FDIC Amends International Banking Regulations
By Nicole DeSantis, Rabobank, NA
On February 14, 2018, the Federal Deposit Insurance Corporation amended its international banking regulations to remove references to external credit ratings and replace them with appropriate standards of creditworthiness consistent with Section 939A of the Dodd-Frank Act. References to credit ratings in the definition of "investment grade" were replaced with a standard of creditworthiness adopted in other federal regulations that conform to Section 939A. Other changes included adding cash to the list of assets eligible for pledging and separately listing Government Sponsored Enterprise obligations as a pledgeable asset category.
Consumer Finance Law
Court Decision in PHH Corp. v. CFPB
By Dave Permut, Goodwin Procter LLP
On January 31, 2018, the D.C. Circuit, sitting en banc, rejected a constitutional challenge to the Dodd-Frank Act’s provision making the Director of the CFPB removable only for cause. The opinion also reinstated the prior panel’s interpretation of the Real Estate Settlement Procedures Act (“RESPA”). The prior panel’s opinion had held that Section 8(c) of RESPA is a safe harbor, that the CFPB’s retroactive application of its new interpretation of RESPA violated due process and that the statute of limitations for RESPA Section 8 enforcement actions is three years.
CFPB Amends Its Prepaid Rule
By Tricia Engelhardt, Aldrich & Bonnefin, PLC
Recently, the Consumer Financial Protection Bureau (CFPB) amended its final rule governing prepaid accounts (the “Prepaid Rule”). Among other things, once effective the Prepaid Rule will amend CFPB Regulation E to apply the consumer protections under Regulation E (including required disclosures, error resolution and unauthorized transaction procedures) to prepaid accounts. Among the CFPB’s most recent amendments is a new requirement under which consumers must register their prepaid accounts in order to receive full fraud and error protection under Regulation E. The CFPB also has extended the effective date of the Prepaid Rule to April 1, 2019. This is the second time the CFPB has extended the effective date of the Prepaid Rule, which was originally slated to take effect on October 1, 2017.
CFPB Issues Numerous Requests for Information
By Michael Flynn, Goodwin Procter LLP
In each of the past several weeks, the Consumer Financial Protection Bureau (CFPB) has issued a Request for Information (RFI) seeking information and recommendations about the usefulness, appropriateness and efficiency of various supervisory and enforcement processes employed by CFPB. The five topics are Civil Investigation Demands, administrative adjudications, enforcement processes, the CFPB’s supervision program, and external engagement. Upcoming RFIs will address complaint reporting, rulemaking processes, rules not under §1022(d) assessment, inherited rules, guidance and implementation support, consumer education and consumer inquiries. These RFIs touch on some of the key areas where the CFPB interfaces with consumer financial services institutions. Responses are due 60 days after the publication of each RFI.
Ginnie Mae Tells Companies to Address VA Refi Churning
By Buckley Sandler LLP
On Feb. 8, 2018, Ginnie Mae announced that it had sent notices to a small number of issuers in its multi-issuer mortgage-backed security program warning them about elevated prepayment speeds on their VA mortgage loans, which it believes puts the veteran benefit at risk. The notices require the issuers to create a “corrective action plan that identifies immediate strategies to bring prepayment speeds in line with market peers.” Issuers unable to correct their performance risk may lose access to participate in Ginnie Mae multi-issuer pools. The warnings are a result of a task force formed between Ginnie Mae and the Department of Veterans Affairs to address refinance speeds and aggressive marketing in VA loans.
In a related measure, Ginnie Mae also issued APM 17-06, which imposes tougher pooling standards on certain refinance loans in an effort to moderate prepayment speed trends with these refinance products.
Whistleblower Protections Reduced
By Meagan Bainbridge, Weintraub, Tobin, Chediak, Coleman, Grodin Law Corporation
On February 21, 2018, in Digital Realty Trust, Inc. v. Somers, the United States Supreme Court significantly reduced the protections of corporate whistleblowers reporting violations of securities laws under the Dodd-Frank Wall Street Reform and Consumer Protection Act. When it was enacted in 2010, Dodd-Frank included an anti-retaliation provision protecting whistleblowers from facing an adverse action (e.g., termination) as a result of their complaints. That provision defined a “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.” (15 U. S. C. §78u–6(a)(6).) While other Courts and the SEC have interpreted the language to extend to complaints made internally, the Supreme Court’s decision clarified that statute only “shields employees . . . as soon as they also provide relevant information to the Commission.” Going forward, while there may be protections under other federal or state law protecting corporate whistleblowers making complaints under the Dodd-Frank Act, complaints must be made to the SEC to receive protection under the Act.
EPA Requiring Reporting of Chemicals Actively Used in Commerce
By Judah Prero, Sidley Austin LLP
For the first time in over 40 years, the US Environmental Protection Agency (EPA) is requiring identification and reporting of chemicals actively used in commerce in the US. If a chemical is not reported by the deadline, it will not be legal for use in the US. This could have significant impacts on any manufacturer or importer of goods: if they do not know what is in the product, they may be using or selling an item that contains an illegal chemical. This could lead to enforcement action by the EPA, supply chain disruptions, and exposure to liability for the failure to report and use of an illegal chemical. Chemical users now have the ability to report any chemical that may not yet have been identified by chemical manufacturers. The reporting deadline is October 5, 2018.