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Senate Confirms Powell as New Fed Chairman
By a vote of 85 to 12, the Senate on Tuesday voted to confirm Federal Reserve Governor Jerome Powell as chairman of the Fed. Powell first joined the board in 2012 and has played a major role in bank supervision and payments system activities during his tenure.
“We congratulate Jerome Powell on his confirmation to serve as chairman of the Federal Reserve Board,” said ABA President and CEO Rob Nichols. “His high integrity, intelligence and wealth of experience in both monetary policy and regulatory issues will serve him well in this critically important role.” Nichols added that “Chairman Powell has demonstrated his interest in reviewing and refining regulations to ensure they work to reinforce economic growth while preserving the important principles of prudential supervision.”
Nichols also saluted outgoing Fed Chairman Janet Yellen for her leadership of the board over the past four years, noting that “her actions helped strengthen both our economy and the financial system.”
Mulvaney: CFPB's Days of 'Pushing the Envelope' Are Over
The Consumer Financial Protection Bureau’s prevailing governing philosophy of “pushing the envelope” in the name of enforcing consumer protection laws will shift under the bureau’s new leadership, Acting Director Mick Mulvaney said Tuesday in a memo to CFPB staff that was later published as a Wall Street Journal op-ed.
“It is not appropriate for any government entity to ‘push the envelope’ when it comes into conflict with our citizens,” Mulvaney said, referencing a statement made by former CFPB Director Richard Cordray in a press interview. He added that the CFPB’s aggressive approach to court actions can have wide-reaching negative consequences for individuals’ jobs, finances and homes. “If a company closes its doors under the weight of a multiyear Civil Investigative Demand, you and I will still have jobs at the CFPB,” he wrote to bureau staff. “But what about the workers who are laid off as a result? Where do they go the next morning?”
Looking ahead, Mulvaney said that the bureau will pursue enforcement actions only in cases where there is “quantifiable and unavoidable harm to the consumer.” It will also engage in more formal rulemaking, prioritize its actions based on the consumer complaints it receives and use quantitative analysis to consider the costs and benefits of its rules on consumers and institutions, instead of relying on qualitative data--an approach that dovetails with what ABA has long advocated. Read the memo.
CFPB Seeks Feedback on Civil Investigative Demands
The Consumer Financial Protection Bureau yesterday issued a request for information seeking feedback from the public on its processes related to civil investigative demands, which are issued during enforcement actions. The request came after Acting Director Mick Mulvaney last week announced plans to undertake a broad public feedback initiative to ensure that the bureau is fulfilling its statutory requirement to protect consumers.
The RFI seeks information on how the CFPB’s CID processes may be updated, streamlined or revised while minimizing burdens on CID recipients, as well as how the CFPB could better align its processes with other agencies with similar authorities. Commenters are invited to provide specific suggestions on processes that could be modified, as well as feedback on any aspects of the bureau’s processes that should not be changed. Read the RFI. For more information, contact ABA's Virginia O’Neill.
Beneficial Ownership Rule Compliance Looms, Free Article Outlines Strategy
As bankers prepare for the mandatory compliance deadline for the Financial Crimes Enforcement Network’s beneficial ownership rule, a new article from the ABA Banking Journal examines the rule’s requirements and what banks can do to prepare.
The final rule establishes a “fifth pillar” of BSA/AML compliance, requiring banks to have a risk-based customer due diligence procedure in place, in addition to being able to identify and verify the identity of beneficial owners of their legal entity customers. In the article, panelists from ABA’s recent Financial Crimes Enforcement Conference break down who is considered a “beneficial owner” under the rule, and discuss how to identify them.
“There’s technical compliance with the rule, and you want to make sure you get that right,” said Daniel Stipano, a partner with law firm Buckley Sandler. “But you don’t want to lose track of the bigger picture, which is to make sure that you know who you’re doing business with ultimately.”
With the May 2018 mandatory compliance deadline fast approaching, ABA members can access a brand-new beneficial ownership course as part of ABA’s free Frontline Compliance Training, which covers the application of the rule, how to identify legal entity owners, the prongs used to determine beneficial ownership and the expanded coverage of the customer due diligence rule. Read the article. Learn more about the Frontline Compliance Training course.
ABA Supports FASB Proposal to Address Reporting Implications of Tax Reform
In a comment letter to the Financial Accounting Standards Board on Monday, ABA offered its full support for a proposal to adjust regulatory capital balances that were unexpectedly affected by the new tax reform law. The association recommended that the proposal be approved immediately and that early adoption be permitted so that companies may apply the new standard to their 2017 reporting results.
Under current tax accounting, the reduction of deferred tax assets and liabilities are recorded entirely within net income, including those applying to items in accumulated other comprehensive income such as unrealized gains and losses on available-for-sale securities. As a result, not only are net income and regulatory capital distorted, but this treatment also creates onerous operational burdens to track the related amounts in the future. While the FASB proposal will not change the impact to net income, the proposed adjustment between AOCI and retained earnings will allow ending regulatory capital to be appropriately stated and also avoid onerous operational requirements to keep track of the amounts that would have been “stranded” within AOCI.
ABA noted that the reclassification of the stranded tax effects from AOCI to retained earnings represents “a good operational solution and provides a truer economic picture than the current guidance.” The association also encouraged FASB to explore backwards tracing as a long term solution.
Comments on the proposal are being accepted through Feb. 2, and bankers are encouraged to submit their own comments in support of the proposal. ABA has created a template for member bankers to use when submitting their letters to FASB.
ABA Calls for Changes to MLA Interpretive Rule Amendments
In a comment letter to the Department of Defense last Friday, ABA called on the Pentagon to repeal a section of the amendments to its Military Lending Act interpretive rule relating to service members’ ability to finance the purchase of Guaranteed Acceptance Protection insurance with a loan used to purchase the vehicle.
Under the MLA statute and regulation, purchase money loans, such as car loans, are exempt if they are used for the express purpose of financing the purchase of the property securing the credit. The MLA’s recent interpretive rule, however, provides that the exemption does not apply if the loan also finances credit insurance such as guaranteed asset protection, known as GAP. As a covered loan, such loans would be subject to the prohibition in the regulation that prevents non-depository institutions from using a title to a vehicle as security for covered loans.
ABA noted that this interpretation will restrict servicemembers’ ability to obtain GAP insurance, which could cause financial hardship for men in women in uniform and their families. The association added that because the amendments to the interpretive rule appear to be retroactive, this interpretation could affect vehicle loans made since the MLA’s effective date of Oct. 3, 2016. Read ABA's letter. For more information, contact ABA's Nessa Feddis.
First Dakota Hosts AgriVisions 2018
First Dakota National Bank will host AgriVisions 2018 featuring Kevin Van Trump. The event will be held Feb. 13 in Sioux Falls and Mitchell, Feb. 14 in Pierre, and Feb. 15 in Yankton. Agri-business professionals and business owners are invited to attend.
Kevin Van Trump from "The Van Trump Report" will give an update and challenge thought processes on agricultural marketing and analysis. With more than 20 years of experience trading professionally at the CME, CBOT and KCBOT, Van Trump is able to "connect the dots" and simplify the complex moving parts associated with today's markets in a thought-provoking yet easy-to-understand format.
For more details on locations and to register, visit www.firstdakota.com/agriculture. Or call First Dakota at 605.665.4904 or 800.657.5826 to reserve a seat.
Save the Date for Great Plains Tribal Leaders Economic Summit
Dates for the second annual Great Plains Tribal Leaders Economic Summit have been set for April 9-11, 2018, in Rapid City. The Summit will provide a forum for tribal leaders from the Great Plains and Rocky Mountain regions to collaboratively develop regional economic development strategies.
 Question of the Week
Question: Do risk-based pricing notices have to be provided to applicants who are denied?
Answer: No—if an application is denied and an adverse action notice is provided, a risk-based pricing notice or exception notice is not required. See Regulation V, section 1022.74(b):
(b) Adverse action notice. A person is not required to provide a risk-based pricing notice to the consumer under §1022.72(a), (c), or (d) if the person provides an adverse action notice to the consumer under section 615(a) of the FCRA.
https://www.ecfr.gov/cgi-bin/text-idx?SID=ae9bcefcc4371b9c2792cf27349a0175&mc=true&node=se12.8.1022_174&rgn=div8
Section 1022.72(a) of the regulation specifies when the bank generally must provide a risk-based pricing notice to a consumer applying for credit, which is subject to the exceptions set out in section 1022.74.
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