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2020 Dollar Thresholds in Regulations Z and M for Exempt Consumer Transactions
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The Consumer Financial Protection Bureau (CFPB) and Federal  Reserve Board announced the dollar thresholds in Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) that will apply for determining exempt consumer credit and lease transactions in 2020. These thresholds are set pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amendments to the Truth in Lending Act and the Consumer Leasing Act that require adjusting these thresholds annually based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Based on the annual percentage increase in the CPI-W as of June 1, 2019, the protections of the Truth in Lending Act and the Consumer Leasing Act generally will apply to consumer credit transactions and consumer leases of $58,300 or less in 2020. However, private education loans and loans secured by real property (such as mortgages) are subject to the Truth in Lending Act regardless of the amount of the loan.
Although the Dodd-Frank Act generally transferred rulemaking authority under the Truth in Lending Act and the Consumer Leasing Act to the Bureau, the Federal Reserve Board retains authority to issue rules for certain motor vehicle dealers. Therefore, the agencies are issuing these notices jointly.
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Concern about New Loans Tied to Libor
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In an interview with MarketWatch, FDIC Chairman Jelena
 McWilliams expressed concern that banks are continuing to originate loans with contracts tied to the London Interbank Offered Rate, despite the fact that the rate is not guaranteed to be available after 2021. "I think the banks in particular are uncertain exactly what the new rate will be," McWilliams said. "They're in this limbo right now."
McWilliams added that the FDIC does not endorse any particular rate to replace Libor. "We said whichever rate you use, make sure you manage the risk associated with that rate appropriately."
The New York Fed's Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate as its preferred alternative for U.S. dollar Libor. The ARRC is releasing resources to support the financial sector's transition away from Libor.
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Implications of Climate Change on Financial Stability
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In remarks at a Federal Reserve Bank of San Francisco event, Fed
 Governor Lael Brainard discussed the potential implications that climate change could have for financial stability, and the importance of properly pricing in climate change-related risk. "For example, if prices of properties do not accurately reflect climate-related risks, a sudden correction could result in losses to financial institutions, which could in turn reduce lending in the economy," Brainard warned. "The associated declines in wealth could amplify the effects on economic activity, which could have further knock-on effects in financial markets."
The Fed "expect[s]banks to have systems in place that appropriately identify, measure, control and monitor all of their material risks," Brainard said, including those associated with climate change. Such risks could include severe weather events and other natural disasters, along with transition risks that could arise as the nation moves to a lower-carbon economy. She added that many companies are already voluntarily assessing and reporting climate-related exposures under the guidelines issued by the Financial Stability Board's Task Force on Climate-Related Financial Disclosure.
Brainard also noted that as changing climate patterns cause more frequent and severe weather events, the agencies are working to clarify that disaster recovery work in low-to-moderate-income communities are eligible for credit under the Community Reinvestment Act.
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Community Banks Encouraged to Inventory Adjustable-Rate Assets, Liabilities
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With the anticipated shift away from adjustable-rate financial  instruments referenced by the London Interbank Offered Rate, ICBA is recommending that all community banks begin to inventory their exposure to LIBOR-based assets and liabilities and the associated fallback language contained in the legal contracts.
ICBA encourages community banks to:
- prepare inventories of the vital components of their contracts, including contingent funding provisions,
- understand how the underlying reference rate will be determined if the index is no longer published or can no longer be relied upon to set the instrument's coupon or payment factor, and
- have candid conversations with their safety and soundness examination teams about which exposures are material to the institution and how any risks would be managed.
The Federal Housing Finance Agency in September instructed all 11 Federal Home Loan Banks to stop purchasing certain assets tied to LIBOR after Dec. 31. The agency also has instructed the FHLBanks to stop entering into LIBOR-based transactions involving advances, debt, derivatives, or other products with certain maturities.
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FDIC's Proposed Changes to Rate Restrictions are an Improvement
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The FDIC's proposed changes to interest rate restrictions for less-
 than-well capitalized institutions are an improvement to the current methodology, CSBS said in a comment letter.
The FDIC asked for comments as it considers revising its rules establishing rate restrictions for banks that are less than well-capitalized. State regulators feel the current methodology for setting deposit rate restrictions, in tandem with brokered deposit limits under Prompt Corrective Action, leaves institutions unable to reasonably compete for deposits.
In the letter, CSBS:
Expressed broad support for the FDIC's new methodology as an improvement over the current methodology.
Discussed the pros and cons of alternative national rate cap methodology.
Asked the FDIC to explore ways to factor in internet-only banks into the local rate cap calculation.
Similarly, ICBA
called on the FDIC to include credit union rates in the national rate cap and ensure that examiners no longer classify brokered deposits at well-capitalized banks as "volatile funding" simply because their interest rates exceed the national rate caps.
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Digital Investments Can Reduce Attrition
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Eighty-two percent of consumers are less likely to consider
 switching banks once they become accustomed to their bank's digital banking services, according to a study by Iselin, N.J.-based Provident Bank. Based on a poll of 600 U.S. adults nationwide, the Digital Banking Consumer Preferences Survey uncovered data meant to inform the bank's investments in online and mobile banking technology.
The survey found that 75% of consumers prefer to deal with their banks via digital channels, and 95% report confidence in their bank's ability to protect online and mobile financial information. Certain services, however, remain the domain of younger users. While 30% of respondents age 18 to 34 use mobile payments at least weekly, only 18% of those age 45 to 54 and 12% of those over 54 say the same.
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