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Category Archives: Regulatory Developments

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FDIC Opens for Business for Industrial Banks

Posted in Regulatory Developments

On March 17, 2020, the Federal Deposit Insurance Corporation (FDIC) announced two significant developments relating to industrial banks (also sometimes called industrial loan companies). First, in a notice of proposed rulemaking (NPR), the FDIC laid out the regulatory regime it expects to apply to companies not subject to consolidated supervision by the Board of Governors… Read More

Patchwork of Coronavirus (COVID-19) Mortgage and Rent Forbearance Efforts Creates Challenges for Mortgage Lenders and Servicers

Posted in Mortgage, Regulatory Developments

As consumers and business face ever-worsening financial conditions in the wake of the COVID-19 pandemic, federal agencies and some states and localities have stepped in to provide foreclosure and eviction relief.  Not surprisingly, the approaches to providing this relief vary greatly, creating significant operational challenges for servicers operating in multiple jurisdictions. We discuss below these… Read More

Scope of Agent of a Payee Exemption in California Appears Poised for Expansion

Posted in Regulatory Developments

The California Department of Business Oversight (DBO) has finally released a much-anticipated draft rulemaking relating to the scope of the “agent of a payee” exemption under the California Money Transmission Act. The DBO’s rulemaking appears to affirm a broader interpretation of the scope of the exemption than has been historically applied, albeit with a number… Read More

Federal Reserve Issues Final Rule on Control Regulations

Posted in Regulatory Developments

On January 30, 2020, the Board of Governors of the Federal Reserve System approved a final rule (the Final Rule) revising the regulations related to the determination of “control” of banks under the Bank Holding Company Act (BHC Act) and of federal savings associations under the Home Owners’ Loan Act (HOLA). The Final Rule is… Read More

FDIC Publishes Brokered Deposits Proposed Rule

Posted in Regulatory Developments

On February 10, 2020, the Federal Deposit Insurance Corporation (FDIC) published a proposed rule intended to modernize the regulatory treatment of brokered deposits (Proposed Rule). The Proposed Rule would amend 12 C.F.R. parts 303 and 337 to set forth the regulatory scheme for determining whether deposits placed through deposit placement arrangements are classified as brokered… Read More

Agencies Propose Amendments to Volcker Rule Covered Fund Provisions

Posted in Regulatory Developments

On January 30, 2020, five federal agencies proposed amendments to the Volcker Rule related to the prohibition on investing, sponsoring, and having certain relationships with covered funds (the “Proposed Funds Rule”). The Proposed Funds Rule comes on the heels of the conclusion of a separate rulemaking process dealing primarily with the Volcker Rule’s proprietary trading… Read More

CFPB Takes a Step Away from “You Know It When You See It” Standard for UDAAP Abusiveness

Posted in CFPB, Regulatory Developments, UDAAP

On February 6, 2020, the Consumer Financial Protection Bureau published a Statement of Policy Regarding Prohibition on Abusive Acts or Practices to “convey and foster greater certainty” regarding how it will apply the “abusiveness” standard in exercising its sweeping UDAAP authority under the Dodd-Frank Act. This is a welcome move by the Bureau, which previously… Read More

Attorneys General Push Against OCC’s Attempts to Codify “Valid When Made” Rule

Posted in Credit Cards, Regulatory Developments

On January 21, 2020, twenty-two State Attorneys General and the Hawaii Office of Consumer Protection submitted a comment letter to the Office of the Comptroller of the Currency in opposition to its proposed rulemaking to resolve the “confusion” stemming from the Second Circuit’s 2015 decision in Madden v. Midland Funding LLC. Read our client alert.

California Regulator Reiterates that Credit Sales Cannot be Used to Evade Financing Law

Posted in Regulatory Developments

In two recent actions, the California Department of Business Oversight (DBO) addressed whether companies that purchase retail installment contracts should be considered bona fide purchasers of credit sales or whether those transactions should be considered loans subject to the California Financing Law (CFL). In doing so, the DBO reiterates existing case law and sets forth… Read More

Are You a Money Transmitter in Massachusetts? In Rhode Island?

Posted in Regulatory Developments

As we enter 2020, the payments and money transmission regulatory landscape continues to evolve on a state-by-state basis.  Newly adopted regulations in Massachusetts affirm that “agent of a payee” transactions meeting certain criteria, as well as funds transfer services provided to business customers, are not subject to regulation under the state’s money transmission law. Additionally,… Read More

The DBO Notifies CFL Lenders of New Rate and Other Limitations Imposed by AB 539

Posted in Regulatory Developments

The California Department of Business Oversight (DBO) has issued a Release that summarizes the provisions of California Assembly Bill 539 and addresses some implementation issues. This bill was chaptered as Chapter 708 of the 2019 Statutes and is effective January 1, 2020. Our earlier Client Alert discussed the new law in detail. Read our client alert.

Federal Regulators Issue Joint Guidance on Banking Hemp-Related Businesses

Posted in Regulatory Developments

According to new guidance released on December 3, 2019, banks are not required to file suspicious activity reports on customers solely because they are engaged in the legal growth or cultivation of hemp. The guidance was issued by the federal banking agencies and the Financial Crimes Enforcement Network in consultation with the Conference of State… Read More

Long Awaited HVCRE Rule Clarifies Capital Treatment of Certain Real Estate Loans

Posted in Regulatory Developments

On November 19, 2019, the federal banking agencies issued a final rule that incorporates a new definition of an “HVCRE exposure” into the U.S. regulatory capital rules. The new definition is substantially that of an “HVCRE ADC loan” from Section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, enacted into law on… Read More

After Madden, OCC and FDIC Propose to Reaffirm “Valid When Made” Rule

Posted in Regulatory Developments

The Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation have taken steps to reaffirm the “valid when made” doctrine in response to Madden. We discuss the key takeaways from the agencies’ proposed rules and how this will affect all national banks and state banks. Read our client alert.

Is Payroll Processing Money Transmission? New York May Be Weighing In

Posted in Electronic Payments, Regulatory Developments, State Regulators

It seems like a natural progression for a company that provides any sort of payments-related information processing to migrate from handling data about payments to seeking to handle the payments themselves. But it can be a challenge for any company, particularly a younger one, to determine whether a payments-related service it wishes to offer —… Read More

California Enacts Interest Rate and Other Restrictions on Consumer Loans

Posted in Credit Reports, Regulatory Developments

As expected, California has enacted legislation imposing interest rate caps on larger consumer loans. The new law, AB 539, imposes other requirements relating to credit reporting, consumer education, maximum loan repayment periods, and prepayment penalties. The law applies only to loans made under the California Financing Law (CFL). Governor Newsom signed the bill into law on… Read More

Uncharted Waters: California Regulator Issues Draft Commercial Financing Disclosure Regulation

Posted in Regulatory Developments

On July 26, the California Department of Business Oversight (DBO) issued a draft regulation and draft disclosures to implement the state’s first-of-its-kind commercial financing disclosure law enacted last year. With this draft regulation, the DBO wades into uncharted waters in implementing the first law requiring disclosures of key terms in connection with certain commercial financings by non-banks. Read our client… Read More

Financial Services Report – Fall 2019

Posted in Arbitration, CFPB, Credit Cards, Credit Reports, Electronic Payments, Enforcement Actions, Fair Lending, Investigations, Mobile Payments, Mortgage, Payday Lending, Preemption, Privacy, Regulatory Developments, State Regulators, Student Lending

We start this issue with a feeling of déjà vu all over again. Decisions made during the mortgage crisis are back in the news with a powerhouse legal ruling and the Treasury’s initial thinking on how to turn back time. First, the Fifth Circuit issued an en banc decision finding the Federal Housing Finance Agency… Read More

Volcker Rule Relief for Foreign Banking Entities

Posted in Regulatory Developments

On August 20, 2019, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) approved a final rule which will amend the Volcker Rule to simplify and tailor compliance with Section 13 of the Bank Holding Company Act’s restrictions on a bank’s ability to engage in proprietary trading and… Read More

Amendments to Volcker Rule Regulations

Posted in Regulatory Developments

On August 20, 2019, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation approved significant amendments  to the Volcker Rule regulations. These amendments address to some extent industry concerns about the complexity of the existing regulations and certain other aspects that have been seen as disruptive of markets. On the whole, the amendments… Read More

FHFA Publishes Final Rule on Validation and Approval of Credit Score Models

Posted in Mortgage, Regulatory Developments

On August 16, the Federal Housing Finance Agency issued a final rule on validation and approval of third-party credit score models that Fannie Mae and Freddie Mac use in deciding whether to purchase residential mortgage loans. The FHFA is the GSEs’ prudential regulator and, since 2008, has served as their conservator. In doing so, the… Read More

On Again, Off Again: Fannie and Freddie Drop the Applicant’s Language Preference Question from the Revised Uniform Residential Loan Application Form

Posted in Mortgage, Regulatory Developments

At the direction of the Federal Housing Finance Agency (FHFA), government sponsored enterprises Fannie Mae and Freddie Mac (the GSEs) announced in June 2019 that the optional use period for the redesigned Uniform Residential Loan Application (URLA) and automated underwriting system (AUS) implementations would be postponed. FHFA has now directed the GSEs to make specific… Read More

Federal Reserve to Create Faster Payments System

Posted in Electronic Payments, Regulatory Developments

On August 5, the Board of Governors of the Federal Reserve System issued a notice and request for comment on its determination that the Federal Reserve Banks should develop a new interbank faster payments system.  The Reserve Banks’ new system — the “FedNow” service — would have a targeted launch date in 2023 or 2024…. Read More