FEDERAL GOVERNMENT RELATIONS
FOMC Members Pause Rate Hike Campaign to Assess Economic Effects
Against a backdrop of tightening credit conditions and higher interest rates expected to continue weighing on the economy, Federal Open Market Committee members decided to maintain the target range for the federal funds rate at 5-5.25%, according to minutes from the committee's June meeting. Participants acknowledged that a pause in rate hikes would provide time to assess the economy’s progress toward the committee’s goals of maximum employment and price stability.
FOMC members continued to agree that a restrictive stance for monetary policy would be appropriate in order to achieve those objectives. “Almost all participants stated that, with inflation still well above the committee’s longer-run goal and the labor market remaining tight, upside risks to the inflation outlook or the possibility that persistently high inflation might cause inflation expectations to become unanchored remained key factors shaping the policy outlook,” the minutes noted.
Report: CFPB Monitoring Developments in Fair Lending Technology
The Consumer Financial Protection Bureau indicated in its annual fair lending report to Congress last week that it has expanded its expertise in data science and analytics to identify fair lending violations as technologies such as artificial intelligence are more widely used in financial products. The agency said that in 2022, much of its fair lending supervision efforts focused on mortgage origination and pricing, small business and agricultural lending, and policies and procedures regarding geographic and other exclusions in underwriting. But the CFPB also noted that it has bolstered staffing resources as advanced algorithmic technologies such as AI are increasingly used throughout the entire life cycle of financial services products.
“The CFPB is keenly focused on the risks that these technologies present to individual consumers, small businesses, communities and the market as a whole,” the agency said. “Big tech platforms, with their vast consumer surveillance and data harvesting infrastructure, have the potential to undermine fairness and competition…Indeed, vast troves of sensitive data available about consumers that institutions using more traditional methods would never have used in a credit decisioning context are now fueling highly complex, black box algorithms.”
The CFPB pointed to a circular it published last year stating that creditors must follow the law and provide statements of specific reasons to applicants against whom adverse action is taken, regardless of the technology they use. The agency also indicated that digital marketers acting as service providers can be held liable by it or law enforcement for committing unfair, deceptive or abusive acts or practices as well as other consumer financial protection violations.
International Task Force Updates Lists of Countries with AML Deficiencies
The Financial Action Task Force (FATF) – an intergovernmental body that establishes international standards for anti-money laundering, countering the financing of terrorism and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF) – has updated its lists of jurisdictions with strategic AML/CFT/CPF deficiencies, the Financial Crimes Enforcement Network said last week.
FATF added Cameroon, Croatia and Vietnam to its list of jurisdictions under increased monitoring. It did not remove any jurisdictions from the list. The task force’s list of high-risk jurisdictions subject to a call for action remains the same, with Iran and North Korea still subject to FATF’s countermeasures. Burma remains on the list and is still subject to enhanced due diligence, not countermeasures. FATF also reiterated that all jurisdictions should be vigilant to current and emerging risks from the circumvention of measures taken against Russia.