STATE GOVERNMENT RELATIONS
Lawmakers Convene for Organization Day
The General Assembly gaveled back into session on Tuesday for the traditional end-of-year one-day session called Organization Day. This once-a-year session day is used to announce important details for the upcoming session regarding calendar and structure. Notably, it was announced that the General Assembly may need to convene later in December to pass legislation needed for the governor to end the public health emergency.
FEDERAL GOVERNMENT RELATIONS
Action Alert: Urge Lawmakers to Oppose New IRS Reporting Rules
The Biden Administration is proposing a sweeping expansion of tax information reporting aimed at raising revenue to help offset the cost of additional spending programs in the American Families Plan. While the initial draft of the Biden administration’s $3.5 trillion spending plan currently does not include the IRS reporting proposal, the language could be added over the coming weeks as the current package is debated. We must continue our grassroots efforts to ensure that this provision stays out of future drafts of the bill.
Contact your lawmakers today to express your opposition to any new IRS reporting that leads to increased compliance costs, damages your customer relationships and threatens customer privacy. In addition to the current action alert seeking bank employee participation, we have created an action alert with messaging specifically designed for bank customer engagement. Please consider sharing this unique action alert link so they may urge Congress protect their financial privacy!
Federal Court Issues Nationwide Stay of Vaccine Mandate
A federal appellate court on Friday issued a nationwide stay of enforcement of the emergency temporary standard that will require all employers with 100 or more employees to be fully vaccinated or test weekly for COVID-19. The stay, which was issued in response to a legal challenge to the standard filed by several governors and private entities, affirms the court’s initial stay granted a week ago.
The Fifth Circuit Court of Appeals ordered the Occupational Safety and Health Administration, which developed the stay at the direct of President Biden, to “take no steps to implement or enforce the [vaccine] Mandate until further court order.” Under the standard, if allowed to go forward, employees of covered firms would have until Jan. 4 to receive the vaccine or be required to produce a negative test on “at least a weekly basis.”
Challenges to the standard have been brought in at least five federal appellate courts. A random draw will be held Nov. 16 to determine which appellate court will hear the case. The Fifth Circuit’s stay is expected to remain in effect until the appellate court selected through the random draw has an opportunity to hear the case.
In light of the possibility that the standard may be permanently enjoined, banks may wish to consider carefully the resources and effort they expend at this time to develop a program in anticipation of compliance with the standard.
GOP Senators: USPS May Lack Legal Authority for Financial Services Pilot
A group of Republican senators led by Sen. John Boozman (R-Ark.) Monday raised concerns about a recent effort by the U.S. Postal Service to launch a pilot program offering expanded financial services – including check-cashing services – at certain locations in four U.S. cities. Specifically, they expressed concern that USPS lacks the legal authority to initiate the program, and that the pilot “raises serious questions about whether these activities waste taxpayer resources without any commensurate benefit.”
The lawmakers asked the USPS to provide information by Dec. 3 to support that the pilot program is in compliance with applicable legal requirements. “Given substantial financial shortfalls, a mission-specific focus on mail delivery, and a history of unsuccessfully competing with private sector alternatives, we are highly skeptical that the Postal Service can safely and effectively provide financial services,” they wrote. “The unilateral action to implement the pilot program and expand into untested consumer financial services raises significant policy and legal questions, and we must ensure that the Postal Service has not exceeded the applicable statutory authority.”
More broadly, the letter pushed back against the “radical expansion of the government’s role in providing financial services,” such as through offering Federal Reserve retail bank accounts at post offices – something the senators said would be “equally unnecessary and ill-advised.”
CFPB: Reg C Reporting Threshold Declines Jan. 1
The Consumer Financial Protection Bureau on Monday reminded financial institutions that the threshold for reporting data under Regulation C and the Home Mortgage Disclosure Act will fall to 200 open-end lines of credit on Jan. 1, 2022. The new permanent threshold will replace the temporary threshold of 500 open-ended lines of credit.
The CFPB indicated that starting on Jan. 1, an institution that originated at least 200 open-end lines of credit in each of the two preceding calendar years and meets all other Reg C coverage criteria will be required to collect, record and report data about its open-end lines of credit. The CFPB recently released a set of frequently asked questions regarding coverage criteria.
FDIC Supporting Inclusion Through Community Banks: McWilliams
The Federal Deposit Insurance Corp. is working to expand financial inclusion by helping reduce community bank costs of adopting innovative products and services, FDIC Chairman Jelena McWilliams said. McWilliams cited the FDIC’s updates to its brokered deposit rules and request for input on third-party due diligence standards. She also pointed to the agency’s collaboration with minority depository institutions and community development financial institutions.
House Committee Republicans Issue CBDC Principles
The House Financial Services Committee Republicans have released principles to guide Congress in evaluating potential proposals for a U.S. central bank digital currency. The principles say any U.S. CBDC should: Maintain the dollar as the world’s reserve currency; maintain the preeminence of the U.S. payment system, not impede stablecoin development; support digital currency policies that promote private-sector innovation; and ensure privacy and security protections. With policymakers debating CBDC and digital asset oversight, committee Democrats have continued developing their own policy views of CBDC while the Federal Reserve works on a U.S. CBDC paper. Also on Monday, the Financial Stability Oversight Council met to discuss, among other provisions, a President’s Working Group report on stablecoins, which recommended bank-like rules for stablecoin issuers.
CFPB Seeks Input on HMDA Rules
The Consumer Financial Protection Bureau has requested input on rules implementing the Home Mortgage Disclosure Act. The CFPB indicated that it plans to review recent changes to the rules and evaluate their effectiveness. The bureau said it will focus on: Institutional and transactional coverage; data points; benefits of the new data and disclosure requirements; and operational and compliance costs. The comment period will be open for 60 days.
Hsu: Agencies Planning Additional Clarity on Crypto Activities
Federal banking regulators will soon issue a short statement that describes the recently concluded interagency “crypto sprint,” Acting Comptroller of the Currency Michael Hsu said. He also said the Office of the Comptroller of the Currency will provide clarity on a recent review of crypto-related interpretive letters. Speaking at the Federal Reserve Bank of Philadelphia, Hsu said the message from both is that the agencies are approaching crypto activities carefully and expect banks to do the same – and safety and soundness is paramount. “The releases should not be interpreted as a green light or a solid red light, but rather as reflective of a disciplined, deliberative, and diligent approach to a novel and risky area,” Hsu said.
OSHA Suspends Work on Vaccine Mandate
The Occupational Safety and Health Administration indicated it has “suspended activities related to the implementation and enforcement” of the emergency temporary standard issued Nov. 4, pending future developments in the litigation challenging the standard. The standard is currently stayed by order of the Fifth Circuit Court of Appeals.
Banking, Consumer Groups Call for Oversight Hearing on NCUA
In a joint letter with the Independent Community Bankers of America, the National Community Reinvestment Coalition and the American Bankers of Association urged lawmakers to schedule an oversight hearing for the National Credit Union Administration in light of several recent NCUA rulemakings that the groups said “would undermine important statutory guardrails designed to protect low-income consumers.” The groups noted that an NCUA-specific congressional hearing has not been held since 2015.
The letter came one day before NCUA is set to finalize a new rule that would expand the definition of “service facility” for common bond credit unions, enabling them to add groups to their fields of membership on effectively a national basis – disregarding the statutory requirement that credit unions be in “reasonable proximity” to the customers they seek to serve. The NCUA board appears likely to approve the rule even amid opposition from the current Democratic NCUA Chairman Todd Harper and former chairman Mark McWatters, a Republican. Previously, NCUA finalized another controversial rule – which Harper also opposed – expanding the range of permissible lending activities for credit union service organizations, or CUSOs.
In addition to ensuring proper oversight of NCUA, the groups also called on Congress to take “the next logical step” and subject the credit union industry to the Community Investment Act regulations to which banks must adhere.
“Credit unions are not held accountable to fulfill community reinvestment activities, creating a regulatory inconsistency between banks and credit unions, even though both take deposits and should thus have similar requirements to meet needs and conveniences of the communities where they operate,” the groups wrote. “Absent such expectations, some credit unions are not making efforts to invest in lower-income areas.”
Omarova Takes Softer Stance on ‘Relationship Banking’ in Prepared Testimony
In prepared testimony submitted ahead of her nomination hearing on Thursday, Saule Omarova, President Biden’s nominee for comptroller of the currency, said her top priority if confirmed “will be to guarantee a fair and competitive market where small and midsize banks that invest in their neighbors’ homes and small businesses can thrive, and where every community – regardless of wealth, geography or history – has access to safe and affordable financial services.”
Omarova – who is currently a professor at Cornell Law – added that “a critical part of that task is preserving and fostering the relationship banking that drives economic growth and creates local jobs and prosperity.” She also raised concerns about the dwindling number of community banks in the U.S., as well as big tech companies that are becoming direct competitors with community banks.
In her prepared testimony, Omarova appeared to distance herself from policies she has previously advocated during her academic career that would transform the existing banking system bank – including those that would have community banks “pass through” their deposits to the Federal Reserve and effectively making them utilities.
A number of lawmakers – including Jon Tester (D-Mont.), a key Democrat on the Senate Banking Committee – have expressed reservations about Omarova’s nomination.