Top Story Compliance Related

The CFPB has posted a Bureau Blog article announcing the key areas on which its fair lending team will focus in 2017:

• Redlining. It will continue to evaluate whether lenders have intentionally avoided lending in minority neighborhoods.
• Mortgage and Student Loan Servicing. It will determine whether some borrowers who are behind on their mortgage or student loan payments may have more difficulty working out a new solution with the servicer because of their race or ethnicity.
• Small Business Lending. Congress expressed concern that women-owned and minority-owned businesses may experience discrimination when they apply for credit, and has required the CFPB to take steps to ensure their fair access to credit.

The SEC and New York Attorney General have announced that Deutsche Bank has agreed to pay each regulator $18.5M to settle charges that it misled clients about the performance of a core feature of its automated order router that primarily sent client orders to dark pools. According to the SEC’s order, Deutsche Bank made materially misleading statements and omissions concerning the Dark Pool Ranking Model feature of one of its order routers, known as SuperX+. The Dark Pool Ranking Model was intended to measure execution quality and liquidity of venues to which it sent orders. Deutsche Bank used the Dark Pool Ranking Model to determine which venues would receive orders and the sequence in which Deutsche Bank would send them.

Director Cordray presented prepared remarks yesterday to the participants at the CFPB Research Conference. The Director observed, “in the last two generations, the markets for consumer credit and household finance have expanded and become much more complex. Raw numbers tell the story. The mortgage market today stands at just over $10 trillion. Student loan debt has risen rapidly in recent years to over $1.3 trillion. Auto loan debt exceeds $1.1 trillion. And credit card debt now totals around $700 billion. Growing along with this debt has been the availability, variety, and complexity of consumer financial products and services “ He also noted, “We are also the first federal agency with jurisdiction over both banks and the nonbank financial companies that compete against them in markets like mortgage origination, mortgage servicing, auto finance, consumer installment lending, and the like. Just as an umpire must be authorized to assess the entire field of play, this authority enables us to level the expectations and compliance standards of these two types of financial services providers.”

Cordray also announced the unveiling of a new Consumer Credit Trends web tool, which offers a fresh and timely perspective on the performance of consumer financial markets both today and over time. The beta version of the Consumer Credit Trends tool tracks originations for mortgages, credit cards, auto loans, and student loans.

The OCC has announced the release of a final rule to remove or amend outdated or unnecessary provisions of certain rules to reduce the regulatory burden on national banks and federal savings associations. The rule:

• removes notice and approval requirements for certain changes in permanent capital involving national banks;
• clarifies national bank director oath requirements;
• removes certain financial disclosure requirements for national banks;
• simplifies certain licensing rules for business combinations involving federal mutual savings associations;
• removes unnecessary burden with respect to federal savings associations’ fidelity bond activities;
• removes certain unnecessary regulatory reporting, accounting, and management policy requirements for federal savings associations;
• removes unnecessary requirements in the electronic activities rule for federal savings associations;
• revises certain fiduciary activity requirements for national banks and federal savings associations, including increasing the asset size limit for mini-funds;
• integrates and updates OCC rules for national banks and federal savings associations relating to municipal securities dealers, Securities Exchange Act disclosures, securities offering disclosures, and insider and affiliate transactions;
• updates recordkeeping and confirmation requirements for national banks’ and federal savings associations’ securities transactions; and
• permits the electronic submission of filings required under the Securities Act of 1933 and the Securities Exchange Act of 1934.

The Federal Reserve Board encouraged consumers to closely monitor their financial accounts for unauthorized activity and know where to find help if they spot unauthorized activity. Signs of potential problems may include a notice, bill, or debit card for an account that was not activated or authorized, as well as a notice of fees for unsolicited products or services tied to an existing account. The Federal Reserve maintains the Federal Reserve Consumer Help (FRCH) website, which offers an online complaint form and information on filing complaints by fax and phone for consumers.

The Federal Reserve Board has announced its adoption of a a final rule to strengthen the ability of government authorities to resolve in an orderly way the largest domestic and foreign banks operating in the United States without any support from taxpayer-provided capital. These institutions will be required to meet a new long-term debt requirement and a new "total loss-absorbing capacity" (TLAC) requirement. The final rule applies to domestic firms identified by the Board as global systemically important banks (GSIBs) and to the U.S. operations of foreign GSIBs. The final rule also will require the parent holding company of a domestic GSIB to avoid entering into certain financial arrangements that would create obstacles to an orderly resolution. These "clean holding company" requirements will include bans on issuance of short-term debt to external investors and on entering into derivatives and certain other types of financial contracts with external counterparties. Board Chair Yellen and FDIC Chairman Gruenberg issued statements on the final rule.

The OCC has announced in Bulletin 2016-44 an update to the "Consigned and Other Customer Services" booklet of the Comptroller's Handbook. This booklet provides updated guidance to examiners assessing the risks associated with consigned items and other customer services. Consigned items include traveler’s checks, money orders, and U.S. commemorative coins. Other customer services include safe deposit boxes and messenger services.

The Office of the Comptroller of the Currency has released its December 2016 list of new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations. There were nine orders listed, all against individuals. An order issued to a former director of Landmark Community Bank, N.A., Isanti, Minnesota, is the fifth order issued to former directors of that bank in connection with the alleged diversion of bank capital while the bank remains under an enforcement order to maintain capital minimums. In each case, the director was ordered to make restitution to the bank, to pay a civil money penalty and was banned from the industry. The other eight orders included in the December list, each imposing a $5,000 civil money penalty, were issued to current directors of a Platteville, Wisconsin, bank in connection with late filings or erroneous filings of Call Reports.

The Financial Crimes Enforcement Network (FinCEN) has announced its assessment of a $500,000 civil money penalty against Bethex Federal Credit Union, Bronx, New York, for significant violations of anti-money laundering (AML) regulations. Bethex was liquidated by the NCUA in 2015 as insolvent with no prospects of returning to viability. FinCEN's assessment is a claim against any assets remaining after the completion of the liquidation process. In 2011, Bethex took on a lot of new business with money services businesses without revising its AML program to handle the additional business and the change in customer activity it entailed. As a result, it failed to detect and report significant volumes of suspicious activity, and when it was forced to file late SARs on that activity, the SARs were inadequately completed. For further information, see our Penalty page for this FinCEN action.

The CFPB has released its 2016 Student Banking Report, which raises new concerns about costly fees and risky features that can be attached to certain college-sponsored accounts. The Bureau’s analysis of roughly 500 marketing deals between schools and large banks found that many deals allow for risky features that can lead students to rack up hundreds of dollars in fees per year. The report also examines trends in the school-sponsored credit card market. The CFPB also issued a bulletin reminding colleges and universities they are required to publicly disclose marketing agreements with credit card companies.