The Office of the Comptroller of the Currency (OCC) issued a final rule on October 27 that determines when a national bank or federal savings association (bank) makes a loan and is the “true lender” in the context of a partnership between a bank and a third party, such as a marketplace lender. This is a significant regulatory development that warrants the close attention of the national banking community and those who do business with national banks and federal savings associations.
An August 31 memorandum issued by the Office of Information and Regulatory Affairs (OIRA), an arm of the Office of Management and Budget (OMB) within the Executive Branch, could dramatically change the way agencies handle civil and administrative enforcement proceedings. The memorandum directs covered agencies to provide greater due process to individuals and companies under investigation and reemphasizes the principle that the burden of proof of a violation rests solely with the government. The memorandum was issued to implement the directives contained in Section 6 of Executive Order 13924, Executive Order on Regulatory Relief to Support Economic Recovery (issued May 19, 2020). In relevant part, the executive order directed agency heads to revise agency procedures and practices in light of “the principles of fairness in administrative enforcement and adjudication.”
California’s governor is expected to sign into law soon a bill creating a state consumer financial protection agency, the Department of Financial Protection and Innovation (DFPI), which some have called California’s “mini-CFPB.” We reported previously on the importance of this law in January and March.
In a series of recent interviews (including with the American Bankers Association and a podcast with the ABA Banking Journal), Acting Comptroller of the Currency Brian Brooks discussed the Office of the Comptroller’s (OCC’s) plans to soon roll out another special purpose national bank (SPNB) charter specifically geared toward payments companies. This “payments charter” could be especially appealing for those companies looking for a national licensing platform for their payments business because it would provide federal preemption of state money transmitter licensing and related laws, which would eliminate the need to obtain a license to operate in each state.
The Federal Deposit Insurance Corporation (FDIC) issued a final rule on June 25 that reaffirms the enforceability of the interest rate terms of loans made by state-chartered banks and insured branches of foreign banks (collectively, state banks) following the sale, assignment, or transfer of the loan. The rule also provides that whether interest on a loan is permissible is determined at the time the loan is made, and is not affected by a change in state law, a change in the relevant commercial paper rate, or the sale, assignment, or other transfer of the loan. The final rule follows the FDIC’s proposed rule on this topic, and will take effect 30 days after publication in the Federal Register.
The Office of the Comptroller of the Currency (OCC) issued a similar final rule on May 25 that reaffirms the enforceability of the interest rate terms of national banks’ loans following their sale, assignment, or transfer. The OCC’s rule (on which we previously reported) takes effect 60 days after its June 2 publication in the Federal Register, or August 3.
The US Supreme Court on June 29 ruled in Seila Law v. Consumer Financial Protection Bureau that the Consumer Financial Protection Bureau’s (CFPB’s) structure unconstitutionally insulates the agency from presidential oversight and must be altered.
The Dodd-Frank Act sculpted the now-stricken structure, including protective provisions for the independent regulatory agency’s sole director that were known to be novel in that they allowed the president to oust the unitary director, who is appointed by the president with the advice and consent of the Senate for a five-year term, only “for cause” (more specifically for “inefficiency, neglect of duty or malfeasance”), while the vast majority of presidential appointees serve at the president’s pleasure alone and thus may be terminated for any reason or no reason at all. Prior to the CFPB’s creation, such “for cause” removal provisions typically were associated with independent regulatory agencies governed by multimember boards or commissions, rather than by a single director. Following the decision, the president may remove the agency’s director “at will.”
On June 18, 2020, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a procedural rule to launch a new pilot advisory opinion (AO) program to publicly address regulatory uncertainty in the Bureau’s existing regulations. The pilot AO program will allow entities seeking to comply with regulatory requirements to submit a request where uncertainty exists, and the Bureau will then select topics based on the program’s priorities and make the responses available to the public. The Bureau states that it is establishing the pilot AO program in response to feedback received from external stakeholders encouraging the Bureau to provide written guidance in cases of regulatory uncertainty. For the pilot AO program, requestors will be limited to covered persons or service providers that are subject to the Bureau’s supervisory or enforcement authority.
The Office of the Comptroller of the Currency (OCC) issued a final rule on May 29 clarifying that when a national bank or national savings association sells, assigns, or otherwise transfers a loan, interest permissible before the transfer (the maximum rate permitted in the bank’s home state) continues to be permissible after the transfer. This marks one of the first acts of Acting Comptroller of the Currency Brian P. Brooks, who assumed office that same day.
The Federal Trade Commission (FTC) announced a settled action on April 22 with Canadian company RevenueWire (the Company) and its CEO to resolve allegations that the Company assisted and facilitated two tech-support scams that the FTC had previously targeted. Under the alleged scheme, consumers were marketed tech support services to “fix” nonexistent computer problems, leading to hundreds of millions of dollars of consumer injury. The FTC’s complaint and consent judgment maintain that, in addition to serving as a lead generator for the alleged fraudsters, the Company processed consumer credit card charges on their behalf.
The Consumer Financial Protection Bureau (CFPB or Bureau) announced on March 6 three steps designed to advance its strategy on one of its key priorities: preventing consumer harm. The CFPB is (i) implementing an advisory opinion program to provide additional guidance to assist companies in better understanding their legal and regulatory obligations; (ii) amending and reissuing its responsible business conduct bulletin; and (iii) engaging with Congress to advance proposed legislation that would authorize the CFPB to establish a whistleblower program with respect to reporting violations of federal consumer financial law.
Taken together, the first and second of these steps further the Bureau’s stated goal of clarifying in a meaningful way the regulatory requirements applicable to covered businesses. At the same time, the proposed whistleblower program would bring the Bureau in line with other federal enforcement agencies, e.g., the US Securities and Exchange Commission, that have launched similar programs in part to enhance the detection of violations in an era of leaner agency staffing.