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CFPB extends debt collection comment period
On August 2, the CFPB announced that it is extending the comment period on its Notice of Proposed Rulemaking implementing the FDCPA to “facilitate the ability of commenters to consider the issues raised in the NPRM, gather data, and prepare their responses.” The comment period now closes on September 18.
Detailed InfoBytes coverage on the CFPB’s debt collection proposal is available here.
President Trump authorizes new sanctions on Russian sovereign debt; OFAC imposes prohibition on certain U.S. bank loans
On August 1, President Trump issued Executive Order (E.O.) 13883 titled “Administration of Proliferation Sanctions and Amendment of Executive Order 12851,” which authorizes sanctions on new issuances of Russian sovereign debt and directs the U.S. government to attempt to cut off international financing and forbids U.S. bank loans to governments subject to U.S. sanctions for using chemical or nuclear weapons. Among other things, E.O. 13883 allows the Secretary of the Treasury, in consultation with the Secretary of Defense, the authorization to (i) “oppose. . .the extension of any loan or financial or technical assistance to [a sanctioned] country by international financial institutions”; and (ii) “prohibit any U.S. bank from making any loan or providing any credit to the government of [a sanctioned] country, except for loans or credits for the purpose of purchasing food or other agricultural commodities or products.”
Following the issuance of E.O. 13883, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions on August 3 against the Russian Federation, which will “impos[e] a prohibition related to certain U.S. bank loans and will oppose multilateral development bank assistance to the Russian Federation.” According to OFAC, the sanctions are issued in response to Russia’s use of the “Novichok” nerve agent in the U.K. in March 2018. In order to implement the sanctions related to U.S. bank loans, OFAC issued the CBW Act Directive on August 2—scheduled to take effect August 26 following a required Congressional notification period—which “prohibits U.S. banks from participating in the primary market for non-ruble denominated bonds issued by the Russian sovereign and also prohibits U.S. banks from lending non-ruble denominated funds to the Russian sovereign.” OFAC also released a set of FAQs to provide guidance on the CBW Act Directive.
CFPB releases TRID FAQs on loan estimates
On July 31, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID Rule) compliance. The five new FAQs relate to providing loan estimates to consumers. Highlights include:
- If a consumer submits the six pieces of information (name, income, social security number, property address, estimate of the value of the property, and loan amount sought) that constitute an application under the TRID Rule, the creditor must ensure that a loan estimate is delivered or placed in the mail within three business days.
- A creditor cannot require the consumer to submit anything other than the six pieces of information that constitute an application under the TRID Rule as a condition to providing a loan estimate.
- A creditor cannot require a consumer to provide verifying documents in order to receive a loan estimate.
- If a consumer submits the six pieces of information that constitute an application, in order to receive a pre-approval or a pre-qualification letter, the creditor must also provide a loan estimate within three business days of receipt.
- A creditor may collection additional information, beyond the six pieces of information that constitute an application, it deems necessary to process a request for a mortgage loan, including a request for a pre-approval or pre-qualification letter.
OFAC sanctions Iran’s foreign minister
On July 31, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), pursuant to Executive Order (E.O.) 13876, designated Iran’s foreign minister for allegedly acting on behalf of, directly or indirectly, the Supreme Leader of the Islamic Republic of Iran. As previously covered by InfoBytes, in June, the President issued E.O. 13876, which, among other things, authorizes the Secretaries of the Treasury and State Departments to impose sanctions on a foreign financial institution if it is determined the institution has knowingly conducted or facilitated any significant financial transactions for or on behalf of a blocked person. OFAC noted that additional information also indicated the Iranian foreign minister had coordinated with the IRGC-Qods Force, which is designated pursuant to terrorism and human rights authorities.
As a result of the sanctions designation, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that persons who engage in transactions with designated individuals and entities may expose themselves to sanctions or be subject to enforcement action.
FDIC Chairman stresses innovation in banking
On August 2, FDIC Chairman Jelena McWilliams spoke before the Financial Conduct Authority’s 2019 Global AML and Financial Crime TechSprint in Washington, D.C. on the importance of promoting innovation within the banking industry and ramping up efforts to help banks embrace new technologies. McWilliams noted that she is “impatient for transformation,” especially in areas that would assist banks—particularly community banks—in eliminating regulatory uncertainty, adopting new technologies, managing risks, or partnering with fintech startups to improve regulatory compliance in areas such as Bank Secrecy Act/anti-money laundering rules. McWilliams discussed the FDIC’s new office of innovation (FDiTech), which was created to support these goals. In particular, McWilliams indicated that the FDIC would support collaboration with developers, institutions, and regulators to pilot new products and services, with the goal of publishing the results of these pilots to facilitate understanding of what worked, what did not, and methods of improvement going forward. According to McWilliams, “[b]y promoting these developments and encouraging our FDIC-supervised institutions to voluntarily adopt a more advanced technological footing, we can help foster the transformation of the community banking sector. In turn, the institutions we supervise can reach greater efficiency with products and services that are more attractive to consumers.”
Federal Reserve developing real-time payment system
On August 5, the Federal Reserve Board (Board) announced that Federal Reserve Banks will develop a “round-the-clock real-time payment and settlement service” called the “FedNow℠ Service.” According to a notice and request for comment, “the service would support depository institutions’ provision of end-to-end faster payment services and would provide infrastructure to promote, ubiquitous, safe, and efficient faster payments in the United States.” The Board is requesting comments on how the service might be designed in order to support payment system stakeholders and the general functioning of the U.S. payment system. FedNow is anticipated to be available in 2023 or 2024. Comments on the notice will be due 90 days after publication in the Federal Register. The Board also released FAQs associated with faster payments.
In a speech announcing the service, Governor Brainard noted that FedNow will be accessible to all banks and “will permit banks of every size in every community across the country to provide real-time payments to their customers.” Brainard noted that the Board is “uniquely placed to deliver this outcome” given its “long-standing service connections with more than 10,000 banks across the country.”
As previously covered by InfoBytes, the Board issued a request for comments in October 2018 regarding potential actions the Board could take to facilitate real-time interbank settlement of faster payments. The Board reports that it received over 350 comments and over 90 percent supported the Board operating its own, round-the-clock payment service alongside services provided by the private sector.
Ginnie Mae announces new VA refinance loan eligibility requirements
On August 1, Ginnie Mae issued All Participants Memorandum APM 19-05 announcing changes to the mortgage-backed securities (MBS) pooling eligibility requirements for Department of Veterans Affairs (VA) refinance loans. In order to establish requirements that positively impact the performance of Ginnie Mae securities and implement the “Protecting Affordable Mortgages for Veterans Act of 2019,” (covered by InfoBytes here) APM 19-05 announces changes applicable to all VA-guaranteed refinance loans and establishes new criteria for VA cash-out refinance loans with loan-to-value (LTV) ratios above 90 percent.
Effective with MBS guaranteed on or after August 1, a refinance loan is only eligible for Ginnie Mae securities if the date on the refinance loan is on, or after, the later of (i) “the date on which the borrower has made at least six consecutive monthly payments on the loan being refinanced”; and (ii) “the date that is 210 days after the first payment due date of the loan being refinanced.” Additionally, effective with MBS guaranteed on or after November 1, “High LTV VA Cash-Out Refinance Loans”—defined as a VA refinance loan with a LTV ratio that exceeds 90 percent at the time of origination and where the borrower converts any amount of home equity into cash—are, with certain exceptions, ineligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools.
Treasury undersecretary delivers remarks on the importance of network sanctions
On July 31, Department of Treasury Under Secretary for Terrorism and Financial Intelligence (TFI) Sigal Mandelker delivered remarks at the Center for Strategic and International Studies in Washington, D.C. to discuss the use of sanctions in combating critical national security and illicit financial threats. After summarizing several achievements related to the exposure and disruption of global financial schemes, Mandelker discussed TFI’s collaboration with other Treasury agencies, such as the Office of Foreign Assets Control, the Financial Crimes Enforcement Network, the Office of Intelligence and Analysis, and the Office of Terrorist Financing and Financial Crimes, to create an organizational structure that “integrates unparalleled insight into the financing of emerging global threats with powerful economic authorities to counter them.” Mandelker noted that while sanctions can be very powerful tools to cut off both financial and material support to terrorist groups and regimes, a broader strategic approach is necessary, including, among other things, anti-money laundering measures, enforcement actions, foreign engagement, intelligence and analysis, and private-sector partnerships. She noted that one method employed by the agencies to maximize their impact in combating illicit financial threats is through the use of network sanctions, which recognize that “bad actors” rarely act alone, and instead frequently rely upon complicated structures using shell companies, business partners, and facilitators to disguise activities and launder money. “When we focus on these broader networks and their assets, we can more effectively block a bad actor’s ability to access their ill-gotten gains, making it more difficult for them to use the global marketplace or continue in their business arrangements,” Mandelker stated. Mandelker further commented that in 2019 alone, Treasury has “issued nearly $1.3 billion in civil monetary penalties and settlements for financial institutions and corporate actors related to violations of our sanctions programs.”
FCC adopts rules addressing spoofed texts and international robocalls
On August 1, the FCC announced the adoption of new rules that will extend the Truth in Caller ID’s prohibitions against robocalls to caller ID spoofing of text messages and international calls, and implement measures passed last year in the RAY BAUM’s Act. As previously covered by InfoBytes, the rules are supported by a bipartisan group of more than 40 state attorneys general, and will allow the FCC to bring enforcement actions and assess fines on international players who try to defraud U.S. residents. However, while Commissioner Michael O’Rielly voted in favor of the measure, he raised concerns that the FCC may encounter problems when trying to enforce the rules across international borders. “As I expressed before, the expanded extraterritorial jurisdiction may prove difficult to execute in uncooperative nations and come back to bite us in other contexts,” O’Rielly stated. “In addition, the definitions of text messaging and voice services are broader than my liking and may cause future unintended consequences.” However, his statement did not specify what these unintended consequences might be.
OCC issues guidance on CRA designations
On July 31, the OCC issued Bulletin 2019-40, which provides guidelines for requesting designation as a wholesale or limited purposes bank for Community Reinvestment Act (CRA) purposes, or requesting confirmation of exemption as a special purposes bank under the CRA. The guidelines summarize the process for requesting or confirming designation, including (i) information that a bank should provide to substantiate its request; (ii) instructions on how to submit requests; and (iii) the review and approval process. Among other things, the OCC encourages banks seeking confirmation or designation to request an informal consultation with the bank’s supervisory office. As for such a request, the OCC notes that it is customary to include a description on how the bank satisfies the definition for a wholesale bank, limited purposes bank, or special purposes bank, including facts and data sufficient to describe the nature of the bank's current and prospective business, the credit products offered, and the market area served. Within 60 days of receiving a complete designation or confirmation request, the OCC will notify the bank of its decision to approve or deny the request. For designations as wholesale or limited purpose, the designation will remain in effect until the bank requests revocation or one year after the OCC notifies the bank it has revoked the designation. For special purpose confirmations, the exemption remains in effect until the OCC is informed the exemption no longer applies. Designation and confirmation requests may be made available to the public under the Freedom of Information Act (FOIA), but a bank may request confidential treatment for information that would normally be exempt from FOIA disclosure requirements.