In This Issue. President Trump announced his intended nominee for Chairman of the Federal Deposit Insurance Corporation (FDIC), the Consumer Financial Protection Bureau (CFPB) proposed updates to its prepaid account rule, and the Office of the Comptroller of the Currency (OCC) updated its Comptroller’s Licensing Manual to cover charter and bylaw amendments. These and other recent developments are covered below.
Regulatory Developments
President Trump Intends to Nominate Banking Lawyer to Head FDIC
On June 16, President Trump announced his intention to nominate James Clinger to serve as Chairman of the FDIC. According to the announcement, Mr. Clinger will first be nominated to fill the vacant director position on the FDIC Board for a six-year term and then will be nominated to replace Martin Gruenberg as Chairman of the FDIC for a five-year term beginning on November 29, 2017. Mr. Clinger was most recently the Chief Counsel for the House Committee on Financial Services, having held this position since 2007. Mr. Clinger previously served as Deputy Assistant Attorney General from 2005 to 2007 and as Senior Banking Counsel for the House Committee on Financial Services from 2001 to 2005, and as the Committee’s Assistant Staff Director from 1995 to 2001. Like Joseph Otting, President Trump’s nominee to serve as Comptroller of the Currency, Mr. Clinger is expected to support the Trump administration’s financial regulatory reform efforts if confirmed by the Senate.
CFPB Proposes Updates to Prepaid Account Rule
On June 15, the CFPB announced that it is proposing several updates to the prepaid account rule. The prepaid account rule, which was issued in 2016 but is not yet effective, amends Regulation E to extend consumer protections such as limited liability against unauthorized transactions and required account opening disclosures, to prepaid accounts. The prepaid account rule also amends Regulation Z, extending credit card protections to prepaid cards that offer overdraft and credit features. The CFPB’s proposal seeks comment on several proposed changes to the rule. First, the CFPB is proposing to require consumers to register their accounts and confirm their identity in order to receive full fraud and error protection, in response to industry concerns that applying such protections to unregistered accounts would increase fraud risk. However, for accounts where the consumer’s identity is later verified, financial institutions would be required to limit liability and resolve errors with regard to disputed transactions that occurred prior to verification. Second, the CFPB is proposing to create a limited exception to the Regulation Z portion of the prepaid account rule for certain business arrangements between prepaid account issuers and credit card issuers that offer traditional credit card products, a common arrangement for digital wallet products, if certain conditions are satisfied. The exemption would apply only if (1) the prepaid card cannot access credit from the credit card account unless the consumer has submitted a written request to authorize linking the two accounts, (2) the parties do not condition the acquisition or retention of either account on whether the consumer authorizes such a linkage, and (3) the parties do not vary certain terms and conditions based on whether the two accounts are linked. Finally, the proposal would allow flexibility for disclosing fees on pre-acquisition disclosures, and clarify exemptions for certain loyalty and promotional rewards and gift cards from the prepaid account rule. In April 2017, the CFPB delayed the general effective date of the prepaid rule by six months, to April 1, 2018. In this proposal, the CFPB is requesting comment on whether a further delay would be necessary. Comments are due by 45 days after publication in the Federal Register. A revised Small Entity Guide, which includes a summary of these updates, can be found here.
Comptroller’s Licensing Manual Expanded to Cover Charter and Bylaw Amendments
On June 19, the OCC added a new booklet to its Comptroller’s Licensing Manual on amendments to the articles of association, charter and bylaws of national banks and federal savings associations. The booklet provides the OCC’s policies and procedures regarding articles of association amendments for national banks, charter amendments for federal savings associations, and bylaw amendments for both national banks and federal savings associations. The booklet also contains some common legal requirements that may affect amendments to articles of association, charters, or bylaws.
Enforcement & Litigation
CFPB Imposes Hefty Fine on Mortgage Servicer for Alleged Violations of Servicing Rules
On June 7, the CFPB issued a consent order against mortgage servicer Fay Servicing, LLC (Fay), requiring Fay Servicing to pay $1.15 million to borrowers and to cease activities that the CFPB contended violated the Real Estate Settlement Procedures Act (RESPA), its implementing regulation, Regulation X, and the Consumer Financial Protection Act of 2010 (CFPA). View the LenderLaw Watch blog post.
CFPB Examines Complaints Filed by Older Consumers
On May 31, the CFPB issued its Monthly Complaint Report, this month’s complaints by consumers aged 62 and older. The CFPB drew its analysis of more than 103,100 complaints from its Complaint Database, which can be found here. The complaint report is an illuminating view into common issues older consumers feel they face in interacting with their financial institutions, and as such can be a helpful resource for entities interested in improving their customer service, especially for older segments of their customer base. View the LenderLaw Watch blog post.
