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  • CFPB releases consumer advisory for student borrowers notifying them of April deadline to cancel

    Federal Issues

    On March 11, the CFPB published a consumer advisory notifying student loan borrowers that they may have an opportunity to cancel or receive credits toward the cancellation of their student loans but some borrowers will need to consolidate their loans by April 30 in order to obtain the benefit. The Department of Education has implemented a “one-time adjustment” to help borrowers receive credit toward federal student loan cancellation. This adjustment is designed to enable the counting of more payments, including all payments made on federally managed loans since July 1, 1994, as well as certain periods of deferment, economic hardship, and forbearance. Generally, federal student loans are eligible for Income Driven Repayment (IDR) plans, which offer loan cancellation after 10, 20, or 25 years of qualifying payments, or after 10 years for those pursuing Public Service Loan Forgiveness (PSLF), provided other eligibility criteria are met. The Bureau also noted that consolidation is free, warning against scammers who would charge for that service.

     

    Federal Issues CFPB Consumer Finance Student Lending Department of Education Income-Driven Repayment

  • Business groups sue the CFPB over credit card late fee rule

    Courts

    On March 7, several business groups (plaintiffs) sued the CFPB rule in the U.S. District Court for the Northern District of Texas over its announced credit card late fee rule. As previously covered by InfoBytes, the Bureau’s new final rule limited most credit card late fees to $8, among other actions, and was met immediately with criticism from banks and legislators.

    The plaintiffs’ complaint claimed the CFPB completed the rule hastily to implement a pledge made by President Biden around his State of the Union Address to reduce credit card late fees by 75 percent. The complaint further asserted the CFPB skipped necessary steps, made economic miscalculations, and otherwise breached the Administrative Procedure Act. As alleged, the Bureau likely understated “the volatility of card issuers’ cost-to-fee ratios pertaining to late fees” and improperly relied on data which does not allow for the recovery of a “reasonable and proportional” penalty fee. On the Bureau’s use of the Y-14M data, the complaint alleged the new rule ignored peer-reviewed studies and instead opted to base the rule on an internal study using confidential data that was not available for examination during the period allocated for public comment. The plaintiffs argued the final rule would incur “substantial compliance costs” by amending printed disclosures, using the cost-analysis provisions, and notifying consumers of changes in interest rates to recoup costs, among other problems. The complaint also cited TILA’s effective-date provisions and the Bureau’s embattled funding structure to support the argument that the final rule would cause irreparable harm.

    Courts Federal Issues CFPB Litigation Credit Cards Agency Rule-Making & Guidance Fees Consumer Finance Consumer Protection

  • GAO report calls for FDIC, Fed to fix bank supervision issues

    On March 6, the U.S. Government Accountability Office (GAO) released a report to congressional requesters, including Senator Sherrod Brown (D-OH), Chairman of the U.S. Senate’s Committee on Banking, Housing, and Urban Affairs, regarding the Fed and FDIC’s communication of supervisory concerns related to the 2023 banking issues and the agencies’ procedures for escalating concerns. The report found that while both regulators generally met their requirements for communicating concerns, the Fed’s escalation procedures lacked clarity and specificity, which could have contributed to delayed enforcement last year.

    The GAO recommended that the Fed revise its escalation procedures to be more precise and include measurable criteria. The Fed agreed with the recommendation and acknowledged that clearer examination procedures could help in addressing supervisory concerns more promptly. For the FDIC, the GAO recognized that the FDIC already updated its escalation procedures in August 2023 and will intend to implement further revisions to respond promptly. The GAO report also suggested that Congress amend the FDI Act to incorporate noncapital triggers related to unsafe banking practices before they affect capital.

    Bank Regulatory Federal Issues FDIC Federal Reserve Bank Supervision GAO Congress

  • VA proposes rule changes to VA-Guaranteed, IRRRLoans

    Agency Rule-Making & Guidance

    On March 7, the VA published a supplemental notice of proposed rulemaking in the Federal Register titled “Loan Guaranty: Revisions to VA-Guaranteed or Insured Interest Rate Reduction Refinancing Loans” which sought comment on whether the “date of loan issuance” should be defined as date of the note (as originally suggested) or as the date “the first payment is due.” The notice explained the VA did not receive any comments on this aspect of the proposed rule and enumerated several concerns with the initial proposed definition. The comment period for this proposed rule will close on May 6.

    Agency Rule-Making & Guidance Federal Issues Department of Veterans Affairs Loans

  • Fed issues final rule for FMUs to update risk management requirements, noting cyber and climate risks

    Agency Rule-Making & Guidance

    On March 8, the Federal Reserve Board announced a final rule that will update risk management requirements for financial market utilities (FMUs) supervised by the Fed. FMUs provide the financial infrastructure to clear and settle payments and transactions. The rule will go into effect 30 days after publication in the Federal Register, and FMUs are expected to comply with certain updates by 90 days and all updates by 180 days after publication. The Fed reported the final rule is “substantially similar” to the proposed rule and provided additional details to the exiting requirements for the following: (i) review and testing; (ii) incident management; (iii) business continuity management; and (iv) third-party risk management.

    Agency Rule-Making & Guidance Federal Issues Federal Reserve Cyber Risk & Data Security Risk Management

  • OCC’s Hsu speaks on operational resilience framework as regulators consider non-financial disruptions

    Federal Issues

    On March 12, the Acting Director for the OCC, Michael J. Hsu, delivered a speech at a banking conference in Washington, D.C. on “operational resilience,” which he defined as a bank’s ability to “prepare for, and adapt to, and withstand or recover from disruptions.” Hsu stressed that the most concerning impacts on financial institutions are not financial, but often arise from natural disasters, pandemics, global conflicts, or weak internal governance management. The acting director noted an increase in the probability of disruptions occurring and the impacts of them. In response, the OCC will expect financial institutions to be operationally resilient, and Hsu stated that the federal banking agencies are considering making changes to their operational resilience framework for large banks and possibly third-party service providers.

    These principles were first laid out in a white paper following the September 11, 2001, attack on the World Trade Center whereby the paper promoted geographic diversity and the resiliency of data centers. During the Covid-19 Pandemic, the federal banking agencies issued a paper that integrated existing guidance and common industry practices in October 2020.

    Federal Issues OCC Operational Resilience

  • FTC confirms two members as its board returns to full strength

    Federal Issues

    On March 8, the FTC announced the confirmation of two new commissioners: Andrew N. Ferguson and Melissa Holyoak. Additionally, current Commissioner Rebecca Kelly Slaughter received a confirmation vote for a second term. Newcomers Ferguson and Holyoak were nominated by President Biden and will serve until September 25, 2025; Slaughter will serve until the same date in 2029. Ferguson had previously been working as solicitor general of Virginia, and before that he was chief counsel to U.S. Sen. Mitch McConnell of Kentucky and as Republican counsel on the U.S. Senate Judiciary Committee. Holyoak was most recently solicitor general with the Utah Attorney General’s Office. Before that, she served as president and general counsel of a D.C.-based public interest law firm.

    Federal Issues FTC Utah

  • Fed Chairman Powell testifies before House Financial Services Committee on Basel III “Endgame,” commercial real estate, and banking capital

    Federal Issues

    On March 6, the House Financial Services Committee held its semi-annual hearing on the Federal Reserve’s Monetary Policy Report, and heard testimony from the Federal Reserve Chairman Jerome Powell a day after the Republican committee members sent a letter to the banking regulators urging withdrawal from the Basel III “Endgame” proposal. Powell discussed the Basel III Endgame proposal comments, the commercial real estate market, and capital requirements, among others.

    On the Basel III “Endgame” proposal, Chairman McHenry (R-NC) asked if the Fed was listening to the comments received and what the status of the rulemaking is moving forward. Powell confirmed that the Fed has received substantive comments in mid-January and had put out the Quantitative Impact Study; the Fed is still analyzing the comments and will soon reach a point where the Fed can begin making decisions. Powell signaled to expect “broad and material changes to the proposal” while expressing confidence that the final proposal will receive support from the Fed and the public.

    Congressman Barr (R-KY), who also questioned the Basel III “Endgame” proposal, asked whether a re-proposal that implemented Basel III in a “capital neutral way” could be achieved without jeopardizing financial stability; Powell responded with “hypothetically, yes.” Then, pointing to a report that found 97 percent of comment letters either opposed or expressed concerns about the proposal, Powell stated “it’s unlike anything I’ve seen.” On technical matters, Barr raised the concern that subjecting different size banks to a one-size-fits-all standard would concentrate the industry, increase risks, and decrease competition. Powell indicated he shared that concern.

    Congressman Himes (D-CT) inquired about the commercial real estate market, specifically if the rapid decline in vacancy rates was a manageable risk. Powell indicated that the risks are manageable but stressed that “[t]here will be some losses by banks” and that the Fed is actively in touch with these banks, mostly small- and medium-sized banks with higher concentrations in this market. Congressman Lynch (D-MA) inquired about the 2023 banking issues and if they were caused in part by the “instantaneous” withdrawals of money from the banks as a proverbial bank run. Powell confirmed that the Fed is working on liquidity rules to change this.

    Congressman Loudermilk (R-GA) inquired about the driving force behind the record-high levels of credit card debt. Powell believed that pure economic growth was the cause, and the number has just scaled up; alternatively, it was because of the stimulus spending from the pandemic. Loudermilk then posed a hypothetical: if there was a rule on restricting lending from banks, if that rule would drive businesses and consumers towards “alternative forms of credit”; Powell said it would, and that would present nonbank lenders with more business. Moreover, Congressman Loudermilk had Powell commit to at most an analysis of how capital proposals affect small business credit access and small-dollar lending before finalizing any proposals.

    Federal Issues House Financial Services Committee Basel

  • HUD Secretary Fudge resigns effective March 22

    Federal Issues

    On March 11, Housing and Urban Development Secretary Marcia L. Fudge announced her resignation and will transition to life as a private citizen. Her statement highlighted her five decades of public service, including as a mayor, congressional staffer, congresswoman, and Secretary. According to Secretary Fudge, during her tenure, HUD has helped more than two million families avoid foreclosure; removed barriers for those with student loans buy a home with an FHA mortgage; and strengthened the number of Black and Hispanic borrowers based on the percentage of volume, among other accomplishments. According to the White House’s brief, Fudge provided HUD with the largest investment in affordable housing in U.S. history. Secretary Fudge’s resignation will go into effect on March 22, and Deputy Secretary Adrianne Todman will succeed her as Acting Secretary.

    Federal Issues HUD

  • House Financial Services Committee holds a hearing to address the “moving target” of CFPB’s recent actions

    Federal Issues

    On March 7, the House Committee on Financial Services held a hearing entitled, “Politicized Financial Regulation and its Impact on Consumer Credit and Community Development” to discuss recent actions and proposals, like mandated fee caps and government price fixing, by federal financial regulatory agencies. During the hearing, Congressman Barr (R-KY) criticized recent regulatory actions by federal authorities, particularly the Biden Administration and the CFPB, which he saw as politically-motivated interventions in the financial sector. He expressed concern over the implementation of fee caps and price controls, like the CFPB’s new rule on credit card late fees (covered by InfoBytes here), which he believed could impact consumer access to credit and competition. Barr argued that these regulations served political interests rather than protecting consumers, dismissing the concept of "junk fees" as undefined and hypocritical as the CFPB charges fees itself. Barr also discussed the need for clear standards in enforcement actions under UDAAP to provide certainty to financial institutions and foster a more inclusive market. He criticized other regulatory proposals, such as the Community Reinvestment Act final rule and the new certification process for the Community Development Financial Institutions Fund, for potentially overreaching into the operations of financial institutions.

    Barr contended the timing of the CFPB's most recent rule announcement, which was close to President Biden's State of the Union address, alleged a political agenda rather than an independent regulatory action. A witness policy analyst also shared that using financial regulation for political gain can negatively impact consumer credit. The analyst addressed the CFPB’s recent actions against overdraft fees and cited a May 2023 CFPB report which noted that revenue from overdraft and insufficient fund fees in the fourth quarter of 2022 was $1.5 billion lower than in the fourth quarter of 2019 and that many banks have already adjusted their overdraft practices––making the Bureau’s proposals unwarranted. Witnesses also argued how smaller banks and credit unions do not boast the same revenue nor goals as some larger banks, and that regulations should not be a “one size fits all” model.

    Federal Issues Hearing House Financial Services Committee CFPB Federal Reserve Overdraft

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