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  • The Corporate Transparency Act: FinCEN Finalizes Beneficial Ownership Information Access Rule as Reporting Rule Takes Effect

    Federal Issues

    The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued a final rule (the Access Rule) regarding access to and use of beneficial ownership information (BOI) maintained by FinCEN.

    The Access Rule details the circumstances under which FinCEN can disclose BOI to authorized recipients. It also spells out how FinCEN will protect that information and outlines data protection protocols and oversight mechanisms for those who receive beneficial ownership information. The rule takes effect February 20, 2024.  It is the second of three FinCEN rulemakings to implement the Corporate Transparency Act (CTA).

    The first rule, the Beneficial Ownership Reporting Rule, took effect January 1, 2024. As covered previously, it requires certain domestic and foreign companies created, or registered to conduct business, in the United States to report information to FinCEN regarding their beneficial owners – individuals who directly or indirectly own or control 25 percent or more of the ownership interests of a reporting company or who exercise substantial control over such an entity.

    Read more here.

    Federal Issues Agency Rule-Making & Guidance FinCEN Beneficial Ownership Corporate Transparency Act

  • Agencies adjust civil money penalties for 2024

    Agency Rule-Making & Guidance

    Recently, the CFPB, NCUA, FDIC, FTC, and OCC provided notice in the Federal Register of adjustments to the maximum civil money penalties due to inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Each notice or final rule (see CFPB here, FDIC here, OCC here, FTC here, and NCUA here) adjusts the maximum civil money penalties available and documents the inflation-adjusted maximum amounts associated with the penalty tiers for each type of violation within a regulator’s jurisdiction. For violations occurring on or after November 2, 2015, the OCC’s adjusted maximum penalties go into effect as of January 8; the CFPB and FDIC’s adjustments go into effect January 15; and the FTC and NCUA’s adjustments go into effect January 10.

    Agency Rule-Making & Guidance Federal Issues Bank Regulatory OCC CFPB Assessments Fees Civil Money Penalties

  • Freddie Mac launches pilot program on loan repurchase alternatives

    Agency Rule-Making & Guidance

    On January 1, Freddie Mac is launching a pilot program intended to improve the quality of performing loans for sellers. This pilot program, titled “Fee-Based Repurchase Alternative for Performing Loans,” is the fourth initiative from Freddie Mac’s Pilot Transparency programs, which included pilot programs on appraisal modernization, shared equity conversion, and asset and income modeler for direct deposits. This fee-based repurchase alternative pilot program for 2024 focuses on replacing Freddie Mac’s current repurchase policy for defective performing loans. “[L]enders will not be subject to repurchases on most performing loans and will instead be subject to a fee-based structure based on non-acceptable quality (NAQ) rates.” According to Freddie Mac, the fee-based structure will be more efficient and transparent and rewards lenders that deliver high-quality loans. Freddie Mac also notes that loans that are non-performing in 36 months or have life of loan defects could be repurchased. The pilot program is active; accordingly, the fee structure will begin rolling out in early 2024 to targeted lenders.

    Agency Rule-Making & Guidance Freddie Mac Pilot Program Loans Repossession Repurchase

  • FTC settles with lead generator for deceiving consumers

    Agency Rule-Making & Guidance

    On January 2, the FTC filed a complaint against a California-based lead generator (the “Company”), alleging that the Company operated as a “consent farm” that deceived consumers into providing their consent to be contacted for telemarketing purposes, then selling those consents to telemarketers, sellers, or intermediaries. Relying on the Company’s purported consent from consumers, those parties then inundated consumers with telemarketing calls. These calls included robocalls and calls made to telephone numbers on the National Do Not Call Registry. Since 2019, the defendants are alleged to have operated over 50 websites focused on lead generation.

    The FTC charged the Company with violating the FTC Act for misrepresenting the collection of consumers’ personal information, and for violating the Telemarketing Sales Rule for assisting and facilitating telemarketers in breaking the Rule.

    On the same day the complaint was filed, the FTC announced a proposed settlement in which the Company was ordered to pay $7 million for its alleged use of deception and dark patterns to trick consumers into providing personal information. Additionally, the proposed stipulated order banned the Company from initiating or helping anyone make telemarketing robocalls, calling phone numbers on the National Do Not Call Registry, and selling consumer information connected with lead generation. The stipulated order must first be approved by the court before it comes into effect. The Company neither admits nor denies any of the allegations

    Agency Rule-Making & Guidance FTC FTC Act Consent Order Fraud Telemarketing Telemarketing Sales Rule

  • CFPB distributes nearly $6 million in relief payment to veterans harmed by bad-faith lenders

    Agency Rule-Making & Guidance

    On January 2, the CFPB reported it had sent nearly $6 million to consumers harmed by illegal lending practices that specifically targeted veterans. Between 2019 and 2020, the CFPB filed four suits against several loan brokers, which InfoBytes previously covered. In 2019, the CFPB entered into a settlement with an online loan broker that promised to connect veterans with companies offering high-interest loans in exchange for the assignment of some or all of their military pension payments. Again in 2019, InfoBytes covered another settlement between the CFPB and a pension-advance broker for allegedly misrepresenting the contracts offered to veterans and other consumers between 2011 and 2016. In 2020, the CFPB entered into a settlement with and a loan broker who offered high-interest loans to veterans in exchange for assignment of some of their monthly pension or disability payments. Lastly, and again in 2020, InfoBytes covered a complaint brought by the South Carolina Department of Consumer Affairs against a pension-advance scheme in violation of the CFPA for brokering contracts offering high-interest credit to disabled veterans and other consumers in exchange for the assignment of some of the consumers’ unpaid earnings, monthly pensions, or disability payments.

    The recent payments totaled $5.1 million from the CFPB’s victims’ relief fund and over $720,000 from money paid by the defendants. The CFPB sent checks in December to certain customers, but an individual who believes they are eligible can submit a claim for a refund.

    Agency Rule-Making & Guidance CFPB CFPB Act Fraud

  • NYDFS releases guidance on risk management

    State Issues

    On December 21, 2023, NYDFS released guidance for managing significant financial and operational risks associated with climate change for New York State-regulated banking and mortgage institutions. The guidance emphasized the importance of ensuring operational resiliency which is “the ability to deliver operations, including critical operations and core business lines, through a disruption from any hazard.” Regulated organizations are encouraged to consider three key areas: 1) understanding climate-related financial risks; 2) prioritizing operational resilience; 3) and complying with consumer protection laws when adjusting risk frameworks for climate-related risks. The NYDFS categorizes climate-related financial risks as either physical risks, like hurricanes, floods, and wildfires, or transition risks from policy, regulations, adoption of new technologies, consumer, and investor preferences, and changing liability risks which can directly and indirectly affect financial institutions.

    Regulated organizations are urged to consider potential impacts on at-risk communities while adapting their risk management approaches. NYDFS suggests they maintain reasonable, risk-based business strategies to prevent unnecessary market disruptions and comply with consumer protection laws and fair lending considerations at all times. The guidance suggests institutions also maintain fair lending practices while managing climate-related financial risks, and further suggests not divesting from low-income communities to manage risk.

    The NYDFS has not set a timeline for implementation of the Guidance expectations as it would like “to provide regulated organizations with sufficient opportunity to integrate consideration of climate-related financial and operational risks into their governance frameworks, organizational structures, business strategies and risk management processes in a proportionate manner.” To offer an overview of these documents and highlight key feedback themes, NYDFS has scheduled a webinar for January 11, 2024, at 11:30 am ET. Interested parties can register for the webinar via the provided link. The Department also made additional resources available to aid organizations in implementing measures to tackle climate-related risks.

    State Issues Agency Rule-Making & Guidance NYDFS Risk Management New York

  • Agencies update the Uniform Rules of Practice and Procedure

    On December 28, 2023, the Fed, OCC, FDIC, and NCUA published a final rule amending the Uniform Rules of Practice and Procedure to recognize the use of electronic communications and enhance the efficiency and equity of administrative hearings. The agencies have implemented measures recognizing the role of electronic communications across all facets of administrative proceedings. Among other things, the final rule (i) defines “electronic signature” in the Uniform Rules; (ii) codifies permitting electronic service and filings for administrative actions; (iii) allows for remote depositions; (iv) includes Equal Access to Justice Act procedures based on the 2019 Administrative Conference of the United States Model Rule; (v) adds provisions on when parties must pay civil money penalties; (vi) adds specific provisions pertaining to the forfeiture of a national bank, federal savings association, or federal branch or agency charter or franchise due to certain money laundering or cash transaction violations; (vii) modifies the discovery rules to recognize electronic documents and allow for electronic production; (viii) establishes new rules for expert and hybrid fact-expert witnesses; and (ix) consolidates the Uniform Rules and Local Rules for national banks and federal savings associations.

    Additionally, the OCC has revised its specific administrative practice and procedure regulations to harmonize rules for national banks and federal savings associations. Furthermore, adjustments were made to the OCC’s regulations on organization and operations to encompass service of process considerations.

    The rule is effective April 1, 2024.

    Bank Regulatory Agency Rule-Making & Guidance OCC Federal Reserve FDIC NCUA Administrative Procedures Act

  • OCC announces CRA bank asset-size threshold adjustments for 2024

    On December 26, 2023, the OCC announced revisions to the asset-size thresholds used to define small and intermediate small banks and savings associations under the Community Reinvestment Act (CRA). Effective January 1, 2024, a small bank or savings association will mean an institution that, as of December 31 of either of the past two years, had assets of less than $1.564 billion. An intermediate small bank or savings association will mean an institution with assets of at least $391 million as of December 31 of both of the prior two years, and less than $1.564 billion as of December 31 of either of the prior two years. As previously covered by InfoBytes, the Fed and the FDIC also announced joint annual adjustments to the CRA asset-size thresholds used to define “small bank” and “intermediate small bank.”

    Bank Regulatory OCC Federal Reserve FDIC Federal Issues Agency Rule-Making & Guidance CRA Bank Supervision

  • IOSCO publishes nine recommendations on decentralized finance

    Agency Rule-Making & Guidance

    On December 19, 2023, the International Organization of Securities Commissions (IOSCO) published a report on decentralized finance to address market integrity and investor protection. The report includes nine policy recommendations for decentralized financial regulators to follow. Decentralized finance structures include financial products and arrangements that use a distributed ledger or blockchain technology. IOSCO’s policy recommendations on decentralized finance complement a similar report on crypto and digital asset markets, as written about on InfoBytes, here. The policy recommendations are as follows: (i) regulators should analyze decentralized finance products, services, and activities in its jurisdiction; (ii) regulators should identify the persons or entities that could be subject to its regulatory framework; (iii) regulators should use frameworks to regulate and address risks arising from decentralized finance consistent with IOSCO standards; (iv) regulators should require responsible persons to address conflicts of interest; (v) regulators should require responsible persons to address material risks, including operational and technological ones; (vi) regulators should require responsible persons to disclose information clearly to users and investors; (vii) regulators should apply comprehensive powers to decentralized financial services to detect and enforce violations under law; (viii) regulators should cooperate and share information with other regulators and authorities; and (ix) regulators should seek to understand how decentralized finance products are linked to the crypto-asset market as well as traditional finance markets. The final section of the report summarized the feedback garnered from 45 stakeholders on eight categories.

    Agency Rule-Making & Guidance IOSCO Decentralized Finance Securities Of Interest to Non-US Persons

  • FTC sues for-profit university for deceptive and illegal practices

    Agency Rule-Making & Guidance

    On December 27, 2023, the FTC filed a suit in the U.S. District Court of Arizona against a for-profit university for allegedly deceiving students, misrepresenting the university as a nonprofit entity, and committing telemarking abuses. The FTC sued under the FTC Act and Telemarketing Sales Rule (TSR). The complaint alleges that the university in question is a for-profit institution operating as a publicly traded entity, but nonetheless marketed itself as a “nonprofit” university. The complaint further alleges that the university misled students about the cost of its “accelerated” doctoral programs and used abusive telemarketing calls to try to boost enrollment. According to the FTC, the university called those who requested not to be called by the university, as well as consumers on the National Do Not Call Registry. The FTC asserts five claims against the university. The first two counts allege violations of Section 5(a) of the FTC Act for deceptive representations about its non-profit status and for falsely advertising its doctoral programs. The last three counts allege violations of the TSR predicated on deceptive telemarketing acts or practices, contacting those who have requested to not be contacted, and calling people on the National Do Not Call Registry.

    Agency Rule-Making & Guidance FTC FTC Act For-Profit College TSR Telemarketing Telemarketing Sales Rule Do Not Call Registry Fraud

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