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The FDIC has published [89 FR 48430] in today's Federal Register a notice that it has terminated its receiverships of Nova Bank (Berwyn, PA) and Ericson State Bank (Ericson, NE), effective June 1, 2024. FDIC, as Receiver for each of the insured depository institutions, was charged with the duty of winding up the affairs of the former institutions and liquidating all related assets. The FDIC has fulfilled its obligations and made all dividend distributions required by law.

OFAC has posted a Notice that it has amended the Syrian Sanctions Regulations (31 C.F.R. Part 542) to, among other things, implement the relevant provisions of a May 1, 2012 Executive order regarding foreign sanctions evaders with respect to Syria and Iran, and certain provisions of the Iran Threat Reduction and Syria Human Rights Act of 2012, the Countering America’s Adversaries Through Sanctions Act, and the Caesar Syria Civilian Protection Act of 2019. In addition to new prohibitions, OFAC is adding several relevant definitions and interpretations and one new general license. OFAC is also incorporating, with amendments, one general license; and updating six general licenses. The amendments were published at 89 FR 48310 in today's Federal Register, and are now effective.

OFAC has also published a list of areas of northeast and northwest Syria in which activities are authorized under General License 22,

OFAC also issued a new Syria Frequently Asked Question (FAQ 1180) and amended a number of Syria Frequently Asked Questions (FAQs 205, 231, 232, 934, and 938).

The NCUA has released its Quarterly Credit Union Data Summary for the quarter ending March 31, 2024.

According to the report, total assets in federally insured credit unions rose by $96 billion, or 4.4 percent, over the year ending in the first quarter of 2024 to $2.31 trillion. During the same period, total loans outstanding increased $71 billion, or 4.6 percent, to $1.60 trillion. Insured shares and deposits rose $40 billion, or 2.3 percent, to $1.77 trillion, from one year earlier. The delinquency rate at federally insured credit unions was 78 basis points in the first quarter of 2024, up 25 basis points compared with the first quarter of 2023.

Credit unions with assets over $1 billion were required to provide information on overdraft and NSF fees collected during the quarter. There were 443 credit unions that provided that information, with total assets of $1.781 trillion for the group. Those CUs reported $915.6 million in overdraft and NSF fees for the quarter. Forty-five of those CUs reported $0 in NSF fees. Twenty-five reporting CUs showed no overdraft fees, and nine CUs reported they collected neither NSF nor overdraft fees during the quarter.

The FDIC has issued its June 2024 list of banks examined for CRA Compliance, which includes 61 financial institutions whose CRA evaluation ratings were assigned in March 2024. Fifty-three of those evaluations were rated Satisfactory. Four banks' evaluations were rated Outstanding:

• Cape Cod Five Cents Savings Bank, The, Hyannis, Massachusetts
• Medallion Bank, Salt Lake City, Utah
• Stock Exchange Bank, The, Woodward, Oklahoma
• Tustin Community Bank, Tustin, California

Four of the banks' evaluations were rated Needs to Improve:

• Century Bank of Kentucky, Inc., Lawrenceburg, Kentucky
• First Bank of Ohio, Tiffin, Ohio
• Milestone Bank, Salt Lake City, Utah
• United Savings Bank, Philadelphia, Pennsylvania

The CFPB has announced it has issued Consumer Financial Protection Circular 2024-03, which addresses the use of unlawful or unenforceable terms and conditions on contracts for consumer financial products and services, which may violate the prohibition on deceptive acts or practices in the Consumer Financial Protection Act (CFPA).

“Covered persons” and “service providers” under the CFPA must comply with the prohibition on deceptive acts or practices in the CFPA. The inclusion of certain terms in contracts for consumer financial products or services may violate the prohibition when applicable federal or state law renders such contractual terms, including those that purport to waive consumer rights, unlawful or unenforceable.

UPDATE: Published in the 6/21/2024 Federal Register, at 89 FR 51955.

The FDIC has issued FIL-32-2024 with guidance to provide regulatory relief to financial institutions and facilitate recovery in areas of Arkansas — Benton, Boone, and Marion Counties — affected by severe storms, straight-line winds, tornadoes and flooding May 24–27, 2024.

The CFPB has announced it has finalized a rule, "Nonbank Registration," to be added to Title X of the C.F.R. as Part 1092. The rule will establish a registry to detect and deter corporate offenders that have broken consumer laws and are subject to federal, state, or local government or court orders. The registry will also help the CFPB to identify repeat offenders and recidivism trends.

The CFPB’s new registry will facilitate better understanding of bad actors that seek to restart a scam, fraudulent scheme, or other illegal conduct that harms the public. The CFPB expects that the registry will be used by state attorneys general, state regulators, and a range of other law enforcement agencies. The registry will also assist investors, creditors, business partners, and members of the public that are conducting due diligence or research on financial firms bound by law enforcement orders.

The CFPB’s final rule requires covered nonbank companies to:

• Register with the CFPB when they have been caught violating consumer law: Generally, covered nonbanks will report certain final agency and court orders and judgments to the CFPB. These orders include consent and stipulated orders brought under consumer protection laws.
• Provide an attestation from a senior executive that the company is not flouting orders: For nonbank companies supervised by the CFPB, the entity subject to an order will provide a written attestation from an executive that confirms compliance with any relevant orders.

The rule will become effective September 16, 2024, with implementation dates that are 30, 120, or 210 days after the effective date.

• Executive summary
• Publication update: Published at 89 FR 56028 on 7/8/2024

The NCUA has announced it issued four consent prohibition orders in May 2024. The individuals named below are permanently prohibited from participating in the affairs of any federally insured depository institution.

• Arneta Davis, a former member service representative of Dow Great Western Credit Union in Antioch, California; the NCUA Board found that she had stolen tens of thousands of dollars from credit union member accounts, defrauding the CU of over $40,000.
• Eric Stash, a former teller, loan officer, and branch manager of San Juan Credit Union in Blanding, Utah, for stealing over $294,000 in cash from the branch's vault and altering internal records.
• Britnee Maree Starling, a former member services representative/teller at AltaOne Federal Credit Union in Ridgecrest, California, for increasing her VISA credit card's cash advance limit from $1,000 to $100,000 and obtaining cash advances against the card of $96,950.
• Tina L. Torres, a former manager of Valley Agricultural Federal Credit Union in Santa Paula, California, for embezzling funds from the credit union by initiating unauthorized wire transfers and falsely reporting that the credit union held greater assets than it possessed, causing the credit union significant losses. Torres subsequently pleaded guilty to four counts of grand theft, two counts of forgery, and four counts of grand theft/embezzlement.

An order of prohibition bars a party from ever working for a federally insurance depository institution.

The OCC has released 19 CRA evaluations that became public in May for national banks and federal savings associations. Eleven of those institutions received rating of Satisfactory. Eight institutions received ratings of Outstanding:

• PNC Bank, National Association, Wilmington, Delaware
• First National Bank, Cloverdale, Indiana
• United Fidelity Bank, F.S.B., Evansville, Indiana
• Industrial Commercial Bank of China (USA), National Association, New York, New York
• Keybank National Association, Cleveland, Ohio
• Texas National Bank, Mercedes, Texas
• Community National Bank, Derby, Vermont
• Hilltop National Bank, Casper, Wyoming

The Federal Reserve Board's archive of CRA evaluations of state member banks shows that the Reserve Banks made public ten CRA evaluation in May. Eight of those evaluations were rated Satisfactory, and Outstanding ratings were assigned to:

• Bank of Hawaii, Honolulu, Hawaii
• First State Bank, Anadarko, Oklahoma

The FDIC has issued FIL-31-2024 to remind all FDIC-insured financial institutions of the annual Summary of Deposits Survey as of June 30, 2024. All institutions with branch offices are required to submit the survey; institutions with only a main office are exempt. Survey responses are due by July 31, 2024, and no extensions will be granted.

• The description for the Home Banking service level (13) has been expanded to include mobile applications (mobile apps). Refer to Section 7 of the SOD instructions.
• No later than September 30, 2024, SOD survey results will be published on the FDIC’s SOD Deposit Market Share website.
• The FDIC’s SOD Deposit Market Share website will be discontinued by the end of 2024, and will be replaced by a new and improved SOD application that is available for preview now. Refer to Section 1G of the SOD instructions for more information.
• Institutions must either complete the survey directly in the Central Data Repository (CDR), or use vendor software to prepare and submit their survey responses to the CDR. Software vendors available to assist with the SOD filing are listed under “Filing Procedures” within this FIL.
• Consistent with the prior year, password requirements have been implemented for the CDR. Refer to Section 5C of the SOD instructions.
• Reporting instructions are available on the FDIC’s Summary of Deposits website. Refer to Section 5I of the SOD instructions for amending SOD surveys after initial submission.

The FDIC has issued a list of nine enforcement decisions and orders issued in April 2024.

• An order to pay a $13,000 civil money penalty for flood insurance rules violations was issued to CNB Bank, Carlsbad, New Mexico
• Consent orders were issued to —
  • Spring Valley Bank, Wyoming, Ohio
  • Tioga-Franklin Savings Bank, Philadelphia, Pennsylvania
  • Commodore Bank, Somerset, Ohio
  • The First Bank and Trust Company of Murphysboro, Murphysboro, Illinois (Corrected order)
• A notice of intention to prohibit and notice of charges for an order of restitution and assessment of a civil money penalty was issued to Derrick Alan Smith, formerly a community banking branch banker at Branch Banking and Trust Company (now known as Truist Bank), Charlotte, North Carolina
• An order of prohibition assessing a $7,000 civil money penalty was issued to Cody Kietzman formerly employed by The Frederick Community Bank, Paxton, Illinois
• An order of prohibition was issued to David P. Ritter formerly employed by Summit Community Bank, Inc., Moorefield, West Virginia
• An order approving the termination of FDIC insurance was issued to Interstate Federal Savings and Loan Association of McGregor, McGregor, Iowa

On Friday, the Treasury Department reported that OFAC has targeted four entities associated with OFAC-designated Rayan Roshd Afzar Company that have procured critical parts for Iran’s unmanned aerial vehicle (UAV) program. Additionally, OFAC is targeting an Iranian executive of Iran Aviation Industries Organization, a subsidiary of Iran’s Ministry of Defense and Armed Forces Logistics that oversees UAV manufacturers Iran Aircraft Manufacturing Industrial Company and Qods Aviation Industries.

For the names and identification information of the designated parties, see the May 31, 2024, BankersOnline OFAC Update.

The CFPB has reported it has sued student loan servicer Pennsylvania Higher Education Assistance Agency (PHEAA), which does business as American Education Services (AES), for illegally collecting on student loans that have been discharged in bankruptcy and sending false information about consumers to credit reporting companies. The CFPB’s lawsuit asks the court to order PHEAA to stop its illegal conduct, provide redress to borrowers it has harmed, and pay a civil penalty.

PHEAA is a student loan servicer with its principal office in Harrisburg, Pennsylvania. It is a public corporation organized under the laws of the Commonwealth of Pennsylvania. As of December 2023, PHEAA serviced a portfolio of student loans worth roughly $17.8 billion.

The United States Bankruptcy Code provides consumers a financial fresh start by discharging debts and prohibiting creditors from collecting on discharged debts. Many student loans, both federal and private, can be discharged in bankruptcy only if a borrower initiates a separate proceeding and meets a more stringent legal standard than is applied to other debts. However, certain private student loans are discharged in normal bankruptcy proceedings like other unsecured consumer debt. These “non-qualified” private student loans include money borrowed to pay for tuition at schools that do not qualify for federal Title IV funding, such as unaccredited trade or K-12 schools, loans for medical and dental residency, loans to students attending school less than half-time, or loans where the loan amount was higher than the cost of attendance (which can occur when a loan is disbursed directly to a consumer).

AES services a range of private student loans, including those that have strict discharge requirements in bankruptcy and non-qualified loans that are routinely discharged. Nevertheless, when a consumer with private student loans serviced by AES receives a bankruptcy discharge, the company’s practice is to treat all of that consumer’s education-related loans as not discharged, unless it receives an explicit court order or other express direction from the loan owner.

In March 2023, the CFPB issued a bulletin warning the industry about this issue, detailing how supervisory examinations had found some student loan servicers illegally returning loans to collections after bankruptcy courts had discharged the loans.

The CFPB's complaint alleges that, between 2017 and 2021, AES collected or attempted to collect on approximately 7,934 private student loans after a bankruptcy proceeding. Although discovery in litigation will reveal the total scope of PHEAA’s unlawful collection activity, the Bureau says at least 177 were loans eligible for discharge in bankruptcy. Borrowers were thus subjected to illegal collections on loans they did not owe. AES also furnishes inaccurate information to credit reporting companies regarding borrowers’ outstanding debt, which causes financial harm to consumers and may make it harder to qualify for other credit in the future.

This is the CFPB’s second public enforcement action against PHEAA this year. On May 6 the CFPB filed a complaint and proposed stipulated judgment, which, if approved by the court, would require PHEAA and the National Collegiate Student Loan Trusts to pay more than $5 million for student loan servicing failures, including failing to provide accurate information to borrowers and incorrectly denying forbearance requests.

The FDIC has posted its Community Reinvestment Act examination schedules for the third and fourth quarters of 2024.

The Federal Reserve Board, FDIC, and OCC on Friday jointly issued state loan-to-deposit ratios that are used to evaluate compliance with the Riegle-Neal Interstate Banking and Branching Efficiency Act. Each respective host state loan-to-deposit ratio shows the ratio of total loans in a state to total deposits in the state for all banks that have that state as their home state. These ratios replace those issued in May 2023.

By law, a bank is generally prohibited from establishing or acquiring branches outside of its home state primarily for the purpose of acquiring additional deposits. This prohibition seeks to ensure that interstate bank branches will not take deposits from a community without the bank also reasonably helping to meet the credit needs of that community.

• Section 109 Host State Loan-to-Deposit Ratios

The FDIC has issued Financial Institution Letters with guidance to provide regulatory relief to financial institutions and facilitate recovery in areas of—

• Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union, and Whitley Counties in Kentucky (FIL-28-2024) affected by severe storms, straight-line winds, tornadoes, landslides, and mudslides on April 2, 2024.
• Adair, Montgomery, Polk, and Story Counties in Iowa (FIL-29-2024) affected by severe storms causing significant property damage May 20–21, 2024.
• Boone, Cabell, Fayette, Kanawha, Lincoln, Marshall, Nicholas, Ohio, Putnam, Wayne, and Wetzel Counties in West Virginia (FIL-30-2024) affected by severe storms, straight-line winds, tornadoes, flooding, landslides, and mudslides caused significant property damage April 2–6, 2024.

The CFPB on Thursday morning announced it is launching a public inquiry into fees that are increasing mortgage closing costs. The CFPB wants to understand why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered. According to a CFPB analysis, the closing costs borrowers pay in connection with a mortgage have risen steeply in recent years. From 2021 to 2023, median total loan costs for home mortgages increased by over 36%. The unavoidable fees borrowers must pay at closing can strain household budgets and families’ ability to afford a down payment. The fees may also limit the ability of lenders to offer competitive mortgages because they have to absorb the higher costs or pass them on to borrowers.

The CFPB noted that, in 2022, median closing costs were $6,000, including substantial increases in the cost of credit reports.

The CFPB’s request for information seeks input from the public, including borrowers and lenders, about how mortgage closing costs may be inflated and constraining the mortgage lending market. Specifically, the CFPB asks for information about:

• Which fees are subject to competition: The CFPB is interested in the extent to which consumers or lenders currently apply competitive pressure on third-party closing costs. The CFPB also wants to learn about market barriers that limit competition.
• How fees are set and who profits from them: The CFPB wants to learn about who benefits from required services and whether lenders have oversight or leverage over third-party costs that are passed onto consumers.
• How fees are changing and how they affect consumers: The CFPB wants information about which costs have increased most in recent years and the reasons for such increases, including the rise in cost for credit reports and credit scores. The CFPB is also interested in data on the impact of closing costs on housing affordability, access to homeownership, or home equity.

Publication and comment period update: Published in the Federal Register on 6/6/2024 at 89 FR 48400, with comments due by 8/2/2024.

The OCC has released its schedule of Community Reinvestment Act (CRA) evaluations to be conducted in the third (July–September) and fourth (October–December) quarters of 2024.

The Treasury Department has announced that OFAC has sanctioned two companies that are linked to the Private Military Company “Wagner” (Wagner Group). Mining Industries SARLU and Logistique Economique Etrangere SARLU were designated pursuant to Executive Order (E.O.) 14024 for enabling Wagner Group security operations and Wagner Group-linked illicit mining endeavors in the Central African Republic (CAR).

For the identification information of the designated parties, see the May 30, 2024, BankersOnline OFAC Update.

The FDIC Board has announced its has terminated the Special Committee charged with overseeing the Cleary Gottlieb Steen & Hamilton LLC third-party review of allegations of sexual harassment and other interpersonal misconduct at the FDIC and assessment of the FDIC's workplace culture. The committee's termination was effective May 30, 2024. Going forward, any inquiries and other matters relating to the recently completed independent review will be handled by the FDIC’s staff.

The OCC has issued its Alert 2024-1 indicating that consumers have reported receiving various forms of fictitious correspondence via email, Google Chat, and the U.S. Postal Service related to up-front fee scams involving fictitious inheritance or beneficiary payouts. The notifications appear to be initiated by senior officials of the Office of the Comptroller of the Currency (OCC) regarding funds purportedly held by the OCC. Scam correspondence may include the names of other governmental agencies who are purportedly involved in the fake transaction.

In all instances, victims are initially contacted regarding funds being held on their behalf by the OCC and are asked to provide the scammers general personal information including name, address, and telephone number. Follow-up correspondence from the scammers includes requests for more specific personal information including, but not limited to Social Security number, bank account details, and copies of driver’s licenses and passports. Correspondence is generally poorly written with typographical and grammatical errors and may include instructions for the victim to pay thousands of dollars in required fees or taxes for the release of the supposedly held funds.

These scams not only involve the theft of victim funds, but also their identities. There are at least four known variations of this scam. Refer to the OCC's Alert for details and other information.

The OCC has announced the launch of REACh 2.0 at its Project REACh Financial Inclusion Summit.

Project REACh, the Roundtable for Economic Access and Change, brings together leaders from the banking industry, national civil rights organizations, business, and technology to identify and reduce barriers that prevent full, equal, and fair participation in the nation’s economy. Under REACh 2.0, working groups will replace workstreams and focus on place-based initiatives; underserved and disadvantaged populations; technology; and tools, products, and services. Existing REACh projects will transition to the new working groups.

In a CFPB Blog article ("Banks' responsibility for scams")posted yesterday, CFPB General Counsel Seth Frotman described an ongoing case in which Citibank has been sued by the state of New York for failing to respond adequately when people promptly told the bank that scammers had stolen money by initiating wire transfers from the consumers’ accounts online. The losses New York alleges people have suffered are serious: for example, New York alleges that one person discovered that a scammer had changed her online banking password, transferred money from her savings to her checking account, and then stole $40,000 via wire transfer—all through Citibank’s online banking platform. And New York alleges that instead of complying with the Electronic Fund Transfer Act’s protections in circumstances like these, Citibank looked to a law that was intended to govern transactions between commercial entities which does not provide the same level of consumer protection to victims of scams.

Mr. Frotman reports that, in response to New York’s allegations, Citibank has argued that the Electronic Fund Transfer Act doesn’t apply because the scammers ultimately used a wire transfer to take the money, and the Act contains an exemption for transfers made by banks “by means of” a wire service. But the CFPB disagrees with Citibank's stance, as it explained in a Statement of Interest (amicus brief) submitted to the court. The Bureau's position is that when a bank connects wire transfer capabilities to its online consumer banking platform and a person authorizes (or a scammer purports to authorize) a transfer online, the Electronic Fund Transfer Act applies to the transaction except for the bank-to-bank portion of it.

Editor's Note: CFPB Blog articles are not official interpretations of law or regulations. The ABA and other industry associations have issued a statement opposing the CFPB's blog article, arguing that the “CFPB cannot reinterpret a statute and reverse decades of settled law in an amicus brief and then use a blog post to suggest that its position is the law.”

The Federal Housing Finance Agency yesterday announced that Fannie Mae and Freddie Mac (the Enterprises) will enhance their Flex Modification policies to allow more borrowers facing longer-term hardships to achieve meaningful payment reductions. The updated Flex Modification policies will promote sustainable homeownership and the safety and soundness of the Enterprises.

Flex Modification is the Enterprises’ loan modification offering that provides a home retention solution for eligible borrowers facing a permanent hardship who can no longer afford to make their regular monthly mortgage payments. ​The enhanced Flex Modification policies lower a borrower’s monthly payment by incrementally applying the steps below to achieve a 20 percent Principal and Interest payment reduction:

• Reducing the borrower’s interest rate (if eligible); 
• ​Extending the mortgage term; and
• Forbearing principal for borrowers with mark-to-market loan-to-value ratios greater than 50 percent.

Borrowers facing financial hardship should contact their servicer to discuss their unique circumstances to determine their eligibility. Servicers may offer borrowers one of several solutions to resolve a delinquency, including the updated Flex Modification, payment deferral, or a repayment plan depending on borrowers’ individual circumstances. The enhanced Flex Modification policies will become effective on December 1, 2024. ​

• ​Fannie Mae's Flex Mod Announcement
• Freddie Mac​'s Flex Mod Announcement

The Treasury Department yesterday announced it has published a 2024 Non-fungible Token (NFT) Illicit Finance Risk Assessment. The risk assessment explores how vulnerabilities associated with NFTs and NFT platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.

The assessment finds that NFTs are highly susceptible to use in fraud and scams and are subject to theft. The report determines that illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime. It also found little evidence of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters, to date. The assessment finds that inadequate cybersecurity protections, challenges related to copyright and trademark protections, and the hype and fluctuating pricing of NFTs can enable criminals to perpetrate fraud and theft related to NFTs and NFT platforms. Moreover, some NFT firms and platforms lack appropriate controls to mitigate risks to market integrity and to combat money laundering and terrorist financing, and sanctions evasion. The assessment recognizes that mitigation measures, such as industry tools, law enforcement authorities, and analysis of public blockchain data, can partially mitigate such risks.

To address outstanding risks, the risk assessment recommends several U.S. government actions, including:

• Raising awareness within industry of existing obligations
• Continuing to enforce existing laws and regulations related to NFTs and NFT platforms; and
• Considering further application of regulations to NFTs and NFT platforms

The Office of Foreign Assets Control (OFAC) has amended the Cuban Assets Control Regulations, 31 C.F.R. Part 515 (CACR) to further implement portions of the president’s foreign policy toward Cuba. Among other things, these amendments increase support for internet freedom for the Cuban people and independent Cuban private sector entrepreneurs by expanding authorizations for internet-based services and a range of financial transactions. The rule was published in the Federal Register and became effective today.

OFAC also issued six new, Cuba-related Frequently Asked Questions (FAQs 1174-1179) and amended eight Cuba-related Frequently Asked Questions (FAQs 732, 736, 745, 748, 757, 769, 770, and 785).

The staff of the Federal Trade Commission has provided its annual report to the Consumer Financial Protection Bureau on its enforcement and related activities in 2023 on the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA).

The report highlights the FTC’s enforcement actions and initiatives under these laws and their implementing regulations, including in the areas of automobile financing and leasing, payday lending, other credit and leasing, and electronic fund transfers.

• Press release

The Federal Reserve Board on Tuesday released the minutes from its recent meetings to review and determine the discount rates provided to depository institutions through the discount window. Today's minutes cover the Board meetings that occurred on April 8 through May 1, 2024.

The Department of the Treasury announced yesterday that OFAC has designated three individuals, Yunhe Wang, Jingping Liu, and Yanni Zheng, for their activities associated with the malicious botnet tied to the residential proxy service known as 911 S5. OFAC also sanctioned three entities—Spicy Code Company Limited, Tulip Biz Pattaya Group Company Limited, and Lily Suites Company Limited—for being owned or controlled by Yunhe Wang.

For identity information on the designated individuals and entities, see the BankersOnline May 28, 2024, OFAC Update.

Acting Comptroller of the Currency Michael J. Hsu discussed recovery planning via livestream in remarks May 27 at the Entrepreneurship, Markets and Technology: Regulation's Challenges in a Changing World Conference in Zurich, Switzerland.

In his remarks, Mr. Hsu discussed the importance of recovery planning and how it can mitigate the too-big-to-fail problem. He highlighted the importance of recovery planning at large banks in the context of the bank failures in March 2023 and offered thoughts on expanding recovery planning guidelines to apply to banks with at least $100 billion in assets.

The FDIC on Friday issued FIL-27-2024 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Texas affected by severe storms, straight-line winds, tornadoes, and flooding on April 26, 2024, and continuing.

The affected areas are Harris, Liberty, Montgomery, Polk, San Jacinto, Trinity, and Walker Counties.

The FDIC yesterday issued FIL-26-2024 announcing revisions to Call Reports and the FFIEC 002 Report as published [89 FR 45046] on May 22, 2024, in the Federal Register.

Proposed changes were issued on September 28, 2023 (FIL-52-2023) and December 27, 2023 (FIL-68-2023). After considering the comments received on these notices, the agencies are moving forward with certain proposed revisions related to replacing references to “troubled debt restructurings” with “modifications to borrowers experiencing financial difficulty” consistent with ASU 2022-02, the reporting on the internet website addresses of depository institution trade names, and the adoption of the standards for electronic signatures. These updates to the Call Report and FFIEC 002 report forms and instructions will be effective as of the June 30, 2024, report date.

The agencies are implementing revisions related to reporting of loans to NDFIs as of the December 31, 2024, report date. The agencies are also adding a new Memorandum item that would identify the amounts reported as a structured financial product that are guaranteed by U.S. Government agencies or sponsored agencies, which would be effective as of the December 31, 2024, report date.

The agencies are continuing to review comment letters related to loan modifications to borrowers experiencing financial difficulty under ASU 2022-02, as well as the proposed clarification on the reporting of past due loans and proposed reporting of long-term debt requirements, for further changes to the Call Report and the FFIEC 002. Comments on the May 22, 2024, Federal Register notice will be accepted through June 21, 2024.

The Federal Housing Administration's Mortgagee Letter 2024-10, issued yesterday, requires FHA-approved mortgagees to notify HUD when a cyber incident occurs. The letter, effective immediately, applies to all FHA insurance programs.

The mortgagee letter adds a new section, Significant Cybersecurity Incident, which requires FHA-approved mortgagees to report cyber incidents to HUD within 12 hours of detection. Reports will be made to HUD's FHA Resource Center and to HUDs Security Operations Center.

The OCC yesterday reported recent enforcement actions against two national banks and five institution-affiliated parties to OCC-supervised institutions.

• A formal agreement with Comerica Bank & Trust, National Association, Ann Arbor, Michigan, for unsafe or unsound practices, including those relating to the bank’s risk governance framework and internal controls
• A formal agreement with Lemont National Bank, Lemont, Illinois, for unsafe or unsound practices, including those relating to capital planning, strategic planning, succession planning, and liquidity risk management
• An order of prohibition against Stanley Acosta, a former senior specialist relationship banker at a Dartmouth, Massachusetts, branch of Santander Bank, N.A., Wilmington, Delaware, for stealing approximately $27,449 from cash deposit bags that customers provided to the bank via the night deposit vault
• An order of prohibition against Bahtia Greene, a former associate operations processor at the Philadelphia, Pennsylvania, lockbox facility for Wells Fargo Bank, N.A., Sioux Falls, South Dakota, for misappropriating confidential information of bank customers and selling the information to a third party, resulting in fraudulent transactions and a loss to the bank of approximately $688,000
• An order of prohibition against Sabina Prince, former teller at a Mountain Brook, Alabama, branch of PNC Bank, National Association, Wilmington, Delaware, for taking $15,000 in cash from the bank and manipulating cash shipment processing receipts to hide her actions
• An order of prohibition against Stephanie Sanders, former relationship banker at NBT Bank, N.A., Norwich, New York, for misappropriating approximately $30,650 from the bank by crediting her checking and savings accounts over 100 times
• A notice of charges for Gerald E. Milligan, II, a former teller at a Royal Palm, Florida, branch of PNC Bank, N.A., Wilmington, Delaware. The Notice of Charges alleges, among other things, that Milligan knowingly made false attestations and provided false supporting documentation for a Paycheck Protection Plan (PPP) loan application, received PPP loan proceeds in the amount of $141,530, and used the funds for personal gain.

The National Credit Union Administration has published [89 FR 45602] in this morning's Federal Register a notice of regulatory review and request for comments.

The NCUA Board is voluntarily reviewing agency regulations to identify rules that are outdated, unnecessary, or unduly burdensome on federally insured credit unions. The NCUA is not statutorily required to undertake the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) review; however, the Board has elected to participate in the decennial review process.

The NCUA divided its regulations into 10 categories. Over the next 2 years, the NCUA will publish four Federal Register documents each requesting comment on multiple categories of regulations. This first document requests comment by August 21, 2024, on regulations concerning the following two categories: “Applications and Reporting,” and “Powers and Activities.”

The FDIC yesterday published its 2024 Risk Review, which provides an overview of banking conditions in 2023 in five broad categories: market risks, credit risks, operational risks, crypto-asset risks, and climate-related financial risks. The market risks areas discussed are liquidity, deposits and funding, and net interest margins and interest rate risk. The credit risks areas discussed are commercial real estate, residential real estate, consumer, agriculture, small business, corporate debt and leveraged lending, nonbanks, and energy.

The discussion of operational risks examines the potential negative impact to banks from cyber threats and illicit activity. The crypto-asset risks section discusses the FDIC’s approach to understanding and evaluating crypto-asset-related markets and activities. The discussion of climate-related financial risks focuses on the physical risk of severe weather and climate events to the banking system.

Monitoring these risks is among the FDIC's top priorities.

The Federal Reserve has posted the Minutes of the Federal Open Market Committee held on April 30 and May 1, 2024.

The Securities and Exchange Commission this morning announced that The Intercontinental Exchange, Inc. (ICE) agreed to pay a $10 million penalty to settle charges that it caused the failure of nine wholly-owned subsidiaries, including the New York Stock Exchange, to timely inform the SEC of a cyber intrusion as required by Regulation Systems Compliance and Integrity (Regulation SCI).

According to the SEC's Order, in April 2021, a third party informed ICE that ICE was potentially impacted by a system intrusion involving a previously unknown vulnerability in ICE’s virtual private network (VPN). ICE investigated and was immediately able to determine that a threat actor had inserted malicious code into a VPN device used to remotely access ICE’s corporate network. However, the SEC’s order finds that ICE personnel did not notify the legal and compliance officials at ICE’s subsidiaries of the intrusion for several days in violation of ICE’s own internal cyber incident reporting procedures. As a result of ICE’s failures, those subsidiaries did not properly assess the intrusion to fulfill their independent regulatory disclosure obligations under Regulation SCI, which required them to immediately contact SEC staff about the intrusion and provide an update within 24 hours unless they immediately concluded or reasonably estimated that the intrusion had or would have no or a de minimis impact on their operations or on market participants.

The CFPB this morning issued an interpretive rule that confirms that Buy Now, Pay Later (BNPL) lenders are credit card providers. Accordingly, BNPL lenders must provide consumers some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a BNPL loan. The CFPB launched its inquiry into the rapidly expanding BNPL market more than two years ago and continues to see consumer complaints related to refunds and disputed transactions.

Under the rule, BNPL lenders will be required to:

• Investigate disputes
• Refund returned products or canceled services
• Provide periodic billing statements

The interpretive rule is applicable 60 days after its May 31, 2024, publication at 89 FR 47068 in the Federal Register (Effective date July 30, 2024). While the CFPB states that Administrative Procedures Act does not require it, the Bureau is opting to collect comments on the rule and may make revisions after reviewing any feedback. Comments will be accepted on the rule through August 1, 2024.
Update: Federal Register publication information and effective date have been added. References to a "proposal" have been removed; the interpretive rule was issued to become effective as published, but may be revised after the CFPB reviews the feedback it receives.

The Federal Reserve Board has issued its report on Economic Well-Being of U.S. Households in 2023, which examines the financial circumstances of U.S. adults and their families. Overall, the report shows that financial well-being was nearly unchanged from 2022 as higher prices remained a challenge for most households and workers continued to benefit from a strong labor market.

During 2023, 72 percent of adults reported either doing okay or living comfortably financially, similar to the 73 percent seen in 2022 but down 6 percentage points from the recent high of 78 percent in 2021. Despite the moderating pace of inflation, higher prices continued to be a top financial concern. Sixty-five percent of adults said that changes in the prices they paid compared with the prior year had made their financial situation worse, including 19 percent who said price changes made their financial situation much worse.

Some groups continued to experience financial stress at higher rates than others. In particular, low-income adults were more likely to face material hardships, including not paying all bills in full, sometimes or often not having enough to eat, and skipping medical care because of cost. Seventeen percent of adults said they did not pay all their bills in full in the month prior to the survey.

This year's report also discusses topics new to the survey including homeowners' insurance, caring for aging or disabled adults, and childcare. For example, childcare was reported as a significant cost in family budgets. Parents using paid childcare typically spent 50 to 70 percent as much per month on childcare as they did on their housing payment, which is most people's single largest monthly expense.

The report, a fact sheet, downloadable data, data visualizations, and a video summarizing the report's findings are available on the Federal Reserve's website.

FDIC FIL-25-2024, issued yesterday, provides guidance to help financial institutions and facilitate recovery in areas of Massachusetts affected by severe storms and flooding September 11–13, 2023. The areas included in the declared disaster include Worcester and Bristol counties in Massachusetts.

The Conference of State Bank Supervisors, which owns and operates the NMLS, is inviting comments on proposed 2025 NMLS fee changes affecting both state licensing and federal registration of mortgage loan originators. Comments are due by Monday, July 22, 2024, at 5 p.m. EDT.

The NMLS will conduct a virtual town hall discussion on the proposal on Thursday, June 13, at 1 p.m. EDT. Registration in now open for the event. Webinar space is limited, but a recording will be made available.

On Monday, as part of the Treasury Department's Counter Fentanyl Strike Force, FinCEN, in partnership with the IRS Criminal Investigation (CI), announced a new initiative to combat the illicit trafficking of fentanyl into the United States. The “Promoting Regional Outreach to Educate Communities on the Threat of Fentanyl” (or PROTECT) series of FinCEN Exchange sessions will be held through the remainder of 2024 in U.S. cities that are highly impacted by the opioid epidemic.

The series is specifically designed to work with regional and local banks who are deeply connected to their communities and offer unique perspectives on the opioid crisis, and will focus on how law enforcement can best support their efforts to monitor activity that may be tied to the illicit trafficking of fentanyl. At these exchanges, federal officials brief on information critical to tracking these illicit financial flows, including typologies and red-flag indicators of fentanyl-related activity, and discuss what types of information are particularly valuable when financial institutions report suspicious activity.

The PROTECT series is being launched in collaboration with other government partners, including the Drug Enforcement Administration, Homeland Security Investigations, Customs and Border Protection, the U.S. Secret Service, the Federal Bureau of Investigation, the Department of Justice Money Laundering and Asset Recovery Section, various U.S. Attorney’s Offices, and local law enforcement agencies.

The Boston event in the PROTECT series was conducted on Monday, bringing federal agencies and law enforcement authorities from the Boston area together with representatives from the financial industry for a discussion on ways to deepen collaboration and enhance the value of suspicious activity reporting to counter illicit fentanyl trafficking. FinCEN and law enforcement representatives highlighted the significant value that Suspicious Activity Reports contribute to law enforcement efforts to combat fentanyl trafficking, and financial institutions shared their observations on money laundering flows and tactics used by narcotraffickers and their enablers.

The CFPB on Monday reported it had taken action against Western Benefits Group for charging illegal advance fees for student loan debt relief and misrepresenting to consumers that advance fees would go toward paying down their loans. The CFPB found Western Benefits also misrepresented that it was affiliated with and endorsed by the Department of Education, and that the company would help consumers consolidate student loans, lower consumers’ monthly student loan payments, or obtain loan cancellation.

The Bureau found that since 2016, Western Benefits Group’s practices caused approximately 5,970 consumers a total of approximately $974,590 in harm, reflecting the total fees they paid, less any refunds.

The CFPB is ordering Western Benefits to permanently cease operations and pay a $400,000 penalty to be deposited in the CFPB’s victims relief fund. The order also rescinds all existing agreements with consumers.

Western Benefits Group is reportedly a nonbank telemarketer headquartered in Pleasanton, California, that has offered debt relief services since at least 2016.

In January 2016, Western Benefits began to market, sell, and administer student loan debt relief services to consumers. Western Benefits used lead generators to increase its inbound telemarketing calls. The lead generators marketed debt relief services to consumers through email marketing campaigns and web campaigns.

• Consent Order against Western Benefits Group, LLC

Yesterday, FDIC Chairman Martin J. Gruenberg issued a statement that, in light of recent events, he is prepared to step down from his responsibilities once a successor is nominated and confirmed. He said that, until that time, he will continue to fulfill his responsibilities as chairman, including the transformation of the FDIC's workplace culture.

The OCC has posted a list and schedule of workshops designed to meet the needs of new directors, experienced directors, and senior management of national community banks and federal savings associations wishing to review fundamentals or get critical updates. Two series of workshops have been scheduled throughout the year:

• Basic Series, which includes Building Blocks (1.5 days in person or 3 hour virtual workshop)
• Risk Management Series, which comprises:
  • Risk Governance (1 day in person or 3 hours virtually)
  • Credit Risk (1 day in person or 3 hours virtually)
  • Operational Risk (1 day in person or 3 hours virtually)
  • Compliance Risk (1 day in person or 3 hours virtually)
  • Capital Markets (1/2 day in person)

The schedule of the workshops and online registration are available on the OCC's website.

The CFPB has announced is has sued SoLo Funds, Inc., a fintech company that operates a nationwide website and mobile-application based peer-to-peer lending platform through which consumers can obtain small-dollar, short-term loans. SoLo markets its lending platform to consumers as a consumer-friendly alternative to high-cost, short-term loans.

The Bureau sued SoLo for deceiving borrowers about the total cost of loans. Despite advertising zero-interest loans or 0% APR loans, SoLo’s use of dark patterns ensures that almost every borrower pays a fee, in the form of a “tip” or “donation.” The CFPB is seeking, among other things, injunctions against SoLo to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains, and a civil money penalty.

According to the Bureau's complaint, Since at least 2018, SoLo has operated a digital lending platform through which consumers can obtain short-term loans. The maximum SoLo loan amount is $575, and the minimum is $20. SoLo brokers loans between consumer borrowers and investors. SoLo requests consumers pay fees to lenders and to SoLo, which the company refers to as “tips” and “donations,” respectively. SoLo services and collects on loans brokered through its platform. While SoLo claims fees paid to lenders and the company are voluntary, the CFPB alleges that is not the case. When consumers reach the part of the application that asks them to pay a fee to SoLo, consumers only see options for what percentage to give—none of the options is zero. SoLo also informs prospective lenders of the fee they will receive from a consumer to fund a loan. The result is that consumers who do not pay a fee to lenders are unlikely to get their loans funded. In fact, as of December 31, 2022, only 0.5% of funded loans did not include a fee paid to the lender by the borrower.

The CFPB alleges that SoLo has violated the Consumer Financial Protection Act and the Fair Credit Reporting Act. The company deceives borrowers about the cost of credit, uses dark patterns to trick borrowers, services and collects on loans that are void and uncollectible, and does not have procedures to assure the maximum possible accuracy of its consumer reports. The CFPB’s lawsuit against SoLo seeks a stop to alleged unlawful conduct, forfeiture of ill-gotten gains, redress payments to harmed consumers, and imposition of a civil money penalty

The Federal Reserve Board on Friday announced its denial of two rulemaking petitions due to legal and policy considerations. The first petition asked the Board to develop a framework requiring Board-supervised firms to disclose promised financial commitments to certain corporate initiatives, and the second asked for revisions to the Uniform Financial Institution Rating System framework and adjustments to the framework for financial holding company eligibility.

• Statement of Governor Michelle W. Bowman

The CFPB has posted an update on its Small Business Lending rule under section 1071 of the Dodd-Frank Act. The rule, which amends Regulation B to require the collection and reporting of certain small business lending data on applications for credit for women-owned, minority-owned, and small businesses, was to have become effective on August 23, 2023. However, some lenders filed challenges against the rule in a federal court in Texas.

The court, on July 31, 2023, stayed the rule for certain lenders pending the Supreme Court's decision in CFPB v. CFSA [see Friday's Top Story]; on October 26, 2023, the court extended the stay to all lenders covered by the rule. In the event of a reversal in the CFSA case, the Texas court ordered the CFPB to extend the rule's compliance deadlines to compensate for the period stayed.

The CFPB now plans to issue an interim final rule to extend compliance deadlines. As 290 days have elapsed between the July 31 order and the CFSA decision on May 16, the interim final rule will extend compliance dates as follows:

• For Tier 1 institutions (highest volume lenders), the original compliance date of October 1, 2024, will be extended to July 18, 2025, and the first filing deadline will be June 1, 2026.
• For Tier 2 institutions (moderate volume lenders), the April 1, 2025, compliance date will be extended to January 16, 2026, with a first filing deadline on June 1, 2027.
• For Tier 3 institutions (smallest volume lenders), the January 1, 2026, compliance date will be extended to October 18, 2026, with a first filing deadline on June 1, 2027.

UPDATE: Updated to correct an incorrect date.

The FDIC has issued FIL-24-2024 with guidance to help financial institutions and facilitate recovery in areas of Iowa affected by severe storms and tornadoes from April 26–27, 2024.