Regulatory Compliance Updates for Banks & Credit Unions – October 2022 Recap

There were eight noteworthy regulatory and compliance updates for banks and credit unions in October of 2022. Below are the details on these changes and how they affect you and your institution.

July Regulatory Compliance Updates for Banks and Credit Unions

FRB/CFPB: 2023 Exemption Thresholds Increased for Regulations M and Z

The Federal Reserve Board and the CFPB jointly announced on October 13, 2022 the dollar thresholds used to determine whether certain consumer credit and lease transactions in 2023 are exempt from Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing).

By law, the agencies are required to adjust the thresholds annually based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. Transactions at or below the thresholds are subject to the protections of the regulations. Specifically, based on the annual percentage increase in the CPI-W as of June 1, 2022, Regulation Z and Regulation M generally will apply to consumer credit transactions and consumer leases of $66,400 or less in 2023 (an increase of $5,400, or about 8.85 percent, from the 2022 threshold amount). However, private education loans and loans secured by real property, such as mortgages, are subject to Regulation Z regardless of the amount of the loan.

Why Is This Important to Me?

You may need to adjust your procedures to align with the adjusting thresholds based on CPI-W and changes will go into effect January 1, 2023.

FinCEN: Schedule for CTA Implementation

In prepared remarks at the October 12, 2022, ACAMS AML Conference, FinCEN Acting Director Himamauli Das discussed FinCEN’s planned schedule for the remaining regulatory changes needed to implement the Corporate Transparency Act (CTA), a title of the Anti-Money Laundering Act of 2020. The first piece of the required regulations, the Reports of Beneficial Ownership Information Rule [31 CFR 1010.380], was published on September 30, and will become effective on January 1, 2024.

The second piece will be the Access Rule, which will lay out the protocols for access to the beneficial ownership database by law enforcement—at the Federal, state, local, and tribal levels—and by financial institutions. Das said that FinCEN is working on the proposed rulemaking now, and intends to issue it “in the near term.”

The third step will be a revision of the Customer Due Diligence Rule on beneficial ownership [31 CFR 1010.230] that financial institutions are currently following, “no later than one year after the effective date of the reporting rule, as required by the CTA.”

Why Is This Important to Me?

FinCEN is developing the infrastructure to build a secure and confidential database that meets high security standards, and that ensures that only authorized users can access the information for authorized purposes. Das said that FinCEN expects the system to be operational by the time the reporting rule becomes effective January 1, 2024.

FRB/OCC/CFPB:2023 Threshold Increased for Smaller HPML Appraisal Exemption

On October 13, 2022, the Federal Reserve Board, the CFPB, and the OCC jointly announced that the 2023 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $28,500 to $31,000 (an increase of $2,500, or about 8.77 percent).

Why Is This Important to Me?

You may need to adjust your procedures to align with the new threshold amount, effective January 1, 2023, and based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W, as of June 1, 2022.

Fifth Circuit Panel Vacates Payday Lending Rule

NPR.com reported on October 19, 2022 a three-judge panel of the Fifth U.S. Circuit Court of Appeals has vacated the CFPB’s Payday, Vehicle Title, and Certain High-Cost Installment Loans regulation and ruled that the way the Bureau is funded “violates the Constitution’s structural separation of powers.”

In Community Financial Services Association v. CFPB, which has been working its way through the courts since 2018, the three judges ruled that the funding mechanism for the CFPB, which is independent from the congressional appropriation process, is unconstitutional, and declared the “Payday Lending” rule invalid.

Why Is This Important to Me?

The CFPB can appeal the ruling to the full Fifth Circuit, and request a stay of the panel’s order pending that appeal. Ultimately, the case could be decided at the Supreme Court.

FHFA: Two New Credit Score Models

On October 24, 2022, the FHFA reported it has validated and approved both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by Fannie Mae and Freddie Mac (the Enterprises).

FHFA expects that implementation of FICO 10T and VantageScore 4.0 will be a multiyear effort. Once implemented, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores with each loan sold to the Enterprises. FHFA and the Enterprises will conduct outreach to stakeholders to ensure a smooth transition to the newer credit score models.

The announcement is the result of a multi-year effort by FHFA and the Enterprises to implement Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The new models improve accuracy by capturing new payment histories for borrowers when available, such as rent, utilities, and telecom payments.

FHFA also announced that the Enterprises will work toward changing the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies (CRAs). Instead, the Enterprises will require lenders to provide credit reports from two of the three nationwide CRAs.

Why Is This Important to Me?

The Enterprises will work with stakeholders on a plan for implementing the change from a tri-merge credit report requirement to a bi-merge credit report requirement.

FHFA: Appraisals Data File Published

On October 24, 2022, the FHFA announced it has published its new Uniform Appraisal Dataset (UAD) Aggregate Statistics Data File and launched UAD Aggregate Statistics Dashboards on its website to provide user-friendly visualizations of the newly available data.

The UAD Aggregate Statistics Data File and UAD Aggregate Statistics Dashboards give stakeholders and the public new access to a broad set of data points and trends found in appraisal reports. Additionally, the appraisal statistics may be grouped by neighborhood characteristics and geographic levels (national, state plus the District of Columbia and Puerto Rico, Metropolitan Statistical Areas (MSAs) or Metropolitan Divisions, county, and tract). The UAD Aggregate Statistics Data File is intended for users capable of using statistical software to extract and analyze data. In contrast, the UAD Aggregate Statistics Dashboards are for users of all types and are designed to provide user-friendly access through customized maps and charts.

FHFA’s Division of Research and Statistics used 47.3 million anonymized UAD appraisal records collected from 2013 through the second quarter of 2022 on single-family properties to create a data file of UAD aggregate statistics in a manner that protects borrower privacy. Each UAD appraisal record includes information reported by appraisers on the Uniform Residential Appraisal Report (URAR).

Why Is This Important to Me?

The UAD Aggregate Statistics Data File is intended for users capable of using statistical software to extract and analyze data. In contrast, the UAD Aggregate Statistics Dashboards are for users of all types and are designed to provide user-friendly access through customized maps and charts.

CFPB: Guidance on OD and Returned-Check Fee

The CFPB has added another target in its campaign against what it describes as “surprise” fees. The CFPB announced on October 26, 2022 “Guidance to Help Banks Avoid Charging Illegal Junk Fees on Deposit Accounts,” about two fee practices that the CFPB says are likely unfair and unlawful under existing law.

· “Surprise” fees, including overdraft fees charged when consumer had enough money in their account to cover a debit charge at the time the bank authorized it

· A fee we have not seen targeted by the CFPB before—a fee imposed on depositors when the bank charges back a check that has been “bounced” (returned unpaid)

The CPFB has issued Consumer Financial Protection Circular 2022-06 on “Unanticipated overdraft fee assessment practices.” The Circular states that charging “authorize positive, settle negative” or “APSN” overdraft charges is likely to be an unfair act or practice under the Federal Trade Commission Act and the Consumer Financial Protection Act. The Circular also describes other practices—such as authorizing transactions and assessing overdraft fees based on the available, rather than ledger, account balance—that may be unfair under the law.

The CFPB also issued Compliance Bulletin 2022-06 on “Unfair Returned Deposit Item Fee Assessment Practices.” In the Bulletin, the CFPB states, “Blanket policies of charging Returned Deposited Item fees to consumers for all returned transactions irrespective of the circumstances of the transaction or patterns of behavior on the account are likely unfair.” The Bulletin suggests that an institution is unlikely to violate the prohibition against unfair acts or practices if it only charges consumers a fee if they repeatedly deposit bad checks from the same issuer, or if the consumer could otherwise have reasonably expected an item to be returned unpaid. Disclosing such a fee in account opening disclosures does not eliminate the institution’s likelihood of violating the prohibition on unfair acts or practices.

Why Is This Important to Me?

The Compliance Bulletin notes that the CFPB issued it “to notify regulated entities how the Bureau intends to exercise its enforcement and supervisory authorities on this issue.”

FinCEN: GTOs Renewed and Expanded

FinCEN announced on October 26, 20222 the renewal and expansion of its Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in non-financed purchases of residential real estate. The terms of the GTOs are effective beginning October 27, 2022 and ending on April 24, 2023. The GTOs continue to provide valuable data on the purchase of residential real estate by persons possibly involved in various illicit enterprises. Renewing the GTOs will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.

FinCEN renewed the GTOs that cover certain counties within the major U.S. metropolitan areas of Boston; Chicago; Dallas-Fort Worth; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle, the District of Columbia, Northern Virginia, and Maryland (DMV) area; as well as the City and County of Baltimore, the County of Fairfield, Connecticut, and the Hawaiian Islands of Honolulu, Maui, Hawaii, and Kauai.

Why Is This Important to Me?

FinCEN also expanded the geographic coverage of the GTOs to counties encompassing the Texas cities of Houston and Laredo. The effective period of the GTOs for purchases in these newly added areas begins on November 25, 2022. The purchase amount threshold remains at $300,000 for each covered metropolitan area, except for the City and County of Baltimore, where the purchase threshold is $50,000.

Rachel Davis - Product Manager at OCL

About the Author

Rachel Davis

Product Manager at OnCourse Learning

Rachel Davis is the Product Manager of GRC and professional education for banks, credit unions, and non-bank financial services at OnCourse Learning. Rachel has worked in the financial services industry for 12 years and keeps up to date on financial industry hot topics. Rachel received her Bachelor of Arts in English Literature from Saint Louis University.

Rachel Davis - Product Manager at OCL

About the Author

Rachel Davis

Product Manager at OnCourse Learning

Rachel Davis is the Product Manager of GRC and professional education for banks, credit unions, and non-bank financial services at OnCourse Learning. Rachel has worked in the financial services industry for 12 years and keeps up to date on financial industry hot topics. Rachel received her Bachelor of Arts in English Literature from Saint Louis University.

By |2022-11-07T08:22:30-06:00November 7th, 2022|Bank, Credit Union, Financial Services|Comments Off on Regulatory Compliance Updates for Banks & Credit Unions – October 2022 Recap