On February 14, the FDIC issued guidance (FIL-9-2017) intended to provide regulatory relief to financial institutions and to facilitate recovery in areas of Louisiana affected by recent severe storms, tornadoes, high winds, and flooding. A current list of designated areas—where damage assessments are currently underway—is available at www.fema.gov. Among other things, the guidance encourages banks to “work constructively with borrowers experiencing difficulties” due to weather-related damage by considering “[e]xtending repayment terms, restructuring existing loans, or easing terms for new loans.” Such flexibility, the FDIC instructs, can both “contribute to the welfare of the local community” and also “serve the long-term interests of the lending institution.” The FDIC is also considering “regulatory relief from certain filing and publishing requirements.”
CFPB Seeks Comments on New Initiative Intended to Increase Transparency in Student Loan Servicing Market
On February 16, the CFPB announced a request for comments on an information collection plan titled “Student Loan Servicing Market Monitoring.” The proposed plan will collect student loan data from the largest student loan servicers in order to provide the Bureau “with a broader and deeper look into the student loan market, with a focus on key areas that might put consumers . . . at risk.” Key areas of examination will be: (i) the total size of the student loan market; (ii) borrowers who seek to repay their loans based on how much money they have (Income-Driven Repayment plans); (iii) borrowers who face the greatest risk of default; and (iv) borrowers with private student loans who experience financial distress. Comments must be submitted on or before April 17, 2017.
In prepared remarks at the “Global Interdependence Center’s Payment Systems in the Internet Age” Conference, Philadelphia Fed President Patrick T. Harker said that regulating the evolving FinTech industry benefits not only consumers, but also the innovators. While Harker did not speculate as to whether the Fed will become involved in FinTech regulation, he stated that it is in the best interest of FinTech companies “to have an established framework in which to operate.” He cautioned, however, that “all financial systems are a matter of trust” and thus FinTech firms will “need that trust the same as any other bank or financial institution.” Harker noted that regulations will help determine which companies can survive the “down side” of a credit cycle, but implementing regulations after a “crisis. . . could mean tighter strictures and less room for innovation.”
CFPB, Federal Banking Agencies, and NCUA Issue Interagency Guidance Regarding Deposit Reconciliation Practices
On May 18, the CFPB, the Federal Reserve, the OCC, the FDIC, and the NCUA issued interagency guidance on supervisory expectations regarding customer account deposit reconciliation practices. According to the guidance, banks create a “credit discrepancy” if they credit a customer a different amount than the total of the items the customer tried to deposit into an account. In further explaining what constitutes a credit discrepancy, the guidance states, “the customer may deposit $110 to an account, but may indicate on the deposit slip that only $100 has been tendered. In this case, the financial institution may credit $100 to the customer’s account as indicated on the deposit slip without reconciling the $10 discrepancy.” According to the guidance, some financial institutions fail to correct the inconsistencies between the dollar value of items deposited to the customer’s account and the amount actually credited to that same account. This is a potential violation of (i) the Expedited Funds Availability Act’s, as implemented by Regulation CC, requirement to make deposited funds available for withdrawal within prescribed time limits; (ii) the FTC Act’s ban of unfair or deceptive acts or practices; and (iii) the Dodd-Frank Act’s prohibition of unfair, deceptive, or abusive acts or practices. In addition to reminding financial institutions of their obligations to comply with the aforementioned applicable laws, the guidance stresses that financial institutions are expected to “adopt deposit reconciliation policies and practices that are designed to avoid or reconcile discrepancies, or designed to resolve discrepancies such that customers are not disadvantaged.”
On October 27, the OCC issued an updated Floor Plan Lending booklet of the Comptroller’s Handbook. The revised booklet (i) summarizes the basics of floor plan lending for examiners, including a description of indirect dealer lending and the regulatory and legal foundation for floor plan lending; (ii) provides banks with sound risk management practices and describes regulatory risk rating guidelines; and (iii) includes an expanded examination procedures section with examples of risk rating cases and factors for determining the quantity of credit risk and the quality of credit risk management. The updated booklet replaces a similarly titled booklet issued in March 1990, as well as section 216 of “Floor Plan and Indirect Lending” issued in January 1994 as part of the former Office of Thrift Supervision’s Examination Handbook.