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FDIC announces Louisiana disaster relief
On June 10, the FDIC issued FIL-40-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Louisiana affected by severe storms, tornadoes, and flooding. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC further stated that it will also consider regulatory relief from certain filing and publishing requirements.
CFPB publishes rulemaking agenda
On June 11, the Office of Information and Regulatory Affairs released the CFPB’s spring 2021 rulemaking agenda. According to a Bureau announcement, the information released represents regulatory matters the Bureau is “currently pursuing under interim leadership pending the appointment and confirmation of a permanent Director.” Any changes made by the new permanent director will be reflected in the fall 2021 rulemaking agenda. Additionally, the Bureau indicates that it plans to continue to focus resources on actions addressing the adverse impacts to consumers due to the ongoing Covid-19 pandemic, and highlighted an interim final rule issued in April that addresses certain debt collector conduct associated with the CDC’s temporary eviction moratorium order (covered by InfoBytes here). The Bureau will also continue to take concrete steps toward furthering the agency’s “commitment to promoting racial and economic equity.”
Key rulemaking initiatives include:
- Small Business Rulemaking. Last September, the Bureau released a Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) outline of proposals under consideration, convened an SBREFA panel last October, and released the panel’s final report last December (covered by InfoBytes here and here). The Bureau reports that it anticipates releasing a notice of proposed rulemaking (NPRM) for the Section 1071 regulations this September to “facilitate enforcement of fair lending laws as well as enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.”
- Consumer Access to Financial Records. The Bureau notes that it is considering rulemaking to implement section 1033 of Dodd-Frank in order to address the availability of electronic consumer financial account data. The Bureau is currently reviewing comments received in response to an Advance Notice of Proposed Rulemaking (ANPR) issued last fall regarding consumer data access (covered by InfoBytes here).
- Property Assessed Clean Energy (PACE) Financing. As previously covered by InfoBytes, the Bureau published an ANPR in March 2019 seeking feedback on the unique features of PACE financing and the general implications of regulating PACE financing under TILA. The Bureau notes that it continues “to engage with stakeholders and collect information for the rulemaking, including by pursuing quantitative data on the effect of PACE on consumers’ financial outcomes.”
- Automated Valuation Models (AVM). Interagency rulemaking is currently being pursued by the Bureau, Federal Reserve Board, OCC, FDIC, NCUA, and FHFA to develop regulations for AVM quality control standards as required by Dodd-Frank amendments to FIRREA. The standards are designed to, among other things, “ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, [ ] avoid conflicts of interest, require random sample testing and reviews,” and account for any other appropriate factors. An NPRM is anticipated for December.
- Amendments to Regulation Z to Facilitate LIBOR Transition. As previously covered by InfoBytes, the Bureau issued an NPRM in June 2020 to amend Regulation Z to address the sunset of LIBOR, and to facilitate creditors’ transition away from using LIBOR as an index for variable-rate consumer products. A final rule is expected in January 2022.
- Reviewing Existing Regulations. The Bureau notes in its announcement that while it will conduct an assessment of a rule implementing HMDA (most of which took effect January 2018), it will no longer pursue two HMDA proposed rulemakings previously listed in earlier agendas related to the reporting of HMDA data points and public disclosure of HMDA data. Additionally, the Bureau states that it finished a review of Regulation Z rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 and plans to publish any resulting changes in the fall 2021 agenda.
The Bureau’s announcement also highlights several completed rulemaking items, including (i) a final rule that formally extended the mandatory compliance date of the General Qualified Mortgage final rule to October 1, 2022 (covered by InfoBytes here); (ii) proposed amendments to the mortgage servicing early intervention and loss mitigation-related provisions under RESPA/Regulation X (covered by a Buckley Special Alert) (the Bureau anticipates issuing a final rule before June 30, when the federal foreclosure moratoria are set to expire); and (iii) a proposed rule (covered by InfoBytes here), which would extend the effective date of two final debt collection rules to allow affected parties additional time to comply due to the ongoing Covid-19 pandemic (the Bureau plans to issue a final rule in June on whether, and for how long, it will extend the effective date once it reviews comments).
FDIC announces West Virginia disaster relief
On June 1, the FDIC issued FIL-38-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of West Virginia affected by severe storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
Agencies extend CRA credit period for certain disaster relief efforts
On May 27, the FDIC, OCC, and the Fed (collectively, “Agencies”) issued an interagency statement on granting a 36-month extension of the original period provided for Community Reinvestment Act (CRA) consideration for bank activities that help to revitalize or stabilize Puerto Rico and the U.S. Virgin Islands in response to Hurricane Maria. As previously covered by Infobytes, the Agencies issued an interagency statement on the availability of CRA credit for financial institution activities that “help revitalize or stabilize the U.S. Virgin Islands and Puerto Rico, which were designated as major disaster areas by the President because of Hurricane Maria” in January 2018. Provided financial institutions continue to be responsive to the community needs of their own CRA assessment areas, the Agencies will now give “favorable consideration” to community development activities, such as assistance to displaced people, in the areas impacted by Hurricane Maria. In addition, the Agencies state that they may give greater weight to activities aimed at assisting the low and moderate income affected areas, but that general consideration will be given regardless of median or personal income. The Agencies have determined that the ongoing impact of Hurricane Maria in Puerto Rico and the U.S. Virgin Islands warrants an extension through September 20, 2023.
FDIC releases April enforcement actions
On May 28, the FDIC released a list of administrative enforcement actions taken against banks and individuals in April. During the month, the FDIC issued 10 orders consisting of “two Orders to Pay Civil Money Penalties, one Section 19 Application, one Order Terminating Consent Order, and one Order of Prohibition from Further Participation.” Among the orders is a civil money penalty imposed against a Washington-based bank related to alleged violations of the Flood Disaster Protection Act (FDPA) for “failing to obtain adequate flood insurance on buildings and/or the buildings’ contents securing designated loans at the time the Bank made, increased, extended, or renewed the loans.” The order requires the payment of a $17,000 civil money penalty.
The FDIC also imposed a civil money penalty against a California-based bank related to alleged violations of the FDPA. Among other things, the FDIC claims that the bank (i) failed to notify the borrower to obtain flood insurance; and (ii) failed to purchase flood insurance on the borrower’s behalf. The order requires the payment of a $281,000 civil money penalty.
U.S.-UK financial regulators discuss bilateral issues
On May 24, the U.S. Treasury Department issued a joint statement covering the recently held fourth meeting of the U.S.-UK Financial Regulatory Working Group (Working Group). Participants included officials and senior staff from both countries’ treasury departments, as well as regulatory agencies including the Federal Reserve Board, CFTC, FDIC, OCC, SEC, the Bank of England, and the Financial Conduct Authority. The Working Group discussed, among other things, (i) financial sector implications of the UK’s withdrawal from the EU; (ii) “cooperative efforts to promote the free flow of cross-border financial services data crucial for effective financial sector regulation and supervision”; (iii) regulatory fragmentation and data localization risks; (iv) the Financial Stability Board’s work on non-bank financial intermediation, which involves active engagement from both U.S. and UK authorities; and (v) the management of climate-related financial risks and other sustainable finance issues. Working Group participants will continue to engage bilaterally on these issues and others ahead of the next meeting planned for this fall.
FDIC counters states’ challenge to “valid-when made” rule
On May 20, the FDIC filed a motion for summary judgment in response to a challenge brought by eight state attorneys general to the FDIC’s valid-when-made rule. As previously covered by InfoBytes, the FDIC’s final rule clarifies that, under the Federal Deposit Insurance Act (FDIA), whether interest on a loan is permissible is determined at the time the loan is made and is not affected by the sale, assignment, or other transfer of the loan. The AGs filed a lawsuit last year (covered by InfoBytes here) arguing, among other things, that the FDIC does not have the power to issue the rule, and asserting that while the FDIC has the power to issue “‘regulations to carry out’ the provisions of the FDIA,” it cannot issue regulations that would apply to nonbanks. The AGs also claimed that the rule’s extension of state law preemption would “facilitate evasion of state law by enabling ‘rent-a-bank’ schemes,” and that the FDIC failed to explain its consideration of evidence contrary to its assertions, including evidence demonstrating that “consumers and small businesses are harmed by high interest-rate loans.”
The FDIC countered that the AGs’ arguments “misconstrue” the rule, which “does not regulate non-banks, does not interpret state law, and does not preempt state law.” Rather, the FDIC argued that the rule clarifies the FDIA by “reasonably” filling in “two statutory gaps” surrounding banks’ interest rate authority. “The rule, which enjoys widespread support from the banking industry, represents a reasonable interpretation of [the FDIA], and should be upheld under Chevron’s familiar two-step framework,” the FDIC stated. Moreover, the FDIC contended, among other things, that the rule is appropriate because the FDIA does not address at what point in time the validity of a loan’s interest rate should be determined and is “silent” about what effect a loan’s transfer has on the validity of the interest rate. The FDIC also challenged the AGs’ argument that it is improperly trying to regulate non-banks, pointing out that the rule “regulates the conduct and rights of banks when they sell, assign, or transfer loans” and that “any indirect effects the rule has on non-banks do[es] not place the rule outside the agency’s authority.”
Agencies to proceed with Call Report revisions
On May 24, the FDIC, Federal Reserve Board, and the OCC published a joint notice and request for comments on information collections published last December and this February (covered by InfoBytes here). The proposed reporting changes would revise and extend three versions of the Call Report—FFIEC 031, FFIEC 041, and FFIEC 051—as well as FFIEC 002, “Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,” and FFIEC 002S, “Report of Assets and Liabilities of a Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or Agency of a Foreign (Non-U.S.) Bank.” After considering comments received on the information collections, the agencies announced their intention to proceed with the proposed revisions and will submit a request to Office of Management and Budget for approval. The proposed revisions to the reporting forms, along with revised instructions related to FDIC amendments to the deposit insurance assessment system, will be effective with the June 30, 2021, report date. Additionally, the agencies noted that the exclusion of sweep deposits and certain other deposits from reporting as brokered deposits will be effective with the September 30, 2021, report date. Comments on the joint notice must be received by June 23.
Federal agencies release host state loan-to-deposit ratios
On May 21, the FDIC, the Federal Reserve Board, and the OCC released the current host state loan-to-deposit ratios for each state or U.S. territory, which the agencies use to determine compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act). Under the Interstate Act, banks are prohibited from establishing or acquiring branches outside of their home state for the primary purpose of deposit production. Branches of banks controlled by out-of-state bank holding companies are also subject to the same restriction. Determining compliance with Section 109 requires a comparison of a bank’s estimated statewide loan-to-deposit ratio to the estimated host state loan-to-deposit ratio. If a bank’s statewide ratio is less than one-half of the published host state ratio, an additional review is required by the appropriate agency, which involves a determination of whether a bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches.
FDIC seeks input on digital assets
On May 17, the FDIC issued a notice and request for comments regarding information on insured depository institutions’ (IDIs) current and potential digital asset activities. The Request for Information (RFI) solicits input on digital asset use cases involving IDIs and their affiliates to help the agency “inform its understanding of the industry’s and consumers’ interests in this area.” According to the agency, there are “novel and unique considerations” connected to digital assets and “banks are increasingly exploring several roles in the emerging digital asset ecosystem, such as being custodians, reserve holders, issuers, and exchange or redemption agents; performing node functions; and holding digital asset issuers’ money deposits.” FDIC Chairman Jelena McWilliams states that digital asset areas have “seen rapid expansion and innovation in recent years” and that “[t]his RFI gives us an opportunity to gain additional insight into the market, and what role banks might play in the future.” The deadline for submitting comments for the RFI is July 16.