Federal Reserve Proposes Guidelines on Requests for Accounts and Payment Services at Federal Reserve Banks

On Wednesday, May 5, 2021, the Board of Governors of the Federal Reserve System (“Federal Reserve”) issued a notice requesting public comment on proposed guidelines articulating a series of principles to be used by Federal Reserve Banks in evaluating requests for Reserve Bank master accounts and payment services (the “Proposed Guidelines”). The Federal Reserve intends for the Proposed Guidelines to promote key policy goals with respect to the banking system, financial stability, monetary policy, consumer protection, and the payment system. Comments on the Proposed Guidelines are due 60 days after publication in the Federal Register.

Click here to read our Eight Things to Know about the Federal Reserve’s Proposed Guidelines.

Treasury Secretary Yellen to Appoint Acting Comptroller of the Currency

On May 3, 2021, media outlets reported that Treasury Secretary Janet Yellen will appoint Michael Hsu to serve as Acting Comptroller of the Currency.  Mr. Hsu currently serves as an Associate Director of the Division of Supervision and Regulation at the Board of Governors of the Federal Reserve System, where he heads the Large Institution Supervision Coordinating Committee (“LISCC”), which oversees the largest U.S. banking organizations.

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Supreme Court Ruling Complicates FTC’s Ability to Obtain Consumer Redress

On April 22, the Supreme Court unanimously ruled in AMG Capital Management v. Federal Trade Commission that § 13(b) of the Federal Trade Commission (“FTC”) Act does not authorize the FTC to obtain equitable monetary relief, such as restitution for consumer harm.  This development will make it more complicated for the FTC to obtain consumer redress.  While the FTC will still be able to seek consumer redress through other legal avenues, especially § 19 of the FTC Act, these avenues generally impose additional legal requirements beyond what § 13(b) required.  This decision may prompt Congress to consider amending the FTC Act to increase the availability of consumer redress.  It may also encourage the CFPB to be more assertive in areas where the agencies share jurisdiction.

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Federal Banking Regulators Issue Proposal on Income Tax Allocation Agreements

On April 22, 2021, the Federal Reserve Board, FDIC, and OCC (the “agencies”) issued a notice of proposed rulemaking that would require banks that file tax returns as part of a consolidated tax filing group to enter into income tax allocation agreements with their parent companies and other members of the consolidated group that join in the filing, and would set forth specific requirements for the contents of those agreements.  The proposal would apply to all insured depository institutions and OCC-chartered uninsured institutions that are not registered as Subchapter S corporations (collectively, “covered institutions”).

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CFPB Issues Rule Targeted at Preventing Illegal Evictions

On April 19, 2021, the CFPB issued an interim final rule (“rule”) aimed at preventing illegal evictions.  This measure is intended to support an eviction moratorium issued by the Centers for Disease Control and Prevention (“CDC”), which prevents landlords from evicting tenants for failing to pay rent when the tenant is unable to afford full payments and would likely be driven into homelessness or a shared living setting by the eviction.  The rule applies to debt collectors—as defined in the Fair Debt Collection Practices Act (“FDCPA”)—who are collecting debts for landlords.  Under the rule’s terms, such collectors must disclose the existence of the CDC moratorium and may not misrepresent tenants’ eligibility for protection under the moratorium.

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CFPB Releases FDCPA Report to Congress Covering Debt Collection Activities in the Previous Year

On March 23, 2021, the CFPB submitted its report to Congress covering its administration of the Fair Debt Collection Practices Act (“FDCPA”) during 2020.  Because the CFPB shares responsibility for enforcing the FDCPA with the FTC, the report also describes the FTC’s activities relating to debt collection.  Notable developments include the effect of the COVID-19 pandemic on the debt collection industry and a description of the CFPB’s recently issued final debt collection rules.

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CFPB Rescinds Abusiveness Policy Statement

On March 11, 2021, the Consumer Financial Protection Bureau (the “CFPB” or “Bureau”) announced it was rescinding its “Statement of Policy Regarding Prohibition on Abusive Acts or Practices” (the “2020 Policy Statement”).  The rescission is the latest in a series of actions under Acting Director David Uejio that demonstrate a recalibration in the Bureau’s regulatory and enforcement priorities from those of previous leadership.  The Bureau has signaled with the rescission that as part of its enforcement review going forward, it will pursue abusiveness claims without necessarily adhering to the boundaries set by the 2020 Policy Statement.

The now-rescinded 2020 Policy Statement, which was issued under the direction of former CFPB Director Kathy Kraninger, provided a framework for interpreting the scope of the Bureau’s supervisory and enforcement authority with respect to abusive conduct under section 1031(d) of the Dodd-Frank Act.  In describing this framework, the 2020 Policy Statement set forth three principles:

  • First, the Bureau would focus on citing conduct as abusive only when the harms to consumers outweighed the benefits to consumers.
  • Second, the Bureau would generally avoid challenging conduct as abusive where it was relying on all or nearly all of the same facts that the Bureau alleged were unfair or deceptive. This principle was intended to provide clarity to industry participants regarding the specific facts that would give rise to an abusiveness claim.
  • Third, the Bureau would generally not seek certain types of monetary relief for abusiveness violations where a financial institution was making a good-faith effort to comply with the abusiveness standard.

At the time, Director Kraninger praised the framework as “prevent[ing] consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future.”

In rescinding the 2020 Policy Statement, the Bureau rebuked the Bureau’s prior work, citing its “review of, and experience in applying, the Policy Statement.”  Moving forward, the Bureau indicated that it will assert abusiveness claims, regardless of whether they overlap with claims of unfair or deceptive conduct, and may seek the full array of potential penalties, regardless of whether the financial institution was attempting in good faith to comply with the abusiveness standard.  To do less, the Bureau argued, would be “contrary to the Bureau’s current priority of achieving general deterrence through penalties and other monetary remedies.” The Bureau did not provide new guidance on the contours of the abusiveness standard or its approach to its enforcement except to state that it “intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress,” and that, “[g]oing forward, the CFPB intends to consider good faith, company size, and all other factors it typically considers as it uses its prosecutorial discretion.”

CFPB Issues Interpretive Rule Clarifying that ECOA’s Prohibition of Discrimination Based on Sex Extends to Sexual Orientation and Gender Identity

On March 9, 2021, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued an interpretive rule clarifying that the Equal Opportunity Credit Act (“ECOA”) and its implementing regulation, Regulation B, prohibit discrimination based on sexual orientation and gender identity.  The CFPB made clear that this prohibition also extends to “actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other association.”  Specifically, the Bureau found that, under ECOA and Regulation B:

  • (1) “sexual orientation discrimination and gender identity discrimination necessarily involve consideration of sex”;
  • (2) “an applicant’s sex must be a ‘but for’ cause of the injury, but need not be the only cause”; and
  • (3) “discrimination against individuals, and not merely against groups, is covered.” Continue Reading

The UK Independent Anti-Slavery Commissioner’s January 2021 Report: Mitigating Modern Slavery in Financial Services

The UK Independent Anti-Slavery Commissioner’s January 2021 report—entitled “Preventing Modern Slavery & Human Trafficking: An Agenda for Action across the Financial Services Sector” (the “report”)—has concluded that there is a significant lack of awareness of modern slavery risks within the financial services sector (the “sector”).

The Commissioner, Dame Sara Thornton, notes that “modern slavery has been estimated to generate $150 billion in profits annually” constituting “one of the top three international crimes alongside drug trafficking and trade in counterfeit goods.”  The report accordingly calls on the sector to “detect and disrupt this serious organised criminality” and to take proactive steps to mitigate the various risks associated with modern slavery, including financial, regulatory, legal, governance and reputational risks.

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CFTC MRAC Meeting Features Discussion of Climate Risk

The Market Risk Advisory Committee (“MRAC”) of the Commodity Futures Trading Commission (“CFTC”) met last week to discuss reports from its subcommittees on the following issues: Climate-Related Market Risk, CCP Risk and Governance, Market Structure, and Interest Rate Benchmark Reform.  The meeting also featured a panel discussion on diversity and inclusion in the derivatives and related financial markets.  The discussion on Climate-Related Market Risk featured discussion of the Climate-Related Market Risk Subcommittee’s report: Managing Climate Risk in the U.S. Financial System (“Report”), which it previously released on September 9, 2020.  Subcommittee Chair Robert Litterman addressed the MRAC to discuss the Report’s findings and issue a call to action on climate change.

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