STATE GOVERNMENT RELATIONS
Indiana General Assembly Concludes 2023 Session
Lawmakers worked late into the evening Thursday night to conclude all legislative business for the 2023 session. Lawmakers had up until April 29 to finish their legislative work, but were able finish two days early. Last-minute negotiations on several key bills, including the state budget, went into the late hours of the evening, with these bills being the last to be finalized before the official conclusion of session. Many of the bills passed this last week must still receive the governor’s signature to become law. Once signed, the majority of the bills have an effective date of July 1.
FEDERAL GOVERNMENT RELATIONS
House Oversight Committee Probes San Francisco Fed’s Role in SVB Failure
House Oversight and Accountability Committee leaders Thursday wrote to San Francisco Federal Reserve Bank President and CEO Mary Daly requesting documents and information related to the oversight of Silicon Valley Bank (SVB), noting that “SF Fed appears to have failed to adequately supervise SVB and respond to the bank’s mismanagement.”
The lawmakers requested the Fed provide, by May 11, all examination and audit reports related to SVB, along with information about the examination teams tasked with overseeing SVB and communications regarding the supervision of the bank.
“Public documents show that SVB’s assets and liabilities were not appropriately diversified to match the bank’s growth, and regulators filing MRAs and MRIAs may have been responding to knowledge that, at the end of 2022, almost 96% of deposits held at SVB were uninsured, making the bank susceptible to a run,” they noted. “While the signs of significant and alarming risk were clear, no regulator used more severe tools, such as fines or consent orders, to require action from SVB.”
SAFE Banking Act Introduced in House, Senate
A bipartisan group of lawmakers Wednesday reintroduced the SAFE Banking Act, an industry-supported bill that would address the conflict between state and federal law over cannabis banking. The bill – which has passed the House in several prior Congresses – was introduced by Sens. Jeff Merkley, D-Ore., and Steve Daines, R-Mont., and Reps. Dave Joyce, R-Ohio, and Earl Blumenauer, D-Ore.
FDIC: ‘Authorize Positive, Settle Negative’ Overdraft Fees Present Risks of Unfairness
The Federal Deposit Insurance Corp. Wednesday indicated that overdraft fees resulting from “authorize positive, settle negative” transactions may present risks of possible unfairness violations under unfair or deceptive acts or practices(UDAP) regulations. Under this pattern, a first transaction is authorized on positive funds. Then a second transaction authorizes and posts, lowering the available balance (or bringing the available balance below $0). When the first transaction posts, it posts against negative funds, and the customer is assessed an overdraft fee.
In its financial institution letter, the FDIC indicated that APSN overdraft fees present risks of unfairness under the Dodd-Frank Act and Section 5 of the Federal Trade Commission Act because the consumer cannot reasonably avoid receiving these fees due to the “complicated nature of overdraft processing systems” and because “the consumer does not have the ability to effectively control payment systems.” According to the FDIC, the risks of unfairness exist under either “available balance” or “ledger balance” methods of assessing overdraft fees but may be “more pronounced” when the bank uses available balance methods.
Disclosures may not mitigate Unfair and Deceptive Acts and Practices (UDAP) risk, the agency indicated. Instead, the FDIC directed banks to "ensure customers are not charged overdraft fees for transactions consumers may not anticipate or avoid.” Significantly, the FDIC did not direct banks to provide remediation to customers over a “lookback” period or indicate that any bank has been cited for a UDAP violation for charging APSN overdraft fees.
In March, the Consumer Financial Protection Bureau indicated it has cited institutions for unfairness where the institution charged consumers APSN overdraft fees. The CFPB’s action followed a circular it issued in October saying that overdraft fees assessed by financial institutions on transactions that a consumer “would not reasonably anticipate,” including APSN overdraft fees, are “likely unfair.” Acting Comptroller of the Currency Michael Hsu also has stated that APSN overdraft fees present risks of unfairness. The Office of the Comptroller of the Currency also issued a bulletin to banks addressing the risks associated with overdraft protection programs.