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CFPB Report August 8, 2014
CFPB Asks about Agreements with Financial Institutions
On Wednesday, August 6, 2014, the CFPB sent a letter to the 14 "Big Ten" universities urging them to disclose their agreements with financial institutions which result in providing financial products to students on campus. According to a Bureau blog post, The letter was sent to follow up an effort the CFPB began in 2013 to collect information about the marketing of financial products to students at universities.
In the letter, CFPB Student Loan Ombudsman Rohit Chopra asserted, “This failure to be transparent may pose potential consumer protection risks. Prominent and easily locatable disclosure of these agreements can help students and families understand the nature of the relationship between your school and the financial institution.”
CBA Submits “Big Data” Comments
On Tuesday, August 5, 2014 CBA submitted a joint comment letter with the American Bankers Association to the Department of Commerce’s National Telecommunications and Information Administration which addressed how consumers are benefitting from “big data” innovations in the financial industry. CBA offered support for “big data” usage, citing benefits such as fraud prevention and efficiencies in the marketplace. CBA also urged regulators to allow big data to develop organically and not to stifle innovation. CBA offered support for the current legal framework of federal and state laws, as well as guidance and industry best practices which help to protect consumers.
Federal Reserve, FDIC Want New Living Wills from Top 11 Banks
On Tuesday, August 5, 2014, the Federal Reserve and the FDIC requested 11 of the largest banks revise their living wills, which are mandated by the Dodd-Frank ACT. The agencies regarded the wills assumptions to be unrealistic or inadequately supported, including: (1) assumptions about the likely behavior of customers, counterparties, investors, central clearing facilities, and regulators; and (2) failure to make or identify the kinds of changes in firm structure and practices necessary to enhance the prospects for orderly resolution.
The second round of living wills, which are due July 1, 2015, must:
- Establish a rational and less complex legal structure taking into account the best alignment of legal entities and business lines to improve the firm's resolvability; Develop a holding company structure supporting resolvability;
- Amend, on an industry-wide and firm-specific basis, financial contracts to provide for a stay of certain early termination rights of external counterparties triggered by insolvency proceedings;
- Ensure the continuity of shared services which support critical operations and core business lines throughout the resolution process; and
- Demonstrate operational capabilities for resolution preparedness, such as the ability to produce reliable information in a timely manner.
FDIC Launches Youth Savings Account Pilot Program
On August 4, 2014, the FDIC announced the launch of its Youth Savings Account Pilot Program, which, according to the agency, “seeks to identify and highlight promising approaches to offering financial education tied to the opening of safe, low-cost savings accounts to school-aged children.” Inviting FDIC-insured institutions to apply and participate, the FDIC said the program will first look at partnerships during the 2014-2015 school year, and then recognize partnerships during the 2015-2016 school year. After the research is completed, the FDIC will publish a report outlining the financial institutions with best practices on combining financial education and access to a savings account with schools and other organizations.
OCC Publishes Guidance on Debt Sales
On Wednesday, August 6, 2014, the Office of the Comptroller of the Currency (OCC) posted a bulletin on consumer debt sales which discussed supervisory safety and soundness concerns and opined on specific consumer protection issue. The OCC outlined specific bank practices which might prompt further regulatory oversight, including:
- Ensuring appropriate internal policies and procedures have been developed and implemented to govern debt-sale arrangements consistently across the bank;
- Performing appropriate due diligence when selecting debt buyers;
- Ensuring debt-sale arrangements with debt buyers cover all important considerations;
- Providing accurate and comprehensive information regarding each debt sold at the time of sale;
- Ensuring compliance by the bank with applicable consumer protection laws and regulations; and
- Implementing appropriate oversight of debt-sale arrangements.
Trades Lend Support for Cybersecurity
On Friday, August 1, 2014, CBA and other trade associations wrote to Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) in support of the “Cybersecurity Information Sharing Act of 2014” (CISA), (S. 2588), which received favorable report out of the Senate Select Committee on Intelligence by a 12-3 bipartisan vote. The bill would provide more effective information sharing between private and public sector interests, and help protect customers from cyber-attacks. As cyber threats continue to grow, many sectors without robust protections are becoming increasingly vulnerable to cyber-attacks. CISA would relieve some of these tensions by strengthening the ability of the private sector and federal government to work together to develop a more effective information sharing framework to respond to cyber threats. It would also provide narrow liability protections while strengthening, and making explicit, privacy protections.