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Trade associations sue regulators over new CRA rules

The Independent Community Bankers of America, American Bankers Association, U.S. Chamber of Commerce, Texas Bankers Association, Independent Bankers Association of Texas, Amarillo Chamber of Commerce and Longview Chamber of Commerce filed a lawsuit in the Northern District of Texas against the Federal Reserve, FDIC and OCC for exceeding their statutory authority and acting arbitrarily and capriciously with their recent amendments to the Community Reinvestment Act rules. The lawsuit asks the court to vacate the Final Rules, and the groups will also seek a preliminary injunction pausing the new rules while the court decides the merits of the case.

 “ICBA and the nation’s community banks support agency efforts to modernize the CRA’s implementing regulations,” said ICBA President and CEO Rebeca Romero Rainey. “Unfortunately, the Final Rules are likely to have unintended consequences and fail to consider the long-term impact on the very communities they seek to protect. Rather than increasing lending in low- or moderate-income communities, the new and unnecessarily complex evaluation could result in banks being forced to close branches or reduce product offerings, in contravention of CRA’s stated purpose. The agencies’ approach penalizes many smaller institutions, eroding the diversity of institutions and products that drive much-needed access to banking services, credit, and reinvestment in communities around the country. ICBA submitted a comment letter to the regulators that clearly laid out our position and concerns, many of which were not included in the Final Rules. Our nation’s community banks have a strong track record of meeting and exceeding the credit needs of underserved communities that the new rules are likely to undermine.”

Source: ICBA

FDIC urged to consider its stance on innovation in financial services

Following an inquiry by Republican lawmakers, along with Rep. French Hill, (R-AR) the American Fintech Council (AFC), the premier industry association representing responsible fintech companies, including the largest innovative Banking-as-a-Service (BaaS) banks has requested that the Federal Deposit Insurance Corporation (FDIC) to consider its posture towards innovation in financial services and to pursue additional efforts to connect with responsible financial services companies creating access and equity in financial services.

“The FDIC should hold itself to the same level of transparency and communication thatthey expect from innovative banks and responsible fintech companies creating critical access and equity in financial services,” said Phil Goldfeder, Chief Executive Officer of AFC. “Agency engagement with industry is crucial to ensuring that pragmatic regulatory frameworks and effective oversight of the modern banking system. We have long advocated for a clear and consistent regulatory framework that reflects responsible industry developments and clarifies supervisory expectations for innovative financial services business models, products, and services.”

In a recent letter sent to Chairman Martin Gruenberg at the Federal Deposit Insurance Corporation, the AFC expressed disappointment with the lack of effective communication and industry engagement from the FDIC and offered to assist the agency understand innovative products and help bolster the financial resilience of the banking system and improve financial inclusion. 

In addition, House Financial Services Committee Chair Patrick McHenry (R-NC), Digital Assets, Financial Technology and Inclusion Subcommittee Chair French Hill (R-Ark.), and Rep. Mike Flood (R-Neb.) urged Consumer Financial Protection Bureau Director Rohit Chopra to reopen and extend the public comment period and reconsider finalizing its proposed digital consumer payment rule. The lawmakers said the CFPB's plan has "insufficient justification, unclear guidance regarding third-party service providers, unknown effects on the digital asset ecosystem, and an inadequate comment period."

Source: S&P Global Market Intelligence

Call for end of credit union tax exemption

The nonpartisan Tax Foundation released a new report calling on policymakers to wean credit unions off taxpayer subsidies.

In the report, President Emeritus Scott Hodge cites the diminished role of credit unions’ field-of-membership and common-bond restrictions as well as questions about their dedication to people of modest means. With credit unions now acquiring banks, he says, fairness and equity demand that credit unions be put on the same tax footing as the banks they compete with.

Attention to credit union policy has grown amid ICBA efforts to raise questions about the industry’s tax exemption and acquisitions of community banks. ICBA has called on congressional committees to convene a hearing on credit union oversight following reports of discriminatory lending at Navy Federal Credit Union, and ICBA President and CEO Rebeca Romero Rainey recently noted on X that 20% of this year’s bank acquisitions are by credit unions.

A recent Federal Reserve Bank of Atlanta report noted the National Credit Union Administration has no enforcement authority over third-party service providers, posing risks to credit unions and their members. As ICBA has testified before Congress, it supports allowing the NCUA to directly examine and regulate credit union service organizations and other third-party providers, which has contributed to legislation to grant the NCUA such authority.



Source: S&P Global Market Intelligence; ICBA 

Senate committee discusses check fraud

The Senate Banking Committee spotlighted concerns with how check fraud enabled by large financial institutions and the U.S. Postal Service is affecting community banks and their customers.

In a written statement for the hearing, ICBA cited Community Bankers Association of Illinois data showing how large banks and credit unions of first deposit are slow to reimburse for unresolved checks. ICBA noted that check fraud is facilitated by fraudulent accounts opened at these institutions despite the Bank Secrecy Act’s Know Your Customer and Customer Identification Program standards.

During the hearing, Sen. Chris Van Hollen (D-Md.) cited community bank concerns raised by the Maryland Bankers Association and CBAI over reimbursement delays and fraudulent account openings at large institutions.

In its statement, ICBA also cited concerns with Postal Service security, noting the post office is the nation’s biggest source of stolen checks. It said community banks are a critical part of the solution—with their relationship banking model preventing fraud on the front lines and supporting customer education—but strong postal security and cooperation among financial institutions is needed to combat check fraud.

Amid a dramatic rise in check fraud, community banks are urged to use:

• Nacha’s ACH Contact Registry, which includes thousands of check contacts.
• The Treasury Department’s Treasury Check Verification System to catch canceled, duplicate, or other problematic Treasury checks at the time of presentment.
• Tips for filing Suspicious Activity Reports from the Financial Crimes Enforcement Network’s alert on fraud schemes.



Source: ICBA

Regulators should focus more on third-party providers

Federal Reserve Governor Michelle Bowman said she is concerned that federal regulators respond to financial industry risks by focusing too much on regulated banks.

Speaking in Hawaii, Bowman said focusing on regulated banks, including by monitoring risk and holding banks accountable, risks pushing financial activity to nonbanks. Ramping up oversight of third-party service providers under the Bank Service Company Act could help align supervisory attention with the sources of risk and more efficiently address risks on the “borders of the regulatory perimeter,” she said.

Source: S&P Global Market Intelligence

FHFA scorecard doesn’t address 15-year conservatorship

A new Federal Housing Finance Agency scorecard on Fannie Mae and Freddie Mac fails to address the 15-year conservatorship of the government-sponsored enterprises.

In a post on X, ICBA said the conservatorship has subjected the GSEs to political influence. It pointed to a blog post from ICBA’s Ron Haynie calling for the end of what was intended to be a short-term timeout for the GSEs.

On Main Street Matters, Haynie said the federal government should follow established law and end its conservatorship to ensure Fannie and Freddie focus on expanding the secondary mortgage market instead of serving as cash machines for the federal government.

Rather than addressing the conservatorship, the FHFA’s 2024 Scorecard focuses on enterprise objectives such as addressing multifamily rental housing needs and mitigating risk in the single-family property insurance market.

Source: ICBA

The Qualms of QR Codes

Quick-response, or QR codes, are used every day. These square-shaped images are readable by a mobile device's camera to open links and access information. They are widely used by consumers to view menus at restaurants, pay for parking or get into a concert or sporting event. 

Over 94 million consumers will use their phone to scan a QR code this year, according to Insider Intelligence. Allied Market Research valued the global QR code payment market at $8.07 billion in 2020, with a projection of $35.07 billion by 2030.

QR codes offer a measure of convenience for customers and help companies conduct business. But where the money goes, fraudsters will follow. And fake QR codes give bad actors a way to steal consumers' personal information. The good news is accountholders can help protect themselves by simply being aware of the risk and taking basic precautions. 

What is “Quishing”? 

Quishing, also known as QR code phishing, is a phishing technique involving fictitious QR codes. Using free online code generators, fraudsters create their own QR codes to steal people’s personal information. These fraudulent QR codes are sent to a person directly via text or email. Additionally, criminals will cover up a legitimate QR code from a business with a sticker over a flyer, menu or even a parking ticket. These fictitious QR codes, if scanned, redirect people to a fake payment site, to download a virus (malware) on a person's device or redirect them to a malicious site to gather personal identifiable information (PII), which could lead to identify theft. 

How to protect yourself...

Source: SHAZAM