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07/26/2021

Nacha opt-in program for returning bogus unemployment benefits

Nacha has created an Opt-In Program to better facilitate the return and recovery of potentially fraudulent unemployment benefits originally paid by ACH credits. The program is designed to help improve the recovery of funds that may have been disbursed to inappropriate parties. The Opt-In Program is beginning with two participating Originating Depository Financial Institutions (ODFIs), participating on behalf of eight states: Florida, Idaho, Kansas, Minnesota, Montana, Nebraska, Utah and Wisconsin. Receiving Depository Financial Institutions (RDFIs) do not need to opt in to return funds to the participating states.

  • An RDFI can return a partial or full amount to a state unemployment agency via a "Program Return."
  • Program Returns are treated as an ODFI Request for Return under the Nacha Rules, in which the ODFI indemnifies the RDFI for the return of funds.
  • A Program Return may be sent via a new, forward CCD Credit Entry, using a data format specified by the opt-in rules. Such a CCD credit can be for the full amount or for a partial amount of the original ACH credit.
  • An RDFI may also send the full amount of the original ACH credit via an R06 return if the participating ODFI has indicated acceptance.
  • Program Returns, in accordance with program rules, may be sent for two years after the settlement date of the original ACH credit.

For additional information and program documents, visit Nacha's Unemployment Benefits Return Opt-In Program webpage.

07/23/2021

$27M for HUD AIDS program

HUD has announced more than $27 million in assistance to thousands of low-income persons living with HIV/AIDS and their families over a three-year period. The funding announced today is offered through HUD’s Housing Opportunities for Persons with AIDS Program (HOPWA) and will renew HUD's support of 31 local programs. These grants provide a combination of housing assistance and supportive services for this vulnerable population.

07/23/2021

NCUA to propose simplified capital adequacy measure

The National Credit Union Administration Board has approved a proposed rule that would create a simplified measure of capital adequacy for complex credit unions, and a request for information on the use of digital assets and related technologies by federally insured credit unions.

07/23/2021

Fraudulent websites use Walmart logo

The U.S. Attorney’s Office for the District of Maryland has seized fraudulent websites that contained numerous uses of the legitimate Walmart trademarked logo and appeared to mimic a legitimate Walmart website. The fraudulent websites allegedly offer a number of drugs for sale for the experimental and unapproved treatment or prevention of COVID-19. Instead, the domains were allegedly used to collect the personal information of individuals visiting the sites in order to use their information for nefarious purposes, including fraud, phishing attacks and/or deployment of malware.

07/23/2021

OFAC sanctions Cuban defense minister and special forces unit

Yesterday, OFAC sanctioned one Cuban individual and one Cuban entity, targeting the Cuban Minister of Defense, Alvaro Lopez Miera, and the Brigada Especial Nacional del Ministerio del Interior of the Cuban Ministry of the Interior in connection with the repression of peaceful, pro-democratic protests in Cuba that began on July 11.

For identification information, see BankersOnline's July 22, 2021, OFAC Update.

07/23/2021

Fed increases interest rate on reserve balances

The Federal Reserve Board has published at 86 FR 38905 in today's Federal Register an amendment to its Regulation D to increase the rate of interest paid on balances maintained to satisfy reserve balance requirements (“IORR”) and the rate of interest paid on excess balances (“IOER”) maintained at Federal Reserve Banks by or on behalf of eligible institutions.

The final amendments, which are effective today, specify that IORR is 0.15 percent and IOER is 0.15 percent, a 0.05 percentage point increase from their prior levels. The amendments are intended to enhance the role of IORR and IOER in maintaining the Federal funds rate in the target range established by the Federal Open Market Committee.

07/23/2021

If You See Something, Say Something campaign materials

Homeland Security's “If you See Something, Say Something “ campaign is committed to educating the American public about how to recognize and report the signs of suspicious activity. Campaign materials are now available in ten additional languages: Arabic, Chinese (Simplified), French, Haitian, Korean, Portuguese, Russian, Spanish, Thai, and Vietnamese. They can be downloaded from the DHS website.

“If You See Something, Say Something” is a national campaign that raises public awareness about the indicators of terrorism, terrorism-related crime, and domestic violent extremism, as well as the importance of reporting suspicious activity to state and local law enforcement. The campaign regularly works with state, local, tribal and territorial partners across the country to distribute public awareness messaging throughout local communities, organizations, and on social media.

07/22/2021

$19.4M to fight housing discrimination

HUD has announced it is making $19.4 million available to help HUD Fair Housing Initiatives Program (FHIP) agencies conduct activities that will address discriminatory housing practices related to the COVID-19 pandemic. The funds may also be used to address fair housing issues affecting individuals and families experiencing housing instability, including those who may face displacement due to discriminatory evictions and foreclosures.

07/22/2021

Treasury: Significant increase in Emergency Rental Assistance

Treasury reports the grantee performance data for June on the Emergency Rental Assistance (ERA) program shows a significant increase in the number of households served and the amount of funds provided to households as state and local programs continued to ramp up their efforts. More than $1.5 billion in assistance was delivered to eligible households in the month of June, more than the assistance provided all three previous reporting periods combined. The number of households served in June grew by about 85% over the previous month and nearly tripled since April. This represents significant progress, but there is still much further work to go to ensure tenants and landlords take advantage of the historic funding available to help cover rent, utilities, and other housing costs and keep people in their homes.

07/22/2021

FTC amends rules of practice

The Federal Trade Commission has published a final rule [86 FR 38542] amending its rules of practice in 16 CFR parts 0 and 1. The revised rules, effective today, modernize procedures for rulemakings to define unfair or deceptive acts or practices under the FTC Act to provide for more efficient conduct of rulemaking proceedings. The Commission is also revising these rules to better reflect the agency's organizational structure and authority.

The Commission is also making conforming edits to make the rule language more gender-neutral; use active voice instead of passive voice; replace ambiguous uses of “shall” with “may”, “will”, or “must” as appropriate; make nonsubstantive grammatical changes; and add and standardize citations to the U.S. Code where appropriate.

07/22/2021

CFPB celebrates its first ten years

The CFPB yesterday celebrated its 10th anniversary.

07/22/2021

Agencies extend review period on credit risk retention

The OCC, Federal Reserve, FDIC, FHFA, SEC, and HUD have published [86 FR 38607] a notice in today's Federal Register of the extension of the period for the review, and publication of determination of the review, of the definition of qualified residential mortgage; the community-focused residential mortgage exemption; and the exemption for qualifying three-to-four unit residential mortgage loans, in each case as currently set forth in the Credit Risk Retention Regulations (12 CFR Parts 43, 244, 373, and 1234; 17 CFR 246; and 24 CFR 267) as adopted by the agencies.

The period for completion of the review of the subject residential mortgage provisions and publication of notice disclosing the determination of this review is extended until December 20, 2021.

07/22/2021

Tandy Leather and former CEO settle SEC charges

The Securities and Exchange Commission has announced that Fort Worth, Texas, specialty retailer Tandy Leather Factory Inc. and its former chief executive officer, Shannon Greene, have agreed to settle charges for accounting, reporting, and control failures that led to a multi-year restatement of the company’s financial statements.

According to the order filed by the SEC, Tandy’s inventory tracking system was incapable of supporting its disclosed inventory accounting methodology because it did not properly maintain historical cost information for its inventory. Data from this system populated Tandy’s financial statements with inaccurate financial information, which in turn impacted the company’s calculations for, among other things, inventory, net income, and gross profit for years. Greene and others at the company were aware of the inventory tracking system’s limitations, but did not adequately remedy them, and failed to design and maintain proper accounting controls to reasonably ensure that Tandy’s transactions were recorded in accordance with generally accepted accounting principles. Tandy also failed to properly design, maintain, and evaluate its disclosure controls and procedures (DCP) and internal control over financial reporting (ICFR), and Greene failed to properly assess and evaluate the effectiveness of the same. As a result, Greene inaccurately certified that Tandy’s DCP and ICFR were properly designed and effective. On June 22, 2021, Tandy issued restated financial statements for fiscal years 2017 and 2018, each quarter in fiscal year 2018, and the first quarter of fiscal year 2019.

Without admitting or denying the order’s findings, Tandy and Greene each consented to cease and desist from further committing or causing these violations and pay civil money penalties of $200,000 and $25,000, respectively. In accepting Tandy’s settlement offer, the SEC took into account remedial actions the company took promptly after learning of the issues detailed in the SEC’s order.

07/21/2021

Agencies to act jointly on CRA rules modernization

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency on Tuesday issued an interagency statement on Community Reinvestment Act (CRA) Joint Agency Action. The agencies said they are "committed to working together to jointly strengthen and modernize regulations implementing" the CRA. "Joint agency action will best achieve a consistent, modernized framework across all banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods."

The OCC announced it will propose rescinding the Community Reinvestment Act (CRA) rule issued in May 2020 and is committed to working with the Federal Reserve Board and the FDIC to put forward a joint rulemaking that strengthens and modernizes the CRA. The decision to propose rescinding the 2020 rule follows the completion of a review initiated by Acting Comptroller of the Currency Michael Hsu shortly after he took office.

07/21/2021

OFAC issues Venezuela-related license

OFAC has issued a Venezuela-related General License and updated a related FAQ. See the July 20, 2021, BankersOnline OFAC Update for details.

07/21/2021

PrivacyCon 2021 agenda released

The Federal Trade Commission has released the final agenda for its sixth annual PrivacyCon event, which will be held online on July 27 and will include a focus on the privacy and security risks associated with algorithms, online advertising, and the Internet of Things.

PrivacyCon 2021 will highlight exciting new research and build on discussions in the United States and around the globe on trends related to consumer privacy and data security. Commissioner Rebecca Kelly Slaughter and Chief Technologist Erie Meyer will give opening remarks followed by six panels focused on algorithms, privacy considerations and understanding, advertising technology, the Internet of Things, privacy issues related to children and teens, and privacy and the pandemic. The event will also feature a presentation on the Algorithmic Bias Playbook by Ziad Obermeyer, Professor of Health Policy and Management at the Berkeley School of Public Health.

07/21/2021

FDIC proposes changes to deposit insurance for trusts

The FDIC has announced a proposed rule to simplify aspects of the agency's deposit insurance coverage rules.

First, the proposed rule would simplify deposit insurance coverage for deposits held in connection with revocable and irrevocable trusts by merging these two deposit insurance categories and applying a simpler, common calculation to determine coverage for all trust accounts. The proposal would make the trust rules consistent and easier to understand for bankers and depositors, and also would facilitate prompt payment of deposit insurance by the FDIC in the event of an insured depository institution’s failure.

Additionally, the proposal would amend the rule that governs coverage for mortgage servicing accounts to allow principal and interest funds advanced by a mortgage servicer to be included in the deposit insurance calculation.

Comments on the proposal will be accepted for 60 days following publication in the Federal Register.

07/20/2021

SEC orders $8.1M returned to investors

The Securities and Exchange Commission yesterday filed a settled action against UBS Financial Services Inc. for compliance failures relating to sales of a volatility linked exchange-traded product (ETP). The Order filed by the SEC indicates the ETP at issue is designed to track short-term volatility expectations in the market as measured against derivatives of a volatility index. According to the order, the issuer of the product warned UBS that it was not appropriate to hold the product for extended periods, and the product’s offering documents made clear that the product was more likely to decline in value when held over a longer period.

The SEC order finds that UBS:

  • prohibited brokerage representatives from soliciting sales of the product and placed other restrictions on sales of the product to brokerage customers, but did not place similar restrictions on certain financial advisers’ use of the product in discretionary managed client accounts
  • adopted a concentration limit on volatility-linked ETPs, but failed to implement a system for monitoring and enforcing that limit for five years
  • prohibited the financial advisers from making additional recommendations of this ETP prior to being contacted by the Commission staff

The order also finds that between January 2016 and January 2018, certain financial advisers:

  • had a flawed understanding of the appropriate use of the volatility-linked ETP
  • failed to take sufficient steps to understand risks associated with holding the product for extended periods
  • purchased and held the product in client accounts for lengthy periods, including hundreds of accounts that held the product for over a year, resulting in meaningful losses

Without admitting or denying the SEC’s findings, UBS agreed to cease and desist from violations of Rule 206(4)-7 of the Investment Advisers Act of 1940, a censure, and disgorgement and prejudgment interest of $112,274 and a civil penalty of $8 million, which will be distributed to investors harmed by the conduct at issue.

07/20/2021

Large bank resolution plans released

The Federal Reserve Board and FDIC have released the public sections of eight large domestic firms' resolution plans, which are required by the Dodd-Frank Act and commonly known as living wills. Resolution plans describe the company's strategy for rapid and orderly resolution under the Bankruptcy Code in the event of material financial distress or failure. Eight firms were required to submit targeted resolution plans by July 1: Bank of America Corporation; The Bank of New York Mellon Corporation; Citigroup Inc.; The Goldman Sachs Group, Inc.; JPMorgan Chase & Co.; Morgan Stanley; State Street Corporation; and Wells Fargo & Company.

The public sections of the resolution plans are available on the FDIC's and the Federal Reserve's websites.

07/20/2021

President announces nominations

Yesterday, President Biden announced his intent to nominate the following three individuals to serve in key roles:

  • Tamara Cofman Wittes, Nominee for Assistant Administrator for Middle East, United States Agency for International Development
  • Judith D. Pryor, Nominee for First Vice President of the Export-Import Bank
  • Graham Steele, Nominee for Assistant Secretary for Financial Institutions, Department of the Treasury

07/20/2021

FHFA cancels Adverse Market Refinance fee

The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac will eliminate their controversial Adverse Market Refinance Fee for loan deliveries effective August 1, 2021.

To allow families to save more money, lenders will no longer be required to pay the Enterprises a 50-basis point fee when they deliver refinanced mortgages. The fee was designed to cover losses projected as a result of the COVID-19 pandemic. The success of FHFA and the Enterprises' COVID-19 policies reduced the impact of the pandemic and were effective enough to warrant an early conclusion of the Adverse Market Refinance Fee. FHFA's expectation is that those lenders who were charging borrowers the fee will pass cost savings back to borrowers.

07/20/2021

Proposed guidance published

The OCC, FDIC, and Federal Reserve have published [86 FR 38182] their proposed Interagency Guidance on Third-Part Relationships Risk Management, which was announced last week. Comments on the proposal are due by September 17, 2021.

07/19/2021

Procedural notice on PPP guarantee purchases and charge-offs

The Small Business Administration has issued Procedural Notice 5000-812316, "PPP Guaranty Purchases, Charge-Offs, and Lender Servicing Responsibilities," on how lenders can apply to have SBA purchase and charge off Paycheck Protection Program loans for which the borrower has not applied for forgiveness or made payment on the loan.

The notice became effective July 15, 2021.

07/19/2021

Robocalling septic tank cleaner company down the drain

The Federal Trade Commission has announced that the owners of a New Jersey-based company that sells septic tank cleaning products agreed to a permanent ban on telemarketing and will pay more than $1.6 million to settle Federal Trade Commission charges that the company and its telemarketer made illegal robocalls to consumers, including tens of millions of calls to numbers listed on the agency’s Do Not Call Registry. In addition, the defendants will turn over a residential property as part of the settlement.

The FTC's complaint indicted Environmental Safety International, Inc. or ESI; ESI officers brothers Joseph Carney and Sean Carney; and their brother Raymond Carney, who acted together to initiate more than 45 million illegal telemarketing calls to consumers nationwide between January 2018 and March 2019 to promote ESI’s “Activator 1000” line of septic tank cleaning products. The FTC alleges that 31 million of those calls were made to numbers on the DNC Registry. The Department of Justice filed the complaint and proposed orders on the FTC’s behalf.

The complaint also alleges that ESI sent letters to consumers who agreed to buy their products but had unpaid invoices, falsely claiming that they would be referred to a “national collection agency” or to an attorney. However, ESI never took either of these actions.

In addition to the bans on telemarketing, the settlement orders impose $10.2 million civil penalty judgments against all defendants, which will be partially suspended after Joseph and Sean Carney pay $1,646,210 to the U.S. Treasury, and Raymond Carney pays $15,000.

In addition, Joseph and Sean Carney are prohibited from making material misrepresentations to consumers, including that they would be referred to an attorney or collection agency. They are prohibited from billing or attempting to collect payments from any consumers in connection with the sale of their septic tank cleaning products, and are required to notify all ESI customers with unpaid balances that they no longer have to pay ESI because their balances have been cancelled. Joseph and Sean Carney must also apply for ESI’s dissolution within 30 days.

07/19/2021

Open meeting on community banking

The FDIC has announced its Minority Depository Institutions (MDI) Subcommittee to the Advisory Committee on Community Banking will hold an open meeting at 1:00 p.m. EDT on Wednesday, July 21, 2021, which will be webcast live. During the public portion of the meeting, subcommittee members will share insights into key challenges and opportunities facing their communities and financial institutions, including the work to connect unbanked consumers to safe, affordable bank accounts. Following the public meeting, MDI Subcommittee members will provide feedback on the FDIC's strategies to preserve and promote MDIs, including a dialogue with the FDIC's Chief Innovation Officer; an update on the Mission-Driven Bank Fund; and an update on other MDI program initiatives.

There are two other FDIC meetings scheduled to be webcast this week:

07/19/2021

Advisory highlights growing Hong Kong risks

On Friday, the U.S. Departments of State, Commerce, Homeland Security and the Treasury issued an advisory to highlight growing risks associated with actions undertaken by the Government of the People’s Republic of China and the Government of the Hong Kong Special Administrative Region (SAR) that could adversely impact U.S. companies that operate in the Hong Kong SAR of the People’s Republic of China.

Businesses, individuals, and other persons, including academic institutions, research service providers, and investors that operate in Hong Kong, or have exposure to sanctioned individuals or entities, should be aware of changes to Hong Kong’s laws and regulations. This new legal landscape, including the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region, could adversely affect businesses and individuals operating in Hong Kong. As a result of these changes, they should be aware of potential reputational, regulatory, financial, and, in certain instances, legal risks associated with their Hong Kong operations.

These risks fall into four categories: risks for businesses following the imposition of the NSL; data privacy risks; risks regarding transparency and access to critical business information; and risks for businesses with exposure to sanctioned Hong Kong or PRC entities or individuals.

OFAC also designated seven individuals under its Hong Kong Executive Order 13936 sanctions. The July 16, 2021, BankersOnline OFAC Update has identification details.

07/16/2021

Industrial production increases

The Federal Reserve has posted its July 15, 2021, G.17 report of Industrial Production and Capacity Utilization.

Industrial production increased 0.4 percent in June after moving up 0.7 percent in May. In June, manufacturing output edged down 0.1 percent, as an ongoing shortage of semiconductors contributed to a decrease of 6.6 percent in the production of motor vehicles and parts. Excluding motor vehicles and parts, factory output increased 0.4 percent. The output of utilities advanced 2.7 percent, reflecting heightened demand for air conditioning, as much of the country experienced a heat wave in June. The index for mining increased 1.4 percent.

For the second quarter as a whole, total industrial production rose at an annual rate of 5.5 percent. Manufacturing output increased at an annual rate of 3.7 percent despite a drop of 22.5 percent for motor vehicles and parts.

At 100.1 percent of its 2017 average, total industrial production in June was 9.8 percent above its year-earlier level but 1.2 percent below its pre-pandemic (February 2020) level. Capacity utilization for the industrial sector rose 0.3 percentage point in June to 75.4 percent, a rate that is 4.2 percentage points below its long-run (1972–2020) average.

07/16/2021

Project REACh first anniversary

Acting Comptroller Hsu yesterday noted the first anniversary of Project REACh by hosting participants to celebrate the project’s accomplishments and to challenge them to set their sights even higher over the next two years. REACh stands for Roundtable for Economic Access and Change, and the project brings together a range of leaders to reduce specific barriers that prevent full, equal, and fair participation in the nation’s economy.

07/16/2021

Fed report on credit card operations profitability

The Federal Reserve Board has submitted its July 2021 Report to the Congress on the Profitability of Credit Card Operations of Depository Institutions, which analyzes the profitability over time of depository institutions' credit card activities by examining the performance of larger institutions that specialize in such activities and of a sample of smaller commercial banks that offer a range of credit services. The report also reviews trends in credit card pricing, including changes in interest rates.

The report is mandated by section 8 of the Fair Credit and Charge Card Disclosure Act of 1988. The analysis in the report is based largely on information from the Call Reports and quarterly reports of credit card plans on from FR 2835a. The July 2021 report is based on reported data through December 31, 2020.

07/16/2021

SEC charges former officers of Florida company

The Securities and Exchange Commission has announced it has charged the former CEO and CFO of FTE Networks Inc., a network infrastructure company formerly based in Naples, Florida, with conducting a multi-year accounting fraud.

This alleged scheme involved inflating the company’s revenues for certain periods by as much as 108 percent, the misappropriation of millions of dollars of company funds for personal use, and concealing the then-NYSE listed publicly traded company’s issuance of almost $23 million in convertible notes. The complaint filed by the SEC alleges Michael Palleschi and David Lethem, the former CEO and CFO respectively of FTE, directed the company to issue approximately $22.7 million in convertible notes with short-term maturities, steep interest rates, and market-price-based formulas for conversion into shares. As alleged, Palleschi and Lethem misled in-house accounting personnel and FTE’s outside auditor about certain material terms of the notes, which were not properly accounted for or disclosed in FTE’s financial statements. The complaint also alleges that Palleschi and Lethem inflated FTE’s revenue by directing FTE to improperly recognize revenue and related accounts receivable for nonexistent construction projects. According to the complaint, Palleschi and Lethem misappropriated millions of dollars of company funds to pay for personal expenses, including luxury car leases, private jet services, and unauthorized salary increases.

07/16/2021

Direct deposit of Child Tax Credit has begun

The IRS and the Treasury announced yesterday that millions of American families have started receiving monthly Child Tax Credit payments as direct deposits begin posting in bank accounts and checks arrive in mailboxes.

This first batch of advance monthly payments worth roughly $15 billion reached about 35 million families yesterday across the country. About 86% were sent by direct deposit.

The payments will continue each month. The IRS urged people who normally aren't required to file a tax return to explore the tools available on IRS.gov. These tools can help determine eligibility for the advance Child Tax Credit or help people file a simplified tax return to sign up for these payments as well as Economic Impact Payments, and other credits they may be eligible to receive.

Under the American Rescue Plan, each payment is up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6 through 17. Normally, anyone who receives a payment this month will also receive a payment each month for the rest of 2021 unless they unenroll. Besides the July 15 payment, payment dates are: August 13, September 15, October 15, November 15 and December 15.

[Editor's note: Bankers should remember that Treasury regulations require that direct deposits that are not posted because the designated account has been closed must be returned "account closed." Treasury will re-send these payments in check form. The IRS has a Child Tax Credit Update Portal that can be used by families to check on their enrollment to receive the advance payments, unenroll to stop getting advance payments, and provide or update their bank account information for monthly payments starting with the August 13 payment.]

07/16/2021

Large Position Reports requested by Treasury

The U.S. Department of the Treasury is calling for Large Position Reports from those entities whose positions in the 0-7/8% Treasury Notes of November 2030 equaled or exceeded $4.1 billion as of Monday, November 16, 2020 or Monday, December 14, 2020.

Entities must submit separate reports for each reporting date on which their positions equaled or exceeded the reporting threshold. Entities with positions in these notes below $4.1 billion are not required to submit Large Position Reports.

Reports must be received by Treasury before 5:00 PM (ET) on Thursday, July 22, 2021, and must include the required position(s) and administrative information. Large Position Reports may be submitted using Treasury’s LPR webform or by fax to Treasury at (202) 504-3788.

07/15/2021

FinCEN Exchange on ransomware

FinCEN has announced it will convene a FinCEN Exchange in August 2021 with representatives from financial institutions, other key industry stakeholders, and federal government agencies to discuss ongoing concerns regarding ransomware, as well as efforts by the public and private sectors. The FinCEN Exchange will build upon FinCEN’s November 2020 event on ransomware. FinCEN anticipates that this FinCEN Exchange will assist its government and private sector partners to inform next steps to address ransomware and focus resources to mitigate the threat. This announcement is part of a government-wide effort to combat ransomware.

According to FinCEN, ransomware attacks are a growing concern for the financial sector, given that financial institutions can be targeted by ransomware attacks as well as reputational and financial integrity concerns about the role financial institutions might play in the processing of ransom payments. Efforts to detect and report ransomware payments are vital to prevent and deter ransomware attacks, and to hold these attackers accountable for their crimes. In October 2020, FinCEN issued Advisory FIN-2020-A006 to alert financial institutions to predominant trends, typologies, and potential indicators of ransomware and associated money laundering activities. In addition, in June 2021, FinCEN highlighted ransomware as a particularly acute cybercrime concern in its issuance of the first government-wide priorities for anti-money laundering and countering the financing of terrorism policy.

07/15/2021

Fed posts paper on remote authentication methods

The Federal Reserve recently published Remote Authentication Landscape and Authentication Methods, the first of three research briefs planned for this summer.

Many financial institutions, payment service providers, processors and merchants rely on outdated authentication and verification methods to prevent payments fraud. The brief explores authentication strategies to address new account, synthetic identity, and account takeover fraud.

The second brief in the series will describe several remote payment use cases where payments stakeholders apply authentication during the enrollment and transaction process. The third and final brief will discuss payments industry approaches and tools to mitigate remote authentication fraud, as well as key findings and recommendations on next steps to build awareness and engage industry stakeholders.

07/15/2021

July 2021 Beige Book

The Federal Reserve has released its July 14, 2021, Beige Book compilation of information collected on or before July 2, based on comments received from outside the Federal Reserve System.

Overall Economic Activity
The U.S. economy strengthened further from late May to early July, displaying moderate to robust growth. Sectors reporting above-average growth included transportation, travel and tourism, manufacturing, and nonfinancial services. Energy markets improved slightly, and agriculture had mixed results. Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods. Strained car inventories resulted in somewhat lower car sales despite steady demand, and home sales rose slightly despite limited supply. Non-auto retail sales grew at a moderate pace on balance, and tourism was buoyed by the further abatement of pandemic-related concerns. Residential construction softened in several Districts in response to rising costs, while commercial construction was mixed but up slightly on balance. Bank lending activity increased slightly or modestly in most Districts. The outlook for demand improved further, but many contacts expressed uncertainty or pessimism over the easing of supply constraints.

07/15/2021

LendingClub pays $18M to settle FTC charges

The Federal Trade Commission has announced that online lender LendingClub Corporation has agreed to pay $18 million to settle charges that the company deceived consumers about hidden fees that it charged and about whether their loan applications were approved. The settlement also bars LendingClub from making misrepresentations to loan applicants and requires that the company clearly and conspicuously disclose the amount of any prepaid, up-front, or origination fee and the total amount of funds that borrowers will receive.

The Commission charged in April 2018 that the company falsely promised loan applicants that they would receive a specific loan amount with “no hidden fees,” when in reality the company deducted hundreds or even thousands of dollars in hidden up-front fees from the loans. The FTC also alleged that LendingClub told consumers they were approved for loans when they were not, and took money from consumers’ bank accounts without authorization.

07/15/2021

FFIEC posts 2021 Median Family Income report

The FFIEC's 2021 Median Family Income (MFI) Report has been posted.

07/15/2021

FDIC and CFPB enhance Money Smart for Older Adults

The FDIC and CFPB have announced they have jointly released an enhanced version of the award-winning financial education curriculum, Money Smart for Older Adults. The enhanced version includes a new section to help people avoid “romance scams” and an updated resource guide. The enhancements to Money Smart for Older Adults are based on stakeholder feedback and recent research conducted by the FDIC and CFPB for this collaborative effort.

In addition, the FDIC and CFPB have released a newly created informational brochure on COVID-19-related scams.

Money Smart for Older Adults training materials can be downloaded from the FDIC

07/14/2021

SEC takes action against teachers' retirement plan

The Securities and Exchange Commission has announced that TIAA-CREF Individual & Institutional Services LLC (TC Services), a subsidiary of Teachers Insurance and Annuity Association of America (TIAA), will pay $97 million to settle charges of inaccurate and misleading statements and a failure to adequately disclose conflicts of interest to thousands of participants in TIAA record-kept employer-sponsored retirement plans (ESPs).

According an order filed by the SEC, from January 1, 2013, through March 30, 2018, TC Services and its Wealth Management Advisers (WMAs) did not adequately disclose the full nature and extent of their conflicts of interest in recommending to clients that they roll over their retirement assets into a managed account program called “Portfolio Advisor.” The order finds that TC Services failed to adequately disclose compensation practices that incentivized the firm and its WMAs to recommend Portfolio Advisor for reasons other than a client’s particular investment needs. Further, TC Services trained its WMAs to make, and its WMAs made, representations that they offered “objective” and “non-commissioned” advice, “put the client first,” and acted in the client’s best interest while holding themselves out as fiduciaries. TC Services simultaneously applied continual pressure to compel WMAs to prioritize the rollover of ESP assets into Portfolio Advisor over lower cost alternatives. The order also finds that TC Services failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act in connection with rollover recommendations.

Without admitting or denying the SEC’s findings, TC Services agreed to cease and desist from committing or causing any future violations of these provisions, be censured, and pay disgorgement, prejudgment interest, and a civil penalty totaling $97 million that will be distributed to investors through a Fair Fund. The $97 million will be distributed to investors affected by the misconduct and settles both the SEC’s case and a parallel action announced yesterday by the Office of the New York Attorney General

07/14/2021

IRS to issue 4 million more unemployment refunds

The IRS has announced it will issue another round of refunds this week to nearly 4 million taxpayers who overpaid their taxes on unemployment compensation received last year.

The American Rescue Plan Act of 2021, which became law in March, excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations. The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000. Refunds by direct deposit will begin July 14 and refunds by paper check will begin July 16.

The IRS previously issued refunds related to unemployment compensation exclusion in May and June, and it will continue to issue refunds throughout the summer. Most taxpayers need not take any action and there is no need to call the IRS. However, if, as a result of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return.

07/14/2021

Fed releases Discount Rate meetings minutes

The Federal Reserve Board has released the minutes of its interest rate meetings from May 17 through June 16, 2021.

07/14/2021

Agencies propose risk management guidance for 3rd-party relationships

The federal bank regulatory agencies (Board of Governors, FDIC, and OCC) on Tuesday requested public comment on proposed guidance designed to help banking organizations manage risks associated with third-party relationships, including relationships with financial technology-focused entities. The proposed guidance is intended to assist banking organizations in identifying and addressing the risks associated with third-party relationships and responds to industry feedback requesting alignment among the agencies with respect to third-party risk management guidance.

Banking organizations that engage third parties to provide products or services or to perform other activities remain responsible for ensuring that such outsourced activities are conducted in a safe and sound manner and in compliance with all applicable laws and regulations, including consumer protection laws.

Comments must be received within 60 days of the proposed guidance's publication in the Federal Register.

07/14/2021

CFPB report on consumer credit during pandemic

The CFPB has posted "Trends in Reported Assistance on Consumers' Credit Records," the second article in a series documenting trends in consumer credit outcomes during the COVID-19 pandemic.

The article focuses on reported assistance on consumers’ credit records. For purposes of this analysis, authors Corinne Candilis and Ryan Sandler define consumer assistance as an account being reported with zero scheduled payment due despite a positive balance. In the June 16, 2021, article, Candilis and Sandler found that most credit products saw a sharp uptick in assistance in March 2020 and an uptick in transitions out of assistance between April and June. Since July 2020, consumers have transitioned out of assistance to varying degrees across all credit products, but a significant share of mortgage borrowers continue to receive assistance.

With the exception of student loans, the total share of loans with payment assistance began declining in the summer of 2020, as the initial increase in loans transitioning into assistance abated and accounts began transitioning out of assistance in larger numbers. There continued to be high rates of assistance in student loans largely due to the CARES Act, which put most student loans in automatic payment suspension. By March of 2021, the total share of auto loans and credit card accounts with assistance was only slightly above pre-pandemic levels, while the share of mortgages and student loans on assistance remains significantly higher than pre-pandemic baselines.

Candilis and Sandler also observed that consumers who exited assistance tend to live in communities hit harder by the pandemic.

07/13/2021

FTC charges two companies for aiding student loan relief scammers

The Federal Trade Commission on Monday announced two Florida companies and their CEO will be permanently barred from offering payment-processing services to settle Federal Trade Commission allegations that they aided a criminal student debt relief scam that bilked $62 million from thousands of students and their families.

According to the FTC’s complaint, Moneta Management, LLC, Moneta Management, Inc., and their CEO Michael Todd Greene knowingly provided false or deceptive information to credit card and ACH processors to obtain merchant processing for the scam operated by Brandon Frere and his three companies. Frere and his companies reached a settlement with the FTC in November 2020 and also pleaded guilty to federal criminal charges in 2019.

Greene and his companies submitted payment processing applications that concealed Frere’s scam, denied that Frere and his companies were offering consumers prohibited debt relief services, and ignored repeated warnings and direct evidence that Frere’s scam was defrauding consumers and violating the Telemarketing Sales Rule, according to the complaint. The accounts that Greene and his companies helped create for Frere’s scam allowed the processing of credit card and debit payments from consumers.

As part of the settlement with the FTC, Greene and his two companies will be barred from payment processing, acting as a sales agent or independent sales organization, and from assisting and facilitating unfair and deceptive trade practices. The proposed final order also imposes a monetary judgment of $28.6 million on Greene and his companies, which will be partially suspended after payment of $20,493 due to their inability to pay the full amount. They will be required to pay the full amount if they are found to have misrepresented their finances.

07/13/2021

CFPB hits fintech GreenSky with $11.9M consent order

The CFPB announced Monday it had taken action against GreenSky LLC, a fintech non-bank institution in Atlanta, Georgia, for enabling contractors and other merchants to take out loans on behalf of thousands of consumers who did not request or authorize them. The CFPB issued a consent order against GreenSky requiring the company to refund or cancel up to $9 million in loans for customers harmed by its illegal conduct, pay a $2.5 million civil penalty, and implement new procedures to prevent future fraudulent loans.

GreenSky used merchants, primarily those providing home improvements, to promote and offer financing to customers before making on-the-spot lending decisions based on criteria provided by its partner banks. Proceeds from GreenSky’s loans, ranging from a few thousand to tens of thousands of dollars, bypass consumers and are disbursed directly to merchants following the merchants’ application for payment. Some consumers complained that they never applied for a loan or even heard of GreenSky before receiving billing statements, collection letters, and calls from the company.

The CFPB found that GreenSky engaged in unfair practices against their customers in violation of the Consumer Financial Protection Act of 2010 (CFPA). For additional details and a link to the CFPB's consent order, see "GreenSky pays $11.9 million for unauthorized consumer loans," in BankersOnline's Penalty pages.

07/13/2021

Spanish version of IRS online tool available

The Internal Revenue Service has launched a new Spanish-language version of its online tool, Child Tax Credit Eligibility Assistant, designed to help families determine whether they qualify for the Child Tax Credit and the special monthly advance payments of the credit, due to begin on July 15. The new Spanish version of the tool, like its English-language counterpart, is interactive and easy to use. By answering a series of questions about themselves and their family members, a parent or other family member can quickly determine whether they qualify for the credit.

07/13/2021

AR holding company gets OK to acquire OK bank

The Federal Reserve Board has approved the application by First Bank Corp. of Fort Smith, Arkansas, to acquire Central Bancshares of Poteau, Inc., and indirectly acquire The Central National Bank of Poteau, both of Poteau, Oklahoma.

First Bank Corp., with consolidated assets of about $2.3 billion, controls First National Bank of Fort Smith, Fort Smith, Arkansas, with branches in Arkansas and Oklahoma, and Citizens Bank & Trust Company, Van Buren, Arkansas, with offices in Arkansas only. Central Bankshares of Poteau, Inc. has total assets of about $305.7 million. Central National Bank of Poteau has branches in Oklahoma only.

07/13/2021

New OFAC Venezuela-related license

OFAC announced yesterday it had issued Venezuela-related General License 40 and two related FAQs.

07/12/2021

IRS on its taxpayer information resources

The IRS on Friday issued a press release listing a number of IRS information tools providing taxpayers with the answers they need.

In addition to 24/7 access to tax forms and instructions, the IRS site allows taxpayers to:

  • Use the File tab on the IRS home page for most federal income tax needs.
  • Access the Interactive Tax Assistant tool that can answer many tax law questions.
  • See their tax account with the View Your Account tool. With this, they can find information such as a payoff amount, the balance for each tax year owed, up to 24 months of their payment history and key information from their current tax year return as originally filed.
  • Use the Get Transcript tool to view, print or download their tax transcripts after the IRS has processed the return.
  • Find the most up-to-date information about tax refunds using the Where's My Refund? tool on IRS.gov and on the official IRS mobile app, IRS2Go. Taxpayers can start checking on the status of their refund 24 hours after the IRS acknowledges receipt of an e-filed return.

07/12/2021

July Monetary Policy Report

The Federal Reserve Board has submitted its July 9, 2021 Monetary Policy Report to the Senate Committee on Banking, Housing, and Urban Affairs and to the House Committee on Financial Services.

The Federal Reserve Act requires the Federal Reserve Board to submit written reports to Congress containing discussions of "the conduct of monetary policy and economic developments and prospects for the future." This report⁠—called the Monetary Policy Report⁠—is submitted semiannually, along with testimony from the Federal Reserve Board Chair.

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