OCC Revises CRA Guidance

On July 15, the OCC, the FDIC, and the Federal Reserve released final revisions to the Interagency Questions and Answers Regarding Community Reinvestment document. The revised Questions and Answers document is based on a September 10, 2014 proposal and addresses questions from bankers, community organizations, and others pertaining to: (i) innovative or flexible lending practices; (ii) responsiveness and innovativeness of an institution’s loans, qualified investments, and community development services; (iii) availability and effectiveness of retail banking services; and (iv) community development-related issues, such as economic development, community development loans and activities, and community development services. According to the Questions and Answers document, the agencies did not adopt one of the revisions in the September 2014 proposal that had addressed “the availability and effectiveness of retail banking services.”

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OCC Releases Semiannual Risk Perspective Report

On July 11, the OCC released its Semiannual Risk Perspective for Spring 2016, which generally provides an overview of supervisory concerns for the federal banking system and specifically presents data as of December 31, 2015 in the following areas: (i) operating environment; (ii) bank performance; (iii) key risk issues; and (iv) regulatory actions. Similar to the fall 2015 report, the current report identifies cybersecurity, third-party vendor management, business continuity planning, TRID, and BSA/AML compliance, among other things, as key areas of potential operational and compliance risk. Further, the report highlights the new Military Lending Act rule, effective October 3, 2016, as a new key potential risk. According to the report, the OCC’s supervisory priorities for the next twelve months will generally remain the same; moreover, the outlook for the OCC’s Large Bank Supervision and Midsize and Community Bank Supervision operating units will remain broadly similar.

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OCC to Host Risk Governance and Credit Workshops

On August 16, the OCC will host a Risk Governance workshop intended to provide directors of national community banks and federal savings associations with information to measure and manage risk. On August 17, the OCC will also host a Credit Risk workshop. Each workshop will take place in Kansas City, Missouri and will be limited to 35 registrants.

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SCOTUS Denies Petition for Certiorari in Securitization Case Involving State Usury Law

On June 27, the United State Supreme Court denied a debt buyer’s petition for certiorari in a Second Circuit case that raises the issue of whether New York’s state usury law is preempted by the National Bank Act (NBA) when a national bank-originated debt is purchased by a nonbank. Midland v. Madden, No. 15-610 (U.S. June 27, 2017). As previously covered in InfoBytes, the nonbank debt buyer was assigned debt owed by a New York consumer. The debt carried an interest rate in excess of that permitted by New York law but which was permitted by the law of the bank’s home state, which the bank lawfully “exported.” Facing a usury challenge, the debt buyer argued that it was able to continue charging the valid rate made by the national bank and that it did not have to abide by the consumer debtor’s state usury laws. The Second Circuit rejected the debt buyer’s argument, reasoning that the NBA did not apply to the debt buyer because it was not acting on the national bank’s behalf. The Supreme Court did not grant the debt buyer’s petition for certiorari, leaving the Second Circuit ruling in effect. Notably, at the request of the Supreme Court, the Solicitor General and the OCC filed a brief stating the position of the United States as to whether the Supreme Court should grant the petition for certiorari. Although the brief advised that the Court not grant certiorari, the Government’s brief sharply criticized the Second Circuit’s decision.

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Comptroller Curry Lends Perspective on Responsible Innovation

Recently, OCC Comptroller Curry delivered remarks regarding the agency’s March 2016 white paper titled “Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective.” In his opening remarks at the OCC’s June 23 forum on this topic, Curry noted a “need for heightened risk management to keep pace with the rapid changes in technology, products, services, and processes.” While recognizing that innovation remains an integral part of the banking system and has the ability to strengthen the financial services industry, Curry also emphasized its potential harm to consumers, banks, and the federal banking system at large. In order to limit the risks – such as cyber threats, phishing schemes, fraud, and identity theft – that innovation may pose to the banking industry, the OCC is developing a comprehensive framework to “improve [its] ability to identify and understand trends and innovations in the financial services industry, as well as the evolving needs of consumers of financial services.” According to the March 2016 paper, the OCC has formulated the following eight guiding principles to ensure that its framework supports responsible innovation consistent with safety and soundness, protection of consumer rights, and compliance with appropriate laws and regulations: (i) support responsible innovation; (ii) foster an internal culture receptive to responsible innovation; (iii) leverage agency experience and expertise; (iv) encourage responsible innovation that provides fair access to financial services and fair treatment of consumers; (v) further safe and sound operations through effective risk management; (vi) encourage banks of all sizes to integrate responsible innovation into their strategic planning; (vii) promote ongoing dialogue through formal outreach; and (viii) collaborate with other regulators. According to Curry’s remarks, the OCC’s forum helped “crystalize [] ideas for implementing a framework for innovation in the most effective way.”

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