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The Internal Revenue Service has announced that its interest rates will remain the same for the calendar quarter beginning January 1, 2024. For individuals, the rate for overpayments and underpayments will be 8% per year, compounded daily.

Here is a complete list of the new rates:

• 8 percent for overpayments (payments made in excess of the amount owed), 7 percent for corporations
• 5.5 percent for the portion of a corporate overpayment exceeding $10,000
• 8 percent for underpayments (taxes owed but not fully paid)
• 10 percent for large corporate underpayments

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points.

The FDIC has announced its Board of Directors has approved a final rule to implement a special assessment to recover the loss to the Deposit Insurance Fund (DIF) associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.

The Federal Deposit Insurance Act (FDI Act) requires the FDIC to take this action in connection with the systemic risk determination announced on March 12, 2023. Currently, the FDIC estimates that of the total cost of the failures of Silicon Valley Bank and Signature Bank, approximately $16.3 billion was attributable to the protection of uninsured depositors.

The FDIC is adopting, as final, the proposed special assessment, with clarifications to promote transparency and a modification to allow for corrective amendments to estimated uninsured deposits associated with the FDIC’s review of an institution’s reporting methodology.

Under the final rule, the FDIC will collect the special assessment at an annual rate of 13.4 basis points beginning with the first quarterly assessment period of 2024 (i.e., January 1 through March 31, 2024) with an invoice payment date of June 28, 2024, and will continue to collect special assessments for an anticipated total of eight quarterly assessment periods. The base for the special assessment is equal to an insured depository institution’s (IDI’s) estimated uninsured deposits for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits from the IDI, or at the banking organization level for IDIs that are part of a holding company with one or more subsidiary IDIs.

It is estimated that a total of 114 banking organizations will be subject to the special assessment, and no banking organizations with total assets under $5 billion will pay the special assessment, based on data for the December 31, 2022 reporting period.

• Fact sheet on the rule

Yesterday, the Department of the Treasury announced that OFAC has imposed sanctions on three entities and identifying as blocked property three vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap. This action underscores Treasury’s commitment, alongside its international partners, to responsibly reducing oil revenues that the Russian government can use to bankroll its invasion of Ukraine.

For the names and identification information of the designated entities and vessels, see this BankersOnline OFAC Update. Look for the sanctions program tag “RUSSIA-EO14024.”

The OCC has released its November 2023 list of enforcement actions. Included are:

• A Formal Agreement with Heritage Bank, National Association, Spicer, Minnesota, for unsafe or unsound practices, including those relating to capital and strategic planning, timely and adequate credit review, ongoing monitoring of the credit portfolio, and liquidity risk management.
• A Consent Order against United Fidelity Bank, FSB, Evansville, Indiana, for engaging in unsafe or unsound practices, including those relating to corporate governance and enterprise risk management, credit underwriting and administration, liquidity risk management, and interest rate risk management.
• A Consent Order against Vast Bank, National Association, Tulsa, Oklahoma, for engaging in unsafe or unsound practices, including those relating to capital ratios, capital and strategic planning, project management, books and records, liquidity risk management; interest rate risk management, information technology controls, risk management for new products, and custody account controls.
• An Order of Prohibition against Andrew Leseberg, a former loan processor at The Citizens National Bank, N.A., Greenleaf, Kansas, for stealing, embezzling, or otherwise misappropriating aspproximately $16,050, at a loss or risk of loss to the bank.
• A Notice of Charges for an Order of Prohibition against a former financial advisor for Citibank, N.A., Sioux Falls, South Dakota, who is alleged to have solicited an elderly customer to invest, and the customer did invest, more than $200,000 in a company the former financial adviser co-owned; received at least $99,000 in direct payments from the company; and falsely represented that she was following, and would follow, policies prohibiting this conduct.

The NCUA's Board has announced it has approved a final rule amending its Incidental Powers regulation (12 CFR Part 721) to amend the charitable donation accounts section to add "war veterans' organizations" to the definition of a "qualified charity" that a federal credit union can donate to using a charitable donation account.

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

Publication and effective date information: Published 11/21/2023 at 88 FR 80950, with an effective date of 12/21/2023.

The FDIC has updated its Risk Management Manual of Examination Policies (RMS).

The November 2023 update affects Section 14.1 (Civil Money Penalties) to incorporate various technical and clarifying edits.

Yesterday, in cooperation with the government of Costa Rica, OFAC designated Gilbert Hernan de Los Angeles Bell Fernandez (Bell), a Costa Rican narcotics trafficker, known not only for the volume of drugs he moves but the violence with which he operates, who has played a significant role in Costa Rica’s recent transformation into a major narcotics transit hub.

For Bell's identification information, see the November 15, 2023, BankersOnline OFAC Update.

The Federal Trade Commission reports it has obtained orders with the four remaining individual defendants and their affiliated companies in a mobile cramming scheme that the agency says bilked consumers out of more than $100 million through bogus charges added to their mobile phone bills.

The proposed settlements with Darcy Michael Wedd and Phwoar, LLC.; Fraser Robert Thompson and Ocean Tactics, LLC; Erdolo Levy Eromo and Erdi Development LLC; and Michael Pajaczkowski, Concise Consulting, Inc., and MMJX Consulting, Inc., resolve the FTC’s charges related to the MDK Media mobile cramming scheme. The FTC in 2015 reached settlements with six other individual defendants and affiliated companies. The FTC’s case against the remaining defendants was then put on hold pending the outcome of related criminal charges brought by the U.S. Attorney’s Office for the Southern District of New York. These actions resulted in criminal sentences against Wedd, Thompson, Eromo, and Pajaczkowski, with the last case resolved in July 2023.

In the complaint first announced in 2014, the FTC charged that the defendants used deceptive practices, including fake websites with bogus offers of “freebies” or gift cards, to trick consumers into providing their mobile phone numbers. The defendants then placed monthly subscription fees for a variety of “services” on consumers’ mobile phone bills without their authorization—a practice known as mobile cramming.

The subscriptions typically cost consumers $9.99 or $14.99 per month, which renewed automatically each month. The defendants made it difficult for consumers to dispute charges. Some consumers were crammed for multiple months and, even after significant effort, were unable to obtain a full refund.

Under the proposed settlements, Wedd, Thompson, Eromo, and Pajaczkowski, as well as their related companies are prohibited from placing any charges on any telephone bills, from making any misrepresentations about any product or service, and from engaging in any unfair billing practices. In addition, they are prohibited from using or benefiting in any way from the customer data they collected through this scheme and are required to destroy any remaining customer data.

Many consumers who were impacted by the defendants’ practices received refunds through settlements the FTC and the Consumer Financial Protection Bureau reached with the four major mobile carriers, AT&T, T-Mobile, Sprint and Verizon, related to mobile cramming charges that were placed on customers’ bills without their authorization. The mobile carriers discontinued such third-party billing practices following the actions by the FTC and other state and federal agencies to crack down on cramming.

The CFPB yesterday announced it has ordered online lender Enova International Inc. to pay a $15 million penalty for widespread illegal conduct including withdrawing funds from customers’ bank accounts without their permission, making deceptive statements about loans, and cancelling loan extensions. Enova paid a $3.2 million penalty to the CFPB in 2019, and was ordered to cease its illegal conduct. For violating that order and continuing to break the law, Enova is now banned from offering certain consumer loans, must provide redress to the consumers it harmed, and is required to tie executive compensation to the company’s compliance with federal consumer financial protection laws.

Enova is a publicly traded nonbank lender headquartered in Chicago, Illinois. Enova extends or arranges unsecured installment loans and lines of credit to consumers in 37 states through its CashNetUSA- and NetCredit-branded subsidiaries. Up until 2022, Enova also extended unsecured payday loans to consumers through its CashNetUSA-branded subsidiaries.

After taking action against Enova in 2019, the CFPB investigated Enova’s compliance with the 2019 order. The investigation found that the company was continuing to engage in illegal behavior, affecting more than 111,000 consumers. The Bureau found that Enova—

• Withdrew funds without borrowers’ consent: Enova withdrew or tried to withdraw funds from consumers’ accounts without having obtained their express informed consent as required by the 2019 order. In some cases Enova used bank account information it had purchased from online lead generators, overwriting the bank account information that borrowers had authorized Enova to use.
• Backtracked on loan extensions: Enova cancelled loan extensions it had granted to certain consumers and in most instances debited such consumers’ bank accounts for the full loan payment instead of only a smaller loan extension fee, in violation of the 2019 order.
• Deceived borrowers with false statements and omissions: Enova failed to tell consumers who had been granted a loan extension that making an interim partial payment would result in cancellation of the loan extension and misrepresented the amount that Enova would charge to consumers who made such an interim partial payment. Enova also misrepresented the due date for certain loan payments, that consumers could skip certain loan payments, and the amounts due on certain loans.
• Failed to provide consumers copies of signed authorizations: Enova initiated recurring electronic fund transfers from consumers’ bank accounts without providing the consumer with a copy of a signed authorization identifying the particular bank account that the consumer had authorized for such transfers, in violation of the 2019 order.

The current consent order requires Enova to:

• Stop offering certain short-term loans: For seven years, Enova is prohibited from offering or providing closed-end consumer loans that must be substantially repaid within 45 days.
• Stop its illegal practices: Enova is prohibited for engaging in certain practices, including initiating attempts to debit funds from a consumer’s account without having obtained the consumer’s express informed consent and failing to honor loan extensions granted to consumers.
• Reform executive compensation: Enova’s executive compensation policies and agreements must consider the actions taken by the executive to ensure that the executive’s business or department complies with the order and federal consumer financial law.
• Provide redress to consumers: Enova must provide redress to all consumers whose accounts Enova debited without their express informed consent, including by returning to those consumers all unlawfully debited amounts and associated fees, costs, and interest.
• Pay a civil penalty: Enova will make a civil penalty payment of $15 million to the CFPB victims relief fund.

For a link to the CFPB's Consent Order, see "Enova ordered to pay $15 million for illegal conduct and violating 2019 order" in the BankersOnline Penalties pages.

The Federal Housing Administration has announced it has increased the allowable property inspection fee limits for property inspections of single-family homes associated with defaulted FHA-insured mortgages. These inspections are a crucial component of servicers’ preservation and protection of properties. They also safeguard neighborhoods from blight arising from inadequately maintained unoccupied homes.

With the updates announced yesterday, FHA is increasing fees for certain allowable inspection categories, making its fee limitations consistent with those in use by other industry participants. FHA intends to evaluate allowable parameters for other property preservation expenses in the future.

• FHA Mortgagee Letter 2023-20

The Federal Housing Finance Agency (FHFA) has announced that the 2024 multifamily loan purchase caps for Fannie Mae and Freddie Mac (the Enterprises) will be $70 billion for each Enterprise, for a combined total of $140 billion to support the multifamily market.

The FHFA will require that at least 50 percent of the Enterprises’ multifamily businesses be mission-driven, affordable housing. In addition, for 2024, loans classified as supporting workforce housing properties in Appendix A of the Conservatorship Scorecard will be exempt from the volume caps. All other mission-driven loans remain subject to the volume caps. To ensure the Enterprises continue to provide sufficient liquidity and support in the multifamily mortgage market, FHFA will continue to monitor the multifamily mortgage market and will increase the caps if necessary. However, to prevent market disruption, if FHFA determines that the actual size of the 2024 market is smaller than was initially projected, FHFA will not reduce the caps.

• 2024 ​Multifamily Caps Fact Sheet

Yesterday, the Treasury Department announced that OFAC had imposed its third round of sanctions targeting Hamas-affiliated individuals and entities since the October 7 Hamas terrorist attacks on Israel. This action designated key Hamas officials and the mechanisms by which Iran provides support to Hamas and Palestinian Islamic Jihad (PIJ). Yesterday’s designations were coordinated with action by the UK and are aimed at protecting the international financial system from abuse by Hamas and their enablers. The U.S. Department of State concurrently designated a leader of PIJ’s military wing.

For the names and identification information of the designated parties, see this BankersOnline OFAC Update.

The Office of the Comptroller of the Currency (OCC) has announced that registration is open for its symposium on the tokenization of real-world assets and liabilities on February 8, 2024, at its headquarters in Washington, D.C.

The symposium will include panel discussions among thought leaders, academics, community groups, and the banking industry on tokenization and is open to the public for in-person or virtual attendance.

The event will feature opening remarks from Acting Comptroller of the Currency Michael J. Hsu and keynote remarks from Hyun Song Shin, Economic Adviser and Head of Research at the Bank for International Settlements (BIS). The symposium will also include moderated panel discussions to explore the legal foundations for digital asset tokens, tokenization use cases, and risk management and control considerations. There will also be a panel discussion of academic papers on tokenization.

Registration is required for in-person attendance at the symposium and is open until January 22, 2024, or until full, whichever occurs first. For security reasons, in-person attendees will be subject to screening and must present a valid government-issued identification to enter the building. The symposium will also be livestreamed.

The CFPB, Federal Reserve, and OCC have announced that the 2024 threshold for whether higher-priced mortgage loans are subject to special appraisal requirements will increase from $31,000 to $32,400.

BankersOnline has added comment 35(c)(2)(ii)-3.xi to Regulation Z in its Regulations pages to reflect this change.

The CFPB has issued a final rule to be effective January 1, 2024, to establish the maximum allowable charge for disclosures during 2024 by a consumer reporting agency to a consumer under section 609 of the Fair Credit Reporting Act. The CFPB is amending Appendix O to Regulation V, to set the maximum allowable charge at $15.50 for 2024.

BankersOnline has updated Appendix O to Regulation V in its Regulations pages to reflect this change.

The CFPB and the Federal Reserve Board have announced the dollar thresholds used to determine whether certain consumer credit and lease transactions in 2024 are subject to certain Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) requirements.

Based on the annual percentage increase in the CPI-W as of June 1, 2023, Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) generally will apply to consumer credit transactions and consumer leases of $69,500 or less in 2024. However, private education loans and loans secured by real property, such as mortgages, are subject to Regulation Z (Truth in Lending) regardless of the amount of the loan.

These changes have been posted to the BankersOnline Regulations pages.

This week, 845 former Student Aid Institute (SAI) consumers will receive checks in the mail in response to a lawsuit filed against Frank Ronald Gebase Jr., the founder, owner, and operator of Processingstudentloans, a student loan debt-relief company that illegally withdrew hundreds of thousands of dollars from the bank accounts of former SAI consumers without their authorization. The total distribution amount is $240,994.00, and the money is from the CFPB’s victims relief fund.

Payments were sent on November 13, 2023, through RUST Consulting.

• CFPB press release

The Securities and Exchange Commission has announced charges against Jake Soberal and Irma Olguin, Jr., the former co-CEOs of Fresno, California-based private technology services startup Bitwise Industries Inc., for misleading investors about the company’s finances. Soberal and Olguin have agreed to resolve the charges against them.

The SEC's complaint alleges that Soberal and Olguin made material misrepresentations and falsified documents concerning Bitwise’s cash position and historical financial performance while raising approximately $70 million from investors in 2022. Soberal and Olguin allegedly created and provided investors with falsified bank records and a fake audit report that showed, respectively, inflated cash balances and higher revenues than Bitwise actually generated. Soberal and Olguin’s alleged misrepresentations and falsified materials painted Bitwise as a healthy, growing business with favorable financial performance. In reality, and as Soberal and Olguin allegedly knew, Bitwise faced constant cash shortages and was often on the brink of failure because it was unable to generate sufficient funds from its operations. As alleged, Soberal and Olguin’s scheme came to light in May 2023 when Bitwise failed to make payroll and abruptly furloughed—and then terminated—all of its hundreds of personnel.

“In one instance, the defendants allegedly conspired to send a purported screenshot to investors of a company bank account showing a cash balance of $23.4 million. In actuality, the account had only $325,100 in it. That’s not a bank error—that’s fraud, and the SEC is taking action to hold the defendants accountable,” said Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office.

Soberal and Olguin have each agreed to the entry of a partial judgment, subject to court approval, imposing permanent and conduct-based injunctions as well as an officer and director bar, and reserving the issues of disgorgement, prejudgment interest, and a civil penalty for further determination by the court.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of California (USAO) has announced criminal charges against Soberal and Olguin.

The Federal Reserve Board has scheduled the publication of its proposal to lower the cap on debit card interchange fees for larger issuers for tomorrow. Comments on the proposal will be due within 90 days (by February 12, 2024).

On Thursday, the Federal Housing Administration (FHA) announced it has posted for industry feedback a proposed update to its Home Equity Conversion Mortgage (HECM) assignment claims eligibility policy. The proposal enables certain categories of due and payable HECMs that were previously ineligible for assignment to be assigned to HUD, enabling servicers to obtain earlier resolution of these loans through HUD’s assignment claims process. This change will support servicer liquidity and strengthen the HECM market for senior homeowners who use a HECM to age in place.

FHA is seeking industry feedback on its proposal through December 11, 2023.

The Federal Reserve Board issues semiannual Supervision and Regulation Reports summarizing banking conditions and the Board's supervisory and regulatory activities in conjunction with semiannual testimony before Congress by the Board's Vice Chair for Supervision. The November 2023 Report was released yesterday.

The Small Business Administration has announced that small nonfarm businesses in Clallam, Grays Harbor, Island, Jefferson, Kitsap and Mason counties in the state of Washington are now eligible to apply for low‑interest federal disaster loans from the SBA. These loans offset economic losses because of reduced revenues caused by drought in Clallam and Jefferson counties that began September 12.

Small nonfarm businesses, small agricultural cooperatives, small businesses engaged in aquaculture and most private nonprofit organizations of any size may qualify for Economic Injury Disaster Loans of up to $2 million to help meet financial obligations and operating expenses which could have been met had the disaster not occurred. These loans have an interest rate of 4 percent for businesses and 2.375 percent for private nonprofit organizations, a maximum term of 30 years and are available to small businesses and most private nonprofits without the financial ability to offset the adverse impact without hardship. No interest accrues for the first year.

The FDIC has issued a Sunshine Act notice of its next scheduled Board of Directors meeting, to be held at 10:00 a.m. EST on November 16, 2023. The meeting will be open to public observation by webcast only.

Among the items for discussion on the agenda are:

• Final Rule on Special Assessment pursuant to systemic risk determination
• Briefing on the semiannual update of the Restoration Plan
• Designated Reserve Ratio for 2024

The Federal Trade Commission yesterday published [88 FR 77420] its proposed trade rule on "junk" fees. Comments will be accepted through January 8, 2024.

On Wednesday, the Federal Housing Finance Agency (FHFA) released its Report on 2022 Federal Home Loan Bank Targeted Mission Activities​.

The report highlights the Federal Home Loan Banks’ (FHLBanks) activities and performance in 2022 under the Affordable Housing Program (AHP), the Community Investment Program (CIP), and the Community Investment Cash Advance Program (CICA). The report also covers Community Development Financial Institution (CDFI) membership in the FHLBank System, the FHLBanks’ affordable housing goals, and their purchases of Acquired Member Assets (AMA).

On Wednesday, the CFPB announced it has ordered Citibank, N.A. (Citi) to pay $25.9 million in fines and consumer redress for intentionally and illegally discriminating against credit card applicants the bank identified as Armenian American.

According to the CFPB's consent order, from 2015 through 2021, Citi singled out for discrimination applicants for certain credit card products, based on their surnames, whom it suspected of being of Armenian descent, in violation of the Equal Credit Opportunity Act, Regulation B, and the Consumer Financial Protection Act (CFPA). Citi supervisors conspired to hide the discrimination by instructing employees not to discuss the discriminatory practices in writing or on recorded phone lines. Citi employees also lied about the basis of denial, providing false reasons to denied applicants, also in violation of ECOA, Regulation B and the CFPA. Under Wednesday’s order, Citi will pay $1.4 million to harmed consumers along with a $24.5 million penalty.

The CFPB reported that Citi treated Armenian Americans as criminals who were likely to commit fraud. From at least 2015 through 2021, Citi targeted retail services credit card applicants with surnames that Citi employees associated with Armenian national origin as well as applicants in or around Glendale, California. The bank specifically targeted surnames ending in “-ian” and “-yan.” Nicknamed “Little Armenia,” Glendale is home to approximately 15% of the Armenian American population in the U.S.

The Bureau said that Citi managers trained and directed employees to take part in the bank’s plan to single out Armenian Americans applying for retail services credit cards because of stereotypes Citi projected onto an entire nationality.

The Federal Trade Commission has announced it is now providing the ability to report fraud, scams and deceptive practices in multiple languages in addition to English and Spanish.

These new language access enhancements will allow people to file reports with the FTC in their preferred language when calling the FTC. Among the new languages available are Mandarin, Tagalog, Vietnamese, French, Arabic, Russian, Korean, Portuguese and Polish. Further details are available in an FTC Blog article. Consumers speaking English and Spanish can also continue to file reports directly online.

The FTC is also offering guidance online and in print to consumers and businesses in additional languages. This includes advice on how to spot, stop and avoid scams and what to do if you paid a scammer online, as well as offering free print resources in multiple languages.

There is a notice on the Department of Defense's Military Lending Act (MLA) website indicating that the site is scheduled for system maintenance on Saturday, November 11, 2023, and will not be available from 6:00 p.m. until 9:00 p.m. PST (9:00 p.m. to midnight EST).

The NCUA has announced it has chartered Young Community Federal Credit Union of Shively, Kentucky, a Louisville suburb.

The credit union is sponsored by the Young Nonprofit Foundation, a local charitable organization focused on providing low-income Kentucky families with access to quality childcare and education.

Young Community Federal Credit Union will primarily serve people who live, work, worship, or attend school in Shively. The credit union will initially operate from the foundation’s headquarters at 2200 Greene Way in Louisville. During its first year of operations, Young Community Federal Credit Union will focus on basic savings and lending services and electronic access. It will open its doors as soon as possible.

Our monthly review of the Federal Reserve's archive of CRA evaluations identified 10 evaluations of state-chartered member banks that were made public in October. Nine of the evaluations were rated Satisfactory. We congratulate Valley Bank of Ronan, Ronan, Montana, on its evaluation, which was rated Outstanding.

The CFPB has released the beta version of the HMDA Platform for data that will be collected in 2024 (2024 Beta Platform). The 2024 Beta Platform provides financial institutions and vendors an opportunity to determine whether their sample loan/application register data comply with the reporting requirements outlined in the Filing Instructions Guide for HMDA data collected in 2024.

Visit the beta version of the HMDA Platform to login and select ‘2024’ from the dropdown to start testing. Financial institutions can use their log-in credentials from the previous filing periods or, if they have not previously filed data, establish log-in credentials and upload sample 2024 HMDA files to perform validation on their data. Use of this platform requires financial institutions to have a Legal Entity Identifier (LEI) which uniquely identifies the institution, and that LEI must be recognized by the HMDA Platform. If your institution has not registered for an LEI and intends to file HMDA data, visit the Global LEI Foundation for information on obtaining an LEI.

The 2024 Beta Platform is for testing purposes only and the Bureau will continue to add functionality. No data submitted on the Beta Platform will be considered for compliance with HMDA data reporting requirements. During the beta period, financial institutions may test and retest HMDA data files as often as desired.

FinCEN has published [88 FR 76995] in today's Federal Register a final rule to specify when and how entities required to report beneficial ownership information to FinCEN may use a FinCEN identifier to report the beneficial ownership information of certain related entities. This rule amends FinCEN’s Beneficial Ownership Information Reporting Requirements Rule, which implements Section 6403 of the Corporate Transparency Act (CTA), when it becomes effective on January 1, 2024.

In its announcement of the amendment, FinCEN said the amendment specifically responds to commenters’ concerns that the reporting of entity FinCEN identifiers could obscure the identities of beneficial owners in a manner that might result in greater secrecy or incomplete or misleading disclosures. The final rule provides clear criteria that must be met in order for a reporting company to report an intermediate entity’s FinCEN identifier in lieu of information about the individual beneficial owner.

The amendment has been posted to the BankersOnline Regulations page for FinCEN's Reports of Beneficial Ownership Information Rule at 31 CFR § 1010.380.

The Federal Housing Finance Agency yesterday released its report on the FHLBank System at 100: Focusing on the Future initiative, the Agency’s comprehensive review of the Federal Home Loan Bank (FHLBank) System in anticipation of the System’s centennial in 2032.

The FHLBank System at 100: Focusing on the Future initiative featured robust public engagement over the course of the past year, including listening sessions and regional roundtables as well as multiple opportunities for written input from stakeholders. FHFA drew on the feedback received through this public engagement along with its own extensive analysis when preparing the report, which includes recommendations for how the FHLBank System could effectively fulfill its mission. FHFA expects the initiative to continue as a multi-year, collaborative effort with stakeholders to address the recommended actions in the report.

• The report
• Fact Sheet

On Tuesday, the CFPB announced its issuance of a proposed rule that would define a market for general-use digital consumer payment applications. The proposed market would cover providers of funds transfer and wallet functionalities through digital applications for consumers’ general use in making payments to other persons for personal, family, or household purposes. It would include larger nonbank financial companies handling more than five million transactions per year. Those companies would be subject to CFPB supervision and examination to ensure they adhere to the same rules as large banks, credit unions, and other financial institutions already supervised by the Bureau.

While the CFPB has enforcement authority over such companies, the CFPB has not previously had, inside many of these firms, examiners carefully scrutinizing their activities to ensure they are following the law and monitoring their executives. Specifically, the proposed rule would help ensure these large nonbank companies:

• Adhere to applicable funds transfer, privacy, and other consumer protection laws: The CFPB would be able to supervise larger participants for compliance with applicable federal consumer financial protection laws, which includes applicable protections against unfair, deceptive, and abusive acts and practices, rights of consumers transferring money, and privacy rights.
• Play by the same rules as banks and credit unions: The CFPB’s supervision of these large companies can foster a level playing field with depository institutions. Greater supervision of nonbanks in this market would ensure federal consumer financial protection law is enforced consistently between non-depository and depository institutions in order to promote fair competition.

The proposed rule would be the sixth in a series of CFPB rulemakings to define larger participants operating in markets for consumer financial products and services that play a substantial role in consumers’ everyday lives. The first five rules covered larger participants in consumer reporting, consumer debt collection, student loan servicing, international money transfers, and automobile financing.

Comments on the proposal will be accepted through the later of January 8, 2024, or 30 days after publication in the Federal Register.

Publication and comment period update: Published on 11/17/2023. Comments will be accepted through 1/8/2024.

Yesterday, the Department of the Treasury announced that OFAC had sanctioned 13 Sinaloa Cartel members—several of whom are fugitives—and four Sonora, Mexico-based entities. This action was coordinated closely with the Government of Mexico, including La Unidad de Inteligencia Financiera (UIF), Mexico’s Financial Intelligence Unit.

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

On Monday, OFAC announced a settlement with daVinci Payments, which manages prepaid reward card programs. DaVinci agreed to remit $206,213 to settle its potential civil liability for apparent violations of sanctions on Crimea, Iran, Syria, and Cuba. Between November 15, 2017 and July 27, 2022, daVinci enabled reward cards to be redeemed from persons in sanctioned jurisdictions. The settlement amount reflects OFAC’s determination that daVinci’s conduct was non-egregious and voluntarily self-disclosed.

Between March 2020 and February 2022, in the course of a compliance review and subsequent investigation, daVinci discovered that on 12,378 occasions it had redeemed prepaid cards for users with Internet Protocol (IP) addresses associated with Iran, Syria, Cuba, and Crimea. After daVinci began preventing access to its platform from IP addresses associated with these sanctioned jurisdictions, the company further discovered it had redeemed prepaid cards for 13 card recipients who had used email addresses with suffixes (sometimes called top-level domains) associated with sanctioned jurisdictions (e.g., Syria is .sy, Iran is .ir) during the redemption process and who were apparently resident therein.

Over the course of the relevant time period, this absence of comprehensive geolocation controls led daVinci to process 12,391 redemptions totaling $549,134.89 for cardholders apparently located in sanctioned jurisdictions, resulting in apparent violations of the Cuban Assets Control Regulations, 31 C.F.R. § 515.201; the Iranian Transactions and Sanctions Regulations, 31 C.F.R. § 560.204; the Ukraine-/Russia-Related Sanctions Regulations, 31 C.F.R. § 589.287; and the Syrian Sanctions Regulations, 31 C.F.R. § 542.207 (the “Apparent Violations”).

The statutory maximum civil monetary penalty applicable for the apparent violations is $4,399,759,685. OFAC determined that the apparent violations were voluntarily self-disclosed and were nonegregious. Accordingly, under OFAC’s Economic Sanctions Enforcement Guidelines, the base civil monetary penalty applicable in this case would be one-half of the transaction value for each Apparent Violation, which is $274,950. The settlement amount of $206,213 reflects OFAC’s consideration of daVinci's remedial measures and cooperation in OFAC's investigation.

On Monday, FinCEN and the Bureau of Industry and Security (BIS) issued a joint notice highlighting a new Suspicious Activity Report (SAR) key term (“FIN-2023-GLOBALEXPORT”) for financial institutions to reference when reporting potential efforts by individuals or entities seeking to evade U.S. export controls not related to Russia’s invasion of Ukraine. FinCEN and BIS previously issued two joint alerts in June 2022 and May 2023 urging financial institutions to be vigilant against potential Russian export control evasion in response to Russia’s illegal invasion of Ukraine. Financial institutions are encouraged to continue to use the key term “FIN-2022-RUSSIABIS” when filing SARs related to suspected Russian export control evasion.

BIS leverages SARs to investigate violations of U.S. export control regulations. Investigations involving advanced technologies (e.g., advanced semiconductors, quantum, hypersonics) sought by nation state adversaries to support military modernization efforts designed to overcome U.S. military superiority, or mass surveillance programs that enable human rights abuses are being prioritized and worked through the interagency Disruptive Technology Strike Force, co-led by BIS and the Department of Justice.

• FinCEN press release

The National Credit Union Administration this morning published [88 FR 76702] in the Federal Register a notice of proposed rulemaking that would incorporate the NCUA's “Second Chance” Interpretive Ruling and Policy Statement 19–1 (IRPS 19–1) and the Fair Hiring in Banking Act (FHBA) into its regulations to expand employment opportunities for those with a previous minor or older criminal offense.

Comments on the NCUA's proposal will be accepted through January 8, 2024.

The FDIC recently updated its Risk Management Manual of Examination Policies (RMS Manual). The RMS Manual provides FDIC examiners information relating to examination activities and supervisory practices.

The October 2023 changes amended section 16.1 (Report of Examination Instructions) to update and clarify instructions on uninsured deposit and commercial real estate concentrations.

The Federal Reserve Board has released the results of its October 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally correspond to the third quarter of 2023.

• Regarding loans to businesses, survey respondents, on balance, reported tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the third quarter.2 Furthermore, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
• For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages, for which standards remained basically unchanged. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Moreover, for credit card, auto, and other consumer loans, standards reportedly tightened, and demand weakened on balance.
• The October SLOOS included a set of special questions that asked banks to assess the likelihood of approving credit card and auto loan applications by borrower FICO score (or equivalent) in comparison with the beginning of the year. Banks reported that they were less likely to approve such loans for borrowers with FICO scores of 620 and 680 in comparison with the beginning of the year, while they were more likely to approve credit card loan applications and about as likely to approve auto loan applications for borrowers with FICO scores of 720 over this same period.
• The October SLOOS also included a set of special questions that inquired about banks’ reasons for changing standards for all loan categories in the third quarter of 2023. Banks most frequently cited a less favorable or more uncertain economic outlook; reduced tolerance for risk; deterioration in the credit quality of loans and collateral values; and concerns about funding costs as important reasons for tightening lending standards over the third quarter.