August 26, 2021

MBA's These Laws Affect You Reviews 2021 State Legislation

MBA had a very successful 2021 session, completing a more than three-year quest to reform PACE residential lending. MBA also obtained updates to bank regulatory and consumer lending codes.

The legislative session, state government and our operations continued to be affected by COVID as in 2020. COVID delays and constraints add to the pressure on the General Assembly to amend and “load-up” bills that appear to be moving. MBA tracks every bill that could become a vehicle to hurt or to help our industry. The General Assembly passed 47 subject matter bills, 19 appropriation bills and four joint resolutions. Compiled by MBA , These Laws Affect You 2021 reviews 12 of the substantive bills and one of the joint resolutions. 

ABA Opposes Bill To Expand Credit Union Membership

In a letter to House Financial Services Committee leaders, the American Bankers Association expressed opposition to a bill that it called a “backdoor effort by the credit union industry to expand its membership rolls at the expense of tax-paying banks.” The Expanding Financial Access for Underserved Communities Act would allow credit unions to further expand the already broad field of membership requirements under the premise of promoting access to banking services for low and moderate-income communities.

However, ABA pointed out that credit unions “have ample opportunity to serve additional communities under their existing authority” and that “they have not stepped up” to provide services to LMI communities. Specifically, ABA pointed to recent data suggesting that credit unions tend to open more branches on net in upper and middle-income census tracts and close more branches in LMI areas. They also are not held to the same stringent Community Reinvestment Act requirements that taxpaying banks adhere to.‌

The association added that the National Credit Union Administration’s recent expansions of credit union field-of-membership rules already provide ample tools for credit unions to serve underserved communities if they so choose.

“NCUA rules require communities added to a credit union’s field of membership to be geographically contiguous to a credit union’s existing footprint, a condition that does not appear to be required by this legislation,” ABA noted. “This could suggest that the real motivation for this legislation is to enable credit unions to establish out-of-market footprints, rather than to serve low-income people close to home.”

The bill comes amid a concerning increase in credit union acquisitions of taxpaying banks, with more than 50 such transactions announced since 2013. ABA continues to call for CRA-like regulatory requirements for credit unions and for Congress to take action to block acquisitions of taxpaying banks by tax-exempt institutions.

Trade Groups Warn Against Re-codifying 2013 Disparate Impact Rule

The American Bankers Association and three other banking and mortgage groups warned that re-codifying the Department of Housing and Urban Development’s 2013 disparate impact rule would run afoul of binding U.S. Supreme Court precedent. HUD proposed to recodify the 2013 rule, which would effectively nullify the previous administration’s September 2020 changes to that rule to align it more closely with the Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, which recognized disparate impact liability under the Fair Housing Act and explained the legal requirements for disparate impact claims.

The trade groups pointed out that HUD’s proposed recodification of the 2013 rule would reinstate a legal standard that is inconsistent with the Supreme Court’s ruling and highlighted several specific areas of inconsistency. The letter is intended help ensure that HUD codifies a standard of disparate impact that is fully consistent with Supreme Court precedent and implements the Fair Housing Act’s requirements with a clear legal framework to address unlawful discrimination.

The trade groups also emphasized that changes to the rule with each new administration creates uncertainty for industry and fair housing advocates and undermines the Fair Housing Act’s goal of expanding availability of housing including mortgage credit.

ABA’s Benda Answers FAQs On Delta Variant, COVID-19 Risk Mitigation

In anew resource guide developed at the request of bankers, Paul Benda with the American Bankers Association answers several frequently asked questions about the recent surge in coronavirus cases connected to the Delta variant and discusses how it has changed the game. He also offers several strategies banks can use to mitigate heightened risks.‌

“Delta has overtaken all other coronavirus variants to become the dominant strain worldwide,” Benda writes. “[I]t’s clear that Delta is outcompeting the other strains and appears to be much more infectious.”

Among other things, Benda discusses addresses COVID-19 transmission risk in an outdoor environment, how to filter air in an office environment, effective use of HEPA filters, requiring vaccinations for bank employees and how the Delta variant could affect unvaccinated children.

FHFA Updates Guidelines For Adverse Classification of Assets At GSEs, FHLBs

The Federal Housing Finance Agency updated its guidelines for adverse and nonadverse classification of assets at Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The guidelines describe sound practices for managing credit risk at the regulated entities. FHFA also outlined procedures for listing assets for special mention. The advisory bulletin issued by FHFA rescinds and replaces several previously issued bulletins on asset classifications.

The bulletin outlines how to make adverse classifications for single-family residential mortgage loans, multifamily residential mortgage loans, other real estate owned, other assets including off-balance sheet credit exposures, and FHLB advances.

CFPB Issues Specifications for Credit Card Agreement, Data Submission

The Consumer Financial Protection Bureau issued technical specifications for complying with credit card agreement and data submission requirements under Truth in Lending Act and the CARD Act. Credit card issuers should use the CFPB’s new “Collect” website to submit required information to the bureau. Card issuers must register to use the Collect site by emailing a registration form to collect_support@cfpb.gov.

Credit card issuers who are required to make quarterly credit card submissions to the Bureau pursuant to 12 CFR 1026.58(c) must register for Collect by Nov. 1. Once card issuers receive their login credentials, starting Dec. 1, they will be able to review their current submissions and make the required submissions for the fourth quarter of calendar year 2021 using Collect.

Treasury, Agencies Urge Financial Institutions to Offer USD Libor Alternatives

In a letter to nonfinancial corporations, the heads of the Treasury Department, Federal Reserve, Securities and Exchange Commission and Commodity Futures Trading Commission addressed the ongoing Libor transition, noting that “a smooth transition will be best supported if financial institutions offer alternatives to USD Libor that meet borrower needs and if this is done in a timely fashion.”

The letter came after nonfinancial corporate trade groups raised concerns about the Libor transition, including challenges with finding loan agreements based on the Secured Overnight Financing Rate, the Alternate Reference Rates Committee’s preferred Libor alternative.

“We have stressed the importance of reference rates built on deep, liquid markets that are not susceptible to manipulation,” the policymakers wrote. “Although the official sector is not positioned to adjudicate the selection of reference rates between banks and their commercial customers, borrower preferences and needs clearly have a significant role to play in the selection of such rates.”

In other reference rate news, CME Group announced that cash-settled, three-month futures on the Bloomberg Short-Term Bank Yield Index are now trading alongside SOFR, Eurodollars and Fed Funds futures. BSBY is a forward-looking, credit sensitive reference rate that tracks the U.S. wholesale unsecured funding market. Meanwhile, Cboe Global Markets announced it will begin listing futures on the Ameribor Term-30 benchmark starting Sept. 13. Ameribor is based on actual interbank transactions among the members of the American Financial Exchange.

‌Morning Consult: One in 10 Adults Don’t Have Checking, Saving Account

One in 10 adults say they do not have a checking or savings account, according to new research released by Morning Consult. About one-quarter of U.S. adults are underbanked and 10% are unbanked, the survey found, with underbanked consumers more likely to be men and unbanked consumers more likely to be women.

The survey of 4,400 U.S. adults also found that 5% of all U.S. adults report that no one in their household has either a checking or savings account, in line with figures reported by the Federal Reserve and the Federal Deposit Insurance Corporation. Underbanked individuals in the survey were defined as having purchased a money order, paid bills or cashed a check with a provider other than a bank or credit union in the past year.

‌The American Bankers Association has urged its member banks to actively promote financial inclusion, including through offering Bank On-certified accounts, which offer features including low costs, online bill pay capabilities, no overdraft fees and certain transaction capabilities. Morning Consult noted many banks already offer accounts with these features but that awareness of Bank On accounts was low with consumers, with just one in four saying they’re familiar with Bank On.

The survey found that 53% of unbanked adults were interested in having a bank account and would be somewhat or very likely to open a bank account if it included convenient bank locations, no fees, convenient hours and no minimum balance requirements, among other things.

New Article Looks At Right Way For Banks To Use Texting

Research shows that 90% of all people read text messages within three minutes of receiving them and that texts boast a 98% open rate, much higher than email, according to an article in ABA Bank Marketing. Text messaging allows customers to talk to their financial institution without saying a word, but there are regulations and best practices to follow, the article states.

Bank marketers should keep in mind several tactics to connect with customers through text messages, including the following.

• letting customers know the bank will not send out personal identification information or request Social Security numbers, account numbers or passwords
• making opting out of text message communication easy
• avoiding overwhelming customers with messages