April 21, 2022

Luetkemeyer, GOP Lawmakers: USPS Financial Services Pilot Program Still Unlawful

‌Congressman Blaine Luetkemeyer was among House Republican leaders calling on the postmaster general of the U.S. Postal Service to stop the extension of a financial services pilot program that the lawmakers claim has been in violation of statutory restrictions from its inception.

‌The four-city pilot program, which was launched quietly in September last year and extended earlier this month, allows customers to cash payroll and business checks to pay for Visa gift cards of up to $500. Lawmakers say the program was started without approval from Congress or the Postal Regulatory Commission and, therefore, its extension continues to violate regulations prohibiting the USPS from offering nonpostal products and using taxpayer funds for programs related to non-banking financial services.

“Indeed, the program’s popularity reflected the fact that it was not designed in response to customer demand — only six gift cards were issued under the pilot and total fee revenue was $35.70,” the lawmakers wrote in their letter to the postmaster general. “In light of the fact that the pilot program undoubtedly cost more to develop and implement than was raised in revenue, the subsequent decision to extend the program begs for an explanation as to why. Republicans on the committees of jurisdiction in Congress will conduct oversight of this program as USPS attempts to justify its continued existence.”

The American Bankers Association has long been a vocal opponent of the postal service offering financial products and services. “The solution to high retail check-cashing fees is a banking relationship, not a government-subsidized service through the post office,” ABA said in a past comment on the issue. “Policies that create new incentives for Americans to remain unbanked undercut significant efforts to bring people into the banking system so they can build for their financial future.”

Biden Taps Michael Barr To Be Fed Vice Chairman For Supervision

President Biden announced he will nominate Michael Barr to serve as the next vice chairman for supervision at the Federal Reserve. Barr, who is currently a law and public policy professor at the University of Michigan, served in the Treasury Department during President Obama’s administration and was a chief negotiator during the drafting of the Dodd-Frank Act.

“Much has changed in the financial services marketplace since Michael Barr played a central role in crafting Dodd-Frank,” commented ABA President and CEO Rob Nichols. “Banks of all sizes have demonstrated their strength and resiliency during an unprecedented global pandemic, banks face increased competition from fintech and crypto firms that currently don’t need to comply with bank rules, and in 2018, Congress passed bipartisan regulatory modifications that allowed banks, particularly community banks, to better serve their customers and communities. Given these changes, it will be important for the Senate to thoughtfully examine Michael Barr’s views on a range of current regulatory and economic issues.”

Barr’s nomination comes after Sarah Bloom Raskin, President Biden’s first pick for vice chair, withdrew her nomination last month after failing to obtain support from enough senators to be confirmed.  

SBA Provides Clarification On Maturing PPP Loans

The Small Business Administration recently clarified that it is released from liability on its guarantee of a Paycheck Protection Program loan if the lender has failed to request that SBA purchase the guarantee within 180 days after maturity of the loan.

However, if the lender is conducting liquidation or debt collection litigation in connection with a loan that has matured, including where a forgiveness decision is pending within SBA, the agency will not be released from its guarantee unless the lender fails to request that SBA purchase the guarantee within 180 days after the completion of the liquidation or debt collection litigation. If SBA’s decision is to decline forgiveness or only partially forgive the loan, the lender will then have 180 days from the date of the forgiveness decision to request that SBA honor the guaranty. For more information contact ppp@aba.com.

ABA Seeks Banker Feedback On Implications Of CBDC

As the Federal Reserve weighs the potential benefits, risks, design and policy considerations related to a central bank digital currency, the American Bankers Association is asking for banker feedback to inform its comment letter on the Fed’s CBDC discussion paper. Specifically, ABA is seeking information on how the creation of a CBDC could affect bank deposits and credit supply. The deadline for the survey is Friday, April 22.‌

CFPB Report Highlights Reliance On Community Banks In Rural Areas

In a data snapshot, the Consumer Financial Protection Bureau highlighted some of the unique challenges facing rural Americans, including an increased reliance on physical bank branches, given the limited access to high-speed internet and online banking options in many of these communities. The CFPB noted that rural customers visit bank tellers, often at community banks, “at nearly double the rate of urban and suburban customers,” according to a 2020 analysis from the Federal Deposit Insurance Corporation.

“Community banks are three times more likely to locate their offices in a non-metro area, and community banks hold the majority of banking deposits in U.S. rural and micropolitan counties,” the CFPB said. “According to the FDIC, in 2012 there were more than 600 counties — or almost one out of every five U.S. counties — that had no other physical banking offices except those operated by community banks.”

‌Bank consolidation, however, has contributed to the expansion of so-called “rural banking deserts,” which the Federal Reserve Bank of St. Louis defines as “census tracts in which there are no branches within a 10-mile radius from the tracts’ centers.” The CFPB report pointed out that “lack of broadband access is a major limiting factor” in filling the banking needs of these communities.

“Only 75.6% of rural people had access to a smartphone compared to 86.2% in urban areas and 88.4% in suburban areas and only 68 percent of rural households had access to the internet in their home, which was a much lower rate than urban households (79.5%) and suburban households (84.5%),” the bureau noted.

The American Bankers Association’s 2021 Bank Access Report noted most “banking deserts” are located in actual deserts, with the median bank desert containing just 7.6 people per square mile.

“For perspective, about a quarter of banking deserts lie in census tracts that are geographically larger than the state of Rhode Island yet contain a median of just 3,000 people,” the ABA report said.

In the average rural low-income Census tract, a consumer is within a 10-mile commuting distance of nine bank branches, compared with four for moderate-income rural tracts, six for middle-income tracts and 10 for upper-income tracts.

OFAC Announces Additional Russian Sanctions

The Treasury Department’s Office of Foreign Assets Control sanctioned Transkapitalbank, a Russian commercial bank, and its subsidiary, Joint Stock Company Investtradebank for sanctions evasion activity connected to the recent Russian invasion of Ukraine. Treasury noted that representatives of the bank “have offered services to several banks in Asia, including within China and the Middle East, and suggested options to evade international sanctions.”

OFAC also targeted a worldwide sanctions evasion and malign influence network led by Russian oligarch Konstantin Malofeyev and announced action against Russian virtual cryptomining firms.

FinCEN Issues Advisory To Help Banks Detect Foreign Corrupt Activity

The Financial Crimes Enforcement Network issued an advisory on kleptocracy and foreign public corruption, urging financial institutions to focus their efforts on detecting the proceeds of foreign public corruption.

Kleptocrats launder corrupt proceeds in a variety of ways, including funneling money through shell companies or by purchasing high-end assets. The advisory provides types and potential indicators of kleptocracy and other forms of foreign public corruption, such as bribery, embezzlement, extortion and the misappropriation of public assets. The advisory also highlights financial red-flag indicators to assist banks in preventing, detecting and reporting suspicious transactions.

Last month, the Treasury Department launched the Kleptocracy Asset Recovery Rewards Program, which offers rewards for information leading to seizure, restraint or forfeiture of assets linked to foreign government corruption.  

ABA, Banking Groups Ask Treasury For Flexibility In Scheduling ECIP Closing Dates

The American Bankers Association and several trade groups sent a joint letter to Treasury Secretary Janet Yellen urging the agency to provide flexibility for Sub S and Mutual Banks on their closing timelines for participation in the Emergency Capital Investment Program.

The letter is a follow-up to feedback provided by ABA and the associations last year urging the Federal Reserve to uniformly waive the debt-to-equity leverage ratio and double leverage ratio for Subchapter S and mutual banks that are ECIP participants. To date, according to the trade groups, the Fed has not provided policy guidance on this matter.

“By default, many affected individual banks have submitted requests for waivers from these policies through their respective regional Federal Reserve banks. Only a very small number have received responses while the large majority have requests pending,” the associations wrote.

Late last week, Treasury notified several banks that they were assigned to one of the first two ECIP closing windows. These banks are still waiting for a response from their regional Federal Reserve banks.

“ECIP promises to be transformative to participating institutions and the communities they serve,” the associations wrote, noting that they are “well aligned with Treasury” in wanting to make the program successful. “Yet, we believe the unnecessarily rushed closing process, coupled with the ultimatum to select a final investment amount while waiver requests are pending, and rigid closing dates place undue stress on the small institutions that are eager to participate in the program.”

ABA Applauds DOL’s Delay Of Proposed Changes To Form 5500

The American Bankers Association thanked the Department of Labor for deferring regulatory action on the Schedule H reforms proposed by the department in its recently finalized revisions to Form 5500, which reports annual information about the operation, funding, assets and investments of pensions and other employee benefit plans. ‌

In earlier correspondence, ABA urged the department to delay the finalization of proposed financial reporting changes to Form 5500’s Schedule H or remove some of the proposed reporting requirements, such as those focused on “hard to value” assets and asset identifiers. ABA supports improving the usability of the form but believes the proposed changes would create unnecessary reporting burdens and costs for banks. The association recommended that changes should be addressed separately as part of DOL’s larger, ongoing effort to modernize the financial and other annual reporting requirements on the form. The department plans to conduct a separate assessment, which will result in a notice of proposed rulemaking later this year.

In its recent letter of support, ABA recommended that the department meet with industry stakeholders prior to the proposal, to help with “crafting revisions that would make the terms used and information requested in the revised Form 5500 consistent with existing industry standards, practices, information systems and technology, while being appropriately targeted to achieve the department’s regulatory goals.”

FHFA Finalizes Strategic Plan For 2022-2026

The Federal Housing Finance Agency released its strategic plan for 2022-2026. The agency’s strategic goals include securing the regulated entities’ safety and soundness, fostering housing finance markets that promote equitable access to affordable and sustainable housing and responsibly stewarding FHFA’s infrastructure.

FHFA flagged several challenges that could influence its success in achieving its goals, including the unpredictable path of the COVID-19 pandemic, a changing interest rate environment, supply-side constraints affecting housing affordability and climate change. Disasters like hurricanes, wildfires and floods could increase credit risk and credit-related expenses at the regulated entities, FHFA said, adding that “a scenario of multiple simultaneous disaster events could stress the regulated entities and their business counterparties who service mortgages and insure property.”

FHFA added that the regulatory environment also could affect its ability to achieve its strategic goals, noting that it does not have the power to examine important counterparties of its regulated entities such as nonbank servicers. The agency said this “could interfere with FHFA’s ability to ensure the safety and soundness of the regulated entities.”

FHA Offers 40-year Mortgage Modification, Proposes Rule To Make It Permanent 

The Federal Housing Administration added a 40-year mortgage modification option to assist borrowers who are behind on their mortgage payments for FHA Title II forward mortgages.

The new option is designed to help borrowers who cannot achieve a minimum targeted 25% reduction in the principal and interest portion of their mortgage payment through FHA’s existing 30-year mortgage modification with a partial claim. The 40-year modification with partial claim is now included as a component of FHA’s COVID-19 Recovery Modification and is to be used for borrowers where other FHA recovery options are unable to achieve the minimum targeted reduction. 

Earlier this month, FHA published a proposed rule in the Federal Register to solicit public comments on a standalone 40-year loan modification option. This would align FHA with modifications available to borrowers with mortgages backed by Fannie Mae and Freddie Mac, which both currently provide a 40-year loan modification option. The public comment period closes on May 31.  

EEOC Opens Collection Of EEO-1 Data Due May 17

The Equal Employment Opportunity Commission opened the portal for banks and other employers to submit 2021 EEO-1 Component 1 data. The EEO-1 Component 1 survey requires private employers with 100 or more employees and federal contractors with 50 or more employees to submit data on employees’ gender, race and ethnicity annually to EEOC. The deadline for submitting the data is Tuesday, May 17.  

CDFI Fund To Host Informational Webinar On Small-Dollar Loan Program

The Community Development Financial Institutions Fund will host a webinar at 1 p.m. Wednesday, April 27, to provide information about its small-dollar loan program, which was created to support CDFIs seeking to offer unsecured small-dollar loans of $2,500 or less to their customers. The CDFI fund anticipates that up to $11.1 million will be available for the fiscal year 2022 application round of the program.  

Treasury To Host Minority Bank Summit This Month

The Treasury Department’s Bureau of the Fiscal Service will hold a virtual summit for minority banks from 11:30 a.m. to 3:30 p.m. Thursday, April 28. The program will discuss how Treasury is supporting minority banks, current technology issues facing minority depository institutions and Treasury’s mentor/protégé program.