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September Regulatory Update: 1071 and Other CFPB News, Proposed Financial Data Standards, and Brokered Deposits

author Cheryl Grizzard
3 min read
Sep 10, 2024

The weather may be cooling down for fall, but the regulatory environment is still hot. But don’t worry – the Ncontracts team of regulatory compliance experts is here to break it all down for you. 

This month’s Regulatory Update podcast delivers on all the hot topics, including what the CFPB is up to, the proposed rules your institution needs to know about and why one CEO is looking at compensation limits for violating mortgage servicing laws.  

 

Here are the highlights: 

Judge rules in favor of CFPB on 1071 

As we explained in our 1071 Update blog post, last month a U.S. District Court ruled against an industry challenge to the CFPB’s Section 1071 rulemaking. Meanwhile, the CFPB released a beta platform for 1071. Data submitted to the platform will not be used for compliance purposes.  
 
For a breakdown of the judge’s ruling and what it means for the future of 1071, listen to our Regulatory Update podcast. We dig deep into the ruling to help you make decisions about your implementation plans. 

Proposed interagency rule would establish new financial data standards  

A group of federal regulatory agencies, including the Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB), Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA), and Securities and Exchange Commission (SEC), has proposed new standards aimed at making collected data "machine-readable." This means that the data will be specially coded so that computers can process it without human intervention.  

The rule would implement the Financial Data Transparency Act of 2022. Comments are due by October 21, 2024. 

Judge overrules FTC’s non-compete clause ban 

A U.S. District Court ruled that the Federal Trade Commission’s (FTC) rule that would ban non-compete clauses in employee contracts is unlawful. The FTC is considering an appeal but can still address non-compete clauses on a case-by-case basis. Employers should proactively review their non-compete agreements and stay aware of both state-level restrictions and potential federal actions.  

CFPB TILA advisory opinion treats “contract for deed” home purchases like traditional mortgages 

The CFPB released an advisory opinion affirming that the Truth in Lending Act’s (Reg Z) consumer protections and creditor obligations apply to contract for deed home purchases, an arrangement where a home buyer makes periodic payments but doesn’t receive the legal title until the full amount is paid. The CFPB says these financing arrangements must comply with the same rules for other home loans. 

CFPB limits mortgage servicer CEO pay for violating foreclosure laws 

The CFPB ordered mortgage servicer Fay Servicing to pay $5 million in redress and penalties and limited its CEO's compensation if compliance violations continue due to violating both mortgage servicing laws and a 2017 agency order. The CFPB says the company engaged in prohibited foreclosure actions against borrowers requesting assistance, failed to offer borrowers mortgage assistance options, and overcharged for private mortgage insurance. The 2017 order required a $1.15 million payment to affected borrowers.  

Want insights into other enforcement actions and common violations? Check out our free report: 2024 Compliance Exam Findings 

FDIC proposes brokered deposits restrictions 

The FDIC has proposed changes to its brokered deposits regulation that could significantly impact banks that are not well-capitalized. The proposal broadens the definition of a deposit broker, changes existing exceptions, and narrows the criteria for the primary purpose exception. These changes could further restrict access to deposit funding for less than well-capitalized banks, potentially affecting their liquidity. Banks in this category should be proactive in understanding and responding to these changes. 

FFIEC plans to sunset CAT

The Federal Financial Institutions Examination Council (FFIEC) announced its Cybersecurity Assessment Tool (CAT) will be sunset August 31, 2025. The FFIEC encourages institutions to transition to more updated resources like NIST 2.0. Ncontracts continues to evolve its products to keep pace with regulatory changes like this one.  

Registered investment advisors subject to AML/CFT reporting requirements 

FinCEN announced that certain SEC-registered investment advisers (RIAs) are now considered financial institutions under the Bank Secrecy Act. That means that those certain RIAs must have an AML/CFT program by January 1, 2026, including the requirement to report suspicious activity to FinCEN. The goal, according to FinCEN, is to make it more difficult for criminal, corrupt, or illicit actors to establish customer relationships – including by using false identities – with investment advisers for the purposes of laundering money, financing terrorism, or engaging in other illicit finance activity.  

These RIAs should begin working on a Customer Identification Program to verify the identity of each customer, ensure they have proper systems and processes to retain records, and establish procedures for filing suspicious activity reports.  

Listen to the Reg Update podcast for even more regulatory compliance news, including: 

  • How banks and credit unions are pushing back against a new interchange law in Illinois 
  • Colorado opt-out legislation that would subject out-of-state banks to state usury laws 
  • What the CFPB has to say about debit and prepaid cash-back fees 
  • Increasing telemarketer fees to access the FTC Do Not Call Registry 

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