FRIDAY3pt SEPTEMBER stroke, 100% 3 size, 2021 for topVOL. of newspaper186 No. 170 = 8.9931 inches AMERICANBANKER.COM Follow us on Twitter @AmerBanker Scope of CFPB small-business 5 loan data requirements worries banks Deadline dash The agency proposed reporting standards for any institution that originates 25 or more Lots of people don't know when bills are due, driving a 2.5pt stroke = 6.75 inches small-business loans a year. The measure market for last-minute walk-in payments for cash-reliant would be especially burdensome for very consumers small lenders and could limit credit access in See story on page 4 underserved communities, critics say. Page 6 Apple is rolling out digital ID. 50% Will banks use it? 2pt stroke = 5.75 inches 6 48% The tech giant’s integration of state-issued 40% 45% identification with its Wallet app could transform the way banks and credit unions 30% handle identity verification. But Apple hasn’t stated what its terms will be. Page 7 1.5pt stroke = 4.6667 inches 20% Robinhood plans early-deposit 7 feature that rivals PayPal 10% Robinhood Markets is working on a new feature that lets users receive their paychecks 8% 0% 1pt stroke = 3 inches via direct deposit up to two days early, Certain of bill due datesNot sure when bills are dueNo idea when bills are due stepping up competition with companies like PayPal Holdings and Wealthfront. Page 8 Source: PayNearMe Google Pay to offer time 8 deposits to Indian users via lender dailybriefing Cash not only survived Google has tied up with an Indian small lender 3 the pandemic — it came to offer time deposits to users of its payments out stronger wallet, extending its presence in the nation’s Biden administration sets The shift away from human contact lucrative digital banking space. Page 8 1 goal of adding 100K affordable increased the popularity of kiosks, ATMs housing units and other technologies that allow for more Wells Fargo pushes back The White House and the Federal Housing flexibility in payment methods. 9 its return to office by two Finance Agency announced steps to (See chart above.) Page 4 more weeks help nonprofits and public agencies The company will now begin bringing back buy foreclosed properties, among other Gulf Coast bankers assess staffers who have been working remotely initiatives, as part of a plan to boost supply 4 toll after Hurricane Ida on Oct. 18, rather than Oct. 4, according to over the next three years. Page 2 Banks in Louisiana and Mississippi are an internal memo Wednesday from Chief finding less physical branch damage than Operating Officer Scott Powell.Page 9 What Microsoft’s Azure many expected. Executives say the pace 2 cloud security vulnerabilities of the recovery will hinge on how quickly Regulators are rethinking mean for banks power and water are restored, as well as the 10 bank M&A rules. It’s Though banks were not directly affected by cost of supplies and labor. Page 5 about time. security flaws discovered in Azure systems If the Justice Department and other last week, they need to be aware of the kinds agencies are serious about overhauling the of misconfigurations that could lead to bank merger process, they need to start by massive data breaches. Page 3 establishing whether consolidation helps or hurts consumers, legal analyst John M. Pachkowski writes. Page 9 FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 2

properties backed by Fannie and Freddie. allow state housing finance agencies to AFFORDABLE HOUSING The period during which occupants, public offer low-cost capital for affordable housing entities and nonprofits can purchase real- production, the White House said. estate-owned properties will be extended The administration also announced Biden admin- from 20 to 30 days. After that period, those several strategies to combat exclusionary properties are available for investors to zoning, which many stakeholders have istration sets purchase. The FHA will also extend its first- long-argued is the number one barrier to look period to 30 days. building affordable housing. As part of that “Extending the amount of time owner endeavor, FHFA is preparing a report on goal of adding occupants have to bid on a REO property, how concentrated Fannie and Freddie’s without competition is especially important mortgage purchases are in areas with 100K afford- for neighborhood preservation while the exclusionary zoning policies. That study supply of homes for sale is severely limited,” will also offer data on the demographic said Sandra Thompson, the acting director characteristics of borrowers whose loans are able housing of the FHFA, in a statement. backed by the GSEs. The Department of Housing and Urban HUD is also creating a “housing supply units Development will also launch efforts to toolkit” that will offer strategies for expand its outreach to nonprofits and local successfully deploying grants in order to By Hannah Lang governments to “further educate” them address housing affordability challenges. September 01, 2021 on the process for bidding on real-estate- “Moving forward, HUD and the Biden- WASHINGTON — The Bidenowned properties. Harris Administration will continue to administration on Wednesday announced As part of the Biden administration’s pursue bold actions to create and preserve several efforts across the government aimed efforts, the Treasury Department will also affordable homes for all Americans,” said at increasing the affordable housing supply. issue “a notice of funding availability” HUD Secretary Marcia Fudge in a statement. The White House said the goal of the for the Capital Magnet Fund, a program Additionally, the Biden administration new initiatives is to make 100,000 new units financed through contributions from Fannie said it would conduct “peer learning and available for both homeowners and renters and Freddie that makes grants available to listening sessions” in conjunction with HUD over the next three years. The steps include nonprofits and community development and FHFA to “allow for the exchange of more financing for manufactured homes financial institutions to facilitate the best practices” on zoning reform to combat and two-to-four unit properties, as well as production of affordable housing. housing supply and affordability challenges. working with state and local governments to That notice from Treasury will also “The sessions will also identify the reform arcane zoning restrictions. “include changes to strongly encourage obstacles to implementation that The administration also said that affordable housing production,” the White remain, which the president’s Build Back nonprofits and individuals will get House said. Better Agenda and potentially federal preference over investors in acquiring Treasury will also restart the partnership administrative action, can help address,” the foreclosed properties that had been insured between its Federal Financing Bank and White House said. by the Federal Housing Administration. HUD’s risk sharing program, which was “President Biden is committed to using suspended in 2019. That partnership will every tool available in government to produce more affordable housing supply as quickly as possible, and to make supply Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 available to families in need of affordable, Phone 212-803-8200 AmericanBanker.com quality housing — rather than to large 3pt stroke, 100% size for top of newspaper = 8.9931 inches investors,” the White House said in a press Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 release. 2.5pt stroke = 6.75 inches In line with the administration’s Managing Editor Dean Anason 770.621.9935 Reporters/Producers announcement, the Federal Housing 2pt stroke = 5.75 inches Finance Agency said effective immediately, Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 Fannie Mae and Freddie Mac will be Miriam Cross 571.403.3834 1.5ptWashington stroke = 4.6667 inches Bureau Chief Joe Adler 571.403.3832 permitted to each invest up to $850 million Jim Dobbs 605.310.7780 annually in the Low-Income Housing Tax 1ptExecutive stroke = 3 inches Editor, Technology Credit market as equity investors. Previously, Penny Crosman 212.803.8673 John Heltman 571.403.3847, Allissa Kline 716.243.2679 the government-sponsored enterprises were Hannah Lang 571.403.3855 limited to investing $500 million each. Community Banking Editor Paul Davis 336.852.9496 John Reosti 571.403.3864, Gary Siegel 212.803.1560 FHFA also said that it would lengthen Contributing Editor Daniel Wolfe 212.803.8397 the “first-look period” that gives certain Kevin Wack 626.486.2341 parties an advantage in buying foreclosed

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 3

so-subtle warning to banks about cloud developers can easily build professional CYBERSECURITY configurations that could be exploited applications. to gain access to seemingly protected An analyst at the security firm UpGuard databases. found a faulty data application programming What Because banks continue to transition parts interface that led to more than 1,000 apps in of legacy systems to cloud-based services, the Power Apps portal being susceptible to Microsoft’s they increasingly operate or integrate with anyone who would request access to data the top cloud providers, mainly Amazon and personal records. Web Services, Microsoft Azure and Google In both cases, security researchers worked Azure cloud Cloud. with Microsoft under its vulnerability “With many firms using the same disclosure program. security suppliers, the financial sector faces an Microsoft assured its customers it reacted additional challenge of concentration quickly to both vulnerabilities — the access risk,” said Teresa Walsh, global head of to keys in Azure and the misconfigured API vulnerabilities intelligence for the Financial Services in Power Apps — that allow unauthorized Information Sharing and Analysis Center, a users into secured databases. mean for cyber risk prevention industry consortium “We fixed this issue immediately to in Reston, Virginia. keep our customers safe and protected,” a Walsh sees the need for thorough network Microsoft spokesman said. banks oversight and an understanding of how the Microsoft also reiterated it did not find cloud companies monitor their systems. any evidence the security gap was “exploited By David Heun “Financial firms are actively investing in by malicious actors.” September 01, 2021 strengthening both third-party due diligence For the most part, banks were standing and operational resiliency,” Walsh said. Where banks should be wary safely on the sidelines last week when Such attention affords the ability to stay in Microsoft said it is working with Power Microsoft delivered security vulnerability operation “even in the face of a cybersecurity Apps customers to ensure they are using the notices to its Azure cloud computing clients. incident such as one stemming from a right privacy settings. The Redmond, Washington, company supply chain attack,” she said. The primary portal designer Microsoft warned of separate security vulnerabilities Financial institutions have to establish provides for developers of Power Apps, related to an Azure database and the Power a zero-trust mindset, create a process for Design Studio, comes with strong privacy Apps portal, both discovered by security managing third-party risk and deploy default settings, the company said. researchers the past few months and risk-monitoring services to assess risks It’s not likely the Cosmos and Power Apps reportedly fixed before any data could be from vendors, Walsh added. A zero-trust security gaps would come into play often at stolen. mindset is one in which all users, inside the same time. In the case of Azure, researchers and outside an organization’s network, are “While it’s possible to hook Cosmos discovered easy access to keys that opened authenticated, authorized, and continuously database up to Power Apps, that’s a design databases. The PowerApps portal was validated before being granted or allowed to choice rather than some inherent part allowing anyone working on an app to maintain access to applications and data. of Power Apps,” Nigel Thorpe, technical potentially access databases other than their director at SecureAge Technology, a data own. Microsoft’s security warnings protection provider in Singapore. “The No financial services firms were directly Citing a flaw in its Azure central database important thing is to avoid using any default affected by exposure to these infrastructure Cosmos, Microsoft informed thousands of security settings without understanding flaws. Those listed as Azure customers on its clients that access keys to their databases what the implications are.” the Microsoft website, most notably Liberty stored on Azure had been left in the open for The problem with Power Apps, Thorpe Mutual and the financial tech provider the past two years. said, is that it is designed so that it can be Finastra, declined to comment. A research team at security company used by newbie or inexperienced developers London-based Metro Bank is listed as a Wiz that was conducting a check of the “who are less likely to understand the Power Apps client, but it cited bank policy system for Microsoft discovered the key- implications of default settings.” in not speaking publicly about security access vulnerability. Microsoft sent out a For banks, this is the most recent incidents or actual breaches. Metro Bank security alert that encouraged Azure clients’ reminder of the risks of storing data in the has about $31 billion of assets. tech teams to create new keys. As another cloud. Federal banking regulators last May “At Metro Bank, we continuously scan our security layer, Microsoft says only clients warned about potential cloud security systems for potential vulnerabilities in order can change their own keys. incidents in what amounted to an awareness to respond as fast as possible to reports of Microsoft’s other security notice was check as banks, like most businesses, had newly discovered issues,” a bank spokesman directed at the government entities and more workers at home during the pandemic. said. private companies using Microsoft Power That regulatory notice came on the Still, the notices provided another not- Apps, an Azure-based service in which heels of a ransomware incident at Finastra,

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 4 a London-based provider of core bank Financial that provides cash-management said, noting that smart safes are very popular technology. technology for independent ATM operators with quick-service restaurants, which have This time, the Microsoft alerts did not and retailers, is seeing growing demand many low-dollar cash transactions. involve breaches. for unmanned secure kiosks to accept cash Bob’s Stores and Eastern Mountain “This is embarrassing for Microsoft, payments, for example. Sports, which has 50 locations, has used but not an issue, though this could trigger “A lot of city offices where people pay their Cash Connect’s smart safes for four years, data breach disclosures for some Cosmos water bill were closed during the pandemic but leaned harder on them during the customers and Power Apps customers,” so consumers needed more options for pandemic. said Tari Schreider, senior analyst with the making payments. And as the popularity of “As we dealt with changing restrictions cybersecurity practice at Aite-Novarica unattended retail grows, we’re seeing growth that involved opening, closing and even Group. “All in all, these were near misses.” in new verticals,” said John Clatworthy, Cash pivoting our business model, our associates Schreider confirmed there appears to be Connect’s senior vice president and chief no longer had the risk associated with taking no impact on financial institutions based on customer and strategy officer. cash to a local bank branch,” said Kerry the types of customers potentially affected. Described as a fintech within the bank, Williams, treasury and account payable Still, she said tech providers, security firms Cash Connect was established in 2000 as a manager at the Meriden, Connecticut and financial institutions all have to take unit of the $15.1 billion-asset WSFS. outdoor-activity retail chain. into account that “misconfigurations in While cash use dropped severely during Over the last three years, sales of Cash cloud infrastructure are a huge problem.” the start of the pandemic, it remained more Connect’s smart safes have increased at Security flaws of this nature have led to resilient in the U.S. compared to other a compound annual growth rate of 40%, data breaches in the past, such as the 2019 countries, according to Visa. Worldwide, surpassing the growth rate of the unit’s core Capital One/Amazon Web Services breach. 46% of consumers surveyed in June 2020 ATM management business, which provides In this case, Microsoft apparently caught the said they haven’t used cash as much since cash-funding services to 27,000 U.S. ATMs, issue before hackers did. coronavirus began its spread. In the U.S., Clatworthy said. “It’s as if the back door was open and no just 35% reduced their cash usage. One of Cash Connect’s partners in the one came in,” Schreider said. “And now the Even in the U.K., where the ATM network fast-growing kiosk business is Chicago- door is closed.” LINK saw withdrawals for April 2020 based QuotePro, whose merchant customers plummet to £4.4 billion — just over half span about a dozen industries including car the volume it was a year earlier — cash use dealerships, mobile home parks, insurance CASH began to steadily climb back the next month. agencies and utilities, according to Marco “There’s a large swath of consumers that Freudman, QuotePro’s president. have always used cash, and our experience QuotePro uses Cash Connect’s technology Cash not only shows the pandemic had no long-term effect within kiosks that can connect to a mobile on their habits,” Clatworthy said. app operated by the merchant, Freudman survived the Research shows that Cash Connect’s said. experience isn’t unique — across the “There are lots of kiosks that accept income spectrum, cash remains popular for payment cards, but not many equipped to pandemic — many reasons. accept cards, checks and cash, including for “While it’s true that unbanked consumers higher sums,” he said. it came out predominantly use cash, those earning over Car dealerships are also interested $100,000 a year and those who describe in same-day ACH credit for total funds themselves as tech-forward are also cash collected provided by Cash Connect’s stronger users,” said Sarah Grotta, director of debit software, which is helping drive strong and alternative products advisory at demand for QuotePro’s kiosks. By Kate Fitzgerald Mercator Advisory Group. One car dealership with dozens of September 01, 2021 Cash Connect’s top-selling product is a locations previously sent staffers to several Cash usage is showing signs of surpassing smart safe that automatically counts the different banks every day with deposits pre-pandemic levels — and some of the cash that clerks feed in throughout the before switching to the QuotePro system digital payment options put in place during day. Users receive an ACH deposit at their with CashConnect’s software, according to lockdown are actually fueling the trend. own bank equal to the cash accumulated Freudman. While much of the attention has been on in the safe each day, a service that became Freudman said that despite the broad major overhauls such as Burger King and even more useful to merchants during the increase in card payments, he predicts no Chipotle creating digital kitchens with no pandemic, Clatworthy said. direct displacement of cash transactions for room for seated dining, companies have “Our safes and built-in software let the foreseeable future. also invested in systems that accommodate businesses get credit for their total liquidity “If you can sell a used car dealership cash users’ habits during lockdown. for the day even when staffing shortages something, you know you have something Cash Connect, a division of the make it difficult for someone to physically exceptional,” Freudman said. Wilmington, Delaware-based bank WSFS pick up and deposit cash at the bank,” he

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 5

of Ida’s path. By Wednesday, some shuttered have power,” Wallace said Wednesday NATURAL DISASTERS branches had reopened, but many remained morning. “They go home and they don’t have closed. any power or any way to cook food for their JPMorgan Chase said that at least 45 of its families.” Gulf Coast New Orleans-area branches were still closed Misty Albrecht, market director at b1Bank, on Wednesday. The city is under a shelter- a Baton Rouge subsidiary of $4.4 billion-asset bankers at-home order that is preventing Chase from Business First Bancshares, gave a phone assessing potential damages. The nation’s interview Tuesday while her home was being largest bank reopened more than a dozen powered by a generator. assess branches Tuesday in Baton Rouge, which With the “catastrophic” blackout in New sustained less damage to its infrastructure Orleans and elsewhere in b1Bank’s footprint, toll after than New Orleans. Ida has so far proven more damaging than Regions Financial, which is headquartered Hurricane Laura was last year, Albrecht said. in Birmingham, Alabama, still had about Workers are still assessing damage and Hurricane Ida 40 branches closed in Louisiana as of setting up generators for b1Bank branches Wednesday, either because of power outages and offices that are still intact, she said. While By Laura Alix, Jon Prior and Polo Rocha or storm damage. three branches in Baton Rouge reopened September 01, 2021 “Many branches are physically in good on Tuesday, crews still have not arrived Having escaped the worst of Hurricane condition; however, power or connectivity in some particularly hard-hit areas, such Ida, Merchants & Marine Bank in Pascagoula, issues mean their reopening dates are as Terrebonne Parish to the west of New Mississippi, is now looking for ways to assist undetermined at this point,” Steve Nivet, a Orleans, where b1Bank has several branches. neighboring banks that weren’t as fortunate. consumer banking regional executive, said in Meanwhile, the bank is preparing to cover Merchant & Marine, which has $742 an email. financial hardships for employees who have million in assets, has been reaching out to Gulf Coast Bank & Trust in New Orleans set been affected by the storm. Other b1Bank Louisiana bankers to offer the delivery of up backup systems to avoid a shut-off of its employees have been gathering to help cut items like latex gloves, bleach, paper towels internet service, processing wires and digital down trees and hand out meals where they and toilet paper, Clayton Legear, the bank’s banking platform, President and CEO Guy are needed — as they did in the wake of last president and CEO, said in an interview Williams said. It also took the precautionary year’s hurricane. Tuesday. step in setting up a remote call center in Gulf Coast Bank, which also operates in “We really believe in bankers helping Dallas, where customers can get help until Baton Rouge and parts of southeast Louisiana, bankers,” he said. late in the evening. is working on calling all of its consumer and On Wednesday, Gulf Coast bankers were Gulf Coast’s 45 offices were closed on business clients to see what assistance they largely still surveying the wreckage left by Ida. Monday, and only five reopened on Tuesday. might need, Williams said. Some local pizza While the physical damage to branches was A few employees lost their houses to flooding places with gas-fired grills have been able to less extensive than many expected, power — far fewer than the more than 60 percent of open and use up their fresh supplies. outages kept bank offices closed in some of employees who suffered the same misfortune “By candlelight they’re making pizza and the hardest-hit areas. Lines at gas stations during Katrina. selling it as fast as they can make it,” Williams were long as many drivers sought to fill their At Pike National Bank in McComb, said. tanks. Mississippi, one branch was closed But other restaurants without power lack Bankers expressed confidence in their Wednesday due to power outages. President that option, Williams said, and the bank has communities’ resilience, but they pointed to and CEO Jennifer Wallace expects the committed to “help them resupply and stand a number of variables that could complicate electricity to be down through at least ready to make loans to get people back on recovery, including how quickly power is Thursday night. their feet.” restored and the impact that high costs for In the meantime, Pike National has focused The Office of the Comptroller of the labor and materials will have on rebuilding. on keeping its four other branches open and Currency, the Federal Deposit Insurance Ida made landfall on Sunday night in its employees fed. With power and internet Corp., the Federal Reserve and National south Louisiana as a Category 4 hurricane, access down, bankers have been making calls Credit Union Administration issued joint exactly 16 years after Hurricane Katrina. The to local businesses to ask if they need cash or guidance Monday encouraging financial storm struck the electronic grid with 150 change. In some cases, they are helping cut institutions that operate in areas affected by mph winds, knocking out power for more trees off of area homes, Wallace said. Ida to meet the needs of their communities. than a million households across Louisiana The $307 million-asset bank has also First Horizon in Memphis, Tennessee, said and Mississippi. Ida weakened into a tropical coordinated efforts with local restaurants Wednesday that because of Ida, it will delay depression Monday afternoon as it continued to feed its own employees, on top of an the operating systems conversion associated to move north. ongoing effort to feed local healthcare with its 2020 acquisition of Iberiabank, Banks across the region shuttered branches workers overwhelmed by the delta variant of originally slated for this year’s third quarter, on Monday or, in some cases, opened them COVID-19. to the first quarter next year. late after confirming that they were outside “Ninety percent of our employees don’t First Horizon executives decided that it

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 6 would be too disruptive for both its employees data reported under the Home Mortgage and clients to attempt the systems conversion SMALL BUSINESS LENDING Disclosure Act. while many will likely still be dealing with But banks have largely resisted any Ida’s aftermath. The delay will add another expansion of data collection including $20 million to $30 million in merger costs, Scope of for women- and minority-owned small which had already exceeded initial estimates. businesses by claiming it requires too much First Horizon estimated that about 8,350 CFPB small- paperwork and is a regulatory burden. clients and 600 employees are in the affected “Financial institutions and their vendors areas. It said that it is offering fee waivers to will also have to make significant changes to customers, as well as financial and housing business their systems and processes to meet new 1071 assistance for employees. data collection and reporting requirements,” Gulf Coast bankers are hopeful that loan data said Richard Hunt, president and CEO of hurricane recovery efforts will offer an the Consumer Bankers Association, in a economic boost to the region, as funds from statement. “The complexities of collecting the federal government and private charities requirements and reporting credit application data on arrive. President Biden issued a disaster women-owned, minority-owned, and small declaration on Sunday, which would direct worries banks businesses under Section 1071 cannot be federal funds to the affected areas. Regions’ overstated due to the nature of small business nonprofit charitable foundation announced By Kate Berry lending and the ways these applications are Wednesday that it had earmarked $250,000 September 01, 2021 processed.” for disaster relief. The Consumer Financial Protection Bureau Under the proposed rule, the CFPB would But bankers said the pace of recovery backtracked on a suggestion that the agency require lenders originating 25 or more will also depend on how quickly water and made during the Trump administration small-business loans to report data on credit electricity are restored. that it would exempt a significant chunk of applicants, including businesses owned by Nearly a million Louisianans were still community banks from small-business loan women and minorities. The CFPB said the without power as of Wednesday afternoon. reporting requirements, sparking concern data would shed light on whether lenders are And while some power was restored to New among industry representatives that the rule meeting borrowers’ needs. Orleans on Tuesday night, Entergy, the state’s will be too broad. Yet that threshold will lead to a significantly largest utility company, said Wednesday that The agency released a long-awaited broader scope of institutions subject to the it could be several more days before it restores proposal Wednesday mandated by Congress requirements than former CFPB Director power. The floodwaters and power outages that would force banks and other lenders Kathy Kraninger had outlined last year. The have also taken out water treatment plants, to collect and send data meant to identify CFPB under the Trump administration said leading to a shortage of drinking water. discrimination and barriers to credit in last year that it was considering whether to “Having lived through this a few years small-business lending. exempt lenders with under $100 million or ago, the restoration of infrastructure is key,” The 918-page notice of proposed $200 million of assets. said Art Stevens, president of retail banking rulemaking would require data on a wide Community banks are not pleased with at Trustmark Bank in Jackson, Mississippi, range of credit products including term loans, the changes because they “would apply drawing on his experience in the aftermath lines of credit, credit cards and merchant to far too many community banks,” said of Katrina. “The roads have to be cleared and cash advances. Rebeca Romero Rainey, president and CEO opened, the power has to come back on, the Data on loans to small businesses is of the Independent Community Bankers of water and sewer has to work, really before full currently very limited, an issue the CFPB America. recovery can even start to take place.” said became apparent during the COVID-19 “The bureau’s proposal — covering Even before Ida struck, many communities pandemic and the rush to provide loans community banks that originate 25 loans or in Louisiana and Mississippi were already through the Paycheck Protection Program. more — would ensnare even the smallest dealing with various impacts from COVID-19, “We don’t know enough about whether community banks in rural and other including supply chain disruptions, which small businesses have fair access to the underserved areas, where barriers to credit could make it more expensive to rebuild after capital they need to generate new jobs and should be reduced,” said Romero Rainey. the hurricane. The price of building materials grow the American economy,” acting CFPB “Imposing any new data collection and has moderated somewhat, but it is still Director Dave Uejio said on a conference call reporting requirements on community banks relatively high, said Legear, of Merchants & with reporters. “Without this information, we would harm small-business lending at the Marine Bank. He said that many local markets cannot reach our potential economic growth very time local businesses are working to have long been plagued by a shortage of as a nation, as we saw all too recently in the recover from the COVID-19 pandemic.” skilled labor. original design and implementation of the The CFPB described in its proposal how “While there may be money flowing in, Paycheck Protection Program.” a number of financial institutions including how does that balance out with the increased The CFPB characterized the small business community banks, credit unions, vendor material prices or labor of skilled craftsmen data collection — required by Section 1071 of finance and dealer-related institutions to help with rebuilding efforts?” he asked. the Dodd-Frank Act — as similar to mortgage requested exemptions from the proposed

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 7 rule — and why it favored keeping the scope Still, the CFPB said in its proposal that it for fair-lending violations. of the rule broad. is trying to reduce the compliance burden “Banks are going to be worried about the “The Bureau does not believe that the on banks through its definition of what liability if they collect data on demographics, request made by several trade association constitutes a small business. The bureau race and gender, and the CFPB will try to make stakeholders to take a more limited approach said it is seeking approval from the Small disparate impact or fair-lending cases out of to scope — including the various limitations Business Administration to define a small it,” Gordon said. “It’s another fair-lending risk on the coverage of certain types of financial business based on a $5 million gross annual that has to be managed in a whole new way institutions and products — would be revenue size standard, which would reduce [because the data] gives regulators a lot more consistent with the statutory purposes of the need for many financial institutions to ammunition to build fair lending cases.” section 1071,” the CFPB said in the proposal. make changes to compliance management As part of the proposal, the CFPB has Uejio also said that he plans to use the systems. launched a web portal for small-business discretion given to the CFPB by Congress “The Bureau believes that it will reduce owners to share their stories about applying in the Dodd-Frank Act to gather basic burden for financial institutions, particularly for credit. Uejio said he wants to hear from information about the cost of credit. those without sophisticated compliance all stakeholders about how the bureau can The CFPB also said in the proposal that management systems or familiarity with improve the proposed rule “to make sure the it is concerned that financial institutions SBA lending, to comply with a gross annual final rule serves the purposes Congress had may be compelled to raise the cost of revenue size standard for the section 1071 in mind when it mandated this rulemaking in credit or originate fewer small business small business definition that better aligns 2010.” loans depending on how it defines small with current lending practices,” the CFPB The CFPB said that failing to make small- businesses. said. business lending accessible to all who qualify “We want to understand more about the If finalized, the CFPB’s proposed rule would stifles innovation and competitiveness. It also kinds of credit applications lenders receive, create the first comprehensive database of said the COVID-19 pandemic “highlighted how they respond to credit applications, and small business credit applications in the U.S. the negative economic impact that occurs what credit is given,” he said. The data submitted by financial institutions when policymakers lack the data to best The CFPB also released a chart of 23 would be made available to the public target financial relief.” proposed data points to be collected annually and on the bureau’s website, though The CFPB is allowing 90 days for the including the loan amount, whether the loan the data would be subject to modifications public to comment on the proposal once it is was approved or denied, pricing information, and deletions to protect privacy, the CFPB published soon in the Federal Register. and the race, ethnicity and sex of the small- said. business loan applicant. Privacy issues have been such a concern Although banks currently provide lending that the CFPB said it is proposing a “balancing DIGITAL ID data in call reports, that data only captures test” that would assess the risks and benefits the outstanding number and amount of loans of public disclosure. After at least one full held on bank balance sheets, not the flow of year of data is reported, the CFPB said it plans Apple is loans. to issue a policy statement that will describe For more than a decade, the CFPB its intended modifications and deletions. rolling out essentially held off from starting the small The bureau also is proposing that business data collection, in part, because publication of the data would satisfy financial the Equal Credit Opportunity Act prohibits institutions’ statutory obligation to make data digital ID. Will collecting race and gender information from available to the public upon request. small businesses. The proposed rule potentially would level banks use it? The CFPB dragged its feet for so long the playing field between banks and fintechs that it was sued in 2019 by the California since online lenders catering to small By Kate Fitzgerald Reinvestment Coalition, which resulted in a businesses also would have to gather the data September 01, 2021 settlement last year. and build compliance systems. When Apple adds driver’s licenses to As a result of the settlement, the CFPB “There has been a movement of banks the Wallet app in the near future, it could convened a small business review panel pointing at fintechs and saying regulate streamline account management, identity last October after releasing an outline in them, and this could be seen as part of that verification and other aspects of financial September of its proposal to implement trend with tools for regulators to go after services. section 1071 of Dodd-Frank. fintechs in the small-business space,” said Apple’s implementation would build on the Banks already are advocating for a Michael Gordon, a partner at Bradley Arant trust of state-issued IDs by adding biometric phased-in implementation of any final rule. Boult Cummings. authentication and other security features Banks also are expected to ask for limits Small-business lending also has been less built into its devices. But like Apple Pay, on the number of data points required regulated because most consumer protection which the technology giant debuted in 2014, by claiming the collection of data would laws apply to consumers, not businesses. the service may come with a fee that Apple is create “unintentional impediments to small But banks will likely raise concerns that the unwilling to negotiate. business credit access,” Hunt said. data will result in more enforcement actions It will be up to banks and credit unions to

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 8 decide if the benefits could outweigh any cost and state IDs to Wallet when iOS 15 rolls out, than 1% to $286.70 on Wednesday in the Apple sets. Apple said in the release. Connecticut, Iowa, wake of the news. In particular, Apple’s digital ID could Kentucky, Maryland, Oklahoma and Utah will If implemented, the new feature would transform know-your-customer processes, follow at a future date. help advance Robinhood toward a vision it said Richard Crone, a principal with Crone laid out for investors since its IPO: that its app Consulting. can be much more than a place to trade. “Providing digital access to the driver’s MOBILE BANKING “We want to be the single place that our license — which has already been KYC’d — customers go to for all things money,” Chief represents a huge leap forward, especially Financial Officer Jason Warnick said during when combined with biometrics to make Robinhood the company’s second-quarter earnings call. processes even more secure through the The company still has a ways to go device, which is extremely important for plans early- before achieving that goal. Robinhood digital account opening,” Crone said. depends mostly on trading activity: Fintechs may also incorporate the Wallet Customer transactions in stocks, options app into the installment loans they offer at the deposit and cryptocurrencies accounted for about point of sale — as could Apple, which in July 80% of revenue in the three months ended unveiled plans to provide buy now/pay later feature that in June. The app has also faced challenges services through Goldman Sachs, which is from regulators and politicians, including also its partner in issuing the Apple Card. criticism of its customer service and approval “Digital ID within the iPhone could be rivals PayPal processes for options trading. a huge advantage for buy now/pay later The developer Steve Moser discovered the financial services, creating an instant, secure By Bloomberg News new feature and shared it with Bloomberg way to connect the consumer, the merchant September 02, 2021 News. Other upcoming features, such as and the lender,” Crone said. Robinhood Markets is working on a new the ability to invest spare change and new The Transportation Security Administration feature that lets users receive their paychecks protections against crypto volatility, were is the first organization planning to accept via direct deposit up to two days early, previously discovered in a beta version of the digital IDs through an encrypted process, so stepping up competition with companies like Robinhood app. users won’t need to unlock or hand over their PayPal Holdings and Wealthfront. Code elsewhere in the beta app indicates devices when clearing security, Apple said in a Work on the new service was discovered that Robinhood is working on a voice Wednesday press release. The TSA will enable inside of a beta version of an upcoming verification feature for its phone customer the new feature at specific airports, but has not update to the company’s iPhone app. The service. The technology will let a user record named them. option is dubbed Early Direct Deposit and themselves so that future calls to support can A big question is how Apple will handle will be available within Robinhood’s existing verify who is speaking. Several traditional third-party access to digital IDs. Even if Apple direct-deposit feature. The code also indicates banks have had that feature for years. is working with government agencies on that the service won’t have fees. the project, it will likely assess a fee for any “Now you can get paid up to two days early,” private-sector organizations that want to use a message inside the app will read. “Because DIGITAL BANKING the digital ID. eligibility depends on your employer, we’ll Beyond the TSA, it will probably take a long let you know if you can get paid early on your time for many other cases to evolve, said Tim next pay cycle.” Google Pay Sloane, director of emerging technologies A Robinhood spokeswoman declined to advisory at Mercator Advisory Group. comment on the findings. to offer time “Digital IDs will impact consumers, The functionality will compete with similar businesses and governments in significant features from PayPal, Wealthfront, Chime ways, but these changes will take time to be and some traditional banks. Robinhood deposits to deployed and longer to be adopted,” Sloane previously launched a cash management said. service in 2019, letting users put some of Indian users Digital IDs could take even longer to catch their money in an interest-bearing account. on than mobile payments because acceptance The feature debuted about a year after the will likely be fragmented, he predicts. company walked back a plan for checking- via lender “Will my liquor store accept it? What about and-savings accounts that drew a rebuke local police? How quickly government and from the Securities Investor Protection Corp. By Bloomberg News business communicate that they issue and Robinhood shares climbed as much as September 01, 2021 accept digital IDs will be a critical determining 6.3% to $47.12 after Bloomberg reported Google has tied up with an Indian small factor to widespread adoption,” Sloane said. on the feature. The stock had climbed 17% lender to offer time deposits to users of its Arizona and Georgia are the first states that since its July initial public offering through payments wallet, extending its presence in have agreed to support adding driver’s licenses Tuesday’s close. PayPal shares dropped less the nation’s lucrative digital banking space.

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Users of Google Pay will now be able Powell wrote in the memo. for many small businesses and low-income to open a time deposit with Equitas Small Financial firms, which have been at the communities have felt the brunt of bank Finance Bank Ltd. in just two minutes, a first forefront of repopulating offices, are now and branch closures over the last 15 years in the industry, the lender said in a statement grappling with how to adjust plans as the — a period when not one bank merger was on Wednesday. Rates will be as high as 6.35% delta variant continues to spread across denied by regulators — that assertion seems for a one-year deposit, the bank said. the country. San Francisco-based Wells well founded. Google’s latest tie-up follows recent Fargo has so far stopped short of requiring A fact sheet put out by the White House announcements in the financial services employees to get vaccinated, but all staffers calls attention to 10,000 bank closings over space by technology firms, including currently working in the firm’s offices are the last 40 years, with many of those closures Facebook, Amazon.com and Xiaomi, that are required to wear masks regardless of whether the result of mergers and acquisitions. The eyeing the country’s thriving and crowded they’ve gotten the shots. Wednesday’s memo White House notes that communities of digital banking industry with more than 300 from Powell included mention of Pfizer’s color are disproportionately affected, with online lending startups. vaccine having been fully approved by U.S. 25% of all rural closures in majority-minority This will improve “financial inclusion drug regulators. census tracts. With increased consolidation by encouraging a savings culture, at consumers have less choice among banks, the same time making the fixed deposit restricted access to credit, and face higher booking process simple and easy,” Murali BANKTHINK interest rates and fees. Vaidyanathan, country head at Equitas SFB, One example of a merger arguably not said in the statement. meeting the needs of the community is Regulators the 2020 acquisition of E-Trade by Morgan Stanley. The Fed noted in its approval that WORKFORCE MANAGEMENT are rethinking Morgan Stanley would control nearly 13% of deposits in Virginia despite not operating any retail branches in that state — or any other Wells Fargo bank M&A state, for that matter. The Justice Department and the banking pushes back rules. It’s agencies have already signaled that there’s a problem here that needs solving. In September 2020, the Justice Department its return to about time. requested public comment on the efficacy of its 1995 Bank Merger Competitive Review office by two By John M. Pachkowski guidelines, a move that typically presages a September 01, 2021 regulatory review. And after the Fed’s May The July 9, 2021, executive order 2021 approval of the acquisition of BBVA USA more weeks “Promoting Competition in the American Bancshares by PNC Financial Services Group, Economy” has been presented by the Biden Fed Gov. Lael Brainard expressed particular By Bloomberg News administration as a “whole-of-government concern for the increased concentration September 01, 2021 effort” to prioritize steps to address unfair of banks in the $250 billion to $700 billion Wells Fargo pushed back its return-to- competition in the American economy. Of asset category, a category where, she said, office plans by two more weeks to mid- the more than 70 industry-specific policy “common-sense safeguards have been October. priorities contained in the executive order, weakened.” The company, which has the most the Department of Justice and the three Although any plan put forth by the Justice employees of any U.S. bank, will now begin federal banking agencies — the Office of the Department and the banking agencies may bringing back staffers who have been working Comptroller of the Currency, the Federal not be released until the beginning of 2022, remotely starting Oct. 18, rather than Oct. 4, Reserve Board and the Federal Deposit scholars have already developed something according to an internal memo Wednesday Insurance Corp. — are encouraged to review of a roadmap for how to make the bank from Chief Operating Officer Scott Powell. current practices and adopt a plan within 180 merger process more equitable and reflective Last month, Wells Fargo delayed its office days for the revitalization of merger oversight of current market realities. return, originally set for Sept. 7, by a month as under the Bank Merger Act and the Bank A 2019 article in the Yale Journal of COVID-19 cases surged again across the U.S. Holding Company Act of 1956. Regulation by Jeremy C. Kress, assistant “The sequence of how employees will The impetus for this review is multifaceted, professor of business law at the University return remains unchanged from what I shared but at its core is a presumed assertion by of Michigan Ross School of Business, argued in my message on July 16, with operations the administration that increased bank that the “current approach to evaluating bank and contact center employees returning over consolidation and a lack of adequate bank merger proposals is poorly suited for modern the course of several weeks beginning Oct. 18, merger oversight has been harmful to financial markets” and the traditional focus followed by our enterprise functions and line consumers. Considering costs have gone up on competition has been rendered “obsolete” of business support employees in November,” for consumers, credit has been restricted by “changes in bank regulation and market

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 10 structure — including the repeal of interstate Bank consolidation is not always bad for contested” but is pleased with the resolution banking restrictions and the emergence of consumers, but a lack of banking options and because it was in its best interest to bring it nonbank financial service providers.” Kress access to capital is. As the Justice Department to a close. suggests that the merger analysis should and banking regulators begin their much- “The Company looks forward to continuing emphasize the statutory factors — impacts needed work overhauling the rules governing to serve customers in the Commonwealth on financial stability, benefits to the public, bank mergers, they should put the onus on of Massachusetts through its financing and the long-term viability of the companies the merging banks to build a case for why programs,” it said. and banks involved in the proposal — that their deal helps the community rather than Healey’s office had alleged in the lawsuit are outlined in the Bank Merger Act and Bank requiring the community to make the case last year that Credit Acceptance made Holding Company Act. that the deal hurts them. expensive loans to borrowers who they knew Regulators could also redouble their were unable to repay them and subjected efforts to ensure that bank mergers really John M. Pachkowski is a senior legal analyst them to hidden finance charges that violated benefit consumers as much as they benefit with Wolters Kluwer Legal & Regulatory U.S. the state’s usury laws. The lawsuit also alleged the merging firms. One way of doing that the company harassed consumers when might be to orient the merger review process looking to collect debt. in such a way that regulators begin with the SUBPRIME LENDING “Thousands of Massachusetts consumers, presumption mergers will harm consumers many of them first-time car buyers, put and thus requiring the merging parties to their faith in CAC to help them with an auto demonstrate the contrary. Subprime loan, but were instead lured into high-cost Any bank merger revision should also loans, fell deeper in debt, and even lost their demonstrate that it would not create or sustain auto lender vehicles,” Healey said in a press release. so-called banking deserts — communities The lawsuit also alleged that the lender had that lack reasonable access to a bank branch. failed to inform its investors that it included Having merging firms explain how they plan reaches $27M higher-risk loans when bundling its loans to address branch redundancies — and how into securities. those choices might affect communities that settlement already have limited banking options — seems like important data for regulators to STRESS TESTS consider. with Massa- Banks could manage some of this themselves and make this process less chusetts AG ECB tells onerous by engaging with vulnerable communities on their own. Although not part By Polo Rocha banks to gird of the formal regulatory process, many banks September 01, 2021 and communities have entered into so-called The subprime auto lender Credit community benefits agreements, which Acceptance Corp. has agreed to pay $27.2 for climate provide merging banks the opportunity million to Massachusetts borrowers to settle to explain how the post-merger entity will claims of predatory lending and deceptive tests that may meet its Community Reinvestment Act debt collection practices brought by state requirements. The agreements outline Attorney General Maura Healey. lending, investments and philanthropy The settlement announced Wednesday hit dividends strategies in low- and moderate-income is the latest Healey’s office has reached with neighborhoods affected by a merger. Since subprime auto lenders, following a $5.5 By Bloomberg News 2016, the National Community Reinvestment million agreement with Exeter Finance and September 01, 2021 Coalition has facilitated the creation of CBAs a $22 million settlement from Santander The European Central Bank is stepping up worth $338 billion with 15 banking groups. Consumer USA. pressure on lenders to prepare for stress tests The largest-to-date plan, finalized in April The settlement with Credit Acceptance — next year that will show just how vulnerable 2021, was a four-year, $88 billion agreement which Healey’s office says is the largest of its the industry is to climate change, according between community groups and PNC Bank. kind — requires the Michigan-based auto to people familiar with the process. Regulators should also be more skeptical lender to provide debt relief to thousands of The ECB, which earlier this year voiced of mergers involving community banks, Massachusetts borrowers and ensure credit displeasure over finance industry efforts a problem that has vexed policymakers bureaus delete any issues stemming from the to respond to climate risks, has sent out for years. Small banks tend to serve small loans. More than 3,000 people will be eligible confidential documents to banks stating communities that larger banks don’t, and to get a chunk of the monetary settlement. they’ll need to provide data on how their the rapid consolidation of the smallest banks The company, which did not admit to balance sheets might fare through 2050, the could limit rural communities’ access to wrongdoing as part of the settlement, said in people said. The regulator also plans to study capital. a statement that the lawsuit was “vigorously the link between profits and carbon risk in

For up to date and complete coverage go to AmericanBanker.com FRIDAY SEPTEMBER 3, 2021 AMERICANBANKER.COM PAGE 11 banks’ portfolios, they said. In Europe, politicians want banks to CLIMATE CHANGE become a key plank in the fight against climate change by steering capital away from polluters. Companies in the region, unlike Climate their peers in the U.S., tend to rely more on their lenders than on capital markets for protesters financing. Investors are taking note as banks burdened by carbon-intensive loan books may face higher capital requirements, which break could erode their power to pay dividends. A methodology for banks may come by windows at October, according to one of the people. Banks will have to supply the ECB with information that shows how their portfolios JPMorgan in might evolve over periods of 10, 20 and 30 years, said the people, asking not to be London identified as the documents are private. An ECB spokesman declined to comment. By Bloomberg News The power of environmental, social and September 01, 2021 governance standards to disrupt the financial Climate activists broke windows at industry played out publicly last month as JPMorgan Chase offices in central London investors dumped shares of DWS Group Wednesday as part of two weeks of protests after it became the target of investigations against organizations that support fossil fuels. for alleged greenwashing. Though DWS Eight women used hammers and chisels says it did nothing wrong, the development to break two windows at the U.S. lender’s shows that financial firms, whether banks Embankment office, the Extinction Rebellion or asset managers, can no longer afford to protest group said in a statement. The activists underestimate ESG compliance. added stickers that read: “In case of climate emergency, break glass.” The stress tests: JPMorgan is the market leader in loans to The ECB has said its supervisory arm’s corporate polluters, according to research stress test next year will rely on banks’ earlier this year by the Rainforest Action assessments of their exposure to climate Network. Since nations signed the Paris change and their readiness to address it. Agreement to cut emissions in 2015, banks The test will also be informed by this year’s globally have offered more than $3.8 trillion of economywide exercise. The outcomes will be fossil-fuel financing. Extinction Rebellion has reflected qualitatively by potentially affecting also criticized the British lenders Barclays, the scores used to calculate individual banks’ HSBC Holdings and Standard Chartered, capital requirements. Yet the ECB has made whose headquarters were splattered with red clear that it will gradually start to treat climate paint last week. as it would any other risk by reflecting it in JPMorgan has pledged a 35% reduction in those requirements. The ECB said in July that “operational carbon intensity” for its oil and hardly any eurozone banks were adequately gas portfolio by the end of the decade. q prepared for the risks they face from climate change. It will give banks individual © 2021 Arizent and American Banker. feedback on their plans for addressing the All rights reserved. deficiencies identified in the self assessments in September, one of the people said. A broader assessment currently underway at the ECB is set to underscore the financial industry’s exposure to global warming. The average default probability in loan portfolios of the 10% of euro-area banks most vulnerable to climate risks could rise by 30% by 2050, according to preliminary findings from the ECB’s economywide stress test.

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