Regulatory Developments
CFPB Addresses Juneteenth’s Impact on Mortgage Industry
On June 18, the CFPB acknowledged concerns by the mortgage industry balancing the abrupt implementation of Juneteenth as a new federal holiday, on the one hand, and compliance with the Truth in Lending Act (TILA) and TILA-RESPA Integrated Disclosure (TRID) timing requirements, on the other hand, particularly whether and how to adjust closing timelines, with some lenders choosing to delay closings to accommodate the reissuance of disclosures adjusted for the new holiday. The CFPB offered reassurances that TILA and TRID requirements generally protect creditors from liability for bona fide errors and allow redisclosure after closing to correct errors, and any guidance issued by the CFPB would take into account the circumstances surrounding the sudden implementation of the holiday as well as the position of other Financial Institutions Reform, Recovery, and Enforcement Act regulators and the Conference of State Bank Supervisors.
SEC Adjusts Thresholds for “Qualified Client” Tests
On June 17, the SEC issued an Order under the Investment Advisers Act of 1940 (the Advisers Act) approving adjustment for inflation of the dollar amount tests in Advisers Act Rule 205-3 (the Order) used to determine if a client is a “qualified client,” which would allow the adviser to charge the client performance-based fees. Advisers Act Section 205(a)(1) generally prohibits an investment adviser from entering into, extending, renewing, or performing any investment advisory contract that provides for performance fee compensation to the adviser. Advisers Act Rule 205-3 exempts an adviser from the prohibition when the client meets the definition of “qualified client.” In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Order adjusts for the effects of inflation the dollar amount thresholds of the assets-under-management and net worth tests (each increased by $100,000 to $1,100,000 and $2,200,000, respectively) at the prescribed five year mark. An investment adviser is exempt from the prohibition on charging performance fees with respect to clients that meet or exceed these thresholds.
“The CFPB recognizes that some lenders did not have sufficient time after the Federal holiday declaration to consider whether and how to adjust closing timelines. The CFPB understands that some lenders may delay closings to accommodate the reissuance of disclosures adjusted for the new Federal holiday. The CFPB notes that the TILA and TRID requirements generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors.”
– CFPB Acting Director Dave Uejio
Fed Extends Comment Period on Proposed Changes to Durbin Amendment
On June 22, the Federal Reserve announced that it will extend the comment period until August 11, 2021 for its proposed changes to Regulation II (Debit Card Interchange Fees and Routing), better known as the Durbin Amendment, that would clarify that debit card issuers should enable and allow merchants to choose from at least two unaffiliated networks for card-not-present debit card transactions, such as online purchases. The Federal Reserve extended the comment period to allow interested persons more time to analyze the issues and prepare their comments. Originally, comments were due by July 12, 2021.
Agencies Update BSA/AML Examination Manual
On June 21, the Federal Financial Institutions Examination Council released updates to its Bank Secrecy Act/AML examination manual. The updates, which do not establish new requirements, are intended to provide additional transparency and emphasize a risk-based approach to BSA/AML supervision. The updates address international transportation of currency or monetary instruments reporting; purchase and sale of monetary instruments recordkeeping; reports of foreign financial accounts; and regulatory requirements for special measures issued under Section 311 of the USA Patriot Act.
Litigation and Enforcement
President Biden Removes FHFA Director After Supreme Court Ruling
On June 23, only hours after a Supreme Court decision gave him the power to fire the FHFA Director, President Biden fired FHFA Director Mark Calabria and replaced him with Sandra Thompson, who has served as deputy director of the agency's Division of Housing Mission and Goals since 2013.
Earlier in the day, in a decision that was anticipated after a similar ruling regarding the CFPB’s single director leadership structure last year, the U.S. Supreme Court ruled that the leadership structure of the FHFA was unconstitutional due to a provision that the president could only remove its director for cause, not at will.
The change at the helm of the FHFA gives President Biden the chance to put his stamp on housing policy generally and the overhaul of Fannie Mae and Freddie Mac specifically.
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