January 27, 2022

CFPB Probes For Information On Financial Product Fees In ‘Misguided’ RFI

The Consumer Financial Protection Bureau issued a request for information seeking comments on fees associated with financial products and services offered by banks and nonbank financial institutions, including overdraft fees, insufficient funds fees, credit card fees, remittance fees, prepaid account fees and mortgage fees, among others.

‌The bureau said it would use the feedback received from the RFI to “assist the CFPB and policymakers in exercising its enforcement, supervision, regulatory and other authorities to create fairer, more transparent and competitive consumer financial markets.”

MBA vigorously opposes the characterization of bank fees outlined in the RFI. Staff intends to submit a comment letter to CFPB and strongly urges its members to do the same.

‌In a joint statement with six other financial trade groups, the American Bankers Association called the CFPB’s effort “misguided,” noting that it paints a “distorted and misleading picture” of the nation’s financial services marketplace.

“Multiple federal laws and the CFPB's own rules already require banks, credit unions and other providers of consumer financial services to disclose terms and fees in a clear and conspicuous manner, and our members do so each and every day,” the groups said. “Consumers in this country know they have a wide range of choices when it comes to financial services products, and those businesses compete every day, including on fees. We look forward to responding to this request for information with facts and perspective sadly lacking from today's announcement.”

Comments on the RFI are due Thursday, March 31. MBA and ABA intend to respond to the RFI.

Long-Awaited Fed Paper Highlights Risks, Potential Benefits Of A U.S. CBDC

The Federal Reserve issued a highly anticipated report assessing the potential benefits and risks of creating a U.S. central bank digital currency, or CBDC. The paper also requests public feedback on these topics, and comments will be accepted until May 20.

Although the Fed took no official position on creating a CBDC, the agency said it “will continue to explore a wide range of design options,” adding that it “does not intend to proceed with the issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”

The paper noted that a CBDC “would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable and identity-verified.” Among the various CBDC structures the Fed is contemplating is an intermediated model through which the private sector would facilitate the management of CBDC holdings and payments through accounts or digital wallets. Such a model “would facilitate the use of the private sector’s existing privacy and identity-management frameworks; leverage the private sector’s ability to innovate; and reduce the prospects for destabilizing disruptions to the well-functioning U.S. financial system,” the Fed said.

In an analysis of potential risks, however, the Fed acknowledged that a CBDC could, depending on its design, “fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank.” In addition, the creation of a CBDC also could have implications for monetary policy and present operational resiliency and cybersecurity challenges, among other things.

The American Bankers Association has previously weighed in on the risks associated with issuing a CBDC, warning that the issuance of a CBDC could compete with bank deposits and limit banks’ ability to power economic growth. 

ABA President and CEO Rob Nichols noted the Fed’s paper “highlights a growing recognition that a U.S. CBDC could fundamentally reshape our banking and payments system which remains the envy of the world, and these implications require a careful weighing of the real-world costs and benefits before any decision to move forward.

Prior to such a decision, “policymakers would need to show that a U.S. CBDC would somehow improve upon this reliable, tested retail banking system that serves our communities and our economy so well, and we believe it will be very difficult to make that case,” Nichols added. “We recognize the importance and complexity of this discussion and appreciate the Federal Reserve's request for public comment on their report. We look forward to sharing the views of our members across the country.”

Ag Secretary Discusses Farming, Rural Economy During House Hearing

Agriculture Secretary Tom Vilsack testified before the House Agriculture Committee on the state of the rural economy. During the four-hour meeting, Vilsack discussed a wide range of topics, including the following.

• supply chain issues
• employment
• exports
• COVID-19 relief funding
• demand and price increases
• underserved rural communities
• needs of specific farming sectors
• reauthorization of the farm bill, which expires next year

‌“Our farm income is as good as it has been in the last eight years. We’ve had record exports,” Vilsack said at the start of his testimony. As lawmakers begin their work on the farm bill, he urged them to focus on fixing a particular issue: the rural extraction economy. It is the “heart of the challenge” that rural farmers have faced for a long time, the secretary said.

“An extraction economy is where we … take things from the land and rather than convert them and adding value [to products] in the rural areas where the resources [are grown], they are transported long distances to where they are ‘value added’ in some other location where opportunities and jobs are created,” he said.

“We learned during the pandemic that our system isn’t as resilient as we hoped it would be,” he explained. “A way to make it more resilient is to create local and regional opportunities. That’s one of the reasons we’re focused on expanding processing capacity at the local level so our livestock producers have the choice of local facilities that create local jobs and allow revenue and wealth to stay in the community.”

FOMC To End Asset Purchases By Early March

The Federal Reserve will continue to reduce the monthly pace of asset purchases and bring them to an end in early March, according to the latest Federal Open Market Committee statement. Fed Chairman Jerome Powell said inflation remains well above the Fed's longer-run goal of 2% and that supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation.

‌In a press conference after the release of the FOMC statement, Powell said he does not expect supply chain issues to be completely worked out by the end of this year but does expect progress to be made in the second half of the year.

‌The committee also said it would continue to hold the target range for the federal funds rate at its current level of zero to 0.25% but noted that they expect “it will soon be appropriate to raise the target range for the federal funds rate.” The FOMC reiterated that the path of the economy continues to depend on the course of COVID-19. The statement added that indicators of economic activity and employment have continued to strengthen, and the sectors most adversely affected by the pandemic have improved in recent months but are now being affected by the recent sharp rise in COVID-19 cases.

The Fed also issued principles for how it plans to unwind its balance sheet and reaffirmed its longstanding statement on its longer-run monetary policy goals, which target an inflation rate of 2%.

FDIC Approves Final Rule Simplifying Deposit Insurance For Trust, MSAs

The Federal Deposit Insurance Corporation approved a final rule to simplify deposit insurance calculations for revocable trusts, irrevocable trusts and mortgage servicing accounts. The rule establishes a “trust accounts” category that governs coverage of deposits of both revocable trusts and irrevocable trusts using a common calculation, the FDIC said.

‌According to the new rule, each grantor’s trust deposits will be insured up to the standard maximum deposit insurance amount, $250,000, multiplied by the number of trust beneficiaries, but not exceeding five. The FDIC said it expects the vast majority of trust depositors will experience no change in the coverage for their deposits when the final rule takes effect April 1, 2024.

The new rule also provides “consistent deposit insurance treatment” for all mortgage servicing account balances held to satisfy principal and interest obligations to a lender. The rule allows principal and interest funds advanced by a mortgage servicer to be included in the deposit insurance calculation.

ABA, Trades Urge DOL To Engage With Industry Prior To Overtime Rulemaking

As the Department of Labor contemplates a new overtime rulemaking, the American Bankers Association joined 109 other trade groups in a letter urging the DOL to meet with industry groups before proposing a new rule.

‌The fall 2021 regulatory agenda of President Biden’s administration projected that DOL would issue a proposed rule in April 2022 that would revisit the salary level at which an employee could be exempted from federal overtime and minimum wage requirements, as well as revisit other aspects of the overtime regulatory regime. In 2019, with ABA’s support, DOL under the administration of President Trump issued a final rule that set the salary level at $684 per week, or $35,568 per year.

“This will be a significant rulemaking with respect to cost, difficulty in implementation and impact on the workforce, particularly given the current acute labor shortages,” said the trade groups. “Our organizations urge DOL to follow past precedents and hold meetings with the regulated community to obtain input on the potential impact of any changes to the overtime exemption requirements.”

FinCEN Proposes SAR Information Sharing Pilot Program

The Financial Crimes Enforcement Network issued a notice of proposed rulemaking to establish a pilot program to for financial institutions to share suspicious activity reports with their foreign branches, subsidiaries and affiliates.

‌The limited-duration pilot program would expand the sharing of suspicious activity reports from previous guidance, which stated that the reports may only be shared internally with foreign head offices, controlling companies and domestic affiliates.

‌FinCEN said it expects the pilot program to provide valuable feedback as it considers longer-term approaches toward SAR sharing with foreign affiliates. The notice of proposed rulemaking seeks comment on establishing the pilot program, including input on the expected costs and benefits, technical challenges, the merits of quarterly reporting and how to protect SAR confidentiality. Comments will be due Monday, March 28.

“ABA has long supported SAR information sharing between banks, and we look forward to working with FinCEN and our members to help make the new pilot program a success,” the American Bankers Association said. “Although important steps must be taken to maintain SAR confidentiality, we believe the program will make it easier and more efficient to fight fraud and illicit finance while allowing banks to better manage enterprise-wide risk.”

OSHA Withdraws ETS, Commits To Issuing Permanent Standard

The Occupational Safety and Health Administration withdrew the emergency temporary standard that would have required employers with 100 or more employees to ensure staff are vaccinated or tested weekly for COVID-19, among other requirements.

OSHA’s withdrawal comes after the U.S. Supreme Court issued a stay of enforcement of the ETS earlier this month after business groups had challenged the ETS.

OSHA affirmed its commitment to issuing a permanent standard, which must be issued by May 5. OSHA did not indicate whether the permanent standard’s breadth of coverage would be similar to the ETS’s or whether OSHA would target a narrower group of industries with vaccine, testing and masking requirements.