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The Department of Housing and Urban Development yesterday announced awards totaling $150.9 million for new affordable and innovative housing investments in tribal communities.

The Indian Housing Block Grant (IHBG) Competitive funds play a crucial role in bolstering vibrant American Indian and Alaska Native communities. These funds are designated for various purposes, such as new construction, rehabilitation, and infrastructure to support affordable housing within Indian reservations and similar areas. The IHBG Competitive program holds particular significance for tribal communities as it injects essential financial resources for the construction of new affordable housing for disadvantaged tribal families.

• List of award recipients

The Department of the Treasury yesterday reported that OFAC has targeted five individuals and seven entities based in Iran, the People’s Republic of China, and Hong Kong that have facilitated procurements on behalf of subordinates of Iran’s Ministry of Defense and Armed Forces Logistics. Those designated today procure various components, including accelerometers and gyroscopes, which serve as key inputs to Iran’s ballistic missile and unmanned aerial vehicle (UAV) program. Iran’s acquisition of critical missile and UAV components continues to enable its proliferation of weapons systems to its proxies in the Middle East and to Russia.

For the names and identification information of the designated individuals and entities, see this July 30, 2024, BankersOnline OFAC Update.

The Federal Trade Commission yesterday announced that online career-training company Career Step, LLC has been ordered to pay $27.8 million in debt cancellation and $15.7 million in cash to resolve charges brought by the Federal Trade Commission that alleged the company lured consumers, specifically servicemembers and their families, with deceptive ads that falsely touted inflated employment outcomes, job placement, and partnerships with prominent companies.

According to the FTC’s complaint, Georgia-based company Career Step (also doing business as CareerStep, CareerCert, and Carrus), promotes career training and certification programs for jobs in the healthcare industry, targeting servicemembers and their spouses. The complaint states that since at least 2019, Career Step has lured servicemembers with deceptive advertising on social media and on its website, where it markets its programs, using sales representatives and AI technology to persuade consumers to enroll. The company has also marketed its services through military-focused publications, such as Military.com, and through events sponsored by the military, including job fairs. Specifically, Career Step has made false claims about job placement and outcomes, externships, hiring partnerships, and the duration of its programs, with the help of deceptive incentivized reviews it uses to promote its services.

The proposed stipulated order will become effective when approved by the U.S. District Court for the Northern District of Georgia, where it was filed on July 30, 2024.

The U.S. Securities and Exchange Commission has announced charges against activist short seller Andrew Left and his firm, Citron Capital LLC, for engaging in a $20 million multi-year scheme to defraud followers by publishing false and misleading statements regarding his supposed stock trading recommendations.

The SEC’s complaint alleges that Left, who resides in Boca Raton, Fl., used his Citron Research website and related social media platforms on at least 26 occasions to publicly recommend taking long or short positions in 23 companies and held out the positions as consistent with his own and Citron Capital’s positions. The complaint alleges that following Left’s recommendations, the price of the target stocks moved more than 12 percent on average. According to the SEC’s complaint, once the recommendations were issued and the stocks moved, Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements. As a consequence, Left bought back stock immediately after telling his readers to sell, and he sold stock immediately after telling his readers to buy.

The complaint alleges that Left and Citron Capital made several false and misleading statements in connection with the scheme. For example, it alleges that defendants told the market that they would stay long on a target stock until the price hit $65 when, in fact, they immediately began selling the stock at $28. It further alleges that they falsely represented to the market that Citron Research was an independent research outlet that had never received compensation from third parties to publish information about target companies when, in fact, the defendants had entered into compensation arrangements with hedge funds.

Among other remedies, the complaint seeks disgorgement, prejudgment interest, and civil monetary penalties against Left and Citron and conduct-based injunctions, an officer-and-director bar, and a penny stock bar against Left.

The Federal Housing Finance Agency has announced that U.S. house prices were unchanged in May, according to the FHFA's seasonally adjusted monthly House Price Index (HPI). House prices rose 5.7 percent from May 2023 to May 2024. The previously reported 0.2 percent price increase in April was revised upward to 0.3 percent.

For the nine census divisions, seasonally adjusted monthly price changes from April 2024 to May 2024 ranged from -0.5 percent in the West North Central division to +0.3 percent in the New England division. The 12-month changes were all positive, ranging from +2.4 percent in the West South Central division to +9.2 percent in the New England division.

On Friday, FinCEN issued a notice to customers of financial institutions about reporting beneficial ownership information.

The Corporate Transparency Act requires certain entities, including many small businesses, to report to FinCEN information about the individuals who ultimately own or control them. A separate regulatory requirement currently requires many financial institutions to also collect beneficial ownership information from certain customers that seek to open accounts as part of Federal customer due diligence requirements. Today’s notice provides answers to key questions about: (1) reporting beneficial ownership information to FinCEN under the Corporate Transparency Act (https://www.fincen.gov/boi); and (2) providing beneficial ownership information to financial institutions in connection with Federal customer due diligence requirements.

FinCEN encourages financial institutions to share this reference guide with customers that may be required to report beneficial ownership information.

The notice reflects the current legal and regulatory situation. FinCEN has plans to revise the customer due diligence regulations by 2025, as required by the Corporate Transparency Act.

• Notice to Customers: Beneficial Ownership Information Reference Guide

The FDIC has released a list of enforcement orders and notices it issued in June 2024. Among those orders are four prohibition orders; one combined prohibition order and order to pay a civil money penalty (CMP); and one CMP order. The first Notice seeks a prohibition order; the second Notice seeks a prohibition order and assessment of a CMP.

• A Notice of Charges and Hearing seeking a civil money penalty and prohibition order against Elias Israel Robiero Rangel, now or formerly affiliated with Truist Bank, Charlotte, NC
• A Notice of Charges and Hearing for a prohibition order against Martin Fernandez Jr., now or formerly affiliated with International Bank of Commerce, Laredo, TX
• An order for assessment of a $15,000 CMP and prohibition against Toni Miller, formerly affiliated with South State Bank, Columbia, SC
• An order assessing a CMP of $7,000 against Mohammed A. Kasem, now or formerly affiliated with Truist Bank, Charlotte, NC
• An order of prohibition against Joshua E. Breedwell, formerly affiliates with Discover Bank, Greenwood, DE
• An order of prohibition against Brady D. Torgerson, formerly affiliated with The Union Bank, Beulah, ND, and First Security Bank, West Beulah, ND
• An order of prohibition against Mitchell A. Fowler, formerly affiliated with Sunmark Community Bank, Perry, GA

OFAC has announced a $7,452,501 settlement with State Street Bank and Trust Company, a Massachusetts-based financial institution, on behalf of itself and its subsidiary, Charles River Systems, related to 38 apparent violations of OFAC's Ukraine-/Russia-Related sanctions. The apparent violations involved invoices that were redated or reissued by Charles River between 2016 and 2020 for certain customers who were subject to Directive 1 of Executive Order 13662, as well as certain payments outside of the applicable debt tenor accepted by Charles River from these customers.

For additional information, see "State Street settles for $7.5M penalty with OFAC" in BankersOnline's Penalty pages.

The CFPB on Friday announced it has sued Acima Holdings, LLC, Acima Digital, LLC (subsidiaries of Rent-a-Center (now known as Upbound Group, Inc.), and collectively, "Acima"), and Acima's founder and former CEO, Aaron Allred for illegal lending activities in connection with as many as five million consumer financing agreements.

The CFPB alleges Acima used deceptive dark patterns and other tricks to trap consumers in high-cost credit agreements to finance the purchase of household goods. Acima sought to disguise many of these credit agreements as leases to evade consumer financial protection laws. Due to Acima’s deception and obstruction, many consumers did not understand they were agreeing to expensive markups, exorbitant finance charges, and having few ways to escape their contracts. The CFPB is asking that the court order the defendants to forfeit the illegally obtained profits, give refunds to consumers, and halt their misconduct.

The CFPB’s lawsuit alleges Acima violated the Consumer Financial Protection Act, Truth in Lending Act, Fair Credit Reporting Act, and Electronic Fund Transfer Act. Specifically, the CFPB alleges Acima has misled and harmed consumers through:

• False marketing
• Deceptive digital dark patterns
• Trapping borrowers
• Widespread credit reporting failures

FDIC FIL-44-2024, issued yesterday, announced that the 2023 voluntary diversity self-assessments can be submitted now and through October 31, 2024. The FDIC encouraged institutions it supervises to voluntarily conduct and submit self-assessments of their diversity policies and practices.

Yesterday, the Department of the Treasury issued two announcements concerning actions taken by its Office of Foreign Assets Control (OFAC).

OFAC sanctioned the Lopez Human Smuggling Organization, which “sought to smuggle thousands of migrants into the United States through an illegal transnational operation that exploited those in search of a better life for themselves and their families,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson.

OFAC also sanctioned the Congo River Alliance, known by its French name Alliance Fleuve Congo (AFC), a coalition of rebel groups that seeks to overthrow the government of the Democratic Republic of Congo (DRC) and is driving political instability, violent conflict, and civilian displacement.

For the names and identification information of the designated individuals and entities, see this July 25, 2025, BankersOnline OFAC Update.

Yesterday, the CFPB's junk fee spotlight shone on school lunch payment platforms that help school districts process children’s school lunch payments. With a captive customer base, these companies can have broad control over fees assessed for each transaction. These fees are widespread and often hit low-income families the hardest. Overall, parents and caregivers have no control over fee rates and lack opportunities to shop around for cheaper options.

The Bureau released a report highlighting average costs and potential risks for families using electronic payment platforms to add money to their children’s school lunch accounts. More generally, the report also reviews the market size and landscape of school lunch payment processing companies, and it builds upon initial observations referenced in the Fall 2023 edition of the CFPB's Supervisory Highlights.

While more than 20 unique companies offer these services to school districts nationwide, the vast majority of enrolled students are served by just three market leaders. These processors typically charge fees to add money to a student’s school lunch account, which collectively can cost families upwards of $100 million each year. Among the companies it studied, the CFPB observed that the payment processors charge transaction fees of $2.37, or 4.4%, of the total transaction, on average, each time money is added into a payment account.

The FDIC, OCC, and Federal Reserve yesterday jointly issued a statement reminding banks of potential risks associated with third-party arrangements to deliver bank deposit products and services. The agencies support responsible innovation and banks engaging in these arrangements in a safe and sound manner and in compliance with applicable law. While these arrangements can provide benefits, supervisory experience has identified a range of safety and soundness, compliance, and consumer-related concerns with the management of these arrangements.

The statement details the potential risks and provides examples of effective risk management practices for these arrangements. In addition, the statement reminds banks of relevant existing legal requirements, guidance, and related resources, and provides insights that the agencies have gained through their supervision. The statement does not establish new supervisory expectations.

Separately, the agencies have requested additional information on a broad range of bank-fintech arrangements, including with respect to deposit, payments, and lending products and services. The agencies are seeking input on the nature and implications of bank-fintech arrangements and effective risk management practices. Responses and comments will be accepted for 60 days following publication of the request for information in the Federal Register. [Update: Published 7/31/2024 at 89 FR 61577, with a 61-day comment period ending 9/30/2024.]

The agencies are considering whether additional steps could help ensure banks effectively manage risks associated with these various types of arrangements.

• OCC Bulletin 2024-20
• OCC Bulletin 2024-21
• FDIC FIL-45-2024

The FDIC, Federal Reserve Board, and the OCC yesterday announced their second notice requesting comment to reduce regulatory burden. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires the Federal Financial Institutions Examination Council and federal bank regulatory agencies to review their regulations every 10 years to identify outdated or otherwise unnecessary regulatory requirements for their supervised institutions.

To facilitate this review, the agencies divided their regulations into 12 categories and are now soliciting comments on their regulations in three categories: Consumer Protection; Directors, Officers, and Employees; and Money Laundering. The public has 90 days from publication in the Federal Register to comment on the relevant regulations. PUBLICATION AND COMMENT PERIOD UPDATE: Published at 89 FR 62679 in the August 1, 2024, Federal Register, with comments due by 10/30/2024.

In a related news release, the agencies announced they will hold a virtual public outreach meeting on September 25, 2024, as part of their review of regulations. The outreach meeting is an opportunity for interested stakeholders to present their views on the six categories of regulations listed in the first two Federal Register notices: Applications and Reporting; Powers and Activities; International Operations; Consumer Protection; Directors, Officers and Employees; and Money Laundering.

Individuals interested in providing oral comments must register by August 9, 2024, and indicate the regulatory category they would like to discuss. The agencies will notify those individuals selected to provide comments within one month of registration closing.

Advance registration is not required to attend this virtual public meeting as an observer.

The CFPB yesterday announced it was sending 122,507 payments totaling $53,885,244 to consumers harmed by BrightSpeed Solutions and its founder, Keven Howard.

In 2021, the CFPB brought a lawsuit against the privately-owned, third-party payment processor for knowingly facilitating payments for companies that tricked consumers into expensive and unnecessary antivirus software or services. In many cases, targeted consumers were older adults unaware that the services and software were available for free.

The distribution of payments from the CFPB's Civil Penalty Fund was made yesterday through Epiq Systems.

• CFPB sues third-party payment processor (3/4/2021)
• CFPB bans Brightspeed Solutions and former CEO (1/19/2022)

The FDIC has released a notice of the next meeting of its Board, scheduled for 10:00 a.m. on July 30, 2024. A link to a webcast of this open to public observation meeting can be found at https://www.fdic.gov/news/board-matters/video.html.

Matters to be considered include:

• Notice of Proposed Rulemaking on Brokered Deposit Restrictions.
• Notice of Proposed Rulemaking on Parent Companies of Industrial Banks and Industrial Loan Companies.
• Request for Information on Deposits.
• Final Guidance for Title I Resolution Plan Triennial Full Filers and Extension of Submission Deadline.
• Proposals regarding the Change in Bank Control Act Regulations and Procedures.
• Final Rule on Revisions to the FDIC’s Section 19 Regulations.
• Interim Final Rule on Clarification of Deposit Insurance Coverage for Legacy Branches of U.S. Banks in the Federated States of Micronesia, the Marshall Islands, and Palau.
• Notice of Proposed Rulemaking regarding the Financial Data Transparency Act.

The CFPB yesterday announced it has issued Consumer Financial Protection Circular 2024-04 to law enforcement agencies on whistleblower protections under section 1057 of the Consumer Financial Protection Act (CFPA). The circular explains how companies may be breaking the law by requiring employees to sign broad nondisclosure agreements that could deter whistleblowing. Imposing sweeping nondisclosure agreements that do not clearly permit communication with law enforcement may intimidate employees from disclosing misconduct or cooperating with investigations. This could impede investigations and potentially violate federal whistleblower protections.

In its press release, the CFPB asserts that whistleblowing plays an important role in addressing illegal and unethical misconduct. In the CFPA, Congress included a provision specifically protecting whistleblowers from retaliation for reporting violations of consumer financial protection laws. Although nondisclosure agreements can be entered into for legitimate purposes, such as ensuring the protection of confidential trade secrets, such agreements, depending on how they are worded and the context, could lead employees to believe they would face lawsuits or other retaliation for reporting suspected misconduct to governmental authorities. An employer can significantly reduce the risk of violating whistleblower protections by ensuring that its agreements expressly permit employees to communicate freely with government enforcement agencies and to cooperate in government investigations.

The Federal Trade Commission has posted a Consumer Alert describing a new delivery method for fake check scams. "Artists" are targeting young adults using social media, offering to pay them for permission to paint their photos.

Young adults report this scam begins with a direct message on social media from someone who says they like a target's photo and want to pay the target thousands of dollars to use it. Next, they’ll send the target a check. They’ll tell the target to deposit it, take some money out to send to the artist for supplies, and keep the rest. They may promise to reimburse any money the target sends back (but never do — it's a scam).

That first check, of course, is fake, and if deposited, it will bounce, leaving the hapless target out any money sent to the scammer and owing the bank any money withdrawn from the deposit.

The Treasury Department yesterday announced that, as part of implementing the historic Rebuilding Economic Prosperity and Opportunity for Ukrainians Act (the “REPO for Ukrainians Act”), OFAC has issued a new reporting requirement for financial institutions holding Russian sovereign assets. Under section 104(a) of the Act, all financial institutions at which Russian sovereign assets are located, and that know or should know of such assets, must provide notice of such assets to OFAC no later than August 2, 2024 or within 10 days of the detection of such assets, and can do so via OFAC’s new form, which can be found on OFAC's Reporting System webpage.

On Wednesday, the Treasury Department reported that OFAC has sanctioned a network of six individuals and five entities based in the People’s Republic of China (PRC) involved in the procurement of items supporting the Democratic People’s Republic of Korea’s (DPRK) ballistic missile and space programs.

In violation of multiple UN Security Council Resolutions, the DPRK has continued to conduct launches using ballistic missile technology, including a recent failed effort to place a military satellite into orbit in late May 2024. Moreover, the DPRK has supplied ballistic missiles to the Russian Federation, which continues to target civilian population centers and infrastructure in Ukraine.

For the names and identification information of the designated individuals and entities, see this July 24, 2024, BankersOnline OFAC Update.

FinCEN has updated its Beneficial Ownership Information Frequently Asked Questions to include new information for entities that are disregarded for U.S. tax purposes (Question F.13), as well as updated information that addresses the time frame for obtaining an Employer Identification Number (EIN) from the IRS (Question G.3). An in-page search for "July 24" will take you to the end of each of those new FAQs.

The updated FAQ can be downloaded as a 50-page PDF document, where the two new FAQs begin on pages 31 and 33, respectively.

The Federal Reserve Board has reported it has executed a consent order for the assessment of a $4,800 civil money penalty against North Shore Bank of Commerce, Duluth, Minnesota, for a pattern or practice of violations of Regulation H, 12 C.F.R. § 208.25, which implements the provisions of the National Flood Insurance Act.

The Treasury Department yesterday reported that OFAC has targeted a network of three individuals associated with the expanded activities of the Islamic State of Iraq and Syria (ISIS) on the African continent. These individuals serve as key financiers and trusted operatives, enabling the activities of ISIS and its leaders across Central, Eastern, and Southern Africa. They also serve as critical links between far-flung ISIS operations, including ISIS affiliates in the Democratic Republic of the Congo (DRC), Mozambique, Somalia, and ISIS cells in South Africa, allowing ISIS leadership to leverage each affiliate’s capabilities to conduct terrorist attacks that undermine peace and security in the region.

Treasury also reported that OFAC has sanctioned two Mexican members of Cartel de Jalisco Nueva Generacion (CJNG) and two Mexican companies.

For the names and identification information of the designated individuals and entities, see this July 23, 2024, BankersOnline OFAC Update.

Yesterday, OFAC released Guidance on Extension of Statute of Limitations to address questions raised by recent legislation that extended the statute of limitations for violations of certain sanctions that the agency administers. As explained in the guidance, OFAC may now commence an enforcement action for civil violations of International Emergency Economic Powers Act- or Trading with Enemy Act-based sanctions prohibitions within 10 years of the latest date of the violation if such date was after April 24, 2019.

The NMLS yesterday launched a video and podcast highlighting NMLS enhancements completed July 20 to improve the NMLS regulator and user experience. The enhancements mark the beginning of a multi-year effort to continually improve NMLS.

The Treasury Department, on behalf of the Financial Crimes Enforcement Network (FinCEN) has published [89 FR 59805] in today's Federal Register a request for public comment on an information collection associated with requests made to FinCEN by certain persons for beneficial ownership information. Written comments on the proposed information collection are due within 30 days (by August 22, 2024).

The 30-day notice seeks comment on the information to be collected from certain authorized recipients requesting access to beneficial ownership information, consistent with the requirements of the Beneficial Ownership Information Access and Safeguards Rule published on December 22, 2023, and effective since February 20, 2024. The Corporate Transparency Act authorizes government agencies as well as financial institutions and their regulators to obtain beneficial ownership information under certain specified circumstances for national security and law enforcement purposes.

This 30-day notice gives the public an opportunity to comment on: (1) the information to be collected from certain persons requesting beneficial ownership information from FinCEN; and (2) FinCEN’s estimate of the burden involved in the information collection. Comments must be submitted by August 22, 2024.

FinCEN is setting the stage for financial institutions and certain government agencies to have access to Beneficial Ownership Information reported by entities subject to Beneficial Ownership Information Reporting requirements, which is expected to be finalized early in 2025.

The FDIC, Federal Reserve Board, NCUA, and OCC have jointly announced they are requesting comment on a proposal to update their requirements for supervised institutions to establish, implement, and maintain effective, risk-based, and reasonably designed anti-money laundering and countering the financing of terrorism (AML/CFT) programs. The amendments are intended to align with changes concurrently proposed by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), most of which result from the Anti-Money Laundering Act of 2020 (AML Act).

The proposed amendments would require supervised institutions to identify, evaluate, and document the regulated institution’s money laundering, terrorist financing, and other illicit finance activity risks, as well as consider, as appropriate, FinCEN’s published national AML/CFT priorities. Additionally, and consistent with the AML Act, the proposal would mandate that the duty to establish, maintain, and enforce the AML/CFT program remain the responsibility of, and be performed by, persons in the United States who are accessible to, and subject to the oversight and supervision by, the relevant agency. The proposal also supports institutions’ consideration of innovative approaches to meet compliance obligations.

Comments on the proposal are due 60 days after the date of publication in the Federal Register.

• Interagency Statement on the Issuance of the AML/CFT Program Notices of Proposed Rulemaking
• FDIC FIL-42-2024
• OCC Bulletin 2024-19

On Friday, the Federal Reserve Board announced it has executed a consent cease and desist order with Jiko Group, Inc., San Francisco, California, a registered bank holding company that owns and controls Mid-Central National Bank, Wadena, Minnesota, and various non-bank subsidiaries that develop and service technology platforms and provide broker-dealer services.

The order was issued following the October 30, 2023, supervisory inspection of and recent communications to Jiko issued by the Federal Reserve Bank of San Francisco, which identified significant deficiencies in the financial condition of the holding company, including capital planning, earnings, strategic planning, cash flow, and liquidity, which Jiko has begun to take steps to address.

The Treasury Department on Friday reported that OFAC has exposed the identity of two members of a Russian government-related hacktivist group, and imposed sanctions on them. OFAC designated Yuliya Vladimirovna Pankratova and Denis Olegovich Degtyarenko, two members of the Russian hacktivist group Cyber Army of Russia Reborn (CARR) for their roles in cyber operations against U.S. critical infrastructure. These two individuals are the group’s leader and a primary hacker, respectively.

For identification information on Pankratova and Degtyarenko, see BankersOnline’s July 19, 2024, OFAC Update.

The Federal Reserve Board has reported it has addressed consumer compliance breakdowns by Green Dot, fining the firm $44 million for numerous unfair and deceptive practices and a deficient consumer compliance risk management program.

The Board found that Green Dot violated consumer law in its marketing, selling, and servicing of prepaid debit card products, and its offering of tax return preparation payment services. For example, Green Dot failed to adequately disclose the tax refund processing fee for tax preparation services offered on a third party's website. The firm also blocked access to accounts of legitimate customers receiving unemployment benefits and lacked reasonable policies and procedures to help those customers cure those blocks. In addition, Green Dot did not maintain effective consumer compliance risk management and anti-money laundering programs.

For additional details and a link to the Board's consent order, see "Green Dot fined $44M for UDAP violations and deficient compliance program," in BankersOnline's Penalties webpages.

The Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, reports that FSB Chair Klaas Knot has written to G20 finance ministers and central bank governors, ahead of a G20 meeting set for July 25–26, 2024. In his letter, Chair Knot highlights high debt levels and vulnerabilities in non-bank financial intermediation (NBFI) as key risks to financial stability. He also cites uneven progress in implementation of agreed NBFI policies and notes a need to timely finalize them.

The letter covers two reports the FSB is delivering to the G20 — a stocktake on regulatory and supervisory initiatives related to the identification and assessment of nature-related financial risks, which was published last week; and the FSB’s annual progress report on its work to enhance resilience in NBFI, delivered together with the letter.

The CFPB yesterday announced a proposed interpretive rule explaining that many paycheck advance products, sometimes marketed as “earned wage” products, are consumer loans subject to the Truth in Lending Act. The guidance, according to the Bureau, will ensure that lenders understand their legal obligations to disclose the costs and fees of these credit products to workers. The CFPB also published a report examining employer-sponsored paycheck advance loans. The report finds that workers using these employer-sponsored products take out an average of 27 such loans per year and that the typical employer-sponsored loan carries an annual percentage rate (APR) over 100%.

The proposed interpretive rule [Note: Published 7/31/2024 at 89 FR 61358] explains how existing law applies to this emerging product market, and replaces a 2020 advisory opinion that addressed a very specific paycheck advance product that is not common in the real market. The proposed interpretive rule makes clear that many paycheck advance products – whether provided through employer partnerships or marketed directly to borrowers – trigger obligations under the federal Truth in Lending Act. In addition, the CFPB’s proposed interpretive rule makes clear that:

• Many loan costs are finance charges: Fees for certain “tips” and expedited delivery meet the Truth in Lending Act’s standard for being finance charges. When the paycheck advance product is no-fee and truly free to the employee, many requirements would not apply.
• Borrowers must receive key disclosures: Among other requirements, earned wage lenders must provide workers with appropriate disclosures about the finance charges. Clear disclosures help borrowers understand and compare loan options, sharpens price competition, and ultimately benefits companies that offer competitive products.

The CFPB encourages the public to submit comments on this interpretive rule to inform whether additional clarifications are needed. Comments will be accepted until August 30, 2024.

The Treasury Department yesterday reported that OFAC has designated and identified as blocked property a dozen persons and vessels, respectively, that have played a critical role in financing the Houthis’ destabilizing regional activities as part of the network of Sa’id al-Jamal.

Treasury also reported that OFAC sanctioned the Abdul Karim Conteh Human Smuggling Organization (Karim HSO), a transnational criminal organization (TCO) based in Tijuana, Mexico.

For the names and identification information of the designated parties and blocked vessels, see this July 18, 2024, BankersOnline OFAC Update.

The NCUA yesterday reported that its Board has approved a proposed rule on incentive-based compensation and a revised proposed rule on succession planning. The NCUA Board also approved maintaining the current interest rate ceiling for federal credit unions at 18 percent.

The proposed rule on incentive-based compensation is required under section 956 of the Dodd-Frank Act, which requires federal financial institutions regulators, including the NCUA, to issue joint regulations or guidelines requiring disclosure and reporting of compensation at financial institutions with more than $1 billion in assets. The rule was adopted by the FDIC, the FHFA, and the OCC on May 6. The Federal Reserve Board and the SEC have not approved the joint rulemaking yet. Once the notice of proposed rulemaking is adopted by all six agencies, it will be published in the Federal Register with a comment period of 60 days following publication. Until then, each agency acting on the proposed rule will make it available on their respective websites and accept comments.

The NCUA Board also approved a proposed rule that would require boards of directors at federally insured credit unions to establish and adhere to processes for succession planning. This new proposed rule modifies the 2022 proposal based on the public comments received and upon further consideration of the issues.

The FFIEC has released the 2024 Census flat file, which incorporates the boundary changes from OMB Bulletin 23-01.

The OCC has released a list of 11 enforcement actions taken against national banks and federal savings associations and individuals currently and formerly affiliated with OCC-supervised financial institutions.

• The amended cease and desist order previously announced against Citibank, N.A., Sioux Falls, South Dakota.
• A cease and desist order against CNB Bank & Trust, N.A., Carlinville, Illinois, for violations of 12 CFR 21.21 (BSA/AML compliance program), 31 CFR 1020.210 (Customer Due Diligence), and 1020.220 (Customer Identification Program) as well as unsafe or unsound practices relating to the bank’s BSA/AML compliance, and failure to correct previously reported BSA/AML compliance problems.
• A formal agreement with Lincoln FSB of Nebraska, Lincoln, Nebraska, for unsafe or unsound practices, including those relating to strategic planning, liquidity risk management, contingency funding planning, interest rate risk management, and board oversight and corporate governance.
• A cease and desist order against Summit National Bank, Hulett, Wyoming, for unsafe or unsound practices including those related to capital and strategic planning, liquidity risk management, transactions with affiliates, and the bank’s BSA/AML compliance program, and violations including of 12 CFR 21.21 (BSA/AML compliance program).
• Orders of prohibition against the following individuals:
  • Cindy M. Flores, former branch operations associate manager at a Fargo, North Dakota, branch of Wells Fargo Bank, N.A., Sioux Falls, South Dakota, for misappropriating at least $47,600 by diverting funds from customer deposit accounts
  • Randall David Ditzer, former banking center team lead relationship banker at a Prairie Village, Kansas, branch of BOKF, N.A., Tulsa, Oklahoma, for making unauthorized withdrawals from the accounts of an elderly bank customer and depositing the funds into his own accounts.
  • Aaliyah Shaheed, former digital banking representative for Varo Bank N.A., Draper, Utah, who worked remotely from Charlotte, North Carolina, for improperly accessing and modifying customer account information, which resulted in approximately $21,700 of fraudulent transfers.
  • Kathryn Thomure (now known as Kathryn Makler), former business banking specialist at a Farmington, Missouri, branch of U.S. Bank, N.A., Cincinnati, Ohio, for making false representations on two Paycheck Protection Program loan applications to the U.S. Small Business Administration and receiving a loan for approximately $29,300.
  • Valeria Martinez Vazquez, former branch relationship banker at Zions Bancorporation, N.A., Salt Lake City, Utah, for misappropriating approximately $11,100 from a customer’s account.
  • Andre Jackson, former relationship banker at a Kenmore, New York, branch of Bank of America N.A., Charlotte, North Carolina, for misappropriating at least $8,000 in cash from the bank.
  • Cordia Shedde McDonald, former associate banker at a New Rochelle, New York, branch of JPMorgan Chase Bank, N.A., Columbus, Ohio, for misappropriating at least $10,000 in cash from the bank.

Yesterday, the Department of the Treasury announced that the Financial Services Sector Coordinating Council (FSSCC) and Treasury have published a suite of resources to share with financial services institutions on effective practices for their secure cloud adoption journey. These deliverables are the result of a year-long public-private partnership of the Financial and Banking Information Infrastructure Committee (FBIIC) and the FSSCC.

To provide leadership support for this joint effort the U.S. Department of the Treasury established the Cloud Executive Steering Group (CESG) in May 2023 at the direction of the Financial Stability Oversight Council (FSOC), to help close the gaps identified in Treasury's landmark report on the Financial Services Sector’s Adoption of Cloud Services. The documents published yesterday are intended to arm financial institutions of all sizes with effective practices for secure cloud adoption and operations, and to establish a continuing effort and partnership to begin to address the gaps identified in Treasury’s report, which include:

• Establishing a common lexicon that may be used by financial institutions and regulators in discussions regarding cloud.
• Enhancing information sharing and coordination for examination of cloud service providers.
• Assessing existing authorities for cloud service provider (CSP) oversight.
• Establishing best practices for third-party risk associated with cloud service providers, outsourcing, and due diligence processes to increase transparency.
• Providing a roadmap for institutions considering comprehensive or hybrid cloud adoption strategies including an update to the Financial Sector’s Cloud Profile.
• Improving transparency and monitoring of cloud services for better “security by design.”

Clear explanations for the utility and application of the documents can be found on the U.S. Treasury website. The website also includes links to the FSSCC-led outputs so that financial institutions can consult them at any part of their cloud services adoption journey and risk management process.

Five federal agencies — the CFPB, FDIC, Federal Reserve, NCUA, and OCC — yesterday jointly announced final guidance addressing reconsiderations of value (ROVs) for residential real estate transactions. The guidance advises on policies and procedures that financial institutions may implement to allow consumers to provide financial institutions with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal.

ROVs are requests from a financial institution to an appraiser or other preparer of a valuation report to reassess the value of residential real estate. Deficiencies identified in valuations, either through an institution's valuation review processes or through consumer-provided information, may be a basis for financial institutions to question the credibility of the appraisal or valuation report.

The guidance offers examples of ROV policies and procedures that a financial institution may implement to help institutions identify, address, and mitigate discrimination risk; describes the risks of deficient residential real estate valuations; and explains how financial institutions may incorporate ROV processes into risk management functions. The agencies finalized the guidance largely as proposed, with the addition of clarifying edits based on public comments received on the proposed guidance published in July 2023.

The guidance is final as of the date it is published in the Federal Register.

• Federal Register notice: Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations.
• Publication update: Published in the Federal Register on 7/26/2024 at 89 FR 60549

The FDIC's final rule amending Part 328 — "Advertisement of Membership, False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC's Name or Logo" — became effective on April 1, 2024, with compliance required as of January 1, 2025.

The FDIC has posted Questions and Answers Related to the FDIC’s Part 328 Final Rule, which will be updated periodically, with answers to a collection of questions about the rule.

The Q&A clarifies several questions resulting from some misinterpretations of wording in the regulation.

Six federal agencies — The CFPB, FDIC, FHFA, Federal Reserve Board, NCUA, and OCC — have jointly announced their issuance of a final rule required by the Dodd-Frank Act and designed to help ensure the credibility and integrity of models used in valuations for certain mortgages secured by a consumer's principal dwelling. In particular, the rule will implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing those homes. The final rule is substantially similar to the proposal issued in June 2023.

Under the final rule, the agencies will require institutions that engage in certain transactions secured by a consumer's principal dwelling to adopt policies, practices, procedures, and control systems designed to:

• ensure a high level of confidence in estimates
• protect against data manipulation
• seek to avoid conflicts of interest
• require random sample testing and reviews
• comply with nondiscrimination laws

The agencies said that, driven in part by advances in database and modeling technology and the availability of larger property datasets, AVMs are being used with increasing frequency as part of the real estate valuation process. While advances in AVM technology and data availability have the potential to reduce costs and turnaround times of the property valuation process, it is important that institutions using AVMs take appropriate steps to ensure the credibility and integrity of the valuations produced. It is also important that the AVMs institutions use adhere to quality control standards designed to comply with applicable nondiscrimination laws.

The CFPB and the OCC previously announced their approvals of the rule, which will become effective on the first day of the calendar quarter following 12 months after publication in the Federal Register (if it is published by September 30, it will become effective October 1, 2025).

• FDIC FIL-43-2024

PUBLICATION UPDATE: Published [89 FR 64538] in the 8/7/2024 Federal Register, with an effective date of 10/1/2025.

The OCC has reported that Acting Comptroller of the Currency Michael J. Hsu yesterday discussed three long-term trends that are reshaping banking in remarks at the Exchequer Club.

Mr. Hsu’s written remarks in support of his appearance discussed the increasing number and size of large banks, the complexity of bank-nonbank relationships, and the rise in polarization. Mr. Hsu described how the OCC is uniquely positioned to address each trend.

The U.S. Treasury Department yesterday announced that OFAC has sanctioned three Mexican accountants and four Mexican companies linked, directly or indirectly, to timeshare fraud led by the Cartel de Jalisco Nueva Generacion (CJNG). Concurrently, the Financial Crimes Enforcement Network (FinCEN) issued a Notice, jointly with OFAC and FBI, to financial institutions that provides an overview of timeshare fraud schemes in Mexico associated with CJNG and other Mexico-based transnational criminal organizations.

For the names and identification information of the designated parties, see this July 16, 2024, BankersOnline OFAC Update.

FinCEn, OFAC, and the FBI have issued a joint notice to financial institutions, urging them to be vigilant in detecting, identifying, and reporting timeshare fraud perpetrated by Mexico-based transnational criminal organizations (TCOs). According to the FBI, since at least 2012, the Jalisco New Generation Cartel (CJNG) and other Mexico-based TCOs have increasingly targeted U.S. owners of timeshare properties in Mexico. Older adults, including retirees, are frequent victims in these schemes. The TCOs use proceeds from timeshare fraud to diversify their revenue streams and finance other criminal activities,
including the manufacturing and trafficking of illicit fentanyl and other deadly synthetic drugs into the United States.

The notice provides an overview of methodologies associated with these schemes and related financial typologies, highlights red flag indicators, and reminds financial institutions of their reporting requirements under the Bank Secrecy Act (BSA). In addition to filing BSA reports, financial institutions are critical partners in preventing their customers from becoming victims of timeshare fraud in Mexico, assisting those that become victims, and—in the case of older customers—reporting suspected elder financial exploitation to law enforcement, their state-based Adult Protective Services, and any other appropriate authorities.

The National Credit Union Administration has published a notice [89 FR 57946] in today's Federal Register of the next meeting of the NCUA Board, to be held at 10:00 a,m., Thursday, July 18, 2024, at the NCUA's Board Room. Matters to be considered include:

• NCUA Rules and Regulations, Parts 701 and 741 (Succession Planning)
• NCUA Rules and Regulations, Parts 741 and 751 (Incentive-Based Compensation Agreements)
• Federal Credit Union Loan Interest Rate Ceiling

The White House’s Office of Information and Regulatory Affairs has released its Spring 2024 Unified Agenda of Regulatory and Deregulatory Actions, or URA. This semi-annual report details each federal agency’s upcoming plans to issue or rescind regulations.

The Consumer Financial Protection Bureau’s agenda includes four proposed rule actions, addressing the Fair Credit Reporting Act, or FCRA, mortgage servicing, the Financial Data Transparency Act and consumer financial product contracts under Regulation AA. The bureau released last month the initial part of its FCRA rulemaking and a final rule regarding the attributes a standard-setting body must demonstrate in order to be recognized by the CFPB for purposes of the personal data rights rule; the Bureau plans to finalize the remainder of the proposed rule regarding personal data rights rule in October. The proposed rules for mortgage servicing were issued last week and the Regulation AA proposal is expected in September.

According to the URA, the CFPB projects it will release final rules on non-sufficient fund fees in October and on overdraft fees in January 2025.

On the BSA/AML front, FinCEN expects an August 2024 unveiling of its final AML/CFT rules applicable to investment advisers and certain real estate professionals. FinCEN reported an October target for its proposed revisions to the Customer Due Diligence rule, and is aiming for a May 2025 reveal of proposed rules on 314(b) information sharing protections.

The FDIC has issued FIL-40-2024 with guidance to provide regulatory relief to financial institutions and facilitate recovery in areas of Texas affected by Hurricane Beryl July 5–9, 2024.

The Federal Emergency Management Agency (FEMA) declared a federal disaster for selected areas affected in Texas on July 9, 2024. FEMA may make additional designations after damage assessments are completed in the affected areas. A current list of designated areas is available at www.fema.gov.

The IRS issued a consumer alert yesterday following bad advice circulating on social media about a non-existent “Self Employment Tax Credit” that's misleading taxpayers into filing false claims.

Promoters and social media are marketing something they describe as the “Self Employment Tax Credit” as a way for self-employed people and gig workers to get big payments for the COVID-19 pandemic period. Similar to misleading marketing around the Employee Retention Credit, there is inaccurate information suggesting many people qualify for the tax credit and payments of up to $32,000 when they actually do not.

In reality, the underlying credit being referred to in social media is not called the “Self Employment Tax Credit.” It is a much more limited and technical credit called “Credits for Sick Leave and Family Leave.” Many people simply do not qualify for this credit, and the IRS is closely reviewing claims coming in under this provision so people filing claims do so at their own risk.

OFAC has released the second video in its “OFAC Basics” video series.

“My Funds Are Blocked, Now What?” provides viewers with guidance on what it means when funds are blocked in connection with OFAC sanctions, as well as recommended steps for what to do if their funds have been blocked.