United States: Bank Regulatory News And Trends - August 2019

Last Updated: August 14 2019
Article by Jeffrey L. Hare, Christopher N. Steelman, Adam Dubin and Bethany Krystek

This regular publication from DLA Piper focuses on helping banking and financial services clients navigate the ever-changing federal regulatory landscape.

Fed announces plans to create real-time 24/7 payments service. In a much anticipated move, the Federal Reserve Board announced on August 5 that it will develop a new round-the-clock real-time payment and settlement service, called FedNow℠  , to support faster, safer and more efficient payments for all US banks. A notice of request for comment soon to be published in the Federal Register indicates that the Fed has determined that the banks in its system "should develop a new interbank 24x7x365 realtime gross settlement service with integrated clearing functionality." The proposed new service would support banks in providing end-to-end faster payment services and create the infrastructure to promote such a universal system, "alongside services provided by the private sector," as the Fed explained in an 8-page FAQs issued with the request for comment. The Fed also said it intends to explore expanding the hours for the Fedwire® Funds Service and the National Settlement Service to a round-the-clock basis, as part of an upcoming request for public comment.

  • "Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community," Fed Board Governor Lael Brainard, the Fed's point person on payments issues, said in an August 5 speech at the Kansas City Fed. "FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers." In the days leading up to the Fed announcement, Chairman Jerome Powell, in correspondence with Congress and at a July 31 news conference, also came out in strong support of a Fed-designed system. The vote in favor of advancing the proposal at the Fed Board's August 2 meeting was 4-1, with Randal Quarles, vice chair for supervision, casting the sole vote in opposition.
  • As reported in the July 29 edition of this publication, the idea of a Fed-built payments system has generated both support and opposition in Congress. A group of Democratic Senate and House members who had introduced legislation calling on the Fed to take the lead on building a new payments system applauded the Fed's action. However, other members of Congress have expressed skepticism and competing legislation has been introduced to require the Fed to satisfy certain conditions before launching the new service.
  • The Fed payments proposal has divided the banking industry, with smaller community banks and credit unions supporting the move, and bigger banks opposing it out of concern that it could undermine the existing Real-Time Payments network established by 24 of the nation's largest banks through the Clearing House Payments Company. The Independent Community Bankers of America, which has long urged the Fed to take action, called the proposal a "victory for Main Street." But the ABA, in its August 5 statement, encouraged banks to connect to the Clearinghouse's RTP network while the Fed's system is under construction, and said that the Fed's system should be "fully interoperable with the RTP network."
  • The public comment period on the Fed's payments proposal will be 90 days.

Fed, FDIC complete living will evaluations, extend filing deadline. The Federal Reserve and the FDIC announced on July 26 that they have completed their evaluations of the 2018 resolution plans for 82 foreign banks, and that they will extend the deadline for the next resolution plans from those firms, as well as 15 domestic banks, to July 1, 2021. Commonly known as living wills, resolution plans provide a strategy for rapid and orderly resolution under bankruptcy. Living wills for foreign banks are focused on their US operations. The Fed and FDIC said the deadline extension is intended to allow firms time to prepare their plans as the two agencies conclude work on a proposal announced in April that would revise the resolution plan rule. That proposal would, among other changes, create tiered requirements meant to be more tailored to the size and complexity of individual institutions. The agencies' evaluations did not identify shortcomings or deficiencies in the 2018 resolution plans of the 82 foreign banks, but they are requesting additional information in the next resolution plans from seven firms.

CFPB to allow QM patch for GSEs to expire. The Consumer Financial Protection Bureau on July 25 issued an advance notice of proposed rulemaking that would allow for the scheduled expiration by January 10, 2021, of the temporary qualified mortgage provision for loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac, under the Bureau's Ability to Repay/Qualified Mortgage (ATR/QM) Rule. Under Regulation Z of the Truth in Lending Act, creditors are required  to make a reasonable, good faith determination of a consumer's ability to repay any residential mortgage loan, and loans that meet Regulation Z's requirements for "qualified mortgages" obtain certain protections from liability. One category of QMs is loans eligible for purchase or guarantee by the government-sponsored enterprises Fannie and Freddie. CFPB may allow for a short extension beyond the January 2021 date to facilitate a smooth and orderly transition away from the Temporary GSE QM loan category. CFPB is also considering possible revisions to Regulation Z's general qualified mortgage definition in light of the planned expiration and is soliciting public comment on possible revisions. The deadline for submission of comments will be 45 days after the proposal is published in the Federal Register.

CFPB extends comment period on FDCPA rulemaking. CFPB announced on August 2 that it will extend the public comment period by 30 days, until September 18, on its notice of proposed rulemaking implementing the Fair Debt Collection Practices Act. Consumer groups had asked for a 60-day extension to have more time to review and respond to the 538-page proposed rule, unveiled in May. The proposal includes limits on how many calls per week debt collectors could place to consumers and would allow consumers to unsubscribe to text messaging and emails. It would also require collectors to provide additional itemized information to help consumers identify debts and respond to collection attempts, and clarify how collectors may use communications technologies developed since the FDCPA was enacted in 1977.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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