June 8, 2023

Parson Signs MBA Priority Measure Into Law

On Wednesday, Gov. Mike Parson signed an MBA priority bill that clarifies Missouri’s credit card lending law and modernizes Missouri Division of Finance statutes.

Senate Bill 13 ensures that banks that choose to issue their own credit cards may, upon approval by the state, adopt the full terms and conditions of a bordering state’s credit card law.  It will put a stop to frivolous lawsuits alleging banks are not allowed to collect interest on those cards.

The bill also provides much-needed updates to various statutes relating to the Division of Finance. Most notably, Senate Bill 13 includes a new section allowing the division to issue guidance to regulated institutions in the form of bulletins and industry letters. Bulletins will be shared industrywide to answer common questions while industry letters will address a bank’s specific concerns. Banks adhering to the guidance in industry letters will have safe harbor. MBA believes this is an important tool for the division to assist banks in their compliance efforts.

MBA appreciates the bill’s sponsor, Senator Sandy Crawford, R-Buffalo, House handler Rep. Bill Owen, R-Springfield, and House Financial Institutions Chair Michael O’Donnell, R-Oakville, for all their work to get this important bill to the governor’s desk. We also thank all the Target Bankers who helped educate their legislators both in the Missouri Capitol and at home. The law is effective Aug. 28.

ATM Thefts on the Rise in Missouri

Member banks have notified MBA about recent ATM thefts and destruction. St. Louis police are investigating a recent ATM theft, and law enforcement in Branson recently arrested four men for ATM thefts.

Legislation passed by the Missouri General Assembly this session would make it a felony offense to destroy, damage, modify, steal or install a skimming device on a teller machine. Senate Bill 186 also would clarify into law that this type of crime is a felony and is intended to prevent ATM “smash-and-grab” crimes, which have been on the rise in Missouri.

The bill is currently awaiting approval from Gov. Mike Parson. Once action is taken, MBA will notify its members.

MBA: Urge Congress to Reject Credit Card Routing Bill

A group of U.S. senators and representatives has reintroduced legislation that would force card-issuing financial institutions to choose among routing networks set by the Federal Reserve and end credit card reward points.

The Credit Card Competition Act would dramatically reduce interchange income from credit card transactions while increasing security and fraud risk. MBA is staunchly opposed to this bill.

“Much like the Durbin amendment that made debit card rewards economically infeasible, this measure would do the same to credit card transactions as reductions in interchange income make the programs unsustainable,” said MBA President and CEO Jackson Hataway.

The reintroduced bill mirrors legislation from the last congressional session that failed to move forward thanks to the advocacy efforts of bankers and other stakeholders who recognized the potential harm to consumers.

That harm was expressed in a joint letter to congressional leaders from MBA, the American Bankers Association and state bankers associations. The groups said mandating network routing requirements on banks that issue credit cards is anti-consumer and anti-competitive, and it will harm everyone except large merchants.

“Make no mistake: this bill was specifically written to deliver a major payday for big retail and big grocery at a time that these giant retailers have been getting even bigger, increasing their profits, and raising prices on American consumers,” the associations said.

MBA urges its members and their customers to contact Sens. Josh Hawley and Eric Schmitt to oppose the Credit Card Competition Act.

“Our banks and their customers were successful in helping us to prevent the Credit Card Competition Act from becoming law last year,” Hataway said, “and we need that support again if we want to protect consumers from fraud and keep credit card rewards programs.”

Banking Regulators Issue Joint Guidance on Third-Party Risk Management

Federal banking regulators have issued long-awaited joint guidance for financial institutions when managing risks associated with third-party relationships, including relationships with technology providers. The three agencies—the Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency —also said they plan to develop additional resources to assist community banks in managing third-party risks. The guidance replaces each agency’s existing guidance on third-party risk management.

The guidance establishes principles for all banking organizations to consider when developing and implementing risk management practices governing third-party relationships, according to the agencies. The document offers direction and expectations for all stages in those relationships, including planning, due diligence and third-party selection, contract negotiation, and termination. It also offers guidance for conducting independent reviews and maintaining documentation.

The guidance stresses that the agencies will review a bank’s risk management practices of third-party relationships as part of their standard supervisory processes. Among other things, supervisors typically:

• assess the ability of a bank’s management to oversee and manage its third-party relationships
• evaluate the effects of those relationships on the bank’s risk profile
• perform transaction testing to evaluate the activities performed by the third party and assess compliance with applicable laws and regulations

Biden Administration Launches Fresh Effort Against ‘Appraisal Bias’

Six federal regulatory agencies requested public comment on a proposed rule to regulate the credibility of algorithmic models used in real estate valuations, which is part of a larger effort by the Biden administration to address alleged bias in the appraisal process. The rule would require institutions that engage in covered transactions to adopt policies, practices, procedures and control systems to ensure that automated valuation models, or AVMs, adhere to quality control standards designed to ensure the credibility and integrity of valuations, according to a joint statement.

“While advances in AVM technology and data availability have the potential to contribute to lower costs and reduce loan cycle times, it is important that institutions using AVMs take appropriate steps to ensure the credibility and integrity of their valuations,” the agencies said. “It is also important that the AVMs institutions use adhere to quality control standards designed to comply with applicable nondiscrimination laws.”

The proposed rule is one of several initiatives announced by the White House to address racial bias in home valuations. Others include the following.

• regulatory guidance on how financial institutions may integrate reconsiderations of value, or ROV, policies and controls into their current appraisal processes
• a new working group to develop more consistent standards for the ROV processes of the Federal Housing Administration, Fannie Mae and Freddie Mac
• a Federal Housing Finance Agency push to update appraisal data that is publicly available
• anonline dashboard on barriers to entry in the appraisal profession

Agencies Propose Interagency Guidance on ROV for Residential Real Estate Valuations

Five federal regulatory agencies today requested public comment on proposed guidance addressing reconsiderations of value for residential real estate transactions.

The proposed guidance advises on policies that financial institutions may implement to allow consumers to provide financial institutions with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal. ROVs are requests from a financial institution to an appraiser or other preparer of a valuation report to reassess the value of residential real estate. An ROV may be warranted if a consumer provides information to a financial institution about potential deficiencies or other information that may affect the estimated value.

The proposed guidance shows how ROVs intersect with appraisal independence requirements and compliance with applicable laws and regulations. The proposed guidance describes how financial institutions may create or enhance their existing ROV processes while remaining consistent with safety and soundness standards, complying with applicable laws and regulations, preserving appraiser independence and remaining responsive to consumers.

In addition, the proposed guidance would describe the risks of deficient residential real estate valuations and how financial institutions may incorporate ROV processes into established risk management functions. Deficient collateral valuations can contain inaccuracies because of errors, omissions or discrimination that affect the value conclusion. The proposed guidance also would provide examples of ROV policies and procedures that a financial institution may establish to help identify, address and mitigate valuation discrimination risk.

The request for public comments is from the Office of the Comptroller of the Currency, the Federal Reserve, Federal Deposit Insurance Corporation, Consumer Financial Protection Bureau and the National Credit Union Administration. Comments must be received within 60 days of the proposed guidance’s publication in the Federal Register.

Merck Sues Agency Over Price Fixing

Drug manufacturer Merck has sued the U.S. Health and Human Services Department to halt the Medicare drug price negotiation program. The lawsuit, filed in the U.S. District Court for the District of Columbia, alleges the new Medicare drug price framework enacted under the Inflation Reduction Act is unconstitutional.

The Merck complaint cites a 2015 U.S. Supreme Court precedent that held that the U.S. Department of Agriculture overstepped its authority by a per se taking when requiring raisin farmers to forfeit a portion of their crop to the government.

MBA General Counsel Keith Thornburg said this case is important for the financial services industry and banking in relation to the Consumer Financial Protection Bureau.

“The new Medicare framework gives the federal government carte blanche authority to set drug prices and confiscate private property under threat of extortionate fines,” Thornburg said. “The CFPB has taken similarly abusive steps to set prices and fees under the guise of regulating ‘abusive’ market conduct. In cases where the CFPB fixes contract rates, the federal government is effectively taking private property.”