Banking and Finance Law Daily Wrap Up, WORTH NOTING—Other regulatory, legislative, litigation, and industry developments, (Nov 19, 2021)

By WK Editorial Staff

A weekly roundup of other items of interest to the banking and finance law community.

BANKING OPERATIONS—The Federal Deposit Insurance Corporation has issued a correcting amendment to the authority citation and regulatory text regarding the applicability of annual independent audits and reporting requirements for fisc ...

By WK Editorial Staff

A weekly roundup of other items of interest to the banking and finance law community.

BANKING OPERATIONS—The Federal Deposit Insurance Corporation has issued a correcting amendment to the authority citation and regulatory text regarding the applicability of annual independent audits and reporting requirements for fiscal years ending in 2021, which was published in an interim final rule in October 2020 (see Banking and Finance Law Daily, Oct. 21, 2021). The rule would allow insured depository institutions (IDIs) to temporarily freeze consolidated total assets as of Dec. 31, 2019, for the purpose of determining compliance with the audit and reporting requirements of 12 CFR Part 363 for fiscal years ending in 2021. The correcting amendment makes no change to the relief provided by the interim final rule but clarifies the authority citation and revises 12 CFR 363.1 by removing the temporary relief regarding the applicability of annual independent audits and reporting requirements for fiscal years ending in 2021 from paragraph (a) and adding the temporary relief into paragraph (e). The correction is effective on Nov. 22, 2021, except for instruction 3, which is effective Nov. 22, 2021 through Dec. 31, 2021.

COMMUNITY DEVELOPMENT—9th Cir.: Addressing a previously decided Fair Housing Act (FHA) case, the U.S. Court of Appeals for the Ninth Circuit: (i) withdrew its prior Aug. 23, 2021, opinion (see Banking and Finance Law Daily, Aug. 27, 2021); (ii) replaced it with a superseding court opinion affirming the federal district court’s summary judgment in favor of the defendant Maricopa Domestic Water Improvement District (District); (iii) denied a petition for a panel rehearing; and (iv) denied a petition for rehearing en banc. The Southwest Fair Housing Council, Inc. (SFHC) and two public housing residents challenged, as impermissibly discriminatory under the FHA, the District’s policy of increasing to $180 the refundable security deposit required of new public housing customers before the District would agree to provide water services, while non-public housing customers were subject only to a $55 deposit—purportedly causing a “disparate impact” under the FHA because the District’s public housing customers “are disproportionately African American, Native American, and single mothers.” Now, in its updated replacement opinion of Nov. 12, 2021, the Ninth Circuit panel has clarified that, “to make out a prima facie case of disparate impact, the plaintiff must demonstrate: (1) the existence of a policy, not a one-time decision, that is outwardly neutral; (2) a significant, adverse, and disproportionate effect on a protected class; and (3) robust causality that shows, beyond mere evidence of a statistical disparity, that the challenged policy, and not some other factor or policy, caused the disproportionate effect.” Although the appellate panel determined that the SFHC had adequately established “robust causation” and met their prima facie burden, the Ninth Circuit panel still affirmed the lower court’s judgment in favor of the District because the District “established by undisputed evidence that the policy served in a significant way the District’s legitimate business interests and because Appellants [SFHC] failed to establish a triable issue of fact that there existed an equally effective, but less discriminatory, alternative.” Moreover, SFHC did not “adduce evidence sufficient to establish a triable issue of fact” with respect to its disparate treatment claim (Southwest Fair Housing Council, Inc. v. Maricopa Domestic Water Improvement District, Nov. 12, 2021, Bea, C.).

CONSUMER CREDIT—4th Cir.: The U.S. Court of Appeals for the Fourth Circuit was called to review proposed class-action claims by Virginia consumers against online lenders affiliated with a federally recognized Native American tribe, certain tribal officials, and two non-members affiliated with the tribal lenders. The consumers, who had defaulted on their short-term loans from the lenders, alleged various violations of state and federal laws. Agreeing with the lower court’s rejection of the defendants’ motion to compel arbitration and that court’s refusal to dismiss most of the consumers’ claims, the Fourth Circuit: (i) determined that the pertinent arbitration provision was unenforceable as a prospective waiver of the borrowers’ federal rights; (ii) rejected the tribal officials’ invocation of “tribal sovereign immunity;” and (iii) concluded that the underlying loan agreements’ “choice of tribal law” provision was unenforceable as a “violation of Virginia’s strong public policy against unregulated lending of usurious loans.” At the same time, upholding the lower court’s ruling, the Fourth Circuit did not allow the consumers’ Racketeer Influenced and Corrupt Organizations Act (RICO) claim against the tribal officials to advance, determining that RICO does not authorize private plaintiffs to sue for injunctive relief (Hengle v. Treppa, Nov. 16, 2021, Rushing, A.).

CONSUMER FINANCIAL PROTECTION BUREAU—The Consumer Financial Protection Bureau is requesting to renew an existing information collection, “Generic Information Collection Plan for the Collection of Qualitative Feedback on Bureau Service Delivery.” The information collection plan provides for the collection of qualitative feedback from consumers, financial institutions, and stakeholders on a range of services the Bureau provides. The Bureau expects this feedback to include insights into consumer, financial institution, or stakeholder perceptions, experiences, and expectations, provide an early warning of issues with service, or focus attention on areas where communication, training or changes in operations might improve delivery of products or services. Comments are due by Jan. 18, 2022.

CONSUMER FINANCIAL PROTECTION BUREAU—The Consumer Financial Protection Bureau has issued its financial report for fiscal year 2021, which provides summary results of the CFPB’s operational activity. In an introductory message, CFPB Director Rohit Chopra noted that “America today is far different than the America of just one year ago,” and that “[t]he COVID-19 pandemic has had a significant impact to all of America.” He stated that while there are signs that the tide is turning, “we must not forget that the financial lives of millions of Americans are in ruin. Experts expect distress across a number of consumer credit markets, including an avalanche of loan defaults and auto repossessions.” Chopra stated that “due to the economic devastation stemming from COVID-19, millions face the prospect of losing their home, with communities of color particularly at risk,” and added that “administration of consumer protection laws can help families navigate their options to save their homes.”

DEBT COLLECTION—Under the Consumer Financial Protection Bureau’s Debt Collection Rule, debt collectors who adopt and follow certain procedures can obtain a bona fide error defense from civil liability for unintentional violations of the prohibition against third-party communications when communicating by email or text message. For text message communications, one element of those procedures includes using a “complete and accurate database” to confirm that the consumer’s telephone number has not been re-assigned to another user. The Rule’s commentary identifies the FCC’s Reassigned Numbers Database as a “complete and accurate database.” The FCC has now published that database.

FINANCIAL STABILITY—The Financial Stability Oversight Council on Nov. 15, 2021, convened in executive session by videoconference. During the meeting, the Council heard a presentation from Treasury Department staff on the recently issued progress report by staff of agencies participating in the Inter-Agency Working Group on Treasury Market Surveillance. The Council also received an update from Treasury staff on the report on stablecoins issued by the President’s Working Group on Financial Markets, and an update from Treasury staff on the development of the Council’s 2021 annual report. The Council also voted to approve the minutes of its previous meeting on Oct. 21, 2021.

FINANCIAL STABILITY—The Treasury Department’s Office of Financial Stability has published an agency report on the Troubled Asset Relief Program for fiscal year 2021. The report is the first in a series of separate reports to provide the fiscal year 2021 financial and performance information for TARP. Among other things, the report contains a statement from the Deputy Assistant Secretary for Community and Economic Development providing his assessment of the reliability and completeness of the financial and performance data contained in the report, as well as a summary status of TARP programs; a summary of the TARP mission and OFS, including OFS programs, initiatives and operational goals; a financial section, providing the Independent Auditor’s Report and the financial statements; and additional TARP historical information.

FINANCIAL TECHNOLOGY—The Financial Crimes Enforcement Network (FinCEN) has held a virtual FinCEN Exchange convened to focus on identifying and combatting illicit financial flows associated with environmental crimes and related money laundering. Representatives from financial institutions, law enforcement, and several government agencies attended the session. Topics discussed at the Exchange included illicit financial flows related to wildlife trafficking, illegal logging, illegal fishing, illegal mining, and waste and hazardous substances trafficking, and possible solutions for better understanding the related illicit flows.

LOANS—Representatives Blaine Luetkemeyer (R-Mo), Ranking Member of the House Small Business Committee and Consumer Protections and Financial institutions Subcommittee, and French Hill (R-Ark), wrote to Small Business Administration Administrator Isabel Guzman to express their concern with the SBA’s support for the agency being a direct lender of 7(a) loans. The representatives urged the SBA to stop its direct lending efforts in order to allow private sector lenders to do their jobs. “The SBA should focus on improving its existing programs and incentivizing financial institutions to participate as lenders instead of expanding its own footprint,” the legislators wrote. They also noted in their letter that the SBA has shown its “inability to effectively operate a direct lending program over its lifetime and has failed to impose effective guardrails for these programs.” Further, the SBA partners with financial institutions to guarantee small business loans under the 7(a) loan program, and the “partnership model has proven extremely successful.”

LOANS—The Federal Reserve Board has filed a periodic report providing updates pursuant to Section 13(3) of the Federal Reserve Act concerning a lending facility established by the Fed in response to economic effects of the COVID-19 pandemic. The Fed is required to submit an initial report regarding each facility established under Section 13(3) and periodic updates at least every 30 days thereafter. This report provides the next periodic update on the Term Asset-Backed Securities Loan Facility (TALF), the Municipal Liquidity Facility (MLF), the Paycheck Protection Program Liquidity Facility (PPPLF), the Main Street New Loan Facility (MSNLF), the Main Street Expanded Loan Facility (MSELF), the Main Street Priority Loan Facility (MSPLF), the Nonprofit Organization New Loan Facility (NONLF), and the Nonprofit Organization Expanded Loan Facility (NOELF). In addition, the Fed has released transaction-specific disclosures for the TALF, MLF, and PPPLF.

Attorneys: Christopher Brancart (Brancart & Brancart) for Southwest Fair Housing Council, Inc., Tavita Pena, and Jennifer Peters. Jeffrey C. Matura (Barrett & Matura, P.C.) for Sirius XM Holdings Inc. and Maricopa Domestic Water Improvement District. Matthew W. H. Wessler (Gupta Wessler PLLC) for George Hengle. Rakesh N. Kilaru (Wilkinson Stekloff LLP) for Sherry Treppa.

Companies: Golden Valley Lending, Inc.; Majestic Lake Financial, Inc.; Mountain Summit Financial, Inc.; Silver Cloud Financial, Inc.; Southwest Fair Housing Council, Inc.; Sirius XM Holdings Inc.; Upper Lake Processing Service, Inc.

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