Friday's News

September 14, 2018

Primary elections were held in the State of New York yesterday, with important implications for the next State Legislative session.  In Washington, it was an active week with regulators releasing an array of proposals. The House Financial Services Committee also teed up more regulatory relief measures for full House consideration.

State Political Update

• Governor Andrew M. Cuomo handily defeated his Democratic primary opponent, Cynthia Nixon, yesterday by a margin of 64-33%. He now faces Dutchess County Executive Marc Molinaro in the general election.  Lt. Governor Kathy Hochul squeezed out a very narrow victory over Jumaane Williams. New York City Public Advocate Letitia James defeated a slew of candidates for the Attorney General’s Democratic nomination.  In an important implication for the State Senate, six of the eight members of the former Independent Democratic Conference were defeated by progressive candidates. Their victories solidify the Democrat seats in those districts, though the balance of power remains the same in the Senate, where the Republicans have a one seat majority. All eyes turn to the November general elections, as the Democrats make a push to gain the majority.

State Regulatory Developments

• Following the OCC’s conditional approval of a fintech firm’s national charter application earlier this month, the NY Department of Financial Services filed a new lawsuit challenging the OCC’s authority to do so, after a similar lawsuit filed earlier this year was dismissed on the grounds that the claim was not ripe. The Department’s filing follows an announcement by the Council of State Bank Supervisors that their group, representing state regulators throughout the country, would pursue a similar lawsuit against the OCC.

Federal Regulatory Developments

• The Office of the Comptroller of the Currency (OCC) issued for comment a proposed rule that would provide more business flexibility to federal savings associations. The proposed rule would allow certain federal thrifts to elect the rights and duties under the Home Owners’ Loan Act, without changing charters. The broader goal is to provide federal savings associations with a way to adapt to new economic conditions and business environments without having to change their charters. Comments are due 60 days after the proposal is published in the Federal Register.
• The FDIC issued a proposal regarding the treatment of reciprocal deposits, to conform existing rules with changes to the Federal Deposit Insurance Act required by Section 202 of the bank regulatory reform law. The change excepts a capped amount of reciprocal deposits from treatment as brokered deposits for certain insured depository institutions. This proposal is the first of two parts, with the second part expected to be completed later this year.
• The Financial Crimes Enforcement Network (FinCen) announced that it would grant relief from certain beneficial ownership requirements for CD rollovers, safe deposit box renewals, and other automatically renewing loans that occurred on or after May 11, 2018.  
• The FDIC is considering a plan to eliminate unnecessary regulatory burden on financial institutions by retiring nearly 400 obsolete Financial Institutions Letters. Comments on the FDIC’s proposal are due by October 10. 

• The five federal banking regulatory agencies issued a statement clarifying that supervisory guidance does not carry the authority of law, and that it is meant to convey general expectations. Importantly, the agencies confirmed that they would not pursue enforcement actions based on supervisory guidance.

Federal Legislative Developments

• The House Financial Services Committee advanced several bills yesterday, including one that would preempt state-by-state data breach notification standards (H.R. 6743). The Committee also approved a bill, co-sponsored by Rep. Greg Meeks (D-Brooklyn), that would exempt affiliates and subsidiaries of insured depositories from the definition of “deposit broker” under Section 29 of the Federal Deposit Insurance Act.
• The House Ways and Means Committee approved three bills that would make permanent the tax cuts enacted in 2017. The new package of bills, referred to as “Tax Reform 2.0” on the Hill, include the 20% deduction for pass-through businesses, such as banks organized as S corporations. The legislation also creates Universal Savings Accounts for retirement and educational savings. It also permits new businesses to deduct start-up costs earlier.

Resources

• The Consumer Financial Protection Bureau has finalized changes to its model disclosure forms for the Summary of Consumer Rights and the Summary of Identity Theft Rights. The new forms incorporate changes made to the Fair Credit Reporting Act by the banking regulatory reform law. The changes become effective on September 21.
•  The Office of the Comptroller of the Currency has revised its Comptroller’s Handbook, releasing a new section governing Deposit-Related Credit. The revision covers check credit, overdraft protection, deposit advance products, as well as small dollar lending, military lending, and third-party risk management.

Questions?
Contact Mike Smith at (212) 297-1699 or msmith@nyba.com, Roberta Kotkin at (212) 297-1684 or rkotkin@nyba.com or Clare Cusack at (212) 297-1664 or ccusack@nyba.com .
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