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FHFA overstepping with FHLBank inquiry

The Federal Housing Finance Agency does not have the authority to redefine the mission of the Federal Home Loan Banks, ICBA told American Banker.  

In a new article (subscription required), ICBA’s Tim Roy said the FHFA director's authority was clearly defined in the Housing and Economic Recovery Act of 2008 and any change to the FHLBank mission must be approved by Congress. 

The FHFA is considering feedback from its recent request for information on the FHLBank mission. In its comment letter last month, ICBA said the agency should not create additional requirements that restrict FHLBank advances to members in good standing and with eligible collateral, which would reduce the availability of mortgage credit and community development funding. 

After submitting its comments, ICBA issued a national news release on a FHLBank of New York message to its member banks that it plans to impose additional information reporting requirements to align with the FHFA’s more restrictive approach to lending. In that statement, ICBA repeated its call for the FHFA not to disrupt the FHLBank System as an important source of liquidity for community banks. 

Following last fall’s comprehensive FHFA report on the FHLBanks, ICBA urged the agency to ensure any new policies affecting the system do not disrupt it as a source of liquidity for community banks. ICBA also offers a high-level summary of the report outlining its views on the agency’s policy recommendations.

 Source: ICBA

Removing medical debt from credit reporting won’t work

ICBA told the Consumer Financial Protection Bureau that its proposed rule to remove medical debt information from credit reporting will lead to inaccurate reports and hinder community banks’ ability to comply with other regulations. 

The CFPB is proposing to amend Fair Credit Reporting Act regulations by prohibiting creditors from using medical financial information and by limiting the circumstances under which consumer reporting agencies are permitted to provide medical debt information to creditors. 

ICBA View:  

• The CFPB does not have the statutory discretion to eliminate the use of all medical debt from consumer reports. 
• While the CFPB justifies the proposal by citing concern for accurate credit reports, the proposal would in fact increase the inaccuracy of credit reports by mandating the removal of accurate information.  
• The proposal would hinder community bank efforts to comply with other regulatory requirements, such as determining a consumer’s debt-to-income ratio or assessing a borrower’s ability to repay.  

ICBA has repeatedly opposed efforts that limit the value of credit scores and requested a 30-day extension of the comment period on the CFPB’s medical debt proposal.

Source: ICBA

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Ineffective customer service

The Consumer Financial Protection Bureau plans to issue rules or guidance to regulate "ineffective and time-wasting chatbots" used by banks and other financial institutions for customer services. The proposed rulemaking comes as part of a broader crackdown on corporations by the Biden administration to tackle "unnecessary headaches and hassles" faced by US citizens in everyday lives, according to an Aug. 12 White House statement. 

Source: S&P Global Market Intelligence

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Guidance on interactive teller machines

The FDIC issued guidance on whether the use of interactive teller machines at a location other than an established branch facility would require banks to file a domestic branch application. 

The FDIC said it would not consider an ITM established by a state nonmember bank to be a “domestic branch” subject to FDIC approval if the ITM is an automated, unstaffed banking facility that allows customers to initiate an interactive session with remotely located bank personnel and perform transactions independently. ITMs that operate outside of these parameters may require a branch application, according to the agency. 

Source: FDIC

Regulations need to be appropriate, flexible

Community banks must be flexible to survive, which puts them at loggerheads with increasing rigid regulations, ICBA President and CEO Rebeca Romero Rainey wrote in the latest issue of Independent Banker. 

Noting that regulators have advanced more than 7,000 pages of new regulations over the past year, Romero Rainey said ICBA continues to fight for tiered regulation that will allow community banks to continue their strong record of safety, soundness, and service to their communities.  

Source: FDIC

HELOC’s rebound, fraud increases

Americans are returning to home equity lines of credit, or HELOC, to tap the rising equity of their homes without giving up their low mortgage rates, according to the Federal Reserve Bank of New York’s new Quarterly Report on Household Debt and Credit. After nearly 13 years of declines, balances on HELOCs have rebounded, gaining 20% since 2021.

Fraudsters are increasingly using information gained from public record searches on recorded mortgages to create checks drawn on home equity lines of credit, ICBA’s Rebeca Romero Rainey shared in a message to community bankers.

HELOC documents often contain all the information a fraudster needs to generate checks, including the customer's name, address, lender, signature, and account number.

Romero Rainey recommended that community bankers mitigate this growing source of fraud by:

• Not printing the account number on new mortgage documents.
• Reviewing all HELOC checks processed.
• Advising customers to regularly review their HELOC accounts.
• Reporting incidents to the FBI's Internet Crime Complaint Center on its website.

Community bankers can discuss the HELOC trend, check fraud, and related issues in ICBA Community’s fraud subgroup.

Source: Federal Reserve; ICBA 

Request for comment extension on bank-fintech arrangements

ICBA and other groups requested a 30-day extension to the comment period for the regulatory agencies’ request for information on bank-fintech arrangements. 

The banking agencies’ RFI solicits input on the nature of bank-fintech arrangements, effective risk-management practices, and whether enhancements to existing supervisory guidance may be helpful. 

ICBA and the other groups emphasized that bank-fintech partnerships play a crucial role in the evolution of banking and that this important issue warrants additional time to thoroughly consider stakeholders’ input. 

Source: ICBA

Corporate bankruptcy filings ease 

Bankruptcy filings cooled slightly in July after surging in June to the highest level since the early days of the COVID-19 pandemic, but remain on track for one of the worst years for bankruptcies since 2020.

There were 50 bankruptcy filings in July of public and certain private companies, down from a revised 72 in June and the lowest monthly number since February, according to the latest S&P Global Market Intelligence. With 392 bankruptcy filings through the first seven months of this year, bankruptcy filings are the highest since 2020, when there were 407 filings through July.

Corporate reorganizations have risen in response to higher interest rates, which have remained at roughly 20-year highs for the past year, rising geopolitical uncertainty and an overall economic cooling.

Source: S&P Global Market Intelligence