Skip to main content
Menu Icon Menu Icon

InfoBytes Blog

Financial Services Law Insights and Observations
Section Content

Upcoming Events


Subscribe to our InfoBytes Blog weekly newsletter for news affecting the financial services industry.

  • Senate passes bipartisan financial regulatory reform bill

    Federal Issues

    On March 14, by a vote of 67-31, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) (the bill)—a bipartisan regulatory reform bill crafted by Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo, R-Idaho—that would repeal or modify provisions of Dodd-Frank and ease regulations on all but the biggest banks. (See previous InfoBytes coverage here.) The bill’s highlights include:

    • Improving consumer access to mortgage credit. The bill’s provisions state, among other things, that: (i) banks with less than $10 billion in assets are exempt from ability-to-repay requirements for certain qualified residential mortgage loans; (ii) appraisals will not be required for certain transactions valued at less than $400,000 in rural areas; (iii) banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages are exempt from HMDA’s expanded data disclosures (the provision would not apply to nonbanks and would not exempt institutions from HMDA reporting altogether); (iv) amendments to the S.A.F.E. Mortgage Licensing Act will provide registered mortgage loan originators in good standing with 120 days of transitional authority to originate loans when moving from a federal depository institution to a non-depository institution or across state lines; and (v) the CFPB must clarify how TRID applies to mortgage assumption transactions and construction-to-permanent home loans, as well as outline certain liabilities related to model disclosure use.
    • Regulatory relief for certain institutions. Among other things, the bill simplifies capital calculations and exempts community banks from Section 13 of the Bank Holding Company Act if they have less than $10 billion in total consolidated assets. The bill also states that banks with less than $10 billion in assets, and total trading assets and liabilities not exceeding more than five percent of their total assets, are exempt from Volcker Rule restrictions on trading with their own capital.
    • Protections for consumers. Included in the bill are protections for veterans and active-duty military personnel such as: (i) permanently extending the protection that shields military personnel from foreclosure proceedings after they leave active military service from nine months to one year; and (ii) adding a requirement that credit reporting agencies provide free credit monitoring services and credit freezes to active-duty military personnel. The bill also addresses general consumer protection options such as expanded credit freezes and the creation of an identity theft protection database. Additionally, the bill instructs the CFPB to draft federal rules for the underwriting of Property Assessed Clean Energy loans (PACE loans), which would be subject to TILA consumer protections.
    • Changes for bank holding companies. Among other things, the bill raises the threshold for automatic designation as a systemically important financial institution from $50 billion in assets to $250 billion. The bill also subjects banks with $100 billion to $250 billion in total consolidated assets to periodic stress tests and exempts from stress test requirements entirely banks with under $100 billion in assets. Additionally, certain banks would be allowed to exclude assets they hold in custody for others—provided the assets are held at a central bank—when computing the amount such banks must hold in reserves.
    • Protections for student borrowers. The bill’s provisions include measures to prevent creditors from declaring an automatic default or accelerating the debt against a borrower on the sole basis of bankruptcy or cosigner death, and would require the removal of private student loans on credit reports after a default if the borrower completes a loan rehabilitation program and brings payments current.

    The bill now advances to the House where both Democrats and Republicans think it is unlikely to pass in its current form.

    Federal Issues Federal Legislation Bank Regulatory Dodd-Frank S. 2155 CFPB HMDA Mortgages Licensing TILA TRID Servicemembers Volcker Rule Student Lending Consumer Finance Bank Holding Companies Community Banks Privacy/Cyber Risk & Data Security

    Share page with AddThis
  • 9th Circuit holds California's interest on escrow requirements is not preempted by federal law


    On March 2, the U.S. Court of Appeals for the 9th Circuit held that a national bank must comply with a California law that requires mortgage lenders to pay interest on the funds held in a consumer’s escrow account because the law does not “prevent or significantly interfere” with the national bank’s exercise of its power. The case results from a 2014 lawsuit in which a consumer sued the national bank for refusing to pay interest on the funds in his mortgage escrow account as required by a California state law. The district court dismissed the action, holding that the California state law interfered with the bank’s ability to perform its business making mortgage loans and therefore, was preempted by the National Bank Act (NBA).

    In reversing the district court’s decision, the 9th Circuit held that the Dodd-Frank Act of 2011 (Dodd-Frank) essentially codified the existing NBA preemption standard from the 1996 Supreme Court decision in Barnett Bank of Marion County v. Nelson. The panel cited to Section 1639d(g)(3) of Dodd-Frank (“if prescribed by applicable State or Federal law, each creditor shall pay interest to the consumer on the amount held in any . . . escrow account that is subject to this section in the manner as prescribed by that applicable State or Federal law”), which, according to the opinion, expresses Congress’ view that the type of law at issue does not “prevent or significantly interfere with a national bank’s operations.” Moreover, the panel disagreed with the national bank’s reliance on the OCC’s 2004 preemption regulation, which interpreted the standard more broadly, by concluding that the regulation had no effect on the preemption standard. This decision could have significant implications for the rise of preemption by federally chartered banks.

    Courts U.S. Supreme Court Appellate Ninth Circuit Mortgages Escrow Preemption National Bank Act Dodd-Frank OCC

    Share page with AddThis
  • Buckley Sandler Special Alert: Supreme Court limits definition of “whistleblower” in potentially hollow victory for public companies


    Buckley Sandler Special Alert

    On February 21, the U.S. Supreme Court issued its opinion in Digital Realty Trust, Inc. v. Somers, a long-anticipated case that clarifies who is protected as a “whistleblower” under the Dodd-Frank Act’s anti-retaliation provisions. In a unanimous decision penned by Justice Ginsburg, the Court held that the Dodd-Frank Act protects an individual only if he or she has reported a securities law violation to the U.S. Securities & Exchange Commission (SEC)—internal reports are not sufficient.


    * * *

    Click here to read the full special alert.


    If you have questions about the decision or other related issues, please visit our Whistleblower practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.

    Courts U.S. Supreme Court Whistleblower Special Alerts SEC Dodd-Frank

    Share page with AddThis
  • Treasury releases Orderly Liquidation Authority report

    Federal Issues

    On February 21, the U.S. Department of the Treasury released a report on the Orderly Liquidation Authority (OLA) and Bankruptcy Reform. The report is in response to the April 2017 Presidential Memorandum requiring the Treasury Department to review and provide recommendations for improving the OLA under the Dodd-Frank Act, previously covered by InfoBytes here. According to the Treasury Department’s announcement, the recommendations outlined in the report “ensure that taxpayers are protected by strengthening the bankruptcy procedure for a failed financial company and retaining OLA in very limited circumstances with significant reforms.” In addition to recommending a new Chapter 14 of the Bankruptcy Code for distressed financial companies, the report recommends significant reforms to the OLA process, such as (i) creating clear rules administered with impartiality, including restricting the FDIC’s ability to treat similarly situated creditors differently; (ii) ensuring market discipline and strengthening protection for taxpayers by, among other things, only allowing the FDIC to lend on a secured basis; and (iii) strengthening judicial review to provide a stronger check on the decision to invoke OLA.

    Federal Issues Department of Treasury Dodd-Frank Orderly Liquidation Authority Trump Bankruptcy

    Share page with AddThis
  • FDIC adopts final rule to remove references to external credit ratings from international banking regulations

    Agency Rule-Making & Guidance

    On February 15, the FDIC announced it adopted a final rule, which removes references to external credit ratings from its international banking regulations related to permissible investment activities and the pledging of assets. According to FIL-9-2018, among other things, the amended final rule (adopted February 14) modifies the FDIC’s definition of “investment grade” under FDIC Rules and Regulations Part 347 by replacing references to external credit ratings with standards of creditworthiness that conform to Section 939A of the Dodd-Frank Act. As FIL-9-2018 explains, the final rule defines “investment grade” as a security issued by an entity that has adequate capacity to meet financial commitments for the projected life of the exposure. And as the final rule itself explains, this revision was made to “encourage regular, in-depth analysis by the banking organization of credit risks of securities, which is a prudent practice already expected of banks.” The final rule takes effect on April 1.

    Agency Rule-Making & Guidance FDIC International Credit Ratings Dodd-Frank

    Share page with AddThis
  • FDIC Chairman discusses challenges associated with living wills

    Federal Issues

    On February 16, FDIC Chairman, Martin J. Gruenberg, spoke at an event hosted by The Wharton School in Philadelphia about the challenges associated with managing the orderly failure of a systemically important financial institution. In prepared remarks, Gruenberg discussed his views on how the FDIC’s Title II Orderly Liquidation Authority granted under Dodd-Frank—which allows the regulator “to manage the orderly failure of any financial institution whose failure in bankruptcy could pose a risk to the financial system”—is complementary to the Title I living will process. Title I requires firms to “make significant changes in their organizational structure and operations to facilitate orderly failure in bankruptcy.” Gruenberg outlined the evolution of the living will process from its inception under Dodd-Frank in 2010, to the efforts undertaken by the eight largest, most complex banks when assembling their mandated resolution plans, which are reviewed by the FDIC and the Federal Reserve (the agencies). While the banks have demonstrated “substantial” progress on their resolution plans, Gruenberg commented “there is still a great deal of work to do.” Specifically, Gruenberg noted that in 2016, the agencies determined that (i) five of the eight submitted plans “would not facilitate an orderly resolution of the firm under the Bankruptcy Code,” and (ii) all eight plans contained “shortcomings” that raised questions about the plans’ feasibility. All systematically important financial institutions were directed to address their shortcomings in their next submissions. During his remarks, Gruenberg cited examples of progress made in 2017, and highlighted the “structural and operational improvements” firms have made to improve resolvability. However, he closed his remarks by noting these resolutions have not yet been tested and emphasized the need to continue to address challenges as they arise.

    Federal Issues FDIC Federal Reserve Dodd-Frank Living Wills SIFIs

    Share page with AddThis
  • Buckley Sandler Special Alert: D.C. Circuit upholds CFPB’s constitutionality but rejects its interpretation of RESPA


    On January 31, the U.S. Court of Appeals for the D.C. Circuit issued its long-awaited en banc decision in CFPB v. PHH Corporation. In a 7-3 decision, the court concluded that the CFPB’s single-director structure is constitutional, even though the president can only remove the director for cause. Importantly, however, the court also reinstated the portion of t he October 2016 panel opinion concluding that the CFPB misinterpreted the Real Estate Settlement Procedures Act (RESPA) and its statute of limitations. As a result, the $109 million penalty imposed on PHH is vacated and the case will go back to the CFPB, where new leadership must decide whether to pursue the action. PHH has 90 days to seek review by the Supreme Court.

    Ten judges issued seven separate opinions in this case, totaling 250 pages. The following is a summary of the key holdings.

    * * *

    Click here to read the full special alert.

    If you have questions about the decision or other related issues, please visit our Consumer Financial Protection Bureau practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.

    Courts Federal Issues CFPB PHH v. CFPB Dodd-Frank

    Share page with AddThis
  • Federal Reserve Publishes Stress Test, CCAR FAQs

    Agency Rule-Making & Guidance

    On January 8, the Federal Reserve Board (Fed) published an updated set of questions and answers to assist financial institutions in complying with the Dodd-Frank Act-mandated stress tests (DFAST) and Comprehensive Capital Analysis and Review (CCAR). According to the Fed, the FAQs are designed to provide answers concerning DFAST and CCAR reporting requirements and related guidance, and generally cover applicable questions that have been asked by covered financial institutions since August 1, 2017. The Fed instructs financial institutions that CCAR projections should only reflect new accounting standards if the standards were implemented prior to December 31 of the previous calendar year. For material business changes occurring in the fourth quarter of a year, financial institutions should discuss any changes that may materially impact the institution’s capital adequacy and funding profile in their CCAR filings. The Fed will review the information when making modelling projections and may request additional information. The Fed also explains the circumstances in which a bank is required to issue replacement capital to stay in compliance with its capital plan.

    Agency Rule-Making & Guidance Federal Reserve Stress Test CCAR Dodd-Frank

    Share page with AddThis
  • House Passes Legislation Modifying Systemic Risk Designation Requirements

    Federal Issues

    The House voted 288-130 on December 19 to pass legislation modifying Dodd-Frank Act asset requirements for systemic risk designations of bank holding companies. Under H.R. 3312, the Systemic Risk Designation Improvement Act of 2017, bank holding companies that are subject to increased capital requirements and heightened supervision by the Federal Reserve (Fed) will no longer be automatically designated as systemically important financial institutions (SIFIs) if their asset threshold is $50 billion or greater. Instead, the Fed will review a bank holding company’s size, interconnectedness, infrastructure, “global cross-jurisdictional activity,” and complexity to determine whether it should be designated as a SIFI. Relatedly, the Senate Banking Committee is currently considering a separate measure, S. 2155, which would, among other things, increase the SIFI asset threshold to $250 billion.

    Federal Issues Federal Legislation Dodd-Frank SIFIs Bank Regulatory

    Share page with AddThis
  • Senate Banking Committee Approves Financial Regulatory Relief Bill

    Federal Issues

    On December 5, the Senate Banking Committee approved bill S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act, which would alter certain financial regulations under the Dodd-Frank Act of 2010. While not as sweeping as previous legislative relief proposals (see previous InfoBytes coverage on House Financial CHOICE Act of 2017), the bill was introduced and passed the Committee with bipartisan support. The bill’s highlights include, among other things:

    • Consumer Access to Credit. The bill deems mortgage loans held in portfolios by insured institutions with less than $10 billion in assets to be “qualified mortgages” under TILA, and removes the three-day waiting period for TILA-RESPA Integrated Disclosures if the second credit offer is a lower rate. The bill also instructs the CFPB to provide “clearer, authoritative guidance” on certain issues such as the applicability of TRID to mortgage assumptions and construction-to-permanent loans. Additionally, the bill eases appraisal requirements on certain mortgage loans and exempts small depository institutions with low mortgage originations from certain HMDA disclosure requirements.
    • Regulatory Relief for Certain Institutions. The bill exempts community banks from Section 13 of the Bank Holding Company Act if they have, “[i] less than $10 billion in total consolidated assets, and [ii] total trading assets and trading liabilities that are not more than five percent of total consolidated assets” – effectively allowing for exempt banks to engage in the trading of, or holding ownership interests in, hedge funds or private equity funds. Additionally, the bill raises the threshold of the Federal Reserve’s Small Bank Holding Company Policy Statement and the qualification for certain banks to have an 18-month examination cycle from $1 billion to $3 billion.
    • Protections for Consumers. Included in an adopted “manager’s amendment,” the bill requires credit bureaus to provide consumers unlimited free security freezes and unfreezes. The bill also limits certain medical debt information that can be included on veterans’ credit reports.
    • Changes for Bank Holding Companies. The bill raises the threshold for applying enhanced prudential standards from $50 billion to $250 billion.

    The bill now moves to the Senate, which is not expected to take up the package before the end of this year.

    Federal Issues Senate Banking Committee Dodd-Frank Federal Legislation TILA RESPA TRID Federal Reserve OCC FDIC Mortgages HMDA Credit Reporting Agency

    Share page with AddThis