April 1, 2021
NCUA Extends Comment Period On CUSO Proposal To April 30
In response to a request from the American Bankers Association, the National Credit Union Administration extended the comment deadline to April 30 on its proposal to expand the range of permissible lending activity for credit union service organizations. The proposed rule would allow CUSOs to originate any type of loan a federal credit union may originate, including auto and payday loans.
In its request for an extension, ABA noted the NCUA board chairman’s opposition to the proposal and the need for sufficient time to analyze and evaluate the nature and extent of the proposal’s impact and the risks imposed upon consumers, communities, and the financial services industry.
ABA is calling on bankers to write to the NCUA to oppose the proposed rule
and has provided a sample comment letter for bankers to easily complete and send through its grassroots platform, Secure American Opportunity.
Biden Unveils Infrastructure Plan, Proposed Tax Changes
President Biden released his $2 trillion plan for overhauling the nation’s infrastructure
, including new investments in transportation systems, broadband access and alternative energy. To pay for it, Biden proposed significant changes to the tax code. Among other things, the plan calls for an increase of the corporate tax rate from 21% to 28% and a 15% minimum tax on book income that would apply to the largest corporations.
The plan also makes several changes to international tax provisions that were included in the 2017 tax reform law. Specifically, it calls for doubling the global intangible low-taxed income rate and eliminating a provision that allowed domestic corporations to deduct foreign-derived intangible income. It also supports a global minimum tax.
In addition to these proposals, the administration also called for increased enforcement around corporate tax evasion and increased audits of corporations by the Internal Revenue Service. The White House said it would put forward “additional ideas in the coming weeks” for further changes to the tax code.
Yellen Flags Climate Change As Key Emerging Risk
Treasury Secretary Janet Yellen flagged climate change
as the most significant urging risk for the Financial Stability Oversight Council to address, noting that “our financial system must be prepared for the market and credit risks of these climate-related events.”
Yellen, who serves as chair of FSOC, added that “it must also be prepared for the best-possible case scenario: that we begin a rapid transition to a net-zero carbon economy, which also creates potential challenges for financial institutions and markets,” and noted that FSOC will play an important role in coordinating regulatory efforts related to measuring and managing climate risk.
In addition to climate change, Yellen also said FSOC will focus on vulnerabilities in nonbank financial intermediation and the resiliency of the Treasury market after last year’s significant market disruption.
CFPB Rescinds Several Temporary Pandemic Flexibilities
The Consumer Financial Protection Bureau rescinded seven policy statements that provided temporary flexibilities for financial institutions when serving customers during the COVID-19 pandemic. The rescissions take effect today (April 1).
The rescinded policy statements include the following.
- a March 26, 2020, statement affirming that the CFPB would take into account staffing and related resource challenges facing banks when conducing supervision and enforcement activities
- a March 26, 2020, statement postponing quarterly Home Mortgage Disclosure Act reporting requirements
- a March 26, 2020, statement postponing data submission requirements related to credit card and prepaid accounts required by TILA, Regulation Z and Regulation E
- an April 1, 2020, statement on financial institutions’ reporting obligations under the Fair Credit Reporting Act and Regulation V during the pandemic
- an April 27, 2020, statement affirming that the bureau would not take supervisory or enforcement action against land developers subject to the Interstate Land Sales Full Disclosure Act and Regulation J until further notice
- a May 13, 2020, statement providing flexibility for creditors to resolve billing errors during the pandemic
- a June 3, 2020, statement providing flexibility for credit card issuers when providing electronic versions of disclosures that are required to obtain electronic consent from a consume in accordance with the E-Sign Act and Reg Z
In addition to these statements, the bureau also issued a revised bulletin on supervisory communications
, replacing a 2018 bulletin that sought to distinguish Matters Requiring Attention and Supervisory Recommendations. The revised bulletin notes that “examiners will continue to rely on Matters Requiring Attention to convey supervisory expectations” and will no longer issue Supervisory Recommendations. It further states that “bureau examiners may issue MRAs with or without a related supervisory finding that a supervised entity has violated a Federal consumer financial law.”
Fed Issues Final Rules Clarifying Role Of Supervisory Guidance
The Federal Reserve issued its final rule codifying that regulatory guidance does not have the force and effect of law
, granting much of a joint petition filed by the American Bankers Association and the Bank Policy Institute that sought a formal rulemaking to ensure that banking organizations would not need to rely on a 2018 interagency statement to clarify the role of guidance.
The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and National Credit Union Administration each issued similar final rules earlier this year. The agencies elected to adopt the final rule on an agency-by-agency basis rather than pursue a final joint rulemaking to better address agency-specific issues.
The Fed also published a set of frequently asked questions that address existing legal interpretations related to several of its longstanding regulations, including Regs H, K, L, O, W and Y.
ARRC Outlines Approach For Using SOFR In New Issuances Of Securitized Products
With the publication of all tenors of London Interbank Offered Rate set to cease after June 30, 2023, the Alternative Reference Rates Committee outlined a model for using the Secured Overnight Financing Rate, the ARRC’s preferred Libor alternative, in asset-backed securities products, including noncollateralized loan obligation asset-backed securities, mortgage-backed securities and commercial mortgage-backed securities products.
In a white paper
, the ARRC outlines how new issuance of ABS products could use 30-day average SOFR, with a monthly reset, set in advance of the interest accrual period. This methodology, which was developed by the ARRC’s Securitization Working Group, uses the actual SOFR rates from the 30-day period before the applicable reset date, which the ARRC determined to be preferable to the alternatives for operational ease.
“The SWG believes that the use of 30-day average SOFR aligns well with current market practices and will meet market participants’ expectations for a vibrant and well-functioning market for the foreseeable future,” the ARRC said. The paper also noted that “although this paper sets forth one option for how ABS, MBS, and CMBS products could use 30-day average SOFR, market participants may select appropriate adjustments to the methodologies described herein in connection with any particular ABS issuance based on the unique attributes of the collateral backing the applicable securitization as well as the desired terms of the related securities.”
The paper does not address how asset-backed securities products could use SOFR set in arrears, nor does it include considerations for how new issuance of corporate CLOs could use SOFR.
Basel Committee Issues Principles For Operational Resilience, Risk
The Basel Committee on Banking Supervision issued a pair of guidance documents to help banks manage operational resilience and risk. “Principles for Operational Resilience
” is intended to assist banks to better withstand, adapt to and recover from severe adverse events. The resilience guidance builds on the committee’s “Principles for the Sound Management of Operational Risk
,” which has been revised and also was re-released. It focuses on change management and information and communication technologies.
“Given the critical role played by banks in the global financial system, increasing banks' resilience to absorb shocks from operational risks, such as those arising from pandemics, cyber incidents, technology failures or natural disasters, will provide additional safeguards to the financial system as a whole,” BCBS said. “In recent years, the growth of technology-related threats has increased the importance of banks' operational resilience. The COVID-19 pandemic has made the need to address these threats even more pressing.”
FEMA: NFIP Overhaul Could Have Uneven Consequences For States
Ahead of an expected announcement on changes to the National Flood Insurance Program, the Federal Emergency Management Agency has begun posting information suggesting that the changes will have an uneven effect on states. For example, states in coastal, hurricane-prone areas could see different rate increases or decreases. According to state-by-state fact sheets, about 20% of Florida policyholders will see their rates decrease, compared to just 14% of policyholders in Texas and 13% in Hawaii, according to a Politico
analysis. Missouri information can be found here
FEMA is expected to officially announce details of its “Risk Rating 2.0” plan today (April 1). These changes will “fundamentally change the way FEMA prices insurance and determines an individual’s property flood risk,” and are intended to deliver rates that more accurately reflect flood risk. To view individual state profiles, click here
99% Of FDIC-Supervised Banks Rated Satisfactory, Better For Consumer Compliance
The Federal Deposit Insurance Corporation said that 99% of the banks it supervises were rated satisfactory or better for consumer compliance and Community Reinvestment Act compliance, as of the end of 2020. In the agency’s Consumer Compliance Supervisory Highlights publication
, the FDIC said it observed many banks taking steps to assist customers and communities as the pandemic unfolded. The FDIC said it monitored banks allowing loan modifications with no fees, waiving fees on accounts and offering some in-home banking services.
“In addition to serving customers, we observed supervised institutions supporting employees by offering paid time to assist with local community efforts and to provide financial education to the public,” the FDIC said.
The agency said it conducted approximately 1,000 consumer compliance examinations in 2020 and initiated eight formal enforcement actions to address consumer compliance exam findings. The Supervisory Highlights
publication provides an overview of the most salient issues identified by examiners, including those related to the Real Estate Settlement Procedures Act, the Truth in Lending Act and fair lending.
Agencies Seek Information On Banks’ Use Of AI, Machine Learning
Recognizing the benefits and increasing use of artificial intelligence and machine learning capabilities in financial services, the federal banking agencies are seeking feedback
from financial institutions on how they are using these capabilities to provide banking services to consumers or for other business or operational purposes.
The request for information also seeks input on:
- appropriate governance, risk management and controls over AI
- challenges in developing, adopting and managing AI and machine learning systems
- benefits to financial institutions and customers
It also asks whether additional regulatory clarifications are needed on the use of AI on a safe and sound manner and in compliance with applicable laws and regulations. Comments are due 60 days after publication in the Federal Register
IRS: EIPs To Start Reaching Social Security Recipients, Nontax Filers This Weekend
The Internal Revenue Service said that it expects to begin issuing economic impact payments
this weekend to Social Security recipients and others who do not normally file a tax return.
The IRS said a majority of the payments will be sent electronically through direct deposits and payments to existing Direct Express cards, and a majority will be sent by April 7. The IRS added that its Get My Payment tool
for consumers to check the status of their EIPs will not be updated until the weekend of April 3.
IRS Allows Face Masks, Other PPE As Qualified Medical Expenses
The Internal Revenue Service announced
that the purchase of personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, are qualified medical expenses if used for preventing the spread of coronavirus.
The announcement applies to expenses incurred on or after Jan. 1, 2020, and permits these expenses to be paid tax-free with health savings accounts, Archer MSAs, health FSAs and HRAs. The announcement also allows employers and plan administrators to amend their plans to include these expenses.
IRS Extends Contribution Due Dates For IRAs, HSAs To May 17
Following an announcement from the Internal Revenue Service earlier this month extending the filing date for individual tax returns from April 15 to May 17, the IRS issued additional guidance
on the extension. Among other things, the IRS confirmed that the due dates for contributions to individual retirement arrangements, health savings accounts and other similar savings accounts have been extended to May 17.
The IRS also confirmed that that the extended due date only applies to individual income tax returns and certain related filings. The due date for the Form 5498 series of information returns, normally due June 1, has been extended to June 30.
While the date for payments due with individual tax returns has been extended, the IRS said that the due date for other payments of tax, including estimated tax payments has not been extended from April 15.
CFPB Releases Bank-Level HMDA Data
The Consumer Financial Protection Bureau published Home Mortgage Disclosure Act modified loan application registers
for approximately 4,400 financial institutions. The bureau said it will publish additional HMDA-related information later this year, including a nationwide loan-level dataset that will provide all publicly available data from all HMDA reporters.
FFIEC Issues 2021 Guide To HMDA Reporting
The Federal Financial Institutions Examination Council’s 2021 Guide to HMDA Reporting is now available for download. The 2021 guide
focuses on HMDA data submissions due March 1, 2022, and offers the most official source for assisting institutions in their HMDA reporting.
This edition includes information on collection of data on ethnicity, race and sex, step-by-step charts summarizing transactional and institutional coverage and a small entity compliance guide.
Federal Eviction Moratorium Extended To June 30
As the coronavirus pandemic persists, the Centers for Disease Control and Prevention announced that the federal eviction moratorium has been extended through June 30. The Consumer Financial Protection Bureau and the Securities and Exchange Commission issued a joint statement
that they “will be monitoring and investigating eviction practices, particularly by major multistate landlords, eviction management services, and private equity firms, to ensure that they are complying with the law.”
ABA Seeks Participants For Older Americans Benchmarking Survey
The ABA Foundation invites banks to participate in its Older Americans Benchmarking Survey starting April 26. The survey looks at how banks educate their older customers, train staff to identify elder fraud and respond to fraudulent activity. Results of the survey are used by the ABA Foundation to develop resources and training for banks and to advocate on behalf of the industry.
Findings from the 2019 survey were highlighted by Forbes
. Banks are asked to identify a survey coordinator
by April 9. The coordinator will receive an advance copy of the questionnaire and will be eligible for a $100 discount toward ABA online training after completing the survey.