The CFPB last week revealed its semiannual regulatory agenda.  Because the CFPB writes consumer regulations that community banks must follow, even if the CFPB cannot supervise them, several announcements are worth noting, including coming final rules on mortgage servicing and prepaid products and proposed rules on TRID, payday lending, and auto title lending.

          Banks should also note guidance in two areas that are likely to be covered in exams: resolutions of discrepancies in consumer deposit accounts and the use of money market funds.

          The full set of developments over the last week includes:

The Economy

  • Minutes of FOMC meeting on April 26-27 released (May 18).  Target range for federal funds rate remains at ¼ to ½ %.
    • "[W]ith 12-month PCE inflation continuing to run below the Committee’s 2 percent objective, a number of participants judged that it would be appropriate to proceed cautiously in removing policy accommodation."
    • "A few participants judged it appropriate to increase the target range for the federal funds rate at this meeting, citing their assessments that downside risks associated with global economic and financial developments had diminished substantially since early this year, that labor market conditions were consistent with the Committee’s maximum-employment objective, and that inflation was likely to rise this year toward the Committee’s 2 percent objective."
    • "Two participants noted that several standard policy benchmarks, such as a number of interest rate rules and some measures of the equilibrium real interest rate, continued to imply values for the federal funds rate well above the current target range. Such large and persistent deviations of the federal funds rate from these benchmarks, in their view, posed a risk that the removal of policy accommodation was proceeding too slowly and that the Committee might, in the future, find it necessary to raise the federal funds rate quickly to combat inflation pressures, potentially unduly disrupting economic or financial activity. Overly accommodative policy could also induce imprudent risk-taking in financial markets, posing additional risks to achieving the Committee’s goals in the future."
    • "Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June."
    • "Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting."
    • "Members generally agreed that, in light of the recent weak readings on spending and production, and with inflation below the Committee’s objective, it would be prudent to wait for additional information bearing on the medium-term outlook before deciding whether to raise the target range for the federal funds rate."
    • Minutes available at http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.

Auto Title Loans

Capital

CFPB

  •  CFPB to issue proposed rule on payday lending, auto title loans, and similar products in next several weeks (May 18).
    • See Payday Lending below.

Debt Collection

Deposit Accounts

  • Banking agencies and CFPB issue guidance on treatment of consumer deposit account discrepancies (May 18).
    • Guidance calls for:
      • Deposit reconciliation polices and practices to avoid or resolve discrepancies without disadvantaging consumers.
      • Effective management of deposit reconciliation practices to avoid legal violations and harm to consumers.
      • Effective compliance management systems.
    • Guidance available in OCC Bulletin 2016-16, http://www.occ.gov/news-issuances/bulletins/2016/bulletin-2016-16.html.
  • Recordkeeping: FDIC extends comment period on deposit account recordkeeping proposal to June 25 (May 20).

FinTech

Incentive-based Compensation

  • Agencies complete roll out of proposal on limits on incentive-based compensation under section 956 of Dodd-Frank (May 16).
    • Qualitative requirements apply to all banks, bank holding companies, and other financial institutions (collectively, "banks") regardless of size.
    • New limits tiered by asset size:
      • Less than $1 billion: no new restrictions in proposal.
      • $1 billion or more to $50 billion: restrictions may apply if bank determined to have complexity of operations or compensation practices consistent with those of larger banks.
      • $50 billion or more to $250 billion: restrictions slightly less onerous than those for larger banks.
      • $250 billion or more: full set of restrictions.
    • For C-level and other senior executives and for "significant risk-takers" at banks with $50 billion or more, deferral periods for portions of incentive-based compensation:
      • For banks between $50 billion and $250 billion, 50% and 40%, respectively, for three years.
      • For banks of $250 billion or more, 60% and 50%, respectively, for four years.
      • Other deferral periods for long-term incentive plans.
      • "Significant risk-takers" are individuals who receive one-third or more of annual compensation in incentive-based form and who either are among the most highly paid group at bank (definition of group varies by asset size) or may commit or expose 0.5% of bank's net worth or total capital.
    • Forfeiture or bonus payment reductions for poor financial performance due to significant deviations from business plan, inappropriate risk-taking, material risk management or control failures, or any legal violation that results in an enforcement or other legal action or a restatement to correct a material error.
    • Seven-year claw back at banks of $50 billion or more.
    • Other limits on increases in incentive-based compensation.
    • Risk control, corporate governance, and practice and procedure requirements.
    • Joint agency press release available at http://www.federalreserve.gov/newsevents/press/bcreg/20160516a.htm
    • Comment deadline: July 22.

Insurance

  • "Insurance Companies and the Role of the Federal Reserve," remarks of Federal Reserve Governor Tarullo at the NAIC International Insurance Forum (May 20).

Money Market Funds

  • OCC issues Bulletin 2016-17 to highlight actions national banks and federal thrifts should take in light of 2014 SEC rules on money market funds (May 19).
    • SEC rules do not apply directly to banks but indirectly affect banks that make MMFs available to their customers, deposit sweep programs that include MMFs, and banks that invest in MMFs.
    • Bulletin addresses possible changes to banks' MMF processes and products and compliance, liquidity, operational, and strategic risks.
    • Bulletin available at http://www.occ.gov/news-issuances/bulletins/2016/bulletin-2016-17.html.

Mortgage Lending – TRID/Know Before You Owe

Mortgage Servicing

  • CFPB to issue final rule this summer to amend certain aspects of mortgage servicing rules that took effect in 2013 (May 18).

Mutuals

Overdrafts

  • CFPB now engaged in pre-rulemaking activities for regulation of overdraft services on checking accounts (May 18).

Payday Lending

  •  CFPB to issue proposed rule on payday lending in next several weeks (May 18).
    • Proposal will address lenders' failure to determine whether consumers have the ability to repay without default or reborrowing and payment collection practices.
    • Proposal will build on three documents:
      • April 2013 white paper, Payday Loans and Deposit Advance Products.
      • March 2014, data point, CFPB Data Point: Payday Lending.
      • April 2016 report, Online Payday Loan Payments.
  • Announcement, including links to source material, available at http://www.consumerfinance.gov/about-us/blog/spring-2016-rulemaking-agenda/

Prepaid Products

  • CFPB to issue final rule this summer to create a comprehensive set of consumer protections for prepaid financial products (May 18).

Women- and Minority-Owned Businesses

Congressional Activity – Recent

Congressional Activity – Upcoming

  • May 24
    • House Financial Services Committee hearing.
      • "Stopping Terror Finance: A Coordinated Government Effort."
    • Senate Banking Committee hearing.
      • "Understanding the Role of Sanctions Under the Iran Deal."
  • May 25
    • Senate Banking Committee hearing, "Understanding the Role of Sanctions Under the Iran Deal: Administration Perspectives."

Upcoming Events

  • June 9
    • FTC conference on FinTech.
  • June 20-22
    • OCC Director Workshop, "Building Blocks for Directors," Syracuse NY.
  • June 23
    • OCC forum on "Supporting Responsible Innovation in the Federal Banking System," Washington DC.
  • June 28
    • OCC Director Workshop, "Risk Governance," Milwaukee WI.
  • June 29
    • OCC Director Workshop, "Credit Risk," Milwaukee WI.
  • July 20
    • FDIC Money Smart Train-the-Trainer Online Live Meeting.

Regulatory Comment Deadlines

  • May 31 – OCC: white paper on responsible innovation (FinTech).
  • June 3 – Federal Reserve: single party credit exposures.
  • June 12 – CFPB: Student Loan Payback Playbook.
  • June 15 – FDIC: mobile financial services strategies to serve the underbanked.
  • June 25 – FDIC: recordkeeping requirements for banks with more than 2 million deposit accounts.
  • July 22 – Banking agencies et al.: incentive-based compensation limits.
  • Aug. 5 – Federal Reserve/FDIC/OCC: net stable funding ratio.
  • Aug. 5 – Federal Reserve: amendment of QFCs to prevent immediate cancellation in event of bankruptcy or other resolution.
  • Aug. 8 – Treasury/IRS: foreign-owned, single-owner entities required to obtain EIN.
  • 90 days after publication in Federal Register – CFPB: ban on mandatory arbitration clauses.