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  • OCC Announces Recent Enforcement Actions and Terminations

    Federal Issues

    On October 19, the OCC released a list of new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such parties. The OCC also released a list of recently terminated enforcement actions. The new enforcement actions include cease and desist orders, civil money penalty orders, personal cease and desist orders, removal/prohibition orders, and notices. The personal cease and desist orders relate to four directors of a Texas bank that were each fined $5,000 for breaches of fiduciary duty and unsafe or unsound practices. These practices allegedly included approving and ratifying loans with “concessionary and liberal terms to unqualified borrowers” in order to “finance the borrower’s purchase of stock in the [b]ank’s holding company to raise capital for the Bank.” (See civil money penalties here, here, here, and here.)

    Federal Issues OCC Enforcement Compliance

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  • Pennsylvania Issues Reminder to Fintech Companies of Licensing Requirements

    FinTech

    On October 6, prompted by the “evolving technological innovations that impact the financial services sector” and the rise of “technology focused companies offering financial services via new delivery mechanisms,” the Pennsylvania Department of Banking and Securities (Department) issued a reminder of the Department’s “long-standing position” that all persons offering financial services to the consumers of the Commonwealth of Pennsylvania must be licensed by the Department and comply with consumer protection requirements before conducting business with Pennsylvania consumers. “The Department regulates financial transactions based upon the transaction offered or delivered, not the method of delivery,” and as a result, fintech companies must comply with all applicable statutes and regulations.

    Fintech State Issues Licensing Compliance Consumer Finance

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  • CFPB Publishes Updated TRID Small Entity Compliance Guide; ABA Submits Comments on CFPB’s Proposal to Fix TRID’s “Black Hole” Issue

    Lending

    On October 6, the CFPB released an updated version of its TILA-RESPA Integrated Disclosure Rule (Final Rule) small entity compliance guide. The updated guide reflects amendments issued July 7, previously discussed in a Buckley Sandler Special Alert, that the CFPB made to the Final Rule. The guide also provides a version log to outline incorporated changes.

    Separately, on October 10, the American Bankers Association (ABA) issued a comment letter regarding the CFPB’s proposal to address an aspect of the Final Rule concerning a “black hole” issue that prevents creditors from resetting tolerances using the Closing Disclosure except in very limited circumstances. (See previous InfoBytes coverage here.) The proposal was issued August 11, the same day the CFPB published the Final Rule. In its letter, the ABA requested additional clarification on certain areas of the proposal, but stated that it supports the removal of the “four-business-day limit for providing Closing Disclosures for purposes of resetting tolerances” because it “is an effective and very efficient approach to addressing the ‘black hole’ problem while preserving adequate consumer protections that will avoid bait-and-switch tactics or unjustified fee increases.” Furthermore, the ABA believes, “the use of [Closing Disclosures], whether initial or corrected, as a vehicle for correcting and ‘re-baselining’ fee disclosures, is a straightforward approach to returning regulatory order and compliance clarity on this provision.”

    Lending Agency Rule-Making & Guidance CFPB ABA TRID Compliance

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  • Federal Agencies Offer Regulatory Relief for Hurricane Victims

    Federal Issues

    Federal agencies continue to announce regulatory relief for financial institutions aiding consumers affected by recent hurricane disasters. InfoBytes coverage on previous disaster relief measures can be accessed here, here, and here.

    Freddie Mac. On September 25, Freddie Mac issued Bulletin 2017-21 (Bulletin) to extend certain temporary selling and servicing requirements meant to provide flexibility and relief for mortgages and borrowers in areas impacted by all hurricanes occurring on or after August 25 through the 2017 hurricane season. In particular, Freddie Mac will reimburse sellers for property inspections completed prior to the sale or securitization of mortgages secured by properties in disaster areas caused by a 2017 hurricane. Freddie Mac is also requiring servicers to suspend foreclosure sales and eviction activities on property located in eligible disaster areas affected by Hurricane Maria. However, the Bulletin provides that a servicer can proceed with a foreclosure sale if it can confirm that (i) inspection was completed on a mortgaged property “identified as vacant or abandoned prior to Hurricane Maria,” and (ii) the property sustained no “insurable damage.” The Bulletin also reminds servicers to report all mortgages affected by an eligible disaster that are 31 or more days delinquent to Freddie Mac.

    Veterans Affairs (VA). On September 27, the VA issued Circular 26-17-28 to outline measures that it encourages mortgagees to utilize to provide relief to veterans affected by Hurricane Maria. Specific recommendations include: (i) extending forbearance to distressed borrowers; (ii) establishing a 90-day moratorium on initiating foreclosures on affected loans; (iii) waiving late charges; (iv) suspending credit bureau reporting with the understanding that servicers will not be penalized by the VA; and (v) extending “special forbearance” to National Guard members who report for active duty to assist recovery efforts.

    FDIC. On September 27, the FDIC released a financial institution letter to provide additional guidance for depository institutions assisting affected consumers. As previously covered in Infobytes, the FDIC released guidance for Hurricane Harvey disaster relief, and issued a joint press release in conjunction with the Federal Reserve Board, Conference of State Bank Supervisors, and the OCC as a response to those affected by Hurricane Irma. The newest release, FIL-46-2017, announced regulatory relief for financial institutions affected by Hurricane Maria, and steps to facilitate recovery in affected areas, which include: (i) “extending repayment terms, restructuring existing loans, or easing terms for new loans,” and (i) “encourage[ing] depository institutions to use non-documentary verification methods permitted by the Customer Identification Program requirement of the Bank Secrecy Act for affected customers who cannot provide standard identification documents.” Further, banks that support disaster recovery efforts, the FDIC noted, may receive favorable Community Reinvestment Act consideration.

    SEC. On September 28, the SEC issued an order providing regulatory relief to companies and individuals with federal securities law obligations who have been affected by recent natural disasters. The order provides conditional exemptions to certain securities laws requirements for specified periods of time. The Commission additionally adopted “interim final temporary rules” applicable to Regulation Crowdfunding and Regulation A filing deadline extensions.

    Financial Crimes Enforcement Network (FinCEN). On October 3, FinCEN issued a notice to financial institutions that file Bank Secrecy Act reports to encourage communication with FinCEN and their functional regulator regarding any expected filing delays caused by recent hurricanes.

    Federal Issues Consumer Finance Compliance Disaster Relief Flood Insurance Mortgages Foreclosure Freddie Mac Department of Veterans Affairs FDIC SEC FinCEN Bank Secrecy Act CRA Securities

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  • OCC Releases Bank Supervision Operating Plan for Fiscal Year 2018

    Agency Rule-Making & Guidance

    On September 28, the OCC’s Committee on Bank Supervision released its  bank supervision operating plan (Plan) for fiscal year (FY) 2018. The Plan outlines the agency’s supervision priorities and specifically highlights the following supervisory focus areas: (i) cybersecurity and operational resiliency; (ii) commercial and retail credit loan underwriting, concentration risk management, and the allowance for loan and lease losses; (iii) business model sustainability and viability and strategy changes; (iv) Bank Secrecy Act/anti-money laundering compliance management; and (v) change management to address new regulatory requirements.

    The annual Plan guides the development of supervisory strategies for individual national banks, federal savings associations, federal branches, and federal agencies, and service providers.

    The OCC will provide updates about these priorities in its Semiannual Risk Perspective, as InfoBytes has previously covered.

    Agency Rule-Making & Guidance OCC Risk Management Anti-Money Laundering Bank Secrecy Act Compliance Lending Privacy/Cyber Risk & Data Security

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  • CFTC Orders Large Financial Institution to Pay for Supervision Failures

    Securities

    On September 28, the Commodity Futures Trading Commission (CFTC) announced a concurrent filing and settling of charges against a large financial institution/clearing firm (Firm) for failing to adequately supervise fee processing. The Order alleges that between 2009 and 2016, the Firm did not implement and maintain adequate procedures and systems that could account for and help prevent the risk of overcharging customers for exchange and clearance fees. In 2015, according to the Order, the Firm modified its processes to prevent future overcharges to customers.

    The settlement requires the Firm to pay a $500,000 civil penalty.

    Securities Enforcement CFTC Financial Institutions Compliance Settlement

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  • CFPB Publishes Updated Reference Material for HMDA

    Agency Rule-Making & Guidance

    On September 28, the CFPB released, on its website, updates to the reference material for the Home Mortgage Disclosure Act (HMDA). The Bureau updated the, (i) institutional coverage criteria; (ii) transactional coverage criteria; and (iii) key dates timeline.

    These updates are associated with the changes, previously reported in InfoBytes, that the CFPB made in the 2017 HMDA final rule.

    Agency Rule-Making & Guidance CFPB HMDA Consumer Finance Compliance Mortgages

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  • DOJ Obtains Auto Repossession Settlement for Servicemembers

    Consumer Finance

    On September 27, the DOJ announced a settlement with a California-based indirect auto financing company and its subsidiary responsible for extending auto title loans (defendants) resolving allegations that the defendants violated the Servicemembers Civil Relief Act (SCRA) by illegally repossessing at least 70 SCRA-protected servicemembers’ vehicles. The DOJ filed its complaint against the defendants in the U.S. District Court for the Central District of California the same day the settlement agreement was reached. This is the second DOJ settlement reached this month over alleged SCRA violations concerning auto repossessions. (See previous InfoBytes summary here.) According to the complaint, the CFPB’s Office of Servicemember Affairs alerted the DOJ in 2016 to the alleged unlawful vehicle repossessions. The DOJ’s investigation concluded that the defendants repossessed the vehicles between 2011 and 2016, without confirming whether the servicemembers were SCRA-protected or obtaining court orders. The defendants’ practice of violating the SCRA, the DOJ contends, was “intentional, willful, and taken in disregard for the rights of servicemembers.”

    Under the terms of the settlement agreement, the defendants must comply with the following: (i) obtain a court order or “valid SCRA waiver” in compliance with the outlined terms of the agreement before repossessing servicemember vehicles; (ii) develop a set of SCRA policies and procedures that outline repossession compliance measures and another set of policies and procedures to provide SCRA relief; (iii) appoint SCRA-specialized employees; and (iv) provide SCRA compliance training. The defendants must also compensate affected servicemembers $700,000, in addition to “lost equity,” accrued interest, credit repair relief, and an auto loan interest rate cap for eligible servicemembers. Further, the defendants must pay a civil penalty of $60,788 to the Treasury, and provide a list of repossessions between October 2016 and the effective date of the settlement to be reviewed by the DOJ for additional SCRA-violations.

    Consumer Finance DOJ Enforcement Settlement SCRA CFPB Servicemembers Compliance

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  • CFTC Director of Enforcement Offers Incentives to Regulated Companies for Self-Reporting and Cooperation

    Securities

    On September 25, the U.S. Commodity Futures Trading Commission Director of the Division of Enforcement James McDonald spoke before the New York University Institute for Corporate Governance & Finance to address the Division’s priorities and outline its self-reporting and cooperation program. Director McDonald described the Division’s enforcement actions as part of a “broader mission to facilitate healthy, robust, and resilient markets,” with the goal of deterring misconduct. “Optimal deterrence,” he stressed, requires receiving buy-in from regulated companies and financial institutions, which is the premise of the Division’s cooperation and self-reporting program. The Division’s program requires companies to comply with three specific criteria: (i) voluntarily report wrongdoing to the Division in a timely and fully disclosed manner prior to the announcement of a government investigation; (ii) proactively cooperate with the Division throughout the investigation; and (iii) engage in timely and appropriate remedial measures to prevent future misconduct, and implement fixes to internal compliance and control programs. Should a company follow these steps, Director McDonald stated, the Division “will recommend a substantial reduction in the penalty,” and in “extraordinary circumstances . . . may recommend declining to prosecute a case.”

    Securities Agency Rule-Making & Guidance CFTC Enforcement Financial Institutions Compliance

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  • CFPB Clarifies Remittance Transfer Rule Compliance

    Agency Rule-Making & Guidance

    As previously covered in InfoBytes, the CFPB recently released its summer 2017 Supervisory Highlights (Highlights) outlining its supervisory progress this year. Included among the issues highlighted by the Bureau is its recent activity in the remittance transfer rule (RTR) space under Regulation E. The Highlights indicate that the CFPB intends to continue its focus on RTR compliance at both large and small institutions. Of particular note, the Bureau—for the first time—has provided informal guidance on international mobile top-up products for telephone airtime. Prior to the Highlights, it was unclear to what extent these products were subject to the RTR. The Highlights confirm that the CFPB will take the position that these products fall within the scope of the rule and has taken supervisory action against at least one institution for that institution’s failure to treat international mobile top-ups in excess of $15 as remittance transfers subject to the RTR.

    This edition of the Highlights helps to clear up prior confusion around the industry regarding international mobile top-ups and bill pay products, as discussed in a recent article.

    Agency Rule-Making & Guidance CFPB Remittance Remittance Transfer Rule Regulation E Mobile Top-Ups Compliance

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