Thursday, May 23, 2024

August 2019 OBA Legal Briefs

  • Amendments to Title 47
  • EGRRCPA Update – Part 2

Amendments to Title 47

By Pauli Loeffler

Sell the vehicle, keep the license plate. Effective July 1, 2019, § 1112.2 was added to Title 47. If the borrower buys a new or used car or truck from a dealer, nothing has changed. If the borrower trades his car in for a new one, he will take his license plate with him, but will display the paper tag until the car is registered. He has 30 days to do so or face a penalty. The borrower presents the license plate to the tag agent, and once the registration is completed, puts the old tag on the new car. He will not get a new license tag.

On the other hand, things are different if buying from a private party in Oklahoma. The private party will keep the plate, and things get hairy. Billy Bob Smith buys Justin Will’s truck. Justin will retain the plate. Billy Bob isn’t trading or selling any vehicles, so he has a truck with no plate. He can drive around Oklahoma without a license plate for 5 days as long as he has a notarized bill of sale from Justin. Billy Bob still has 30 days to register the truck, but he pretty much will have to park it in his garage after the 5 days are up. I kind of wonder how often Billy Bob will get stopped and have to produce the bill of sale during that time, but getting stopped a couple of times will probably spur him into registering the vehicle quickly. I also would guess it will make it easy for law enforcement to make contact quotas if such quotas exist.

There is another problem that wasn’t considered when the statute was enacted: What happens when there is a lien on a Justin’s truck, and there’s lien on the certificate of title?

Sec. 1110 of Title 47 provides:

  1. 1. A secured party shall, within seven (7) business days after the satisfaction of the security interest, furnish directly or by mail a release of a security interest to the Tax Commission and mail a copy thereof to the last-known address of the debtor… If the secured party fails to furnish the release as required, the secured party shall be liable to the debtor for a penalty of One Hundred Dollars ($100.00). Following the seven (7) business days after satisfaction of the lien and upon receipt by the lienholder of written communication demanding the release of the lien, thereafter the penalty shall increase to One Hundred Dollars ($100.00) per day for each additional day beyond seven (7) business days until accumulating to One Thousand Five Hundred Dollars ($1,500.00) or the value of the vehicle, whichever is less, and, in addition, any loss caused to the debtor by such failure.

Your bank has the title to the truck. As a practical matter, Justin’s lender is receiving a cashier’s check payable to the lender or to Justin and the lender. Cashier’s checks are not subject to stop payment, so the lender could sign the lien release (your bank can fill one out and send it with the check) right then and there. Unfortunately, that is probably NOT going to happen. If Justin’s lender waits until the cashier’s check is paid to provide the lien release, and your bank is holding the title until the release is received, Billy Bob has a truck without a tag and no way to register title.

As far as your bank is concerned, you need to know that there can be more than one lien on a certificate of title (I think the limit is either 4 or 5 although only two will be displayed on the certificate), so there is no real reason to delay filing your lien entry and speeding matters along provided you know the bank has the cashier’s check, and it will be presented for payment. When Justin’s institution files its release, it will no longer have a lien, its lien will be removed from any subsequent certificate of title. You will need to make sure that the truck does not serve as collateral for another of Justin’s loans.

Note: The following license plates are NOT subject to § 1112.2: Mobile Chapel, Manufactured Home, Boat/ Outboard Motor. Construction Machinery, Special Mobilized Trailer – Trailer Exempt, Commercial Rental Trailer – Commercial Trailer, Farm Trailer- Forest Trailer – Private Trailer, or ATV- Utility Vehicle – Off Road Motorcycle.

Another item for your glove box. Also. effective July 1, 2019, is new § 1112.3 of Title 47:

  1. Except as otherwise provided in subsection B of this section, at all times while a vehicle is being used or operated on the roads of this state, the operator of the vehicle shall have in his or her possession or carry in the vehicle and exhibit upon demand to any peace officer of the state or duly authorized employee of the Department of Public Safety, either a:
  2. Registration certificate or an official copy thereof;
  3. True copy of rental or lease documentation issued for a motor vehicle;
  4. Registration certificate or an official copy thereof issued for a replacement vehicle in the same registration period;
  5. Temporary receipt printed upon self-initiated electronic renewal of a registration via the Internet; or
  6. Cab card issued for a vehicle registered under the International Registration Plan.
  7. The provisions of subsection A of this section shall not apply to the first thirty (30) days after purchase of a replacement vehicle.

So, dig out your registration documents and put them in your car just in case the officer asks.

EGRRCPA Update – Part 2

By Andy Zavoina

We updated the status on sections 101 through 202 in last month’s Legal Briefs.

Section 203: Synopsis – The Bank Holding Company Act is amended to exempt certain banks from the “Volcker Rule” when it has less than $10 billion in assets, and trading assets and liabilities comprising not more than 5% of total assets. (The Volcker Rule prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds.) and

Section 204: Synopsis Volcker Rule restrictions on entity name sharing are eased in specified circumstances.

Effective Dates 203 & 204: The effective date is upon enactment. While it may be effective immediately changes to existing regulations are anticipated.

Updates 203 & 204: July 22, 2019 – The FDIC, FRB, OCC, SEC, and the U.S. Commodity Futures Trading Commission have issued a final rule to amend regulations implementing Section 13 of the Bank Holding Company Act (the Volcker Rule) in a manner consistent with the statutory amendments made pursuant to Sections 203 and 204 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). These statutory amendments modified the Volcker Rule to exclude certain community banks from the Volcker Rule and to permit banking entities subject to the Volcker Rule to share a name with a hedge fund or private equity fund that it organizes and offers under certain circumstances.

Based on September 30, 2018 call report data, this change to the Volcker Rule exempted approximately 97.5% of the 5,486 U.S. depository institutions. Only 0.15% of depository institutions had trading assets equal to at least 5% of their total assets.

Section 205: – SynopsisThe Federal Deposit Insurance Act will be amended to require federal banking agencies to issue regulations allowing small depository institutions, less than $5 billion in assets, to satisfy reporting requirements with a shorter or simplified Report of Condition and Income (the Call Report) and to file these only after the first and third quarters.

Effective Date: The effective date is not stated. While it may be effective immediately changes to existing regulations are anticipated.

Update: On June 26, 2019, the three agencies published a final rule expanding the eligibility to file the FFIEC 051 report of condition, which is the most streamlined version of the call report.

https://www.govinfo.gov/content/pkg/FR-2019-06-21/pdf/2019-12985.pdf

Section 206: SynopsisThe Home Owners’ Loan Act will now permit federal savings associations with assets under $20 billion to operate under the Office of the Comptroller of the Currency (OCC) with the same rights and duties as national banks, without requiring a change in its charter. OCC regulations will be required to complete this.

Effective Date: The effective date is not stated. While it may be effective immediately changes to existing regulations are anticipated.

Update: The OCC has issued a final rule to implement a new section of the Home Owners’ Loan Act. The new section allows a Federal savings association with total consolidated assets equal to or less than $20 billion, as reported by the association to the Comptroller as of December 31, 2017, to elect to operate as a covered savings association. A covered savings association has the same rights and privileges as a national bank and is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations as a national bank. A covered savings association retains its Federal savings association charter and existing governance framework. The new rule, published as a new part 101 of title 12 of the CFR, is effective July 1, 2019.

https://www.federalregister.gov/documents/2019/05/24/2019-10902/covered-savings-associations

Section 207: Synopsis – The Federal Reserve Board (FRB) must increase the consolidated asset threshold (permissible debt level) for a bank holding company or savings and loan holding company (BHCs) that is not engaged in significant nonbanking activities, does not conduct significant off-balance-sheet activities and does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding, from $1 billion to $3 billion. The FRB may exclude a company from this threshold increase if warranted. Currently the FRB allows BHCs under $1 billion in assets to take on more debt in order to complete a merger than it would a larger BHC.

Effective Date: The effective date is not stated. While it may be effective immediately changes to existing regulations are anticipated.

Update: On August 28, 2018, the FRB issued an interim final rule which raises the asset threshold for relief under the FRB’s small bank holding company policy statement from $1 billion to $3 billion. It also applies to savings and loan holding companies with less than $3 billion in total consolidated assets. The interim final rule is effective upon publication but the regulatory agencies will accept comments for 30 days after publication.

Section 208: SynopsisThe Expedited Funds Availability Act (implemented by Reg CC) will apply to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam. The Reg CC’s one-day extension for certain deposits in non-contiguous states or territories will also apply to these territories.

Effective Date: This section is effective 30 days after the laws signing, or June 23, 2018.

Update:  On June 24, 2019, the FRB and CFPB issued a final rule amending Reg CC. The changes include extending coverage to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam. https://files.consumerfinance.gov/f/documents/cfpb_availability-of-funds-collection-checks-reg-cc_final-rule-2019.pdf

This change will be effective September 3, 2019.

This final rule also added cost of living adjustments (COLA) which are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. This is the first set of adjustments and provides that future changes will be made every five years. This change will go into effect July 1, 2020.

The adjustment impacts a number of dollar amounts incorporated into Subpart B – Availability of Funds and Disclosure of Funds Availability Policies of Reg CC including:

  1. The $200 rule under Sec.229.10(c)
  2. The $400 rule under Sec. 229.12(d)
  3. The $5,000 amount in sections. 229.13(a), (b) and (d)(2)

These COLA adjustments may impact your Funds Availability Disclosures given to customers and displayed as notices to customers in your lobby. These changes can also impact your training materials, training requirements. You have a year to implement this so there’s no hurry, but add it to your 2020 calendar now unless you elect to comply prior to the required implementation date.  Early compliance is allowed.

Since the changes are not detrimental to the customers (consumer and commercial)  with transaction accounts, prior notice will not be required. These changes expedite availability so (229.18(e)) Reg CC only requires a change notice not later than 30 days after implementation.

Section 210: SynopsisThese revisions raise the asset threshold from $1 billion to $3 billion allowing more banks to be eligible for an 18-month examination cycle instead of a 12-month cycle. If a bank has less than $1 billion in assets and meets specified criteria related to capital adequacy and scores received on previous examinations, it may be examined only once every 18 months. The federal banking agencies will have to determine if qualified banks already scheduled for an exam under the 12-month cycle will be rescheduled for the longer 18 months.

Effective Date: The effective date is upon enactment. While it may have been effective immediately changes to existing regulations were published in September 2018.

Update: Sep. 10, 2018 (OCC Bull 2018-27)  The OCC, FDIC and FRB published an interagency interim final rule amending the regulations governing eligibility for the 18-month on-site examination cycle. To qualify for the extended 18-month examination cycle, a bank with

  1. less than $3 billion in total assets must be
  2. 1- or 2-rated,
  3. be well capitalized,
  4. not be subject to a formal enforcement proceeding or order from a federal banking agency, and
  5. not have experienced a change of control in the preceding 12-month period. Additionally, a national bank or federal savings association
  6. must have a management rating of 1 or 2 to qualify.

On December 21, 2018 the Federal banking agencies issued final rules that adopted without change the interim final rules were made final.

https://www.occ.gov/news-issuances/news-releases/2018/nr-ia-2018-143a.pdf

Section 214SynopsisThis allows a bank to classify certain commercial credit facilities that finance the acquisition, development, or construction of commercial properties as regular commercial real estate exposures instead of high volatility commercial real estate (HVCRE) exposures for risk-weighted capital requirement calculations and the federal banking agencies may not subject a bank to higher capital standards with respect to HVCRE exposure unless the exposure is an HVCRE acquisition, development, or construction (ADC) loan.

An HVCRE ADC loan is secured by land or improved real property, has the purpose of providing financing to acquire, develop, or improve the real property such that the property becomes income-producing; and is dependent upon future income or sales proceeds from, or refinancing of, the real property for the repayment of the loan.

Effective Date: The effective date is upon enactment. While it may be effective immediately changes to existing regulations are anticipated.

Update: On September 18, 2018, the regulatory agencies issued a proposed rule implementing this provision. The new law limits the exposures subject to a 150 percent risk weight to only those high-volatility commercial real estate loans that fall under the statutory “HVCRE ADC” definition. The proposal defines these loans as secured by land or improved real property with the purpose of providing financing to acquire, develop or improve the real property such that the property would become income producing; and is dependent upon future income or sales proceeds from, or refinancing of, the real property for repayment of the loan.

An additional proposal to expand on the September 2018 proposal has been made by the OCC, FDIC and FRB in June 2019. It has not been published in the Federal Register as of the production of this update but the comment period will extend for 30 days after being published. This new proposal adds language to the definition of HVCRE exposure providing that the one-to-four-family residential property exclusion would not include credit facilities that solely finance land development activities, such as the laying of sewers, water pipes and similar improvements to land without any construction of one-to-four-family structures. The agencies are seeking feedback

https://www.fdic.gov/news/board/2019/2019-06-07-notational-fr-a.pdf

Section 215: SynopsisThe Social Security Administration (SSA) will develop a database for verification of consumer information upon request by a certified financial institution. An E-SIGN’ed consent Verifications will be provided only with the consumer’s consent and in connection with a credit transaction. Users of the database shall pay system costs as determined by the SSA.

Effective Date: The effective date is not stated. While it may be effective immediately changes to existing regulations are anticipated.

Update: The Social Security Administration published a notice announcing the initial enrollment period for a new electronic Consent Based Social Security Number (SSN) Verification (eCBSV) service. SSA will roll out the service to a limited number of users in June 2020, and plans on expanding the number of users within six months of the initial rollout. All interested permitted entities must apply during this initial enrollment period to be eligible to use the new eCBSV service during either the initial rollout or subsequent planned expansion. Permitted entities that do not apply during the initial enrollment period must wait until the next designated period after the planned expansion to apply for enrollment. The initial enrollment period for permitted entities will begin on July 17, 2019, and remain open until the period closes on July 31, 2019. In accord with statutory requirements, permitted entities will be required to provide payment to build the new eCBSV system.

https://www.federalregister.gov/documents/2019/06/07/2019-11995/notice-of-an-initial-enrollment-period-for-our-electronic-consent-based-social-security-number

Section 301: SynopsisThe Fair Credit Reporting Act (FCRA) will increase the length of time a consumer reporting agency must include a fraud alert in a credit file from the current 90 days to at least one year.

It will require consumer reporting agencies to provide a consumer with free credit freezes and to notify them of this availability. It will establish provisions for placement and removal of freezes, and creates requirements related to the protection of the credit records of minors.

The FCRA now requires that whenever a consumer is required to receive a summary of rights required under FCRA’s Section 609, a notice of consumer rights regarding the new security freeze right must be included. This includes for employment purposes discussed at the “Effective Date” of this section.

Effective Date: This section is effective 120 days after the laws signing, or September 21, 2018.

Update: The Bureau published an interim final rule on September 18, 2018 which contained the new “Summary of Consumer Rights” in both English and Spanish. Each is available at consumerfinance.gov.

Section 604(b)(2) of the FCRA requires a summary of rights notice to employees and prospective employees when a credit report is used in the hiring process. One requirement is that as part of the hiring process the bank must give the applicant or employee notice in advance that a credit report may be obtained, include a written description of consumer rights and have that person’s consent to access the credit file. If your credit report vendor provides the bank with a copy of the summary at the same time it provides the report to the employer, ensure everything is updated.  The credit report provider does not have to provide a copy with each report if it “has previously provided” the summary. Many vendors are likely relying on this provision.  If a new one was sent, remove your outdated versions of the notice.

Section 302: Synopsis – Medical debt could not be included in a veteran’s credit report until one year has passed from when the service was provided.

A new dispute process and verification procedure will be created when the veteran’s medical debt in a consumer credit report. It establishes a dispute process for veterans so that a credit reporting agency must remove information related to a debt if the veterans notifies it and provides documentation showing the Department of Veterans Affairs is in the process of making payment.

Finally, this section requires credit reporting agencies to provide free credit monitoring to active duty military members that would alert them to material changes in their credit scores.

Effective Date: This section is effective one year after the laws signing, or May 24, 2019. Changes to regulations are anticipated.

Update: June 28, 2019, The Federal Trade Commission has published a final rule to implement the credit-monitoring provisions applicable to active duty military consumers. The final rule defines “electronic credit monitoring service,” “contact information,” “material additions or modifications to the file of a consumer,” and “appropriate proof of identity,” among other terms. It also contains requirements on how NCRAs must verify that an individual is an active duty military consumer. Further, the final rule contains restrictions on the use of personal information and on communications surrounding enrollment in the electronic credit monitoring service.

The amendments are effective July 31, 2019. Compliance is not required until October 31, 2019. They changes do not require any action by financial institutions.

https://www.federalregister.gov/d/2019-13598

Section 304: SynopsisThe sunset provision of the Protecting Tenants at Foreclosure Act was repealed, restoring notification requirements and other protections related to the eviction of renters in foreclosed properties. (The Act expired on December 31, 2014.)

As a refresher, this applies to a federally related mortgage or any dwelling or residential property. A tenant for these purposes is a person in possession of the property with or without a lease, provided:

  • The occupant is not the mortgagor or the child, spouse or parent of the mortgagor;
  • The lease or tenancy was the result of an arm’s-length transaction; and
  • The lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property, or the unit’s rent is reduced or subsidized due to a federal, state or local subsidy.

A party acquiring the property through foreclosure or as a successor in interest to the purchaser takes the property subject to the rights of a tenant, and a tenant without a lease or with a lease terminable at will under state law is entitled to a 90-day notice before the owner may commence eviction proceedings. The tenant may not be evicted until the end of the lease term. There is an exception for purchasers who will occupy the property as a primary residence, although a 90-day notice must still be delivered before commencing an eviction.

Effective Date: This section is effective 30 days after the laws signing, which was June 23, 2018.

Update: The Federal Reserve issued Consumer Affairs Letter CA-18-4 on June 22, 2018. This addresses the restoration of the Protecting Tenants at Foreclosure Act and it provides background information The Board also issued compliance examination procedures for the Act. The law protects tenants from immediate eviction by persons or entities that become owners of residential property through the foreclosure process, and extends additional protections for tenants with U.S. Department of Housing and Urban Development Section 8 vouchers.

CA-18-4 https://www.federalreserve.gov/supervisionreg/caletters/caltr1804.htm

Exam procedures https://www.federalreserve.gov/supervisionreg/caletters/caltr-1804-attachment.pdf

Section 307Synopsis

The Consumer Financial Protection Bureau must extend ability-to-repay regulations to Property Assessed Clean Energy (PACE) loans which retrofit homes (as well as commercial and ag property) for energy efficiency but are often financed at high interest rates with 100% financing and 20 years to repay. The debt stays with the property and is controlled locally via a Dept. of Energy program.

Effective Date: The effective date is not stated. While it may be effective immediately changes to existing regulations are anticipated.

On March 4, 2019 the Bureau published an advanced Notice of Proposed Rulemaking to gather information for consideration. PACE financing is dependent on state enabling laws. It is typically used to finance clean energy projects, disaster resiliency improvements, and water conservation measures. Loans are repaid over a number of years via an annual assessment on municipal property tax bills.

The Bureau will consider the information it receives in response to its ANPR to develop a Notice of Proposed Rulemaking. The information solicited will enable the Bureau to better understand the market and unique nature of PACE financing. This will help the Bureau formulate proposed regulations that not only would achieve statutory objectives but also would reflect a careful consideration of costs and benefits. Comments on the ANPR were open for 60 days.

Title IV is targeted at large banks and addresses changes in Bank Holding Company (BHC) rules.

Section 401SynopsisThe Financial Stability Act of 2010 was amended with respect to nonbank financial companies supervised by the FRB and certain bank holding companies, to:

  • increase the asset threshold at which certain enhanced prudential standards shall apply, from $50 billion to $250 billion, while allowing the FRB discretion in determining whether a financial institution with assets equal or greater than $100 billion must be subject to such standards;
  • increase the asset threshold at which company-run stress tests are required, from $10 billion to $250 billion;
  • and increase the asset threshold for mandatory risk committees, from $10 billion to $50 billion.

Effective Date: This section is effective 18 months after the law’s signing, or November 2019, less changes to any bank holding company with total consolidated assets of less than $100 billion, which are effective immediately.

Update December 2018 – The FDIC and other agencies published a notice of proposed rulemaking amending stress testing requirements to reflect the new $250B threshold instead of the older $10B. https://www.fdic.gov/news/board/2018/2018-12-18-notice-sum-j-fr.pdf?source=govdelivery&utm_medium=email&utm_source=govdelivery Additional updates include:

Tailoring Capital and Liquidity Rules for Foreign Banking Organizations, Proposed rule May 24, 2019 – The proposed amendments establish risk-based categories for determining the application of the resolution planning requirement to certain U.S. and foreign banking organizations and a proposal by the agencies to extend the default resolution plan filing cycle, allow for more focused resolution plan submissions, and improve certain aspects of the Rule. Comments closed June 21, 2019.
https://www.govinfo.gov/content/pkg/FR-2019-05-24/pdf/2019-09245.pdf

Section 402: Synopsis – This requires the appropriate federal banking agencies to exclude, for purposes of calculating a custodial bank’s supplementary leverage ratio, funds of a custodial bank that are deposited with a central bank. The amount of such funds may not exceed the total value of deposits of the custodial bank linked to fiduciary or custodial and safekeeping accounts.

Effective Date: The effective date is not stated. While it may be effective immediately changes to existing regulations are anticipated.

Supplementary Leverage Ratio for Custodial Banks, This proposed rulemaking was published April 30, 2019
https://www.govinfo.gov/content/pkg/FR-2019-04-30/pdf/2019-08448.pdf

Section 403: Synopsis – The Federal Deposit Insurance Act will now require certain municipal obligations to be treated as level 2B liquid assets if they are investment grade, liquid, and readily marketable. Under current law, corporate debt securities and publicly traded common-equity shares, but not municipal obligations, may be treated as level 2B liquid assets (which are considered to be high-quality assets).

The FRB, FDIC and OCC issued an interim rule on this on August 31, 2018 which was in the Federal Register, Vol. 83, No 170, Pg. 44451.

Effective Date: The effective date is not stated. While it may be effective immediately changes to existing regulations are anticipated.

Update: On May 30, 2019, the FDIC issued a press release announcing that the final rule will adopt without change the agencies’ interim final rule issued in August 2018, amending their liquidity coverage ratio (LCR) rules to treat certain eligible municipal obligations as high-quality liquid assets (HQLA).

The rule takes effect 30 days after publication in the Federal Register. This now treats liquid, readily marketable and investment-grade municipal securities as HQLA for the purposes of the LCR, one of the Basel III liquidity regimes.

https://www.fdic.gov/news/news/press/2019/pr19044a.pdf