October and November Developments

by Sullivan & Worcester
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Overview

For the first time in my memory, the Congress passed a joint resolution to disapprove a final regulation of a federal agency—in this case the CFPB and the rule was related to arbitration clauses in contracts for consumer financial products. In addition, the agencies amended certain definitions under CRA and these changes should be reflected in CRA policies and procedures at banks. Both the OCC and FDIC published final rules on requirements for Qualified Financial Contracts and introduced required language for larger banks.

On November 22, 2017 the CFPB published a notice of revocation of its rule published on July 19, 2017, covering arbitrations. See the notice at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-22/html/2017-25324.htm

FDIC restrictions on QFCs

On October 30, 2017, the FDIC issued final rules to ensure that covered qualified financial contracts (QFCs) to which they are a party provide that any default rights and restrictions on the transfer of the QFCs are limited to the same extent as they would be under the Dodd-Frank Act. Covered banks are generally prohibited from being party to QFCs that would allow a QFC counterparty to exercise default rights against the covered bank based on the entry into a resolution proceeding. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-30/html/2017-21951.htm

Qualified Financial Contracts and default rights and Resolution of National Banks

On November 29, 2017, the OCC published a final rule regarding default rights under QFCs where there might be conflicts with resolutions of larger banks. The rule follows an FDIC similar rule and adds protections from the Dodd-Frank Act regarding provisions that need to be in QFCs. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-29/html/2017-25529.htm

Community Reinvestment Act Definitions

On November 24, the agencies published new definitions for CRA compliance and consistency with BCFP definitions. See the changes at: https://www.gpo.gov/fdsys/pkg/FR-2017-11-24/html/2017-25396.htm

Credit Union Advertising

On October 4, 2017, the NCUA published proposed rules to ease the required disclosures on federal insurance in connection with credit union advertising. The eased restrictions relate to how a credit union must state that it is federally insured. In particular, the proposed rules focus on radio and TV advertisements of less than 15 seconds. See the proposed rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-04/html/2017-21316.htm

Fed Policy on Payments System Risk

On October 6, 2017, the Fed published revised schedules to its payment policy to reflect the introduction of same day entries starting on September 15, 2017. See the revised policy at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-06/html/2017-21602.htm

OCC Rescinds Guidance on Deposit Advance Products

On October 12, 2017, the OCC announced that it would rescind its 2013 guidance on deposit advance products in view of the CFPB’s rules on payday and high cost installment loan products. See the OCC release at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-12/html/2017-22012.htm

Mortgage Servicing under RESPA

On October 16, 2017, the CFPB published interim final rules on mortgage servicing activities related to consumers who invoke their right to cease communications. See the final rules at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-16/html/2017-21912.htm

Mortgage Servicing under Truth in Lending

On October 18, 2017, the CFPB published proposed rules on mortgage servicing activities related to statements and coupon books for consumers who are in bankruptcy proceedings. See the proposal at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-18/html/2017-21907.htm

Swaps Margin Requirements and EU laws comparable to US laws

On October 18, 2017, the CFTC published a lengthy review of the laws in the EU to determine whether the margin requirements for uncleared swaps were comparable to the US. The CFTC determined that there was comparability of result and thus an entity may rely on “substituted compliance” under the EU margin rules to demonstrate compliance under the CFTC’s margin rules. See the determination at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-18/html/2017-22616.htm

CFPB Supervisory Highlights

The CFPB published its summary of enforcement and other actions during the first half of 2017—it is a useful statement of enforcement priorities and an object lesson on what to avoid. See the report at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-19/html/2017-22700.htm

Interagency Simplifications to the Capital Rules

On October 27, 2017, the banking agencies published a proposed rule to reduce the regulatory burden for small banks that use the “non-advanced approach” to capital. See the lengthy document at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-27/html/2017-22093.htm

Iranian Global Terrorism Regulations

On October 31, 2017, OFAC published certain terrorism-related sanctions with respect to foreign persons that are officials, agents, or affiliates of Iran's Islamic Revolutionary Guard Corps. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-10-31/html/2017-23433.htm

Reserves on Deposits

The Fed announced a final rule change regarding the reserves exemption amount and the low reserve tranche changes. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-08/html/2017-24297.htm

CFPB Thresholds for Application of Consumer Laws

As required by law, the CFPB has raised the levels above which financial institutions need to comply with certain leasing, high-cost mortgage and Truth-in-Lending rules. See the rules at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-09/html/2017-24443.htm

https://www.gpo.gov/fdsys/pkg/FR-2017-11-09/html/2017-24443.htm

https://www.gpo.gov/fdsys/pkg/FR-2017-11-09/html/2017-24443.htm

Cuba Sanctions

On November 9, 2017, OFAC published revised sanctions against Cuba. These amendments implement changes to the authorizations for travel to Cuba and related transactions and restrict certain financial transactions. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-09/html/2017-24447.htm

Ivory Coast Sanctions

On November 13,2017, OFAC removed these sanctions. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-13/html/2017-24521.htm

Vehicle Title and High-cost Installment Loans

On November 17, 2017, the CFPB published hundreds of pages of regulations placing restrictions on loans made without assurance that the consumer could repay the loan, the ability of creditors to withdraw funds from consumer accounts and prevents efforts to evade these restrictions. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-17/html/2017-21808.htm

Capital Changes for Smaller Banks

On November 21, 2017, the banking agencies published a final rule to extend the regulatory capital treatment applicable during 2017 under the regulatory capital rules (capital rules) for certain items. These items include regulatory capital deductions, risk weights, and certain minority interest limitations. The final rule extends the current regulatory capital treatment of mortgage servicing assets, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks, significant investments in the capital of unconsolidated financial institutions in the form of common stock, non-significant investments in the capital of unconsolidated financial institutions and significant investments in the capital of unconsolidated financial institutions. See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-21/html/2017-25172.htm

Credit Union Tier 1 Capital and Retained Earnings

On November 22, 2017, the NCUA published a final rule to define a retained earnings ratio and deal with capital in connection with mergers and consolidations. See the final rule at: 

https://www.gpo.gov/fdsys/pkg/FR-2017-11-22/html/2017-25223.htm

BCFP work on Uniform Residential Loan Application

On November 24, 2017, the BCFP published a notice to give an update on how the Uniform Residential Loan Application work was progressing and publishing the final forms. See the notice at:

https://www.gpo.gov/fdsys/pkg/FR-2017-11-24/html/2017-25434.htm

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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