On May 22, 2018, the House of Representatives passed the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) (the “Consumer Protection Act”), which had been previously passed by the Senate. The Consumer Protection Act will now be sent to President Trump who is expected to sign it into law in the coming weeks.
The Consumer Protection Act becomes the first legislatively enacted regulatory relief bill since the recession, and rolls back various Dodd-Frank Act provisions. Below we provide a brief summary of some of the Consumer Protection Act’s major provisions.
Capital Simplification for Qualifying Community Banks. The federal banking agencies would be directed to initiate the rulemaking process to develop a “Community Bank Leverage Ratio” of not less than 8 percent and not more than 10 percent for community banks and their holding companies with total consolidated assets of $10 billion or less. Any qualifying community bank or holding company that exceeds the Community Bank Leverage Ratio will be considered well-capitalized. Qualifying banks that meet this ratio would not even have to calculate the various other capital ratios currently employed by the federal banking regulators (e.g., Total Risk-Based Capital Ratio, Common Equity Tier-1 Capital Ratio, or Tier-1 Risk-Based Capital Ratio). Continue Reading Update: Regulatory Relief Passed by Congress
On May 11, 2018, compliance with the beneficial ownership rule became mandatory. In accordance with the rule, a covered financial institution must verify, at the time a new account is opened, the beneficial owners opening the account on behalf of a legal entity customer. For purposes of the rule, any rollover or renewal of an existing account is deemed to be an opening of a “new” account. Despite the clarity of the regulation, many financial institutions are not certain how they are to comply with the beneficial ownership requirements when many renewals of loan accounts and rollovers of certificates of deposit (CDs) are automated.
After a 10 day jury trial, a jury found U.S. Bancorp liable for almost $3.3 million in damages for infringing upon a patent covering check-processing technology owned by Solutran, Inc. (”Solutran”). Solutran’s U.S. Patent No. 8,311,945 covers a method for processing paper checks whereby data regarding a transaction captured at a merchant’s point of purchase is later matched against a scanned image of a check at a remote location. The jury rejected U.S. Bancorp’s argument that the patent was obvious based on prior art, and found that almost 100 million of the bank’s transactions had infringed on Solutran’s patent.
On April 10, 2018, the Federal Financial Institutions Examination Council (the “FFIEC”), an interagency body composed of the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency and the State Liaison Committee, issued guidance to assist financial institutions in analyzing the use of cyber insurance in an effective risk management program (the “Guidance”).