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One of the key provisions of the Dodd-Frank Act rollback law signed by President Trump on May 24, 2018, hasn’t met its early promise for U.S. community banks. Recently proposed rules to implement simplified capital requirements have fallen short of the industry’s expectations when the bank deregulation law was enacted in May.

On November 21, 2018, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency jointly announced a proposed rule to simplify capital requirements for qualifying community banking organizations that opt into the community bank leverage ratio framework. The agencies are seeking public comment on a proposal that would simplify regulatory capital requirements for qualifying community banking organizations, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155 regulatory reform bill).  Continue Reading Community Banks Disappointed with Federal Regulators’ Proposed Community Bank Leverage Ratio

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Co-Authored by Erin Fonte and Brenna McGee

Continuing from last week’s post, here is the second half of our “Top 10 List” of key issues U.S. financial institutions, non-banks providing financial services, and financial technology (fintech) entities should plan for and watch throughout 2019.

  1. OCC Fintech Charter

On July 31, 2018, after several years of discussion, the Office of the Comptroller of the Currency (OCC) announced that it is accepting applications for special purpose national bank charters for fintech companies. Long anticipated by the fintech industry and opposed by multiple state regulators, the OCC fintech charter could potentially alter the financial services landscape for nondepository financial institutions. For fintech companies serving customers in multiple states, the OCC fintech charter could reduce the administrative and compliance challenges posed by the existing patchwork of state licensing requirements. But it comes at a steep cost because fintech companies would have to meet the stricter, bank-like regulatory requirements associated with a bank charter.  Continue Reading Crumpets, Congress, Cannabis and Crypto: Top 10 Issues for Financial Services in 2019 – Part 2

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Co-Authored by Erin Fonte and Brenna McGee

As an eventful 2018 comes to a close, we look ahead to 2019 and our “Top 10 List” of key issues U.S. financial institutions, non-banks providing financial services, and financial technology (fintech) entities should plan for and watch throughout the upcoming year. The first five items on the list are discussed below, and the remainder of our list will follow shortly in another post.

  1. Brexit

We will start the list with a couple of topics from “over the pond” that will have a continuing impact on U.S. financial services entities. The British Parliament was scheduled to vote on Tuesday on the agreement that Prime Minister Theresa May reached with the European Union (EU) for Britain’s departure from the EU, commonly referred to as “Brexit.” But in an unscheduled address to Parliament on Monday, May said that she would seek to postpone the parliamentary vote, noting that if the vote were to be held as planned, her proposal “would be defeated by a significant margin.” As a result, May’s own party triggered a no-confidence vote on May that would have seen her removed as Prime Minister if she lost. By a vote of 200 to 117, May won a vote of confidence in her leadership and is now immune from a leadership challenge for a year.  Continue Reading Crumpets, Congress, Cannabis and Crypto: Top 10 Issues for Financial Services in 2019 (Part 1 of 2)

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This article originally appeared in the November 2018 edition of National Mortgage Professional Magazine.

In the fallout from the 2008 financial crisis, courts across the United States were inundated with litigation challenging the legitimacy of mortgages, notes, and the records purporting the transfer or assign them. Such claims included asserting that endorsements of promissory notes were not enforceable, claiming assignments of mortgages were executed without authority, and allegations that the note, mortgage, or associated disclosure documents were neither presented to nor signed by the borrowers. In recent years, as the economy appears to have improved, much of this litigation has died down. However, it does not take much imagination to assume that if and when the next economic downturn hits, some borrowers may again find themselves in default on their mortgage obligations, and in turn may seek to challenge the enforceability of those agreements.  Continue Reading What’s Past is Prologue: Applying Lessons from the Financial Crisis to the Future of eMortgage and eNote Litigation

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Co-Authored by Erin Fonte

Cryptocurrencies have captured the imaginations of individuals and emerging businesses drawn to their potential to serve as alternative stores of value, to reduce transaction costs by eliminating intermediaries, and―most notably in popular culture and media―to provide eye-catching opportunities for speculative investing. Coin valuations for well-established players Bitcoin and Ethereum have fallen sharply since late 2017/early 2018, and new players continue to enter and leave the marketplace. As noted previously in this blog, regulators are taking interest.

Much less appreciated and often overlooked is the business potential for the distributed-ledger, or blockchain, architecture that makes cryptocurrencies possible. Distributed-ledger systems present enormous opportunities for businesses to operate more efficiently and mitigate risks. The financial-services industry in particular stands to gain from the adoption of blockchain technology due to the significant variation and complexity of products, business processes, and relationships among industry participants. We have seen great interest in blockchain technology in the banking and securities industries in particular.  Continue Reading Brave New Wheels? Potential Uses for Blockchain Technology in Auto Finance

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After a highly publicized and controversial confirmation process, the senate voted to approve Brett Kavanaugh’s nomination to the Supreme Court this past Saturday, October 6, 2018. Kavanaugh was sworn in later that day and began hearing cases on Tuesday, October 9, 2018.

It goes without saying that Justice Kavanaugh is a conservative judge and is expected to lean to the right. It also goes without saying that Justice Kavanaugh’s appointment pushes the Supreme Court to the right with a 5-4 ratio. But what does Justice Kavanaugh’s appointment mean for the financial services industry?  Continue Reading What Can the Financial Services Industry Expect Following Justice Kavanaugh’s Confirmation to the Supreme Court?

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There has been a growing trend among individuals and even estate planners to avoid having to go to the probate court. Even for those people who need wills, a large percentage of their assets will be transferred pursuant to beneficiary designations in account agreements at banks and credit unions, in IRA’s and other qualified retirement plans, and through life insurance policies. Add a trust, and an even wider range of assets can be transferred outside the probate courts. What this non-probate disposition of assets means, of course, is that financial institutions are called upon to help a customer determine what type of account to use and, after death of the customer, review legal documents and carry out the transfer instructions.

In addition, more people are using simplified probate tools to avoid a formal probate. In Texas, small estates affidavit can be used when a person dies without a will and has $75,000 or less in personal assets, not including the homestead. If there is a will and there are no unpaid debts or a need for administration, the will can be admitted to probate under a unique Texas proceeding known as a “muniment of title.” Under these procedures, no representative of the estate is appointed. Banks may be presented with a court certified copy of an affidavit for small estates or an order admitting a will to probate as a muniment of title. The financial institution may be called upon to review the documents and pay the funds in an account. These procedures are currently authorized by statute, but may become more widely used. A task force formed by the Supreme Court of Texas is considering promulgating forms for use by non-lawyers to make it easier for them to take advantage of these simplified procedures. Continue Reading Avoid Probate Court: Head to Your Bank Instead

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In an important joint statement issued on September 11, 2018, the federal financial regulatory agencies (the FDIC, the OCC, the Federal Reserve, the NCUA, and the CFPB) clarified the role of supervisory guidance, stating that supervisory guidance “does not have the force and effect of law.” Community and regional banks and other regulated financial institutions are applauding this effort by regulators to ensure that both the regulated and their regulators have a clear understanding of the appropriate role of guidance in supervision. Financial institutions over the years have raised numerous concerns about the application of guidance in the examination process, and will likely view this as a positive step towards providing greater clarity.

The agencies said guidance can provide examples of practices that the agencies generally consider consistent with safety-and-soundness standards or other applicable laws and regulations, including those designed to protect consumers. “Supervised institutions at times request supervisory guidance, and such guidance is important to provide insight to industry, as well as supervisory staff, in a transparent way that helps to ensure consistency in the supervisory approach,” the agencies point out in the joint statement.   Continue Reading Federal Financial Regulators Clarify Supervisory Guidance Not “Force of Law”

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Co-Authored by Erin Fonte

On July 31, 2018, the U.S. Department of the Treasury (“Treasury”) released a report on “Nonbank Financials, Fintech, and Innovation,” its fourth and final report on the U.S. financial system pursuant to Executive Order 13772 (the “Report”). At over 200 pages long, with 80 separate recommendations, the Report addresses products and services ranging from payments and marketplace lending to debt collection and wealth management. While many of Treasury’s recommendations would have a positive impact on creating a national and state regulatory environment to foster innovation in financial services, the Report is ambitious, and implementing many of its recommendations will be a massive effort in legislation, policy-making and regulatory oversight.  Continue Reading Fintech-Forward: U.S. Treasury Department’s Report on Nonbank Financials, Fintech, and Innovation

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Anyone interested in charters from the Office of the Comptroller of the Currency should be following Lusnak vs. Bank of America, 883 F.3d 1185 (9th Cir. 2018), which is being appealed from the Ninth Circuit to the United States Supreme Court. OCC charters are of course a hot topic—now that the OCC is accepting applications from FinTech companies for national bank charters, the power of federal regulators to excuse federally chartered entities from compliance with state regulations may be more important than ever. After all, the key benefit offered by a national bank charter for many FinTech companies is exemption from state-level money transmission licensing and regulation… in theory.

In reality, many state-vs-federal constitutional questions remain unanswered. Federal courts are still defining the extent of the power of federal financial regulators to exempt federally regulated institutions from state laws. The Supreme Court could help clarify these important issues in the next year or two if it grants the recent request to consider Lusnak.  Continue Reading Supreme Court Asked to Clarify Applicability of State Laws to OCC-Chartered Entities in Lusnak v. Bank of America