The most significant events of the past several days involve the CFPB. Yesterday, the U.S. Court of Appeals for the D.C. Circuit ruled that the CFPB is unconstitutionally structured, that its enforcement action against PHH incorrectly interpreted the RESPA provisions on captive reinsurance, and that the action was impermissibly retroactive and partly outside RESPA's three-year statute of limitations. The 110-page decision is available at Additionally, last week the CFPB issued a final rule on prepaid accounts that requires new disclosures and provides new consumer protections.

Elsewhere, the OCC provided guidance on the management of BSA/AML risks associated with foreign correspondent banking, and the NY Department of Financial Services issued guidance on incentive compensation arrangements.

Aside from this bombshell, the past week saw other events of interest. The full set of developments over the past week includes:

The Economy

  • September jobs report is released showing the unemployment rate at 5% (Oct. 7).
  • "Low Interest Rates," remarks of Federal Reserve Vice Chairman Fischer at the 40th Annual Central Banking Seminar (Oct. 5).
  • "The U.S. Economy and Monetary Policy," remarks of Federal Reserve Vice Chairman Fischer at the 31st Annual Group of Thirty International Banking Seminar (Oct. 9).
    • "I see the U.S. economy as close to full employment, with some further improvement expected."
    • "I expect that business investment will pick up in the second half of the year as the drag from the oil sector wanes and as firms expand capacity to meet rising demand."
    • "The combination of strong job gains and lackluster GDP growth over the past four quarters reflects exceptionally poor labor productivity growth."
    • "I believe that transitory effects of the fall in oil prices and the rise in the dollar are the primary reason that inflation has fallen short of the FOMC's 2 percent goal."
    • Remarks available at



  • NY Dep't of Financial Services issues Guidance on Incentive Compensation Arrangements (Oct. 11).
    • Elements of guidance:
      • Balance Between Risks and Rewards: Any incentive compensation arrangement must appropriately balance risk and financial results in a manner that does not encourage employees to expose their organizations to imprudent risks;
      • Effective Controls and Risk Management: A banking institution's risk management processes and internal controls must reinforce and support the development and maintenance of any incentive compensation arrangements: and
      • Effective Corporate Governance: Incentive compensation arrangements must be supported by strong corporate governance, including active and effective oversight by the organization's board of directors.
    • Guidance available at


  • U.S. Court of Appeals for the D.C. Circuit declares structure of CFPB to unconstitutional and a RESPA-based enforcement action to be inconsistent with RESPA (Oct. 11).
    • Constitutionality issue:
      • No checks and balances within the executive branch on decisions and actions by the single-director CFPB.
      • CFPB unique among independent federal agencies in having a single director not removable at will by the President.
      • Relief is to sever portion of Dodd-Frank that limits President's removal power. President now may remove Director at will.
    • RESPA issues:
      • CFPB took position that captive reinsurance arrangements illegal under RESPA, a departure from previous interpretations by HUD.
      • Court rulings:
        • Captive reinsurance arrangements are permissible, subject to requirement that amount paid by insurer does exceed reasonable market value of reinsurance.
        • Retroactive application of new CFPB interpretation violated due process.
        • RESPA includes three-year statute of limitations that applies to administrative enforcement actions.
      • Relief:
        • Case remanded to CFPB to determine whether, within three-year limitations period, mortgage insurers paid more than reasonable market value to reinsurer.
    • Slip opinion in PHH Corporation v. CFPB, No. 15-1177, available at


  • FFIEC announces two webinars in observance of Cybersecurity Awareness Month (Oct. 6).
    • Oct. 13: Mobile Financial Services – Appendix E of the Retail Payment System Booklet.
    • Oct. 31: Getting the Most Out of Your FS-ISAC Membership.
    • Announcement available at

Debt Collection

Distributed Ledger

  • "Distributed Ledger Technology: Implications for Payments, Clearing, and Settlement," remarks by Federal Reserve Governor Brainard at the Institute of International Finance Annual Meeting Panel on Blockchain (Oct. 7).
    • "Like many new financial technologies, distributed ledgers could ameliorate or exacerbate traditional financial risks. What matters to us as policymakers and regulators is not only whether the migration to a new technological platform increases or reduces risks, but also whether risks are rendered more or less opaque, and how they are distributed among and between financial intermediaries and end users."
    • "In the payments, clearing, and settlement arena, some important risk areas for consideration include settlement, operations, and cybersecurity, as well as money laundering and terrorist financing. In managing risks, important considerations include system resiliency and governance as well as the role of licensing in ensuring proper oversight."
    • "Robust security is an important element of any system."
    • "It will be important that users and administrators of distributed ledger technologies can meet their responsibilities to combat money laundering, terrorist financing, and other key law enforcement concerns."
    • Remarks available at


  • SEC to hold forum on financial technology innovation in the financial services industry on Nov. 14 in Washington DC.
    • Forum designed "to foster greater collaboration and understanding among regulators, entrepreneurs and industry experts into Fintech innovation and evaluate how the current regulatory environment can most effectively address these new technologies."
    • Agenda not yet available.
    • Announcement available at

Foreign Correspondent Banking

  • OCC releases bulletin on risk management of foreign correspondent banking accounts (Oct. 5).

Payment Systems

  • Federal Reserve announces that task forces have begun to review several proposals for faster payments (Oct. 4).
    • Faster Payments Task Force to prepare two-part report.
      • Part I, scheduled for release in January 2017, will describe history and background of payment systems.
      • Part II, scheduled for release in mid-year 2017, will discuss and assess specific proposals and models for faster end-to-end payments.
    • Output of Payment System Security Task Force to be determined.
    • Announcement available at

Prepaid Accounts

Qualified Financial Contracts

  • OCC emphasizes proposed rule to restrict exercise of default rights of QFC holders in the event of failure of a systemically important national bank (Oct. 3).
    • QFC would be required to:
      • Contain a contractual stay-and-transfer provision analogous to statutory stay-and-transfer provision imposed in Title II of Dodd-Frank.
      • Limit exercise of default rights based on insolvency of affiliate of covered bank.
    • Bulletin 2016-31 with link to proposed rule available at
    • Comment deadline: Oct. 18.


  • U.S. Court of Appeals remands CFPB enforcement decision on captive reinsurance arrangements (Oct. 11).
    • Arrangements permissible provided insurer does not pay reinsurer more than reasonable market value.
    • For more details, see CFPB above.


  • OCC issues bulletin on revised interagency examination procedures for the Military Lending Act (Oct. 7).
    • Revised procedures cover:
      • Expansion of MLA protections to a broader range of consumer credit products.
      • Rules for determining fees and charges for calculating the MAPR.
      • Optional safe harbor available to creditors for identifying covered service members and dependents.
      • Disclosures to covered borrowers.
      • Limitations on consumer credit extended to covered borrowers.
    • Bulletin 2016-33 available at

Too Big to Fail

  • Federal Reserve and FDIC post public sections of "targeted submissions" by 8 systemically important U.S. banking firms (Oct. 4).
    • Earlier plans of 5 bank holding companies were not credible or would not facilitate an orderly resolution.
    • Weaknesses found in plans of 3 other bank holding companies.
  • U.S. and European financial regulators hold coordination exercise on cross-border resolution planning (Oct. 10).


Upcoming Events

  • Oct. 13
    • FDIC Community Banking Initiative: De Novo Outreach Meeting, New York NY.
    • FFIEC webinar, Mobile Financial Services – Appendix E of the Retail Payment System Booklet.
  • Oct. 19
    • FDIC Money Smart Train-the-Trainer Online Live Meeting.
  • Oct. 27
    • FDIC Atlanta Region Regulatory Conference Call, Reasonably Expected Market Area, Trade Area, and Assessment Area: Where Do They Fit under CRA and Fair Lending?
  • Oct. 27-28
    • OFR and Center on Finance, Law, and Policy, Big Data: Improving the Scope, Quality, and Accessibility of Financial Data, Ann Arbor, MI.
  • Oct. 28
    • FDIC 6th Annual Consumer Research Symposium.
  • Oct. 31
    • FFIEC webinar, Getting the Most Out of Your FS-ISAC Membership.
  • Nov. 9
    • OCC Directors Workshop, "Compliance Risk", Cincinnati OH.
  • Nov. 10
    • OCC Directors Workshop, "Operational Risk", Cincinnati OH.
  • Nov. 14
    • SEC FinTech forum, Washington DC.
  • Nov. 15
    • OCC Directors Workshop, "Compliance Risk", Little Rock AR.
  • Nov. 16
    • OCC Directors Workshop, "Operational Risk", Little Rock AR.
  • Nov. 29
    • FDIC Community Banking Initiative: De Novo Outreach Meeting, Atlanta GA.

Regulatory Comment Deadlines

  • Oct. 14 – Federal Reserve, FDIC, OCC: streamlined call report for small banks.
  • Oct. 18 – CFPB: changes to required Know Before You Owe mortgage lending disclosures.
  • Oct. 18 – OCC: mandatory contractual stay requirements for QFCs.
  • Oct. 24 – FinCEN: extension of BSA/AML requirements to banks without a federal functional regulator.
  • Oct. 27 – FDIC: third-party lending guidance.
  • 45 days after publication in NYS Register – NY Dep't of Financial Services: cybersecurity requirements.
  • Nov. 14 – OCC: receiverships of uninsured national banks (with implications for possible FinTech charter).
  • Nov. 14 – OCC: prohibition from dealing and investing in industrial and commercial metals.
  • Nov. 25 – Federal Reserve: changes to capital planning and stress testing for large, noncomplex banking firms.
  • 90 days after publication in Federal Register – Federal Reserve: limits on physical commodity activities of financial holding companies.