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May 2019 Compliance Journal: Compliance Notes

The below article is the Compliance Notes section of the May 2019 Compliance Journal. The full issue may be viewed by clicking here.

CFPB published its Spring 2019 Rulemaking Agenda which reflects ongoing rulemaking activities, including initiatives to implement statutory requirements and to address the potential sunset of statutory and regulatory provisions. The agenda may be viewed at: https://www.consumerfinance.gov/about-us/blog/spring-2019-rulemaking-agenda/


FRB approved final amendments to its regulations to reflect the transfer of FRB’s rulemaking authority for the Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act) to the CFPB. Entities that were subject to FRB’s rules are now subject to CFPB’s rules. The notice may be viewed at: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20190509a.htm


FinCEN issued interpretive guidance to remind persons subject to the Bank Secrecy Act (BSA) how FinCEN regulations relating to money services businesses (MSBs) apply to certain business models. For a discussion of the concept of “business model” as used within this guidance, see infra, Section 1.1. involving money transmission denominated in value that substitutes for currency, specifically, convertible virtual currencies (CVCs). The guidance may be viewed at: https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf


CFPB published an article titled Promising Practices and Lessons Learned For Child Savings Account Programs. The article discusses four briefs for use by government, nonprofits, financial institutions, and communities considering starting or expanding child savings opportunities through a child saving account program. The article may be viewed at: https://www.consumerfinance.gov/about-us/blog/promising-practices-lessons-learned-child-savings-account-programs/


FHA proposed several revisions to its lender certification requirements with the goal of providing lenders and servicers greater certainty in how to satisfy the agency’s compliance requirements. In providing greater certainty to the process, FHA believes the changes will facilitate more competition in the market and result in more financing choices for borrowers, especially first-time and minority homebuyers. FHA is proposing significant changes to its loan-level and annual lender-level certifications to provide more precision and needed clarity to compliance documents. Specifically, FHA is proposing revisions to its Addendum to Uniform Residential Loan Application (Form 92900-A) and to its annual lender certification form. In addition, FHA is revising its ‘defect taxonomy’ to clarify the various loan defect categories and how the agency weighs the severity of each defect. The notice may be viewed at: https://www.hud.gov/press/press_releases_media_advisories/HUD_No_19_059


FRB proposed modifications to the Federal Reserve Banks’ (Reserve Banks) payment services to facilitate adoption of a later same-day automated clearinghouse (ACH) processing and settlement window. Specifically, the Reserve Banks would extend the daily operating hours of the National Settlement Service (NSS) to allow the private-sector ACH operator to settle its in-network transactions resulting from the later same-day ACH window. The notice may be viewed at: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20190509b1.pdf


FRB, FDIC, NCUA, OCC, and FCA staff will hold an interagency Flood Insurance Update webinar on the Private Flood Insurance Rule. The webinar was originally scheduled for 05/14/2019, but has been rescheduled for 06/18/2019. Registration information may be viewed at: https://www.webcaster4.com/Webcast/Page/577/30085


CFPB released a guide titled “Protect Your Identity: What Older Adults Should Know” for consumers. The guide includes steps for protecting personal information. The guide may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_identity_protection_guide.pdf


OFAC published “A Framework for OFAC Compliance Commitments” which is intended to provide organizations with a framework for the five essential components of a risk-based sanctions compliance program (SCP), and contains an appendix outlining several of the root causes that have led to apparent violations of the sanctions programs that OFAC administers. OFAC recommends all organizations subject to U.S. jurisdiction review the settlements published by OFAC to reassess and enhance their respective SCPs, when and as appropriate. The framework may be viewed at: https://www.treasury.gov/resource-center/sanctions/Documents/framework_ofac_cc.pdf


Treasury initiated a renewal of the public certificate securing the www.treasury.gov website, including OFAC’s sanctions lists downloads. This announcement is especially important for users that utilize command line interfaces to download OFAC’s sanctions list data. The existing certificate (expiring June 6, 2019) was replaced on May 16, 2019 at 9PM. This process took roughly 3-6 hours for the replacement certificate to be distributed worldwide. The notice may be viewed at: https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/20190501.aspx


FRB Chairman Jerome H. Powell issued the welcoming remarks to the attendees of the 2019 Federal Reserve System Community Development Research Conference, “Renewing the Promise of the Middle Class,” in Washington, D.C. He noted, “This year our conference focuses on pathways to the middle class. While there are many definitions of ‘middle class,’ I think we can agree that achieving a basic level of economic security is fundamental. Surveys suggest that many Americans believe being middle class means having a secure job and the ability to save. In recent decades, income growth for middle-income households has lagged behind that for high income households.” His full remarks may be viewed at: https://www.federalreserve.gov/newsevents/speech/files/powell20190509a.pdf


FDIC Chairman Jelena McWilliams today announced the retirement of Steve App, Deputy to the Chairman and Chief Financial Officer (CFO). App has served as CFO for the past 17 years and has almost 40 years of federal service. Replacing him as Deputy to the Chairman and CFO is Bret Edwards, who is currently Director of Division of Resolutions and Receiverships (DRR). In addition, long-time FDIC veteran Maureen Sweeney was named as Edwards’ replacement. The announcement may be viewed at: https://www.fdic.gov/news/news/press/2019/pr19039.html   


President Donald Trump has issued an Executive Order imposing sanctions with respect to the iron, steel, aluminum, and copper sectors of Iran. In relation to the Executive Order, OFAC has published FAQs. The FAQs may be viewed at: https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#eo_metals


OCC issued the “Real Estate Settlement Procedures Act” (RESPA) booklet of the Comptroller’s Handbook. The revised booklet replaces the similarly titled booklet issued in April 2015. The booklet provides guidance and procedures to examiners in connection with changes made by the Consumer Financial Protection Bureau (CFPB) to Regulation X (12 CFR 1024), which implements RESPA. The main changes to the booklet relate to implementation of the CFPB’s mortgage servicing rule and to clarification and amendment of provisions of Regulation X that took effect October 19, 2017, as well as provisions related to successors in interest, which took effect April 19, 2018. The booklet also reflects changes resulting from the final rule on integrated mortgage disclosures, which became effective October 3, 2015. The booklet may be viewed at: https://www.occ.gov/publications/publications-by-type/comptrollers-handbook/respa/pub-ch-respa.pdf


FRB released March 2019 data to its G.19 Consumer Credit statistics page. Consumer credit increased at a seasonally adjusted annual rate of 4-1/4 percent during the first quarter. Revolving credit increased at an annual rate of 1-1/2 percent, while nonrevolving credit increased 5-1/4 percent. In March, consumer credit increased at an annual rate of 3 percent. The full dataset may be viewed at: https://www.federalreserve.gov/releases/g19/current/default.htm


CFPB proposes to amend Regulation F, 12 CFR part 1006, which implements the Fair Debt Collection Practices Act (FDCPA) and currently contains the procedures for State application for exemption from the provisions of the FDCPA. CFPB’s proposal would amend Regulation F to prescribe Federal rules governing the activities of debt collectors, as that term is defined in the FDCPA. CFPB’s proposal would, among other things, address communications in connection with debt collection; interpret and apply prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection; and clarify requirements for certain consumer-facing debt collection disclosures. The notice may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_debt-collection-NPRM.pdf


OFAC removed sanctions imposed on Manuel Ricardo Cristopher Figuera (Cristopher), who broke ranks with the Maduro regime and rallied to the support of the Venezuelan constitution and the National Assembly. Cristopher is the former Director General of Venezuela’s National Intelligence Service, more commonly known as SEBIN. As a result of Tuesday’s action, all property and interests in property, which had been blocked solely as a result of Cristopher’s designation, are unblocked and all otherwise lawful transactions involving U.S. persons and Cristopher are no longer prohibited. The designation removal may be viewed at: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20190507.aspx


FRB released the April 2019 Senior Loan Officer Opinion Survey on Bank Lending Practices which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally corresponds to the first quarter of 2019. Regarding loans to businesses, respondents to the April survey indicated that, on balance, they left their standards basically unchanged and eased some of the terms on commercial and industrial (C&I) loans to large and middle-market firms, while standards and most terms remained basically unchanged for such loans to small firms. Meanwhile, banks reported weaker demand for C&I loans from firms of both size categories. The full results may be viewed at: https://www.federalreserve.gov/data/sloos/sloos-201904.htm


FinCEN issued an update to the “Advisory on Widespread Public Corruption in Venezuela” issued by FinCEN on September 20, 2017 (“2017 Venezuela Advisory”) to alert financial institutions of continuing widespread public corruption in Venezuela under the regime of Nicolas Maduro, which the U.S. Government considers illegitimate. It also alerts financial institutions to additional methods utilized by corrupt Venezuelan senior political figures (and their associates, family members, and front persons) to move and hide corruption proceeds—money stolen from the Venezuelan people—and contribute to the dire humanitarian situation in Venezuela, which includes, among other things, starvation, human rights violations, lack of medicine or medical care, and children and the elderly being separated from their families because they cannot care for them. The advisory may be viewed at: https://www.fincen.gov/sites/default/files/advisory/2019-05-03/Venezuela%20Advisory%20FINAL%20508.pdf


CFPB filed a complaint against PGX Holdings Inc. and subsidiaries Progrexion Marketing Inc., Progrexion Teleservices Inc., eFolks LLC, and CreditRepair.com Inc.; and against John C. Heath, Attorney at Law PLLC, which does business as Lexington Law. The lawsuit, filed in U.S. district court in Utah, alleges the defendants violated the Telemarketing Sales Rule (TSR) by requesting and receiving payment of prohibited upfront fees for their credit repair services. Under the rule, companies can only charge fees for telemarketed credit repair services after providing consumers with documentation reflecting that the promised results have been achieved. That documentation cannot be provided to consumers until more than six months after the results were achieved. CFPB also alleges that Progrexion and its subsidiaries violated the TSR and the Consumer Financial Protection Act by making deceptive representations in its marketing, or by substantially assisting others in doing so. The complaint may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_pgx-holdings_complaint_2019-05.pdf 


Treasury’s Borrowing Advisory Committee of the Securities Industry and Financial Markets Association issued a report to the Treasury Secretary. The report states economic activity grew at a strong pace in the first quarter, with a 3.2% annualized increase in real GDP despite an estimated 0.3pp drag from the government shutdown. The strength resulted in part from rapid inventory accumulation and a large decline in imports, factors that are likely to reverse, and domestic final sales grew at a slower 1.4% pace. Looking ahead, both the growth drag from the large tightening in financial conditions last year and the growth boost from tax and government spending legislation are likely to fade. Growth is likely to slow over the remainder of 2019 from the 3.2% pace seen over the last four quarters, but is expected to remain somewhat above estimates of the economy’s longer-run potential. The report may be viewed at: https://home.treasury.gov/news/press-releases/sm678


CFPB issued a factsheet titled “Are Loan Estimates and Closing Disclosures Required for Assumptions.” The factsheet addresses whether a Loan Estimate and Closing Disclosure are required under the TILA-RESPA Integrated Disclosure Rule (TRID Rule)for a specific group of transactions. It addresses whether these disclosures are required for a transaction:(1) in which a new consumer is being added or substituted as an obligor on an existing consumer credit transaction; (2) that is a closed-end consumer credit transaction secured by real property or a cooperative unit; and (3) that is not a reverse mortgage subject to 12 CFR 1026.33. The factsheet may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_tila-respa-factsheet.pdf


FDIC issued the April 2019 edition of the FDIC Consumer News. This edition focuses on tips for protecting seniors from financial abuse. The FDIC Consumer News may be viewed at: https://www.fdic.gov/consumers/consumer/news/april2019.html  


FATF issued the May 2019 FATF Business Bulletin, providing a brief update on recent FATF outcomes of interest to the private sector, including those of the 2019 FATF Private Sector Consultative Forum and the FATF/MONEYVAL Joint Experts’ meeting. The bulletin may be viewed at: http://www.fatf-gafi.org/media/fatf/documents/FATF-Business-Bulletin-May-2019.pdf


FRB issued the May 2019 Supervision and Regulation Report, which summarizes banking conditions and the Federal Reserve’s supervisory and regulatory activities. The report demonstrates the continued health and soundness of the banking industry. Figures in the report show that industry profitability ratios remain high, driven in part by the industry’s net interest margin reaching a six-year high. The report may be viewed at: https://www.federalreserve.gov/publications/files/201905-supervision-and-regulation-report.pdf


CFPB issued an updated Small Entity Compliance Guide for the Prepaid Rule. The guide may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_prepaid_small-entity-compliance-guide.pdf


FRB issued a progress report on its payments improvement initiatives. The progress report highlights recent accomplishments and next steps for Federal Reserve payments improvement initiatives. The report may be viewed at: https://fedpaymentsimprovement.org/wp-content/uploads/fedpayments-improvement-report-web.pdf


FRB issued an update to the Bank Holding Company Supervision Manual. The manual provides guidance for conducting inspections of bank holding companies and their nonbank subsidiaries. The manual may be viewed at: https://www.federalreserve.gov/publications/supervision_bhc.htm


Treasury and IRS released a six-year plan to modernize IRS business operations. The plan is organized around four “Modernization Pillars” critical to the IRS’s mission and future development: (1) Tax Payer Experience, (2) Core Taxpayer Service and Enforcement, (3) Modernized IRS Operation, and (4) Cybersecurity and Data Protection. The plan may be viewed at: https://www.irs.gov/pub/irs-utl/irs_2019_integrated_modernization_business_plan.pdf 

By, Ally Bates