STATE GOVERNMENT RELATIONS
Huston Selected as Next House Speaker
Indiana House Republicans met Monday and selected State Rep. Todd Huston (R-Fishers) to serve as the next House speaker.
House Speaker Brian Bosma (R-Indianapolis) recently announced his retirement after the 2020 legislative session. To provide a smooth transition, House Republicans chose Huston to serve as speaker-elect. He will work closely with Bosma during the upcoming session and will be sworn in as House speaker by the full House as session closes.
First elected in 2012, Huston represents House District 37, which includes Fishers and a portion of Hamilton County.
Register for the IBA Legislative Briefing & Reception
Save the date for the 2020 IBA Legislative Briefing & Reception, scheduled for Jan. 15 at the Hyatt Regency Indianapolis. As the first IBA grassroots advocacy event of the new year, this is a prime opportunity to get your bank involved in 2020. The briefing, conducted by the IBA Government Relations Team, will include an in-depth discussion of current legislative issues. The following reception will allow for valuable networking time to connect with your banking peers and Indiana legislators.
FEDERAL GOVERNMENT RELATIONS
Banking Agencies Issue Much-Needed Guidance on Hemp Banking
The federal banking agencies and the Financial Crimes Enforcement Network, in consultation with the Conference of State Bank Supervisors, on Tuesday issued guidance on banks’ Bank Secrecy Act obligations related to hemp producers. The guidance makes clear that banks are not required to file Suspicious Activity Reports on hemp producers operating under an approved federal, state or tribal license or plan. The guidance also notes that bank customers are responsible for complying with regulatory requirements, not the banks.
"Because hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, banks are not required to file a [SAR] on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations," the agencies wrote. "For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants."
The guidance came following an interim final rule in October from the U.S. Department of Agriculture, which provided a framework for how USDA will approve regulatory plans from states and Indian tribes that wish to oversee hemp production, as well as a federal plan to license producers in areas without approved local plans. FinCEN indicated it will issue further guidance after reviewing the USDA rule.
House Passes Legislation to Combat Illegal Calls
By a vote of 417-3 on Wednesday, the House passed legislation that would give the Federal Communications Commission greater enforcement powers to combat those who place illegal automated calls and that would direct the FCC to establish a call authentication framework. This compromise legislation merges two bills that had passed the House and Senate earlier this year.
The legislation also directs the FCC to issues regulations to ensure that banks and other callers have effective redress options if their calls are erroneously blocked by call-blocking services.
The final legislation does not include a provision that would have assigned liability to banks and other businesses that call customer numbers that have been reassigned to another consumer. The legislation also does not expand the scope of the Telephone Consumer Protection Act’s restrictions to capture calling equipment used by banks and other businesses to contact their customers, as an earlier version of the House legislation had provided.
Agencies Outline Risks and Benefits of Alternative Data Use
Five federal banking agencies on Tuesday issued a joint statement on the use of alternative data in credit underwriting. In the statement, the Fed, CFPB, FDIC, NCUA and OCC noted that use of alternative data – such as cash flow data – may improve the speed and accuracy of credit decisions and increase access to credit for some consumers. The agencies warned, however, that as with other credit underwriting innovations, a thorough analysis of relevant consumer protection laws will be necessary.
"Many factors associated with the use of alternative data, including those discussed for cash flow data, may increase or decrease consumer protection risks," the agencies wrote. "Robust compliance management includes appropriate testing, monitoring and controls to ensure consumer protection risks are understood and addressed."
WSJ Article Examines Mission Creep, Rising Risk Among Credit Unions
Tax-exempt credit unions – which have seen significant growth in the years since the financial crisis – are increasingly "using their newfound financial heft to compete aggressively for business" against taxpaying banks, according to a Wall Street Journal article published Monday. As many larger credit unions have grown in scale, they have engaged in higher-risk forms of lending while loosening the common bond requirements and even purchasing taxpaying banks, the article noted.
"They are making lots of loans with high-risk features," said Federal Financial Analytics’ Karen Shaw Petrou, who was interviewed for the story and who previously conducted a study of the credit union industry that found that credit unions have fallen short of their statutory mission to serve customers of small means. For example, credit unions have become particularly involved in auto lending in recent years – now accounting for nearly one-third of outstanding auto loans in the U.S. – and WSJ noted that a large share of these loans are for terms of six years or more, an indication that consumers may end up owing more than the vehicle is worth.
In addition to taking on more risk, WSJ pointed out that the National Credit Union Administration has repeatedly delayed a critical post-crisis rulemaking to set more stringent capital requirements for credit unions. The article noted that "economists and analysts are uneasy about how these bulked-up credit unions will fare in a recession. In another financial crisis, some could fail or shrink, stranding borrowers who prefer not to use banks. In a worst-case scenario, taxpayers could be saddled with the losses."
Read the article (subscription required)
Fed’s 2020 Fees Expected to Rise 2.4%
The Federal Reserve System’s 2020 fee schedules for priced services that go into effect Jan. 2 are expected to be 2.4% higher on average than in 2019, and the system projects that it will recover 100.2% of its priced services costs, the Fed reported last week.
Check fees will rise 3.3% on average, while FedLine prices will rise by 2.9%, and Fedwire Funds prices will rise 3.7%. Fees will remain unchanged for FedACH, National Settlement Services and Fedwire Securities.