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FINRA updates FAQs to address meetings with members by video or audio conferencing and forwarding of firm mail
On April 16, FINRA updated certain questions in its FAQs related to regulatory relief due to Covid-19. The FAQs clarify requirements for a firm to supervise its registered representatives that meet with clients via a live video or audio conferencing platform. For such meetings, FINRA notes that members generally are not required to record live video or audio conferences with customers. However, to the extent the meeting utilizes chat or instant messaging features, or presents slides or other written (including electronic) communications, the member must keep records of these written communications, and their content must be consistent with applicable standards. Recorded live video or audio conversations with customers may need to be produced upon regulatory request. The FAQs also clarify situations in which the firm may redirect firm mail from a branch to an associated person's residence.
Freddie Mac announces system updates to facilitate use of exterior-only appraisals
On April 16, Freddie Mac announced that it will be adding a new feedback message (effective April 17, 2020) to Loan Collateral Advisor and Uniform Collateral Data Portal (UCDP). The message will note when exterior-only appraisals (as identified in the Map Reference field of the appraisal report) are submitted to UCDP using an incorrect appraisal form and will request resubmission to UCDP on the appropriate form.
Wisconsin extends stay at home order
On April 16, the Wisconsin Department of Health Services extended its order closing all non-essential businesses and ordering residents to stay at home until May 26, 2020. Banks, credit unions, and other depository or lending institutions; licensed financial service providers; insurance services; broker dealers; and investment advisors are not required are considered essential and not required to close.
NYDFS permits depository institutions to hold remote meetings
On April 16, the New York State Department of Financial Services announced that it issued an order permitting state-chartered banks, credit unions, mutual savings and loan associations, and mutual savings banks to hold meetings virtually. These include stockholder, shareholder and accountholder meetings. The order also extends the timing requirement for annual stockholder meetings so that meetings may be held within seven months of the institution’s fiscal year end, instead of four months.
New York extends stay at home order
On April 16, the New York governor issued an executive order extending the state’s stay-at-home order and closure of schools and non-essential businesses until May 15, 2020.
Agencies to hold webinar for bankers on loan modifications and reporting
On April 16, the FDIC released FIL-46-2020, announcing a webinar to provide accounting and reporting guidance for bankers pursuant to Section 4013 of the CARES Act and the revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (covered by InfoBytes here). The webinar is scheduled for Friday, April 24 at 3:00 pm EDT and will be jointly hosted by the FDIC, the Federal Reserve, the OCC, and the NCUA. Participants are encouraged to email questions prior to the webinar to asktheregulators@stls.frb.org. To register for the webinar, click here.
9th Circuit: Trustees’ loan transaction is entitled to state and federal consumer disclosure protections
On April 14, the U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of claims under TILA, RESPA, and California’s Rosenthal Fair Debt Collection Act, holding that a loan transaction made by a borrower in her capacity as a trustee (appellant-borrower) remained a consumer credit transaction entitled to state and federal consumer disclosure protections. According to the opinion, the appellant-borrower obtained a loan to finance repairs to a personal residence that was occupied by her niece—the trust’s sole beneficiary. The appellant-borrower alleged that the lender’s (defendant-appellee) loan disclosures were materially inconsistent with the loan’s terms and filed a complaint alleging that “the due date disclosures did not accurately reflect the terms of the loan.” The complaint sought rescission of the loan under TILA, damages against the defendant-appellee under the Rosenthal Fair Debt Collection Act due to the alleged use of unfair means to collect her debt, and inaccurate disclosure damages and reimbursements for payments she claimed she was not obligated to make. Under TILA and RESPA, rescission and damage remedies are only available to consumer credit transactions, and the defendant-appellee moved to dismiss on the ground that a residential loan to a trust can only qualify as a consumer credit transaction where a trustee-borrower lives at the residence. The appellant-borrower countered that the CFPB’s Official Staff Commentary (Commentary) to Regulation Z, which implements TILA, explains “that ‘[c]redit extended for consumer purposes to certain trusts is considered to be credit extended to a natural person rather than credit extended to an organization.’” The district court agreed with the defendant-appellee’s position that the loan was not a consumer credit transaction and dismissed the complaint.
On appeal, the 9th Circuit noted that the Commentary states that “a loan for ‘personal, family, or household purposes’ of the beneficiary of this type of trust is a consumer credit transaction,” and that furthermore, “trusts should be considered natural persons under TILA, so long as the transaction was obtained for a consumer purpose, because, ‘in substance (if not form) consumer credit is being extended.” The appellate court rejected the defendant-appellee’s argument and concluded that the loan should be considered a consumer credit transaction under all three statutes. Holding that the district court erred in dismissing the complaint by construing the statutes too narrowly, it reversed and remanded for further proceedings.
CFPB to host conference call on Covid-19 financial issues
On April 16, the CFPB published notices in the Federal Register announcing that the Bureau’s four advisory boards will host a May 1 combined open conference call to address the Covid-19 pandemic’s effects on consumers. The first half of this public meeting, which is scheduled to begin at 2:00 pm EDT, will focus on Covid-19’s impact on consumers and the financial marketplace, and the second half will focus on the impacts on specific consumer groups, including older individuals, students, servicemembers, and underserved individuals. Participants may email questions to the advisory boards at least seven days prior to the call date here. RSVPs must be submitted by April 30 here.
For additional information, see the Federal Register notice for the Consumer Advisory Board here, for the Credit Union Advisory Council here, for the Community Bank Advisory Council here, and for the Academic Research Council here.
OFAC guidance addresses Covid-19 humanitarian assistance and trade
On April 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Fact Sheet providing guidance to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic. Specifically, the Fact Sheet highlights the most pertinent exemptions, exceptions, and authorizations for humanitarian assistance and trade under the Iran, Venezuela, North Korea, Syria, Cuba, and Ukraine/Russia-related sanctions programs. OFAC notes, however, that under certain sanctions program, entities may be required to obtain separate authorization from other U.S. government agencies. The Fact Sheet also provides guidance for persons seeking to export personal protective equipment from the U.S. Additional questions regarding the scope or applicability of any humanitarian-related authorizations can be directed to OFAC’s Sanction Compliance and Evaluation Division.
CFPB raises HMDA reporting thresholds
On April 16, the CFPB issued a final rule permanently raising coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under HMDA. As previously covered by InfoBytes, these changes were first proposed by the Bureau last May. The final rule, which amends Regulation C, increases the permanent threshold from 25 to 100 loans starting July 1, 2020 and is applicable to both depository and nondepository institutions. The Bureau states in an executive summary that newly excluded institutions can stop collecting HMDA data on their closed-end mortgage loans beginning July 1, 2020; however, these institutions may still be obligated to collect home loan activity information required by other regulations. Under the final rule, newly excluded institutions are still required to record closed-end data for the first quarter of 2020; however because these institutions would not otherwise report the data until early 2021, the final rule relieves newly excluded institutions of the March 1, 2021 reporting obligation on data collected in 2020 (including closed-end mortgage loan data collected in 2020 prior to July 1, 2020). The Bureau notes that newly excluded institutions “may voluntarily report HMDA data on closed-end mortgage loans in 2021 as long as the institution reports data for the full calendar year 2020.”
The final rule also increases the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200, however this change will not take effect until January 1, 2022, when the current temporary threshold of 500 open-end lines of credit expires (covered by InfoBytes here). Beginning in 2022, both depository and nondepository institutions that meet this threshold must report data on open-end lines of credit by March 1 of the following calendar year.
Additional resources, including a timeline of key dates and institutional/transactional coverage charts are available here. “The Bureau recognizes the operational challenges confronted by institutions due to the current COVID-19 pandemic,” the CFPB states in its press release. “The Bureau anticipates that this final rule, once effective, will reduce regulatory burden on smaller institutions to help those institutions to focus on responding to consumers in need now and in the longer term.”