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NCUA to reinstate civil money penalties for late call reports
Recently, the National Credit Union Administration (NCUA) announced it will reinstate assessing civil money penalties for credit unions that fail to submit a call report (NCUA Form 5300) in a timely manner. The call report program was suspended after December 2019 during the Covid-19 pandemic. “The December 2023 Call Report will be the first reporting cycle under the reinstated program and will be due by 11:59:59 p.m. Eastern time, January 30, 2024.” The NCUA states it will send a reminder to credit unions with outstanding call reports a week before their deadline. The NCUA will also consider extenuating circumstances, including the size and good faith of the credit union, the gravity of the violation, the history of previous violations, and other matters like natural disasters or incapacitation of key employees.
Fed enters into written agreement with Ohio bank
On December 19, the Federal Reserve Board announced a written agreement with an Ohio state-chartered bank and its holding company to address certain deficiencies identified during a recent examination of the bank. Under the agreement, the bank and its holding company agreed to: (i) use the bank’s resources as a “source of strength”; (ii) submit a written plan to enhance board oversight and management; (iii) conduct a third-party assessment of the bank’s staff; (iv) submit an enhanced written investment policy that includes “periodic analysis of the investment portfolio, including, but not limited to the assessment of market risk, credit risk, interest rate risk, and liquidity risk of the underlying investments”; (v) improve the bank’s investment portfolio management and interest rate risk management practices; (vi) implement an enhanced liquidity risk management program; and (vii) submit a written plan regarding sufficient capital (among other corrective actions).
OCC issues cease-and-desist order to NY bank
On December 14, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals that are or were affiliated with such entities. Included is a cease-and-desist order against an upstate New York bank for allegedly engaging in unsafe or unsound practices, including on the bank’s corporate governance, capital planning, interest rate risk management, liquidity risk management, and reports of condition.
Under the order, the bank must appoint a compliance committee to take corrective action, submit a three-year strategic plan to establish objectives for the bank’s risk profile, earnings performance, growth, and balance sheet mix, among other areas, and maintain a capital ratio of at least 15 percent, a common equity tier 1 capital of at least equal to 14 percent, and a leverage ratio of at least ten percent. The order also requires the bank to create an interest rate risk program and a third-party risk management program.
FSB report addresses financial risk concerns with third-party relationships
On December 4, the Financial Stability Board (FSB) published a report titled “Enhancing Third-Party Risk Management and Oversight: A Toolkit for Financial Institutions and Financial Authorities,” as summarized in this press release. The report provides a toolkit that: (i) defines common terms to improve consistency among financial institutions, including “third-party service relationship,” “service provider,” and “critical service,” among others; (ii) outlines tools for financial institutions to identify critical third-party services and manage potential risks throughout the service lifecycle, onboarding and monitoring of service providers, and reporting incidents, among others; and (iii) outlines tools for financial authorities to manage third-party risks, including how to identify third-party dependencies and potential systemic risks. In preparing the report, the FSB received public feedback over the past summer regarding risk concerns stemming from outsourcing and third-party service relationships.
FTC announces settlement of charges against operators of alleged telemarketing training scheme
On December 11, the FTC issued a press release announcing proposed orders against the CEO and other related individuals and businesses of an income telemarketing training scheme. In connection with the settlement, the FTC filed a complaint in the U.S. District Court of the Middle District of Tennessee alleging violations of the FTC Act and the Telemarking and Consumer Fraud and Abuse Prevention Act. The FTC alleged that the defendants, a Tennessee-based group of companies, practiced deceptive and unlawful advertising, marketing, promotion, distribution, and selling of money-making and investment opportunities in offering a sales mentor program. The complaint alleges defendants performed these acts through several business entities via a telemarketing sales training and coaching program and through marketing practices on social media platforms. Since 2019, consumers paid more than $29 million to defendants for access to this sales training program.
The FTC filed two stipulated judgments for “permanent injunction, monetary judgment, and other reliefs.” The orders contain a total monetary judgment of $16.4 million. The stipulated orders also prohibit the defendants from: (i) making misleading earnings claims, so if the defendants make earnings claim in the future, they have to have a reasonable basis for those claims; and (ii) misrepresenting any sales of goods or services, including the description of the good or service, any past performance, any testimonials, any future predictions of profit earnings, among others. The defendants will also be required to turn over a total of $1 million to be used to refund harmed consumers, with one CEO ordered to pay $600,000 and the other defendants ordered to pay $400,000. All defendants neither admit nor deny any of the allegations in the complaint.
Freddie Mac standardizes down payment assistance programs
On December 4, Freddie Mac announced new, standardized mortgage documents aimed at of making down payment assistance (DPA) programs more accessible nationwide. According to Freddie Mac, the subordinate lien programs for DPA programs have been specific to particular housing finance agencies which created confusion. By standardizing these documents, Freddie Mac hopes to benefit lenders by making DPA programs more efficient.
To create the standardized documents, Freddie Mac partnered with Fannie Mae and state housing finance agencies. These documents will initially be available for 19 states, and eventually for all 50 states and the District of Columbia. These changes come in tandem with Freddie Mac’s new tool, DPA One®, to aggregate and showcase down payment assistance programs on a single platform.
CFPB comments on California DFPI licensing provisions, income-based advances
On December 1, the CFPB posted a blog entry sharing its comment letter responding to the California DFPI’s notice of proposed rulemaking for “income-based advances” from earlier this year. As previously covered by InfoBytes, the DFPI’s proposed regulations would, among other things, clarify licensing provisions and the applicability of the CFL to certain activities. Within the CFPB’s comment letter, it stressed the importance of regulatory consistency of consumer financial products and services across federal and state law. The letter noted the CFPB’s view that companies offering “income-based advances” (also marketed as “earned wage access”) are subject to federal oversight, and the CFPB supports state oversight of such companies as well. Moreover, the CFPB said that DFPI’s particular treatment of income-based advances takes a similar approach to TILA and Regulation Z and that the CFPB plans to issue further guidance regarding the applicability of TILA to these products.
VA asks all mortgage servicers to pause all VA foreclosures, extends the Covid-19 Refund Modification program
On November 17, the U.S. Department of Veterans Affairs (VA) asked all mortgage servicers to pause any foreclosure proceedings of VA-guaranteed loans, as well as extended its Covid-19 Refund Modification program through May 2024. The VA acknowledges that the veteran community is struggling to make mortgage payments, despite VA-backed mortgages having some of the lowest foreclosure rates in the U.S. The VA’s extension of its Covid-19 Refund Modification program allows more veterans to get a zero-interest, deferred-payment loan to maintain affordable monthly payments. The VA wishes to delay any foreclosure proceedings so that it may continue to assist veterans before it launches its VA Servicing Purchase program, which will allow the VA to purchase defaulted VA loans, modify them, and create a direct loan so that veterans will have a chance at keeping their homes.
FTC approves measures for compulsory process use for AI-related products and services
On November 21, the FTC approved an omnibus resolution in a 3-0 vote, allowing the use of compulsory processes in nonpublic inquiries involving products and services produced or claimed to be produced by artificial intelligence (AI). This resolution aims to streamline the FTC staff's issuance of civil investigative demands (CIDs), in AI-related investigations while maintaining the Commission's authority to decide when CIDs are necessary. This resolution remains valid for 10 years.
FHFA reports no internal control weaknesses FY 2023 performance report
On November 15, FHFA released its annual performance report, titled “FHFA FY 2023 Performance and Accountability Report” to detail how it regulated the FHLBank system, as well as Fannie Mae and Freddie Mac, during the past fiscal year. The report refers to its FY 2022-2026 Strategic Plan with the goals of securing the safety of regulated entities, fostering equitable housing finance markets, and stewarding FHFA’s infrastructure. For FY 2023, FHFA identified 35 performance targets to help guide it toward achieving its strategic goals. Of the 35 targets, the FHFA met 31 of them––an 89 percent success rate. Table 2 from page 15 of the report displays the goals and ones that have not been met, including (i) “Improve Time-to-Hire” within 80 days; and (ii) “Develop FHFA Information Technology Strategic Plan” by the time the report had been published.
Looking forward, FHFA wishes to implement an “Enterprise Fair Lending Rating System to annually assess each Enterprise’s compliance with fair lending and fair housing standards.” For fintech initiatives, FHFA will publish a summary on Velocity TechSprint, a problem-solving event with “mortgage industry leaders and fintech entrepreneurs to address mortgage market issues.”