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The CFPB has announced it is beginning a rulemaking process to remove medical bills from Americans’ credit reports. The CFPB outlined proposals under consideration by its Small Business Advisory Review Panel that would help families financially recover from medical crises, stop debt collectors from coercing people into paying bills they may not even owe, and ensure that creditors are not relying on data that is often plagued with inaccuracies and mistakes.

If the proposals are finalized, they would:

• Remove medical bills from consumers' credit reports
• Stop creditors from relying on medical bills for underwriting decisions
• Curtail coercive collection practices

The proposal would not stop creditors from obtaining medical bill information for other purposes, such as verifying the need for medical forbearances, or evaluating loan applications to pay for medical services.

The NCUA's board has announced it has unanimously approved a final rule that amends the NCUA’s regulations regarding indirect lending, the purchase of loan participations, and the purchase, sale, and pledge of eligible obligations and notes of liquidating credit unions.

“This new rule codifies several long-standing supervisory guidance letters on third-party due diligence, indirect lending, and loan participations, and it shifts the regulatory framework from a prescriptive structure to a principles-based system,” NCUA Chairman Todd M. Harper said. “However, with greater freedom also comes greater responsibility. Managers and boards of directors choosing to use this new rule, therefore, must ensure their third-party due diligence and vendor management policies are updated, followed, and reflect the size and complexity of their activities and risk levels.”

The rule will become effective 30 days after it is published in the Federal Register.

On Thursday, OFAC announced a $9,618,477 settlement with 3M Company. 3M had agreed to settle its potential liability for 54 apparent violations of OFAC's sanctions on Iran arising from its subsidiary's sale of reflective license plate sheeting to an Iranian entity controlled by Iranian law enforcement forces.

OFAC's announcement also reported a settlement with Emigrant Bank, located in New York. Emigrant agreed to remit $31,867.90 to settle its potential civil liability for apparent violations of sanctions against Iran. For approximately 26 years, Emigrant maintained a Certificate of Deposit account on behalf of two individuals ordinarily resident and located in Iran, for which it processed 30 transactions between June 2017 and March 2021 totaling $91,051.13. Emigrant had actual knowledge of the Iranian address and apparent location of the accountholders during this period.

For more information on each of these settlements, see OFAC settles with 3M Company and Emigrant Bank, in the BankersOnline OFAC Updates pages. Additional details on the Emigrant Bank settlement can be found in Emigrant Bank settles with OFAC for apparent violations in BOL's Penalty pages.

The OCC has released new enforcement actions taken against three institution-affiliated individuals in September 2023.

• Ralph Derrickson, president of First Federal Savings & Loan Association, Morehead, KY, was issued a consent order to pay a $2,500 civil money penalty.
• Megan Leigh Conton, a former teller at PNC Bank, Pittsburgh, PA, received a consent order of prohibition after a finding that she misappropriated almost $11,300 from her teller drawer and the branch vault.
• Stephanie E. Jordan, a former assistant branch manager for Woodforest National Bank, The Woodlands, TX, was issued a consent order of prohibition after a finding that she had made over 16 unauthorized withdrawals from a customer's bank account, personally gaining and causing a loss to the bank of $52,700.

An order of prohibition bars its respondent from participating in any way in the affairs of any insured bank or depository institution or of any insured credit union or Farm Credit institution, any federal depository institution regulatory agency or the FHFA and any Federal Home Loan Bank, without prior written consent of both the issuing agency and the institution's federal regulator.

The Federal Reserve has released the Federal Open Market Committee's statement following the Committee's September 19–20, 2023, meeting.

The Committee found that recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated.

Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.

The Implementation Note issued with the Statement indicates the Board voted not to change the interest rate paid on reserve balances, and not to change the primary credit rate charged for advances from the Federal Reserve Banks.

The Fed Board and FOMC also released the economic projections from the meeting.

The FDIC, Federal Reserve Board, and OCC yesterday announced they are extending the period for giving favorable consideration under their Community Reinvestment Act (CRA) regulations to institutions located outside of Puerto Rico and the U.S. Virgin Islands, for bank activities that continue to help revitalize or stabilize these areas devastated by Hurricane Maria.

The agencies have determined that a 36-month extension through September 20, 2026 is appropriate given the continuing economic impact of Hurricane Maria from September 2017 in Puerto Rico and the U.S. Virgin Islands.

Activities that help to revitalize or stabilize Puerto Rico and the U.S. Virgin Islands will be treated consistently with the agencies’ original statement, which was issued in January 2018. The agencies previously extended the period for giving favorable consideration in May 2021.

The SBA has announced low-interest federal disaster loans are available to Oklahoma businesses and residents in Harper County, Oklahoma, affected by severe storms, straight-line winds and tornadoes that occurred June 14–18, 2023.

The U.S. Department of Housing and Urban Development (HUD) announced yesterday a package of 29 regulatory and administrative waivers aimed at helping communities in Florida accelerate their recovery from Hurricane Idalia. The announcement of regulatory and administrative waivers issued by the Department builds on other support HUD is providing in the wake of the storm.

The regulatory and administrative relief announced covers the following HUD programs: Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME), Housing Trust Fund (HTF), Housing Opportunities for Persons with AIDS (HOPWA), Emergency Solutions Grant (ESG), Continuum of Care (CoC), and Youth Homelessness Demonstration Program (YHDP).

The FDIC has announced that its Board of Directors has appointed Arthur J. Murton to serve as Director of the Division of Complex Institution Supervision and Resolution (CISR), following the retirement of Acting Director James McGraw, on October 20, 2023. Mr. Murton will perform these duties while retaining his role as Deputy to the Chairman for Financial Stability.

Mr. Murton has served as the Deputy to the Chairman for Financial Stability since 2018 where he advises the Chairman on matters related to resolution and deposit insurance activities. Prior to this role, he was the director of the Office of Complex Financial Institutions, which was consolidated under the newly established CISR division in 2019. Mr. Murton joined the FDIC in 1986 as a financial economist, and he has served in leadership roles since 1995.

CISR manages the FDIC’s supervision and resolution readiness for globally systemically important banks and complex financial institutions.

Treasury Secretary Janet Yellen, Under Secretary for Domestic Finance Nellie Liang, and Climate Counselor Ethan Zindler yesterday met with leaders from a range of financial institutions. The discussion focused on voluntary best practices and challenges related to developing and implementing net-zero commitments, supporting client and portfolio company transition-related efforts, and mobilizing additional private finance towards the clean energy economy. Earlier in the day Treasury released its Net-Zero Principles for Financing & Investment.

Attendees present included representatives from Amalgamated Bank, BlackRock, Citigroup, Energy Impact Partners, HSBC, Kohlberg Kravis Roberts & Co (KKR), Neuberger Berman, New York State Common Retirement Fund, RockCreek, and Wellington Management Company.

• Press release

The Consumer Financial Protection Bureau yesterday announced its issuance of guidance about certain legal requirements that lenders must adhere to when using artificial intelligence and other complex models. The guidance describes how lenders must use specific and accurate reasons when taking adverse actions against consumers. This means that creditors cannot simply use CFPB sample adverse action forms and checklists if they do not reflect the actual reason for the denial of credit or a change of credit conditions. This requirement is especially important with the growth of advanced algorithms and personal consumer data in credit underwriting. Explaining the reasons for adverse actions help improve consumers’ chances for future credit, and protect consumers from illegal discrimination.

The CFPB confirmed in Consumer Financial Protection Circular 2022-03, published at 87 FR 35864 in the June 14, 2022, Federal Register, that the Equal Credit Opportunity Act requires creditors to explain the specific reasons for taking adverse actions. This requirement remains even if those companies use complex algorithms and black-box credit models that make it difficult to identify those reasons. Yesterday’s guidance expands on last year’s circular by explaining that sample adverse action checklists should not be considered exhaustive, nor do they automatically cover a creditor’s legal requirements.

Specifically, Tuesday's guidance explains that even for adverse decisions made by complex algorithms, creditors must provide accurate and specific reasons. Generally, creditors cannot state the reasons for adverse actions by pointing to a broad bucket. For instance, if a creditor decides to lower the limit on a consumer’s credit line based on behavioral spending data, the explanation would likely need to provide more details about the specific negative behaviors that led to the reduction beyond a general reason like “purchasing history.” Creditors must disclose the specific reasons, even if consumers may be surprised, upset, or angered to learn their credit applications were being graded on data that may not intuitively relate to their finances.

• Consumer Financial Protection Circular 2023-03, Adverse action notification requirements and the proper use of the CFPB’s sample forms provided in Regulation B

The Securities and Exchange Commission yesterday announced settled charges against CBRE, Inc. (CBRE), a Dallas-based commercial real estate services and investment firm and subsidiary of publicly traded CBRE Group, Inc., for using an employee release that violated the SEC’s whistleblower protection rule.

According to the SEC’s order, between 2011 and 2022, as a condition of receiving separation pay, CBRE required its employees to sign a release in which employees attested that they had not filed a complaint against CBRE with any federal agency. The SEC’s order finds that by conditioning separation pay on employees’ signing the release, CBRE took action to impede potential whistleblowers from reporting complaints to the Commission.

Once the SEC informed CBRE that it had launched an investigation, the company cooperated with Commission staff and began taking extensive remedial action, including revising all versions of its domestic releases and similar agreements for compliance with the whistleblower protection rule. CBRE also communicated with more than 800 of its employees who had signed the release, clarifying the protections afforded to them by the rule, including their right to communicate directly with SEC staff regarding any potential violation of federal securities laws.

Without admitting or denying the SEC’s findings, CBRE consented to cease and desist from committing or causing any violations of the same whistleblower protection rule. CBRE also agreed to pay a civil penalty of $375,000. In determining to accept CBRE’s offer of settlement, the SEC considered CBRE’s cooperation and remedial actions.

The U.S. Treasury Department has announced that OFAC has sanctioned seven individuals and four entities based in Iran, the People’s Republic of China (PRC), Russia, and Türkiye in connection with Iran’s unmanned aerial vehicle (UAV) and military aircraft development. This network has facilitated shipments and financial transactions in support of the U.S.-designated Iran Aircraft Manufacturing Industrial Company’s (HESA’s) UAV and military aircraft production, procurement, and maintenance activities. OFAC also updated HESA’s entry on the Specially Designated Nationals and Blocked Persons (SDN) List to include its new alias (Shahin Co.), which it has used to evade sanctions and export control measures.

For the names and identification information of the designated individuals and entities and the update to HESA's entry, see the September 19, 2023, BankersOnline OFAC Update.

HUD has announced that it is charging Ronit Mecham and Voyl “Tom” Mecham, the owner and property manager of a dwelling in Jamestown, New York, with violating the Fair Housing Act by refusing to allow a tenant with a disability to live with her assistance animal.

The Fair Housing Act (“Act”) prohibits discrimination based on disability. This includes refusing to provide reasonable accommodation so that persons with disabilities can have an equal opportunity to enjoy their housing. A reasonable accommodation includes waiving a “no pet” policy for assistance animals. The Act also prohibits statements that indicate a preference or limitation based on disability. HUD’s Charge of Discrimination alleges that the Mechams denied the tenant’s request for an assistance animal and then presented her with the option to either terminate the lease early or leave upon the end of the lease term. Although the tenant offered to submit medical documentation supporting her request, the Mechams allegedly stopped communicating with her instead. Additionally, the charge alleges that the Mechams made comments indicating a preference for non-disabled tenants.

FinCEN has announced it has published a Small Entity Compliance Guide to assist the small business community in complying with the beneficial ownership information (BOI) reporting rule. Starting in 2024, many entities created in or registered to do business in the United States will be required to report information about their beneficial owners—the individuals who ultimately own or control a company—to FinCEN. The Guide is intended to help businesses determine if they are required to report their beneficial ownership information to FinCEN.

The guide is now available on FinCEN's Beneficial Ownership Information Reporting webpage.

FinCEN has also updated its Beneficial Ownership Information Reporting FAQs, which now incorporate content from the Guide. Each updated or new FAQ is dated September 18, 2023.

Learn more about the Small Entity Compliance Guide and the updated FAQs in BOL Learning Connect's October 27, 2023, Live Webinar—Beneficial Ownership: What Your Customer Needs to Know and Do—to be presented by Deborah Crawford. REGISTER NOW!

On Monday, the Treasury Department's Office of Foreign Assets Control (OFAC) designated Mahmoud Ahmadinejad, the former president of Iran, for having provided material support to the Iranian Ministry of Intelligence and Security (MOIS), an entity concurrently designated by the Department of State. These actions are being taken pursuant to Executive Order (E.O.) 14078, “Bolstering Efforts to Bring Hostages and Wrongfully Detained U.S. Nationals Home,” which expands the tools available to deter and impose tangible consequences on those responsible for, or complicit in, hostage-taking or the wrongful detention of a United States national abroad.

The State Department designated MOIS for being responsible for, or complicit in, to have directly or indirectly engaged in, or to be responsible for ordering, controlling, or otherwise directing, the hostage-taking of a U.S. national or the wrongful detention of a U.S. national abroad.

For identification information on Ahmadinejad and the MOIS, see the September 18, 2023, BankersOnline OFAC Update.

The CFPB has issued a final rule with the adjustments that will be effective January 1, 2024, in dollar amounts for provisions implementing the Truth in Lending Act (TILA) and amendments to the TILA that affect HOEPA loans and qualified mortgages. The Bureau is adjusting these amounts, where appropriate, based on the annual percentage change reflected in the Consumer Price Index (CPI) in effect on June 1, 2023.

• The threshold that triggers requirements to disclose minimum interest charges will remain unchanged at $1.00
• For HOEPA loans, the adjusted total loan mount threshold for high-cost mortgages in 2024 will be $26,092
• The adjusted points-and-fees dollar trigger for high-cost mortgages in 2024 will be $1,305
• For qualified mortgages (QMs) under the General QM loan definition in § 1026.43(e)(2), the thresholds for the spread between the annual percentage rate (APR) and the average prime offer rate (APOR) in 2024 will be:
  • 2.25 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $130,461
  • 3.5 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $78,277 but less than $130,461
  • 6.5 or more percentage points for a first-lien covered transaction with a loan amount less than $78,277
  • 6.5 or more percentage points for a first-lien covered transaction secured by a manufactured home with a loan amount less than $130,461
  • 3.5 or more percentage points for a subordinate-lien covered transaction with a loan amount greater than or equal to $78,277
  • 6.5 or more percentage points for a subordinate-lien covered transaction with a loan amount less than $78,277
• For all QMs, the thresholds for total points and fees in 2024 will be—
  • 3 percent of the total loan amount for a loan greater than or equal to $130,461
  • $3,914 for a loan amount greater than or equal to $78,277 but less than $130,461
  • 5 percent of the total loan amount for a loan greater than or equal to $26,092 but less than $78,277
  • $1,305 for a loan amount greater than or equal to $16,308 but less than $26,092
  • 8 percent of the total loan amount for a loan amount less than $16,308

The changes have been posted to the Official Interpretations of sections 1026.32 and 1026.43 in the BankersOnline Regulations pages for Regulation Z.

A federal judge in Kentucky has issued a nationwide injunction preventing enforcement of the CFPB's Small Business Lending (Section 1071) final rule (subpart B of Regulation B) until the U.S. Supreme Court rules on the constitutionality of the Bureau's funding mechanism.

The Kentucky case was brought by the Kentucky Bankers Association and eight banks. They asked the court to block enforcement of the rule while SCOTUS considers CFPB v. Community Financial Services Association of America, which is scheduled to be argued in October. SCOTUS could release a decision any time before the end of June, 2024.

The Bureau has not yet updated the message on its Small Business Lending compliance resource page to acknowledge the order of the federal court in Kentucky.

The Federal Trade Commission has warned five tax preparation companies — H&R Block, Inc., Intuit Inc., TaxAct, Inc., TaxSlayer LLC, and The Lampo Group, LLC d/b/a Ramsey Solutions — that they could face civil penalties if they use or disclose confidential data collected from consumers for the purpose of preparing their taxes for other unrelated purposes, such as advertising, without first obtaining consumers’ consent.

The FTC is using its penalty offense authority to remind tax preparation companies of the law and deter them from breaking it. By sending a Notice of Penalty Offenses, the agency is warning recipients they could incur civil penalties of up to $50,120 per violation if they misuse personal data in ways that run counter to the original purpose for which this information was collected. The penalty offense authority allows the agency to seek civil penalties against a company that engages in conduct that it knows is unlawful, and that has been found unlawful in a previous FTC administrative order, other than a consent order.

• FTC press release

FinCEN on Friday announced it has assessed a $15 million civil money penalty against Bancrédito International Bank and Trust Corporation (Bancrédito) for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations. This is FinCEN’s first enforcement action against a Puerto Rican International Banking Entity (IBE), and includes the first violation for failure to implement and maintain an Anti-Money Laundering (AML) program under 31 C.F.R. 1020.210(b) (effective on March 15, 2021), also known as the “Gap Rule.”

“Bancrédito processed millions of dollars in suspicious transactions through the United States on behalf of high-risk customers, providing correspondent accounts to foreign financial institutions without the required due diligence and reporting required by the BSA,” said FinCEN’s Director Andrea Gacki. “With today’s action, FinCEN is sending the message that the era of easy money laundering through Puerto Rican IBEs is over.”

Bancrédito admitted to willfully violating the BSA between October 2015 and May 2022, by failing to timely report suspicious transactions to FinCEN; failing to establish a due diligence program for correspondent accounts established, maintained, administered, or managed in the United States for foreign financial institutions; and failing to implement and maintain an AML program.

News reports indicate that Bancrédito Holding Corporation, the sole shareholder of the bank, has threatened to take legal action against the Financial Crimes Enforcement Network (FinCEN) after they imposed a $15 million fine against the bank for violations of the Bank Secrecy Act (BSA) and applicable anti-money laundering regulations. According to the holding company, FinCEN had assumed an inadequate process, so the decision against it was not well-founded.

For further information on the FinCEN action, see Puerto Rican IBE pays $15M for willful BSA violations, in the BankersOnline Penalties pages.

The CFPB has announced it has issued a new report, Tuition Payment Plans in Higher Education, that finds that students face risk when entering into agreements with colleges to spread the upfront cost of tuition into several, interest-free loan payments.

The report, which looks at tuition payment plans offered by nearly 450 institutions, finds that many plans have inconsistent disclosures and confusing repayment terms, putting students at risk of missing payments, incurring late fees, and accumulating debt. The report also finds that many institutions withhold transcripts from students as a debt collection tool, a potentially illegal practice that can have severe consequences for students trying to begin their careers or finish their education.

The CFPB has updated its FAQs concerning the Small Business Lending (Dodd-Frank Act section 1071) Rule.

There is one new or updated FAQ on the definition of "small business." The Bureau also added seven new FAQs concerning the "firewall" provision in the rule, and two FAQs about related record retention requirements.

On Friday, the Treasury Department announced that OFAC had designated 29 individuals and entities in connection with the Iranian regime’s violent suppression of nationwide protests following the death of Mahsa “Zhina” Amini in custody of its ‘Morality Police,’ and the regime’s continued efforts to detain dissenting voices and restrict access to a free and open internet.

OFAC’s action targets: 18 key members of the regime’s security forces, the Islamic Revolutionary Guard Corps (IRGC) and the Law Enforcement Forces (LEF); the head of Iran’s Prisons Organization; three individuals and one company in connection with the regime’s systematic censorship and blocking of access to the internet; and three IRGC and regime-controlled media outlets––Fars News, Tasnim News and Press TV––and three senior officials. Friday’s action was taken in coordination with partners from the United Kingdom, Canada, Australia, and other partners who are also imposing sanctions on those involved in the Iranian regime’s repression.

For the names and identification information of the designated parties, see the September 15, 2023, BankersOnline OFAC Update.

Ginnie Mae has announced the launch of its “Social Bond” label for Single-Family Forward Mortgage-Backed Securities (MBS) prospectuses and released the Social Impact and Sustainability Framework. Together, these updates support Ginnie Mae's mission-oriented work and communicate the positive social impact of its programs to investors.

Yesterday’s launch will help increase investor awareness of the value proposition in Ginnie Mae securities, increasing opportunities to attract new sources of capital in support of lenders and borrowers Ginnie Mae ultimately serves. The prospectus revisions highlight structural aspects of Ginnie Mae’s programs that have a significant social impact by promoting broader access to mortgage financing for historically underserved communities. With the revision to the prospectus, investors will have the choice, along with MBS pool level disclosure data, to independently determine Ginnie Mae MBS as “Social Bonds,” meaning the underlying collateral is designed to support a positive social and affordable housing outcome. The new Social Impact and Sustainability Framework outlines the characteristics of Ginnie Mae’s Social Bonds and broader portfolio.

The Small Business Administration has issued news releases announcing the availability of Economic Injury Disaster Loan (EIDL) availability for small businesses in Texas, New Mexico, Kansas, Montana, Louisiana, and Iowa.

The Treasury Department on Thursday announced OFAC has imposed nearly 100 sanctions on Russian elites and Russia’s industrial base, financial institutions, and technology suppliers as the United States continues to leverage sanctions and economic restrictions to undermine Russia’s capacity to wage its war against Ukraine. The Department of State also designated more than 70 persons. Yesterday’s sanctions focus on persons benefiting from, supporting, and sustaining Russia’s war against Ukraine.

For the names and identification information of the designated parties, see the September 14, 2023, BankersOnline OFAC Update.

The Securities and Exchange Commission has proposed rule and form amendments to improve filer access to and management of accounts on the Commission’s EDGAR system.

The proposed amendments would require EDGAR filers to authorize identified individuals who would be responsible for managing filers’ EDGAR accounts. In addition, individuals acting on behalf of filers on EDGAR would need individual account credentials to access those EDGAR accounts and make filings. If the proposed amendments are later adopted, the SEC will make technical changes to EDGAR, including to make available to EDGAR filers certain Application Programming Interfaces (APIs) for machine-to-machine submissions on EDGAR and retrieval of related filing information.

The SEC today also announced that it will open to the public on September 18, 2023, a beta software environment for filer testing and feedback that will reflect the proposed rule and form amendments and the related technical changes. Information about signing up for beta testing and extensive additional information about the proposal and related technical changes can be found on the EDGAR Next—Filer Access and Account Management page on SEC.gov.

A public comment period will remain open for 60 days after the proposal is published in the Federal Register.

The Small Business Administration has issued press releases announcing the availability of:

• Low-interest federal disaster loans available to certain private nonprofit organizations in Wyoming
• Economic Injury Disaster Loans (EIDLs) in Minnesota for small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private nonprofit organizations with economic losses due to the drought conditions that began on August 29
• EIDLs in Mississippi for small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private nonprofit organizations with economic losses due to the drought conditions that began on August 29
• EIDLs in 33 Louisiana parishes and adjacent counties in Mississippi and Texas for small nonfarm businesses.

The FDIC has issued Financial Institution Letter FIL-50-2023 with guidance to help financial institutions and facilitate recovery in areas of Georgia affected by Hurricane Idalia.

The Federal Reserve Board announced Wednesday that Chair Jerome Powell has sworn in three members of the Board of Governors.

• Dr. Philip N. Jefferson took the oath of office as Vice Chair. His term as Vice Chair ends on September 7, 2027, and his term as a Board member ends on January 31, 2036.
• Dr. Lisa D. Cook was sworn in for her second term as a member of the Board. Her term ends on January 31, 2038.
• Dr. Adriana D. Kugler took the oath of office as a member of the Board. Her term ends on January 31, 2026.

Our monthly poking about in the Federal Reserve Board's archive of Community Reinvestment Act evaluation ratings determined that the Reserve Banks made public ten evaluation ratings in August 2023. Nine of the evaluations were rated Satisfactory. We congratulate Brattleboro Savings & Loan Association, Brattleboro, Vermont, on its receipt of the one evaluation rated Outstanding.

The Treasury Department has reported that its Office of Foreign Assets Control (OFAC), in coordination with the Drug Enforcement Administration, has designated key Hizballah operatives and financial facilitators in South America and Lebanon.

For the names and identification information of the designated parties, see the September 12, 2023, BankersOnline OFAC Update.

The Securities and Exchange Commission has announced a settled action against New York-based YieldStreet Inc. and its registered investment adviser subsidiary, YieldStreet Management LLC (together, YieldStreet), for failing to disclose critical information to investors in a $14.5 million asset-backed securities offering.

According to the SEC’s order, in September 2019, YieldStreet offered securities to finance a loan a YieldStreet affiliate made to a group of companies to transport a retired ship and arrange its deconstruction. The SEC’s order finds that the collateral for the loan was the ship to be deconstructed and that YieldStreet’s right to the ship was the most important security for the loan and for the securities that YieldStreet sold to investors.

According to the order, YieldStreet failed to disclose to investors a heightened risk that it would be unable to seize the ship in the event of a default. Prior to the offering, YieldStreet personnel allegedly had information showing that ships securing other loans that YieldStreet affiliates had made to the same borrowing group were reported as deconstructed without any notice or repayment or could not be located because their tracking systems were off. YieldStreet allegedly proceeded with the offering without disclosing this material information to investors. The order states that YieldStreet later concluded that the borrowing group caused the ship securing the September 2019 offering to be deconstructed, but it stole the deconstruction proceeds by not repaying the loan from YieldStreet, leaving investors facing millions of dollars of losses.

Without admitting or denying the findings, YieldStreet consented to the entry of an SEC order finding that they violated certain antifraud and other provisions of the federal securities laws. The SEC’s order requires YieldStreet to cease and desist from these violations and to pay more than $1.9 million in penalties, disgorgement, and interest.

FinCEN Notice FIN-2023-NTC2 announces that victims of the Hawaii Wildfires and Hurricane Idalia, in parts of Florida, have until February 15, 2024, to file Reports of Foreign Bank and Financial Accounts (FBARs) for the 2022 calendar year.

The FBARs for calendar year 2022 otherwise would be due on or before October 16, 2023.

FinCEN is offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance as a result of the Hawaii Wildfires and Hurricane Idalia. Should FEMA designate FBAR filers in other localities affected by these natural disasters as eligible for individual assistance at a later date, they will receive the same filing relief automatically.

In addition, FinCEN will work with any FBAR filer who lives outside the disaster areas but who must consult records located in the affected areas to meet the deadline. FBAR filers who live outside the affected areas and who are seeking assistance in meeting their filing obligations (including workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization) should contact the FinCEN Regulatory Support Section at 800-767-2825 or electronically at frc@fincen.gov.

The Federal Housing Finance Agency on Monday announced additional opportunities for ongoing public engagement to facilitate the transition to updated credit score models and credit report requirements for loans acquired by Fannie Mae and Freddie Mac (the Enterprises). This engagement, which will include stakeholder forums and listening sessions, will allow for identification of a wide variety of issues, opportunities, and challenges related to successful implementation of the new requirements, including potential refinements to the timeline for adoption.

In October 2022, FHFA announced the validation and approval of both the FICO 10T and VantageScore 4.0 credit score models for use by the Enterprises. Also in October, the agency announced that the Enterprises would transition from a tri-merge requirement, in which credit reports are required from all three nationwide consumer reporting agencies, to a bi-merge requirement, in which credit reports are required from at least two of these agencies. FHFA expects this update will promote competition in the market while maintaining the information needed to support robust risk management. FHFA further expects that the implementation date for this bi-merge requirement will occur later than the first quarter of 2024, as was initially proposed.

• FHFA Credit Score Transition page

The United States District Court for the Eastern District of Texas has issued a summary judgment in favor of the plaintiffs (the ABA, the Texas Bankers Association, the U.S. Chamber of Commerce and several others) in their challenge to the CFPB’s March 2022 interpretation in its Consumer Compliance Examination Manual of its authority to include discrimination as an unfair act or practice under its Consumer Financial Protection Act (CFPA) UDAAP authority .

The court's order vacates (nullifies) the CFPB's inclusion of discrimination as an unfair act or practice under the CFPA, but only with regard to the membership of the co-plaintiffs. Prohibitions against discrimination under the ECOA, Fair Housing Act, etc., are not affected by the court's order. The CFPB has not said whether will appeal the court's ruling.

The OCC has announced it will host two workshops October 24–25 in Dallas for directors, senior management, and other key executives of national community banks and federal savings associations.

The Risk Governance: Improving Effectiveness workshop on October 24 will provide practical information for participants to effectively identify, measure, monitor, and control risk. The workshop also focuses on the OCC’s approach to risk-based supervision and major risks in the financial industry.

The Capital Markets: Keeping Current workshop on October 25 is designed to help bank leadership better understand balance sheet management risks such as interest rate risk, liquidity risk, and risks associated with the investment portfolio. Additionally, the workshop will discuss quantifying balance sheet risk related to assets and liabilities.

The Risk Governance workshop fee is $99. Participants receive course materials, supervisory materials, and lunch. The half-day Capital Markets workshop fee is $49, which is waived for participants also attending the previous day’s workshop.

The CFPB announced Monday it has taken action against Tempoe, LLC for tricking consumers into expensive leasing agreements by concealing the contract terms and costs, and failing to provide legally required disclosures. Forty-one states and the District of Columbia are entering into a parallel multi-state settlement addressing the same conduct.

Tempoe offered financing at the point of sale to customers at major retailers such as Sears and Kmart. By hiding the true nature of the agreements, Tempoe tricked consumers into signing the leases, and consumers found themselves unable to return products and on the hook for unexpectedly large payments. The CFPB is permanently banning Tempoe from offering consumer leases, requiring the company to close each of its outstanding consumer accounts, and ordering the company to let customers keep leased merchandise with no further payment, representing approximately $33.6 million in released payments. Tempoe is also paying a $2 million penalty, with $1 million deposited into CFPB's victims relief fund and $1 million paid to the states entered into the settlement.

Tempoe, LLC is an Ohio-based nonbank consumer finance company that offered lease purchase agreements to consumers nationwide. Between 2015 and 2022, Tempoe entered into over 1.8 million financial agreements with consumers. Monday’s enforcement action covers conduct by Tempoe from January 1, 2015, to the present.

For consumers who did not receive required disclosures after the initial five-month term, and as funds permit, the CFPB will work to get them monetary relief from the CFPB’s victims relief fund.

HUD has published an update to its Housing Counseling Program Handbook. The update is the first set of comprehensive changes implemented since 2010 and will ensure that HUD’s housing counseling program participants have ready access to the information, they need to meet the needs of individuals and families seeking to buy, rent, or sustain their homes. Housing counselors play a pivotal role in helping low-to-moderate income households – particularly communities of color – prepare financially for the wealth building potential of homeownership and to obtain safe, decent, and affordable housing.

The Handbook also outlines how to become a HUD-approved housing counseling agency or HUD certified housing counselor and details the grant application process for those seeking HUD funding for their housing counseling programs.

The guidance in the Housing Counseling Program Handbook is effective on January 1, 2024.

FinCEN has announced it has issued a Financial Trend Analysis (FTA) on patterns and trends contained in Bank Secrecy Act (BSA) reporting on suspected evasion of Russia-related export controls. The BSA reports analyzed for this FTA were filed in response to previous joint Alerts on this topic and indicate almost $1 billion in suspicious activity.

The FTA describes several trends found in this BSA reporting:

• Suspicious transactions conducted after Russia’s invasion indicate that companies in intermediary countries appear to have purchased U.S.-origin goods on behalf of Russian end-users.
• Suspicious transactions link trade activity, likely involving sensitive items, between end users in Russia and other jurisdictions, particularly China, Hong Kong, and Turkey.
• The majority of companies within the dataset are linked to the electronics industry and are potentially associated with—or directly facilitating—Russian export control evasion.
• Companies in the industrial machinery industry are also potentially supplying Russia with equipment.

FinCEN anticipates that new trends in BSA data may emerge as more individuals and entities are publicly identified as being potentially connected to evasion of Russia-related export controls.

On Friday, FDIC Chief Risk Officer Marshall Gentry released FDIC’s Supervision of First Republic Bank, an internal review evaluating the agency’s supervision of First Republic Bank, San Francisco, California, from 2018 until its failure in May 2023. The report provides information on the causes of First Republic Bank’s failure and evaluates the FDIC’s supervision of the bank.

The report cites “a loss of market and depositor confidence, resulting in a bank run” following the March 2023 failures of Silicon Valley Bank and Signature Bank as the primary cause of failure. The report notes there were attributes of First Republic’s business model and management strategies that made it more vulnerable to interest rate changes and the contagion that ensued following the failure of Silicon Valley Bank. These attributes included, “rapid growth and loan and funding concentrations, overreliance on uninsured deposits and depositor loyalty, and failure to sufficiently mitigate interest rate risk.” The report notes that “[f]or an institution of its size, sophistication, and risk profile, the bank should have taken additional proactive measures to mitigate interest rate risk.”

The report notes that FDIC supervised First Republic under a continuous examination process and that the dedicated examination team issued required examination products timely, assigned generally positive examination ratings, and issued few Supervisory Recommendations. However, the report acknowledges that the FDIC could have been more forward-looking in assessing how increasing interest rates could negatively impact the bank and could have done more to effectively challenge and encourage bank management to implement strategies to mitigate interest rate risk. Given First Republic’s size, there were also opportunities for the FDIC to take a more holistic approach to supervising the bank, including greater involvement of FDIC headquarters supervision resources and leadership in assisting the San Francisco region with effectively challenging bank management’s strategies and assumptions, and bringing a broader horizontal perspective and understanding of risks.

The internal review identifies eight items for further study focusing on FDIC examiner guidance and processes.

The SEC has announced settled charges against Monolith Resources LLC, a privately held energy and technology company headquartered in Lincoln, Nebraska, for using employee separation agreements that violated the SEC’s whistleblower protection rules.

According to the SEC’s order, from February 2020 until early March 2023, Monolith used separation agreements that required certain departing employees to waive their rights to monetary whistleblower awards in connection with filing claims with or participating in investigations by government agencies. The SEC’s order finds that Monolith’s separation agreements raised impediments to participation in the SEC’s whistleblower program by having employees forego important financial incentives that are intended to encourage people to communicate directly with SEC staff about possible securities law violations.

“Both private and public companies must understand that they cannot take actions or use separation agreements that in any way disincentivize employees from communicating with SEC staff about potential violations of the federal securities laws,” said Jason J. Burt, Regional Director of the SEC’s Denver Office. “Any attempt to stifle or discourage this type of communication undermines our regulatory oversight and will be dealt with appropriately.”

The SEC’s order finds that Monolith violated Securities Exchange Act of 1934 Rule 21F-17. Without admitting or denying the SEC’s findings, Monolith consented to cease and desist from committing or causing violations of the SEC’s whistleblower protection rules. Monolith also agreed to pay a civil penalty of $225,000, which takes into account its remedial actions, including notifying former employees who had signed the improper separation agreements that the agreements do not in any way limit their ability to obtain financial awards in connection with providing information to government agencies.

FinCEN has issued an alert to highlight a prominent virtual currency investment scam known as “pig butchering.” Multiple U.S. law enforcement sources estimate victims in the United States have lost billions of dollars to these scams and other virtual currency investment frauds.

“This scam has impacted far too many Americans, which is why FinCEN is sounding the alarm and asking financial institutions to report suspicious activity indicative of this scheme,” said Acting Director Himamauli Das. “Suspicious Activity Reports filed by financial institutions will enable law enforcement to both aid victims and track down the perpetrators.”

“Pig butchering” scams resemble the practice of fattening a hog before slaughter. Victims invest in supposedly legitimate virtual currency investment opportunities before they are conned out of their money. Scammers refer to victims as “pigs,” and may leverage fictitious identities, the guise of potential relationships, and elaborate storylines to “fatten up” the victim into believing they are in trusted partnerships before they defraud the victims of their assets—the “butchering.” These scams are largely perpetrated by criminal enterprises based in Southeast Asia who use victims of labor trafficking to conduct outreach to millions of unsuspecting individuals around the world.

The alert includes a number of "red flag" indicators s to help detect, prevent, and report potential suspicious activity related to pig butchering, as well as a request that any SAR filed that reports suspected pig butchering activity include "FIN-2023-PIGBUTCHERING" in SAR field 2 and in the narrative, and have "Fraud-Other" selected under SAR field 34(z) with the description "Pig Butchering."

• FIN-2023-Alert005

The Financial Stability Board (FSB) and International Monetary Fund (IMF) have published a report outlining a comprehensive policy and regulatory response to crypto-asset activities.

The report synthesizes the IMF and FSB’s policy recommendations and standards. It illustrates macroeconomic and financial stability implications of crypto-asset activities, how they may interact, and how the IMF and FSB’s policy recommendations fit together. The report also encourages implementation of the Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing (AML/CFT) standards to address risks to financial integrity and mitigate criminal and terrorist misuse of the crypto-assets sector.

The report finds that a comprehensive policy and regulatory response for crypto-assets is necessary to address the risks of crypto-assets to macroeconomic and financial stability. To address macroeconomic risks, jurisdictions should safeguard monetary sovereignty and strengthen monetary policy frameworks, guard against excessive capital flow volatility and adopt unambiguous tax treatment of crypto-assets. Comprehensive regulatory and supervisory oversight of crypto-assets can help to address financial stability and financial integrity risks while supporting macroeconomic policies. Comprehensive regulatory and supervisory oversight of crypto-assets should be a baseline to address macroeconomic and financial stability risks.

The CFPB has announced its publication of a new Issue Spotlight report, "Big Tech's Role in Contactless Payments: Analysis of Mobile Device Operating Systems and Tap-to-Pay Practices," which highlights the impacts of Big Tech companies’ policies and practices that govern tap-to-pay on mobile devices like smartphones and watches. Apple currently forbids banks and payment apps from accessing the tap-to-pay functionality on Apple iOS devices and imposes fees through Apple Pay. Google’s Android operating system does not currently have such a policy. The issue spotlight explains how regulations imposed by mobile operating systems can have a significant impact on innovation, consumer choice, and the growth of open and decentralized banking and payments in the U.S.

According to the CFPB, as of the second quarter of 2023, Apple’s iOS operating system was on 55 percent of smartphones shipped in the U.S., and Google’s Android operating system was on 45 percent of smartphones shipped. Apple and Google set regulations that govern app developers’ ability to integrate near field communication (NFC) technology into their apps, which is needed to execute tap-to-pay transactions. The dominant market share of these two operating systems, coupled with the increasing shift toward mobile device payments, underscores the important role their policies and practices play in retail payments.

The report states that restrictive tap-to-pay practices may reduce consumer choice and hamper innovation. That can inhibit progress toward a more robust open banking ecosystem, where consumers have more control over their personal financial information and developers provide payments solutions that better meet consumers’ needs. For example, Apple’s current NFC policy prohibits directly integrating tap-to-pay functionality into existing banking applications and other payment apps (e.g., PayPal, Venmo, Cash App).

The CFPB has added the HMDA Filing Instructions Guide (FIG) for data collected in 2024 and a Supplemental Guide for Quarterly Filers for 2024 to its FFIEC HMDA Resources webpage.

Reports from 4,645 commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reflect aggregate net income of $70.8 billion in the second quarter of 2023. Though second-quarter net income decreased by $9.0 billion (11.3 percent) from first quarter 2023, after excluding the effects on acquirers‘ incomes of their acquisition of three failed banks in 2023, quarter-over-quarter net income would have been roughly flat for the second consecutive quarter. Declines in noninterest income, reflecting the accounting treatment of the acquisition of three failed institutions, lower net interest income, and higher provision expenses were the drivers of the decline in net income. These and other financial results for second quarter 2023 are included in the FDIC‘s latest Quarterly Banking Profile released yesterday.

• FDIC press release

A Treasury Department release on Thursday reported that OFAC, in coordination with the United Kingdom, sanctioned eleven individuals who are part of the Russia-based Trickbot cybercrime group. The Department of Justice concurrently unsealed indictments against nine individuals in connection with the Trickbot malware and Conti ransomware schemes, including seven of the individuals designated yesterday.

For the names and identification information of the designated individuals, see the September 7, 2023, BankersOnline OFAC Update.

The Securities and Exchange Commission has reported that Irving, Texas-based Fluor Corporation will pay $14.5 million to settle charges stemming from the company’s improper accounting on two large-scale, fixed-price construction projects. Five former and current officers and employees also agreed to settle related charges for causing Fluor’s violations.

The SEC’s order found that Fluor, a global engineering, procurement, and construction company, bid on the two projects relying on overly optimistic cost and timing estimates and subsequently experienced cost overruns that worsened over time. Fluor then failed to sufficiently maintain internal controls to account for the projects in accordance with the percentage of completion accounting method under U.S. generally accepted accounting principles (GAAP). According to the SEC’s order, Fluor failed to include all anticipated costs that were known or should have been known in each project’s respective forecasts—thereby delaying loss recognition on each. Additionally, Fluor improperly incorporated revenue from unapproved change orders in the forecasts of one of the projects, including change orders that had not yet been submitted to, or had already been rejected by, the customer.

Without admitting or denying the SEC’s findings, Fluor consented to cease and desist from committing or causing future violations and to pay a civil money penalty of $14.5 million. Per the order, Fluor’s remedial acts and cooperation factored into the SEC’s settlement decision. Similarly, without admitting or denying the SEC’s findings, the five former and current officers and employees consented to cease and desist from committing or causing the relevant violations and to pay penalties ranging from $15,000 to $25,000.

The U.S. Department of Housing and Urban Development (HUD) has announced the availability of $256 million in Choice Neighborhoods Implementation (CNI) Grants funding to communities across the country. The CNI Grants will ultimately transform public and other HUD-assisted housing, while investing in the surrounding neighborhood and resident services. Public housing authorities, local governments, and/or Tribal entities are eligible and encouraged to apply for these transformative grants of up to $50 million each.