On November 1, President Trump signed the Joint Resolution of Congress nullifying the Consumer Financial Protection Bureau’s (CFPB) rule prohibiting the use of a pre-dispute arbitration agreement to prevent a consumer from filing or participating in certain class action suits. The move came despite a personal letter from CFPB Director Richard Cordray asking the president to save the rule. As reported in the October 25 edition of the Roundup, the Senate had previously voted 51-50 to nullify the rule.
On October 31, the Office of the Comptroller of the Currency (OCC) released a revised “Subsidiaries and Equity Investments” booklet of the Comptroller’s Licensing Manual (Manual), which supersedes the July 2008 version of the booklet. The revised booklet is the latest in a series of recent updates to the Manual, and it reflects the OCC’s integration of certain functions of the former Office of Thrift Supervision and certain revisions to 12 CFR Part 5, which became effective in 2015. The booklet describes the types of subsidiaries and other entities that national banks and federal savings associations (Banks) may establish or acquire, and the activities in which they may engage, as well as the various equity investments Banks may make. The booklet also describes related notice and application processes, and describes the factors used by the OCC to evaluate such submissions, as applicable. Finally, the booklet contains links, references and other helpful resources for financial institutions interested in establishing subsidiaries or making equity investments.
The OCC, the Federal Deposit Insurance Corporation (FDIC) and the FRB are inviting public comment on additional technical revisions to the Call Report, which will take effect June 30, 2018. The revisions, which are part of the agencies’ ongoing effort to reduce the Call Report burden on banks, will remove or consolidate several data items and add or raise certain existing reporting thresholds in three versions of the Call Report. Comments are due 60 days from publication in The Federal Register.
Enforcement & Litigation
On November 1, the Financial Crimes Enforcement Network (FinCEN) announced the assessment of a $2 million civil money penalty against Lone Star National Bank (Lone Star) for willfully violating the Bank Secrecy Act (BSA). According to FinCen, “the action underscores the dangers that institutions face when taking on international correspondence activities without properly equipping themselves to manage such business.” As noted in FinCEN’s assessment, among other lapses, Lone Star failed to comply with section 312 of the USA PATRIOT Act, which imposes specific due diligence obligations with respect to correspondent banking. Many of the lapses in Lone Star’s BSA compliance were previously covered in an earlier action by the OCC, but FinCEN’s action focusing on the bank’s 312 violations specifically highlights the need for a financial institution to avoid taking on international business for which it is not prepared.
On November 1, the Federal Trade Commission (FTC) and Illinois Attorney General’s Office (Illinois AG) announced (here and here) that they had reached a settlement to resolve a joint action brought against affiliated Chicago-based debt collectors that allegedly used false and misleading tactics in attempting to collect on payday or other small-dollar loans. View the Enforcement Watch blog post.
On October 30, the FTC announced that it had obtained a stipulated order for a permanent injunction and monetary judgment against two individuals for allegedly using fake rental property ads to lure consumers to visit websites promising “free” credit reports. When consumers visited those websites, the individuals allegedly deceived them into signing up for a negative option seven-day trial credit monitoring service, after which consumers were charged $29.94 monthly without their authorization. The FTC alleged that the scheme violated Section 5 of the FTC Act, generated more than 500 consumer complaints, and caused millions of dollars in consumer loss. View the Enforcement Watch blog post.
Corporate governance is evolving and is increasingly relevant to complying with regulatory requirements, managing risk and creating a foundation for a bank's success. The Federal Reserve Board has released proposed supervisory expectations for banks and boards of directors, which give hope that regulators will accept a return to the core mission of bank directors, rather than the post-crisis narrow focus on compliance issues. This briefing/webinar will discuss recent and emerging trends in corporate governance and how banks can alter their governance structure in a way that better manages risk and positions the bank for future growth. Bankers can be proactive and use the Federal Reserve’s stated new approach in current examinations. Samantha Kirby and Matthew Dyckman of Goodwin’s Financial Industry practice will be speaking. For more information, please visit the event website.
Join Goodwin on November 30 for the 6th Annual Banking Symposium, a forum for CEOs and senior management to discuss emerging issues in the financial industry. This year’s symposium, Innovation: The Great Equalizer, will feature entrepreneurs and disrupters, and highlight opportunities for innovation across the industry. Our keynote speaker, Brian Forde, is a Senior Lecturer for Bitcoin and Blockchain, MIT Sloan School of Management, and previously served as Senior Advisor for Mobile and Data Innovation for the White House. For more information, please visit www.bankingsymposium.com.