March 10, 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.

FinCEN Flags Russian Attempts To Evade Sanctions

As the U.S. continues its crackdown against Russia over the recent invasion of Ukraine, the Financial Crimes Enforcement Network called on financial institutions to be vigilant against attempts to evade the expansive sanctions and restrictions currently in place. The advisory noted that “sanctioned Russian and Belarusian actors may seek to evade sanctions through various means, including through non-sanctioned Russian and Belarusian financial institutions and financial institutions in third countries.”

FinCEN noted several red flag indicators that could signal attempted sanctions evasions, including several related to convertible virtual currency, noting that “sanctioned persons, illicit actors and their related networks or facilitators may attempt to use CVC and anonymizing tools to evade U.S. sanctions and protect their assets around the globe, including in the United States.”

According to FinCEN, banks should specifically watch for:

• transactions initiated from IP addresses located in Russia, Belarus or other sanctioned jurisdictions
• transactions connected to CVC addresses listed on the Office of Foreign Assets Control’s lists of specially designated nationals and blocked persons
• customer use of a CVC exchanger or foreign-located money service businesses in a high-risk jurisdiction

The advisory also reminded institutions of dangers posed by Russian-related ransomware campaigns. The American Bankers Association continues to track developments related to the Russian invasion of Ukraine on its dedicated webpage.

Biden Signs Executive Order To Advance Digital Assets, Explore CBDC

President Biden signed a long-awaited executive order directing government agencies to take “concrete steps” to advance the use of digital assets, including further exploration of a possible U.S. central bank digital currency. The order calls on the Fed to continue its ongoing work in this area and for “placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest.”

In addition, the order:

• directs the Treasury Department and other agencies to develop policy recommendations to address the growing digital asset sector and ensure consumer protection
• directs the Financial Stability Oversight Council to identify and mitigate systemic risks related to digital assets
• calls for a whole of government approach to direct “unprecedented focus” to mitigate illicit finance and national security risks posed by illicit use of digital assets

The order also focuses on driving U.S. leadership and competitiveness in developing and using digital asset technologies and calls for a Treasury report on the future of money and payment systems, including implications for economic growth and financial inclusion, among other things. As policy conversations continue regarding the creation of a U.S. CBDC, the American Bankers Association has raised concerns that the creation of such a currency could compete with bank deposits and limit banks’ ability to power economic growth.

“While much of the executive order calls on federal agencies to assess the expanding marketplace of digital assets before recommending new rules, we are concerned that it clearly directs federal agencies to begin pursuing a central bank digital currency even before determining if a U.S. CBDC is actually ‘in the national interest’ as the order also requires,” said ABA President and CEO Rob Nichols. “We urge the administration and the agencies involved to carefully consider the implications of a U.S. CBDC, which could fundamentally reshape our banking and payments system to the detriment of bank customers and their communities.”

House Clears Omnibus Spending Bill Containing ABA-Advocated Provisions

The omnibus appropriations package passed by the House includes several banking-related provisions that address “tough legacy” Libor contracts, an increase to the authorization cap for the Small Business Administration’s 504 loan program and $5 billion for debt refinancing.

The American Bankers Association President and CEO Rob Nichols welcomed the inclusion of the Libor provision, which has bipartisan support.

“With this action today, Congress continues to express overwhelming support for a federal solution to ensure investors, consumers and issuers of securities avoid years of uncertainty and unexpected economic losses from Libor’s cessation,” Nichols said.

With two tenors of U.S. dollar Libor no longer being published and the remainder set to cease by June 30, 2023, the legislative language would direct the Federal Reserve to determine replacement rates for Libor-referencing contracts that lack fallback language and to provide a safe harbor from litigation over a change in rates after the cessation of Libor. A companion bill in the House, H.R. 4616, passed by an overwhelming bipartisan vote of 415-9 in December.

In addition, lawmakers authorized $295 million for community development financial institutions, including $35 million for the Treasury Department’s Bank Enterprise Award Program. ABA and a coalition of trade groups previously urged House and Senate appropriations leaders to continue bipartisan support of at least $360 million in funding for the CDFI Fund in fiscal year 2022, with $42 million allocated for the BEA program. The House bill reflects a total increase of $25 million for CDFIs, with about $10 million for the BEA program specifically.

The Senate is expected to approve the spending package as early as today, though it could face temporary delays if objections are raised.

ABA Opposes Legislative Efforts To Curb Use Of Arbitration

In a statement for the record of a Senate Banking Committee hearing held Tuesday, the American Bankers Association said it will continue to oppose legislative efforts to limit the use of arbitration clauses in private contracts, including S. 505, the Forced Arbitration Injustice Repeal Act that lawmakers are currently considering.

ABA noted that banks use arbitration because it is “fair and more consumer-friendly than litigation” and that “eliminating arbitration clauses will only benefit class action lawyers and will harm consumers by replacing a cost-effective and fair arbitration process with expensive and time-consuming litigation.” The association added the majority of customer disputes with their banks do not require arbitration, and in cases when they do, consumers receive $5,389 on average, compared to just $32.35 in litigation, according to data from the Consumer Financial Protection Bureau.

ABA previously advocated successfully for the repeal of a controversial 2017 CFPB rule that sought to prohibit customers from waiving their ability to participate in class action suits and drastically limit the use of mandatory arbitration agreements for financial products and services. That rule was overturned by Congress under the Congressional Review Act, which gives lawmakers the authority to reject new regulations.

ABA Expresses Support For Bill Clarifying That Postal Banking Is Not Authorized

The American Bankers Association wrote to Senate Banking Committee Ranking Member Pat Toomey, R-Pa., to express support for the Postal Service Reform Act of 2022, a bill that would clarify that the postal service is not authorized to provide banking services.

The association wrote that allowing USPS to provide banking services “is beyond the postal service’s core competencies and raises a number of obvious regulatory and consumer protection questions.” ABA also urged senators to join in opposition to any efforts that would authorize postal banking.

ABA also said that financial institutions are strongly supportive of the postal service and that physical mail remains an important communications channel for banks, adding that “our members are committed to identifying long-term solutions to ensure an efficient, self-sustaining, and affordable U.S. postal system.”

Nichols Addresses Bank Fees, Overdraft, ESG Issues At ABA Summit

In his opening remarks at the 2022 American Bankers Association Washington Summit, ABA President and CEO Rob Nichols laid out the association’s advocacy priorities and pushed back against some misconceptions about the banking industry that have made their way into policy conversations.

Specifically, Nichols noted that despite recent criticism from the Consumer Financial Protection Bureau and others on bank fees, a new ABA/Morning Consult poll found that a majority of consumers — 83% — believe their bank is transparent when disclosing fees and that 62% believe the fees charged by their bank are reasonable.

“Acknowledging that no one likes fees, those are powerful numbers,” Nichols added. “We know that our large, diverse, transparent and highly competitive financial services marketplace is one of the things that makes the U.S. financial system the envy of the world — and as this data clearly shows, Americans know it, too.”

Nichols also pointed out that there is broad agreement among consumers about the value of overdraft, with 89% saying they find it valuable.

“A strong majority say it’s reasonable for a bank to charge a fee for an overdraft,” he said, citing the ABA/Morning consult data. “And finally, a majority of consumers would oppose a government proposal that prevents banks from offering overdraft protection.”

Turning to environmental, social and governance issues, Nichols shared ABA’s view that “regulators should not seek to use the banking industry as a tool to regulate, restrict or favor one industry over another, and we will continue to make that case as these conversations continue.”

OCC’s Hsu: Climate Risk Exams For Midsize Banks ‘Number Of Years’ Away

During a recent industry event, OCC Acting Comptroller Michael Hsu said his agency is “laser-focused on the safety and soundness aspects” of climate change risks. Specifically, the Office of the Comptroller of the Currency is concentrating on large banks’ climate risk management capabilities — identifying, measuring, monitoring and mitigating climate-related exposures. “Weaknesses in risk management could adversely affect a bank’s safety and soundness, as well as the overall financial system,” he said.

Hsu called “prudent” risk management a safety and soundness “imperative,” noting that the draft principles the OCC released in December are just a starting point and will be finalized later this year. At that time, more detailed guidance will be developed, along with the Federal Reserve and Federal Deposit Insurance Corporation. After what Hsu called “an appropriate transition period” — although he didn’t define how long that would be — assessment of large banks’ climate risk management capabilities would begin.

“This means that for midsize and community banks, it will be a number of years before OCC examiners conduct climate risk management examinations,” Hsu said. “My suggestion to those bankers has been simple: Use the time wisely. To the extent that midsize and community banks can develop thoughtful, tailored assessments of their climate risk profiles, they will help mitigate the risk of a ‘trickle down’ of large-bank climate risk management expectations in the future.”

ABA Responds To MSRB’s Request For Input On ESG-related Risk Factors

The American Bankers Association issued a comment letter responding to the Municipal Securities Rulemaking Board’s recent request for information on environmental, social and governance trends in the municipal securities market. Specifically, MSRB sought input on the disclosure of information regarding ESG-related risk factors and ESG-related practices, as well as the labeling and marketing of municipal securities with ESG designations.

ABA recommended that the MSRB focus on the transparency of disclosures, noting that the reliability of environmental metrics will be challenging in the face of unestablished global principles and guidelines. ABA encouraged a flexible approach to disclosure, “reflecting the differences in the circumstances and complexities of financial institutions, participants in the municipal market and their respective business models.” Regarding the labeling and marketing of municipal securities with ESG designations, ABA stressed that the identification of climate designations will evolve, adding that, historically, climate-related financial risks have been rooted in banks’ risk-management practices and “naturally appear through the processes of dynamic market conditions, economic and counterparty data that overwhelmingly contribute to strong risk management.”

“Ongoing engagement with industry analysts, third-party data providers, and relevant industry regulators is important for the future of this important issue,” ABA wrote. “We believe that priorities for investors as it relates to ESG can and will evolve over time. Thus, ABA recommends the [SEC] and other financial regulators work to address how preparers consider materiality in an ever-changing environment.”

SEC Issues Proposal On Cyber Risk Management, Incident Reporting

A new proposal by the Securities and Exchange Commission would create new requirements for public companies regarding the disclosure of cybersecurity incidents. Among other things, the SEC would amend Form 8-K to require that registrants “disclose information about a material cybersecurity incident within four business days after the registrant determines that it has experienced a material cybersecurity incident.”

The proposal also would require enhanced and standardized disclosure of cyber risk management, strategy and governance practices as part of various filings. Specifically, firms would be required to describe their policies and procedures for the identification and management of cyber risks, provide information about the board’s oversight of and management’s role in cybersecurity risk, and disclose whether any member of the board has expertise in cybersecurity. Comments on the proposal will be due 60 days after publication in the Federal Register.

ABA/Morning Consult Survey: Americans Report High Satisfaction With Banks

Nine in 10 Americans with a bank account say they are “very satisfied” or satisfied” with their primary bank, according to a new American Bankers Association/Morning Consult poll. A similar number — 88% — also agreed that they have multiple options when selecting products and services such as bank accounts, loans and credit cards.

The survey polled consumers on several policy topics, including cannabis banking. According to the results, a strong majority of U.S. adults (65%) support allowing cannabis businesses to access banking services such as checking accounts and business loans in states where cannabis is legal, and seven in 10 said they would support a law enabling them to do so.

“Consumers clearly agree that now is the time to resolve the ongoing conflict between state and federal law so banks can serve legal cannabis and cannabis-related businesses,” said ABA President and CEO Rob Nichols. “Doing so will help banks meet the needs of their communities while enhancing public safety, increasing the efficiency of tax collections and improving the financial transparency of the cannabis industry.”

ABA Releases Bank On Dashboard

The American Bankers Association has released a new dashboard featuring an interactive U.S. map that shows the share of households, by county, that are located near a financial institution offering a Bank On-certified account. The map shows that in 2021, Bank On accounts were accessible to 94.8% of low and moderate-income households, up from 65.4% in 2015 when the first Bank On accounts were issued. The interactive map allows users to search for their state and provides information over time.

FDIC’s Consumer News Focuses On Economic Inclusion

The newest issue of the Federal Deposit Insurance Corporation’s Consumer News publication focuses on economic inclusion and building financial stability. The issue include information on financial education, insured deposits and mortgage credit. The issue also provides information about programs for small business and where to find additional resources.