News from Washington: Regulatory Updates
The Office of the Comptroller of the Currency (OCC) announces that it is considering offering special purpose charters for fintech companies. 
On December 2, 2016, Comptroller of the Currency Thomas J. Curry announced during a speech at Georgetown University Law Center that the OCC is developing special purpose national bank charters for fintech companies. Comptroller Curry also stated that the OCC has published a white paper 
discussing the agency’s considerations when reviewing an application for such a charter. Public comment on the white paper may be submitted through January 15, 2017. Separately, in October 2016, the OCC established a new Office of Innovation to serve as a central point of contact and a clearinghouse for requests and information related to innovation, including fintech.
The Consumer Financial Protection Bureau (CFPB) issues its fall 2016 rulemaking agenda.
On December 2, 2016, the CFPB published its fall rulemaking agenda based on its regulatory activities as of October 19, 2016. The agenda was posted online by the Office of Management and Budget on December 1, 2016. The CFPB also posted its “Fall 2016 Statement of Regulatory Priorities” document, and on December 2, the CFPB published a blog post providing a brief status update.
The CFPB releases its 2017 lists of rural and underserved counties.
On November 20, 2016, the CFPB released the 2017 iteration of its annual lists of rural counties and rural or underserved counties. Certain creditors originating residential mortgages in rural or underserved areas are exempt from some residential mortgage requirements, such as exemption from the escrow requirements for higher-priced mortgage loans.
The Federal Reserve extends post-employment restrictions for senior examiners.
On November 18, 2016, the Board of Governors of the Federal Reserve System (Board) announced it is broadening the scope of post-employment restrictions applicable to Reserve Bank senior examiners and officers. By law, senior bank examiners are prohibited for one year from accepting paid work from a financial institution for which they had primary responsibility for examining in their last year of Reserve Bank employment. This law has historically been applied to examiners who are central points of contact at firms with more than $10 billion in assets. The revised policy expands the number of senior Reserve Bank examiners subject to the ban. A new policy also prohibits former Reserve Bank officers from representing financial institutions and other third parties before current Federal Reserve System employees for one year after leaving their Federal Reserve position and imposes a one-year ban on current Reserve Bank employees from discussing official business with these former officers. The restriction on former officers was effective on December 5, 2016, and the revised senior examiner policy is effective on January 2, 2017.
A Government Accountability Office (GAO) report finds that servicemembers face challenges obtaining the student loan rate cap benefit.
On November 15, 2016, the GAO sent a report to Congress regarding enforcement of the Servicemembers Civil Relief Act’s (SCRA) interest rate cap of 6 percent on the student loans of servicemembers during active duty service. The report found that eligible servicemembers may not always receive the benefit for several reasons. Among these, the report found that information provided to servicemembers about the SCRA interest rate cap is sometimes inaccurate and that private student loan lenders and servicers are not subject to the same rules applicable to federal student loan servicers. For example, private student loan servicers are not required to identify eligible borrowers and automatically apply the rate cap. The report also found that oversight of compliance with SCRA is dispersed across multiple agencies, each of which has limitations on its authority.
The Federal Financial Institutions Examination Council (FFIEC) announces an updated Uniform Interagency Consumer Compliance Rating System (CC Rating System).
On November 14, 2016, the FFIEC issued final guidance updating the CC Rating System, which provides FFIEC member agencies a general framework for evaluating compliance assessment factors in order to assign a consumer compliance rating to each federally regulated financial institution. The CC Rating System was revised to better reflect current consumer compliance supervisory approaches and to more fully align it with FFIEC member agencies’ current risk-based, tailored examination processes. The revisions do not create new or higher supervisory expectations for financial institutions. The revised system stresses the importance of institutions’ compliance management systems, with an emphasis on practices to manage consumer compliance risk, support compliance, and prevent consumer harm. The policy’s effective date is March 31, 2017.
The Federal Deposit Insurance Corporation (FDIC) releases its biennial report on the unbanked and underbanked.
Since 2009, the FDIC has conducted a biennial survey of the unbanked and underbanked. On October 20, 2016, the FDIC published the results of its most recent survey (2015), the “FDIC National Survey of Unbanked and Underbanked Households.” As noted in the survey's executive summary: “The survey provides estimates of the proportion of U.S. households that do not have an account at an insured institution, and the proportion that have an account but obtained (nonbank) alternative financial services in the past 12 months. The survey also provides insights that may inform efforts to better meet the needs of these consumers within the banking system.” Key highlights include:
- In 2015, 7 percent of U.S. households were unbanked — defined as a household in which no one has a checking or savings account — falling from 7.7 percent when the last study was conducted in 2013.
- In addition, 19.9 percent of U.S. households were underbanked — defined as a household in which members have bank accounts but also use alternative financial services (AFS), such as money orders, check cashing, international remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shop loans, or auto title loans.
- Finally, 68 percent of U.S. households were fully banked — defined as a household in which members have not used AFS in the last 12 months.
- The most common reason households are unbanked is that members “do not have enough money to keep in an account.”
The CFPB issues its annual report from the Student Loan Ombudsman.
Section 1035 of the Dodd–Frank Wall Street Reform and Consumer Protection Act created within the CFPB the position of Private Education Loan Ombudsman, or Student Loan Ombudsman, for receiving, reviewing, and attempting to resolve private student loan borrower complaints, making recommendations to lawmakers and policymakers, and issuing an annual report. On October 17, 2016, the CFPB released the “Annual Report of the CFPB Student Loan Ombudsman,” its analysis of complaints submitted September 1, 2015, through August 31, 2016. The report analyzed more than 5,500 private student loan complaints and approximately 2,300 debt collection complaints regarding private and federal student loans. The executive summary of the report includes the following findings:
- More than 650,000 student loan borrowers rehabilitated a defaulted loan by making monthly payments of $5 for nine months. The CFPB projects that, over the next two years, more than 220,000 of these borrowers will default for a second time and be charged more than $125 million in “unnecessary” interest charges.
- Federal law permits a student loan borrower who experiences financial hardship and is in default to cure the default and enroll in an income-driven repayment (IDR) plan. Borrowers attempting to rehabilitate their loans experienced breakdowns in communications, paperwork processing, and customer service at every stage of the default-to-IDR transition.
- The report cites private credit analysts who project that 45 percent of borrowers who rehabilitate a federal student loan will default again shortly after curing the previous default.
- The report recommends that policymakers and market participants improve the default-to-IDR transition.
The CFPB issues a final rule amending its 2013 mortgage servicing rules.
On October 19, 2016, the CFPB published a final rule in the Federal Register to amend certain mortgage servicing rules issued in 2013 under Regulations Z and X. The rules are generally effective on October 19, 2017, except the provisions relating to periodic statements for borrowers in bankruptcy and successors in interest become effective on April 19, 2018. Small servicers (a servicer that, together with affiliates, services 5,000 or fewer mortgages for which the servicer or affiliate is the creditor or assignee) will continue to be exempt from some of these requirements. The CFPB published a guide on August 4, 2016, to assist small servicers in determining the applicability of the changes.
Among other revisions, the final rule (1) establishes who is a “successor in interest” (SII) for purposes of the rule, establishes servicers’ duties to individuals who assert that they are SIIs, and applies the rule’s protections to confirmed SIIs; (2) changes current provisions requiring servicers to comply with loss mitigation requirements only once during the life of a loan to more than once in certain circumstances; (3) amends other loss mitigation requirements, including the rule’s dual tracking limitations; (4) provides servicers with ways to comply with the rules consistent with bankruptcy laws and the Fair Debt Collection Practices Act; (5) adds a definition of “delinquency”; and (6) clarifies that certain seller-financed transactions and mortgage loans voluntarily serviced for a nonaffiliate without compensation do not count toward the loan threshold in the small servicer exemption.