All in Regulatory Update

FinCEN Speech Addresses Pandemic Issues

Adam Witmer
BSA, Regulatory Update

On 9/29/2020, FinCEN Director, Kenneth Blanco, presented a speech at the ACAMS Virtual AML Conference. After beginning the speech with a discussion on FinCEN’s response to the global health crisis, Director Blanco shared some fraud trends FinCEN is seeing related to COVID-19. Though much was a reiteration of applicable advisories issued by FinCEN, it was explained that the most common trend seen in COVID-19 related SARs involves fraudsters “targeting multiple COVID-19 related government stimulus programs, employing money mules and cyber techniques.”

Agencies Issues Final Rules Related to COVID-19

Adam Witmer
Regulatory Update, Appraisals

On 9/29/2020, the Federal Reserve, FDIC, and OCC jointly finalized two interim final rules that are currently in effected and were issued in light of the COVID-19 pandemic. The rules include:

  • A final rule that temporarily defers appraisal and evaluation requirements for up to 120 days after the closing of certain residential and commercial real estate transactions; and

  • A final rule that neutralizes—due to the lack of credit and market risk—the regulatory capital and liquidity effects for banks that participate in certain Federal Reserve liquidity facilities.

Auto Lender Fined for UDAAP Violations Related to Loss Damage Waivers

Adam Witmer
Regulatory Update

On 9/21/2020, the CFPB announced that it had settled with the auto-loan servicer, Lobel Financial Corporation. According to the CFPB’s release, the CFPB found “that Lobel engaged in unfair practices with respect to its Loss Damage Waiver (LDW) product, in violation of the Consumer Financial Protection Act (CFPA). When a borrower has insufficient insurance, rather than force-placing collateral-protection insurance, Lobel places the LDW product, which is not itself insurance, on borrower accounts and charges a monthly premium of approximately $70 for the LDW coverage. The LDW product provides that Lobel will pay for the cost of covered repairs and, in the event of a total vehicle loss, cancel the borrower’s debt. The Bureau found that Lobel continued to bill certain consumers for LDW coverage but then failed to provide it, and assessed fees from consumers that they were not obligated to pay.“

Extended Comment Period for Seasoned QM Proposal

Adam Witmer
Regulatory Update

On 9/21/2020, the CFPB announced that it is extending the comment period on its notice of proposed rulemaking that will create a new category of qualified mortgages - known as “seasoned QMs” - by three days. This short extension is meant to accommodate for the Yom Kippur Jewish holiday. Originally required by September 28, 2020, comments must now be submitted by October 1, 2020.

Federal Reserve Issues Notice of Upcoming CRA Proposal

Adam Witmer
CRA, Regulatory Update

On 9/21/2020, the Federal Reserve Board issued an Advance Notice of Proposed Rulemaking (ANPR) and invited public comment on an approach to modernize CRA regulations. The ANPR is looking for feedback on “ways to evaluate how banks meet the needs of low- and moderate-income (LMI) communities and address inequities in credit access.” This rule, of course, comes a few months after the OCC issued a final rule that requires financial institutions regulated by the OCC to comply with by October 1, 2020, January 1, 2023, or January 1, 2024. Therefore, it appears that this ANPR would only apply to financial institutions regulated by the Federal Reserve. The FDIC has not yet announced their intentions for CRA revisions, though they had originally issued the the proposal jointly with the OCC, but have not yet finalized the same rule as the OCC.

FinCEN Requests Comments on AML Program Requirements

Adam Witmer
BSA, Regulatory Update

On 9/16/20, the Financial Crimes Enforcement Network (FinCEN) issued an Advance Notice of Proposed Rulemaking (ANPRM) seeking public comment on a number of questions pertaining to potential regulatory amendments under the Bank Secrecy Act (BSA). Specifically, FinCEN explained in their advisory that they are seeking comment on creating a new AML program component, referred to as an “effective and reasonably designed” AML program component, so that financial institutions can be empowered to allocate resources more effectively. FinCEN also explained that this component would also seek to create an understanding between financial institutions and their regulators regarding which AML program elements are deemed necessary, while imposing minimal additional obligations under the existing supervisory framework.

CFPB Issues Outline of Proposals for Small Business Data Collection

Adam Witmer
Fair Lending, Regulation B, Regulatory Update

On 9/15/20, the Consumer Financial Protection Bureau (CFPB) issued an “Outline of Proposals Under Consideration and Alternatives Considered for Section 1071 of the Dodd-Frank Act.” This release explains how the CFPB is currently working to implement Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that will create a requirement for financial institutions to compile, maintain, and report certain data on applications for credit from women-owned, minority-owned, and small businesses.

FATF Issues Report of Red Flags for Virtual Assets

Adam Witmer
BSA, Regulatory Update

On 9/14/2020, the Financial Action Task Force (FATF) issued a report called “Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing.” This 24-page report was designed to help government agencies detect whether virtual assets are being used for criminal activity. Specifically, the report highlights key red flag indicators - that were identified through more than 100 case studies - that could suggest criminal behavior. The red flag indicators included in the report could assist financial institutions in detecting and reporting suspicious activity related to virtual assets.

CFPB Issues Consent Orders for VA Advertising

Adam Witmer
Regulatory Update

During the third quarter of 2020, the CFPB has settled with several different mortgage companies in relationship to their advertising practices for VA-guaranteed loans. Referred to as a “sweeping effort” by the CFPB, several lenders throughout the country have been issued consent orders and fines related to their inappropriate advertising practices which often violated several laws including UDAAP and Regulation Z.

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