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08/04/2020

FFIEC statement on COVID-19-related loan accommodations

The Federal Financial Institutions Examination Council (FFIEC) has issued a statement providing prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as initial coronavirus-related loan accommodation periods come to an end and they consider additional accommodations.

As initial loan accommodation periods come to an end, some borrowers may be able to resume contractual payments, and others may be unable to meet their obligations due to continuing financial challenges. The agencies encourage financial institutions to consider, when appropriate, prudent options for additional accommodations that can ease cash flow pressures on affected borrowers, improve their capacity to service debt, and facilitate the financial institution’s prudent management of its loans, consistent with applicable laws and regulations.

The statement also addresses issues relative to accounting and regulatory reporting and internal control systems.

08/04/2020

FTC sues merchant cash advance lender for UDAP

The Federal Trade Commission has filed a complaint in the U.S. District Court for the Southern District of New York against Yellowstone Capital LLC and Fundry LLC, both New York limited liability companies; and Yitzhak D. Stern, also known as Isaac Stern, and Jeffrey Reece, individually and as officers of the two LLCs; seeking permanent injunctive and other equitable relief. Yellowstone and Fundry are providers of merchant cash advances, and used deception to lure small business customers, then regularly withdrew money from their accounts without consent even after the customers had repaid the money they owed, according to the Commission's complaint.

Merchant cash advances are a form of financing in which the defendants provide money to a small business up front in exchange for a larger amount repaid through daily automatic payments. The Commission alleges that the defendants unlawfully withdrew millions of dollars in excess payments from their customers' accounts, and took weeks or months to provide refunds when challenged by those customers.

In addition, the complaint alleges that for years Yellowstone deceived potential customers about the amount of money they would receive, with the amount shown on the contract not reflecting additional fees that would be deducted. According to the complaint, these fees totaled hundreds and even thousands of dollars, and were not revealed to business owners until, in some cases, after their contracts were signed, The FTC also alleges that the defendants relied on deceptive marketing to promote their services. Specifically, the complaint states that Yellowstone promised that business owners would not be required to provide collateral or be subject to a personal guaranty. These promises appeared in online ads and other forms of marketing, but in many instances Yellowstone’s contracts actually required business owners to be personally liable if their business failed to make repayments, as well as put the business and all of its property up as collateral.

08/03/2020

Funding of March 2020 C&I drawdowns discussed

An article, "How Did Banks Fund C&I Drawdowns at the Onset of the COVID-19 Crisis?" has been posted to the Federal Reserve Board's FEDS Notes pages discussing how banks funded C&I drawdowns at the onset of the COVID-19 crisis. Banks experienced significant balance sheet expansions in March 2020 due to unprecedented increases in commercial and industrial (C&I) loans and deposit funding. According to the Federal Reserve's H.8 data, "Assets and Liabilities of Commercial Banks in the U.S.", C&I loans increased by nearly $480 billion in March—the largest monthly increase in the history of this series, surpassing the nearly $90 billion increase in C&I loans in the six weeks following Lehman Brothers' collapse in 2008.

Commentary in banks' and firms' earnings calls, as well as write-in comments provided in weekly data submissions, indicate that this growth was primarily attributable to firms drawing down revolving lines of credit to make up for revenue and funding disruptions related to the coronavirus pandemic.

07/31/2020

CFPB adds two HMDA FAQs

The CFPB has updated its Home Mortgage Disclosure Act FAQs, adding two questions in a new "Multiple data points" section:

  1. Are financial institutions required to report the credit score, DTI and CLTV relied on in making a credit decision when such data is not the dispositive factor?
  2. When income and property value are factors in the credit decision, though not the dispositive factor, should such data points be reported?

The answer to each question is "Yes" and is followed by an explanation.

07/31/2020

NCUA Board approves membership rule changes and proposals

The NCUA Board has announced it approved a final rule and two proposed rules yesterday:

  • A final rule amending the chartering and field-of-membership rules for credit unions applying for a community charter approval, expansion, or conversion.
  • A proposed rule that would phase-in the day-one adverse effects on regulatory capital that may result from the adoption of the current expected credit losses accounting methodology over a three year period.
  • A proposed rule that amends the NCUA’s regulation governing the assessment of an annual operating fee on federal credit unions.

The rule amending the chartering and field-of-membership regulations re-adopts a provision to allow an applicant to designate a combined statistical area, or an individual, contiguous portion thereof, as a well-defined local community if the chosen area has a population of 2.5 million or fewer. Credit unions that had their combined statistical areas removed from their fields of membership because of litigation will be contacted by the agency to determine if they would like those reinstated. If they would, then NCUA will do so as soon as the rule is effective (30 days after Federal Register publication).

07/31/2020

FinCEN Advisory on cybercrime during pandemic

Advisory FIN-2020-A005 has been issued by FinCEN to alert financial institutions to potential indicators of cybercrime and cyber-enabled crime observed during the COVID-19 pandemic. Many illicit actors are engaged in fraudulent schemes that exploit vulnerabilities created by the pandemic.

The advisory contains descriptions of COVID-19-related malicious cyber activity and scams, associated financial red flag indicators, and information on reporting suspicious activity. FinCEN will continue issuing COVID-19-related information to financial institutions to help enhance their efforts to detect, prevent, and report suspected illicit activity on its website www.fincen.gov/coronavirus.

07/31/2020

Treasury and USPS agree on CARES Act loan terms

Treasury has reached an agreement with the United States Postal Service on the material terms and conditions of a loan of up to $10 billion to the USPS under Section 6001 of the CARES Act. The loan will be documented in an agreement to be developed and executed by Treasury and the USPS. The CARES Act authorizes the USPS to borrow up to $10 billion from Treasury for operating expenses if the USPS determines that, due to the COVID-19 emergency, it will not be able to fund operating expenses without borrowing money.

Treasury Secretary Mnuchin noted that the USPS does not need the funding now, but the material terms and conditions of a loan have been agreed upon should the need arise.

07/30/2020

Kraninger updates Senate Banking Committee

In oral testimony before the Senate Banking Committee, CFPB Director Kathleen Kraninger discussed the steps the Bureau is taking to help create real and sustainable changes in the U.S. financial system so that African Americans and other minorities have equal opportunities to build wealth and close the economic divide. Kraninger also discussed the actions taken to protect consumers during the COVID-19 pandemic.

07/30/2020

FOMC Statement issued

The Federal Reserve Board has issued the Federal Open Market Committee statement, following the meeting of the FOMC that ended Wednesday, July 29.

In light of developments surrounding the coronavirus pandemic, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent, and expects to maintain that target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.

07/30/2020

Fed extends temporary swap lines and FIMA repo facility

The Federal Reserve Board announced Wednesday it is extending its temporary U.S. dollar liquidity swap lines and the temporary repurchase agreement facility for foreign and international monetary authorities (FIMA repo facility) through March 31, 2021. The extensions of these facilities will help sustain recent improvements in global U.S. dollar funding markets by maintaining these important liquidity backstops. In addition, the FIMA repo facility will help support the smooth functioning of the U.S. Treasury market by providing an alternative temporary source of U.S. dollars other than sales of securities in the open market.

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