Our overview of the Top 10 Considerations for Financial Institutions in 2020 series noted that financial institutions will continue to face challenges in a number of corporate, compliance, and risk areas, especially in light of COVID-19 and a potentially slowing economy in 2020. Our ninth consideration is compliance with consumer protection laws and regulations.
The advent of online banking and online lending has been a strong reminder for many financial institutions of the robust nature of many consumer protection laws. Increased speed and variation in online products are just a couple of the reasons for financial institutions to place an increased focus on compliance obligations with consumer protection laws. In addition, while the Consumer Financial Protection Bureau (CFPB) may not have primary jurisdiction over certain community bank lenders, for example, the prudential bank regulators look to the interpretive guidance of the CFPB when supervising and advising on bank products and service offerings to consumers. Further, in the area of consumer protection, the state regulatory and law enforcement authorities are playing an increasingly active role.
As a result of the COVID-19 pandemic, Congress, governors, federal and state agencies, and businesses are taking steps to protect consumers. It is therefore crucial that financial institutions stay on top of this evolving landscape of consumer protections. For example, the Coronavirus Aid, Relief, and Economic Security (CARES) Act and guidance from federal agencies provide foreclosure relief to consumers who have federally or Government Sponsored Enterprise backed mortgages (FHA, VA, USDA, Fannie Mae, Freddie Mac). If a financial institution makes such loans, it may not begin a judicial or non-judicial foreclosure or finalize a foreclosure judgment or sale through at least August 31, 2020.
In addition, consumers experiencing financial hardship due to COVID-19 have a right to request and obtain a forbearance for up to 180 days—no additional fees, penalties, or additional interest (beyond scheduled amounts) may be added to a consumer’s account. Supporting forbearance guidance has been issued by the CFPB and state regulators.
On August 3, 2020, the Federal Financial Institutions Examination Council (FFIEC) issued a Joint Statement on Additional Loan Accommodations Related to COVID-19 (Loan Accommodations Joint Statement). The Loan Accommodations Joint Statement provides prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as loans near the end of the initial loan accommodation periods applicable during the COVID-19 event.
In light of COVID-19 concerns, consumers are increasingly turning to online options to conduct banking services. Many financial institutions are evaluating their online services to ensure they are consumer friendly and encourage their usage. The challenge for financial institutions in the increased demand for online banking services, however, is the risk of operational failures or security breaches. This risk management includes the safe and sound use of cloud computing services. In May 2020, the FFIEC issued a joint statement concerning Security in a Cloud Computing Environment (Security Joint Statement). The Security Joint Statement provides guidance on monitoring cloud security, whether using a public cloud or an in-house private service, to ensure the safety of information—including consumer information—that may be stored in a cloud environment.
1. Compliance officers must be aware of the changing regulatory landscape as a result of COVID-19.
2. Review your online banking services to determine if they are compliant and consumer friendly.
3. Contact your Howard & Howard attorney for any assistance in developing compliance plans and keeping up to date on regulatory developments concerning consumers.
Howard & Howard has a dedicated team of financial services attorneys with deep experience handling complex transactional, regulatory, and litigation matters. Our attorneys regularly advise clients on M&A, strategic transactions, third-party engagement, enforcement matters, and regulatory compliance. For more information, or for questions related to this Financial Institutions Advisory, please contact the author(s), your Howard & Howard attorney, or visit us at https://howardandhoward.com/services/financial-banking/.