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10/28/2021

Updated Reg Z exam procedures

The Federal Reserve Board has issued a Community Affairs Letter announcing the Task Force on Consumer Compliance of the Federal Financial Institutions Examination Council recently developed updated interagency examination procedures for Regulation Z – Truth in Lending (TILA).

The revised procedures reflect amendments to Regulation Z published by the Consumer Financial Protection Bureau in 2020 and 2021: (1) implementing permanent changes to Regulation Z's qualified mortgage provisions, and (2) implementing an extension and phase-out for the GSE Patch, which had originally carried a January 10, 2021, sunset date under the Ability to Repay/Qualified Mortgage rule and which will now sunset on October 1, 2022.

10/28/2021

FHFA proposes added capital disclosures by Enterprises

Wednesday, the Federal Housing Finance Agency (FHFA) announced it is seeking comment on a notice of proposed rulemaking that would introduce additional public disclosure requirements for the Enterprise Regulatory Capital Framework (ERCF) for Fannie Mae and Freddie Mac (the Enterprises).

The proposed rule would implement quarterly quantitative and qualitative disclosure requirements for the Enterprises related to regulatory capital instruments, risk-weighted assets calculated under the ERCF’s standardized approach, and risk management policies and procedures.

The deadline for the Enterprises to comply with the disclosure requirements outlined in the proposed rule is six months from publication of the final rule in the Federal Register. FHFA invites comments on the proposed rule within 60 days of its publication.

10/28/2021

FTC warns of EIP scam

The Federal Trade Commission has posted a blog entry with a warning about phony IRS emails saying the target can get a third Economic Impact Payment (EIP) if they click a link that lets them “access the form for your additional information” and “get help” with the application. But the link is a trick. If it is clicked, a scammer might steal the victim's money and personal information to commit identity theft. It’s yet another version of the classic government impersonator scam.

10/28/2021

New residential sales in September

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau jointly announced new residential sales statistics for September 2021:

  • New Home Sales—Sales of new single-family houses in September 2021 were at a seasonally adjusted annual rate of 800,000. This is 14.0 percent (±17.9 percent)* above the revised August rate of 702,000 but is 17.6 percent (±12.1 percent)* below the September 2020 estimate of 971, 000.
  • Sales Price—The median sales price of new houses sold in September 2021 was $ 408,800 The average sales price was $451,700.
  • For Sale Inventory—The seasonally adjusted estimate of new houses for sale at the end of September was 379,000, a supply of 5.7 months at the current sales rate.

    10/27/2021

    FATF lists jurisdictions with AML/CTF/CPF deficiencies

    FinCEN has issued a press release to inform U.S. financial institutions that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards to combat money laundering, counter the financing of terrorism, and combat weapons of mass destruction proliferation financing (AML/CFT/CPF), has issued public statements updating its lists of jurisdictions with strategic AML/CFT/CPF deficiencies following its plenary meeting this month. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices.

    On October 21, 2021, the FATF added Jordan, Mali, and Turkey to its list of the Jurisdictions under Increased Monitoring and removed Botswana and Mauritius.

    The FATF’s list of High-Risk Jurisdictions Subject to a Call for Action remains the same with Iran and the Democratic People’s Republic of Korea still subject to the FATF’s countermeasures.

    FATF issued two statements:

    1. Jurisdictions under Increased Monitoring, which publicly identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline
    2. High-Risk Jurisdictions Subject to a Call for Action, which publicly identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and calls on all FATF members to apply enhanced due diligence, and, in the most serious cases, apply counter-measures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from the identified countries.

    10/27/2021

    OCC FAQs on proposal to rescind CRA rule

    With Bulletin 2021-50, issued yesterday, the Office of the Comptroller of the Currency has issued responses to frequently asked questions about a notice of proposed rulemaking soliciting comments on the proposal to rescind the OCC’s Community Reinvestment Act (CRA) rule issued on June 5, 2020. The notice, which was published in the Federal Register on September 17, 2021, proposes that the June 2020 CRA rule largely be replaced with the rules adopted jointly by the OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation in 1995, as revised.

    The FAQs provide information on the rulemaking process and the OCC’s consideration of potential CRA transition issues, including:

    • the impact of the proposed rule on CRA bank type.
    • qualifying activities and the qualifying activity confirmation request system.
    • the transition period.
    • examination administration.
    • assessment areas.
    • targeted geographic areas.
    • strategic plans.
    • public comments.

    Related Links

    10/27/2021

    CFPB makes annual Reg Z inflation adjustments

    The CFPB is issuing a final rule amending the official interpretations for Regulation Z, which implements the Truth in Lending Act (TILA). The Bureau is required to calculate annually the dollar amounts for several provisions in Regulation Z. This final rule revises the dollar amounts for provisions implementing TILA and amendments to TILA, including under the CARD Act, HOEPA, and the Dodd-Frank Act.

    The adjustments are effective January 1, 2022.

    • For open-end consumer credit plans under TILA, the threshold that triggers requirements to disclose minimum interest charges will remain unchanged at $1.00
    • For open-end consumer credit plans under the CARD Act amendments to TILA, the adjusted dollar amount in 2022 for the safe harbor for a first violation penalty fee will increase to $30 and the adjusted dollar amount for the safe harbor for a subsequent violation penalty fee will increase to $41
    • For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2022 will be $22,969.
    • The adjusted points-and-fees dollar trigger for high-cost mortgages in 2022 will be $1,148.
    • 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 2022 will be:
      • 2.25 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $114,847
      • 3.5 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $68,908 but less than $114,847 6.5 or more percentage points for a first-lien covered transaction secured by a manufactured home with a loan amount less than $114,847
      • 3.5 or more percentage points for a subordinate-lien covered transaction with a loan amount greater than or equal to $68,908
      • 6.5 or more percentage points for a subordinate-lien covered transaction with a loan amount less than $68,908
    • For all categories of QMs, the thresholds for total points and fees in 2022 will be:
      • 3 percent of the total loan amount for a loan greater than or equal to $114,847
      • $3,445 for a loan amount greater than or equal to $68,908 but less than $114,847
      • 5 percent of the total loan amount for a loan greater than or equal to $22,969 but less than $68,908
      • $1,148 for a loan amount greater than or equal to $14,356 but less than $22,969
      • 8 percent of the total loan amount for a loan amount less than $14,356
    The changes have been posted to the affected sections of Regulation Z in BankersOnline's Regulations pages.

    10/27/2021

    House prices continue to climb

    The Federal Housing Finance Agency has reported that house prices rose nationwide in August, up 1.0 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index. House prices rose 18.5 percent from August 2020 to August 2021. The previously reported 1.4 percent price change for July 2021 remained unchanged.

    For the nine census divisions, seasonally adjusted monthly house price changes from July 2021 to August 2021 ranged from -0.1 percent in the New England division to +1.9 percent in the South Atlantic division. The 12-month changes ranged from +14.9 percent in the West North Central division to +25.8 percent in the Mountain division.

    10/27/2021

    OCC takes enforcement action against mortgage subservicer

    The OCC on Tuesday announced it had issued a Consent Cease and Desist Order against Cenlar FSB (Ewing, NJ), the largest mortgage sub-servicer in the country, performing servicing duties on behalf of financial institution clients throughout the United States, and the second largest mortgage servicer in the United States.

    The OCC's action was based on the bank’s failure to establish effective controls and risk management practices related to its mortgage servicing and subservicing activities. The order requires the bank to take comprehensive corrective actions to address identified deficiencies and implement internal controls and risk management practices that are appropriate to the bank’s risk profile and the size of its mortgage subservicing operations.

    The order also limits excessive growth and prioritizes remediation by requiring the bank to receive no supervisory objection from the OCC before adding new subservicing clients and prior to declaring or paying dividends to shareholders while the order is effective.

    10/27/2021

    Hsu discusses the end of LIBOR and its replacement

    The OCC has released remarks of Acting Comptroller of the Currency Michael J. Hsu on the importance of maintaining trust in the banking system during the transition from LIBOR to replacement rates at the Alternative Reference Rates Committee (ARRC) Symposium.

    His remarks highlighted the importance of a smooth transition away from LIBOR and the potential negative effects that complacency by bank management over LIBOR’s cessation and replacement can have on bank operations, safety and soundness.

    10/27/2021

    FTC warns businesses about deceptive money-making claims

    The Federal Trade Commission has announced that this week, the Commission put more than 1,100 businesses that pitch money-making ventures on notice that if they deceive or mislead consumers about potential earnings, the FTC won’t hesitate to use its authority to target them with large civil penalties.

    The FTC is deploying its Penalty Offense Authority to remind businesses of the law and deter them from breaking it. By sending a Notice of Penalty Offenses to the companies, the agency is placing them on notice they could incur significant civil penalties—up to $43,792 per violation—if they or their representatives make claims about money-making opportunities that run counter to prior FTC administrative cases. The Notice of Penalty Offenses 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.

    Companies receiving the Notice also received a copy of the recently issued Notice of Penalty Offenses concerning endorsements and testimonials [see "FTC warns advertisers: honest opinions only"], as companies frequently use testimonials to advertise money-making opportunities. Together, the notices make clear that it is illegal to use testimonials to mislead consumers about the rewards of participating in a money-making opportunity.

    Related link

    10/27/2021

    Treasury sanctions Libyan national

    The Treasury Department on Tuesday announced that OFAC, acting in coordination with an action by the United Nations Security Council, sanctioned Libyan national Osama Al Kuni Ibrahim (Al Kuni), who is responsible for serious human rights abuse against migrants in Libya. Al Kuni is designated pursuant to Executive Order 13726 for being involved in, or having been involved in, the targeting of civilians through the commission of acts of violence, abduction, forced displacement, or attacks on schools, hospitals, religious sites, or locations where civilians are seeking refuge, or through conduct that would constitute a serious abuse or violation of human rights or a violation of international humanitarian law.

    As a result of yesterday’s action, all property and interests in property of the designated individual that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.

    Al Kuni was designated by the UN Security Council’s Libya Sanctions Committee. Pursuant to that designation, all UN Member States are obligated to impose an asset freeze and travel ban.

    For more information on Al Kuni, see the BankersOnline October 26, 2021, OFAC Update.

    10/26/2021

    Census tract reminder from CFPB

    The CFPB has sent out reminders that, when providing census tract information required by HMDA Regulation C for calendar year 2022 applications and loans, financial institutions should use census tract information provided in the 2020 census. The FFIEC's Geocoder will use 2020 census tract information beginning January 1, 2022.

    10/26/2021

    Justice announces new initiative to combat redlining

    The Department of Justice announced the launch on Friday of the department’s new Combatting Redlining Initiative. Redlining is an illegal practice in which lenders avoid providing services to individuals living in communities because of the race or national origin of the people who live in those communities. The new Initiative represents the department’s most aggressive and coordinated enforcement effort to address redlining, which is prohibited by the Fair Housing Act and the Equal Credit Opportunity Act.

    This Initiative, which will be led by the Civil Rights Division’s Housing and Civil Enforcement Section in partnership with U.S. Attorney’s Offices, will build on the longstanding work by the division that seeks to make mortgage credit and homeownership accessible to all Americans on the same terms, regardless of race or national origin and regardless of the neighborhood where they live. The Initiative will:

    • Utilize U.S. Attorneys’ Offices as force multipliers to ensure that fair lending enforcement is informed by local expertise on housing markets and the credit needs of local communities of color.
    • Expand the department’s analyses of potential redlining to both depository and non-depository institutions. Non-depository lenders are not traditional banks and do not provide typical banking services, but engage in mortgage lending and now make the majority of mortgages in this country.
    • Strengthen DOJ's partnership with financial regulatory agencies to ensure the identification and referrals of fair lending violations to the Department of Justice.
    • Increase coordination with State Attorneys General on potential fair lending violations.

    10/26/2021

    Chopra speaks out on 'digital redlining'

    At the joint Justice Department, OCC, and CFPB news conference on the Trustmark National Bank enforcement action on Friday, CFPB Director Rohit Chopra said that the Bureau will be watching for "digital redlining, disguised through so-called neutral algorithms, that may reinforce the biases that have long existed." He continued, "Technology companies and financial institutions are amassing massive amounts of data and using it to make more and more decisions about our lives, including loan underwriting and advertising. While machines crunching numbers might seem capable of taking human bias out of the equation, that’s not what is happening....When consumers and regulators do not know how decisions are made by the algorithms, consumers are unable to participate in a fair and competitive market free from bias. Algorithms can help remove bias, but black box underwriting algorithms are not creating a more equal playing field and only exacerbate the biases fed into them."

    Chopra added, "Given what we have seen in other contexts, the speed with which banks and lenders are turning lending and advertising decisions over to algorithms is concerning. Too many families were victimized by the robo-signing scandals from the last crisis, and we must not allow robo-discrimination to proliferate in a new crisis.

    "We should never assume that algorithms will be free of bias. If we want to move toward a society where each of us has equal opportunities, we need to investigate whether discriminatory black box models are undermining that goal."

    10/26/2021

    $1B+ in SBA Hurricane Ida assistance delivered

    SBA Administrator Isabella Casillas Guzman announced yesterday that the agency has delivered more than $1 billion in disaster rescue funds to small businesses, homeowners, renters, and private nonprofit organizations recovering from damages caused by Hurricane Ida in September.

    As of October 25, the SBA Office of Disaster Assistance (ODA) has approved more than 20,600 low-interest disaster loans delivering a combined $1 billion in financial assistance to areas impacted by Hurricane Ida. The SBA is rapidly processing applications and will continue working to meet the needs of all those affected by this disaster. Businesses, homeowners, renters, and private nonprofit organizations in 67 counties and parishes across Georgia, Louisiana, Maryland, Mississippi, New Jersey, New York, and Pennsylvania are eligible to apply for low-interest disaster loans to help repair the physical damage caused by Hurricane Ida.

    The deadline for residents of Louisiana impacted by Hurricane Ida to apply for financial assistance is October 28, 2021. Those that have not applied to receive aid yet are encouraged to apply as soon as possible. The owners of private property impacted by natural disasters, like Hurricane Ida, are eligible for up to 20% of their total physical losses, as verified by SBA, to incorporate protective measures to protect them against the next disaster.

    10/26/2021

    Arizona housing providers settle discrimination claims

    HUD has announced that it has reached a Conciliation and Voluntary Compliance Agreement with MGM Investment Company, the owner of Roosevelt Plaza Apartments in Phoenix, Arizona, as well as its property manager, resolving allegations that they violated the Fair Housing Act and Title VI of the Civil Rights Act of 1964 when they failed to provide adequate language services for a resident with limited English proficiency (LEP). Roosevelt Plaza Apartments is a recipient of HUD funding.

    10/26/2021

    First Treasury counselor for racial equity appointed

    Treasury Secretary Yellen has announced the appointment of Janis Bowdler to serve as the Department’s first Counselor for Racial Equity. Ms. Bowdler will be charged with coordinating Treasury’s efforts to advance racial equity including engaging with diverse communities throughout the country and to identify and mitigate barriers to accessing benefits and opportunities with the Department. In announcing the appointment, Secretary Yellen said, “The American economy has historically not worked fairly for communities of color. The pandemic threw a spotlight on this inequity; people of color were often the first to lose their jobs and businesses. Treasury must play a central role in ensuring that as our economy recovers from the pandemic, it recovers in a way that addresses the inequalities that existed long before anyone was infected with COVID-19.”

    10/26/2021

    Your Guide to America’s Finances updated

    The U.S. Department of the Treasury's Bureau of the Fiscal Service has updated its “Your Guide to America’s Finances” to coincide with the release of the Federal Government’s year-end financial data. Your Guide was launched in 2019 to make federal financial information transparent and accessible to all Americans. It presents a snapshot of the trillions of dollars collected and spent by the Federal Government each year and provides useful context for those numbers. Your Guide was designed to help Americans understand the core financial concepts of revenue, spending, deficit, and debt and the part these concepts play in the overall financial picture of the United States.

    10/26/2021

    FTC restores practice of restricting anticompetitive mergers

    The Federal Trade Commission has announced that it is restoring its long-established practice of routinely restricting future acquisitions for merging parties that pursue anticompetitive mergers.

    The Prior Approval Statement issued yesterday puts industry on notice that the FTC’s merger enforcement orders will once again require acquisitive firms to obtain prior approval from the agency before closing any future transaction affecting each relevant market for which a violation was alleged, for a minimum of ten years.

    In July 2021, the Commission rescinded a 1995 policy statement that for decades had fueled consolidation by preventing the agency from imposing these merger restrictions. The application of the Prior Approval Policy Statement will protect consumers and deter merging parties from pursuing anticompetitive deals. The consequences of attempting an anticompetitive deal will be more severe and the bar for consummating further anticompetitive acquisitions will be higher.

    Parties settling an anticompetitive deal with a consent order will need the Commission’s permission to close any further acquisition in an affected market, and sometimes in broader markets depending on the circumstances, for at least ten years. The FTC will weigh a number of factors in determining the scope of a prior approval provision, including the nature of the transaction, the level of market concentration and degree to which the transaction increases market concentration, the degree of pre-merger market power, the parties’ history of acquisitiveness, and evidence of anticompetitive market dynamics. The Commission may also seek prior approvals even when parties abandon a transaction.

    10/26/2021

    $2.8 B in September Emergency Rental Assistance

    The Department of the Treasury has reported State and local governments distributed nearly $2.8 billion from Treasury’s Emergency Rental Assistance program to more than 510,000 households in September, up from $459,000 in August. Through September 30, state, local, and tribal governments have made over two million payments to households and distributed over $10 billion. The September data provide the first look into Emergency Rental Assistance spending since the Supreme Court overturned the Centers for Disease Control’s national eviction moratorium at the end of August.

    10/25/2021

    Real estate lending guidelines amended

    The FDIC has announced in FIL-71-2021 that the FDIC Board has adopted a final rule to amend the Interagency Guidelines for Real Estate Lending Policies to incorporate consideration of the capital framework established in the community bank leverage ratio (CBLR) rule into the method for calculating the ratio of loans in excess of the supervisory loan-to-value limits (LTV limits). The amendment provides a consistent approach for calculating the ratio of loans in excess of the supervisory LTV limits at all FDIC-supervised institutions without requiring the computation of total capital.

    The final rule was adopted without any changes from the notice of proposed rulemaking published on June 25, 2021.

    The final rule will become effective 30 days after publication in the Federal Register.

    10/25/2021

    Regulators take action against Mississippi Bank

    The Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ), in cooperation with the Office of the Comptroller of the Currency (OCC), took action on Friday to put an end to alleged redlining by Trustmark National Bank. The CFPB and DOJ complaint alleges that Trustmark discriminated against Black and Hispanic neighborhoods by deliberately not marketing, offering, or originating home loans to consumers in majority-Black and Hispanic neighborhoods in the Memphis, Tennessee, metropolitan area. The CFPB and DOJ also allege that Trustmark discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit.

    If entered by the court, the settlement would require Trustmark to put $3.85 million into a loan subsidy program for impacted neighborhoods, increase its lending presence there, and implement proper fair lending procedures. The order would also impose a $5 million civil money penalty against the bank, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.

    See "Trustmark to pay $5 million for alleged redlining" in BankersOnline's Penalty Pages for additional information.

    10/25/2021

    G.20 Finance Companies data

    The Federal Reserve has posted August 2021 G.20 Finance Companies owned and managed receivables outstanding data.

    10/25/2021

    Fed report on general-use prepaid cards

    The Board has posted its annual report to the Congress on the use of general-use prepaid cards in federal, state, and local government-administered payment programs and on the interchange fees and cardholder fees charged with respect to the use of those cards.

    Federal, state, and local government offices use government-administered prepaid cards to disburse funds at a lower cost than checks (or other paper-based payment instruments, such as vouchers or coupons) and to provide an alternative to direct deposit for payment recipients, especially those recipients who do not have bank accounts. As a result, government offices contract with financial institutions to issue prepaid cards, disburse program funds, and provide customer service.

    For calendar year 2020, government agencies disbursed $408.9 billion through government- administered prepaid cards across the roughly 1,000 programs reported by issuers. The Board collected data on 10 types of government-administered payment programs that used prepaid cards as a method to disburse funds. Total funds disbursed through government-administered prepaid cards varied widely by program type. Unemployment disbursed the largest share of total funds through government-administered prepaid cards across all reported programs in 2020. In total, these prepaid disbursements represent approximately 0.6 percent of total government expenditures in 2020.

    10/22/2021

    OCC September enforcement actions released

    The OCC has released a list of new enforcement actions taken in the month of September. Included were:

    • The previously announced cease-and-desist order against MUFG Union Bank, National Association, of San Francisco
    • A civil money penalty of $2.5 million was assessed against Washington Federal Bank, National Association, Seattle, for BSA/AML compliance failures
    • A consent order of prohibition and for a $140,000 civil money penalty was issued to Jared P. Schultz, former senior vice president, First National Bank in Fairfield, Fairfield, Iowa, upon a finding that he failed to comply with the bank's loan policies; authorized loans from which he personally benefited, in violation of Regulation O; and otherwise engaged in violations of policy and law, reckless unsafe or unsound practices, and breaches of his fiduciary duty to the bank
    • A consent order for a $16,000 civil money penalty and to cease-and-desist was issued to Patrick Hurley, former president, CEO and director of First National Bank in Fairfield, Fairfield, Iowa, upon a finding that he failed to adequately supervise Jared P. Schultz; failed to adequately review the banks problem loan and exception reports to detect unsafe or unsound lending activities that Schultz engaged in; and failed to ensure the bank's internal controls were sufficient

      10/22/2021

      Tech companies ordered to provide info to CFPB

      The Consumer Financial Protection Bureau (CFPB) has issued a series of orders to collect information on the business practices of large technology companies operating payments systems in the United States. The information will help the CFPB better understand how these firms use personal payments data and manage data access to users so the Bureau can ensure adequate consumer protection.

      The orders were issued pursuant to Section 1022(c)(4) of the Consumer Financial Protection Act. The CFPB has the statutory authority to order participants in the payments market to turn over information to help the Bureau monitor for risks to consumers and to publish aggregated findings that are in the public interest. The CFPB’s work is one of many efforts within the Federal Reserve System to make payments safer, faster, and more competitive. The initial orders were sent to Amazon, Apple, Facebook, Google, PayPal, and Square. The Bureau will also be studying the payment system practices of Chinese tech giants, including Alipay and WeChat Pay.

      10/22/2021

      NCUA board approves final rules on CUSOs and CAMELS

      The NCUA Board yesterday announced it has approved:

      • a final rule that adds the sensitivity to market risk or “S” component to the existing CAMEL rating system and redefines the liquidity risk or “L” component.
      • a final rule that (1) expands the list of permissible activities and services for CUSOs to include originating any type of loan that a federal credit union may originate; and (2) grants the NCUA Board additional flexibility to approve permissible activities and services outside of notice-and-comment rulemaking.

      10/22/2021

      OCC updates Payment Systems booklet

      The OCC has issued a revised “Payment Systems” booklet of the Comptroller’s Handbook. The booklet:

      • provides examiners with information regarding payment systems, types of payments, risks associated with payment systems, and associated risk management practices
      • discusses requirements of 12 CFR 7.1026 regarding payment systems memberships
      • includes expanded examination procedures for examiners to use when assessing payment products and services
      • includes supplemental procedures for deeper review of certain payment activities

      10/22/2021

      Fed Board to survey finance companies

      The Federal Reserve Board yesterday announced that it will begin its Survey of Finance Companies this month as part of the Board's continuing effort to improve its understanding of credit availability to households and businesses in the United States.

      The survey collects data on major categories of household, real estate, and business loans, various liabilities, and income and expense information from finance companies. In addition, the 2021 survey includes questions on COVID-19 pandemic relief accommodations provided by finance companies. These data provide a benchmark for the Federal Reserve's monthly report on the outstanding balances of finance companies (presented in the Federal Reserve's Finance Companies statistical release) and provide a comprehensive update on these companies' sources of funds. This information in turn becomes an important input to the estimates of total consumer credit (presented in the Federal Reserve's Consumer Credit statistical release) and the Financial Accounts of the United States.

      A letter from Chair Powell was sent to approximately 2,000 companies urging their participation in the survey. Individual responses will be kept confidential.

      10/22/2021

      New investment restrictions on Fed policymakers and staff

      The Federal Reserve Board has announced a broad set of new rules that will prohibit the purchase of individual securities, restrict active trading, and increase the timeliness of reporting and public disclosure by Federal Reserve policymakers and senior staff.

      As a result of the new policies, senior Federal Reserve officials will be limited to purchasing diversified investment vehicles, like mutual funds. The new restrictions will apply to both Reserve Bank and Board policymakers and senior staff and prohibit them from purchasing individual stocks, holding investments in individual bonds, holding investments in agency securities (directly or indirectly), or entering into derivatives. The new rules are expansive and are designed to place the Federal Reserve's investment and trading rules at the forefront among major federal agencies.

      To help guard against even the appearance of any conflict of interest in the timing of investment decisions, policymakers and senior staff generally will be required to provide 45 days' advance notice for purchases and sales of securities, obtain prior approval for purchases and sales of securities, and hold investments for at least one year. Further, no purchases or sales will be allowed during periods of heightened financial market stress.

      Reserve Bank presidents will now be required to publicly disclose financial transactions within 30 days, as Fed Board members and senior staff currently do.

      The Board and the Reserve Banks will incorporate these new restrictions into the appropriate Federal Reserve rules and policies over the coming months.

      10/22/2021

      MLA database users must keep accounts active

      The Department of Defense Military Lending Act website has announced a planned systems upgrade scheduled for January 20, 2022. Under new version 5.11, all users will be required to log into their accounts at least once every 35 days to maintain active-account status. After 35 days of account inactivity, accounts will be disabled and users will need to create a new account.

      10/21/2021

      October Beige Book released

      The Federal Reserve has released its October 2021 Beige Book based on information collected on or before October 8, 2021.

      Overall, economic activity grew at a modest to moderate rate, according to the majority of Federal Reserve Districts. Several Districts noted, however, that the pace of growth slowed this period, constrained by supply chain disruptions, labor shortages, and uncertainty around the Delta variant of COVID-19. A majority of Districts indicated positive growth in consumer spending; however, auto sales were widely reported as declining due to low inventory levels and rising prices.

      Travel and tourism activity varied by District with some seeing continued or strengthening leisure travel while others saw declines that coincided with rises in COVID cases and the start of the school year.

      Manufacturing grew moderately to robustly in most parts of the country, as did trucking and freight. Growth in nonmanufacturing activity ranged from slight to moderate for most Districts.

      Loan demand was generally reported as flat to modest this period. Residential real estate activity was unchanged or slowed slightly but the market remained healthy, overall. Reports on nonresidential real estate varied across Districts and market segments. Agriculture conditions were mixed and energy markets were little changed, on balance. Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months.

      10/21/2021

      FedNow Explorer announced

      The Federal Reserve's FedNow Instant Payments group has announced the availability of the FedNow Explorer website, which provides a customized learning path with tools and content to meet the needs of those who want to learn more about the service. From instant payment basics and how the FedNow Service works to information about features, functionality and use cases, FedNow Explorer will offer the information and guidance needed to start getting ready for the future of instant payments. The Fed has confirmed the service will be available in 2023.

      10/21/2021

      OCC report on interest rate risk

      The OCC has issued Bulletin 2021-47 to announce its publication of the fall 2021 edition of its Interest Rate Risk Statistics Report, which presents interest rate risk data gathered during examinations of OCC-supervised midsize and community banks and federal savings associations.

      The fall 2021 report provides statistics on interest rate risk exposures and risk limits for different midsize and community bank populations, including

      • all OCC-supervised midsize and community banks with reported data.
      • banks by asset size.
      • banks by charter type.
      • minority depository institutions.

      In addition, the fall 2021 report includes statistics on average lives for non-maturity deposits for all bank populations. The report excludes statistics on exposures and policy limits for a –200 basis point change because of the current market environment of low interest rates.

      10/21/2021

      Bureau updates 2022 FIG

      The CFPB has released an update to the Filing instructions guide (FIG) for HMDA data collected in 2022. FIG Version 1.1 corrects the entries in Section 5.3 for edits V720-2 and V721-2 in Table 6, and Q657 in Table 7.

      Users of the FIG should always ensure they are using the most current version for the data year they are working on. The FIG can be accessed at https://ffiec.cfpb.gov under Help for Filers.

      10/21/2021

      Joint statement on LIBOR discontinuation risks

      The CFPB yesterday joined the Federal Reserve Board, FDIC, NCUA, OCC, and state bank and credit union regulators in a Joint Statement on Managing the LIBOR Transition to emphasize the expectation that supervised institutions with LIBOR exposure continue to progress toward an orderly transition away from LIBOR. Additionally, the statement includes clarification regarding new LIBOR contracts, considerations when assessing appropriateness of alternative reference rates, and expectations for fallback language.

      In its press release the Bureau said the "approaching discontinuation of most LIBOR tenors in June 2023 presents financial, legal, operational, and consumer protection risks. Additionally, consumers may not know when the transition from LIBOR will occur or how institutions will calculate their interest rates if they do not issue required disclosures to consumers."

      On June 4, 2020, the CFPB issued a Notice of Proposed Rulemaking and FAQs relating to the LIBOR transition. The CFPB is continuing work on a final rule to address the anticipated expiration of LIBOR and expects to issue it in January 2022. The FAQs pertain to compliance with existing CFPB regulations for consumer financial products and services impacted by the anticipated LIBOR discontinuation and resulting need to transition to other indices.

      In October 2019, the CFPB published a blog post discussing the transition away from LIBOR to help consumers understand this market-wide change. In June, 2020, the CFPB released an updated consumer handbook on adjustable rate mortgages to help consumers better understand these products and how their payments can change over time.

      The interagency statement identifies specific actions financial institutions can consider in preparation for the elimination of LIBOR based loans. Among those actions are developing and implementing a transition plan for communicating with consumers and including fallback language that defines a fallback reference rate. Finally, the interagency statement includes clarification on the meaning of certain key terms, factors industry should consider when selecting alternative rates, and expectations for fallback language.

      10/21/2021

      NCUA issues ECIP action guidance

      The NCUA yesterday announced it has sent a letter to credit unions announcing that eligible low-income credit unions (LICUs) may accept 30-year subordinated debt investments from the U.S. Department of the Treasury’s Emergency Capital Investment Program (ECIP). Additionally, a LICU may treat this ECIP funding as secondary capital in accordance with the NCUA’s regulations, provided that any LICU receiving secondary capital treatment has an NCUA-approved secondary capital plan by December 31, 2021.

      10/21/2021

      Purchasers of phony pain treatments to get refunds

      The Federal Trade Commission has announced it is sending refund payments totaling more than $1.1 million to 84,847 consumers who bought three supplements deceptively marketed as treatments for pain and other health conditions related to aging. According to the FTC's complaint, the marketers of Neurocet, Regenify, and Resetigen-D deceptively promoted their products using false or unsubstantiated claims that the supplements could stop pain and treat age-related ailments. The pitches were made primarily through direct mail campaigns.

      The final order settling the FTC’s complaint bars the defendants—five related companies called Mile High Madison Group, Inc., Nordic Clinical, Inc., Encore Plus Solutions, Inc., Le Groupe Mile High Madison, Inc., and Clinique Nordique, Inc. and their principals, Vittorio DiCriscio and Vito Proietti—from making any claims about the health benefits of their products unless they are true and supported by scientific evidence. It also requires them to pay for the consumer refunds.

      10/20/2021

      Discount rate meeting minutes released

      The Federal Reserve Board has released the minutes of its interest rate meetings from August 23 through September 22, 2021.

      10/20/2021

      FinCEN exceptive relief for casinos with online gambling

      FinCEN announced on Tuesday it has granted limited exceptive relief in Ruling FIN-2021-R001 to casinos from certain customer identity verification requirements in the context of online gaming. Specifically, under the terms of this relief, a casino may utilize suitable non-documentary methods to verify the identity of online customers. The suitability or non-suitability of any particular method should be evaluated based on risk. This exceptive relief is effective as of October 19, 2021.

      10/20/2021

      Credit Suisse pays $474M+ for misleading customers

      The Securities and Exchange Commission has announced Credit Suisse Group AG has agreed to pay nearly $475 million to U.S. and UK authorities, including nearly $100 million to the SEC, for fraudulently misleading investors and violating the Foreign Corrupt Practices Act (FCPA) in a scheme involving two bond offerings and a syndicated loan that raised funds on behalf of state-owned entities in Mozambique.

      According to the SEC's order, these transactions that raised over $1 billion were used to perpetrate a hidden debt scheme, pay kickbacks to now-indicted former Credit Suisse investment bankers along with their intermediaries, and bribe corrupt Mozambique government officials. The SEC's order finds that the offering materials created and distributed to investors by Credit Suisse hid the underlying corruption and falsely disclosed that the proceeds would help develop Mozambique's tuna fishing industry. Credit Suisse failed to disclose the full extent and nature of Mozambique's indebtedness and the risk of default arising from these transactions.

      VTB Capital plc, a London-based subsidiary of Russian bank VTB, separately agreed to pay more than $6 million to settle SEC charges related to its role in misleading investors in a second 2016 bond offering. According to the SEC's order in this case, the second offering as structured by VTB Capital and Credit Suisse allowed investors to exchange their notes in an earlier bond offering for new sovereign bonds issued directly by the government of Mozambique. But the SEC found that the offering materials distributed and marketed by Credit Suisse and VTB Capital failed to disclose the true nature of Mozambique's debt and the high risk of default on the bonds. The offering materials further failed to disclose Credit Suisse's discovery that significant funds from the earlier offering had been diverted away from the intended use of proceeds that was disclosed to investors. Mozambique later defaulted on the financings after the full extent of "secret debt" was revealed.

      10/20/2021

      CFPB and FTC file amicus brief in FCRA violation case

      The CFPB has announced that the Bureau, the Federal Trade Commission, and the North Carolina Department of Justice have filed an amici curiae brief in support of the consumer plaintiffs in Henderson v. The Source for Public Data, L.P. The case is currently on appeal before the U.S. 4th Circuit Court of Appeals.

      The plaintiffs allege The Source for Public Data is a consumer reporting agency that uses the internet to obtain public records and assemble them into consumer background check reports for its customers. The district court ruled The Source for Public Data could not be held liable for violating the Fair Credit Reporting Act’s (FCRA’s) procedural requirements when disseminating consumer reports that included false, incorrect, or misleading consumer information because the plaintiffs’ FCRA claims treat The Source for Public Data as a publisher and speaker of third-party information and are therefore barred under Section 230 of the Communications Decency Act.

      The CFPB and its partners contend that Section 230 does not apply to the plaintiffs’ claims because they challenge The Source for Public Data’s failure to abide by the FCRA’s procedural requirements when it disseminated its own reports.

      10/20/2021

      CFPB acts against prison financial services company

      The CFPB on Tuesday announced it took action against the prison financial services company JPay for violating the Consumer Financial Protection Act by charging consumers fees to access their own money on prepaid debit cards that consumers were forced to use.

      JPay also violated the Electronic Fund Transfer Act when it required consumers to sign up for a JPay debit card as a condition of receiving government benefits – in particular, “gate money,” which is money provided under state law to help people meet their essential needs as they are released from incarceration. The consent order severely limits the fees JPay can charge on release cards going forward, allowing only inactivity fees after 90 days without card activity. The order also requires the company to pay $4 million for consumer redress and a $2 million civil money penalty.

      JPay, a Delaware company, headquartered in Miramar, Fla., is a dominant provider of financial services to prisons and jails nationwide. JPay is owned by the private equity firm Platinum Equity Partners. Since 2011, JPay has provided approximately 1.2 million debit release cards to consumers. JPay calls itself “a highly trusted name in corrections,” but the company leveraged its relationships with state and local departments of correction to impose fees on consumers exiting the prison or jail system. JPay’s fee-bearing debit release card replaced cash or check options previously offered by state departments of correction. The Bureau's Consent Order states that JPay—

      • Abused its market dominance
      • Illegally required consumers in certain states to receive protected government benefits on debit release cards
      • Charged fees without authorization
      • Misrepresented fees to consumers

      The Bureau's Consent Order requires JPay to:

      • Stop charging most fees. JPay cannot charge any fees on release cards, except an inactivity fee after 90 days of inactivity
      • Refund harmed consumers by paying $4 million to the Bureau for monetary relief and damages for injured consumers
      • Pay a civil money penalty of $2 million to the Bureau

      10/19/2021

      September G.17 data released

      The Federal Reserve has released September 2021 G.17 Industrial Production and Capacity Utilization data, which indicates industrial production fell 1.3 percent in September after moving down 0.1 percent in August; output was previously reported to have risen 0.4 percent in August. In September, manufacturing output decreased 0.7 percent: The production of motor vehicles and parts fell 7.2 percent, as shortages of semiconductors continued to hobble operations, while factory output elsewhere declined 0.3 percent. The output of utilities dropped 3.6 percent, as demand for cooling subsided after a warmer-than-usual August. Mining production fell 2.3 percent.

      The lingering effects of Hurricane Ida more than accounted for the drop in mining in September; they also contributed 0.3 percentage point to the drop in manufacturing. Overall, about 0.6 percentage point of the drop in total industrial production resulted from the impact of the hurricane.

      Despite the decrease in September, total industrial production rose 4.3 percent at an annual rate for the third quarter as a whole, its fifth consecutive quarter with a gain of at least 4 percent.

      At 100.0 percent of its 2017 average, total industrial production in September was 4.6 percent above its year-earlier level. Capacity utilization for the industrial sector fell 1.0 percentage point in September to 75.2 percent, a rate that is 4.4 percentage points below its long-run (1972–2020) average.

      10/19/2021

      OCC updates Libor-transition self-assessment tool

      The OCC has issued Bulletin 2021-46, which provides an updated self-assessment tool for banks to evaluate their preparedness for the cessation of the London Interbank Offered Rate (LIBOR). This bulletin rescinds OCC Bulletin 2021-7, “Libor Transition: Self-Assessment Tool for Banks,” published on February 10, 2021, and replaces the tool attached to OCC Bulletin 2021-7. Bank management can use this self-assessment tool to evaluate the bank’s risk management process for identifying and mitigating LIBOR transition risks.

      Not all sections or questions in the tool apply to all banks. Bank management should tailor the bank’s risk management process to the size and complexity of the bank's LIBOR exposures. For example, large or complex banks and those with material LIBOR exposures should have a robust, well-developed transition process in place. but small or non-complex banks and those with limited exposure to LIBOR-indexed instruments can consider less extensive and less formal transition efforts. Bank management should consider all applicable risks (e.g., operational, compliance, strategic, and reputation) when scoping and completing LIBOR cessation preparedness assessments.

      The OCC expects banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and no later than December 31, 2021. When assessing preparedness, bank management should consider whether the bank’s progress in preparing for the transition is sufficient. LIBOR exposure and risk assessments and cessation preparedness plans should be complete or near completion with appropriate management oversight and reporting in place. Most banks should be working toward resolving replacement rate issues while communicating with affected customers and third parties, as applicable.

      10/19/2021

      IRS videoconferences now available to all large businesses

      The IRS has announced that, beginning October 18, the IRS's large business division will accept all taxpayer requests to meet with IRS employees using secure videoconferencing. This step extends the practice used during the pandemic to accommodate taxpayers who sought more than meeting with an IRS employee over telephone calls.

      A new guidance requires Large Business and International Division (LB&I) employees to grant large business taxpayer requests for a secure video meeting with IRS-approved platforms in lieu of an in-person or telephone discussion with a compliance function. It also includes the expanded use of secure email and the launch of a virtual reading room environment to enable large LB&I taxpayers and IRS agents to share certain privileged taxpayer documents in a read-only capacity. In addition, LB&I also launched and expanded its use of paperless processes so that cases can continue to move swiftly through examination and resolution.

      10/19/2021

      FTC annual report on protection of older adults

      The Federal Trade Commission has issued its latest report to Congress on protecting older adults, which highlights updated findings from the Commission’s fraud reports showing trends in how older adults report being affected by fraud. It also includes information on the FTC’s efforts to protect older consumers through law enforcement actions and outreach and education programs. This year’s report calls particular attention to the Commission’s work to combat scams related to the COVID-19 pandemic.

      10/19/2021

      Appeals court extends stay of Payday Lending Rule

      The ABA Banking Journal reports that the U.S. Court of Appeals for the Fifth Circuit has extended the compliance date of the CFPB's Payday Lending Rule (12 CFR Part 1041) until 286 days after resolution of an appeal from the decision of the U.S. District Court for the Western District of Texas to set the compliance date at June 13, 2022.

      10/19/2021

      Eligibility for Fannie and Freddie programs expanded

      The Federal Housing Finance Agency (FHFA) yesterday announced two measures to sustainably advance the affordability of homeownership for mortgage borrowers across the nation, especially those in underserved communities.

      • First, over the coming months, Fannie Mae and Freddie Mac (the Enterprises) will expand certain eligibility requirements for their RefiNow and Refi Possible refinance programs aimed at assisting low-income borrowers.
      • Second, both Enterprises will incorporate desktop appraisals into their Selling Guides for many new purchase loans starting in early 2022. The use of desktop appraisals by the Enterprises was one of several temporary flexibilities initiated last year in response to the COVID-19 pandemic. This decision is the result of a thorough review of data collected from use of the loan flexibilities, as well as input received from the Request for Input (RFI) and public listening session on appraisal-related policies, practices, and processes.

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