Top Story Compliance Related

The NCUA reports that Chairman Metsger has submitted a letter to the CFPB requesting an exemption from the final CFPB payday lending rule for NCUA’s payday alternative loan rules. “We respectfully request the Bureau exempt FCUs completely from its final rule for loans made under and consistent with NCUA’s PALs regulation,” Metsger said in his letter. “As the prudential regulator for federal credit unions, NCUA already ensures that members receive the type of protections the Bureau is seeking to address. The Bureau should therefore defer to determinations of the FCU prudential regulator about this product.”

The OCC will host two workshops in Cincinnati, Ohio, at the Hyatt Regency Cincinnati, November 9-10, for directors of national community banks and federal savings associations supervised by the OCC. The Compliance Risk workshop on November 9 combines lectures, discussion, and exercises on the critical elements of an effective compliance risk management program. Topics of discussion include the Bank Secrecy Act, Community Reinvestment Act, and the Truth-in-Lending (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA) Integrated Disclosures Rule, also known as TRID. The Operational Risk workshop on November 10 focuses on the key components of operational risk — people, processes and systems. The workshop also covers governance, third-party risk, vendor management, and cybersecurity.

The FDIC has issued a list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in July 2016. Three were rated outstanding, 55 satisfactory, one needs to improve and none substantial non-compliance.

The Federal Reserve Board and the FDIC have jointly announced public portions of the required "targeted submissions" for the eight systemically important, domestic banking institutions. To foster transparency, the agencies required all of the firms to file a public portion of their targeted submissions. In April of this year, the agencies jointly determined that each of the 2015 resolution plans of Bank of America, Bank of New York Mellon, JPMorgan Chase, State Street, and Wells Fargo was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, the standard established in the Dodd-Frank Wall Street Reform and Consumer Protection Act. As such, the agencies issued joint letters to these firms detailing the deficiencies in their plans and the actions the firms must take to address them. The agencies required these five firms to remediate their deficiencies by October 1, 2016, and file a targeted submission to the agencies detailing the remediation. If a firm has not remediated the identified deficiencies, it may be subject to more stringent prudential requirements.

The Office of Foreign Assets Control has posted a Specially Designated National (SDN) List Update removing several Zimbabwe-related listings. The Update also included changes to one Zimbabwe-related, and two Kingpin Act-related, listings.

Almost two years after its November 13, 2014, proposal, the Consumer Financial Protection Bureau announced early this morning a finalized rule amending Regulations E and Z to provide federal consumer protections for prepaid account users. The new rule requires financial institutions to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, and give consumers free and easy access to account information. The Bureau also finalized new “Know Before You Owe” disclosures for prepaid accounts to give consumers clear, upfront information about fees and other key details. Finally, prepaid companies must now generally offer protections similar to those for credit cards if consumers are allowed to use credit on their accounts to pay for transactions that they lack the money to cover.

The rule covers traditional prepaid cards, including general purpose reloadable cards. It also applies to mobile wallets, person-to-person payment products, and other electronic prepaid accounts that can store funds. Other prepaid accounts covered by the new rule include: payroll cards; student financial aid disbursement cards; tax refund cards; and certain federal, state, and local government benefit cards such as those used to distribute unemployment insurance and child support. New protections for these cards under the Electronic Fund Transfer Act and Regulation E include requirements for statements or free and multi-channel access to account information, error resolution rights, and protections for lost cards and unauthorized transactions. New upfront disclosures will use standard formats for both short-form and long-form versions, and card agreements will be publicly available on issuers' websites and, in the future, on a CFPB site.

Credit protections similar to those provided for credit card accounts will apply when consumers have access to credit products via their prepaid accounts, including ability to pay requirements, monthly billing statements, at least 21 days from billing to payment due dates, and limited fee and interest charges. Credit features cannot be made available via a prepaid account until 30 days after a consumer registers the account, and prepaid companies cannot automatically grab a credit repayment when a prepaid account is next reloaded with funds, and can't automatically take funds from a prepaid account balance when a credit payment is due without consumer consent.

The new rule will be effective October 1, 2017.

UPDATE: The rule was published in the Federal Register on November 22, 2016.

• The CFPB's Final Rule [1,689 page PDF]
• LINK to November 22, 2016, publication in the Federal Register
• Sample disclosures under the new rule
• Link to the Bureau's new Prepaid Accounts page, with links to resources, model forms, etc.
• The CFPB Prepaid Accounts implementation page
• Bureau YouTube video with highlights of the rule

Recently posted articles on the CFPB's Blog:

• How minority borrowers can get money from Honda Finance Corporation for overcharging
• Tools for saving from the Project Catalyst research pilot
• Compiling a list of companies offering free credit scores

The OCC has published Bulletin 2016-31 seeking comment on a proposed rule {published August 19) that would enhance the resilience and the safety and soundness of federally chartered and licensed financial institutions. The proposed rule would address concerns relating to the exercise of default rights of certain financial contracts that could interfere with the orderly resolution of certain systemically important financial firms. Under this proposed rule, a covered bank would be required to ensure that all covered qualified financial contracts (QFC) (1) contain a contractual stay-and-transfer provision analogous to the statutory stay-and-transfer provision imposed under title II of the Dodd-Frank Act and in the Federal Deposit Insurance Act, and (2) limit the exercise of default rights based on the insolvency of an affiliate of the covered bank. In addition, this proposed rule would make conforming amendments to the OCC’s capital adequacy standards in 12 CFR 3 and the liquidity risk measurement standards in 12 CFR 50. The OCC's Bulletin notes that this proposal "would not apply to community banks." Comments are due by October 18, 2016.

FinCEN has assessed a civil money penalty of $12 million against CG Technology, L.P., doing business as Cantor Gaming, for egregious and systemic violations of the AML provisions of the Bank Secrecy Act (BSA). FinCEN’s analysis of reports filed under the BSA and information obtained from a 2010 examination by the Internal Revenue Service’s Small Business/Self-Employed Division, as well as a 2014 follow up audit by FinCEN, support this action. Additional supporting information concerning illegal gambling and money laundering surfaced stemming from a criminal investigation and indictment of 25 individuals, known as the “Jersey Boys,” conducted by the U.S Attorney’s Office for the Eastern District of New York.

FinCEN’s assessment is concurrent with the U.S. Attorney’s Offices for the Eastern District of New York and District of Nevada’s announcement of a non-prosecution agreement with Cantor Gaming. In that settlement, Cantor Gaming resolved possible criminal charges, agreeing to a forfeiture of $6 million and a criminal fine of $10.5 million. Six million dollars of the criminal fine and forfeiture will be credited to partially satisfy FinCEN’s $12 million civil money penalty.

For more information on these actions, see "Cantor Gaming pays $22.5MM for AML violations," in our BSA/AML Penalties pages.

HUD has announced the filing of charges against Massachusetts landlords and a Manhattan condo owner alleging discrimination against families with children and residents with disabilities.