NASCUS Summary re: CFPB Interim Final Rule re: Small Business Lending Extension of Compliance Dates
12 CFR Part 1002
The CFPB issued an Interim Final Rule with Request for Comments that amends Regulation B to extend the compliance dates set forth in the 2023 Small Business Lending Rule and to make other date-related conforming adjustments.
The Interim Final Rule becomes effective on July 18, 2025, and comments are due on July 18, 2025. The rule can be found here.
Summary
Section 1071 of Dodd Frank requires financial institutions collect and report to the CFPB certain data regarding applications for credit for women-owned, minority-owned, and small businesses. The purpose of this requirement is to facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of these types of businesses.
Legal challenges to the rule remain ongoing in three jurisdictions. Courts in those jurisdictions have stayed the rule’s compliance deadlines for certain plaintiffs. To facilitate consistent compliance requirements for all covered financial institutions, the Bureau is extending the compliance dates set forth in the 2024 interim final rule by approximately one year. The Bureau has indicated that it intends to issue a new small business reporting proposed rule. The Bureau believes this extension should provide sufficient time to account for the court-ordered stays and to issue a new proposal.
As a result, Tier 1 institutions now have a compliance date of July 1, 2026. Tier 2 institutions now have a compliance date of January 1, 2027, and Tier 3 institutions now have a compliance date of October 1, 2027.
In addition, Section 1002.114(c)(1) of Regulation B permits a covered financial institution to collect protected demographic information required under the 2023 rule from small business applicants beginning 12 months prior to its compliance date.
The interim final rule revises Section 1002.114(c)(3) of Regulation B to permit a financial institution to use its number of originations of covered credit transactions for the following years – 2022 and 2023, or 2023 and 2024 or 2024 and 2025.
Finally, covered financial institutions are required to submit their small business lending application registers to the CFPB on or before June 1 following the calendar year for which the data are compiled and maintained. As a result, Tier 1 institutions will make their first data submission by June 1, 2027; Tier 2 and Tier 3 institutions will make theirs by June 1, 2028.
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- Goldman Sachs CEO David Solomon said he isn’t worried about Apple’s new savings account overshadowing his bank’s own Marcus savings accounts.
- But Solomon said on Tuesday that he’s watching closely for “cannibalization.”
- Goldman Sachs offers high-yield savings accounts through its Marcus brand, while also partnering with Apple in financial products.
Courtesy of Kif Leswing, CNBC | Click here to learn more
Goldman Sachs CEO David Solomon said Tuesday he isn’t worried about Apple’s new savings account overshadowing Goldman’s own Marcus offerings but that he’s watching closely for “cannibalization.”
The Wall Street firm reported first-quarter results Tuesday, a day after Apple launched its new savings accounts with an annual percentage yield over 4%. The new accounts carry Apple’s brand and are administered through the iPhone, but Goldman Sachs is the company’s financial partner.
“We’ve obviously worked very closely at the overlap between who holds credit cards and who has a Marcus deposit, and that overlap is small,” Solomon said on his company’s earnings call. “But we’ll obviously watch closely to see whether or not there’s any cannibalization.”
Solomon added that the Apple offering “is a way for us to try to open up another deposit channel” and said “it’s always good for us to broaden our deposit base.”
The Apple-Goldman relationship is unique in that it brings together two historic brands in very different markets and underscores the degree to which some tech giants are jumping into financial services, potentially as competitors. Apple builds features for the iPhone and its Wallet app, like its Apple Card credit card, while Goldman is the actual bank behind the company’s financial services.
Goldman has announced plans to become a large digital bank, perhaps competing at times with Apple to sign up new customers. For example, Goldman offers high-yield savings accounts through Marcus. CNBC has previously reported that the bank’s consumer-focused division, which handles Marcus and Apple partnerships, has struggled with shelved projects, leadership turnover and regulatory probes.
Solomon said Goldman would welcome the deposits from Apple’s savings account and would deploy them within its own client base.
Mortgage servicers have direct communication with homeowners. Servicers may remind homeowners that one option to avoid foreclosure is selling the home. Servicers may recommend homeowners speak with a real estate agent for a free estimate of the home’s current value. Servicers can also direct struggling homeowners to HUD-approved housing counseling agencies.
Biden Asks Supreme Court to Overturn Fifth Circuit’s CFPB Ruling
The Biden Administration on Monday asked the U.S. Supreme Court to overturn an appeals court decision that found that the CFPB’s funding scheme was unconstitutional.
Inside the Petition
“The CFPB’s critical work administering and enforcing consumer financial protection laws will be frustrated,” the administration wrote. “And because the decision below vacates a past agency action based on the purported Appropriations Clause violation, the decision threatens the validity of all past CFPB actions as well.”
Other federal agencies are funded outside the annual appropriations process, according to the administration. “The court of appeals’ novel and ill-defined limits on Congress’s spending authority contradict the Constitution’s text, historical practice, and this Court’s precedent,” the petition states.
Further, administration officials added, “The CFPB’s funding mechanism is entirely consistent with the text of the Appropriations Clause, with longstanding practice, and with this Court’s precedent.”
Additional Support for the CFPB
Biden Administration officials not the only ones blasting the Fifth Circuit and its ruling. During a Senate Banking Committee hearing featuring banking regulators, Sen. Elizabeth Warren, D-Mass., called the Fifth Circuit “the Republicans’ go-to court.” Warren, who is credited with developing the idea of the consumer bureau, said that Congress created independent funding structures for bank regulators to insulate them from political pressure.
Under questioning by Warren, each of the banking regulators—including NCUA Chairman Todd Harper—acknowledged that their agencies are funded outside the appropriations process. The NCUA, for instance, is funded by fees paid by credit unions. READ MORE
The CFPB Finalizes Rule to Increase Transparency Regarding Key Nonbank Supervision Tool
Today, we finalized changes to our nonbank supervision procedural rule. The changes will provide transparency to the public about how we are using an important supervisory tool to keep pace with fast-moving consumer finance markets.
Based on public comments, in this final version of the procedures, we are clarifying the standard we will apply to decide what information is appropriate for public release. We are also extending the amount of time that is available to the nonbank entity to provide us with input about what information we should release.
Agility in Nonbank Supervision
The Consumer Financial Protection Act (CFPA) enables the CFPB to supervise a nonbank covered entity that we have reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers with regard to consumer financial products or services.
This statutory authority gives the CFPB’s supervision program the ability to move as quickly as the marketplace. For instance, fast-growing companies in nontraditional areas of the consumer finance market may be engaged in novel activities that warrant supervisory attention. There can also be supervisory gaps in more traditional areas of the market that ought to be filled. Through the supervisory process, CFPB examiners can work with the company in question to fully understand and manage its risks.
When we make a determination that supervision is warranted, our focus is on identifying risks to consumers, preferably before they manifest in violations of law or consumer harm. READ MORE
CFPB Reports Highlight Problems with Tenant Background Checks
Errors and false information in tenant background checks raise costs and barriers to quality rental housing.
CFPB issued two reports on the tenant background check industry. The reports describe how errors in these background checks contribute to higher costs and barriers to quality rental housing. Too often, these background checks – which purport to contain valuable tenant background information – are filled with largely unvalidated information of uncertain accuracy or predictive value. While renters bear the costs of errors and false information in these reports, they have few avenues to make tenant screening companies fix their sloppy procedures. The CFPB’s analysis of more than 24,000 complaints highlighted the renter challenges associated with the industry’s failures to remove wrong, old, or misleading information and to provide adequate investigations of disputed information.
The tenant background check industry creates reports that include extensive personal information, such as credit history, civil and criminal records, and credit scores, as well as the proprietary risk scores on which many landlords and property management companies base their decision to rent to a prospective tenant. The CFPB’s report on the state of the tenant screening market is an analysis of industry research, legal cases, academic research, the CFPB’s market monitoring, and other third-party sources. The CFPB’s consumer snapshot analyzes more than 24,000 complaints and results from focus groups with 44 renters.
Both reports reveal that people are denied rental housing because negative information is reported that belongs to someone else; outdated information remains on reports; and inaccurate or misleading details about arrests, criminal records, and eviction records are not corrected nor removed from reports. The consumer snapshot reveals that renters submitted more than 16,000 complaints about incorrect information on their reports and another 4,500 complaints about obstacles faced trying to get companies to fix their errors. READ MORE
CFPB Takes Action Against Carrington Mortgage for Cheating Homeowners out of CARES Act Rights
Company wrongly charged fees and inaccurately reported homeowner credit information despite pandemic-era housing protections.
The CFPB investigated Carrington and found they violated the Consumer Financial Protection Act when they misrepresented the requirements of the CARES Act and related federal agency guidelines. The company misrepresented to borrowers that they could not have 180 days of forbearance upon request and that certain borrowers could not have forbearance at all. Carrington also implied that homeowners had to make more detailed attestations than were actually required by law, and the company imposed late fees when they were not permitted.
Specifically, the CFPB found that Carrington:
- Wrongly charged late fees: Carrington deceived certain borrowers, stating they were required to pay late charges they did not owe while their accounts were in forbearance. Carrington also falsely told borrowers in forbearance that they would “be assessed” or had “been assessed” late charges. In some cases, Carrington did wrongfully charge late fees.
- Repeatedly provided false information about pandemic protections: Carrington told certain homeowners that they were required to remit their monthly payments “immediately” and could be facing foreclosure proceedings if they did not do so. In fact, no payment was required nor could the homeowners face foreclosure proceedings. The company also misrepresented to homeowners that they needed to provide specific reasons in order to obtain a forbearance when they only needed to attest to financial hardship during the pandemic. Carrington also told homeowners that to get a forbearance of more than 90 days, they had to make another request after the first 90 days.
- Botched homeowners’ credit reports: Carrington illegally furnished information to consumer reporting companies that certain borrowers’ accounts were delinquent, rather than current, even though the homeowners’ accounts were current entering forbearance. Carrington also inaccurately furnished reports on the delinquency of certain homeowners in forbearance who were delinquent at the time they entered forbearance. Carrington failed to promptly notify the big three credit reporting companies about the errors.
(Nov. 19, 2021) The threshold adjusts to 200 open-end lines of credit for reporting mortgage disclosure data at the start of the new year, CFPB reminded late last week.
In a publicly released letter, bureau stated that in April 2020, the agency issued a final rule amending its Regulation C (implementing the Home Mortgage Disclosure Act, HMDA) to permanently set the reporting threshold for open-end lines of credit at 200, effective Jan. 1, 2022. That threshold replaces the temporary reporting threshold of 500 open-end lines of credit.
The agency noted that, at the start of the year, an institution that originated at least 200 open-end lines of credit in each of the two preceding calendar years, and meets all other Regulation C institutional coverage criteria, will be required to collect, record, and report data about its open-end lines of credit.
For example, an institution that originated at least 200 open-end lines of credit in both calendar years 2020 and 2021, and meets all other Regulation C institutional coverage criteria, will be required to collect, record, and report data about its open-end lines of credit for calendar year 2022 to be submitted by March 1, 2023,” CFPB wrote.
LINK:
CFPB frequently asked questions (FAQs) on institutional and transactional coverage
(Feb. 19, 2021) Four new summaries have been posted by NASCUS, looking at recent actions from NCUA, which include: two regulatory alerts, a final rule on supervisory guidance, and (along with other federal regulators) answers to questions about anti-money laundering activities.
All four of the summaries are available to members only.
The summaries on regulatory alerts from NCUA look at two issued earlier this month: the first on 2021 threshold adjustments under Regs C, Z and V; the second on submission of 2020 Home Mortgage Disclosure Act (HMDA) data. The first alert (21-RA-02) notes that, in January, the bureau published annual adjustments for exemption thresholds under the Home Mortgage Disclosure Act (HMDA, Regulation C) and the Truth in Lending Act (TILA, Regulation Z). The asset-size thresholds, the alert points out, exempt some credit unions from data collection under Regulation C and from escrow account requirements for higher-priced mortgage loans and specific qualified mortgages under Regulation Z.
The alert also notes that the CFPB published an annual adjustment to the maximum amount consumer reporting agencies may charge consumers for making a file disclosure to a consumer under Regulation V.
The second alert (21-RA-03) reminds credit unions with $47 million or more in assets that they have until March 1 to file reports on home mortgage loan applications made last year under HMDA (as implemented by the CFPB’s Reg C). There are some limiting provisions for reporting under the rule, the agency pointed out in the alert. For example, the closed-end mortgage loan threshold increased from 25 to 100 effective July 1, 2020. “Credit unions that originated fewer than 100 covered closed-end mortgage loans in 2018 or 2019 are not required to report any closed-end mortgage loan information for 2020,” the agency wrote, noting that Section 1003.3(c) of Regulation C lists excluded (not covered) transactions.
The third summary from NASCUS looks at the agency’s final rule on supervisory guidance. Issued early this month. Under the rule, aimed at clarifying and codifying the role of supervisory guidance, the meaning of “supervisory guidance” is clarified as meaning, essentially, it doesn’t have the force of law. As finalized, it codifies an interagency statement issued by NCUA and other federal financial institution regulators in September 2018.
The final summary from NASCUS this week outlines “frequently asked questions” (FAQs) about suspicious activity reporting and other anti-money laundering considerations released by NCUA, Treasury’s Financial Crimes Enforcement Network (FinCEN) and federal banking agencies. According to the agencies, the FAQs clarify the regulatory requirements related to suspicious activity reporting to assist credit unions and other financial institutions with their compliance obligations. The FAQs also enable financial institutions to focus resources on activities that produce the greatest value to law enforcement agencies and other government users of Bank Secrecy Act (BSA) reporting, the agencies said.
NASCUS Summary: Final Rule Summary: Role of Supervisory Guidance (Part 791, Subpart D) (member only)
The Federal Financial Institutions Examination Council (FFIEC), comprised of NCUA and Federal Banking Agencies (FBAs), continues to monitor and respond to the COVID-19 pandemic to promote the ongoing ability of the nation’s financial institutions to support the households and businesses that depend on them.
FFIEC members are actively discussing and identifying appropriate measures, both collaboratively and individually, to maintain safety and soundness while protecting consumers. Members note that banks and credit unions of all sizes have built up substantial levels of capital and liquidity over the last decade, positioning them well to support the needs of households and businesses.
The members underscore that the financial services sector provides critical services during the pandemic by ensuring the continued availability of financial resources to consumers and businesses. The members will provide guidance to financial institutions and work with state and local officials on how to identify workers as essential critical infrastructure workers to ensure the security and resilience of the Nation’s critical infrastructure.
The agencies understand that financial institutions may need additional time to submit certain regulatory reports in light of staffing priorities and disruptions caused by the Coronavirus Disease 2019 (COVID-19). The federal banking agencies will not take action against any institution for submitting its March 31, 2020, Reports of Condition and Income (Call Reports) after the respective filing deadline, as long as the report is submitted within 30 days of the official filing date. Institutions are encouraged to contact their primary federal regulator in advance of the official filing date if they anticipate a delayed submission.
Financial Regulators Highlight Coordination and Collaboration of Efforts to Address COVID-19
https://www.ncua.gov/newsroom/press-release/2020/financial-regulators-highlight-coordination-and-collaboration-efforts-address-covid-19
Following the lead of state regulators, NCUA released a letter providing federal credit unions with annual meeting flexibility. Noting that COVID-19 outbreak will impact federal credit unions and their members to varying degrees., the agency is seeking to assure credit unions that it is doing all it can to address the situation.
Because of President Trump’s national emergency proclamation on March 13, effective immediately, a federal credit union may adopt by a two-thirds vote of its Board of Directors the below bylaw amendment to Article IV without undergoing further bylaw approval processes with the NCUA. FCUs that choose to adopt this amendment should ensure that the cross-citations conform to their version of the bylaws.
Section 6. Emergency exception to in-person quorum requirement. This credit union may hold its annual meeting of the members, and special member meetings for authorized purposes other than member expulsion under Article XIV of these bylaws, virtually1 and without an in-person quorum if all of the following conditions apply and are certified in meeting minutes by a resolution of the majority of a quorum of the board of directors:
- At least one of the following is located in an area where a federal, state, or local authority has declared a state of emergency or major disaster:
- all or part of a community the credit union serves; or
- the credit union’s headquarters.
- The credit union has the technological capacity to facilitate virtual meeting attendance, voting, and participation.
- Members receive at least seven days’ advance notice of the change to a virtual meeting format and appropriate instructions for how to join, participate, and vote during the virtual meeting.
- The NCUA has issued general or specific guidance notifying the credit union that it is appropriate to invoke this bylaw provision.
NCUA Actions Related to COVID-19 – Annual Meeting Flexibility
Asserting its concern for the health and safety of all NCUA staff, credit union staff, and credit union members, NCUA released LTCU 20-CU-02 regarding COVID-19.
In the letter NCUA outlines a number of strategies credit unions may consider when determining how to work with their members to address the impact of, and challenges associated with, COVID-19. NCUA also released a Frequently Asked Questions (FAQ) document to further assist federal credit unions in responding to the current situation. The FAQ outlines various options credit unions have, such as delaying annual meetings and how board meetings can be conducted.
NCUA is further limiting examination and supervision work over the next couple of weeks to offsite procedures only, with a few exceptions for exigent circumstances. The agency will be evaluating this posture regularly and extending it as necessary.
NCUA has mandated telework for headquarters and regional office staff unless narrow exemptions are met.
https://www.ncua.gov/files/letters-credit-unions/20-cu-02-ncua-actions-related-covid-19.pdf
Rules covering credit union service organizations (CUSOs), management official interlocks, and agency administrative actions are among the 16 regulations NCUA will be reviewing this year, according to the agency.
Each year, NCUA conducts a “rolling review” of one-third of its regulations – which gives the agency a chance to review all of its rules once every three years. The goal, according to NCUA, is to ensure its rules are clearly articulated and easily understood. “Comments are welcome on that aspect, as well as substantive suggestions for regulatory changes,” according to the online notice of the 2020 review posted on the NCUA website this week.
The 16 rules up for review this year are:
- Credit Union Service Organizations (CUSOs) (Part 712 of agency rules);
- Management Official Interlocks (Part 711 of the rules and regulations);
- Administrative Actions, Adjudicative Hearings, Rules of Practice and Procedure, and Investigations (Part 747);
- Fidelity Bond and Insurance Coverage for Federally Insured Credit Unions (Part 713)
- Leasing (Part 714);
- Supervisory Committee Audits and Verifications (Part 715);
- Fair Credit Reporting (Part 717);
- Incidental Powers (Part 721);
- Appraisals (Part 722);
- Member Business Loans; Commercial Lending (Part 723);
- Trustees and Custodians of Certain Tax-Advantaged Savings Plans (Part 724);
- NCUA Central Liquidity Facility (CLF) (Part 725);
- Accuracy of Advertising and Notice of Insured Status (Part 740);
- Requirements for Insurance (Part 741);
- Share Insurance and Appendix (Part 745);
- Appeals Procedures (Part 746).
Comments on the 16 rules will be accepted by the agency through Aug. 3.
Recently, NCUA has finalized its revisions to the agency’s Interpretive Ruling and Policy Statement (IRPS) regarding statutory prohibitions imposed by § 205(d) of the Federal Credit Union Act (FCUA). Section 205(d) prohibits, except with the prior written consent of the Board, any person who has been convicted of any criminal offense involving dishonesty or breach of trust, or who has entered into a pretrial diversion or similar program in connection with a prosecution for such offense, from participating in the affairs of an insured credit union.
The final IRPS 19-1 may be read here. The NASCUS Summary can be found here.