This Week’s Recap: NCUA’s FOM, CFPB, PPP, and More

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On June 29, the U.S. Supreme Court denied the American Bankers Association’s petition to review the D.C. Circuit Court of Appeal’s decision on the National Credit Union Administration’s field-of-membership rules. This ends nearly four years of uncertainty and helps the NCUA foster greater financial inclusion for all Americans.

The lack of financial access is especially prevalent in rural communities, which have experienced the withdrawal of financial institutions over the last decade. The court’s decision will assist NCUA’s efforts to bring these important and often overlooked communities back into the financial mainstream.

The NCUA is in the process of reinstating the rural districts for 18 credit unions that had these removed due to the ABA lawsuit. You can read more in NCUA’s Letter to Credit Unions 20-CU-21.

In its late June decision, the court denied an appeal from the ABA to void the NCUA’s FOM rule, a decision that marks the end of bankers’ nearly four-year battle to undo NCUA’s FOM rule finalized in October 2016. The California and Nevada Credit Union Leagues and the Credit Union National Association (CUNA) have long supported the rule and NCUA’s authority to provide oversight for the credit union industry. The ruling effectively ended the bankers’ challenge. Read more here.

CFPB Issues Final Rule on Payday Loans
The Consumer Financial Protection Bureau has issued a final rule concerning payday loans in order to maintain consumer access to credit and competition in the marketplace. The final rule rescinds the mandatory underwriting provisions of the 2017 rule after re-evaluating the legal and evidentiary bases for these provisions and finding them to be insufficient. The final rule does not rescind or alter the payments provisions of the 2017 rule.
 
The bureau also issued guidance clarifying the payments provisions’ scope and assistance to lenders in complying with those provisions. In addition, the bureau ratified the payment provisions in light of the U.S. Supreme Court’s recent decision in Seila Law.
 
The Leagues had called on the CFPB to expand the exemption for NCUA PAL loans to include all current and future iterations of the PAL program. Last year, the NCUA authorized a second PALs program (PALs II). The CFPB’s final rule does not provide a blanket exception for all NCUA PAL programs and notes that PALs II loans will likely not meet the safe harbor exemption as the loan amounts are larger and likely will have terms longer than 45 days.

Court Rules on CFPB Director Status
The U.S. Supreme Court also ruled that the president of the United States is free to fire the director of the CFPB without cause. The court issued its opinion on Seila Law vs. CFPB, ruling the “for-cause” provision unconstitutional as a violation of separation of powers.

However, the court also ruled that this provision is severable from the rest of Title X of the Dodd-Frank Act. The CFPB can continue to operate, but the director is removable by the president at will.

PPP Application Deadline Extended to Aug. 8
On July 4, President Donald Trump signed legislation to extend the deadline for eligible businesses to apply for a loan under the Paycheck Protection Program (PPP) to Aug. 8. The original deadline for an eligible business to apply for a PPP loan was June 30. As of that date, the U.S. Small Business Administration (SBA) had approved more than 4.8 million PPP loans for about $520.6 billion. Roughly $130 billion remained unused as of June 30.

Click here for additional guidance on eligibility, PPP loan amounts and terms, and applications.

SBA Issues Interim PPP Final Rules
The SBA has issued two interim final rules (IFR) to implement amendments to the Paycheck Protection Program. On June 24, the SBA issued Business Loan Program Temporary Changes; Paycheck Protection Program-Additional Eligibility Revisions to First Interim Final Rule (PPP IFR 21). On June 25, it issued Business Loan Program Temporary Changes; Paycheck Protection Program — Certain Eligible Payroll Costs (PPP IFR 22).

The PPP IFR 21 revises SBA's June 12 eighteenth PPP IFR by making additional modifications to the eligibility requirement related to felony convictions of applicants or owners of the applicant. The PPP IFR 22 supplements SBA's previous guidance to allow fishing boat captains to use forgivable PPP loans to pay their crew members.

On June 26, SBA also issued updated guidance on how to calculate the maximum loan amount for which a business is eligible, and on June 25, SBA issued updates to the PPP FAQs.

SBA and Treasury: PPP Revisions to Conform to PPP Flexibility Act
On June 22 the SBA and the Treasury Department issued another interim final rule (Business Loan Program Temporary Changes; Paycheck Protection Program – Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule or PPP IFR 20) to implement amendments to the Paycheck Protection Program (PPP) made by the Paycheck Protection Program Flexibility Act (PPP Flexibility Act).
 
PPP IFR 20 revises SBA's fourteenth interim final rule issued May 22 and SBA's fifteenth interim final rule issued May 22 by changing key provisions of the PPP — such as the loan maturity, deferral of loan payments, caps on the amount of loan forgiveness available for owner-employees and self-employed individuals' own payroll compensation, and reductions to loan forgiveness provisions — to conform to the PPP Flexibility Act. Several of these amendments are retroactive to March 27, the date of enactment of the CARES Act.
 
Click here for a summary of the major revisions the PPP IFR 20 made to the 14th and 15th interim final rules.

HUD Soliciting Nominations for HCFAC Appointments
The Department of Housing and Urban Development (HUD) is soliciting nominations for appointment to its Housing Counseling Federal Advisory Committee (HCFAC). Nominations must be in writing and submitted via email to HCFAC.application@hud.gov no later than July 29.

Any credit union voice that is represented on a national committee such as this one is a win for our industry. HCFAC provides HUD’s Office of Housing Counseling (OHC) valuable advice regarding its mission to provide individuals and families with knowledge to obtain, sustain, and improve their housing through a strong national network of HUD-approved housing counseling agencies and HUD-certified counselors. Members are appointed for three-year terms.

For more details, see HCFAC’s information sheet on application membership. Additionally, you can direct questions to housing.counseling@hud.gov with “HCFAC” in the subject line.

You can also click here for more information in the Federal Register.

FFEIC Issues Statement on Managing the LIBOR Transition
The members of the Federal Financial Institutions Examination Council (FFIEC) on July 1 issued a statement that highlighted the risks that will result from the transition away from LIBOR, and encouraged supervised institutions to continue their efforts to transition to alternative reference rates in order to mitigate financial, legal, operational, and consumer protection risks.
 
The financial services industry uses LIBOR as a reference rate for many financial products and instruments that include loans, investments, and deposits to a range of customers, as well as borrowings and derivatives. While some smaller and less complex institutions may have limited exposure to LIBOR-denominated instruments, the transition to alternative reference rates will affect almost every institution.
 
Financial institutions should have risk management processes in place to identify and mitigate their LIBOR transition risks that are commensurate with the size and complexity of their exposure and third-party servicer arrangements. The statement identifies areas where supervisory staff will focus their reviews of LIBOR transition planning and risk mitigation efforts at regulated institutions.
 
The Consumer Financial Protection Bureau (CFPB) also has issued a proposed rule regarding facilitating the LIBOR transition. The proposed rule will be available soon in PowerComment. The comment deadline is Aug. 10, 2020.
 
AICPA Releases Technical Q&As Regarding PPP Loans
On June 30, 2020, the American Institute of CPAs (AICPA) and its Depository Institutions Expert Panel (DIEP) released a Technical Questions and Answers (TQA) to help credit unions as well as depository institutions other lenders appropriately account for the loans they distribute under the Paycheck Protection Program.

The TQA also addresses how creditors may restructure loans made in response to COVID-19 that result in restructurings that are not troubled debt restructurings and include periods of reduced payments, including payment deferrals, fee waivers, extension of repayment terms or delays in payment.
The information provided is AICPA guidance, and not issued by the Financial Accounting Standards Board (FASB). Credit unions may also want to consult with their own CPA/accountants.

FinCEN Advisory: Imposter Scams and Money Mule Schemes
The Financial Crimes Enforcement Network (FinCEN) issued an advisory on July 7 to alert financial institutions to potential indicators of imposter scams and money mule schemes, which are two forms of consumer fraud observed during the COVID-19 pandemic. The advisory contains descriptions of these scams and schemes, financial red flag indicators for both, and information on reporting suspicious activity. Read the advisory here.

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