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Regulatory Update for January 2023: $31 million bank redlining settlement, “too large to manage” banks and appraisal bias

3 min read
Jan 1, 2023

The federal regulatory agencies started off the year with a bang with a record-setting redlining settlement, the denial of a bank application, and a warning of potential limits on the nation’s biggest banks. Then there’s all the guidance and proposals. 

What happened in January? What does it mean for the year ahead? Join Stephanie Lyon, Ncontracts vice president of compliance and regulatory strategy, and her team of compliance pros for a rundown of all the latest regulatory compliance news and updates in this month’s Regulatory Update podcast

Want even more details on what you need to do? Stephanie’s team is also responsible for the content inside our Ncomply compliance management system (CMS), which is updated daily. Log into the solution for more information. 

FinCEN cracks down on illicit Russian finance

In January, the Treasury's Financial Crimes Enforcement Network (FinCEN) issued an order identifying the Hong Kong-based virtual currency exchange Bitzlato as a "primary money laundering concern" in connection with Russian illicit finance. This is the first order of its kind using powers contained in section 9714(a) of the Combating Russian Money Laundering Act that was attached to the 2021 National Defense Authorization Act.  

FinCEN also issued an alert warning that sanctioned Russians or their proxies may have large investments in U.S. commercial real estate, including multifamily housing and apartment buildings. The alert offers advice for identifying sanctions evasion in the real estate market using typology and a review of red flags in transactions. Another unrelated, FinCEN alert helps financial institutions better identify and report suspicious transactions that could be related to human smuggling. 

DOJ’s biggest-ever redlining settlement against a bank

The DOJ announced the largest redlining settlement in its history from City National Bank. The bank will pay $31 million to settle allegations that from 2017 through 2020 the bank had six times fewer applications in majority-Black and Hispanic neighborhoods in Los Angeles because the bank avoided lending in those areas and discouraged applications.

HUD combatting appraisal bias

HUD is creating a process that will allow people who believe their appraisal was influenced by racial bias to ask for a review of their appraisal.

CFPB releases updates mortgage servicing exam procedures

The Consumer Financial Protection Bureau (CFPB) released updated Mortgage Servicing Examination Procedures that covers forbearances and offers questions about foreclosures and the fees servicers charge borrowers, especially in relation to COVID-19.  

CFPB proposes rule creating registry of nonbank terms and conditions.

The CFPB proposed a rule to increase transparency into “take it or leave it” contracts at nonbanks that limit consumer protections like bankruptcy rights, liability, and the ability to file complaints and post reviews. Mortgage companies, private student lenders, and other nonbanks consumer financial institutions would be subject to the order and required to register annually. The information would be published publicly.

Bank regulatory compliance updates

Fed policy statement addresses regulatory framework for state and uninsured banks

The Federal Reserve Board issued a policy statement that banks, including uninsured ones, should be subject to the same regulatory framework and limitation on activities. It’s a sign that state member banks should look to federal statutes, OCC regulations, and OCC interpretations to determine whether an activity is permissible, especially novel activities, such as crypt-related activities, that present heightened risk.

OCC head takes aim at banks “too large to manage”

In a surprising speech, Acting Comptroller of the Currency Michael Hsu suggested that the most effective way to successfully fix issues at a bank that is “too large to manage” is to simplify it by divesting businesses, curtailing operations, and reducing complexity. He laid out four steps the OCC uses to determine whether this action should be taken. Listen to the podcast for more details on what this means.

Credit union regulatory compliance updates

NCUA releases 2023 supervisory priorities

For more information on the NCUA’s 2023 Supervisory Priorities, listen to the podcast or check out our blog: Top Takeaways from NCUA’s Supervisory Priorities.

NCUA extends loan interest rate ceiling

The interest rate ceiling for federal credit union loans remains capped at 18% until September 10, 2024. 

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