Welcome to our April Regulatory Brief where the Ncontracts team of experts covers the most important regulatory compliance developments of March 2024.
This month the Consumer Financial Protection Bureau (CFPB) targets two kind of so-called “junk fees,” Utah becomes the first state to protect consumers from generative artificial intelligence, and the FDIC shares the biggest mistakes banks are making.
What does this mean for your financial institution? Listen in and find out.
News from the CFPB
It wouldn’t be a regulatory update without news from the CFPB.
CFPB amends late fee rules for large credit card issuers
First is a new rule pertaining to large credit card issuers with more than 1 million open accounts. The CFPB amended Reg Z to limit late fees at these companies to be commensurate with an issuer’s costs. They established a new safe harbor of $8, a dramatic reduction from the previous cap of $30 for initial late fees and $41 for subsequent late payments. The rule goes into effect on May 14, 2024, but the U.S. Chamber of Commerce is trying to stop the final rule through litigation. Listen to the podcast for the details.
CFPB takes aim at mortgage closing fees
The CFPB published a blog saying that mortgage closing costs – particularly title insurance, credit report fees, appraisal fees, and origination fees – are driving up the cost of homeownership due to lack of competition. The bureau says it might issue rules and guidance to “improve competition, choice, and affordability.” The CFPB hasn’t released a proposal on the topic yet.
Artificial intelligence
Utah became the first state to enact a law protecting consumers from artificial intelligence (AI). SB 149 holds institutions accountable for any misleading information or inaccurate statements generated by AI, requires that consumers are notified when they engage with AI, and allows the state to impose a $2,500 fine for each violation and $5,000 fine per violation subsequently.
Community Reinvestment Act (CRA)
CRA effective dates for the Facility Based Assessment Area provisions and the Public Notice provisions have been extended from April 1, 2024, to January 1, 2026, under an interim final rule released by the OCC, Fed, and FDIC. As is the case with Section 1071, this and other mandatory compliance dates have been delayed pending active litigation.
FDIC Spring Supervisory Highlights
The FDIC dropped its 2024 Supervisory Highlights, a crucial resource for FDIC-supervised institutions to understand where others are failing, where the examiners may focus their attention, and what consumers are complaining about. Its major concerns are around inaccuracies in closing disclosures required for mortgages under Reg Z, flood insurance violations, failing to investigate and resolve errors in a timely manner (especially when working with third parties) under Reg E, disclosure violations under Reg DD TISA, multiple NSF fees for representing the same transaction, and credit builder products that don’t accurately represent their capabilities.
Third-party relationships and fair lending were also significant areas of concern.
FDIC Proposes Revisions to Bank Merger Transaction
The FDIC proposed revisions to the Statement of Policy on Bank Merger Transactions. The revised statement of policy updates, strengthens, and clarifies the FDIC's policies and expectations for evaluating bank merger transactions. It would address evaluative considerations for each statutory factor, including the risk to the stability of the U.S. banking or financial system.
For more regulatory updates, including Ginnie Mae’s new cybersecurity incident notification requirement and a notification proposal from the Cybersecurity and Infrastructure Security Agency (CISA), NCUA’s CECL update for small credit unions, a lawsuit related to the Corporate Transparency Act, and the latest news from state regulators on guidelines and prohibitions for financial institutions regarding firearms sales, check out the podcast.
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