On January 28, the OCC announced that it would delay publication in the Federal Register of the OCC’s “fair access” rule. As previously reported in the Roundup, the rule prohibits national banks and federal savings associations that are “covered banks” from generally declining to provide financial services to controversial industries such as fossil fuel companies, private prisons, gun manufacturers and others. The rule was proposed on November 20, 2020, its public comment period ended on January 4, 2021, and was finalized on January 14, 2021. During the public comment period, the OCC received approximately 35,700 comments including 4,200 supporting the proposal and 31,290 (including 28,000 form letters) opposing it. This action to pause publication follows the resignation of Acting Comptroller Brian Brooks on January 14, 2021. According to the OCC, the pause will permit the next Comptroller “to review the final rule and the public comments the OCC received, as part of an orderly transition.”
Pursuant to its CRA rule from June 2020, the OCC released 2021’s bank type determinations list, the distressed and underserved areas list and the banking industry median hourly compensation value.
Bank Type: The OCC uses the bank type classifications to determine the performance standards and examination procedures to evaluate a bank’s CRA performance. The OCC classifies banks as a small bank, intermediate bank, wholesale bank, limited purpose bank or a bank subject to the June 2020 rule’s general performance standards. The categorization is generally based on the bank’s asset size, except wholesale and limited purpose banks are classified based on business model. A small bank has assets of $600 million or less. An intermediate bank has $600 million to $2.5 billion in assets. A GPS bank has assets greater than $2.5 billion.
Distressed and Underserved Areas: The list of distressed and underserved areas identifies middle-income census tracts in which qualifying bank activities may receive CRA consideration. The OCC classifies middle-income census tracts as distressed if they have an unemployment rate of at least 1.5 times the national average; a poverty rate greater than 20 percent; or experience at certain levels of population loss. The OCC classifies middle-income census tracts as underserved if they lack the population, or population density, to support institutions that could finance essential community needs or if there are no banks within a certain distance of the community.
Median Hourly Compensation Value: The banking industry median hourly compensation value measures a bank's community development services under the June 2020 CRA rule. For October 2020 to December 2021, the median hourly compensation value applied to community development activities is $39.03.
On January 19, in order to streamline its securities offering regulations and guidance, the FDIC approved a notice of proposed rulemaking that would amend certain securities offering regulations applicable to state nonmember banks and state savings associations (FDIC-supervised institutions). Specifically, the proposed rule would, among other things, replace withdrawn Office of Thrift Supervision regulations and the FDIC’s 1996 Statement of Policy on the Use of Offering Circulars with a new regulation regarding securities disclosures to be made by FDIC-supervised institutions in order to create a unified scheme for securities disclosure requirements applicable to FDIC-supervised institutions.
The proposed new regulation would apply to securities offerings to be made by FDIC-supervised institutions in organizations (de novo institutions), FDIC-supervised institutions that are subject to an enforcement order and intend to issue securities, FDIC-supervised institutions converting from a mutual-to-stock form of ownership, and subsidiaries of such institutions. Issuers in these categories would be required to file a registration statement with the applicable FDIC regional office before proceeding with an offering. The proposed new regulation would not materially alter the current securities offering regime for FDIC-supervised institutions that do not fall into one of these categories.
The proposed new regulation does not recite the required contents of offering documents covering the securities issuances of FDIC-supervised institutions and instead requires that offering documents contain the information that would be required by the appropriate Securities and Exchange Commission (SEC) form when offering securities for sale if the filing of a registration statement were required under the Securities Act or the information that would be required under the appropriate registration exemption if one applies. The proposed regulation thus seeks to treat the securities offerings of FDIC-supervised institutions more like those of other corporations falling under SEC jurisdiction and to eliminate a duplicative system of regulations and forms. Because the proposed new regulation is consistent with both the requirements of the withdrawn regulations and the guidance in the 1996 Statement of Policy, the primary effect of the proposed rule is to codify what was previously guidance for FDIC-supervised institutions that are not state savings associations. As a result, according to the FDIC, “there is no net change in disclosure for FDIC-supervised institutions.”
On January 30, the SBA updated its set of frequently asked questions (FAQs) regarding the PPP. The SBA’s updated FAQs clarify that (1) FinCEN’s April 2020 PPP FAQs apply to second-draw PPP loans and (2) lenders may rely on information obtained from a borrower during a first-draw loan application for a second-draw application, provided the borrower is an existing customer of the lender (See FAQs 54 and 55). The SBA also noted that its other PPP FAQs are in the process of being revised and do not yet reflect changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act enacted on December 27, 2020. On February 1, FinCEN updated its own PPP FAQs confirming the guidance issued by the SBA.
Litigation and Enforcement
On January 19, the California Department of Financial Protection and Innovation (DFPI) launched an investigation into a dozen debt collectors potentially engaging in unlawful, unfair, deceptive, or abusive acts or practices (UDAAP) under California law. This law expands the supervisory role and enforcement power of the DFPI, and represents the first major public action taken under the expanded oversight and enforcement authority of the California Consumer Financial Protection Law (CCFPL), which became effective January 1, 2020. Read the Consumer Finance Enforcement Watch blog to learn more about the investigation.
On January 26, a California federal judge granted the CFPB’s motion for default judgment against a now-defunct financial aid services company. The court also granted in part the CFPB’s motion for summary judgment against the company’s founder. The ruling resolves a complaint filed by the CFPB in 2015, previously covered by Goodwin, alleging that the financial services company ran a nationwide scam preying on consumers’ anxieties about paying for college. Read the Consumer Finance Enforcement Watch blog to learn more about the orders and their results.
The financial services industry is subject to a regularly changing landscape of regulations and laws, driven in part by shifts in policy from regulators and lawmakers. In light of this ever-changing environment, Goodwin launched its FinReg + Policy Watch, which provides real-time updates and analyses focusing on regulation and policymaking. Issues are framed in an easy-to-digest manner, providing insight gained from our experience serving in key roles in government and advising clients across the industry.
Follow along as we deliver our take on the latest developments affecting the financial services community as well as the road ahead.
We have updated the Goodwin 2020-2021 Year-End Tool Kit with a summary of the recent changes in SEC rules that will affect Form 10-K annual reports filed in 2021. These include: (1) form 10-K cover page; (2) business, legal proceedings and risk factors; (3) management’s discussion and analysis, selected financial data, and supplementary financial information (voluntary compliance permitted beginning February 10, 2021); (4) SEC COVID-19 guidance; and (5) electronic signature requirements for SEC filings.
Goodwin is a sponsor at the ABA Conference for Community Bankers, taking place from February 16-17, 2021, which provides the banking community with the opportunity to forge and grow valuable connections across the industry. This highly interactive virtual event puts conversation at the forefront, with planned speaker Q&As, peer group exchanges and small-group video conversations. Goodwin lawyers Samantha Kirby and Matt Dyckman will be joined by OceanFirst Bank’s General Counsel for a discussion on “Lessons Learned from COVID-19: Perspectives from Inside and Outside the Bank.”
Goodwin is a sponsor at the Mutual Funds and Investment Management conference, sponsored by the Investment Company Institute and the Federal Bar Association and being held virtually on March 15, 17 and 19. Don’t miss the chance to learn from experts, earn CPE and CLE credits, and virtually network with peers.
This week’s Roundup contributors: Alex Callen, Brennan Meier, Amelie Hopkins and Samantha Becci.