Another month, another influx of regulatory compliance news and updates. Once again, the CFPB dominates the news cycle – though other agencies offered up new rules and enforcement actions too.
The Ncontracts team of regulatory compliance experts is here to break it down for you in this month’s Regulatory Brief. Read on for the highlights or listen to the podcast for a deep dive.
Supreme Court rules CFPB funding is constitutional
The CFPB has released new implementation dates for Section 1071 of the Dodd-Frank Act after the Supreme Court ruled that the bureau’s funding structure is constitutional. With that matter settled, two other lawsuits aimed at upending 1071, one in Kentucky and one in Texas, could further delay the rule, but for now deadlines are set.
CFPB lawsuits with two fintechs
False advertising of loan pricing. One day after the Supreme Court ruled in favor of the CFPB, the bureau sued a digital provider of short-term consumer loans for advertising zero-interest, 0% APR loans and then forcing borrowers to pay a “tip” to the platform. The platform claims to have issued more than 1 million loans. The CFPB says less than 1% of funded loans didn’t pay a fee and alleges the company violated the Consumer Financial Protection Act and the Fair Credit Reporting Act. The CFPB is seeking monetary penalties.
Delayed account refunds. The CFPB ordered a fintech that works with banks to service consumer checking accounts to pay at least $1.3 million in redress and a $3.25 million penalty for making thousands of consumers wait weeks or months for refunds when their accounts were closed. The CFPB says the illegally delayed refunds, and the inability to access the funds inflicted significant consumer harm.
More CFPB news
The bureau also issued an interpretive rule saying that Buy Now, Pay Later (BNPL) transactions are loans under Reg Z.
Attention on banking fees continues. This time, the CFPB is seeking public comments on the impact of mortgage closing costs on consumers and the industry. Comments are due August 2, 2024.
HUD Update
HUD made two significant announcements in May. The agency released a letter requiring FHA-approved mortgage lenders to notify HUD within 12 hours of detecting a cyber incident. A second letter gives borrowers the power to request a reassessment if they believe their property appraisal is inaccurate or biased.
Bank Enforcement Actions
FDIC. An Arkansas community bank is paying $1.5 million to settle violations of HMDA, RESPA and Section 5 of the Federal Trade Commission Act with the FDIC. The bank misrepresented terms of VA mortgage loans, paid real estate brokers for loan referrals, didn’t provide firm offers of credit or proper disclosures, and didn’t report accurate HMDA data. Nine former employees also settled with the FDIC, with some paying as much as $100,000 in civil money penalties.
Federal Reserve. In yet another BSA/AML enforcement action (EA), the Federal Reserve Bank issued an EA against a small state-chartered bank in Montana. The Fed says the bank failed to maintain adequate internal controls, properly monitor and report suspicious activities, and ensure compliance with BSA/AML requirements. The bank will have to enhance board oversight, improve its BSA/AML compliance program, revise customer due diligence procedures, and ensure proper monitoring and reporting of suspicious activities. While there was no monetary penalty, it’s a reminder that size is no defense when it comes to BSA/AML.
Federal Credit Unions Can’t Insure or Serve as Custodians for Digital Assets
The NCUA updated its website with a FAQ making it clear the National Credit Union Share Insurance Fund does not insure digital assets, including cryptocurrency, stablecoins, and NFTs, and that federal credit unions are not authorized to serve as custodians for cryptocurrencies or other digital assets. State law decides whether federally insured, state-chartered credit unions may be allowed to serve as a custodian for cryptocurrencies and other digital assets.
For more insights, including the latest on the CFPB’s credit card late fees rule, why a federal court ruled in favor of a bank in a class action suit about overdraft fees, and OFAC’s interim final rule for blocked property and rejected transactions, listen to the Reg Update podcast.
The CFPB is moving forward with 1071. We answer your questions about what to do next.
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Regulatory Updates for November 2022: Flood Insurance, State Privacy & Cyber Regulations & the Latest with the CFPB
Regulatory Update March 2023: Unveiling Section 1071, Tackling Junk Fees, HUD Highlights & More
