Earlier this week, by a party-line 34-26 vote, the House Financial Services Committee passed H.R. 4861, a bill seemingly intended to ease restrictions on short-term, small-dollar loans made by depository institutions.  The bill is part of the efforts of House Republicans to provide greater regulatory relief to banks than would be provided by S. 2155, the banking bill passed by the Senate last week.  We expect that Jeb Hensarling, who chairs the House Committee, will attempt to make the bill part of a final banking bill.

H.R. 4861 would nullify the FDIC’s November 2013 guidance on deposit advance products, which effectively precludes FDIC-supervised depository institutions from offering deposit advance products.  (The FDIC supervises state-chartered banks and savings institutions that are not Federal Reserve members.)  We had been sharply critical of that guidance, as well as the OCC’s substantially identical guidance as to national banks.  However, in October 2017,  just hours after the CFPB released its final rule on payday, vehicle title, and certain high-cost installment  loans (CFPB Rule), the OCC rescinded its guidance on deposit advance products.  Because the FDIC has not yet followed suit, H.R. 4861 would remove a regulatory impediment to state-chartered banks and savings institutions offering one form of small-dollar lending to their customers.

H.R. 4861 would require the federal banking agencies to promulgate regulations within two years “to establish standards for short-term, small-dollar loans or lines of credit made available by insured depository institutions.”  The standards must “encourage products that are consistent with safe and sound banking, provide fair access to financial services, and treat customers fairly.”  The regulations would preempt any state laws “that set standards for [such loans or lines of credit]” and would override the CFPB Rule for insured depository institutions that become subject to H.B. 4861 regulations.  (Insured and uninsured credit unions would gain relief from the CFPB Rule even before regulations are adopted.)

Presumably, the “standards” under H.B. 4861 regulations could include interest rate standards.  Thus, federal banking agencies supportive of short-term, small-dollar loans could authorize interest rates higher than the insured depository institutions could otherwise charge under applicable federal law.  Unfortunately, as it is currently drafted, H.R. 4861 could be interpreted to allow the banking agencies to establish rate limits that are more restrictive than the limits that currently apply under federal law.  Accordingly, we would hope that the final bill will clarify that it does allow the federal banking agencies to impair existing rate authority under applicable federal law, including Section 85 of the National Bank Act, Section 27 of the Federal Deposit Insurance Act, and Section 4(g) of the Home Owners’ Loan Act.



The CFPB has announced that with regard to the collection in 2018 of the expanded data fields under the revised Home Mortgage Disclosure Act (HMDA) rules, the CFPB does not intend to require data resubmission unless data errors are material, and does not intend to assess penalties with respect to errors in the data collected in 2018.

As we reported previously, in October 2015 the CFPB adopted significant changes to the HMDA rules that significantly expanded the amount of information that must be collected and reported, and the institutions that are required to collect and report data. Most of the data collection changes are effective January 1, 2018. In announcing the approach to enforcement, the CFPB acknowledged the significant systems and operational challenges faced by the industry in implementing the changes.

The CFPB also noted that any examinations of 2018 HMDA data will be diagnostic to help institutions identify compliance weaknesses, and indicated that it will credit good faith compliance efforts. This approach was expected by the industry, as it is consistent with the approach taken by the CFPB with the implementation of other significant mortgage rules. The FDIC and OCC also issued similar statements.

Significantly, the CFPB also announced that it intends to engage in a rulemaking to reconsider various aspects of the revised HMDA rules, such as the institutions that are subject to the rules, including the related transactional coverage tests, and the discretionary data points that were added to the statutory data points by the CFPB.  While the industry has pressed for a reconsideration of various requirements, and the Trump administration has signaled it was receptive to considering changes, this is the first public announcement by the CFPB that it will reconsider the revisions made to the HMDA rules.

Several federal agencies have issued reminders and requirements related to banking and credit services for borrowers affected by Hurricane Harvey.  We previously reported on mortgage-related guidance issued by Fannie Mae, Freddie Mac, HUD, and VA regarding mortgage loans.

On August 26, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and Conference of State Bank Supervisors (CSBS) issued a joint press release  urging financial institutions in disaster areas to “work constructively with borrowers in communities affected by Hurricane Harvey.”  The joint press release reminds financial institutions that they may receive Community Reinvestment Act (CRA) consideration for community development loans, investments, or services that revitalize or stabilize federally designated disaster areas. It also reminds banks to monitor municipal securities and loans affected by the hurricane, as government projects may be negatively affected.  The joint press release also assures banks that regulators will grant flexibility in regulatory reporting and publishing requirements, and that regulators will expedite any request to operate temporary banking facilities.

Additionally, the agencies have adopted the following disaster relief policies:


The FRB published letter SR 13-6 on March 29, 2013 to highlight the supervisory practices it employs during a disaster.  In general, the letter seeks to encourage covered banking organizations to adopt measures that help borrowers and other customers in communities under stress and that contribute to the health and recovery of these communities.  Per the letter, the FRB will aim to assist in disaster relief efforts by easing the regulatory burden on banks.  For example, the FRB may exercise its authority to waive real estate-related appraisal regulations, and may extend CRA consideration to activities that revitalize or stabilize a disaster area, even if the loans, investments, or services provided are to middle- or upper-income individuals.  The FRB also published a webpage of resources following Hurricanes Katrina and Rita that may be applicable here.


On August 29, the FDIC published Financial Institution Letter FIL-38-2017 (the “Letter”), which applies to all FDIC-supervised institutions, including community banks.  The Letter encourages banks to “consider all reasonable and prudent steps to assist customers in communities affected by recent storms.”  Specifically, the FDIC suggests waiving fees, increasing ATM cash limits, easing credit card limits, allowing loan customers to defer or skip payments, and delaying the submission of delinquency notices to credit bureaus.  The Letter also suggests that banks use the non-documentary verification methods permitted by the Customer Identification Program requirement of the Bank Secrecy Act for affected customers who cannot provide standard identification documents.

The FDIC has also set up a webpage dedicated to Hurricane Harvey information for consumers and bankers.  That webpage links to a document created for institutions supervised by FFIEC member agencies and the Conference of State Bank Supervisors that discusses the lessons they learned from the effects of Hurricane Katrina.

The webpage includes resources for consumers including Hurricane Harvey FAQs, disaster planning assistance, and a disaster recovery to-do list.


On August 24, the OCC issued a Proclamation that permits national banking associations, federal savings associations, and federal branches and agencies of foreign banks to close offices in the areas affected by the emergency conditions for as long as deemed necessary for bank operation or public safety.  The Proclamation also referred to OCC Bulletin 2012-28, which sets forth previous bank guidance applicable to natural disasters (the “Bulletin”).  For the purposes of disaster relief, the Bulletin persuades banks to consider assisting affected borrowers by, among other things, waiving or reducing ATM fees, and restructuring borrowers’ debt obligations.

Banks should also consider previously issued OCC guidance that may be applicable in the event of a disaster.  For example, OCC Bulletin 2014-37 provides that a bank must halt all debt sales on accounts of customers in disaster areas.  According to FEMA declarations, this debt sales moratorium should have started on August 23 for affected counties in Texas, and on August 27 for Louisiana.

Farm Credit Administration (FCA)

On August 29, the FCA issued a press release  encouraging Farm Credit System institutions to extend the terms of loan repayments, restructure borrowers’ debt obligations, ease some loan documentation or credit-extension terms for new loans to certain borrowers, and seek FCA relief from specific regulatory requirements.

National Credit Union Administration (NCUA)

On August 25, in a press release, the NCUA reminded credit unions that its Office of Small Credit Union Initiatives can provide urgent needs grants of up to $7,500 to low-income credit unions that experience sudden costs to restore operations interrupted by the storm.

On August 28, the NCUA announced that there were 150 federally insured credit unions in the areas of Texas affected by Hurricane Harvey and approximately 28 credit unions in the areas of Louisiana affected by the storm.  To help these credit unions, the NCUA stated that its disaster assistance policy was to:

  • Encourage credit unions to make loans with special terms and reduced documentation to affected members;
  • Guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund;
  • Make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility; and
  • Reschedule routine examinations of affected credit unions.

Under certain conditions, the NCUA permits federal credit unions to assist other credit unions and non-members by using their correspondent services authority to provide emergency financial services, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals in the areas affected by the floods.  The NCUA notes that if a credit union provides such emergency services, it may not impose charges for such services that exceed its direct costs.

In addition to following the guidance above, in the absence of applicable exemptions or waivers granted by regulators, financial institutions wherever located must continue to comply with consumer protection and other banking laws.  In particular, financial institutions serving communities impacted by Hurricane Harvey should remain mindful of anti-money laundering, suspicious activity reporting, data security, and privacy requirements.

Effective July 18, 2017, the FDIC has adopted amendments to its Guidelines for Appeals of Material Supervisory Determinations.  The FDIC proposed the amendments last August and received only two comment letters, one from a trade association and the other from a financial holding company.

The amendments are intended to provide institutions with broader avenues of redress with respect to material supervisory determinations and enhance consistency with the appeals process of other federal banking agencies.  The term “material supervisory determinations” is defined by the Reigle Act to include determinations relating to (1) examination ratings; (2) the adequacy of loan loss reserve provisions; and (3) classifications of loans that are significant to an institution.  The Guidelines list the types of determinations that constitute “material supervisory determinations.”   Under the Guidelines, an institution may not file an appeal to the Supervision Appeals Review Committee (SARC) unless it has first filed a timely request for review of a material supervisory determination with the Division Director.

The amendments expand the definition of “material supervisory determination” by allowing determinations regarding an institution’s level of compliance with a formal enforcement action to be appealed as a material supervisory determination.  However, if the FDIC determines that lack of compliance with an existing enforcement action requires further enforcement action, the proposed new enforcement action would not be appealable.  Matters requiring board attention are also added to the list of appealable material supervisory determinations.

The amendments remove decisions to initiate informal enforcement action (such as a Memorandum of Understanding) from the list of determinations that are not appealable and add such decisions to the list of appealable material supervisory determinations.

Other amendments include the following:

  • A clarification that a formal enforcement-related action would commence and become unappealable when the FDIC initiates a formal investigation under 12 U.S.C section 1820(c) or provides written notice to the institution of a recommended or proposed formal enforcement action under applicable statutes or published enforcement-related FDIC policies, including written notice of a referral to the Attorney General pursuant to the ECOA or a notice to HUD for ECOA or FHA violations.
  • An amendment providing that when an institution has filed an appeal of a material supervisory determination through the SARC process, the appeal will not be affected if the FDIC subsequently initiates a formal enforcement-related action or decision based on the same facts and circumstances as the appeal.
  • An amendment providing for the publication of annual reports on Division Directors’ decisions with respect to requests by institutions for review of material supervisory determinations.
  • An amendment providing that the current standard for review for SARC appeals also applies to Division-level reviews.



Politico has reported that James Clinger, President Trump’s nominee to be the next FDIC Chairperson, has asked the White House to withdraw his nomination, citing family issues.

Last month, the White House announced that President Trump intended to nominate Mr. Clinger to be a FDIC member for a six-year term and to be Chairperson for a five-year term, effective November 29, 2017 when the current FDIC chairperson’s term ends.



The FDIC announced last week that it had entered into settlements with Bank of Lake Mills and two non-bank “institution-affiliated parties” through which the bank originated loans for allegedly engaging in unfair and deceptive practices in violation of Section 5 of the FTC Act.  The settlements should serve as a reminder to non-banks entering into arrangements with FDIC-supervised banks that they can become subject to FDIC enforcement authority.

The FDIC did not release the underlying stipulations and consent order and only released the orders requiring payment of restitution and civil money penalties.  The orders require the bank and two non-banks, Freedom Stores, Inc. (FSI) and Military Credit Services, LLC (MCS), to pay approximately $3 million in restitution to eligible borrowers and civil money penalties of, respectively, $151,000, $54,000, and $37,000.

The orders describe eligible borrowers as having received loans from the bank through “FSI and MCS channels.”  It would appear that, because the non-banks originated loans on behalf of the bank, the FDIC deemed the non-banks to be “institution-affiliated parties” under 12 U.S.C. section 1813(u)(1) which defines an “institution-affiliated party” to include any ” agent for an insured depository institution.”

According to the FDIC’s press release, the bank, FSI, and MCS violated Section 5 by practices that included:

  • Charging interest to borrowers who paid off their loans within six months when the loans were promoted as interest free for six months;
  • Selling add-on products without clearly disclosing the terms of those products; and
  • Failing to provide borrowers the opportunity to exercise the monthly premium payment option in conjunction with the purchase of optional debt cancellation coverage

In December 2014, FSI and MCS entered into a consent order with the CFPB to settle allegations that the companies had engaged in unlawful debt collection practices in violation of the CFPA UDAAP prohibition.

On October 17, the FDIC released revised interagency Military Lending Act (MLA) examination procedures for use in connection with consumer credit transactions occurring on or after October 3, 2016. The revised procedures reflect the Department of Defense’s July 2015 final rule and August 2016 interpretive rule and appear consistent with those released by the CFPB and FFIEC last month.

The FDIC also provided guidance on its initial supervisory expectations for examinations relating to MLA compliance. Echoing the words of the CFPB, the FDIC stated that early examinations will focus on financial institutions’ “compliance management systems and overall efforts to come into compliance” with the MLA final rule, and that “examiners will consider an institution’s implementation plan, including actions taken to update policies, procedures, and processes; its training of appropriate staff; and its handling of early implementation challenges.”

Considering the NCUA’s instruction to examiners earlier this month to accept a credit union’s “reasonable and good faith efforts” to comply with the MLA final rule, and the OCC’s Bulletin issued on October 7th, which used language similar to the CFPB regarding initial supervisory expectations, the FDIC has joined what appears to be a growing list of regulators to follow the CFPB’s lead and take a modified approach to early examinations for MLA compliance.

Compliance with the MLA final rule was required for most consumer credit products as of October 3, 2016. For credit extended in a new credit card account under an open-end consumer credit plan, compliance is not required until October 3, 2017.

The FDIC’s Division of Depositor and Consumer Protection will hold a teleconference on
May 21, 2015 on implementation of the CFPB’s mortgage rules.  FDIC staff will share observations made by FDIC examiners during initial examinations since the rules became effective in January 2014.  In addition, FDIC staff will highlight a number of practices currently used by some institutions to ensure compliance with the mortgage rules.

In an unexpected move earlier this week, the FDIC issued a Financial Institution Letter announcing that it was withdrawing the list of “risky” merchant categories that was included in prior guidance on account relationships with third-party payment processors.  Among the listed categories were payday loans and money transfer networks.

At the House Financial Services Committee hearing last week on “Operation Choke Point,” committee members voiced industry charges that FDIC examiners have been using the list to intimidate banks into terminating relationships with companies in the listed categories regardless of whether such companies were engaged in legitimate activities and operating lawfully.

For more on the FDIC’s action, see our legal alert.

Based on the CFPB’s rulemaking agenda issued in December 2013, we continue to expect overdraft programs to be the subject of another CFPB white paper and/or an advance notice of proposed rulemaking this year.  (In June 2013, the CFPB issued a white paper reporting its initial data findings on overdraft programs.)

Any future CFPB rulemaking on overdraft programs is likely to rely in some measure on the CFPB’s authority to prohibit unfair, deceptive or abusive acts or practices.  Recently-issued guidance on continuous or extended overdraft or negative balance fees from certain of the FDIC’s regional offices discusses how a bank’s programs and practices relating to such fees could give rise to violations of Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices.  The guidance encourages bankers “to review the information provided to consumers concerning overdraft services, particularly any extended overdraft and negative balance fees, and conduct transactional testing to ensure that the bank is charging these fees as disclosed from a reasonable consumer’s perspective.”

The guidance includes a series of issues a bank should consider when reviewing bank products and transactions.  For example, the guidance suggests that if a bank’s disclosures provide that overdraft fees may be charged “after” a certain number of days, the bank should consider whether its system ensures that such fees will not be charged on or before the indicated day.  It further suggests that a bank consider how it handles continuous overdraft situations that occur over a weekend or holiday period where the final day of the period to cure an overdraft falls on a non-business day.  The guidance explains that if a bank assesses a fee based on calendar days but only allows customers to cure an overdraft on business days, it could be problematic if the bank’s disclosures indicate that customers have a certain number of days to cure before an overdraft fee is assessed.  

To illustrate this problem, the guidance observes that if a bank were to charge a continuous overdraft fee after three days and an overdraft occurred on a Thursday, the third calendar day after the overdraft would be Sunday.  As Sunday would likely be a non-processing day, the bank would only be giving the customer one day, not three, to cure the default if it charged the fee the prior Friday. The guidance notes that such practices have been cited as unfair in violation of Section 5. 

Other suggested issues for banks to consider include whether assessment of bank service charges can cause an extended negative balance fee to be assessed and the amount of time provided between when a customer receives notice of an overdraft and when a continuous overdraft or negative balance fee is assessed.  The guidance advises banks that find discrepancies between their disclosures and the fees assessed to consider issuing new disclosures and making voluntary restitution.  It further indicates that correcting such issues, including making full restitution, will be considered by the FDIC in reviewing a bank’s disclosures and practices.