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Top Story Lending Related

09/30/2020

Operation Corrupt Collector announced

The Federal Trade Commission, along with more than 50 federal and state law enforcement partners, has announced a nationwide law enforcement and outreach initiative to protect consumers from phantom debt collection and abusive and threatening debt collection practices. This crackdown encompasses more than 50 enforcement actions against debt collectors engaged in these illegal practices brought by the FTC, three federal partners, and partners from 16 states. The initiative, called Operation Corrupt Collector, includes five FTC law enforcement actions, including two newly announced cases and settlements in three prior actions. The two new FTC cases allege that companies were trying to collect debts they cannot legally collect or that a consumer does not owe—a practice known as phantom debt collection.

09/30/2020

Blanco encourages specificity in COVID-19-related SARs

In remarks delivered yesterday during a virtual AML conference, FinCEN Director Kenneth Blanco encouraged attendees to read FinCEN's advisories related to COVID-10 medical fraud, imposter scams, and cyber-related crime. He said that the most common trend FinCEN is seeing in COVID-19 related SARs involves fraudsters targeting multiple COVID-19 related government stimulus programs, employing money mules and cyber techniques. The largest share of COVID-19 SARs addresses fraud against federal or state COVID-19 stimulus programs. Stimulus programs intended to benefit both individual taxpayers and small businesses have been targeted for fraud, with multiple Automated Clearinghouse (ACH) payments disbursed to a single account representing the most common financial pattern reported in SARs.

Blanco recommended that SARs be specific in describing the activity being reported, to make them as useful as possible for law enforcement. Detailed information can help get SARs routed to the correct investigative team. For example, reports of medical scams like fake test kits, non-delivery of goods, and price gouging go to a specialized team of attorneys and investigators across the government. Specificity in the SAR about the fraudulent or suspicious medical aspects, both in the narrative and by checking box 34z, will get a SAR to this team more quickly.

For consumer related fraud, especially targeting the elderly or other vulnerable individuals with a COVID-19 related scam, such as a fake COVID relief charity or bogus person-in-need scam, specificity in SARs is also encouraged. Using the SAR check box 38d for elder financial exploitation will expedite getting the SAR to the right team.

Regarding SARs reporting suspected fraud in government programs, Blanco said vague references to “stimulus” or “CARES Act” or “benefit” in SARs hinder FinCEN's ability to get the information into the hands of the right team. The more specific filers are in their SAR narratives, the faster their reports will get to the right investigators. For example:

  • If the suspicious activity is related to an ACH payment from a state unemployment insurance program, filers should clearly mention COVID19 UNEMPLOYMENT INSURANCE FRAUD in field 2 of the SAR (Filing Institution Note to FinCEN) as well as in the narrative. This will make it much easier for the SAR to get to law enforcement teams working with the states on unemployment fraud.
  • If the activity involves a counterfeit check or ACH payment for the EIDL program, filers should clearly mention COVID19 EIDL FUNDS FRAUD in field 2 of the SAR and state this in the narrative, because there are specific prosecutorial teams working on EIDL fraud.

Blanco said that, from February 1 to September 12, banks and credit unions filed over 64,000, or about 71 percent, of all COVID-19-related SARs.

09/30/2020

Supplemental September 2020 SLOOS

The Federal Reserve has released the results of a supplementary Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) that was conducted to understand the experiences of domestically chartered banks with the Main Street Lending Program (MSLP). The survey consisted of a set of questions that focused on four areas:

  • commercial and industrial (C&I) loan inquiries and banks’ participation in the MSLP since mid-June, when lender registration started
  • banks’ outlook regarding their participation in the program
  • factors that may have shaped banks’ willingness to participate
  • characteristics of borrowers inquiring and receiving MSLP loans

09/30/2020

Agencies finalize CECL phase-in rule

The Federal Reserve, OCC, and FDIC have published [85 FR 61577] a final rule that delays the estimated impact on regulatory capital stemming from the implementation of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses, Topic 326, Measurement of Credit Losses on Financial Instruments (CECL). This final rule is consistent with the interim final rule published in the Federal Register on March 31, 2020, with certain clarifications and minor adjustments in response to public comments related to the mechanics of the transition and the eligibility criteria for applying the transition.

09/30/2020

Regulators issue two final temporary rules

The Federal Reserve, OCC, and FDIC have announced they have finalized two rules, which are either identical or substantially similar to interim final rules currently in effect and issued earlier this year.

The final rule temporarily deferring appraisal and evaluation requirements is substantially similar to the interim final rule issued in April. It will allow individuals and businesses to more quickly access real estate equity to help address needs for liquidity as a result of the coronavirus. In response to comments, the final rule clarifies which loans are subject to the deferral. The final rule is effective upon publication in the Federal Register and will expire on December 31, 2020.

The final rule pertaining to Federal Reserve liquidity facilities adopts without change three interim final rules issued in March, April, and May, 2020. Earlier this year, the Federal Reserve launched several lending facilities to support the economy in light of the coronavirus response. The final rule neutralizes the regulatory capital and liquidity coverage ratio effects of participating in the Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility because there is no credit or market risk in association with exposures pledged to these facilities. It will be effective 60 days after publication in the Federal Register.

09/29/2020

Phony SBA lender settles FTC charges

The Federal Trade Commission has announced that a Rhode Island company and its owner will be permanently prohibited from misrepresenting they are affiliated with the SBA as part of a settlement resolving Commission charges they misled consumers in the early days of the coronavirus pandemic.

Ponte Investments, LLC, and its owner John C. Ponte were charged by the FTC in April with misleading small businesses to think they had an affiliation with the SBA and could offer companies access to the coronavirus relief programs administered by the agency.

The settlement prohibits defendants from misrepresenting that they are authorized to accept or process applications for SBA loans and misrepresenting that they are the SBA or are otherwise affiliated or associated with the SBA or the U.S. Government. The defendants will also no longer be able to use the trade name or domain name "SBA Loan Program."

09/29/2020

HUD Section 3 Rule finalized after 26 years

HUD has announced a final rule [85 FR 61524] implementing the “Section 3” statute. Section 3 of the Housing and Urban Development Act of 1968 (as amended) requires that recipients of certain HUD funds make economic opportunities available for low- and very low-income individuals, especially recipients of government assistance for housing, living in the areas where HUD funds are spent. An “interim rule” has been in effect since 1994. The final rule is designed to improve a focus on economic opportunity outcomes while simultaneously reducing the regulatory burden on those entities that receive those funds.

The rule will become effective November 30, 2020. Public housing financial assistance recipients must implement their Section 3 activities pursuant to these regulations and comply with the reporting requirements starting with the recipient's first full fiscal year after July 1, 2021. These regulations are applicable to Section 3 projects for which assistance or funds are committed on or after July 1, 2021. Published with the rule were Section 3 benchmarks [85 FR 60907].

09/28/2020

FSOC statement on secondary mortgage market review

The Treasury Department announced on Friday that the Financial Stability Oversight Council had voted unanimously to approve a statement summarizing its review of the secondary mortgage market. The Council’s review focused in particular on the activities of Fannie Mae and Freddie Mac. In conducting the review, the Council applied the framework for an activities-based approach described in the interpretive guidance on nonbank financial company determinations issued by the Council in December 2019.

The Council’s review noted the central role the Enterprises continue to play in the national housing finance markets, and found any distress at the Enterprises that affected their secondary mortgage market activities, including their ability to perform their guarantee and other obligations on their mortgage-backed securities (MBS) and other liabilities, could pose a risk to financial stability, if risks are not properly mitigated. The Council’s review also considered whether the regulatory framework of the Federal Housing Finance Agency (FHFA) would adequately mitigate this potential risk posed by the Enterprises.

The council encouraged—

  • the FHFA and other regulatory agencies to coordinate and take other appropriate action to avoid market distortions that could increase risks to financial stability
  • the FHFA to consider he relative merits of alternative approaches for more dynamically calibrating the capital buffers
  • the FHFA to ensure high-quality capital by implementing regulatory capital definitions that are similar to those in the U.S. banking framework and to require the Enterprises to be sufficiently capitalized to remain viable as going concerns during and after a severe economic downturn

09/28/2020

FDIC August enforcement actions

The FDIC has released a list of 13 orders of administrative enforcement actions taken against banks and individuals in August 2020. The administrative enforcement actions in those orders consisted of one cease and desist order, four consent orders of prohibition, and eight Section 19 orders.

CBW Bank, Weir, Kansas, was issued a consent cease and desist order related to findings that the bank's BSA/AML program was deficient. In the order, the bank was directed to cease all activity pertaining to foreign financial institution customers, including funds transfers, remote deposit capture, U.S. dollar repatriation, MSB remittances, ACH transfers, etc., until the FDIC determines the bank has taken sufficient corrective action and can be permitted to resume some or all of those activities.

The prohibition orders were issued to—

  • a former loan teller at Arrowhead Bank, Llano, Texas, for using fraudulent general ledger tickets to conceal unauthorized withdrawals from bank customers' accounts, using the funds for her personal benefit
  • the former president of PrimeSouth Bank (now CB&S Bank, Inc.), Tallassee, Alabama, for obtaining unauthorized advances from a loan to a bank customer and applying the proceeds to unrelated loans of other persons
  • the former CEO of Border State Bank (now Border Bank), Roseau, Minnesota, for arranging for bank customers to obtain loans from the bank and transfer the loan proceeds to himself in violation of Regulation O, and for issuing unauthorized letters of credit in furtherance of a personal investment
  • a former teller at BancorpSouth Bank, Tupelo, Mississippi, for embezzling funds from her teller drawer and the bank's vault for her personal use

09/28/2020

$165M to clean-up lead-based paint

HUD has announced the award of nearly $165 million to 44 state and local government agencies in 23 states to protect children and families from lead-based paint and home health hazards. The grants are available through HUD’s Lead Based Paint Hazard Reduction Grant Program (LBPHR) to identify and clean up dangerous lead in low-income families’ homes.

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