Congress Seeks Answers from Bank CEO and Federal Bank Regulators

On September 20, the CEO of a major national bank faced questions from the House Financial Services Committee over consumer account practices uncovered during a recent enforcement action by the CFPB. The CEO will return to Capitol Hill on September 29 for additional testimony in front of the Committee. In addition, the Director of the CFPB and the Comptroller of the Currency faced scrutiny from the Senate Committee on Banking, Housing & Urban Affairs on their agencies awareness of, and failure to prohibit, the bank’s alleged actions for more than two years. In prepared testimony, Director Cordray indicated that the civil penalty levied against the bank was the “largest fine by far that the Consumer Bureau has imposed on any financial company to date” calling it a “dramatic amount as compared to the actual financial harm to consumers” but also “justified here by the outrageous and abusive nature of these fraudulent practices on such an enormous scale.” Director Cordray further stated that this enforcement action should help clarify how the CFPB will continue to analyze and enforce the prohibition on “abusive” practices under its mandate.  Meanwhile Comptroller Curry explained how this enforcement action demonstrates the complimentary roles played by the OCC and the CFPB in supervising bank practices.

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CFPB Sues Title Lenders for Failure to Post APRs

On September 21, the CFPB announced that it had filed five separate administrative actions against online auto title lenders formed in and operating out of Arizona. In the Notice of Charges to each company, the CFPB alleges that the lender violated the Truth in Lending Act by advertising periodic interest rates on their websites without including a corresponding annual percentage rate (APR). In one case, the lender had provided a monthly rate, and instructed consumers to multiply it by 12, but failed to inform consumers that the sum would be the APR. The CFPB is seeking monetary penalties and administrative orders to correct the alleged practices.

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OCC Lays Out Supervision Plan for 2017

On September 14, the OCC released its bank supervision operating plan for fiscal year 2017. The plan identifies the OCC’s priority objectives, which include: (i) commercial and retail loan underwriting; (ii) business model sustainability and viability; (iii) operational resiliency; (iv) BSA/AML compliance; and (v) processes to address regulatory changes. Moreover, the plan affirms that the OCC will look at each individual bank’s key risks, and will continue the process of stress testing, both for large banks and for midsize and community banks.

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SEC Settles With Accounting Firm Over Alleged Lack of Auditor Independence

On September 19, the SEC announced that it had reached an agreement with a big four accounting firm regarding employee relationships with its auditing clients that violated rules designed to ensure objectivity and impartiality. The accounting firm agreed to pay approximately $4.8 million and $3.3 million in disgorgement, along with civil penalties of $1.2 million and $1 million respectively. In addition, the individual partners involved paid civil penalties of $45,000 and $25,000. Andrew Ceresney, Director of the SEC’s Division of Enforcement, indicated that these actions are the SEC’s first to address “auditor independence failures due to close personal relationships between auditors and client personnel.”

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Congressman Responds to Comptroller on Fintech

On September 20, U.S. Representative David Schweikert (R-AZ) sent a letter to Comptroller of the Currency Thomas Curry, asking the OCC to consider a more flexible and uniform approach for regulating digital currencies and the use of blockchain technology. Specifically, the letter notes that much of the development of digital currencies does not originate within institutions that are already federally chartered. Representative Schweikert further argues that most institutions active in this area do not wish to engage in traditional lending or deposit-taking activity, and instead seek a more limited scope of regulation. Thus, the letter asks Comptroller Curry to consider the following questions as the OCC continues to formulate its policy on digital currencies: (i) can the OCC create a limited purpose charter for non-bank financial service firms operating in this area? (ii) can the OCC take steps to coordinate with AML/CTF authorities, and state regulators, to develop flexible approaches that would allow U.S. digital currency firms to be competitive in light of various foreign regulatory frameworks? and (iii) how can the OCC help to facilitate relationships between digital currency firms and national banks?

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