InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Alabama clarifies proclamation regarding eviction moratorium
On May 8, the Alabama governor issued a Ninth Supplemental Proclamation amending an earlier proclamation providing relief from residential evictions and foreclosures, which we previously covered here. The earlier proclamation is amended to specify that the protection against evictions applies only to evictions based on nonpayment. The proclamation also extends the state of emergency issued on March 13, 2020, for an additional sixty days, unless sooner terminated. The proclamation will remain in effect for the duration of the public health emergency unless rescinded or extended by another proclamation.
Agencies jointly release fact sheets for services and consumers regarding CARES Act forbearance
The Federal Housing Administration, the Department of Veterans Affairs, and the Rural Housing Service have jointly issued fact sheets for servicers and for consumers outlining certain requirements and obligations under CARES Act mortgage payment forbearance. The fact sheet for servicers provides guidance for assisting and educating borrowers and explains that loss mitigation options will vary based on the program under which the loan is insured or guaranteed. The fact sheet for consumers provides guidance on requesting forbearance and information on the forbearance program.
Fed report discusses banking system, cancels non-critical examinations
On May 8, the Federal Reserve Board (Fed) issued its Supervision and Regulation Report, which summarizes banking system conditions and the Fed’s supervisory and regulatory activities. The annual report discusses the safety and soundness of the banking industry, and explains the Fed’s response to Covid-19 pandemic. The report notes that actions taken by the Fed “use existing flexibility in the regulatory and supervisory framework and do not roll back the measures that allowed the banking sector to enter this crisis as a source of strength….” The report emphasizes that the banking system started 2020 in a healthy financial position, which helped enable institutions to “absorb higher credit losses will continuing to lend during times of stress.” The report notes that banks are facing significant operational challenges as a result of social distancing measures, and that during the first quarter of 2020, U.S. bank earnings declined sharply; however, strains in bank funding markets have somewhat eased since their stressed condition in March. As for the Fed’s supervisory activities, the report states that the Fed has deferred or cancelled non-critical examinations at large financial institutions for the remainder of the year. Specifically, the report notes that “examination activity will reflect operating conditions and will continue to target areas of heightened risk due to containment measure-related developments as well as known deficiencies that existed prior to the current crisis.”
OFAC settles Cuban Assets Control Regulation violations
On May 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $257,862 settlement with an animal nutrition company for 44 alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, between July 2012 and September 2017, the company and its owned or controlled foreign entities allegedly coordinated agricultural commodity sales to a Cuban company without OFAC authorization by processing Cuba-related business through its foreign affiliates and developing “a transaction structure that it incorrectly determined would be consistent with U.S. sanctions requirements.” OFAC noted that the company “could potentially have availed itself of such authorization” or applied for a specific licenses from OFAC, but “failed to seek appropriate advice or otherwise take the steps necessary to authorize these transactions.” OFAC determined that in light of the fact that the transactions may have been eligible for authorization, as well as the company’s voluntary self-disclosure, compliance enhancements, and other factors, the apparent violations constituted a non-egregious case.
OFAC advised U.S. companies with a global presence to maintain an appropriate sanctions compliance program and to seek “appropriate advice and guidance” when contemplating business that may be impacted by U.S. sanctions programs. In addition, OFAC referenced enforcement and compliance resources and cautioned that sanctions violations can arise from a misinterpretation or lack of understanding of OFAC’s regulations, including general licenses and authorizations. OFAC advised U.S. persons to “exercise[e] caution when dealing with foreign subsidiaries or affiliates located in regions subject to U.S. sanctions programs” and to understand the full scope and applicability of authorizations related to certain sanctions prohibitions.
Agencies extend two resolution plan filing deadlines
On May 6, the FDIC and Federal Reserve extended the following two upcoming resolution plan filing deadlines for certain banks in light of recent challenges arising from Covid-19:
- September 29, 2020 (90 day extension). This extension applies to the four institutions required to submit plans to address previously identified shortcomings.
- September 29, 2021 (90 day extension). This extension applies to the targeted resolution plans to be submitted by large foreign and domestic Category II and Category III banks under the agencies’ large bank regulatory framework.
Resolution plans for the eight global systemically important banks are still due July 1, 2021, however the agencies noted that they “will monitor conditions and may adjust this deadline if warranted.”
SBA, Treasury extend PPP certification safe harbor
During the week ending May 8, the Small Business Administration (SBA) in consultation with the Treasury Department (Treasury) updated the Paycheck Protection Program (PPP) Frequently Asked Questions (FAQs) to, among other things, provide guidance on the PPP safe harbor and counting a small business’s employees for the 500 or fewer employee requirement. As previously covered by InfoBytes, the SBA will deem that the borrower certification on a loan application was made in good faith if a recipient of a PPP loan prior to April 24 determines it may have other forms of liquidity and repays the loan by the safe harbor deadline of May 7. SBA extended the safe harbor for repayment from May 7 to May 14. The FAQs also provide that a small business must include foreign affiliate employees when calculating how many people it employs for purposes of determining if the business meets the PPP eligibility requirement of 500 or fewer employees. Additionally, the updated FAQs also explain that a PPP loan recipient that makes a good faith attempt, in writing, to rehire a furloughed employee, will not be penalized by a reduction in loan forgiveness it receives if that employee rejects the offer. New FAQs also cover how to calculate maximum PPP loan amounts for seasonal employers and whether nonprofit hospitals qualify for PPP loans.
FDIC encourages relief for South Carolina borrowers affected by severe weather
On May 7, the FDIC issued FIL-53-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of South Carolina affected by severe storms, tornadoes, and straight-line winds from April 12 through April 13. In the letter, the FDIC encourages institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to borrowers affected by the severe weather, provided the measures “[are] done in a manner consistent with sound banking practices, can contribute to the health of the local community and serve the long-term interests of the lending institution.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider relief from certain filing and publishing requirements.
Find continuing InfoBytes coverage on disaster relief guidance here.
FTC reports on FCRA education and enforcement
On May 5, the FTC released a report updating Congress on the agency’s FCRA education and enforcement efforts. The report, titled “Efforts to Promote Consumer Report Accuracy and Disputes,” was requested by Congress as part of the 2020 spending bill that funds the FTC. The report details the agency’s efforts to inform consumers and businesses regarding their rights and obligations under the FCRA, including educating consumers on disputing errors and identity theft. For businesses, the report discusses the guidance provided by the FTC for furnishers and users, including the 2016 publication Consumer Reports: What Information Furnishers Need to Know. The report notes that over the last decade. the FTC has brought over 30 enforcement actions under the FCRA against consumer reporting agencies (CRAs), users of consumer reports, and furnishers of information to CRAs. The FTC notes that once supervisory authority over the nationwide CRAs was transferred to the CFPB in 2011, the FTC has focused its FCRA enforcement on other entities in the credit reporting area, noting that 14 of its FCRA cases involved allegations related to handling consumer disputes of inaccurate information or procedures for ensuring the accuracy of information furnished in reports. A complete list of the 14 cases can be found in the report’s Appendix B. The FTC states that it will continue to look for education and enforcement opportunities, citing a joint workshop with the CFPB held last December, which discussed current trends in consumer reporting accuracy and sought public comments to assist the agency in targeting its efforts in the future.
California Supreme Court: No jury trial for UCL and FAL claims seeking civil penalties in addition to injunctive or other equitable relief
On April 30, the California Supreme Court issued an opinion holding that under the state’s Unfair Competition Law (UCL) and the False Advertising Law (FAL), government enforcement actions seeking civil penalties in addition to injunctive or other equitable relief should be decided by a judge instead of by a jury. The decision overturns a Court of Appeal decision holding that a jury must weigh in when civil penalties are involved. The decision stems from a suit filed in 2015 by the California Department of Business Oversight and several district attorneys (collectively, “People”) against a national debt payment service operation for alleged violations of the UCL and FAL. While the debt payment service operation demanded a jury trial, the People filed a motion to strike, which the trial court granted. The Court of Appeal overturned the trial court decision, holding that under certain provisions of the California Constitution the debt payment service operation had a right to a jury trial.
The California Supreme Court disagreed with the Court of Appeal concluding that, among other things, (i) the causes of action established by the UCL and FAL at issue in this case are equitable rather than legal actions, which should be tried by a court rather than by a jury; and (ii) the U.S. Supreme Court’s decision in Tull v. United States, relied upon by the Court of Appeal, does not govern this case for various reasons, including that the U.S. Supreme Court’s interpretation of the civil jury trial provision of the Seventh Amendment of the U.S. Constitution applies only to federal court proceedings—not state court proceedings—and that the “constitution right to a jury trial in state court civil proceedings is governed only by the civil jury trial provisions of each individual state’s own state constitution.” (Emphasis in the original.)
OFAC issues Finding of Violation to company for issuing prepaid card to SDN
On April 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Finding of Violation to a travel-related services company for alleged violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations. According to OFAC, the company allegedly issued a prepaid card to, and processed 42 transactions totaling more than $35,000 on behalf of, a Specially Designated National (SDN) due to human error and screen system defects. When issuing the Finding of Violation, OFAC considered the fact that, among other things, (i) the company did not engage in willful or reckless behavior; (ii) there is no indication that the company was aware that it provided a card to an SDN or that its risk engine could be overridden; (iii) the company took remedial action in response to the violations to prevent similar reoccurrences; (iv) the company cooperated with OFAC and voluntarily disclosed the violations; and (v) OFAC has not issued a penalty notice or Finding of Violation to the company in at least five years prior to the alleged violations. A civil monetary penalty was not issued to the company.