COVID-19 UPDATES / GOVERNMENT RELATIONS
DFI Releases Reference Documents for Updated Consumer Finance Laws
The Indiana Department of Financial Institutions released the following documents on Tuesday regarding legislation impacting financial institutions that passed during the 2020 legislative session. Included are documents that outline significant changes to the Uniform Consumer Credit Code that will be noteworthy to all Indiana banks.
2020 General Assembly DFI Legislation of Interest (eff. July 2020)
Advisory Letter 2020-01 SEA 395 Law Changes
CFPB Proposes Exemption From Escrow Requirements for High-Priced Mortgages
The Consumer Financial Protection Bureau last week proposed to exempt certain higher-priced mortgage loans from a requirement under Regulation Z to establish escrow accounts for those loans, as required by the S. 2155 regulatory reform law.
Under the proposal, HPMLs made by an insured depository institution or credit union would be exempt from the Reg Z escrow requirement if the institution had assets of $10 billion or less, if the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year and if certain other criteria are met.
CFPB Removes Underwriting Provisions From 2017 Small-Dollar Lending Rule
The Consumer Financial Protection Bureau issued a long-awaited final rule removing the prescriptive underwriting provisions from its 2017 small-dollar lending rule. That rule imposed an ability-to-pay test on a wide swath of small-dollar loans of 45 days or less, including payday loans, auto title loans and bank-provided loans with balloon payments.
The final rule – which takes effect 90 days after publication in the Federal Register – preserves the complete exemption for banks and other depository institutions that made 2,500 or fewer small-dollar loans in each of the current and previous years and for which these loans account for no more than 10% of revenues.
The CFPB also indicated it would move ahead with the rule’s payment provisions, which prohibit lenders from making a new attempt to withdraw funds from an account after two consecutive failed attempts without consumer consent. Those provisions exempt attempted transfers by institutions that hold the borrower’s account and do not charge an insufficient funds or overdraft fee for the attempted withdrawal.
In addition, the CFPB issued a statement noting that it “does not intend to take supervisory or enforcement action” to enforce the payment provisions with regard to loans that exceed the Regulation Z coverage threshold, which is currently set at $58,300.
FFIEC: Examiners to Increase Focus on Libor Transition Preparedness
Federal financial regulators said they will ramp up their supervisory focus on banks’ transitions away from the London Interbank Offered Rate in 2020 and 2021.
In a statement issued by the Federal Financial Institutions Examination Council, the agencies noted that as part of examination activities, “supervisory staff will ask institutions about their planning for the Libor transition including the identification of exposures, efforts to include fallback language or use alternative reference rates in new contracts, operational preparedness, and consumer protection considerations.” The agencies noted that supervisory focus “will be tailored to the size and complexity of each institution’s Libor exposures.”
While the statement does not establish new guidance or regulation, the agencies noted that “institutions should consider existing safety and soundness standards and consumer protection laws as they plan for and address risks that will arise with the transition from Libor,” which is not guaranteed to be sustained beyond 2021. To prepare for the transition, they recommended that institutions take steps including:
• Identifying and quantifying Libor exposure across product categories and lines of business;
• Conducting a risk assessment of Libor exposures, which may include scenario testing, legal review and other analysis;
• Creating transition plans with milestones and key completion dates;
• Conducting an assessment by bank management of revisions that may be necessary to update the institution’s policies, processes and internal control systems;
• Assigning responsibility for Libor transition oversight to a committee, team or officer;
• Reporting progress on the Libor transition to the institution’s board of directors and senior management team.
CFPB Announces New Deputy Director, Executive Team Additions
The Consumer Financial Protection Bureau announced that Thomas Pahl has been named the bureau’s deputy director. Pahl has served as the bureau’s policy associate director for research, markets and regulations since April 2018, and prior to that was acting director of the Federal Trade Commission’s Bureau of Consumer Protection.
The CFPB also announced the leadership for its newly created Consumer Education and External Affairs division. Leading the division will be Policy Associate Director Andrew Duke. Delicia Reynolds Hand will serve as deputy associate director; Desmond Brown will serve as assistant director for the Office of Consumer Education; and Matt Cameron will serve as assistant director for the Office of Stakeholder Management.
Additionally, the division will include a new Office of Public Affairs, which will be led by Marisol Garibay, and an Office of Consumer Response, which will be led by Christopher Johnson.
CFPB Ratifies Previous Actions Following Supreme Court Decision
Following the Supreme Court decision last week in Seila Law v. CFPB – which held that the bureau may continue to operate but that its single powerful director must be able to be removed at will by the president – the CFPB has ratified most regulatory actions it has undertaken between Jan. 4, 2012, and June 30, 2020.
“The ratification of previous regulatory actions provides the financial marketplace with certainty that the rules are valid in light of the Supreme Court decision in Seila Law,” according to the CFPB. The bureau noted that two actions – the bureau’s July 2017 arbitration rule (which was invalidated by Congress) and its November 2017 payday lending rule (which has been partially rescinded) – were not within the scope of its ratification.
The CFPB also indicated it would consider whether to ratify additional “legally significant actions,” including certain pending enforcement actions, but that it would not ratify previous actions “that have no legal consequences for the public, or enforcement actions that have been finally resolved.”
ICYMI - New PPP Data Released
The SBA and Treasury have released additional data on the Paycheck Protection Program, indicating that 4.9 million in PPP loans have supported more than 51 million jobs and more than 80% of small-business employees. Further, 27% of program funds have reached low- and moderate-income communities.
Also available is loan-by-loan information and state statistics, including:
• Total Indiana PPP loans: 79,151
• Total Indiana PPP dollars: $9,485,147,788
• Indiana jobs supported by PPP: 1 million
• PPP approval by state as a percentage of small business payroll: 85%
• Indiana loans of $150,000+: 11,853
• Indiana loans below $150,000: 67,295
In loan-by-loan information, business names are included in the new data for loans of $150,000 and up. Loans of $150,000 and up account for nearly three-quarters of the dollar volume of PPP loans. Loans below $150,000 do not include business names, but do identify loan totals, ZIP code and other information. The agencies have noted that PPP borrower applications disclose that this information could become public.
More than $130 billion remains available for the PPP, which has been extended through Aug. 8.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.