InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
OCC Issues Revised Comptroller’s Licensing Manual Booklets
On May 8, the OCC announced the release of a revised Fiduciary Powers booklet of the Comptroller’s Licensing Manual, which replaces the version issued in June 2002, and applies to all national banks and federal savings associations proposing to exercise fiduciary powers. This revised booklet incorporates updated procedures and requirements following the integration of the Office of Thrift Supervision (OTS) into the OCC in 2011 and the revisions to 12 C.F.R. § 5 (effective July 1, 2015), which address applications for national banks and federal savings associations proposing to exercise fiduciary powers. Specifically, the revised booklet addresses the: (i) policies and procedures to guide a bank in submitting a request to exercise fiduciary powers or submitting a notice to the OCC that it is exercising fiduciary powers in a new state; and (ii) procedures for a bank to surrender its fiduciary powers and for the OCC to revoke those powers. The booklet also lists references and links to informational resources to assist applicants during the filing process.
That same day, the OCC also released a revised Public Notice and Comments booklet of the Comptroller’s Licensing Manual, which replaces the version updated in March 2007. This revised booklet incorporates public notice and comments procedures and requirements that were updated following the integration of OTS into the OCC, and the issuance of revised 12 CFR Part 5, and applies to national banks and federal savings associations, unless otherwise noted, as well as federal branches and agencies of foreign banks. In particular, the booklet addresses the “general requirements related to the public notice process, impact of Community Reinvestment Act (CRA) performance on certain applications or notices (filings), application of the convenience and needs standard under the Bank Merger Act, and requirements and procedures for conducting public hearings, public meetings, and private meetings.”
CFPB Issues Request for Information on Small Business Lending; Prepares to Implement Section 1071 of Dodd Frank Act
On May 10, the CFPB announced the issuance of a Request for Information on various aspects of the market for small business loans as the Bureau prepares to implement Section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. The Request includes questions grouped in five categories: (i) defining what constitutes a small business; (ii) data points the Bureau will require to be submitted and collected; (iii) types of lenders involved in small business lending and the appropriate institutional coverage for the data collection requirements; (iv) types of financial products offered to small businesses generally, and those owned by women and minorities in particular; and (v) privacy concerns related to the data collection.
The CFPB also released Director Cordray’s prepared remarks in advance of a field hearing on small business lending where he introduced the Request for Information and issued a related press release. Comments are due 60 days after the Request for Information is published in the Federal Register. The Bureau also released a report, entitled “Key Dimensions of the Small Business Lending Landscape,” which presents the CFPB's perspective on the market for lending to small, minority-owned and woman-owned firms and gaps in its understanding.
A couple of industry groups have already weighed in regarding expected difficulties with the application of Section 1071. In a letter sent Tuesday in advance of the field hearing, the National Association of Federally-Insured Credit Unions (NAFCU) urged the CFPB to exempt its members from any rulemaking that compels disclosure of business loan information. NAFCU Regulatory Affairs Counsel Andrew Morris cites the unique characteristics of credit unions, and that such data collection “may yield confusing information about credit unions and further restrict lending activity as a result of increased compliance costs.” The letter notes that “[c]redit unions serve distinct fields of membership, and as a result, institution-level data related to women-owned, minority-owned and small business lending substantially differs in relation to other lenders.”
And, in a white paper provided to the Treasury Department, the American Bankers Association criticizes what amounts to Section 1071’s conflation of consumer and commercial lending, “recommend[ing] the elimination of any vestige of Bureau regulatory, supervisory, or enforcement authority over commercial credit or other commercial account and financial services.”
American Bankers Association White Paper Addresses Concerns Over HMDA Expansion
On May 2, the American Bankers Association (ABA) issued a white paper to the Treasury Department on the implementation of the 2015 Home Mortgage Disclosure Act (HMDA) rule as part of its continuing response to President Trump’s executive order outlining “core principles” for financial regulation (see previously issued Special Alert here). The white paper, HMDA – More Really is Less: The Data Fog Frustrates HMDA, presents several views held by the ABA including that the CFPB should (i) rescind requirements to collect any data fields not expressly required by HMDA; (ii) suspend the effective date of the 2015 HMDA rule until privacy and security concerns are addressed (see previously issued Special Alert here); (iii) exclude commercial loans from HMDA coverage; and (iv) revoke the new HMDA data elements added by the Dodd-Frank Act. The ABA noted that the Dodd-Frank Act added more than 13 new categories to the statutory HMDA data fields lenders are required to collect, and in the implementing regulation, Regulation C, the CFPB added 25 new data fields to the existing 23 fields. The ABA noted that the CFPB estimates that, in addition to existing costs of HMDA compliance, the additional annual costs of operations will be approximately $120.6 million conservatively (more if reporting quarterly) and lenders will incur a one-time additional cost of between $177 million and $326.6 million. Furthermore, the ABA states there still remains a need to address the “significant” privacy issues presented by the “vast trove of data points added by Dodd-Frank,” and that “the collection and transfer and warehousing of greatly increased and more sensitive data will necessitate even more robust and costlier private sector and government systems.” However, the ABA noted the Bureau has not initiated rulemaking to address the privacy issues presented.
Notably, last month, the CFPB issued a proposal in the Federal Register to amend the 2015 HMDA rule (see previously issued Special Alert here). The changes are primarily for the purpose of clarifying data collection and reporting requirements, and most of the clarifications and revisions would take effect in January 2018. The deadline to submit comments on the CFPB’s proposal is May 25, 2017.
CFPB Seeks Public Comment on its Plans for Assessing RESPA Mortgage Servicing Rule
On May 4, the CFPB issued a request for comment on its plans for assessing the 2013 Real Estate Settlement Procedures Act (RESPA) servicing rule’s effectiveness in meeting the purposes and objectives outlined in the Dodd-Frank Act, which requires the CFPB to assess each significant rule or order it adopts under Federal consumer financial laws. According to the request for comment and a May 4 blog post on the CFPB’s website, the self-assessment will focus on objectives to ensure that: (i) “[c]onsumers are provided with timely and understandable information to make responsible decisions about financial transactions”; (ii) “[c]onsumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination”; (iii) “[o]utdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens”; (iv) “[f]ederal consumer financial law is enforced consistently”; and (v) “[m]arkets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”
In 2013, the Bureau adopted the 2013 RESPA Servicing Final Rule and further amended the rule several times to address questions raised by the industry, consumer advocacy groups, and other stakeholders. The CFPB deemed the 2013 RESPA Servicing Final Rule, effective January 10, 2014, a “significant rule” for purposes of the Dodd-Frank Act. Importantly, however, in Footnote 10 of its most-recent request for comment, the Bureau clarifies that it “is not seeking comment on the amendments to the mortgage servicing rules that became or will become effective after the January 10, 2014 effective date.” (emphasis added) Accordingly, it appears that the Bureau is not presently seeking comments on the Amendments to Regulation X and Regulation Z that the CFPB published as a Final Rule (12 CFR Parts 1024 and 1026) in the October 19, 2016 edition of the Federal Register – see earlier InfoBytes coverage here – and which are slated to take effect in part on October 19, 2017 and in full on April 19, 2018.
CFPB Releases “Core Outcomes” for Financial Empowerment Programs
On April 27, the CFPB announced in a blog post its release of a core set of financial outcomes designed to help human services organizations integrate financial empowerment and capability initiatives into their programs. Strategies include implementing financial education tools and financial counseling or coaching. In its April report, Tracking Success in Financial Capability and Empowerment Programs, the Bureau identified the following five core outcomes to help consumers improve their financial capabilities: (i) planning and goals; (ii) savings; (iii) bill payment; (iv) credit profile; and (v) financial well-being. According to the report, which assists the financial empowerment field in encouraging commonality in outcomes, core outcomes are designed to:
- “help inform and guide service delivery organizations and those who design, fund, or evaluate service programs as they assess or document the value of integrating financial capability and empowerment strategies into the delivery of human services programs”;
- “provide a suggested core set of common outcomes to measure for the financial empowerment field”;
- “augment, not displace, current programmatic outcomes and accommodate a broad range of different program types”; and
- “help provide consistency across programs by creating a common framework and language for demonstrating success for the provision of financial empowerment services as an element of other human services programs.”
According to the Bureau’s Office of Financial Empowerment, it began identifying common core outcomes with input from multiple financial empowerment practitioners and researchers to “improve the financial well-being of “lower-income and economically vulnerable consumers.”
Fannie Mae to Allow Home Owners to Swap Student Loan Debt for Mortgage Debt
On April 25, Fannie Mae issued updates to its Selling Guide allowing home owners to refinance their mortgages to pay off their student loan debt. The new policies will present opportunities for homeowners to (i) pay down student debt by refinancing their mortgage; (ii) no longer be required to include non-mortgage debt (credit cards, auto loans, and student loans) paid by others on loan applications; and (iii) increase the likelihood of qualifying for a mortgage loan while carrying student debt “by allowing lenders to accept student debt payments included on credit reports.” The updates also allow for debt to be excluded from the debt-to-income ratio if a lender can obtain documents showing that a non-mortgage debt has been paid by another party for at least 12 months. “These new policies provide . . . flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers,” stated Jonathan Lawless, Fannie Mae’s Vice President of Customer Solutions. The policy changes are effective immediately.
AG Sessions Discusses Approach to Enforcement at Annual Ethics Conference
In prepared remarks delivered April 24 at the Ethics and Compliance Initiative Annual Conference, Attorney General Jeff Sessions discussed the DOJ’s anticipated approach to prosecuting corporate fraud and misconduct under his leadership. The Attorney General announced the Department of Justice’s (DOJ) commitment to “re-double” its efforts to combat violent crime, while continuing to investigate and prosecute “corporate fraud and misconduct.” Specifically, Mr. Sessions pledged that the DOJ will “continue to emphasize the importance of holding individuals accountable for corporate misconduct” and when making charging decisions, will account for “whether companies have good compliance programs; whether they cooperate and self-disclose their wrongdoing; and whether they take suitable steps to remediate problems.”
Notable among the many points made by Mr. Sessions during his speech, was his emphasis on the Foreign Corrupt Practices Act (“FCPA”). As explained by Mr. Sessions, “corruption harms free competition, distorts prices, and often leads to substandard products and services coming into this country” and, ultimately, “increases the cost of doing business, and hurts honest companies that don’t pay these bribes.” To this end, the Attorney General promised to “strongly enforce the FCPA and other anti-corruption laws.” As he put it, “[c]ompanies should succeed because they provide superior products and services, not because they have paid off the right people.” In closing, the Attorney General took a moment to remind the audience that “[o]ur economy, and indeed, our whole system of self-government, depends on people believing that those who choose to disregard the law will be caught and punished. This is ultimately the responsibility of the Justice Department.”
OFAC Updates: New Sanction Designations and Additions to Specially Designated Nationals List
In April, OFAC announced implementation of three new sanctions against several entities and individuals designated for, among others, materially assisting, sponsoring, or providing financial support to certain foreign entities. In addition, OFAC updated its list of Specially Designated Nationals (SDN) and Blocked Persons.
Libya-Based ISIS Financial Facilitators / Algerian ISIS Supporter and Arms Trafficker. On April 13, OFAC imposed sanctions against certain Libyan and Algerian financial facilitators for their roles in assisting ISIS’s financial operations in Libya. The designations block the individuals, one of whom was designated as engaging in actions through weapon trafficking, from the global financial system, and further state that “all property and interests in property . . . subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with” the identified individuals.
Syrian “Research Center” Accused of Developing Weapons. On April 24, OFAC announced it was taking action against 271 employees of a Syrian research center for “developing and producing non-conventional weapons and the means to deliver them.” The sanctions came as a reaction to the widely- reported April 4 sarin gas attack against civilians, and followed sanctions announced January 12 against 18 officials, five branches of the Syrian military, and associated entities for their participation in a chemical weapons program responsible for attacks in 2014 and 2015. The 271 named individuals are “designated for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services in support of, and having acted or purported to act for or on behalf of, directly or indirectly, the Government of Syria.” The new sanctions block U.S. persons from dealing with these employees.
Foreign Narcotics Kingpin Sanctions. OFAC made additions to the Specially Designated Nationals (SDN) list, which designates individuals and companies who are prohibited from dealing with the U.S. and whose assets are blocked. Transactions are prohibited if they involve transferring, paying, exporting, or otherwise deal in the property or interest in property of an entity or individual on the SDN list. Additions to the list include Foreign Narcotics Kingpin Sanctions Regulations against two Mexican entities, and Global Terrorism Sanctions Regulations against a Saudi individual.
CFPB to Discuss Small Business Lending at May 10 Field Hearing
On May 10, the CFPB will hold a field hearing on small business lending in Los Angeles, CA. The announcement, which is posted on the Events page of the CFPB’s website, indicates that the hearing will feature “remarks from Director Cordray, as well as testimony from community groups, industry representatives, and members of the public.” Notably, “small business data collection” was among the topics covered by the Bureau in its latest fair lending report (See previous InfoBytes coverage here). Specifically, the CFPB noted in its report that Congress “expressed concern that women-owned and minority-owned businesses may experience discrimination when they apply for credit, and has required the CFPB to take steps to ensure their fair access to credit.” In response to this observation, the Bureau indicated in its report that its “[s]mall business lending supervisory activity will also help expand and enhance the Bureau’s knowledge in this area, including the credit process; existing data collection process; and the nature, extent, and management of fair lending risk.”
CFPB Draws Mixed Reactions in Response to Request for Comments on Proposed Student Lending Information Collection
Back in February, the CFPB proposed information collection on the student loan servicing market, since then two trade associations have submitted comment letters, one in support of the information collection and one believing that the information collection would be unduly burdensome. According to the Bureau, the proposed information collection was intended to provide the Bureau “with a broader and deeper look into the student loan market.” The comment period for its request closed earlier this month.
Americans for Financial Reform (AFR). On April 24, the AFR and 31 other organizations sent a sign-on letter to the CFPB expressing support for the CFPB’s proposed student loan servicing data collection initiative. The letter argues, among other things, that “compiling such metrics and borrower outcomes would benefit market participants, federal and state agencies, policymakers, and borrowers,” by allowing each to “[o]btain[] a clearer view of the student loan market overall” while also “inform[ing] all market participants on how best to serve student loan borrowers.” The AFR letter also offers several suggests as to how the Bureau can best ensure the “quality and transparency of the data.” The letter emphasized, among other things, that “transparency is critical to having a servicing system that works for borrowers,” especially given the large number of student loan defaults.
Consumer Bankers Association (CBA). In an April 24 comment letter, the CBA expressed agreement with the CFPB’s ultimate goal of creating a private student loan market that is both transparent and fair, but argues that its consumer bank members already “effectively tailor[]” their loan products “to meet their customer’s needs” and strive to make loans only “to customers who are judged highly likely to repay them.” Specifically, the CBA believes, among other things, that the CFPB information collection would require unnecessarily duplication of existing publicly reported private loan data. CBA also raised additional concerns, including: (i) whether the CFPB could collect the same data effectively, and with greater protection afforded to loan holders and servicers, through the supervisory process; (ii) whether the CFPB has “grossly underestimate[d]” the burden on servicers to collect the requested data, and (iii) whether the CFPB’s stated market monitoring objectives could be met through less burdensome methods.