts or practices (UDAP), and sections 1031 and 1036 of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which prohibit unfair, deceptive, or abusive acts or practices (UDAAP).

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