On March 29, 2024, the United States District Court for the Northern District of Texas issued a preliminary injunction prohibiting enforcement of the new Community Reinvestment Act (“CRA”) regulations against the plaintiffs in the case.

The CRA, passed in 1977, generally requires insured depository institutions to participate in investment, lending, and service activities that help meet the credit needs of their designated assessment areas—particularly low- and moderate-income communities and small businesses and farms. In October 2023, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (the “Board”), and the Federal Deposit Insurance Corporation (“FDIC”) (the “Agencies”), which enforce the CRA, adopted new regulations significantly overhauling the existing CRA regulatory regime. We previously reported on the new CRA regulations here and here.

In February 2024, several banking trade associations filed a lawsuit in federal court challenging the new regulations and alleging that the new regulations run afoul of the CRA by evaluating banks (1) outside of the geographies where they operate physical facilities and accept deposits and (2) on deposit products, in addition to the existing evaluation of meeting the credit needs of the community. The District Court issued a preliminary injunction against enforcement of the new CRA regulations against the plaintiff trade associations pending resolution of the lawsuit. The District Court also extended the implementation date of the regulations as to the plaintiffs to be day for day while the injunction is in place.[1]

The scope of the preliminary injunction is limited to the plaintiffs, and, as it stands, does not apply to any other banks subject to the CRA. As a result, we expect that other trade associations or banks may try to join the case to obtain the benefits of the injunction, as we have seen in other recent cases challenging federal financial regulations. Another possibility is that the District Court could amend the preliminary injunction to apply to all banks impacted by the new CRA regulations.

In the meantime, separate from the lawsuit, the Agencies extended the deadline for most portions of the new CRA regulations that were initially set to go into effect on April 1, 2024: the delineation of facility-based assessment areas and the public file requirements. The Agencies extended the deadline for these two requirements until January 1, 2026, when the majority of new CRA regulations are scheduled to take effect.

[1] Interestingly, the District Court applied the injunction to the “Plaintiffs,” and not expressly to their member banks. However, applying the injunction to the plaintiffs’ members was most likely the District Court’s intention considering the plaintiffs are trade associations.

On March 5, the Consumer Financial Protection Bureau (the “Bureau”) issued a Final Rule that would significantly restrict late fees that consumer credit card issuers may charge to a mere $8.

Within two days, the Final Rule faced a challenge in the Northern District of Texas by a coalition of trade groups including the United States Chamber of Commerce, the American Bankers Association, and the Consumer Bankers Association. The challenge seeks to invalidate the Final Rule on several constitutional, procedural, and substantive bases, as well as a temporary stay of the rule’s effectiveness while the suit progresses.

In Mayer Brown’s Legal Update, we frame the Final Rule within current law, and describe the changes, the litigation, and the likely industry implications.

On February 23, 2024, the Consumer Financial Protection Bureau published an order establishing supervisory authority over a small-loan consumer finance company, using a Dodd-Frank Act provision that allows the Bureau to supervise certain nonbanks that it has reasonable cause to determine pose risks to consumers.

In Mayer Brown’s Legal Update, we summarize relevant aspects of the Bureau’s supervisory authority and highlight key takeaways from the order.

On March 5, the CFPB issued a final rule that would significantly reduce late fees that may be charged on consumer credit card accounts from $30 or more to $8 in most cases. A proposed rule on this subject matter was issued February 1, 2023, and the credit card industry has paid close attention to the rulemaking process since.

The final rule amends provisions of Regulation Z, implementing the Truth in Lending Act, related to permissible penalty fees—including late fees, NSF fees, returned payment fees, etc.— that a card issuer may impose on consumers who violate the terms of a credit card account subject to the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”).

Continue Reading CFPB Finalizes Significant Restrictions on Credit Card Late Fees

FHA branch offices could become a thing of the past.

The Department of Housing and Urban Development published a final rule on February 2, 2024, eliminating the requirement for lenders to register each branch office where lenders and mortgagees conduct FHA business with HUD. FHA addressed questions from stakeholders in Frequently Asked Questions.

By eliminating the branch registration requirement, HUD hopes that by reducing burdens and eliminating barriers, more lenders will originate FHA-insured loans and expand the availability of FHA programs to underserved communities.

In Mayer Brown’s Legal Update, we discuss the background of HUD’s branch office requirements, the changes the final rule makes to those requirements, and takeaways for stakeholders.

On February 7, 2024, the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Notice of Proposed Rulemaking on certain US residential real estate transactions (“2024 NPRM”). The 2024 NPRM would require certain professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities or trusts. The 2024 NPRM describes the circumstances in which a report would be filed; who would file a report; what information would need to be provided—including information about the beneficial owners of the legal entities and trusts—and when a report about the transaction would be due.

Potentially affected participants should consider submitting comments on the 2024 NPRM by the April 16 deadline to encourage FinCEN to finalize a revised proposal that appropriately weighs the goals of preventing money laundering with potentially burdensome compliance obligations. 

Read more here.

Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we discuss pending legislation in California that would impose new licensing and fiduciary duty obligations on commercial loan brokers, the New York governor’s push for a new licensing and regulatory regime governing Buy Now, Pay Later financing, and the continued trend of state legislatures introducing “true lender” laws. Check it out and subscribe to receive future issues directly.

The New York Department of Financial Services finalized guidance on how banks and mortgage institutions should manage climate-related financial and operational risks. The agency’s guidance creates extensive obligations for New York institutions, particularly mortgage lenders and servicers for which those risk management expectations may be new. Also, the NYDFS emphasizes that those institutions must still recognize the interplay between safe-and-sound climate risk policies and the goal of providing access to affordable credit to all communities and customers. NYDFS will begin requesting information from institutions on their climate risk progress and plans during 2024.

Read about the NYDFS final Climate Risk Management Guidance in Mayer Brown’s Legal Update.

On November 7, 2023, the Federal Housing Finance Agency proposed a series of significant regulatory and legislative reforms for the Federal Home Loan Bank System in a much-anticipated report, “FHLBank System at 100: Focusing on the Future”, containing the results of a year-long comprehensive review of the FLHB System. This Legal Update provides an overview of the report and its most noteworthy legislative and regulatory recommendations.

Mayer Brown is pleased to provide the latest edition of its UDAAP Round-Up. This newsletter is designed to provide readers with a periodic resource to stay abreast of federal activities regarding the prohibition on unfair, deceptive, or abusive acts or practices in the consumer financial services space. In this edition, we cover notable policy, enforcement, and supervisory developments from April 2023 through September 2023.