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FHFA increases conforming loan limits for 2021
On November 24, the FHFA announced that it will raise the maximum conforming loan limits (CLL) for mortgages purchased in 2021 by Fannie Mae and Freddie Mac from $510,400 to $548,250. In most high-cost areas, the maximum loan limit for one-unit properties will be $822,375. According to the FHFA, due to generally rising home values, “the maximum CLL will be higher in 2021 in all but 18 counties or county equivalents in the U.S.” A county-specific list of the maximum loan limits in the U.S. can be accessed here.
OCC’s proposed rule would ensure fair access to financial services
On November 20, the OCC announced a notice of proposed rulemaking (NPRM), which seeks to ensure that national banks, federal savings associations, and federal branches and agencies of foreign bank organizations offer and provide fair access to financial services “based on the risk assessment of individual customers, rather than broad-based decisions affecting whole categories or classes of customers.” The NPRM implements language included in Title III of Dodd-Frank—“which charged the OCC with ‘assuring the safety and soundness of, and compliance with laws and regulations, fair access to financial services, and fair treatment of customers by, the institutions and other persons subject to its jurisdiction’”—and builds upon the principle of nondiscrimination. The NPRM would apply to the largest banks in the country and would prevent such banks from denying or limiting services in an effort to (i) prevent a person from entering or competing in a particular market; or (ii) disadvantage a person in order to benefit another person in which the bank has a financial interest. The OCC emphasizes in its press release that “a covered bank’s decision to deny services based on an objective assessment of the person’s creditworthiness, ability to pay, or other quantitative, impartial, risk-based reasons would not violate the bank’s obligation to provide fair access.” Comments on the NPRM are due by January 4, 2021.
CFPB releases enforcement database
On November 25, the CFPB announced a refreshed website that includes an “interactive enforcement database” to assist the public in tracking the Bureau’s enforcement actions. According to a blog post accompanying the announcement, the enforcement database identifies each public enforcement action by its initial filing date and provides the specific consumer relief associated with each resolution, including the estimated number of consumers or consumer accounts eligible to receive relief, and the total amount of civil money penalties ordered. The data does not include any non-public information about consumer relief and penalties, such as the monetary amounts actually paid and whether those funds are paid to consumers or disgorged.
Additionally, the website updates include a page for petitions for rulemaking, allowing users to search for and find petitions in one centralized location. The Bureau has also archived content that is older than two years old. The archived materials are still accessible, but will be identified as archived and include a note that they may not be the most up-to-date resources offered by the Bureau.
CFPB charges debt-relief company and owners
On November 20, the CFPB announced it filed a complaint in the U.S. District Court for the Northern District of Illinois against a debt-relief company and its two owners (collectively, “defendants”) for allegedly violating the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act. According to the complaint, between 2011 and April 2019, the defendants allegedly misrepresented material aspects of their student loan debt-relief services, by, among other things, falsely representing that the services would reduce or eliminate payments, stop wage garnishment, lift tax liens, and improve credit scores. Additionally, the Bureau alleges the defendants violated the TSR by requesting and receiving payment of fees for their services before they renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to an agreement. Moreover, the defendants’ fees were allegedly not proportional to or a percentage of the amount saved as a result of their services. The complaint seeks injunctions against the defendants as well as damages, redress, disgorgement of ill-gotten gains, and the imposition of civil money penalties.
FHFA extends foreclosure moratorium
On December 2, the FHFA announced that Fannie Mae and Freddie Mac (GSEs) will extend their moratorium on single-family foreclosures and real estate owned (REO) evictions until at least January 31, 2021 (which was set to expire on December 31, previously covered here). The foreclosure moratorium applies to homeowners with a GSE-backed, single-family mortgage, and the REO eviction moratorium applies to properties that were acquired by the GSEs through foreclosure or deed-in-lieu of foreclosure transactions.
California DFPI issues MCA enforcement action covering future receivables
On November 12, the California Department of Financial Protection and Innovation (DFPI) issued a consent order with a commercial financing company, resolving allegations that the company’s merchant cash advance (MCA) product was structured as a lending transaction and offered to California merchants without first obtaining a license as required by the California Financing Law (CFL). According to the DFPI, the MCA agreements in question provide the company with “broad authority to declare ‘default’ on its merchants and when doing so may use extensive recourse allowed under its [a]greement,” including in the event of insufficient funds requiring the full funding amount to be repaid, which DFPI argues, “does not put the risk of the ‘purchase’ of receivables on [the financing company]’s shoulders, but rather the risk of repayment on the merchant’s shoulders, just like a loan.” Moreover, the agreements provide for an indefinite repayment period, placing the “risk of repayment on the merchant by leaving the repayment period open until fully repaid (with fees and interest).” The consent order distinguishes between outstanding and future receivables, noting that under California law, commercial financiers purchasing a share of a merchant’s outstanding receivables without recourse (e.g., factoring), is generally not considered lending, but there is no similar recognition by the legislature or courts with respect to future receivables.
The consent order requires the company to (i) desist from lending in California unless and until licensed under the CFL; (ii) refund fees or payments collected from California merchants in excess of the 10 percent state interest rate cap for non-CFL licensees; and (iii) pay $20,000 to the DFPI to cover the cost of the investigation.
OCC updates Comptroller’s Licensing Manual
On November 23, the OCC announced a new Comptroller’s Licensing Manual booklet, “Mutual to Stock Conversions,” which incorporates provisions of revised regulation 12 CFR Part 192. The new booklet, among other things, “provides an overview of policy considerations and decision criteria that the OCC considers when reviewing applications by federal savings associations to convert from a mutual to stock form of ownership under 12 CFR 192.” The new booklet also outlines requirements for covered institutions when filing conversion applications, as well as references and information resources for prospective filers.
FinCEN, federal banking agencies clarify CDD requirements for charities and non-profit organizations
On November 19, the Financial Crimes Enforcement Network (FinCEN), in concurrence with the Federal Reserve Board, FDIC, NCUA, and OCC (collectively, “federal banking agencies”), released a fact sheet clarifying that Bank Secrecy Act (BSA) customer due diligence (CDD) requirements for charities and nonprofit organizations (NPOs) should be based on the money laundering risks posed by customer relationships. FinCEN and the federal banking agencies remind banks that “the application of a risk-based approach for charities and other NPOs is consistent with existing CDD and other [BSA/anti-money laundering] compliance requirements.” The fact sheet further emphasizes that while “the U.S. government does not view the charitable sector as a whole as presenting a uniform or unacceptably high risk of being used or exploited for money laundering, terrorist financing [], or sanctions violations,” banks must adopt risk-based procedures for conducting CDD that will allow banks to (i) understand the nature and purpose of a customer relationship in order to develop a customer risk profile, and (ii) conduct ongoing monitoring for the purposes of identifying and reporting suspicious transactions “on a risk basis, to maintain and update customer information.” The fact sheet does not alter existing BSA/AML legal or regulatory requirements, nor does it establish new supervisory expectations. (See also OCC Bulletin 2020-101 and FDIC FIL-106-2020.)
Fed’s final rule modifies assessment fees for large financial companies
On November 19, the Federal Reserve Board issued a final rule modifying the annual assessment fees for its supervision and regulation of large financial companies. The final rule is nearly identical to the proposal issued in November 2019, covered by InfoBytes here. The final rule raises the minimum threshold from $50 billion to $100 billion in total consolidated assets to be considered an assessed company and adjusts the amount charged to assessed companies, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rule will be effective 30 days after publication in the Federal Register.
FTC reaches $62 million settlement with student loan debt relief operation
On November 19, the FTC entered into a settlement with defendants accused of engaging in deceptive practices when marketing and selling student loan debt relief services. As part of its enforcement initiative, Operation Game of Loans (covered by InfoBytes here), the FTC alleged that the defendants violated the FTC Act and Telemarketing Sales Rule (TSR) by, among other things, charging illegal up-front fees to enroll consumers in debt relief programs, accepting monthly payments that were not applied towards student loans, and collecting monthly fees that consumers believed were being applied to their loans but instead were going towards unrelated “financial education” programs (see previous InfoBytes coverage here). Under the terms of the order, the defendants are permanently banned from providing secured and unsecured debt relief products and services, and are prohibited from (i) engaging in unlawful telemarketing practices and violating the TSR; (ii) misrepresenting financial products and services; (iii) making unsubstantiated claims; and (iii) collecting, or assigning any right to collect, payments from consumers for products sold by the defendants. The defendants are also ordered to pay $62 million in monetary relief.