Keeping up with regulatory change is a full-time job. That’s why Ncontracts has a team of regulatory attorneys and certified compliance professionals dedicated to making sure we have the latest, most-up-to-date information on regulations, guidance, and which way the regulatory winds are blowing.
This month’s Regulatory Update podcast covers all the major regulatory news for October 2023, including the latest on cannabis banking legislation, the Consumer Financial Protection Bureau’s very big month, and the latest lawsuits and final rules.
Remember: You can also log into Ncomply for updates and implementation guides on changes to state and federal regulations!
For a deeper dive into what all took place in September, be sure to watch the video here.
Here are the highlights:
New cannabis banking advances in Senate.
Forget the SAFE Act. Now the newly-revised SAFER Banking Act (The Secure and Fair Enforcement Regulation Banking Act (S. 2860)) is in play in the Senate, with the Senate Banking committee advancing it to the Senate floor.
The SAFER Act was introduced with additional provisions including:
- “Personal beliefs or political motivations used to restrict access to financial services for lawful businesses have no place at a Federal banking regulator.”
- Federal banking regulators must work with state banking supervisors and the secretaries of Commerce and Treasury and, within two years of enactment, “promulgate tailored rules or guidance to increase access to deposit accounts for businesses and customers and to enable banks and credit unions to more effectively maintain customer relationships—especially for those in rural, low-and moderate-income areas, Tribal communities, and unbanked businesses and consumers.”
- Tribal areas must be included in studies, rules and guidance to increase access to accounts alongside minorities, veterans, and women or state-sanctioned cannabis businesses.
The SAFE Act passed the House seven times.
CFPB news
Update on CFPB 1071 litigation.
In August we reported on a Texas court’s decision to delay implementation of 1071 for American Bankers Association and Texas Bankers Association members. Now a separate Kentucky court issued an injunction applying to any covered financial institution and that prevents the CFPB from enforcing its final rule until after Supreme court makes its ruling pertaining to the CFPB’s constitutionality.
The downside: Unlike the Texas court’s decision, the Kentucky injunction doesn’t include a provision to delay the mandatory compliance deadline after a decision. That means Tier 1 institutions that need to comply with 1071 in 2024 may only have four months to fully prepare should the CFPB be found to be constitutional.
If we know anything from implementing HMDA, four months is not a reasonable amount of time to implement this rule. We’re heard from most of our customers and across several banking conferences that most FIs are continuing their preparation for 1071. This includes continuing to develop policies, procedures, and training and identifying system needs, among other activities. They don’t want to start anew next year when they may have to implement additional rule changes like BO/CDD and CRA modernization.
Related: 1071 September Update
CFPB UDAAP exam manual updates vacated by court.
Courts around the US continue to strip away Bureau guidance. In September a Texas court granted a motion for summary judgement vacating changes to the CFPB’s UDAAP updates to the exam manual in March 2022. The CFPB included discrimination within the definition of “unfair.” This is a massive reversal of the CFPB's attempt at issuing interpretive and informal guidance without going through the rulemaking process.
Despite legal challenges, the CFPB continues to issue new guidance, including on how lenders must comply with Adverse Action Notices regardless of the innovative technology they use to make credit decisions, This is a massive reversal of the CFPB's attempt at issuing interpretive and informal guidance without going through the rulemaking process.
Banking litigation
Yet another DOJ Redlining settlement.
A Rhode Island bank agreed to pay $9 million to settle alleged redlining violations with the Department of Justice. (Details in this blog post.) The bank didn’t have a branch or mortgage loan originators in majority black and Hispanic areas. HMDA data revealed peers had four times more applications from these minority populations in the bank’s area.
News just for banks
OCC releases 2024 supervisory focus.
The OCC release areas that will be subject to heightened focus in 2024. They include: asset and liability management; credit; allowance for credit losses; cybersecurity; operations; digital ledger technology activities; change management; payments; BSA/AML/OFAC; consumer compliance; Community Reinvestment Act (CRA); fair lending; and climate-related financial risks.
With so much focus on change management, it’s important to make sure you have systems in place.
Related: Change Management Guide
Final rule
NCUA approves Final Rule on Financial Innovation.
NCUA’s Final Rule on Financial Innovation takes effect October 30 and impacts credit union engaging in indirect lending/leasing or loan participations and the purchase or sale of eligible obligations. The rule incorporates a prior legal opinion letter that discusses how a loan made by a dealer using the credit union’s underwriting guidelines can be considered a loan made by the credit union into NCUA’s existing lending rule found in 701.21. That means credit unions can participate out these loans.
The rule also moves other NCUA prescriptive guidance into a more principles-based guidance requiring risk management best practices from third-party risk management to risk assessments to policies and legal reviews.
If your credit union engages in indirect lending/leasing or loan participations and the purchase or sale of eligible obligations, you definitely want to check out this rule.
Want to learn more about how a compliance management system can help you manage regulatory change? Download our CMS Buyer’s Guide.
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