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Targeting Hizballah's abuse of the business sector

On Thursday, Treasury announced that OFAC had designated Ahmad Jalal Reda Abdallah, a Lebanese businessman and Hizballah financial facilitator, as well as five of his associates and eight of his companies in Lebanon and Iraq. The action was taken to counter Hizballah’s modus operandi of using the cover of seemingly legitimate businesses to generate revenue and leverage commercial investments across a multitude of sectors to secretly fund Hizballah and its terrorist activities. It also demonstrates how Hizballah goes to great lengths to establish companies with opaque ownership structure in order to conceal their involvement in these businesses, and also their involvement in criminal activities such as altering of medication labels for black market pharmaceutical sales.

For a complete list of the individuals and entities designated yesterday, see the May 19, 2022, BankersOnline OFAC Update.


Fed finalizes rule for transfers over FedNow service

The Federal Reserve Board has announced it has finalized a rule that governs funds transfers over the Federal Reserve Banks' FedNow Service. The final rule, which adds a new subpart C to Regulation J, is substantially similar to the proposal from last year, with a few clarifications in response to comments.

The FedNow Service is a new 24x7x365 interbank settlement service with clearing functionality to support instant payments in the United States and is expected to be available in 2023.

The final rule provides a comprehensive set of rules governing funds transfers over the FedNow Service and provides legal certainty and clarity on the rights and obligations of parties to a transfer over the FedNow Service.

The rule will become effective at the start of the first calendar quarter following its publication in the Federal Register.


FDIC sets process for MDI applications

The FDIC has issued FIL-24-2022 to announce a process for an insured institution or applicant for deposit insurance to make a request that the FDIC recognize the institution as a minority depository institution. The process conforms to the FDIC's June 15, 2021, Statement of Policy Regarding Minority Depository Institutions,

  • FDIC supervised institutions or applicants for deposit insurance that seek to be recognized as an MDI may submit a written request, signed by a duly authorized officer or representative of the institution or applicant, at any time to the appropriate regional office.
    • Institutions may also submit a request in connection with a merger application or a change in control notice.
    • The request should contain sufficient information in support of the designation.
  • If the submitted documentation indicates that the institution or applicant has met the eligibility requirements, the FDIC will send a letter acknowledging recognition of the institution as an MDI.
    • The letter will describe the resources available through the MDI Program.
    • The institution or applicant should maintain documentation supporting its continued eligibility for the MDI designation.


CFPB: states can enforce federal consumer protection laws

The Consumer Financial Protection Bureau yesterday announced it has issued an interpretive rule that describes states’ authorities to pursue lawbreaking companies and individuals that violate the provisions of federal consumer financial protection law. Because of the crucial role states play in protecting consumers, the Consumer Financial Protection Act (part of the Dodd-Frank Act of 2010) grants their consumer protection enforcers the authority to protect their citizens and otherwise pursue lawbreakers. The interpretive rule affirms:

  • States can enforce the Consumer Financial Protection Act, including the provision making it unlawful for covered persons or service providers to violate any provision of federal consumer financial protection law. This provision covers the Consumer Financial Protection Act itself as well as its 18 enumerated consumer laws and certain other laws, along with any rule or order prescribed by the CFPB under the Consumer Financial Protection Act, an enumerated consumer law, or pursuant to certain other authorities.
  • States can pursue claims and actions against a broad range of entities. The Consumer Financial Protection Act outlines entities over which the CFPB may exercise its enforcement authority under the statute. States are able to bring actions against a broader cross-section of companies and individuals.
  • CFPB enforcement actions do not put a halt to state actions. Sometimes states bring enforcement actions in coordination with the CFPB. A state may also bring an enforcement action to stop or remediate harm that is not addressed by a CFPB enforcement action against the same entity. Nothing in the Consumer Financial Protection Act precludes these complementary enforcement activities that serve to protect consumers at both the national and state levels.

The interpretive rule will become effective upon publication in the Federal Register.


OCC enforcement actions

The OCC has released a list of enforcement actions taken by the agency in the month of April. Included was a consent order to cease and desist and pay a $30,000 civil money penalty issued to the president and CEO of a Beauregard, Louisiana, federal savings bank.


State Small Business Credit Awards announced

Treasury has announced the first group of plans approved under the new round of the State Small Business Credit Initiative (SSBCI). The American Rescue Plan reauthorized and expanded SSBCI, which was originally established in 2010 and was highly successful in increasing access to capital for traditionally underserved small businesses and entrepreneurs. The new SSBCI builds on this successful model by providing nearly $10 billion to states, the District of Columbia, territories, and Tribal governments to increase access to capital and promote entrepreneurship, especially in traditionally underserved communities as they emerge from the pandemic. SSBCI funding is expected to catalyze up to $10 of private investment for every $1 of SSBCI capital funding, amplifying the effects of this funding and providing small business owners with the resources they need to sustainably grow and thrive. State governments submitted plans to Treasury for how they will use their SSBCI allocation to provide funding to small businesses, including through venture capital programs, loan participation programs, loan guarantee programs, collateral support programs, and capital access programs.

Today, Treasury is also announcing that it will have specialized programming to enable jurisdictions to share best practices for targeting investments in key industries and businesses owned by underserved entrepreneurs. Treasury strongly encourages jurisdictions to implement their plans in ways that support industries especially important to the U.S. economy – including small businesses that promote American manufacturing, strengthen critical supply chains, and invest in clean energy and renewables to secure our nation’s energy independence. Treasury has structured SSBCI to ensure that these funds will reach underserved small businesses and entrepreneurs in need of access to capital, including by providing $1 billion in incentive funds for jurisdictions that successfully reach underserved entrepreneurs and through its recent announcement of plans to deploy $300 million in technical assistance to reach businesses and entrepreneurs in need of assistance, including through the transfer of funds to the Minority Business Development Agency. Treasury continues to strongly encourage recipients to reach small businesses that provide jobs that pay a living wage, which will help American workers emerge stronger from the pandemic.


FDIC guide on simplified coverage rules

The FDIC has issued FIL-23-2022 to announce the addition of a Small Entity Compliance Guide to its website to assist insured depository institutions and community banking organizations in understanding and preparing for the changes in deposit insurance coverage made by its January 28, 2022, final rule amending the deposit insurance regulations for trust accounts and mortgage servicing accounts. The rule becomes effective April 1, 2024.


FDIC final rule on advertising and misuse of FDIC name or logo

On Tuesday, the FDIC its approval of a final rule implementing its statutory authority to prohibit any person or organization from making misrepresentations about FDIC deposit insurance or misusing the FDIC’s name or logo.

In recent years, the FDIC has observed an increasing number of instances where individuals or entities have misused the FDIC’s name or logo, or have made false or misleading representations about deposit insurance. To provide transparency into how the FDIC will address these and similar concerns, the final rule clarifies the FDIC’s procedures for identifying, investigating, and where necessary, taking formal and informal enforcement actions against individuals or entities to address violations.

The rule, which will amend the FDIC's regulation on Advertisement of Membership at 12 CFR Part 328, will take effect 30 days after its publication in the Federal Register.

SAVE THE DATE! BankersOnline's John Burnett will present a special one-hour webinar on the FDIC's revised "Advertisement of Membership, False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC's Name or Logo" regulation on June 29, 2022, at 2:30 p.m. EDT.


CFPB issues circular supporting FDIC's rule

The CFPB announced on Tuesday it has issued Consumer Financial Protection Circular 2022-02, "Deceptive representations involving the FDIC's name or logo or deposit insurance" to address the question of when representations involving the name or logo of the Federal Deposit Insurance Corporation (FDIC) or about deposit insurance constitute a deceptive act or practice in violation of the Consumer Financial Protection Act (CFPA).

The Bureau's guidance is that "Covered persons or service providers likely violate the CFPA’s prohibition on deception if they misuse the name or logo of the FDIC or engage in false advertising or make misrepresentations to consumers about deposit insurance, regardless of whether such conduct (including the misrepresentation of insured status) is engaged in knowingly. Representations about deposit insurance may be particularly relevant with respect to new financial products or services, especially those involving new technologies such as digital assets, including crypto-assets."


Hsu discusses risk management

Yesterday, Acting Comptroller of the Currency Michael J. Hsu discussed the importance of risk management in remarks at Bloomberg Risk & Regulation Week 2022. In his remarks, the Acting Comptroller encouraged banks to assess exposures and adjust risk profiles ahead of potential uncertainty and volatility in interest rates and loan performance. Mr. Hsu also discussed risk mitigation for counterparty and sector concentrations, and offered thoughts on underwriting trends and developments in retail and commercial credit.


SBA economic injury disaster loans available

Small nonfarm business in the following counties are now eligible to apply for low‑interest federal disaster loans from the U.S. Small Business Administration:

  • Kansas: Finney, Gove, Lane, Ness and Scott
  • Idaho and Oregon: Adams, Gem,Idaho, Valley and Washington (in Idaho) and Baker and Wallowa (in Oregon)
  • Texas: Aransas, Calhoun, Chambres, Galveston, Jackson, Matagorda, Nueces, Refugio, Victoria, Bee, Brazoria, Colorado, DeWitt, Goliad, Harris, Jefferson, Jim Wells, Kleberg, Lavaca, Liberty, San Patricio, and Wharton

Small nonfarm businesses, small agricultural cooperatives, small businesses engaged in aquaculture and most private nonprofit organizations of any size may qualify for Economic Injury Disaster Loans of up to $2 million to help meet financial obligations and operating expenses which could have been met had the disaster not occurred.

Eligibility for these loans is based on the financial impact of the disaster only and not on any actual property damage. These loans have an interest rate of 2.94 percent for businesses and 1.875 percent for private nonprofit organizations, a maximum term of 30 years, and are available to small businesses and most private nonprofits without the financial ability to offset the adverse impact without hardship.


FDIC adopts appeals guidelines

The FDIC has issued FIL-22-2022 to announce its Board has adopted Guidelines for Appeals of Material Supervisory Determinations that restore the Supervision Appeals Review Committee (SARC) as the final level of review in the agency’s supervisory appeals process. The revised Guidelines take effect May 17, 2022. The FDIC is soliciting comment on the revised Guidelines with a comment period of 30 days.

  • Under the revised Guidelines, the SARC generally replaces the Office of Supervisory Appeals as the final level of review in the FDIC’s supervisory appeals process.
  • Consistent with the composition of the SARC as it stood in 2021, the SARC will include: one inside member of the FDIC’s Board of Directors (serving as Chairperson); a deputy or special assistant to each of the other inside Board members; and the General Counsel as a non-voting member.
  • Aside from the substitution of the SARC as the final level of review, most aspects of the supervisory appeals process remain unchanged.
  • The revised Guidelines continue to encourage institutions to make good-faith efforts to resolve disputes with on-site examiners and/or the appropriate Regional Office. The Guidelines also continue to provide for review by the appropriate Division Director before submission of an appeal to the SARC.
  • The revised Guidelines expressly permit electronic submission of appeals and provide e-mail addresses that institutions may use to submit a request for review to the appropriate Division Director or an appeal to the SARC.


SEC issues charges in multibillion dollar securities fraud

The Securities and Exchange Commission yesterday announced charges against Allianz Global Investors U.S. LLC (AGI US) and three former senior portfolio managers with a massive fraudulent scheme that concealed the immense downside risks of a complex options trading strategy they called “Structured Alpha.”

AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals. After the COVID-19 market crash of March 2020 exposed the fraudulent scheme, the strategy lost billions of dollars as a result of AGI US and the portfolio managers’ misconduct.

AGI US has agreed to pay billions of dollars as part of an integrated, global resolution, including more than $1 billion to settle SEC charges and together with its parent, Allianz SE, over $5 billion in restitution to victims.

The SEC’s complaint, filed in the federal district court in Manhattan, alleges that Structured Alpha’s Lead Portfolio Manager, Gregoire P. Tournant, orchestrated the multi-year scheme to mislead investors who invested approximately $11 billion in Structured Alpha, and paid the defendants over $550 million in fees. It further alleges that, with assistance from Co-Lead Portfolio Manager Trevor L. Taylor and Portfolio Manager Stephen G. Bond-Nelson, Tournant manipulated numerous financial reports and other information provided to investors to conceal the magnitude of Structured Alpha’s true risk and the funds’ actual performance.


CDFI Fund funding round opens

The Community Development Financial Institutions Fund has posted a Notice of Funds Availability [87 FR 30001] in today's Federal Register inviting applications for the fiscal year (FY) 2022 funding round of the Small Dollar Loan Program (SDL Program).

Through the SDL Program, the CDFI Fund provides (1) grants for Loan Loss Reserves (LLR) to enable a Certified Community Development Financial Institution (CDFI) to establish a loan loss reserve fund in order to cover the losses on small dollar loans associated with starting a new small dollar loan program or expanding an existing small dollar loan program; and (2) grants for Technical Assistance (TA) for technology, staff support, and other eligible activities to enable a Certified CDFI to establish and maintain a small dollar loan program. All awards provided through the Notice of Funds Availability.are subject to funding availability.

Applications must be submitted by 11:59 p.m. EDT on June 15, 2022 via the web portal.


Advisory: Cloaked DPRK IT workers seeking jobs

OFAC on Monday announced publication of an Advisory issued by the Departments of State and Treasury and the FBI, to alert the international community, the private sector, and the public to attempts by the Democratic People’s Republic of Korea (DPRK) and DPRK IT workers to obtain employment while posing as non-DPRK nationals.

The advisory provides detailed information on how DPRK IT workers operate and identifies red flags to help companies avoid hiring DPRK freelance developers and to help freelance and digital payment platforms identify DPRK IT workers abusing their services. A Fact Sheet, "Guidance on the Democratic People's Republic of Korea Information Technology Workers," has also been published.


CFPB mortgage metric report - COVID 19 responses

The CFPB yesterday announced its second mortgage metrics report providing the CFPB’s observations of data obtained from 16 large mortgage servicers to identify areas of risk in the servicers’ COVID-19 pandemic response. The report addresses similar topics covered in the first report (which covered the period from December 2020 through April 2021), including call center data, COVID-19 hardship forbearance exits, delinquency, and borrower profiles for the period May through December 2021.

In summary, the CFPB's key observations are:

  • Call center hold time variability. Some servicers were outliers in the reported call metrics data, including relatively high average hold times exceeding ten minutes and call abandonment rates exceeding 30%. Borrowers may be at higher risk of obtaining untimely assistance from these servicers.
  • Delinquency and exits from forbearance. The number and rate of delinquent exits from COVID-19 hardship forbearances increased during the reporting period. Overall, 15% of loans exited forbearance in a delinquent status, with no loss mitigation in place, with some servicers reporting significantly higher figures. While servicers have made progress in working through these delinquent loans, large numbers of borrowers – over 330,000 at the 16 servicers – remained delinquent as of the end of 2021. These borrowers continue to face a risk of harm, underscoring the importance of prioritizing borrower outreach and transitions into loss mitigation solutions and the related regulatory requirements.
  • Servicer data challenges. Some servicers did not track, or were otherwise unable to provide, data for key metrics, such as the amount of time borrowers spend on Interactive Voice Response (IVR) systems before connecting to the queue to speak with a live call center agent. Some servicers also reported inconsistent data. These issues raise questions about the servicers’ ability to track and to report high-quality data and to monitor their responsiveness and compliance.
  • Borrower demographics. The collection, categorization, and maintenance of information about borrowers’ race, ethnicity and language preference varied widely among servicers in clarity and completeness. The significant variances in the level of detail and amount of available information did not allow for comparisons across servicers.
  • Borrowers with Limited English Proficiency (LEP borrowers). The number of LEP borrowers whose loans were delinquent without a loss mitigation option after exiting forbearance increased between October and December 2021, while the number of nonLEP borrowers who were delinquent without a loss mitigation option after forbearance decreased during the same period.


CFPB wants consistent enforcement of consumer financial protections

CFPB Director Rohit Chopra yesterday posted a CFPB Blog article to announce a new system for promoting consistent enforcement of consumer financial protections. The CFPB will issue Consumer Financial Protection Circulars to the broad set of government agencies responsible for enforcing federal consumer financial law, with guidance on how the CFPB intends to enforce federal consumer financial law.

The enforcers of federal consumer financial law include, most notably, state attorneys general and state regulators, as well as federal financial regulators such as the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration. Some federal consumer financial laws are also enforceable by other federal agencies, including the Department of Justice, the Federal Trade Commission, the Farm Credit Administration, the Department of Transportation, and the Department of Agriculture. In addition, some of these laws provide for private enforcement.

The CFPB will also release Consumer Financial Protection Circulars publicly to increase transparency for the benefit of the public and regulated entities.

Circular 2022-01, issued yesterday, describes the circulars as policy statements under the Administrative Procedures Act that will provide background information about applicable law, articulate considerations relevant to the CFPB's exercise of its authorities, and advise other parties with authority to enforce federal consumer financial law. The Director of the CFPB will authorize issuance of each Consumer Financial Protection Circular, and the CFPB will publish them on its website and in the Federal Register.


HUD updates Family Self Sufficiency program

HUD has announced a rule [87 FR 30020 in today's Federal Register] to implement changes to the Family Self-Sufficiency (FSS) Program. The changes include permanently expanding the definition of an eligible family to include tenants of privately owned multifamily properties subsidized with Project-Based Rental Assistance (PBRA).

In addition to permanently expanding the Program to multifamily owners and allowing them to compete directly for services funding, the rule also expands eligibility for Program enrollment to include any adult member of the household—rather than only the Head of Household—to be more inclusive of households where the Head of Household is unable to work or increase work activity due to issues such as health conditions, disabilities, or family care taking responsibilities. The rule also expands the definition of “good cause” for a FSS client contract extension to include participants who are in active pursuit of a long-term goal that will help them get ahead, such as a college degree, as opposed to only reasons outside of the family’s control. Additionally, among other positive statutory and regulatory changes, the rule removes administratively burdensome requirements for enrollment and revises graduation requirements.

The goal of the FSS Program continues to be to enable participating low-income families to increase their earned income and meet their financial goals. Local FSS program coordinators create plans with participating families to achieve goals and connect them with services that will assist in making progress toward economic security. Families that meet program requirements and successfully complete the FSS program receive their accrued FSS escrow funds, plus interest. While no formal restrictions exist on the use of the escrowed funds, many families use the funds to help with the purchase of a home, debt reduction, post-secondary education, or to start a new business.

The rule becomes effective on June 16, 2022.


Fed Board amends rates in Regs A and D

The Federal Reserve Board has published final rules in today's Federal Register amending Regulation A (Extensions of Credit by Federal Reserve Banks) and Regulation D (Reserve Requirements of Depository Institutions) to increase certain interest rates.

  • The amendment to Regulation A, published at 87 FR 29649, reflects the Board's approval of a 0.5 percent increase (to 1.00 percent) in the rate for primary credit at each Federal Reserve Bank. The interest rate for secondary credit automatically increases by formula to 1.50 percent.
  • The amendment to Regulation D, published at 87 FR 29650, revises the rate of interest paid on reserve balances (“IORB”) maintained at Federal Reserve Banks by or on behalf of eligible institutions. The final amendments specify that IORB is 0.90 percent, a 0.50 percentage point increase from its prior level. The amendment is intended to enhance the role of IORB in maintaining the federal funds rate in the target range established by the Federal Open Market Committee.

Both amendments are effective today, May 16, 2022, and applicable as of May 5, 2022.


National illicit finance strategy for 2022

The Treasury Department on Friday issued the 2022 National Strategy for Combatting Terrorist and Other Illicit Financing (2022 Strategy), which identifies measures to increase transparency in the U.S. financial system and strengthen the U.S. anti-money laundering/counter the financing of terrorism (AML/CFT) framework. The 2022 Strategy, prepared pursuant to Sections 261 and 262 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), addresses the key risks from the 2022 National Money Laundering, Terrorist Financing, and Proliferation Financing risk assessments and reflects the complex challenges posed by a world remade by the Covid-19 pandemic, the increasing digitization of financial services, and rising levels of corruption and fraud.

The 2022 risk assessments highlighted the illicit finance risk posed by the abuse of legal entities, the complicity of professionals that misuse their positions or businesses, small-sum funding of domestic violent extremism networks, the effective use of front and shell companies in proliferation finance, and the exploitation of the digital economy.

The four priority recommendations:

  • Close legal and regulatory gaps in the U.S. AML/CFT framework that illicit actors exploit to anonymously access the U.S. financial system through the use of shell companies and all-cash real estate purchases
  • Continue to make the U.S. AML/CFT regulatory framework for financial institutions more efficient and effective by providing clear compliance guidance, sharing information appropriately, and fully funding supervision and enforcement
  • Enhance the operational effectiveness of law enforcement, other U.S. government agencies, and international partnerships in combating illicit finance so illicit actors can’t find safe havens for their operations
  • Enable the benefits of technological innovation while mitigating risks, staying ahead of new avenues for abuse presented by virtual assets and other new financial products, services, and activities


Deputy Comptroller testifies on artificial intelligence

On Friday, Deputy Comptroller for Operational Risk Policy Kevin Greenfield testified during a hearing before the House Financial Services Committee Task Force on Artificial Intelligence. He discussed the OCC's approach to responsible innovation and its supervisory expectations for banks’ use of AI, including regulatory compliance. Greenfield also discussed the OCC’s ongoing efforts to update the agency’s technological framework to support its bank supervision mandate.


VA amends regs on fiduciary activities

The Department of Veterans Affairs has published a final rule [87 FR 29671 amending its regulations that govern fiduciary activities. The amendments revise specific procedures to exempt a VA-appointed fiduciary who is also serving as a court-appointed fiduciary from posting multiple bonds and to also exempt a VA-appointed fiduciary that is also a state agency with existing, state-mandated liability insurance or a blanket bond from having to obtain an additional bond payable to the Secretary of Veterans Affairs.

The rule will become effective June 15, 2022.


Powell confirmed for second term as Fed chair

The U.S. Senate yesterday confirmed Jerome Powell for a second term as chairman of the Federal Reserve Board of Governors. Earlier this week, Lisa Cook and Phillip Jefferson were confirmed as members of the Board.


FDIC Board to meet May 17

The FDIC has published [87 FR 29314] a notice of a meeting of its Board to be held at 10 a.m. on Tuesday, May 17, 2022. The meeting will be open to the public by webcast only, and available on-demand about one week later. Matters to be considered include:

  • a memorandum and resolution regarding amendments to the Guidelines for Appeals of Material Supervisory Determinations
  • a memorandum and resolution regarding a final rule on False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC's Name or Logo


Hsu discusses diversity, inclusion and minority homeownership

On May 12, Acting Comptroller of the Currency Michael J. Hsu discussed the OCC’s efforts to reduce barriers to homeownership and promote financial inclusion in remarks at the Asian Real Estate Association of America Diversity and Fair Housing Summit. Hsu highlighted the work of Project REACh to support affordable homeownership, expand alternative credit, and revitalize minority depository institutions. He also discussed the growing interest in cryptocurrency investments and other digital assets.


Revised interagency Q&As on flood insurance

Five federal agencies — the Federal Reserve Board, Farm Credit Administration, FDIC, NCUA, and OCC — on Wednesday announced jointly issued Questions and Answers Regarding Flood Insurance (Q&As) on federal flood insurance law and the agencies’ implementing regulations. These Q&As replace those originally published by the agencies in 2009 and 2011 and consolidate Q&As proposed by the agencies in 2020 and 2021. The revised Q&As reflect significant changes to the flood insurance requirements made by federal law in recent years.

The Q&As cover a broad range of technical flood insurance topics, including the escrow of flood insurance premiums, the detached structure exemption to the flood insurance purchase requirement, force placement procedures, and private flood insurance.

In addition, the agencies reorganized the Q&As by topic to make it easier for users to find and review information related to flood insurance.


CFPB bans scammers and orders them to pay $11M+

The CFPB announced Wednesday it had finalized an enforcement action against debt-relief payment-processors RAM Payment and Account Management Systems (AMS), as well as AMS’s co-founders, Gregory Winters and Stephen Chaya, for collecting debt-relief fees from consumers, lying to consumers about when the fees would be paid to debt-relief companies, and sending illegal advance fees to debt-relief companies before they were legally allowed to do so. The Bureau also said AMS failed to return funds to consumers who cancelled student-loan debt relief agreements, as required by law. The CFPB is ordering RAM Payment, AMS, Winters, and Chaya to pay more than $11 million in consumer redress and civil money penalties.

Knoxville, Tennessee-based AMS and RAM Payment provided account maintenance and payment-processing services to about 270,000 consumers across the U.S. who were enrolled in debt relief programs. Winters and Chaya co-founded AMS. RAM Payment acquired AMS in 2019. After the acquisition, Winters and Chaya continued to manage AMS and RAM Payment, and they exercised substantial control over the companies’ business practices.

Providers of account-maintenance and payment-processing services to debt-relief companies are supposed to be independent, third-party companies that hold fees until debt-relief companies are entitled to them under the law. The CFPB’s investigation found that the respondents violated the Telemarketing Sales Rule and the Consumer Financial Protection Act. The respondents substantially assisted student-loan and traditional debt-relief companies in requesting or accepting advance fees for debt-relief services, misrepresented their payment-processing actions to consumers before disbursing fees to student-loan debt-relief companies, and unfairly disbursed unearned fees for student-loan debt-relief services after consumers had unenrolled from or canceled the services.

Additionally, Winters and Chaya sought to enrich themselves through illegal relationships with an affiliated financing company and debt-relief companies. Winters and Chaya owned a financing company, Account Connect Limited (ACL). For certain debt-relief companies, ACL advanced about 65% of the fees that the companies expected to receive from consumers. ACL recouped these advances from payments consumers made into accounts maintained by AMS and RAM Payment. The respondents deceived consumers by failing to disclose this conflict-of-interest between the respondents and ACL. Instead, the respondents falsely represented that AMS and RAM Payment provided services as independent third-party companies. They also illegally kept money held in consumers’ accounts when consumers cancelled or unenrolled from ACL-funded student-loan debt-relief services with companies.

The CFPB's consent order:

  • Requires the respondents to refund $8.7 million to consumers enrolled in student-loan debt-relief services
  • Issues industry bans against AMS, Winters, and Chaya and requires RAM Payment to stop providing services to both student-loan debt-relief companies and debt-relief companies receiving funding from or owned by an affiliated company, stop paying commissions to third-party marketing companies for consumer referrals, and consent to the CFPB’s supervisory authority.
  • Requires the respondents to pay a $3 million fine


FHFA joins group greening the financial system


Hsu discusses bank mergers

Acting Comptroller of the Currency Michael J. Hsu recently discussed the need to update the framework used to analyze bank merger applications before the Brookings Institution. In his remarks, the Acting Comptroller discussed proposed mergers in the context of bank competition, financial stability, and facilitating the needs of communities.


Federal Reserve adds to FEDS series

The Federal Reserve Board has added two new papers to its Finance and Economics Discussion Series (FEDS).

Cyberattacks and Financial Stability: Evidence from a Natural Experiment studies the effects of a unique multi-day cyberattack on a technology service provider, and identifies first- and second-round effects of the event. For banks using relevant services of the TSP, the attack impaired their ability to send payments over Fedwire, even though the Federal Reserve extended the time they had to submit payments. This impairment (first-round effect) caused other banks to receive fewer payments (second-round effect), leaving them at risk of having too few reserves to send their own payments (a potential third-round effect). These innocent-bystander banks responded differently depending on their size and reserve holdings. Those with sufficient reserves drew down their reserves. Of the others, smaller banks borrowed from the discount window, while larger banks borrowed in the federal funds market. These significant adjustments to operations and funding prevented the second-round effect from spilling over into third-round effect and broader financial instability. These findings highlight the important role for bank contingency planning, liquidity buffers, and the Federal Reserve in supporting the financial system’s recovery from a cyberattack.

The Collateral Channel and Bank Credit studies the role of the collateral channel for bank credit using confidential bank-firm-loan data. The authors estimate that for a 1 percent increase in collateral values, firms pledging real estate collateral experience a 12 basis point higher growth in bank lending with higher sensitivities for more credit constrained firms. Higher real estate values boost firm capital expenditures and lead to lower unemployment and higher employment growth and business creation. These estimates imply that as much as 37 percent of employment growth over the period from 2013 to 2019 can be attributed to the relaxation of borrowing constraints.

FEDS are Federal Reserve staff working papers that investigate a broad range of issues in economics and finance, with a focus on the U.S. economy and domestic financial markets.


NMLS posts updated Policy Guidebook

The NMLS has posted an updated version of the NMLS Policy Guidebook to the NMLS Resource Center and the Regulator Resource Center. Also posted was a summary of the updates.


April 2022 SLOOS posted

The Federal Reserve Board has posted the results of the April 2022 Senior Loan Officer Opinion Survey, which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally correspond to the first quarter of 2022.

Regarding loans to businesses, respondents to the survey reported, on balance, unchanged standards for commercial and industrial loans to firms of all sizes, after having eased them over the previous four quarters, while demand strengthened over the first quarter. Meanwhile, banks reported unchanged standards and demand for most commercial real estate (CRE) loan categories except for those secured by multifamily residential properties, for which they eased standards and demand strengthened on net.

Banks also responded to a set of special questions about changes in lending policies and demand for CRE loans over the past year. Banks reportedly eased some lending terms across all CRE loan categories, including the maximum loan size and maturity, the spread of loan rates over their cost of funds, the length of interest-only periods, and the market areas served.

For loans to households, banks eased standards across most categories of residential real estate (RRE) loans and home equity lines of credit (HELOCs) over the first quarter, while also reporting weaker demand for all types of RRE loans but stronger demand for HELOCs on net. In addition, banks eased standards for card loans and auto loans, while demand reportedly strengthened for all consumer loan types over the first quarter.


SEC extends comment period on climate-related disclosures proposal

The Securities and Exchange Commission has announced that it has extended the public comment period on the proposed rulemaking to enhance and standardize climate-related disclosures for investors until June 17, 2022. The proposal, originally published on April 11, 2022, had a comment period that would have ended on May 20.


HUD expands eviction/diversion program with $20M

The U.S. Department of Housing and Urban Development (HUD) on Monday announced $20 million in new grants for its Eviction Protection Grant Program, doubling the amount originally allocated for the launch of the Program in November 2021.

HUD has offered grants to 11 organizations, in addition to the 10 organizations selected in November, to help non-profits and government entities provide legal assistance to low-income tenants at risk of or subject to eviction. Legal services are integral in helping individuals and families, especially people of color who are disproportionately represented among those evicted, people with limited English proficiency and people with disabilities, avoid eviction or minimize the disruption and damage caused by the eviction process.


OFAC targets network supporting ISIS in Syria

Treasury has announced that OFAC has designated a network of five Islamic State of Iraq and Syria (ISIS) financial facilitators operating across Indonesia, Syria, and Turkey. For names and identification information, see our May 9, 2022, OFAC Update.


OCC Customer Assistance Group address change

The OCC has issued Bulletin 2022-15 announcing a final rule to update the mailing address of its Customer Assistance Group (CAG) in the appendix of 12 CFR Part 14.

The final rule amends Appendix A to 12 CFR 14 by removing the prior physical mailing address for the OCC’s CAG (1301 McKinney Street, Suite 3450, Houston, Texas 77010-3031) and replacing it with the current mailing address (P.O. Box 53570, Houston, Texas 77052).

The OCC's Bulletin 2021-35, issued August 5, 2021, updated the CAG address information with respect to the Community Reinvestment Act, Fair Housing Act, and Equal Credit Opportunity Act. No change was made at that time to 12 CFR Part 14, which governs consumer protection in sales of insurance.


CFPB Advisory Opinion on coverage of ECOA

On Monday, the CFPB published an advisory opinion to affirm that the Equal Credit Opportunity Act (ECOA) bars lenders from discriminating against customers after they have received a loan, not just during the application process.

ECOA bans credit discrimination on the basis of race, color, religion, national origin, sex, marital status, and age. It also protects those who are receiving money from any public assistance program or exercising their rights under certain consumer protection laws. The CFPB issued Monday’s advisory opinion and accompanying analysis to clarify that ECOA protects people from discrimination in all aspects of a credit arrangement. The advisory opinion is consistent with a recent legal brief filed by the CFPB, the Federal Trade Commission, the Federal Reserve Board of Governors, and the U.S. Department of Justice.

The advisory opinion will be published on May 18, 2022, in the Federal Register.


Regulatory relief for New Mexico banks

FDIC FIL-19-2022, issued Monday, provides guidance to help financial institutions and facilitate recovery in areas of New Mexico affected by wildfires and straight-line winds beginning on April 5, 2022, and continuing. FEMA declared a federal disaster for selected areas of New Mexico on May 4. A current list of designated areas is available at Currently, the list comprises Colfax, Lincoln, San Miguel, and Valencia counties.

The FDIC is encouraging banks to work constructively with borrowers experiencing difficulties beyond their control because of damage caused by the wildfires and straight-line winds. Banks that extend repayment terms, restructure existing loans, or ease terms for new loans in a manner consistent with sound banking practices can contribute to the health of the local community and serve the long-term interests of the lending institution. Banks may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.

The FDIC also will consider regulatory relief from certain filing and publishing requirements.


Federal Reserve posts Supervision and Regulation Report

The Federal Reserve System has posted its May 6, 2022, Supervision and Regulation Report, which summarizes banking conditions and the Federal Reserve’s supervisory and regulatory activities, in conjunction with semiannual testimony before Congress by the Vice Chair for Supervision.


U.S. takes wide-ranging action against Russia's war efforts

In a rare Sunday press release, Treasury yesterday announced OFAC has designated individuals and entities critical to Russia’s ability to wage war against Ukraine. These include the board members of two of Russia’s most important banks, a Russian state-owned bank and 10 of its subsidiaries, a state-supported weapons manufacturer, and three of Russia’s state-controlled television stations that generate revenue for the state.

OFAC also acted to cut off access to services that are used by the Russian Federation and Russian elites to evade sanctions. On Sunday, OFAC identified accounting, trust and corporate formation, and management consulting as categories of services that are subject to a prohibition on the export, reexport, sale, or supply, directly or indirectly, from the United States, or by a U.S. person, wherever located, to any person located in the Russian Federation. OFAC also determined that these same services sectors of the Russian Federation economy are subject to sanctions pursuant to E.O. 14024.

OFAC had previously designated the CEO and Chairman, and the First Deputy Chairman of the Executive Board of Public Joint Stock Company Sberbank of Russia (Sberbank). On Sunday, it designated eight other current and recent members of the Executive Board of Sberbank.

In addition, OFAC yesterday designated 27 members of Gazprombank's Board of Directors.

Also designated were Joint Stock Company Moscow Industrial Bank and ten of its subsidiaries, plus Limited Liability Company Promtekhnologiya, a private defense company that supplies Russia's military and intelligence services with rifles, and three of Russia's top state-owned television stations.

Treasury also took action to cut off Russia’s access to certain key services from U.S. companies, which Russian Federation companies and Russian elites use to build wealth, generating revenue for Putin’s war machine, and evade sanctions. OFAC issued a determination pursuant to E.O. 14071 prohibiting the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of accounting, trust and corporate formation, and management consulting services to any person located in the Russian Federation. This prohibition will take effect June 7, 2022. In conjunction with this determination, OFAC issued new guidance and general licenses authorizing certain transactions related to these services. Yesterday’s action means that the Russian Federation and Russian elites will no longer benefit from U.S. companies’ valuable accounting, trust and corporate formation, and management consulting services.

For further information and a list of yesterday's additions to OFAC's SDN List, see the May 8, 2022, BankersOnline OFAC Update.


Agencies schedule CRA update webinar

On Wednesday, May 11, 2022 3:00 p.m. ET, policy experts from the FDIC, OCC, and Federal Reserve System will host a special Ask the Regulators webinar on their notice of proposed rulemaking to strengthen and modernize CRA regulations. During the webinar, the agencies will provide an overview of the proposal and its objectives. Topics will include assessment areas, qualified activities, evaluation framework, ratings, and data collection and reporting.


FTC shuts down 'The Credit Game' as scam

At the request of the Federal Trade Commission, a federal court has temporarily halted a bogus credit repair scheme known as The Credit Game for promoting a series of lies and deceptions. The FTC alleged the scheme’s operators lied to credit reporting agencies regarding information on consumers’ credit reports and pitched consumers a supposed business opportunity that was essentially starting their own bogus credit repair scheme.

In a complaint filed against The Credit Game and its owners, Michael and Valerie Rando, the FTC alleged that the company has illegally charged consumers hundreds and even thousands of dollars for credit repair services of little to no value and told consumers to “invest” their COVID-19 governmental benefits on their unlawful services. In some cases, the company’s “services” included filing false identity theft reports with the FTC and encouraging consumers to take actions that were unlawful. The FTC asked the court to immediately halt the company’s illegal operations, appoint a receiver, and freeze the defendants’ assets. The court issued a temporary restraining order doing so on May 3, 2022.

In addition to the core credit repair scheme, the defendants have also taken advantage of the ongoing pandemic by telling consumers to “invest” pandemic tax benefits into their credit repair schemes. One advertisement used the headline “Free Credit Repair From The Government.”


FTC and CFPB oppose liability shield for sloppy credit reports

The Federal Trade Commission has joined the CFPB in an amicus brief filed with the U.S. Court of Appeals for the Second Circuit in the case of Sessa v. TransUnion. The brief asks the court to overturn a lower court decision, which held that TransUnion was not liable for failing to investigate a wrongfully reported debt because the inaccuracy was “legal” and not “factual.”

The joint brief argues that the lower court’s legal inaccuracy exemption is neither based on any textual language in the law, nor is it workable. The invented defense invites consumer reporting agencies and furnishers to skirt their legal obligations by arguing that inaccurate information is only legally, and not factually, inaccurate. For any number of obviously inaccurate factual mistakes that might appear on a consumer’s credit report, consumer reporting agencies might be able to manufacture some supposed legal interpretation to insulate itself from liability.


OFAC targets virtual currency mixer and targets DPRK cyber threats

Treasury has announced that OFAC has sanctioned virtual currency mixer, which is used by the Democratic People’s Republic of Korea (DPRK) to support its malicious cyber activities and money-laundering of stolen virtual currency. On March 23, 2022, Lazarus Group, a DPRK state-sponsored cyber hacking group, carried out the largest virtual currency heist to date, worth almost $620 million, from a blockchain project linked to the online game Axie Infinity; Blender was used in processing over $20.5 million of the illicit proceeds.

OFAC also updated the SDN List to identify additional virtual currency addresses used by the Lazarus Group to launder illicit proceeds.

See the May 6, 2022, BankersOnline OFAC Update for the new and updated listings.


FHA acts to expand affordable housing supply

The Federal Housing Administration (FHA) announced on Thursday that it published Mortgagee Letter 2022-08, "Expanding Affordable Housing Supply Through FHA’s Claims Without Conveyance of Title."

The Mortgagee Letter adds an initial 30-day exclusive sales period for Claims Without Conveyance of Title (CWCOT) post-foreclosure sales for owner-occupants, HUD-approved nonprofits, and governmental entities. The 30-day exclusive period gives these specified buyers an opportunity to bid on foreclosed properties before investors are allowed to bid during the CWCOT post-foreclosure sales period. The ML also extends the mortgagee’s conveyance timeframe to provide these buyers additional time to obtain financing and complete the sale.

CWCOT is an FHA claim option through which insurance benefits are paid to a mortgagee after the sale of the property to a third-party purchaser at foreclosure of the FHA-insured mortgage or through post-foreclosure sales efforts. This means there is no conveyance of the property to HUD in exchange for payment of the mortgage insurance benefit.


FTC acts against Frontier Communications

The Federal Trade Commission has announced it has moved to stop internet service provider Frontier Communications from lying to consumers and charging them for high-speed internet speeds it fails to deliver. Under a proposed order with the FTC and two California law enforcement agencies, Frontier will be prohibited from tricking consumers about its slow internet service and required to support its speed claims. Frontier must also provide current customers with free and easy cancellations when it fails to deliver the promised speeds.

Connecticut-based Frontier advertises and sells digital subscriber line (DSL) internet service in several plans, or tiers, based on download speed. In a complaint first filed in May 2021, the FTC alleged that Frontier advertised that it could provide various speeds of DSL internet service based on the type of plan consumers purchased. Many of the subscribers to Frontier’s DSL service are in rural areas where they may only have one choice, or very limited choices, for internet service. The FTC alleged, however, that Frontier failed to provide many consumers with the maximum speeds they were promised and the speeds they actually received often fell far short of what was touted in the plans they purchased. Some customers complained that it was difficult to engage in typical online activities that should have been possible under the plan they purchased.

The proposed order will:

  • require Frontier to substantiate its internet speed claims at a customer-by-customer level for new and complaining customers and notify customers when it is unable to do so;
  • require Frontier to ensure it can provide the internet service speeds it advertises before signing up, upgrading, or billing new customers;
  • prohibit Frontier from signing up new customers for its DSL internet service in areas where the high number of users sharing the same networking equipment causes congestion resulting in slower internet service; and
  • require the company to notify existing customers who are receiving DSL internet service at speeds lower than was advertised and allow those customers to change or cancel their service at no charge.

Frontier also will be required to pay $8.5 million in civil penalties and costs to the Los Angeles County and Riverside County District Attorneys’ offices on behalf of California consumers as well as $250,000 that will be distributed to Frontier’s California customers harmed by the company’s practices. In addition, the company must discount the bills of California customers who have not been notified that they are receiving DSL service that is much slower than the highest advertised speed. Frontier is required to deploy fiber-optic internet service, which is generally much faster than DSL, to 60,000 residential locations in California over four years—at an estimated cost of $50 million to $60 million.


HUD charges 4 in Puerto Rico with illegal discrimination

The Department of Housing and Urban Development has announced that it has charged Josefina Amparo De La Fuente-Mundo, Alicia De La Fuente-Mundo, and Rosalia De La Fuente-Mundo, owners and manager of an apartment building in San Juan, Puerto Rico, and Maria Trini Menendez, the real estate agent hired to rent a unit in the building, with housing discrimination for allegedly refusing to rent to a person with disabilities because she uses a service animal.

HUD's charge of discrimination alleges that the complainant, who is legally blind, attempted to rent a unit at the subject property for herself and her partner. During the tour of the property, the complainant told Ms. Menendez of her disability and of her need for a guide dog as a service animal. In response, Ms. Menendez told the complainant that she could not have a pet in the unit because the owners have a no pet policy at the subject property. According to the Charge, the complainant explained that refusing to permit a service animal could be grounds for a lawsuit and suggested that Ms. Menendez speak to the owner of the property. When Ms. Menendez raised the issue with Josefina De La Fuente-Mundo, Ms. De La Fuente-Mundo reiterated that pets are not permitted in the building. Ms. Menendez relayed this to the complainant and suggested other potential rentals.


Agencies jointly propose modernized CRA regulations

The Federal Reserve Board, FDIC, and OCC yesterday announced a joint proposal to strengthen and modernize regulations implementing the Community Reinvestment Act to better achieve the purposes of the law.

Building on feedback from stakeholders and research, the agencies are inviting public comment on their joint proposal, which has the following key elements:

  • Expand access to credit, investment, and basic banking services in low- and moderate-income communities. Under the proposal, the agencies would evaluate bank performance across the varied activities they conduct and communities in which they operate so that CRA is a strong and effective tool to address inequities in access to credit. The proposal would promote community engagement and financial inclusion. It would also emphasize smaller-value loans and investments that can have high impact and be more responsive to the needs of LMI communities.
  • Adapt to changes in the banking industry, including internet and mobile banking. The proposal would update CRA assessment areas to include activities associated with online and mobile banking, branchless banking, and hybrid models.
  • Provide greater clarity, consistency, and transparency. The proposal would adopt a metrics-based approach to CRA evaluations of retail lending and community development financing, which includes public benchmarks, for greater clarity and consistency. It also would clarify eligible CRA activities, such as affordable housing, that are focused on LMI, underserved, and rural communities.
  • Tailor CRA evaluations and data collection to bank size and type. The proposal recognizes differences in bank size and business models. It provides that smaller banks would continue to be evaluated under the existing CRA regulatory framework with the option to be evaluated under aspects of the new proposed framework.
  • Maintain a unified approach. The proposal reflects a unified approach from the bank regulatory agencies and incorporates extensive feedback from stakeholders.

The agencies also released a fact sheet on the proposal. Comments will be accepted through August 5, 2022.


Federal Reserve Board bans former Georgia banker

The Federal Reserve Board has announced its has executed a consent order of prohibition against Angela Garcia, former senior vice president and residential loan servicing director at Synovus Bank, Columbus, Georgia. The Board found that, between 2020 and 2021, Garcia embezzled $69,039 from a bank general ledger account, deposited the funds in accounts belonging to her relatives, and made fraudulent entries in the bank’s records regarding these transactions.

The order states that Garcia was terminated by the bank in June 2021, is no longer involved in banking, and has agreed to reimburse the bank in full for its loss.


FDIC terminates receiverships

The FDIC has published a notice [87 FR 27147] in today's Federal Register that it has wound up the affairs of two institutions and liquidated all assets. The two receiverships terminated as of May 1, 2022 are:

  • Florida Community Bank, Immokalee, Florida
  • Tennessee Commerce Bank, Franklin, Tennessee


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