April 9, 2021  

Luetkemeyer Asks SBA For Details On PPP Forgiveness Exceeding 90 Days

MBA continues to hear from banks frustrated by the Small Business Administration’s lack of adherence to forgiveness time lines for Paycheck Protection Program loans. Congressman Blaine Luetkemeyer recently wrote to SBA about the forgiveness process, noting that the CARES Act required a lender to decide on forgiveness in 60 days and that SBA would remit forgiveness on the determined amount within 90 days of a decision being made. He asked SBA to provide details on:

  • the number of PPP forgiveness applications SBA has in its possession that have surpassed the 90-day period
  • if SBA contacts the lender or small business if the agency doesn’t meet the 90 days and if any additional information is shared regarding forgiveness
  • SBA procedures for a forgiveness application exceeding 90 days
  • the number of days it takes SBA to remit forgiveness funds after receiving PPP forgiveness applications from lenders
  • top reasons why a forgiveness application as an error code
  • the number of days it takes to clear a forgiveness application as an error code

Treasury Releases Details On Proposed Tax Changes

The Treasury Department provided additional details on the President Biden administration’s proposed changes to the U.S. tax code. According to a report, the changes include the following. 

  • an increase of the corporate tax rate from 21% to 28%
  • a 15% minimum tax on book income that would apply to the largest corporations
  • a global minimum tax for U.S. multinational corporations
  • an increase to the global intangible low-taxed income rate
  • elimination of a deduction for foreign-derived intangible income

In addition to these proposals, the administration also is calling for increased enforcement around corporate tax evasion and increased audits of corporations by the Internal Revenue Service, among other things. 

Supreme Court Ruling Protects Banks’ Ability To Contact Customers

In a significant win for bank customers, the U.S. Supreme Court confirmed that customers can receive important communications from their banks and other companies with whom they do business. The court issued its highly anticipated opinion in the case of Facebook v. Duguid, which addresses the definition of “automatic telephone dialing system” commonly known as an “autodialer,” under the Telephone Consumer Protection Act.

The decision reversed a lower court’s ruling, and the Supreme Court offered a narrow interpretation of the definition of autodialer, as the American Bankers Association and others had urged. To qualify as an autodialer, “a device must have the capacity either to store a telephone number using a random or sequential number generator or to produce a telephone number using a random or sequential number generator,” the opinion said. This decision will enable banks to deliver routine, informational communications to their customers, including low-balance alerts, fraud warnings and other time-sensitive calls with substantially less risk of liability under the TCPA.

ABA has been actively engaged in TCPA-related advocacy to both Congress and the Federal Communications Commission to ensure that customers can receive these critical, nontelemarketing communications from banks and other companies. ABA and a coalition of trade associations filed a friend-of-the-court brief in the Facebook case last year.

“Today’s ruling is a win-win,” ABA President and CEO Rob Nichols said in an email to bank CEOs. “Consumers will be able to receive critical, time-sensitive communications — low-balance alerts and fraud warnings, for example — while banks may continue to reach their customers in efficient ways.”

ABA, Financial Trades Raise Concerns About Proposed Call Report Changes

The American Bankers Association joined the Bank Policy Institute and the Securities Industry and Financial Markets Association in a letter to the federal banking agencies providing feedback on recent proposed changes to the call report. Among other things, the groups raised concerns that several of the new reporting items are duplicative of existing requirements, such as data on sweep deposits that firms already report in the FR 2052a.

The groups also raised concerns around the confidential treatment of call report memorandum items, as well as the implementation time line. They urged the agencies to postpone the implementation of the new reporting requirements until the March 30, 2022, report date. In addition, they urged the agencies to confirm that firms are permitted to incorporate the new brokered deposit rules starting with the June 30 as-of date and to provide additional clarification around a requirement for firms to report data on sweep accounts that are “not fully insured.” 

ABA Urges CFPB To Reconsider Extension Of QM Rule Compliance Date

Delaying the mandatory compliance date of the new QM rules could “foster disruptive market confusion and complicate bank compliance efforts considerably,” the American Bankers Association said in a comment letter to the Consumer Financial Protection Bureau.

ABA’s comments came in response to a recent proposal to extend the mandatory compliance date from July 1 to Oct. 1, 2022, and extend the temporary “GSE patch” until the new mandatory compliance date or until Fannie Mae and Freddie Mac exit conservatorship, whichever comes first. The CFPB said it also would conduct a review of the new QM rules.

“[T]he clear and sensible reforms contained in the new General QM provisions are endorsed by a very broad consensus of interests, is more inclusive of the types of communities the bureau wants to see served, and America’s banks are confident that they can continue, and even expand, lending operations to meet the needs of an evolving housing market, without delays,” ABA said. The association added that “any postponement of the compliance date would disrupt and retard the efforts currently underway by third parties and internal staff to redesign QM compliance systems.”

ABA echoed these sentiments in a separate letter submitted in coordination with a broad coalition of consumer advocacy and financial and housing trade organizations, emphasizing that the new QM framework “provides the best solution available” to expand fair and equitable access to credit, maintain existing safe product features and provide an effective replacement for the GSE patch, “while retaining the core consumer protections provided by the QM product safeguards and requirements for lenders to consider and verify debts and income.”

CFPB Issues Proposed Rule Prohibiting Foreclosure Notices Until Dec. 31

The Consumer Financial Protection Bureau proposed to establish a temporary COVID-19 emergency pre-foreclosure review period under Regulation X that would prohibit servicers from making the first notice or filing required to initiate foreclosure until Dec. 31. This “pre-foreclosure” period would apply to mortgage loans secured by the borrower’s principal residence.

The proposed rule would build on existing rules, which prohibit a servicer from making the first notice or filing required by law until a borrower’s mortgage loan obligation is more than 120 days delinquent. The CFPB issued the proposal in response to concerns that a potentially unprecedented number of borrowers may exit forbearance at the same time this fall when they reach the maximum term of forbearance and could strain servicer capacity, “potentially resulting in delays or errors in processing loss mitigation requests.”

In addition, the proposed amendments would temporarily allow mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. The proposed effective date of the temporary rule is Aug. 31 and, if finalized, it would apply until Aug. 31, 2022.

CFPB Proposes Delay To Effective Date Of Debt Collection Rules 

The Consumer Financial Protection Bureau proposed to extend the effective date of its two recent debt collection final rules from Nov. 30, 2021, to Jan. 29, 2022. Both rules were issued pursuant to the Fair Debt Collection Practices Act, which governs the activity of third-party debt collectors. The FDCPA does not generally apply to creditors collecting their own debts and thus does not generally apply to banks. However, banks routinely oversee the activity of third-party collectors. Comments on the extension, including whether the proposed 60-day extension is sufficient, will be due 30 days after publication in the Federal Register.

The first rule, issued in October 2020, addressed the use of text messaging and email to contact consumers regarding debts and provided for consumer opt-out of these contact methods. It also included provisions on disputes, as well as record retention requirements for FDCPA debt collectors. The second final rule, issued in December 2020, covered passive debt collection, time-barred debt and required validation notices to consumers.

FinCEN Seeks Input On Creation Of Beneficial Ownership Database

As part of its efforts to implement provisions of the Anti-Money Laundering Act of 2021, the first significant changes to Bank Secrecy Act/anti-money laundering rules in almost two decades, the Financial Crimes Enforcement Network is seeking public input on the creation of a national beneficial ownership database. Comments on the advance notice of proposed rulemaking are due by May 5.

The creation of the database was a key component of the Corporate Transparency Act, which was included in the broader package of BSA/AML reforms. Under the CTA, corporations, limited liability companies and similar entities will now be required to report certain information about their beneficial owners, which will be stored in a confidential, secure and nonpublic database maintained by FinCEN. In addition, the law authorizes FinCEN to disclose certain beneficial ownership under certain circumstances to recipients, including federal law enforcement. It also directs FinCEN to revise certain existing customer due diligence requirements for banks to reflect the changes to beneficial ownership reporting. 

FEMA Unveils Changes To NFIP Pricing Methodology

As previously shared in the Missouri Bankers Update, the Federal Emergency Management Agency announced sweeping changes to the National Flood Insurance Program that will fundamentally alter the way it prices insurance and determines an individual’s property flood risk. The new methodology, which FEMA dubbed “Risk Rating 2.0,” is intended to deliver rates that are more equitable and more accurately reflect flood risk.

“To provide more equity, FEMA now has the capability and tools to address rating disparities by incorporating more flood risk variables,” the agency said in a press release. “These include flood frequency, multiple flood type — river overflow, storm surge, coastal erosion and heavy rainfall — distance to a water source and property characteristics such as elevation and the cost to rebuild.”

FEMA announced a phased approach to roll out the new rates. In Phase 1, new policies beginning Oct. 1, 2021, will be subject to the new rating methodology. In addition, existing policyholders eligible for renewal will be able to take advantage of immediate decreases in their premiums. In Phase 2, all policies renewing on or after April 1, 2022, will be subject to the new rating methodology.

FEMA previously posted state-by-state facts sheets outlining how the changes will affect policyholders each state. A comparison of the fact sheets showed that the new methodology is likely to have an uneven effect on states, with some states seeing rates increase while others will see decreases. 

FDIC Unveils Resource Page On Brokered Deposits, National Rate Cap

With the Federal Deposit Insurance Corporation’s new rules on brokered deposits and interest rate restrictions now in effect, the agency unveiled a new online resource page with information on the brokered deposit regulations and the new methodologies it uses for calculating the national rate cap.

The new rules that were finalized in December narrow the definition of “deposit broker” and also designate certain business relationships and services that meet the rule’s “primary purpose exemption” and do not require an application to the FDIC. The rule also provides that entities with exclusive deposit placement arrangements with one bank are not deposit brokers. With respect to the national rate cap, the FDIC will include credit unions in the data that backs the national rate and incorporate Fed funds and Treasury rates into the national rate cap. 

Among the resources are FAQs on the brokered deposits rule, instructions for primary purpose exception submissions, information on national rates and rate caps, a compliance guide for small entities and previous FDIC staff interpretations that are set to be phased out in 2022. 

Cuomo Signs ARRC-Backed Libor Transition Legislation

New York Gov. Andrew Cuomo signed a bill developed by the Alternative Reference Rates Committee that will facilitate the transition away from the London Interbank Offered Rate. The bill allows Libor-referencing financial instruments without reference rate fallback language to fall back automatically to a reference rate recommended by the Federal Reserve or the ARRC, currently the Secured Overnight Financing Rate.

The new law helps avoid uncertainty about which rate will be used on the more than $200 trillion in outstanding contracts that reference U.S. dollar Libor, many of which are governed by New York state law. All settings of USD Libor will terminate by the middle of 2023.

Ironing Out The Wrinkles In The Post-Libor Landscape

With the so-called Libor endgame now set in stone, with all settings of U.S. dollar London Interbank Offered Rate set to terminate by June 30, 2023, the race to transition legacy contracts, set up back-end processes, communicate with customers and select alternative rates is on. An article in the upcoming May/June issue of the ABA Banking Journal examines how banks, corporates and bank vendors are approaching the remaining months of Libor availability. The article covers the lack of a forward-looking term Secured Overnight Financing Rate and how some banks are planning for use of SOFR in arrears in the absence of the forward-looking rate. It also examines SOFR alternatives in the market and how the array of options complicates the transition. 

Agencies Issue Call Report Instructions For Q1 Reports

The federal banking agencies issued instructions for institutions required to file Call Report data for the first quarter. Data submissions must be received by Friday, April 30. Institutions with more than one foreign office, other than a “shell” branch or an international banking facility, must file their data by Wednesday, May 5.

The agencies also previously announced several temporary changes to the Call Report to provide relief to banks with under $10 billion in assets. The changes apply to three versions of the Call Report — FFIIEC 031, FFIEC 041 and FFIEC 051 — and will allow banks to use the lesser of the total consolidated assets reported in its Call Report as of Dec. 31, 2019, or June 30, 2020, when determining whether the institution has crossed certain total asset thresholds to report additional data items in its Call Reports for report dates in calendar year 2021.
Institutions may submit their data either by using computer software to prepare and edit the report data and then electronically submitting it directly to the agencies’ Central Data Repository, or by completing the report in paper form and working with an external vendor to convert it to an electronic format. 

ABA To Host DEI Open Forum April 14

The American Bankers Association will host another free open forum on diversity, equity and inclusion in the banking industry at 2 p.m. Wednesday, April 14, for bankers to discuss current DEI challenges and topics, exchange leading practices and ideas and learn more about implementing DEI programs and initiatives at individual banks.

ABA To Host Webinar On Diversity Data, Self-Reporting

ABA will host a free webinar at 1 p.m. Tuesday, April 27, featuring speakers from the Federal Deposit Insurance Corporation who will discuss the agency’s Financial Institution Diversity Self-Assessment, which helps the agency gather and analyze information about institutions’ diversity policies and practices. Speakers will provide a step-by-step walk-through of how to submit data through the FDIC’s online portal and give an overview of the FDIC’s Office of Minority and Women Inclusion. 

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