Top Story Compliance Related

The President issued an Executive Order on July 11, 2017, extending the review period established by an Executive Order issued on January 13, 2017, which set forth criteria for the revocation of certain sanctions on Sudan and the Government of Sudan. The new Order extends until October 12, 2017 the period of review of the Sudanese government's actions. The Office of Foreign Assets Control has published a Frequently Asked Question regarding this Executive Order.

The FDIC has posted a notice of the July 18, 2017, meeting of the FDIC Board.

The OCC will host a Building Blocks for Directors workshop in Kansas City, Missouri, at the Westin Kansas City at Crown Center, August 28–30, for directors, senior management team members and other key executives of national community banks and federal savings associations supervised by the OCC. The workshop combines lectures, discussion, and exercises to provide practical information on the roles and responsibilities of board participation.

The Consumer Financial Protection Bureau has issued a new rule to ban companies from using mandatory arbitration clauses to deny groups of people their day in court. Many consumer financial products like credit cards and bank accounts have arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing. By forcing consumers to give up or go it alone – usually over small amounts – companies can make it financially impractical for the average consumer to sue, thus avoiding both the costs and potential court orders to cease the practices in question. The CFPB’s new rule is meant to deter wrongdoing by restoring consumers’ right to join together to seek damages and corrected conduct through group lawsuits. Under the rule, companies can still include arbitration clauses in their contract,.but companies subject to the rule may not use arbitration clauses to stop consumers from being part of a group action. The rule includes specific language that companies will need to use if they include an arbitration clause in a new contract.

The new CFPB rule applies to the major markets for consumer financial products and services overseen by the Bureau, including those that lend money, store money, and move or exchange money. The rule will be effective 60 days after publication in the Federal Register, and applicable to contracts entered into more than 180 days after the effective date.

UPDATE: Published on July 19, 2017, at https://www.federalregister.gov/d/2017-14225, with effective date of September 18, 2017, and mandatory compliance for contracts entered into on or after March 19, 2018.

• CFPB press release
• Arbitration Agreements Rule
• CFPB YouTube video about the rule
• CFPB Director Richard Cordray's prepared remarks for press call.
• CFPB's Arbitration Agreements Rule implementation page.

The FDIC has announced a meeting of its Advisory Committee on Community Banking on Wednesday, July 12. Senior staff will discuss and provide updates on supervisory issues such as liquidity risk, de novo applications, appraisals, Call Reports, capital and examination processes. There also will be presentations on post-crisis community bank performance and outlook, as well as supervision policy issues, including the implementation of the Home Mortgage Disclosure Act rule and flood insurance. The meeting is open to the public and will be held from 9 a.m. to 3 p.m. EDT in the FDIC's main building at 550 17th Street, N.W., Washington, D.C. The meeting also will be webcast live.

The following products have been released by the FFIEC:

• The FFIEC Online Census Data System (formerly FFIEC Census Reports) provides census data for Metropolitan and Non-Metropolitan areas, counties, and census tracts.

• The FFIEC Census Information Sheets are summaries of how the census data have changed from previous years and guidance on how to combine the census data with the appropriate year(s) of HMDA and CRA data.

• The FFIEC Census Windows Application is a downloadable Windows-based tool that allows you to search and export data, and to create reports using the census data that are published in the HMDA and CRA aggregate and disclosure reports.

• The FFIEC Estimated Median Family Income Report is a list of FFIEC Estimated Median Family Incomes for each MSA and for the non-metropolitan areas of each state.

In addition to the data available from the links above, certain census data are included in the HMDA LAR & TS Raw Data Application. Included with the raw data are Population, Minority Population Percent, MSA Median Family Income, Census Tract MFI to MSA MFI Percent, Number of Owner Occupied Housing Units, and Number of One to Four Family Units. Also, the 2017 Geocoding System has been updated with the 2017 Census demographic data based on the 2011–2015 five year estimated American Community Survey (ACS).

The OCC has reported strategic, credit, operational, and compliance risks remain top concerns for the federal banking system in its Semiannual Risk Perspective for Spring 2017. Highlights from the report include:

• Strategic risk remains elevated as banks make decisions to expand into new products or services or consider new delivery channels and continue merger and acquisition activity. Banks face competition from nonfinancial firms, including financial technology companies entering the traditional banking industry. This competition is causing changes in the way customers and financial institutions approach banking.
• Credit underwriting standards and practices across commercial and retail portfolios remain an area of OCC emphasis. Over the past two years, commercial and retail credit underwriting has loosened, showing a transition from a conservative to an increasing risk appetite as banks strive to achieve loan growth and maintain or grow market share.
• Operational risk continues to challenge banks because of increasing cyber threats, reliance on concentrations in significant third-party service providers, and the need for sound governance over product service and delivery.
• Compliance risk remains high as banks continue to manage money-laundering risks and implement changes to comply with the amended customer protection requirements under the Military Lending Act and integrated mortgage disclosure rules.

Remarks from Acting Comptroller Noreika were also released.

The CFPB has announced the appointment of new consumer experts from outside the federal government to its Consumer Advisory Board, Community Bank Advisory Council, Credit Union Advisory Council, and Academic Research Council.

The Department of Justice has agreed to a settlement with COPOCO Community Credit Union, Bay City, Michigan. In a July 26, 2016, lawsuit, the Department alleged that COPOCO violated the Servicemembers Civil Relief Act by repossessing cars owned by servicemembers without first obtaining court orders as required by the SCRA. Under the agreement, COPOCO must change its policies and compensate four servicemembers whose cars COPOCO unlawfully repossessed.

The agreement requires COPOCO to provide $10,000 in compensation to each of three of the affected servicemembers, plus any lost equity in the vehicle with interest. One servicemember and his wife had their car returned to them the day after the repossession at the DOJ’s request. They will receive $7,500. COPOCO also must repair the credit of all affected servicemembers and pay a $5,000 civil penalty to the United States. The agreement also contains provisions ensuring that all eligible servicemembers will receive the benefit of the SCRA’s six percent interest rate cap on their auto loans.

For additional information, see our Penalties page.

The CFPB announced on Friday a final rule updating its "Know Before You Owe" mortgage disclosure rule (a/k/a the TILA-RESPA Integrated Disclosure or TRID rule) with amendments that are intended to formalize guidance on the rule, and provide greater clarity and certainty. The CFPB is also releasing a limited follow-up proposal to address an additional implementation issue.

In addition to the clarifications and technical corrections, the final rule amendments also address other issues, including:

• Tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge
• Adjustments to expand the provision granting a partial exemption from disclosure requirements of certain housing assistance loans
• Extension of the rule's coverage to all cooperative units
• Provisions allowing the sharing disclosures with real estate brokers and other agents, and clarifying how a creditor may provide separate disclosure forms to the consumer and a seller.

The final rule will be effective 60 days after it is published in the Federal Register, with compliance optional (except for compliance with the amended escrow cancellation notice requirement under § 1026.20(e) and the partial payment policy disclosure requirement under § 1026.39(d)(5)) for any application received before October 1, 2018. Compliance will be mandatory for any application received on or after October 1, 2018, and for all loans with respect to the amended escrow cancellation notice and disclosure of partial payment policy beginning October 1, 2018.

UPDATE: The final rule was published at https://www.federalregister.gov/d/2017-15764 in the 8/11/2107 Federal Register, with an October 10, 2017, effective date. See above for the mandatory compliance date.

The CFPB is also issuing a proposal addressing when a creditor may use a Closing Disclosure or corrected Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith and within tolerance. Apparently, the changes in this area included in its 2016 proposal were interpreted in two very different ways. Comments on the revised proposal will be due 60 days after its publication in the Federal Register.

UPDATE: The proposal was published at https://www.federalregister.gov/d/2017-15763 in the 8/11/2017 Federal Register, with a comment period ending October 10, 2017.

• Final Rule amending the TRID Rule
• Proposal on use of closing disclosure
• Executive Summary