STATE GOVERNMENT RELATIONS
Webinar Hosted by Krieg DeVault LLP: Land v. IU Credit Union - What Does This Decision Mean For My Financial Institution?
Tuesday, November 28, 2023, 12:00pm - 1:00pm EST
The recent Indiana Supreme Court decision in Land v. IU Credit Union has created significant uncertainty for financial institutions. We have been actively monitoring this case – and many others like it throughout Indiana and around the country – since its inception. In Land, the Supreme Court held that the credit union’s amendments to its account agreement were invalid because the depositor’s silence or inaction was insufficient to constitute acceptance of the changes. This webinar will explain the parameters of the Land decision and provide guidance on best practices for implementing changes to your account agreements in the future.
FEDERAL GOVERNMENT RELATIONS
ABA, ICBA, Other Associations Urge CFPB to Move Cautiously in Credit Reporting Rulemaking
The American Bankers Association, Independent Community Bankers of America, U.S. Chamber of Commerce and nine other financial industry associations said Tuesday a Consumer Financial Protection Bureau proposal to overhaul how it regulates consumer credit reporting should first be put forward as an advanced notice of proposed rulemaking or else it risks “a rushed, inadequate rulemaking process raises the stakes for dramatic changes to the foundation of the American economy.”
The CFPB in September announced that it was considering potentially sweeping changes to Fair Credit Reporting Act rules in Regulation V to guard against potential abuse by data brokers in the consumer credit reporting industry and “to address other issues that have arisen in the years since the FCRA’s enactment.” In a joint letter to CFPB Director Rohit Chopra, the associations said that an ANPR would give affected parties more time to review the proposed changes and comment on them.
“The FCRA rulemaking process requires care, thought and deliberation,” the associations said. “The CFPB should consider input from a broad array of stakeholders, many of whose voices have not yet been heard. An ANPR process could increase the bureau’s understanding of the impacts its rule would have on consumers, the American economy and the businesses, nonprofits and government agencies that use information to serve to consumers drive the American economy.”
Read the joint association letter
Read a CFPB summary of FCRA rule changes under consideration
Banking Regulators Preview 2024 Supervisory Priorities
The areas of supervisory focus for banking regulators in 2024 will look a lot like their focus since the bank failures earlier this year, with asset liability management, credit risk, cybersecurity and operational risk top of mind, according to representatives from the Federal Reserve, Office of the Comptroller of the Currency and Treasury Department participating in a panel discussion at the Clearing House annual conference in New York City last Friday.
Patricia Grady, chief deputy counsel at the OCC, pointed to the agency’s 2024 bank supervision operating plan for more insight into her agency’s areas of focus. She also noted that Acting Comptroller of the Currency Michael Hsu has outlined four key priorities that will guide OCC supervision: guarding against complacency by banks, reducing inequity in banking, adapting to digitalization and managing climate-related financial risk. For example, in terms of guarding against complacency, “we expect banks should be prepared to address a wide range of risks,” she said.
Michael Gibson, director of the Fed’s Division of Banking Supervision and Regulation, also pointed to his agency’s recently published supervision report. Among other things, the report says the Fed is seeking to improve its supervision of interest rate risks by conducting targeted reviews at banks exhibiting higher interest rate and liquidity risk profiles. Another area of focus for regulators is digital assets and tokenization, with the OCC holding a conference on the latter early next year.
At the same time, the role of cryptocurrency in allegedly financing terrorist operations is coming under increased scrutiny, with Neil McBride, general counsel at the Treasury Department, noting that the Financial Crimes Enforcement Network recently issued proposed rulemaking to identify international convertible virtual currency mixing as a "class of transactions" of primary money laundering concern.
Read the OCC’s bank supervision operation plan
Read the Fed’s most recent supervision and regulation report
FHFA's Thompson: Home Loan Banks Not Meant as Lender of Last Resort
The Federal Housing Finance Agency is seeking to better balance the mission of the Federal Home Loan Bank system to stress that FHLBs should be a provider of reliable liquidity to financial institutions, but for the purpose of making available funding for housing and community development, FHFA Director Sandra Thompson said Monday. During a Q&A at the Bipartisan Policy Center in Washington, D.C., Thompson discussed the findings of the agency’s recently released overview of the FHLB system. She said the focus of the system over the past few years has been on providing liquidity, even though the FHLBs were not meant to be a lender of last resort for financial institutions.
“That is the primary responsibility of the Federal Reserve's discount window,” Thompson said. “When you don't have those agreements in place [with the Fed], then home loan banks end up being the lender of last resort. Home loan banks are established to provide liquidity, but when an institution is in trouble or when markets are challenging, then we need to have a process in place where the home loan banks work together with the Federal Reserve banks – they work together with a primary federal regulator and FHFA to make decisions that result in stability in the financial system.”
The FHFA instead is seeking to “refocus the pendulum back to having a more balanced perspective – providing liquidity for the purpose of making sure that we have housing finance,” Thompson said. For example, the report calls on FHLBs to focus more on the creditworthiness of their member institutions. “When you have a failing bank or when a bank fails, and the home loan banks have the collateral and they've got the prepayment fees, then they can lend all day and say, ‘Well, you know, you know, we haven't lost any money,’” she said. “Well, you can't just have collateral-based lending. You've got to take a look at the financial condition of the member.”
Affordable Housing to Receive More Attention in FHLB System
Among its many recommendations, the recently released Federal Housing Finance Agency report on the Federal Home Loan Bank system calls on home loan banks to step up their game on providing affordable housing, although accomplishing part of that objective will rely on an act of Congress, according to FHFA Director Sandra Thompson. Currently, FHLBs must set aside 10% of the annual net earnings for affordable housing development. The report recommends that Congress raise that amount to 20%.
“We've looked at the numbers and we think that the home loan banks can afford to at least double their affordable housing program commitments,” Thompson said. “The home loan bank system right now is contributing about 15% of their net earnings to affordable housing...People will say that they're private corporations, but these are government-sponsored entities and they have a public purpose.”
In terms of agency rulemaking, FHFA plans to look for ways to expand access and streamline compliance requirements to the FHLB affordable housing program, according to Thompson. “We're trying to relieve administrative burdens of implementing the program, and are just looking at ways we can make things easier, make access easier and make utilization easier for the banks and the participants involved.”