Page 6 - October 24, 2024 Bulletin

aRTiCLeS

The associations further stated that “while we recognize the FHFA’s to certain protections under Regulation Z, which implements the
role as the regulator of the FHLBs and the appropriateness of Truth in Lending Act, and Regulation M, which implements the
requiring review and updates of credit rating frameworks, we have Consumer Leasing Act.
significant concerns about FHFA’s imposition of new standards, The agencies are required to adjust the thresholds annually based
without sufficient consultation and input from the banking industry, on the annual percentage increase in the Consumer Price Index
banking regulators, and other interested parties.”
for Urban Wage Earners and Clerical Workers, known as CPI-W.
Read more: https://www.aba.com/-/media/documents/letters-to- Effective Jan. 1, 2025, will apply to consumer credit transactions and
congress-and-regulators/jointltrfhlb20240924.pdf consumer leases of $71,900 or less, up from $69,500.

OCC Weighs in Against Illinois In related news, the Fed, CFPB and the Office of the Comptroller
of the Currency announced the 2025 threshold for higher-priced
Interchange Law in Rare Amicus mortgage loans that are subject to special appraisal requirements
Brief will increase from $32,400 to $33,500. The amount is based on the
CPI-W.
The OCC has submitted an amicus brief supporting the request Read more on Reg Z: https://www.federalreserve.gov/newsevents/
for a preliminary injunction against an Illinois state law restricting pressreleases/files/bcreg20241004b1.pdf
interchange fees. In its brief, the OCC called the Illinois law –
which bans card issuers and networks from receiving credit or debit Read more on Reg M: https://www.federalreserve.gov/newsevents/
interchange fees on tips and taxes – an “ill-conceived, highly unusual, pressreleases/files/bcreg20241004b2.pdf
and largely unworkable state law that threatens to fragment and Read more on Reg Higher Priced Mortages: https://
disrupt this efficient and effective system.” The OCC added that www.federalreserve.gov/newsevents/pressreleases/files/
the Illinois Interchange Fee Prohibition Act constitutes “unlawful bcreg20241004a1.pdf
interference” with the OCC’s congressionally granted powers to
oversee national banks. FHFA Issues Guidance for
“Interchange fees play a vital role in enabling banks to protect FHLBanks When Providing
against fraud, cover the costs of transaction processing, and provide
other valuable consumer services,” the OCC said in its submission. Liquidity
“If the interchange fee prohibition provision in the IFPA is not The Federal Housing Finance Agency has issued guidance for
invalidated, it will erode this essential infrastructure, leaving national Federal Home Loan Banks to determine a financial institution’s
banks with extraordinary operational burdens that likely will be creditworthiness when providing liquidity. The guidance is meant to
passed on to consumers in the form of higher fees, reduced services, emphasize the FHFA’s “longstanding expectations that an FHLBank’s
and weakened fraud protection. In addition to the misguided and underwriting and credit decisions should reflect a member’s financial
unlawful restrictions on interchange fees, the IFPA’s imprudent data condition and not rely solely on the collateral securing the member’s
usage limitation will likewise weaken national banks’ and federal credit obligations,” according to the document.
savings associations’ abilities to prevent fraud, manage risk, and
provide critical services to consumers.” The guidance provides an overview of FHFA’s expectations for the
components of the FHLBank’s member credit framework, including
The OCC argued that the National Bank Act preempts Illinois’ credit risk governance, member credit assessment and monitoring
interchange fee restrictions because of national banks’ right to process of credit conditions, according to the document. It also outlines key
debit and credit card transactions and because the IFPA would elements in the oversight of troubled members, including escalation
significantly interfere with national banks’ exercise of this power. The policies and procedures, coordination with members’ prudential
OCC also said the National Bank Act preempts the IFPA provision regulators, and default/failure/insolvency management policies and
prohibiting banks from using or transferring payment-related data. procedures. Finally, it includes instructions for the FHLBanks to
coordinate with members’ primary regulators.
Agencies Announce 2025 “Today’s advisory bulletin on member credit risk management

Thresholds for Consumer Credit, promotes the FHLBank System’s ability to fulfill its function as a
Higher-Priced Mortgage Loans reliable source of liquidity throughout the economic cycle,” FHFA
Director Sandra Thompson said. “This guidance provides clarity for
The Federal Reserve and Consumer Financial Protection Bureau the FHLBanks’ effective management of credit risk and coordination
have announced the dollar thresholds used to determine whether with other financial regulators so that member institutions can
certain consumer credit and lease transactions in 2025 are subject maintain the ability to access liquidity when needed.”

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