BPInsights: February 28, 2020 - Bank Policy Institute

Top of the Agenda

Panelists Spar Over Privacy, Security and Consumer Access to Data at CFPB Symposium

On February 26, the CFPB hosted a symposium on the future application of data aggregation, market practices and ways to ensure that consumers can access their financial data in a safe and secure manner. The symposium consisted of three panels representing a diverse group of stakeholders from the regulatory community, major financial institutions, fintechs and aggregators.

“Digital consent isn’t always clear, consumers don’t always know what they’re agreeing to and it’s difficult to determine whether or not an aggregator or an intermediary is collecting the information,” emphasized PNC’s Natalie Talpas as she and other panelists advocated for the adoption of principles and best practices that move fintech partnerships away from risky practices like screen scraping and toward more secure methods of authentication and authorization, such as an application programming interface (API). Panelists sparred over whether tokenization of account numbers could be implemented in the near future, the level of oversight data aggregators should face and how much access fintechs really need to serve consumers without putting the consumer at risk of fraud, unwanted solicitations or identity theft.

Banks are investing in security measures that comply with best practices and the privacy expectations of their customers. Consumers have a right to have access to their financial data, but it needs to be done in a manner that doesn’t allow malicious actors to circumvent consumer protections. Many of the panelists referenced the recent announcement of Akoya, which establishes a secure and transparent API network that can be leveraged by both large and small financial institutions. The CFPB didn’t indicate what next steps it might take, including whether the agency may issue a rule under Section 1033. But one thing is certain: change is coming. Learn More >>

5 Stories Driving the Week

1. BPI’s Chief Economist Bill Nelson Responds to JPMorgan’s Announcement That It Will Use the Fed’s Discount Window

JPMorgan stated at its investor day this week that it intended to borrow from the Federal Reserve’s primary credit facility (a/k/a the discount window) from time to time this year. Bill Nelson, Chief Economist at the Bank Policy Institute and former Deputy Director in the Division of Monetary Affairs at the Federal Reserve, released the following statement in reaction to the announcement:

JPMorgan’s plan to borrow occasionally from the discount window is an important first step in normalizing how banks approach the use of this important monetary policy and financial stability tool. It should help reduce discount window stigma, which has been a persistent issue for more than 70 years and was exacerbated by the financial crisis. When banks borrow from the discount window, they help enhance its effectiveness as both a monetary policy and financial stability tool.

Learn More >>

2. Under New Settlement, CFPB Will Begin Rulemaking Process for Small Business Data Collection

On February 26, American Banker reported that the CFPB settled a lawsuit led by the California Reinvestment Coalition seeking to compel it to begin its rulemaking process to implement Section 1071 of the Dodd-Frank Act, which requires the CFPB to collect and publish data on lending to women-owned, minority-owned, and small businesses. Though the CFPB has previously engaged in pre-rule activities on the topic, such as its 1071 Symposium in November 2019, it had yet to undertake its rulemaking process in the nearly ten years since Section 1071’s enactment. Under the settlement, still pending approval by a California federal court, the CFPB will provide an outline of proposals under consideration and convene a Small Business Advocacy Review panel to provide feedback, with deadlines for further rulemaking action to be negotiated with the plaintiffs and, if necessary, stipulated by court order. Learn More >>

3. BPI Responds to Fed, FDIC’s Request for Information on CAMELS Rating System

On February 28, BPI submitted a supplemental comment letter to the Fed and FDIC in response to the agencies’ request for information on their use of the Uniform Financial Institution Rating System (UFIRS), also known as the CAMELS rating system. The recommendations included in the letter were based on a survey of BPI members to ascertain their views regarding the federal banking agencies’ application of the UFIRS. The survey responses show that there is a significant need to improve the consistency, transparency, and fairness of the way the agencies apply the UFIRS, including, in particular, the Management rating. The letter proposes several process improvements to assigning CAMELS ratings to address those deficiencies. The letter is intended to be read in conjunction with BPI’s January 10, 2020 letter explaining the need for a substantive review and revision of the UFIRs framework to take into account both of its current, changed role in banking regulation and substantial changes in other regulations that it has failed to incorporate over the years. Learn More >>

4. White Paper Released at RSA Security Conference in Calls for Global Standardized Approach to Cyber Risk Management

On February 26, the Coalition to Reduce Cyber Risk — with input from the International Standards Organization (ISO), the National Institute of Standards and Technology (NIST), BPI and other private sector firms — released a white paper calling for a more coordinated global approach to cybersecurity risk management. It also highlighted how the interconnectedness of global digital supply chains necessitates a consistent approach to cybersecurity and encouraged international regulators to leverage these existing frameworks as a basis for their approach to cybersecurity to improve interoperability and cybersecurity outcomes. Learn More >>

5. Consumer Financial Protection Bureau Issues Supplemental Notice of Proposed Rulemaking On Time-Barred Debt Disclosures

On February 21, the CFPB released its proposal for a supplemental debt collection rule governing the disclosure of time-barred debt. The proposal would prohibit debt collectors from contacting consumers in an attempt to collect a debt that has exceeded the statute of limitations without disclosing the fact that they cannot legally be sued for the unpaid debt, if the collector “know[s] or should know” that the debt is time-barred. The proposal would supplement the CFPB’s broader debt collection proposal, released in May 2019, which would establish a “know or should know” standard with regard to a prohibition on collectors suing or threatening to sue on time-barred debts. Learn More >>

In Case You Missed It

BPI Comments on Proposed Revisions to Proposed California Consumer Privacy Act Regulations

On February 25, BPI filed a comment letter with the California Attorney General’s Office (AG), in response to their proposed revisions to the California Consumer Privacy Act regulations. BPI supports many of the proposed revisions but raised concerns with the AG’s requirement that businesses annually publish several metrics about consumer requests received under the CCPA as well as their responses. This and other regulatory expectations and changes in the proposed revisions could increase fraud and other risks to businesses. BPI also reiterated its previous recommendation to the AG that the effective date of the regulations should be set at least six months after the final rules are published and that the Attorney General should not undertake enforcement actions for conduct that occurs before January 1, 2021.

BPI Submits Comment Letter to Agencies on Call Report and FFIEC 101 Reporting Revisions

On February 24, BPI submitted a comment letter to the Fed, OCC, and FDIC responding to recently finalized reporting revisions to the Call Reports and the FFIEC 101. The letter encourages the agencies to allow Category I and II banks to use the standardized approach for counterparty credit risk (SA-CCR) methodology for Schedule RC-O Memorandum items 14 and 15 after they have adopted SA-CCR for the calculation of risk-weighted assets and total leverage exposure, and recommends that any clarification to the instructions related to the reporting and calculation of counterparty exposures be subject to a separate notice and comment process. Additionally, the letter requests that the agencies continue to allow notional reporting in the Call Report based on the contractual notional consistent with current practice, instead of a “SA-CCR notional” or adjusted notional.

BPI Submits Comment Letter to the Fed on Proposed FR Y-9 Reporting Revisions

On February 24, BPI submitted a comment letter to the Fed responding to proposed reporting revisions to the FR Y-9. The letter does not support the proposed change in reporting of home equity lines of credit that convert from revolving to non-revolving status in view of the potential significant operational challenges associated with these proposed changes and encourages the Fed to create a new memorandum item for these lines of credit consistent with the recently finalized changes to the Call Reports. The letter also suggests that the Fed make other revisions to the reporting of derivatives in the FR Y-9C to conform to changes recently made to the Call Reports. Finally, the letter requests that the Fed provide clarification regarding notional reporting using the standardized approach for counterparty credit risk (SA-CCR) and that such reporting in the FR Y-9C be based on the contractual notional, consistent with current practice.

Events

03/04/2020 – House Financial Services Committee hearing titled “The Traffickers’ Roadmap: How Bad Actors Exploit Financial Systems to Facilitate the Illicit Trade in People, Animals, Drugs, and Weapons”
03/04/2020 – House Financial Services Committee hearing titled “The Traffickers’ Roadmap: How Bad Actors Exploit Financial Systems to Facilitate the Illicit Trade in People, Animals, Drugs, and Weapons”
03/10/2020 – “Evolutions in Consumer Debt Relief” hosted by the CFPB
03/10/2020 – House Financial Services Committee hearing titled “Holding Wells Fargo Accountable: CEO Perspectives on Next Steps for the Bank that Broke America’s Trust”
03/10/2020 – Senate Banking Committee hearing titled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress”
03/11/2020 – House Financial Services Committee hearing titled “Holding Wells Fargo Accountable: Examining the Role of the Board of Directors in the Bank’s Egregious Pattern of Consumer Abuses”
03/11/2020 – Women in Housing & Finance hosts the general counsels of the federal banking agencies
03/18/2020 – Business Roundtable hosts CEO Innovation Summit
03/24/2020 – House Financial Services Committee hearing titled “A Review of Domestic and International Approaches to Digital Currencies”
03/24/2020 – Senate Banking Committee hearing titled “Oversight of the Office of the Comptroller of the Currency”
03/25/2020 – House Financial Services Committee hearing titled “The End of LIBOR: Transitioning to an Alternative Interest Rate Calculation for Mortgages, Student Loans, Derivatives, and Other Financial Products”
03/25/2020 – House Financial Services Committee hearing titled “Holding Wells Fargo Accountable: Examining the Impact of the Bank’s Toxic Culture on Its Employees”
06/18/2020 – BPI and SIFMA 2020 Prudential Regulation Conference

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