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Regulatory Update for March 2023: Final 1071 Rule, SVB's Failure, and Junk Fees

2 min read
Apr 11, 2023

What a month it was! From the second largest bank failure to the highly anticipated deadline for the Consumer Financial Protection Bureau’s (CFPB) final rule implementing Section 1071 of the Dodd-Frank Act, there’s a lot to talk about in  this month’s Regulatory Update podcast. 

Want to hear what Stephanie Lyon, Ncontracts vice president of compliance and regulatory strategy, and her team of regulatory compliance experts have to say about it? 

Here’s a quick rundown of the highlights. Listen to the podcast for a full breakdown. 

1071 is finally here

The CFPB finally released its final version of 1071, the small business lending data collection rule. The most notable differences between the proposed rule and the final rule is phased implementation, a higher threshold for covered institutions, and the removal of visual observation for data collection.

Stephanie’s team will host a webinar breaking down all aspects of the final 1071 rule on Thursday, April 20 at 1 p.m. CST. Register here.

Ncontracts also has a 1071 readiness page which has FAQs and other resources. A substantive reg analysis document will be added to Ncomply soon.

Biden administration continues to fight “junk fees”

The Biden administration released a guide to help state legislatures and attorneys general combat so-called junk fees. The CFPB newest Supervisory Highlights report also focuses on fees it calls “unlawful”, including some overdraft fees.  

News from HUD

The Department of Housing and Urban Development (HUD) published a final rule expanding the maximum term of a post-default loan modification on FHA-insured mortgages to 480 months (up from 360). The rule takes effect May 8.

HUD also reinstated the 2013 Discriminatory Effects Standard. The short version: Unlawful discrimination under the Fair Housing Act does not have to be intentional. Just proving a discriminatory effect (disparate impact) is enough if a lender can’t justify a substantial, legitimate, and nondiscriminatory reason for a policy that resulted in discriminatory effects.

Appraisal discrimination 

The CFPB and Department of Justice (DOJ) have taken an interest in a lawsuit over discriminatory appraisals, filing a statement that relying on discriminatory third-party appraisals can be an Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA) violation. 

The case involves a black family in Baltimore suing a mortgage lender and appraiser for denying their loan application due to a severely undervalued appraisal. After the family “whitewashed” their home, the appraisal came back 60 percent higher. 

Other financial services news 

For other news, including the NCUA’s final Subordinated Debt Rule, SEC proposed rules for cybersecurity risk management, the Fair Hiring in Bank Act, a Conference of State Bank Supervisors proposal on mortgage industry licensing standards, and a $17 million civil money penalty against a former Wells Fargo executive and director involved in the company’s fraudulent account opening scheme, listen to the podcast.

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