The following newsletter provides a roundup summarizing enforcement actions, guidance, rulemakings, and other public statements taken by a federal and/or state financial services regulatory agency, specifically focusing on: (1) the source of the development (regulator, legislative body, etc.), (2) the subject matter (consumer lending, money transmission, capital markets, etc.), and (3) the general issue covered.
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- Interagency (Federal). Community Reinvestment Act (CRA). Federal banking regulators jointly issued a final rule (see fact sheet and overview of key objectives) to strengthen and modernize regulations implementing the CRA including: encouraging lending in low- and medium-income communities, adapting to changes in technology, providing greater clarity and consistency in the application of CRA regulations, and tailoring evaluation and data collection to bank size and type. Most of the rule's requirements will be applicable on January 1, 2026, while the remaining requirements and data reporting will be applicable on January 1, 2027. Separately, FRB released a Board Memo on the action.
- Interagency (Federal). Climate-Related Financial Risk. Federal banking regulators issued final interagency guidance (see FRB Board Memo and Summary of Final Principles) that provide a high-level framework ("principles") for the safe and sound management of exposures to climate-related financial risks, intended for financial institutions with more than $100B in total consolidated assets. The guidance is effective upon publication in the Federal Register.
- Federal Reserve Board & Treasury Department. Payments & Central Bank Digital Currency (CBDC). FRB Gov. Bowman and Treasury Under Secretary for International Affairs spoke at a Harvard Law School Roundtable on CBDC and responsible innovation in money and payments. Separately, FRB Gov. Waller spoke at a payments conference on the role of the agency in the payments system, instant payments, and CBDC.
- Federal Reserve Board. Interchange Fees / Durbin Amendment. FRB published a request for comment on a proposed rule (see Board Memo) to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction as follows: (1) lower the base fee from 21 to 14.4 cents; (2) lower the ad valorem fee from 5 to 4 basis points; and (3) increase the fraud-prevention fee from 1 to 1.3 cents. Additionally, the proposal would establish a regular process for updating the maximum amount every other year going forward. The deadline for comments is 90 days after publication in the Federal Register. Separately, Gov. Bowman released a dissenting statement on the proposal.
- Consumer Financial Protection Bureau. Open Banking. CFPB proposed a rule to establish 12 CFR part 1033, to implement section 1033 the CFPA, which would require depository and non-depository entities to make available to consumers and authorized third parties certain data relating to consumers' transactions and accounts; establish obligations for third parties accessing a consumer's data, including important privacy protections for that data; provide basic standards for data access; and promote fair, open, and inclusive industry standards. The deadline for comments is December 29, 2023. Additionally, Director Chopra provided prepared remarks on the rulemaking. Separately, the agency published "fast facts" on the proposal. For additional details on the rulemaking, please see our advisory on the topic.
- Consumer Financial Protection Bureau. Commercial & Mortgage Lenders. CFPB Dep. Director Martinez spoke at an event on agency priorities, including small business lending and appraisal bias, and he also addressed the case before SCOTUS on the agency's funding structure.
- Treasury Department. Combating the Financing of Terrorism / Anti-Money Laundering (CFT/AML) & Beneficial Ownership. Treasury Under Secretary for Terrorism and Financial Intelligence Nelson spoke at an AML conference touting the Department's CFT efforts in combating a range of illicit finance threats, the steps taken to deny Hamas access to funding streams, and efforts to strengthen the United States' AML/CFT regime. Additionally, he attended a meeting in Riyadh, Saudi Arabia summarizing recent U.S. CFT efforts.
- Treasury Department. Artificial Intelligence (AI). Treasury Assistant Secretary for Financial Institutions Steele gave remarks at an event on responsible AI innovation for the public sector covering cloud computing, the potential benefits and risks of AI in financial institutions, AI in consumer finance, AI and the insurance sector, and actions by policymakers.
- Financial Crimes Enforcement Network. Combating the Financing of Terrorism / Anti-Money Laundering (CFT/AML) & Cryptocurrency. FinCEN announced a proposed rulemaking that identifies international Convertible Virtual Currency Mixing (CVC mixing) as a class of transactions of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act. The deadline for comments is 90 days after publication in the Federal Register.
Enforcement and Litigation
- Federal Reserve Board & New York Department of Financial Services. Troubled Bank Matters. FRB and NY DFS issued orders to a commercial bank regarding alleged violations of customer identification rules and for deficient third-party risk management practices relating to the bank's issuance of prepaid card accounts, including $29.5 million in penalties.
- Department of Justice. Redlining. DOJ announced that its Combating Redline Initiative secured over $107 million in relief, including a $9 million agreement with a bank to resolve allegations that it engaged in a pattern or practice of redlining predominately Black and Hispanic neighborhoods in Florida. Separately, Attorney General (AG) Garland and Assistant AG Clarke spoke on the Department's anti-redlining initiative.
- Multistate. Payments. Forty-four state financial services regulators and fifty states attorneys general entered into a settlement agreement with a payments firm to resolve allegations that the company initiated unauthorized electronic transactions.
Other News of Note
- Conference of State Bank Supervisors. Ransomware. CSBS released updates to the Ransomware Self-Assessment Tool (R-SAT) for banks to help mitigate new risks associated with ransomware attacks and identify security gaps.
Michael Buckalew is a regulatory analyst with Davis Wright Tremaine LLP.