March 7, 2022

Action Request: Complete MBA Survey On CFPB RFI On ODP, NSF, Other Bank Fees

In an email to CEOs and compliance leaders, MBA is asking banks to participate in its survey about the Consumer Financial Protection Bureau's  recent request for information regarding bank fees. The CFBP blatantly mischaracterized fees for overdraft and insufficient funds, credit cards, remittance transfers, prepaid accounts and mortgages as “junk fees,” equating them to “resort fees” and “service fees” charged for resorts and concerts.  

If you have completed the survey, thank you. If not, we encourage your bank to participate in this important survey about your consumer customer accounts. Answering the questions in this survey will help MBA formulate a comment letter to the CFPB responding to the RFI and outlining our serious concerns with the CFPB’s characterization of bank fees. All data will be shared in aggregate.   

Please coordinate with others in your bank to ensure that only one survey response is submitted per bank. Be assured that all financial institution data will be kept confidential. Please respond to the survey by Tuesday, March 15.  Thanks in advance for your cooperation. If you have questions, please contact Carol Barnett at MBA.

Russian Banks Denied Access To Swift; Biden Sanctions Putin

As the conflict in Ukraine continued to escalate, President Biden and several world leaders agreed to block certain Russian banks from accessing the Swift global messaging system. In a joint statement released by the White House, leaders noted that removal from Swift “will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.” They also committed to “restrictive measures” against the Russian central bank, additional punitive actions against Russian oligarchs and greater coordination on sanctions enforcement and combatting the spreading of disinformation and “other forms of hybrid warfare.”

These actions mark the latest in a series of steps taken against the Russian Federation over its invasion of Ukraine. President Biden announced sanctions against Russian Federation President Vladimir Putin and Russian Minister of Foreign Affairs Sergei Lavrov.

As a result of these sanctions, “all property and interests in property of the individuals above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked,” the Treasury Department said in a press release. “All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or otherwise exempt.”

Treasury Announces More Sanctions Against Russia

The Treasury Department once again stepped up its efforts to sanction Russian oligarchs with ties to President Putin following the Russian military’s invasion of Ukraine. The Office of Foreign Assets Control sanctioned several Russian oligarchs and their family members and also designated 26 Russia- and Ukraine-based individuals and seven Russian entities involved with facilitating the spread of disinformation about the conflict. As a result of these sanctions, all property or interests in or held in the U.S. will be blocked and reported to OFAC.

Treasury also announced that it would share financial intelligence and other evidence with the Department of Justice in an effort to support criminal prosecutions and seizure of assets, and continue working with international partners to enforce existing sanctions.

ABA Unveils Webpage Providing Updates On Russian Invasion Of Ukraine

The American Bankers Association has created a new webpage that has announcements, alerts and guidance affecting the banking sector as a result of Russia’s invasion of Ukraine. The page includes updates on potential cyber threats, sanctions announcement from the federal government and other important news from the White House and various government agencies.

Amid growing concerns about potential Russian cyberattacks on critical infrastructure entities, including banks, ABA also has prepared talking points and communications resources to help bankers talk to their customers and assure them that their money remains safe in a U.S. financial institution. ABA also has made available its ransomware toolkit, a resource banks can use to help ensure they are prepared to respond to a potential attack.

GOP Lawmakers Call Out USPS’ Expansion Of Financial Products

A group of Republican lawmakers led by Congressman Blaine Luetkemeyer expressed concern about a recent attempt by the U.S. Postal Service to circumvent a statutorily required product approval process and expand its financial services offerings. Under the Postal Accountability and Enhancement Act, the USPS is required to file with the Postal Regulatory Commission and publish in the Federal Register when seeking to add a product. The USPS recently launched a pilot program through which consumers can exchange a paycheck or business check for a gift card in value of up to $500 but did not seek approval from the PRC before doing so, the lawmakers pointed out.

In their letter, lawmakers wrote that the pilot is yet another indication that the USPS “is expanding its footprint by offering additional financial product and services.” They called on the PRC to assert its statutory authority with regards to the pilot program and block USPS from adding any additional financial services in the future.

“Considering the USPS is $188 billion in debt, it is apparent the USPS is not in a position to expand financial services to consumers before they get their own fiscal house in order,” the lawmakers wrote.

Powell Signals Fed To Move Forward With Interest Rate Hikes

Federal Reserve Chairman Jerome Powell told members of the House Committee on Financial Services this week that he expects the Fed to raise interest rates at the next meeting of the Federal Open Market Committee on March 15-16. Powell told the committee that with inflation well above 2% and a strong labor market, it is appropriate to raise the target range for the federal funds rate and that he supports a 25-basis point rate hike.

Following the invasion of Ukraine by Russian troops, Powell warned that the near-term effects on the U.S. economy remain highly uncertain and that making monetary policy in this environment “requires a recognition that the economy evolves in unexpected ways” and “we will need to be nimble in responding to incoming data and the evolving outlook.” Powell also told the committee that energy prices have already moved up further because of the Ukraine war and that those increases are likely to move through the economy, push up inflation and weigh on spending. He added that “we can’t know how large or persistent those effects will be. That simply depends on events to come.”

Asked about the possible use of digital currencies in Russia to avoid recently enacted sanctions for the Ukraine invasion, Powell told the committee that it underscored the need for congressional action on digital finance, including cryptocurrencies.

“Ultimately what's needed is a framework and in particular ways to prevent these unbacked cryptocurrencies from serving as a vehicle for terrorist finance and general criminal behavior, tax avoidance and the like,” Powell said.

NCUA Chairman: Credit Union Consumer Protection Standards Should Match Banks’

National Credit Union Administration Chairman Todd Harper made the case that consumer financial protection standards at credit unions should match those adhered to by the nation’s banks. Speaking at a credit union industry event, Harper said “there cannot be one standard for bank customers and a different one for credit union members. Continuing such a dynamic only hurts the credit union members who we all have a duty to protect.”

In 2021, NCUA found violations of consumer compliance rules in nearly 15% of federal credit unions, the most common of which related to credit reporting, truth in lending, electronic fund transfers and equal credit opportunity rules, Harper said. NCUA also found in completed fair lending exams and reviews that in a majority of cases, there were weaknesses in compliance management systems.

Last year, the NCUA also resolved violations involving 64,000 credit union members subjected to unfair practices, leading to about $185,000 in restitution and remediation.

“The logic that credit unions do not discriminate because they are owned by their members is a dangerous myth and one that should end,” Harper said. “Given the consumer compliance examination program for comparably sized community banks, our program’s scope is insufficient, especially for those credit unions between $1 billion and $10 billion in assets. We should be doing more, and we can do more.”

ABA To Congress: Question Tax-Exempt Status Of Credit Unions

As the credit union industry lobbied Congress this week, the American Bankers Association urged all members of the House and Senate to question the tax-exempt status of the $2 trillion industry. Although the credit union industry was created during the Great Depression to provide financial services to those of “small means,” there is no requirement that they serve consumers that are most in need, the association wrote.

Credit unions have now grown into regional and national financial institutions and promote business lines like aircraft finance, and some are using their tax subsidy to pay for Super Bowl ads and NBA stadium naming rights, the letter said.

“These credit unions have strayed beyond the narrow purpose Congress created for them. They’ve graduated and are essentially banks that don’t pay taxes,” ABA wrote.

The association urged lawmakers to ask credit union industry representatives pointed questions about how the industry quantifies meeting the needs of the community while being exempt from the Community Reinvestment Act. ABA also urged Congress to question why the credit union industry made only 3% of Paycheck Protection Program loans and deployed less than 2% of all program funds.

GOP Senators Re-Introduce E-Sign Modernization Bill

Sens. John Thune, R-S.D., Jerry Moran, R-Kan., Todd Young, R-Ind., and Marsha Blackburn, R-Tenn., re-introduced legislation that would streamline how consumers consent to receiving electronic documents, such as bank statements, account information and contracts. The bill was previously passed by the Senate Commerce Committee in the last Congress.

The E-Sign Modernization Act would update the 20-year-old E-Sign Act to reflect advancements in technology and shifting consumer preferences. Specifically, the bill would remove the current requirement for consumers to reasonably demonstrate that they can access documents electronically before they can receive an electronic version.

“Now more than ever, consumers want choices that allow them to manage their financial lives using digital banking channels,” said American Bankers Association President and CEO Rob Nichols. “Senators Thune, Young, Blackburn and Moran’s introduction of the E-Sign Modernization Act is an important step toward ensuring Americans have access to more financial options.”

FDIC: Bank Profits Rise In Fourth Quarter, Full Year

FDIC-insured banks and savings institutions earned $63.9 billion in the fourth quarter of 2021, a 7.4% increase from the year prior, and full-year net income increased 89.7% to $279.1 billion, the Federal Deposit Insurance Corporation reported in its Quarterly Banking Profile. FDIC Acting Chairman Martin Gruenberg said that “with strong capital and liquidity levels to support lending and protect against potential losses, the banking industry continued to meet the country’s credit needs while navigating the economic effects of the pandemic.”

The average net interest margin was unchanged from the prior quarter at 2.56%, six basis points higher than the recent record low in the second quarter of 2021 but was down 12 basis points from the previous year. Net interest income increased 4.4% from fourth quarter 2020 to total $137.2 billion. Noninterest income increased 3.4% year-on-year to $72.7 billion, due in large part to higher trading revenue and investment banking fees. Community banks reported a 7.1% increase in fourth-quarter net income year-on-year, the FDIC said.

“The FDIC's latest quarterly report on the health of America’s banks shows that the industry ended the year on firm footing as the economy continued its return to normalcy. Deposit growth remained strong while credit availability and demand continued on their promising upward trajectory,” noted American Bankers Association Chief Economist Sayee Srinivasan. He added that “while deposits continued to increase, we are beginning to see consumer spending and business investment return to more typical patterns. The fourth quarter was the first since the second quarter of 2019 where loan growth exceeded deposit growth.”

The average net charge-off rate declined by 21 basis points year-on-year to 0.21%, and the noncurrent loan rate declined five basis points to 0.89%. During the fourth quarter, no new banks were added, and no banks failed. The number of banks on the FDIC’s problem bank list declined by two to 44, the lowest level on record.

Fed Proposes Tiered Review Framework For Payments System Access

The Federal Reserve published for comment updates to the proposed guidelines it will use when evaluating requests for master accounts with the Fed or access to the agency’s financial services. The Fed originally issued its proposal in May 2021 amid growing requests from fintech firms and other nonbank providers to gain access to the payments system.

In the supplemental notice, the Fed re-proposed its principles for evaluating requests for accounts and services. In addition, the Fed also proposed to establish a three-tiered review framework to provide additional clarity regarding the review process for different types of institutions. Tier 1 would consist of eligible, federally insured institution and would be “subject to a less intensive and more streamlined review.” Tier 2 would consist of eligible institutions that are not federally-insured but are subject (by statute) to prudential supervision by a federal banking agency and any holding company of which would be subject to Federal Reserve oversight (by statute or by commitments). These institutions would generally receive an “intermediate” level of review, the Fed said.

Tier 3 would consist of eligible institutions that are not federally insured and not subject to prudential supervision by a federal banking agency at the institution or holding company level and “would be subject to the strictest level of review.”

As the Fed considers which institutions can access to the payments system, the American Bankers Association remains concerned that some lightly regulated chartered entities may introduce undue risk to the payments system if they are given direct access.

FHFA Finalizes Changes To Regulatory Capital Framework For Fannie, Freddie

The Federal Housing Finance Agency finalized changes to the prescribed leverage buffer amount and the capital treatment of risk transfers under the enterprise regulatory capital framework for Fannie Mae and Freddie Mac. The changes were adopted mostly as proposed and will take effect 60 days after publication in the Federal Register. Specifically, FHFA:

• replaces the fixed PLBA equal to 1.5% of an enterprise’s adjusted total assets with a dynamic PLBA equal to 50% of the enterprise’s stability capital buffer
• replaces the prudential floor of 10% on the risk weight assigned to any retained CRT exposure with a prudential floor of 5% on the risk weight assigned to any retained CRT exposure
• removes the requirement that an enterprise must apply an overall effectiveness adjustment to its retained CRT exposures in accordance with the ERCF’s securitization framework

The final rule also implements technical corrections to provisions of the enterprise regulatory capital framework that were published in December 2020.

CFPB Issues Compliance Bulletin On Auto Repossessions  

In a recent compliance bulletin, the Consumer Financial Protection Bureau signaled that it will hold auto loan holders and servicers “accountable for [unfair, deceptive or abusive acts and practices] related to the repossession of consumers’ vehicles.” The bulletin reminds lenders and servicers of existing laws regarding auto repossessions and provides examples of types of conduct that might violate the law.

The CFPB said that auto lenders, loan holders and servicers should do the following.

• consider reviewing their policies and procedures regarding repossession and cancellation of repossession
• ensure prompt communications between the servicer and the repossession service providers when a repossession is canceled and monitor compliance with cancellations
• incorporate the monitoring of wrongful repossessions in regular audits of customer communications
• ensure they have corrective action programs in place to address any violations and reimburse consumers for costs incurred as a result of unlawful repossessions

Firms also should review their payment allocation policies, any fees that are charged and consumer complaints regarding repossessions, the bureau said. They also should conduct regular reviews of service providers and monitor any force-placed collateral protection insurance programs to ensure that consumers are not charged for unnecessary force-placed insurance.

ABA To Host Free Webinar On Regulatory Issues Affecting Ag, Rural Banking

As part of National Agriculture Month, the American Bankers Association will host a free webinar at noon Thursday, March 17, about the legislative and regulatory issues affecting agricultural and rural banking in 2022. Attendees will hear from ABA’s policy, communication and economic staff experts and get an overview of the ag banking resources ABA has to offer.