RR post-break wrap-up: OCC clarifies CRA rating policy, Fed fines Citigroup, BCFP settles with Hydra Group; and more

Regulatory Report took a week-long break from Aug. 10 to Aug. 17, but the news didn’t. Here is a wrap-up of some of the key developments during the period.

OCC policy on CRA clarified, leaving room for downgrades of more than one rating level: A bulletin (2018-13) clarifying the banking regulator’s policies in determining the effect of evidence of discriminatory or other illegal credit practices on the Community Reinvestment Act (CRA) rating of a national bank, federal savings association or federal branch, published Aug. 15 by the Office of the Comptroller of the Currency (OCC), deletes a previous footnote indicating there would be no downgrades of more than one level. It also adds a sentence that if a bank’s composite or component rating will be downgraded based on evidence of discrimination or other illegal credit practices directly related to the bank’s CRA lending practices, the OCC’s general policy “is to downgrade the rating by only one rating level unless such illegal practices are found to be particularly egregious.” Link: Revisions to Impact of Evidence of Discriminatory or Other Illegal Credit Practices on Community Reinvestment Act Ratings

OCC updates accounting advisory series: The agency’s updated Bank Accounting Advisory Series (BAAS) incorporates accounting standards issued by the Financial Accounting Standards Board (FASB) on topics such as hedging and credit losses. In its third edition, the series also includes recent answers to frequently answered questions from the industry and examiners. Link: Bank Accounting Advisory Series Updated

BCFP settlement with Hydra Group includes $69 million judgment (suspended): A federal district court on Aug. 10 entered an order effectuating a settlement between the bureau and Hydra Group proprietors and 20 related companies over unlawful origination and servicing of short-term, small-dollar online (payday) loans to consumers nationwide. The bureau says that under the terms of the consent order, the defendants will be banned from the industry, forfeit about $14 million in assets, and pay a $1 civil money penalty (with the penalty amount based in part on defendants’ limited ability to pay). A judgment of $69 million to provide consumer redress is suspended pending compliance with the other requirements. Link: Bureau Of Consumer Financial Protection Settles With Defendants In Hydra Group Payday Lending Case

Banks, thrifts affected by wildfires in CA allowed to close: A proclamation issued Aug. 9 by theOffice of the Comptroller of the Currency (OCC) allows national banks, federal savings associations, and federal branches and agencies of foreign banks affected by wildfires and high winds in California to close “for as long as deemed necessary for bank operation or public safety.” Link: OCC Allows Federally Chartered Financial Institutions Affected by Wildfires in California to Close

Citigroup fined $8.6 million by Fed over residential mortgage practices: The Federal Reserve Board announced an $8.6 million civil money penalty (CMP) against Citigroup Aug. 10 while also terminating a 2011 enforcement action against the bank holding company. The CMP was related to mortgage servicing practices of Citigroup’s nonbank subsidiary, CitiFinancial Credit Company (Baltimore, Md.), which exited the mortgage servicing business in 2017. The Fed also announced the termination of an enforcement action from 2011 against Citigroup and CitiFinancial related to residential mortgage loan servicing. “The termination of this action was based on evidence of sustainable improvements,” the Fed said in a release. Link: Federal Reserve Board fines Citigroup $8.6 million for the improper execution of residential mortgage-related documents and announces termination of 2011 enforcement action

Fed terminates enforcement orders: The Fed terminated its January 2010 order with Flagstar Bancorp Inc. (Troy, Mich.) and July 2015 order with Santander Holdings USA, Inc. (Boston, Mass.). The 2010 order involving Flagstar was executed with the former Office of Thrift Supervision. The agency also terminated cease-and-desist orders against HSBC North America Holdings, Inc. (New York, N.Y.), from 2010 regarding compliance risk management; Capital Funding Bancorp, Inc., and CFG Community Bank (both Baltimore, Md.), from 2011 regarding safety and soundness deficiencies, and violations; and CommerceWest Bank (Irvine, Calif.), from 2016 regarding Bank Secrecy Act/anti-money laundering (AML) compliance. Links: Termination of enforcement actions with Flagstar Bancorp, Inc., and Santander Holdings USA, Inc.;Termination of enforcement actions with HSBC North America Holdings, Inc., Capital Funding Bancorp, Inc. and CFG Community Bank, and CommerceWest Bank