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  • Senate Committee on Banking, Housing & Urban Affairs Releases Flood Insurance Bill

    Federal Issues

    On July 17, Senate Committee on Banking, Housing & Urban Affairs Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) released the text of the National Flood Insurance Program Reauthorization Act of 2017, which would reform the National Flood Insurance Program (NFIP) and extend it another six years. Among the provisions covered in the bill are: (i) risk mitigation, particularly in repeatedly flooded communities; (ii) compliance cost increases; (iii) predisaster hazard mitigation programs; (iv) flood risk disclosure requirements for sellers or lessors of real estate; (v) flood mapping program improvements; and (vi) various program improvements, including requirements for federal banking regulators to conduct annual compliance studies on mandatory purchase requirements in special flood hazard areas, and directions for “FEMA to annually study NFIP participation in areas outside of special flood hazard areas.”

    “We have held multiple hearings and worked on a bipartisan basis to hear thoughts and concerns from the Program's stakeholders, regulators and from Banking Committee members,” Crapo and Brown stated in a joint release. “This bill represents the many areas where we have found agreement, and we look forward to working with our colleagues to address outstanding issues.”

    The bill is one of many introduced this year in both the Senate and the House as the NFIP is set to expire at the end of September. (See previous InfoBytes coverage here and here.)

    Federal Issues Federal Legislation National Flood Insurance Program Congress Senate Banking Committee

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  • OCC Acting Comptroller Supports Fintech National Bank Charter

    FinTech

    On July 19, Acting Comptroller of the Currency, Keith A. Noreika, spoke before the Exchequer Club about the proposed concept of granting special purpose charters for financial technology (fintech) companies. In prepared remarks, Acting Comptroller Noreika said the OCC has the authority to grant national bank charters to nondepository fintech companies in “appropriate circumstances.” However, he reiterated that having the authority does not imply a determination has been made as to whether the OCC will accept or grant applications from nondepository fintech companies that rely solely on regulation 12 CFR 5.20(e)(1), which outlines eligibility requirements for receiving special purpose national bank charters. To date, no such applications have been received.

    The OCC continues to demonstrate its support for innovative developments and partnerships between banking and technology companies. As previously discussed in a Special Alert, the OCC issued a draft supplement in March to provide guidance for evaluating charter applications from fintech companies. “Providing a path for these companies to become national banks is pro-growth and in some ways can reduce regulatory burden for those companies,” Noreika remarked. However, the fintech special purpose national bank charter has recently met legal challenges from the New York Department of Financial Services (NYDFS) and the Conference of State Bank Supervisors (see Special Alerts here and here). Norieka stated that the OCC is developing its response to the NYDFS lawsuit “and plans to defend [its] authority vigorously.” He cautioned against defining banking too narrowly, and argued that fintech companies should be allowed to apply for national bank charters if they meet the criteria and are involved in the “business of banking.”

    Fintech OCC Licensing Agency Rule-Making & Guidance

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  • Federal Banking Agencies Issue Proposed Rulemaking to Amend Appraisal Requirement Threshold for Commercial Real Estate Transactions

    Agency Rule-Making & Guidance

    On July 19, the Federal Reserve Board, the FDIC, and the OCC issued a joint notice of proposed rulemaking to raise the threshold for commercial real estate transactions requiring an appraisal from $250,000 to $400,000 in an effort to reduce costs and streamline transactions. The proposal was issued, in part, in response to concerns raised by financial industry representatives during the Economic Growth and Regulatory Paperwork Reduction Act review process that adjustments have not been made to the current thresholds despite increases in property values and a scarcity of appraisers in rural areas. FDIC Chairman Martin J. Gruenberg issued a statement announcing that the proposal will significantly reduce the number of transactions requiring an appraisal. Evaluations, rather than appraisals, would now be required for commercial real estate transactions at or below the proposed threshold.

    Comments on the proposed rule will be accepted for 60 days from date of publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Reserve FDIC OCC Commercial Lending Appraisal

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  • FDIC Adopts Revised Supervisory Appeals Guidelines

    Agency Rule-Making & Guidance

    On July 18, the FDIC adopted revised guidelines for appeals of certain material supervisory determinations to expand the circumstances under which banks may appeal a material supervisory determination. The revisions incorporate changes suggested by commentators during a request for comments in 2016. The revised guidelines also provide consistency with the appeals processes of other federal banking agencies and will, among other things, (i) permit the appeal of the level of compliance with an existing formal enforcement action; (ii) provide that formal enforcement-related actions or decisions do not affect a pending appeal; (iii) allow for additional opportunities for appeal rights available under the guidelines with respect to material supervisory determinations in certain circumstances; and (iv) draw up other limited technical and conforming amendments.

    The guidelines are effective immediately.

    Agency Rule-Making & Guidance FDIC Bank Supervision

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  • FTC Staff Supports FCC’s Proposal to Reverse Broadband Enforcement Authority

    Privacy, Cyber Risk & Data Security

    On July 17, FTC staff submitted its comments to the FCC in response to the FCC’s Notice of Proposed Rulemaking on Restoring Internet Freedom (NPRM), in favor of returning broadband enforcement authority to FTC. (See previous InfoBytes coverage here.) The NPRM would reverse a 2015 FCC decision, which changed the classification of broadband internet access service from an “information service to a common carrier service,” and resulted in a loss to the FTC’s authority. Currently, the FTC cannot regulate common carrier activities. FTC staff argued that with the exception of broadband providers, FTC jurisdiction covers virtually all other internet entities. Having one agency with enforcement authority over all internet entities would allow for “consistent standards and consistent application of those standards.” The result, the staff encouraged, would be the creation of a “level playing field for all companies operating in the Internet ecosystem.”

    Acting FTC Chairman Maureen K. Ohlhausen endorsed the staff comments and offered support for the NPRM to reverse the 2015 Title II classification of broadband internet access service as a way to “restore the FTC’s ability to protect broadband consumers under its general consumer protection and competition authority.” However, FTC Commissioner Terrell McSweeny dissented, stating that “[u]nless Congress repeals the common carrier exemption in the FTC Act, the FTC could continue to face challenges to its authority over common carriers.” Consequently, “[r]epealing these rules would be harmful for consumers and the marketplace . . . . Rather than roll[ing] back protections, we should augment them with renewed FCC vigor and a change to anachronistic barriers to FTC enforcement.”

    Privacy/Cyber Risk & Data Security FTC FCC Federal Issues Agency Rule-Making & Guidance Enforcement

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  • DOJ Files Suit to Seize $144 Million in Laundered Nigerian Oil Bribes

    Financial Crimes

    The U.S. Department of Justice announced Friday, July 14, that prosecutors filed a civil complaint seeking to seize $144 million in assets that were allegedly the proceeds of corruption in Nigeria and were laundered in and through the U.S. According to the complaint, from 2011 to 2015, two Nigerian businessmen bribed Nigeria’s former Minister for Petroleum Resources, who oversaw Nigeria’s state-owned oil company. In return, the former Minister steered lucrative oil contracts to companies owned by the businessmen. The proceeds were then allegedly used to purchase assets subject to seizure and forfeiture, including a $50 million New York City condominium and an $80 million yacht.

    “The United States is not a safe haven for the proceeds of corruption,” said Acting Assistant Attorney General Blanco. “The complaint announced today demonstrates the Department’s commitment to working with our law enforcement partners around the globe to trace and recover the proceeds of corruption, no matter the source. Corrupt foreign officials and business executives should make no mistake: if illicit funds are within the reach of the United States, we will seek to forfeit them and to return them to the victims from whom they were stolen.”

    The suit was part of the Kleptocracy Asset Recovery Initiative.

    Financial Crimes DOJ Anti-Money Laundering Corruption Nigeria

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  • Global Bank and U.S. Subsidiaries Fined $246 Million for Deficiencies in Internal Foreign Exchange Trading Controls

    Securities

    On July 17, the Board of Governors of the Federal Reserve (Board) fined a global bank and two of its U.S. subsidiaries $246 million for allegedly lacking appropriate oversight and controls to ensure the bank’s foreign exchange (FX) trading activities were in compliance. According to the cease and desist order, the Board alleged that the bank’s “deficient policies and procedures” prevented it from detecting unsafe and unsound conduct and communications between bank traders and traders at other financial institutions concerning their trading positions. In addition to the fine, the bank is required to improve its oversight and controls over its FX trading activities, submit a written plan to improve its compliance risk management program, and provide an enhanced written internal audit program, subject to Board approval. Furthermore, the bank is prohibited from re-employing any individuals involved in the illegal communications.

    It was noted in the order that the bank conducted a review of its FX trading activities covering the investigation time period, identified and reported the illegal conduct to the Board and the Federal Reserve Bank of New York, and fully cooperated with the investigation. Improvements to address identified deficiencies have already begun.

    Securities Enforcement Federal Reserve Bank Compliance Federal Reserve Bank of New York

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  • FTC Chairman Announces Reforms for Bureau of Consumer Protection, Aims to Improve Transparency

    Agency Rule-Making & Guidance

    On July 17, FTC Acting Chairman Maureen K. Ohlhausen announced process reforms designed to reduce burden and improve transparency in investigations conducted by its Bureau of Consumer Protection (BCP). The initiative, which is part of the FTC’s reform efforts announced in April of this year, is designed to “protect consumers and promote competition without unduly burdening legitimate business activity.” To streamline information requests for CIDs in consumer protection cases, the BCP intends to:

    • Provide plain language descriptions of the CID process and develop business education materials to help small businesses understand how to comply;
    • Add detailed descriptions of the scope and purpose of investigations to assist companies in better understanding the information the FTC seeks;
    • Limit relevant time periods to minimize undue burden on companies when possible;
    • Significantly reduce the length and complexity of CID instructions for providing electronically stored data; and
    • Increase response times (for example, 21 days to 30 days for targets, and 14 days to 21 days for third parties) to improve the quality and timeliness of compliance by recipients.

    BCP will continue its current practice of communicating with investigation targets at least every six months once the CID has been complied with to provide investigation status updates.

    Agency Rule-Making & Guidance FTC Enforcement Investigations

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  • ABA, CFPB to Host Webinar for Financial Institutions on New HMDA Submission Platform

    Agency Rule-Making & Guidance

    On July 17, the ABA and CFPB announced a joint webinar on August 8 at 2:00 pm EDT, which will instruct compliance, operations, and loan processing professionals on how to use the new platform for submitting HMDA data. The webinar will provide an overview of the new tool and data collection process that all financial institutions must use to submit HMDA data beginning January 1, 2018 for data collected during 2017 and going forward.

    Notably, however, on July 14, the CFPB issued a request for comments on proposed amendments to its HMDA reporting threshold for calendar years 2018 and 2019 to ease the burden on small-volume lenders. The comment period ends July 31, 2017. (See previous InfoBytes summary here.)

    Agency Rule-Making & Guidance CFPB ABA HMDA Mortgages Bank Compliance

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  • FTC Announces Charges Against Debt Collection Operation for FDCPA and FTC Act Violations

    Consumer Finance

    On July 17, the FTC issued a press release announcing charges against a Florida-based debt collection operation for allegedly posing as lawyers and threating individuals with lawsuits or prison time if they failed to pay debt they did not actually owe. According to the complaint filed by the FTC, the defendants’ violated the FTC Act by making false, unsubstantiated, or misleading representations regarding debt owed and threatened legal action. Additionally, the defendants allegedly violated the Fair Debt Collection Practices Act by (i) engaging in “unlawful third-party communications” without obtaining prior consumer consent; (ii) failing to disclose they were debt collectors; (iii) making false, deceptive, or misleading representations by withholding the true status of the debt, impersonating attorneys, and threatening legal action, among others; and (iv) failing to provide consumers written verification of their debt within the required time frame. As a result, the FTC announced a federal court has temporarily halted the operation and frozen its assets.

    Consumer Finance FTC Debt Collection FDCPA

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