Consumer and Community Affairs
The Federal Reserve is committed to promoting fair and transparent financial service markets, protecting consumers' rights, and ensuring that its policies and research take into account consumer and community perspectives. The Board supports consumer protection, financial inclusion, and community development through targeted work in supervision, regulatory policy, and research and analysis (see figure 6.1). This section discusses the Federal Reserve's key consumer and community affairs activities during 2021:
- formulating and carrying out supervision and examination policy to ensure financial institutions comply with consumer protection laws and regulations and meet requirements of community reinvestment laws and regulations
- writing and reviewing regulations that implement consumer protection and community reinvestment laws
- conducting research, analysis, and data collection to identify and assess emerging consumer and community development issues and risks to inform policy decisions
- identifying issues and advancing what works in community development by engaging, convening, and informing key stakeholders
In order to better understand the pandemic's ongoing impact on consumer financial circumstances, the Federal Reserve conducted the yearly Survey on Household Economics and Decisionmaking (SHED) in October 2021. For more information on our consumer and community research, see "Consumer Research and Analysis of Emerging Issues and Policy" later in this section.
Consumer Compliance Supervision
The Federal Reserve's consumer protection supervision program assesses compliance by state member banks with a wide range of consumer protection laws and regulations including, but not limited to, the Truth in Lending Act (TILA), the Electronic Fund Transfer Act, the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the prohibition on unfair or deceptive acts or practices (UDAP) in the Federal Trade Commission Act (FTC Act). The program also enforces these laws and regulations and reviews state member banks' performance under the Community Reinvestment Act (CRA).
The Board's Division of Consumer and Community Affairs develops policies that govern and establish requirements for oversight of the Reserve Banks' programs for consumer compliance supervision and examination of state member banks and bank holding companies (BHCs).
In addition, the Board coordinates with the prudential regulators and the Consumer Financial Protection Bureau (CFPB) as part of the supervisory coordination requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and ensures that consumer compliance risk is appropriately incorporated into financial institutions' consolidated risk-management programs.
The Board also oversees the development and delivery of examiner training and supervision-related budget and technology efforts; analyzes bank and BHC applications related to consumer protection, convenience and needs, and the CRA; and oversees the handling of certain types of consumer complaints by the Reserve Banks and directly processes certain consumer complaints such as congressional complaints and appeals.
Consumer Compliance Examinations
Examinations are the Federal Reserve's primary method of ensuring compliance with consumer protection laws and assessing the adequacy of consumer compliance risk-management systems within regulated entities.1 During 2021, the Federal Reserve, in conjunction with the federal and state financial institution regulatory agencies, updated regulations to reflect evolving COVID-19 conditions.
Acknowledging the pandemic's ongoing economic effects, the Board's regulatory efforts prioritized convenient access to funds for both consumers and financial services providers. In April 2020, the Board published an interim final rule lifting the six-per-month limit on savings deposit transfers and withdrawals. In March 2021, the Board joined the other Federal Financial Institutions Examination Council agencies in responding to this regulatory update by announcing the suspension of Regulation D examination procedures.2 This change permits financial institutions to remove the six-per-month limit on savings deposit transfers and to allow customers to make an unlimited number of withdrawals from savings deposits. Financial institutions that decide to suspend enforcement of the six-transfer limit will no longer need to monitor savings deposit account transaction activity to track the number of convenient transfers, notify customers who exceed the maximum number of transfers, or close savings deposit accounts that repeatedly exceed that maximum. Since the disclosure requirements for deposit accounts under the Truth in Savings Act remain in effect, suspension of the Regulation D examination procedures should reduce financial institutions' compliance burden without any reduction in consumer financial protection.
The Federal Reserve continued to monitor financial institutions for regulatory compliance during the year. The number of examinations the Reserve Banks completed increased from 311 in 2020 to 391 in 2021. The breakdown of consumer compliance examinations completed by Reserve Banks in 2021 included 191 consumer compliance examinations of state member banks, 187 CRA examinations of state member banks, 13 examinations of foreign banking organizations, and no examinations of Edge Act corporations or agreement corporations.3
Community Reinvestment Act
The CRA requires that the Federal Reserve and other federal banking regulatory agencies encourage financial institutions to help meet the credit needs of the local communities where they do business, consistent with safe-and-sound operations. To carry out this mandate, the Federal Reserve
- examines state member banks to assess their performance under the CRA,
- considers banks' CRA performance in context with other supervisory information when analyzing applications for mergers and acquisitions, and
- disseminates information about community development practices to bankers and the public through community development offices at the Reserve Banks.4
The Federal Reserve assesses and rates the CRA performance of state member banks during examinations conducted by staff at the 12 Reserve Banks. During the 2021 reporting period, the Reserve Banks completed 187 CRA examinations of state member banks. Of those banks examined, 27 were rated "Outstanding," 158 were rated "Satisfactory," 2 were rated "Needs to Improve," and none were rated "Substantial Non-Compliance."
In addition to annual evaluations, the Board continued to expand CRA guidance in response to pandemic-related activities that would receive consideration in examinations. Staff also continued to work to reform CRA regulations, analyze public comments to the Board's advanced notice of proposed rulemaking, and collaborate with interagency partners. See box 6.1 for more information on the Division of Consumer and Community Affairs' 2021 CRA reform efforts and policy guidance.5
Box 6.1. Meeting Consumer Needs and Promoting Financial Inclusion for Economic Recovery
The economy expanded during 2021, as many businesses and schools began to reopen, and some COVID-19 restrictions were lifted. The Federal Reserve recognized, however, that the pandemic's effects were not evenly felt by all groups and developed activities to understand the disparities. The Board's Division of Consumer and Community Affairs (DCCA) conducted analysis of banking practices, reviewed Community Reinvestment Act (CRA) guidance, and examined financial inclusion to inform policy actions. Throughout the year, DCCA initiatives, research, and events kept stakeholders apprised of implications of the pandemic's impact and changing policies.
Supervision, Regulation, and Reform
Community banks played a crucial role in supporting small businesses, families, and individuals during the pandemic, underscoring the importance of providing online products and services. To assist community banks in their efforts to serve customers' financial needs through multiple delivery channels, the Board issued a variety of publications and guidance on fintech. The first 2021 issue of Consumer Compliance Outlook featured the article, "Technological Innovation Is Essential to the Future of Community Banking in America," by Governor Michelle Bowman.1 This article emphasized the significance of community bank/fintech firm partnerships to keep pace with the evolving financial services landscape. To ensure community banks understand supervisory expectations related to third-party risk management, the Board issued a fintech due diligence guide with other federal agencies.2 In partnership with the Division of Supervision and Regulation, DCCA released the paper, "Community Bank Access to Innovation through Partnerships," an additional resource for banks navigating fintech collaboration.3
During the pandemic, banks were encouraged to be accommodating and innovative in responding to consumer financial needs.4 DCCA assessed innovative ways that banks can meet the credit needs of low- and moderate-income communities through CRA guidance. In March, the agencies expanded a set of CRA frequently asked questions (FAQs) clarifying that certain pandemic-focused loan application processing and virtual community development efforts would qualify for consideration in CRA exams.5 Additional interagency guidance was issued in November to resume supervision and enforcement of mortgage servicing rules, which had been temporarily lifted in April 2020.6
Research, Policy, and Practice
In 2021, markers of a rebounding economy masked how COVID-19 left those with the fewest financial resources behind.7 DCCA research analyzed how individuals, families, and communities fared. Released in May, the Economic Well-Being of U.S. Households in 2020 report examined responses to the eighth annual Survey of Household Economics and Decisionmaking (SHED).8 The survey showed that the pandemic's economic effects were uneven. Slightly less than two-thirds (64 percent) of Black and Hispanic adults said that they were doing at least okay financially, compared with 80 percent of White adults and 84 percent of Asian adults. Community Advisory Council members stated that women were negatively affected by public health policy in response to the pandemic, such as school and daycare closings. The Federal Reserve engaged stakeholders to better understand inequities in the pandemic's financial fallout.
To explore these issues further, DCCA sponsored events, seminars, and publications that underscored the importance of supporting a diverse and inclusive recovery, particularly with respect to gender differences in economic opportunity. In addition, the Board worked with Reserve Bank partners to redesign the in-person biennial community development research conference into an online seminar series featuring Board and Reserve Bank seminars under the theme, Toward an Inclusive Recovery. This series featured sessions on women's economic participation, the financial fragility of low-income workers, and housing security.9 In November, DCCA hosted the Gender and the Economy Conference, which analyzed how gender can influence outcomes over the course of an individual's lifetime, with particular emphasis on COVID-related effects.10 Published in conjunction with the conference, the November 2021 issue of Consumer & Community Context provided insight into the pandemic's economic impact on women, from childcare disruptions and the financial fragility of single mothers to the experiences of women-owned businesses.11
Information on the Federal Reserve's robust body of work related to economic disparities can be found on the Board's website at https://www.federalreserve.gov/newsevents/economic-disparities-work.htm.
4. See https://www.federalreserve.gov/supervisionreg/caletters/2021.htm for supervisory guidance for consumer compliance issued in 2021. Return to text
7. Chair Jerome Powell mentioned the SHED findings in his remarks at the 2021 Just Economy Conference sponsored by the National Community Reinvestment Coalition. See https://www.federalreserve.gov/newsevents/speech/powell20210503a.htm. Return to text
Consumer Compliance Enforcement Activities
Fair Lending and UDAP Enforcement
The Federal Reserve is committed to ensuring that institutions it supervises comply fully with the federal fair lending and consumer protection laws, including the ECOA, the FHA, and the FTC Act, which prohibits unfair or deceptive acts or practices. The ECOA prohibits creditors from discriminating against any applicant, in any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age. In addition, creditors may not discriminate against an applicant because the applicant receives income from a public assistance program or has exercised, in good faith, any right under the Consumer Credit Protection Act. The FHA prohibits discrimination in residential real estate–related transactions, including the making and purchasing of mortgage loans, on the basis of race, color, religion, sex, handicap, familial status, or national origin.
The Federal Reserve supervises all state member banks for compliance with the FHA. The Federal Reserve and the CFPB have supervisory authority for compliance with the ECOA. For state member banks with assets of $10 billion or less, the Board has the authority to enforce the ECOA. For state member banks with assets over $10 billion, the CFPB has this authority.
With respect to the FTC Act, the Federal Reserve has supervisory and enforcement authority over all state member banks, regardless of asset size and consults with the CFPB with regard to state member banks over $10 billion in assets.
The Board is committed to ensuring that the institutions it supervises comply fully with the prohibition on unfair or deceptive acts or practices as outlined in the FTC Act. An act or practice may be found to be unfair if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers or to competition. A representation, omission, or practice is deceptive if it is likely to mislead a consumer acting reasonably under the circumstances and is material, and thus likely to affect a consumer's conduct or decision regarding a product or service.
When examiners find evidence of potential discrimination or potential UDAP violations, they work closely with the Board's Fair Lending or UDAP Enforcement staff, who provide additional legal and statistical expertise and ensure that fair lending and UDAP laws are enforced consistently and rigorously throughout the Federal Reserve System.
With respect to fair lending, pursuant to the ECOA, if the Board has reason to believe that a creditor has engaged in a pattern or practice of discrimination in violation of the ECOA, the matter must be referred to the Department of Justice (DOJ). The DOJ reviews the referral and determines whether further investigation is warranted. A DOJ investigation may result in a public civil enforcement action. Alternatively, the DOJ may decide to return the matter to the Board for administrative action. If a matter is returned to the Board, staff ensure that the institution takes all appropriate corrective action.
In 2021, the Board referred one fair lending matter to DOJ. The matter involved discrimination based on a pattern or practice of redlining in mortgage lending based on race or national origin.
If there is a fair lending violation that does not constitute a pattern or practice of discrimination under the ECOA or if there is a UDAP violation, the Federal Reserve takes action to ensure that the violation is remedied by the bank. The Federal Reserve uses a range of supervisory and enforcement tools, including nonpublic and public enforcement actions, to resolve any ECOA or UDAP violations and ensure that the institution takes appropriate corrective action. For example, the Federal Reserve uses supervisory tools other than public enforcement actions (such as memoranda of understanding between banks' boards of directors and the Reserve Banks, or board resolutions) to ensure that violations are corrected. When necessary, the Board can bring public enforcement actions.
The Board terminated two public enforcement actions for UDAP violations in 2021. In January 2021, the Board terminated a consent order, initially issued in 2017, against a bank for deceptive practices related to the bank's balance transfer credit cards. The order required the bank to pay restitution of approximately $5 million to more than 20,000 affected consumers and to take other corrective actions.6 In June 2021, the Board terminated a consent order, initially issued in 2019, against a bank for unfair and deceptive practices related to the bank's offering of certain add-on products. The order required the bank to pay restitution of approximately $8.8 million to more than 60,000 customers and to take other corrective actions.7
Given the complexity of this supervision area, the Federal Reserve seeks to provide transparency on its perspectives and processes to the industry and the public. Fair Lending and UDAP Enforcement staff meet with supervised institutions, consumer advocates, and industry representatives to discuss fair lending and UDAP issues and receive feedback. Through this outreach, the Board is able to address emerging fair lending and UDAP issues and promote sound fair lending and UDAP compliance. This includes staff participation in numerous meetings, conferences, and training events.
The Division of Consumer and Community Affairs' outreach and technical assistance included the annual Board-sponsored interagency webinar on fair lending supervision, which attracted more than 5,500 registrants in 2021.8
Flood Insurance Enforcement
The National Flood Insurance Act imposes certain requirements on loans secured by buildings or mobile homes located in, or to be located in, areas determined to have special flood hazards. Under the Federal Reserve's Regulation H, which implements the act, state member banks are generally prohibited from making, extending, increasing, or renewing any such loan unless the building or mobile home, as well as any personal property securing the loan, are covered by flood insurance for the term of the loan. The law requires the Board and other federal financial institution regulatory agencies to impose civil money penalties when they find a pattern or practice of violations of the regulation.
In 2021, the Federal Reserve issued six formal consent orders and assessed approximately $171,000 in civil money penalties against state member banks to address violations of the flood regulation.9 These statutorily mandated penalties were forwarded to the National Flood Mitigation Fund held by the Treasury for the benefit of the Federal Emergency Management Agency.
Mergers and Acquisitions
The Board is required by law to consider specific factors when evaluating proposed mergers and acquisitions, including competitive considerations, financial condition, managerial resources (including compliance with laws and regulations), convenience and needs of the community to be served (including the record of performance under the CRA), and financial stability.
In evaluating bank applications, the Federal Reserve relies on the banks' overall compliance record, including recent fair lending examinations. In addition, the Federal Reserve considers the CRA records of the relevant depository institutions, assessments of other relevant supervisors, the supervisory views of examiners, and information provided by the applicant and public commenters. If warranted, the Federal Reserve will also conduct pre-membership exams for a transaction in which an insured depository institution will become a state member bank or in which the surviving entity of a merger would be a state member bank.10
The Board provides information on its actions associated with these merger and acquisition transactions, issuing press releases and Board Orders for each.11 The Federal Reserve also publishes semiannual reports that provide pertinent information on applications and notices filed with the Federal Reserve.12 The reports include statistics on the number of proposals that were approved, denied, and withdrawn as well as general information about the length of time taken to process proposals. Additionally, the reports discuss common reasons that proposals have been withdrawn from consideration. Furthermore, the reports compare processing times for merger and acquisition proposals that received adverse public comments and those that did not.
Coordination with Other Agencies
Coordination with the Consumer Financial Protection Bureau
During 2021, staff continued to coordinate on supervisory matters with the CFPB in accordance with the Interagency Memorandum of Understanding on Supervision Coordination with the CFPB. The agreement is intended to establish arrangements for coordination and cooperation among the CFPB and the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Association (NCUA), and the Board of Governors. The agreement strives to minimize unnecessary regulatory burden and to avoid unnecessary duplication of effort and conflicting supervisory directives amongst the prudential regulators. The regulators work cooperatively to share exam schedules for covered institutions and covered activities to plan simultaneous exams, provide final drafts of examination reports for comment, and share supervisory information.
Coordination with Other Federal Banking Agencies
The Board regularly coordinates with other federal banking agencies, including through the development of interagency guidance, in order to clearly communicate supervisory expectations. The Federal Reserve also works with the other member agencies of the Federal Financial Institutions Examination Council to develop consistent examination principles, standards, procedures, and report formats.13 In addition, the Federal Reserve participates in the Joint Task Force on Fair Lending, composed of all of the prudential regulators, the CFPB, the DOJ, and the Department of Housing and Urban Development (HUD). See box 6.1 for more information on how the Board worked with the FDIC and the OCC to issue a guide for community banking organizations conducting due diligence on financial technology companies, as well as proposed guidance designed to assist banking organizations in identifying and addressing the risks associated with third-party relationships.
Updating Examination Procedures
In 2021, Board staff worked with other federal banking agencies to develop and revise examination procedures to provide clarity about supervisor expectations regarding consumer compliance. In March, the Board revised Regulation Z examination procedures to reflect amendments published by the CFPB amending and clarifying the TILA-Real Estate Settlement Procedures Act integrated disclosure rule, as well as amendments to TILA in the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) that did not require a rulemaking to be effective. Regulation Z ensures that creditors use a uniform system of disclosures about credit terminology and rates. In October, the Board again revised Regulation Z examination procedures to reflect changes to Regulation Z's qualified mortgage provisions published by the CFPB in 2020 and 2021.14
In December, the Board issued revised examination procedures for use in connection with the Home Mortgage Disclosure Act (HMDA) data collected since January 1, 2021, pursuant to the CFPB's rules, amendments to Regulation C, and amendments to HMDA in EGRRCPA.15 This update clarified the types of transactions that are subject to HMDA and EGRRCPA, as well as the data that institutions are required to collect, record, and report.
The Federal Reserve maintains a comprehensive public outreach program to promote consumer protection, financial inclusion, and community reinvestment. During 2021, the Board continued to enhance its program, delivering timely, relevant compliance information to the banking industry, experienced examiners, and other regulatory personnel.
In 2021, three issues of Consumer Compliance Outlook were released, discussing regulatory and supervisory topics of interest to compliance professionals.16 This publication is distributed to state member banks as well as to bank and savings and loan holding companies supervised by the Federal Reserve, among other subscribers.17 In addition, the Federal Reserve offered one
Outlook Live seminar, "2021 Fair Lending Interagency Webinar."18
The Federal Reserve's Examiner Training program supports the ongoing professional development of consumer compliance supervisory staff, from an initial introduction to the Federal Reserve System through the development of proficiency in consumer compliance topics sufficient to earn an examiner's commission and beyond. The goal of these efforts is to ensure that examiners have the skills necessary to meet their supervisory responsibilities now and in the future.
Consumer Compliance Examiner Commissioning Program
The Consumer Compliance Examiner Commissioning Program is designed to provide an examiner with (1) a foundation for supervision in the Federal Reserve System and (2) the skills necessary to effectively perform examiner-in-charge responsibilities at a non-complex community bank.19 On average, examiners progress through a combination of self-paced online learning, classroom offerings, virtual instruction, and on-the-job training over a period of two to three years. Achievement is measured by completing the required course content, demonstrating adequate on-the-job knowledge, and passing a professionally validated proficiency examination.
In 2021, 21 examiners passed the Consumer Compliance Proficiency Examination. The combination of multiple training delivery channels offers learners and Reserve Banks an ability to customize learning and meet training demands more individually and cost effectively. Special instructional and curriculum solutions were deployed throughout 2020 and 2021 to ensure uninterrupted learning for supervisory staff at all levels during the pandemic.
Continuing Professional Development
In addition to providing core examiner training, continuing, career-long learning is offered. Opportunities for continuing professional development include online learning modules, special projects and assignments, self-study programs, rotational assignments, instruction at System schools, mentoring programs, and the Consumer Compliance Senior Forum held every 18 months. Staff have access to continuing professional development resources on a variety of topics, including learning assets for examiners moving into examiner responsibilities at larger financial institutions and other curated learning content.
In 2021, the System continued to offer Rapid Response sessions to provide timely training to examiners through webinars and case studies on emerging issues or to address urgent training needs that result from, for example, the implementation of new laws or regulations. Two Rapid Response sessions with an exclusive consumer compliance focus were designed, developed, and presented to System staff during 2021. An additional 37 Rapid Response sessions were offered that addressed a broader range of supervisory issues, including consumer compliance topics, to keep supervision function staff informed of the Federal Reserve's actions during the pandemic.
Responding to Consumer Complaints and Inquiries
The Federal Reserve investigates complaints against state member banks and selected nonbank subsidiaries of BHCs (Federal Reserve regulated entities), and forwards complaints against other creditors and businesses to the agency with relevant authority. Each Reserve Bank investigates complaints against Federal Reserve regulated entities in its District. The Federal Reserve also responds to consumer inquiries on a broad range of banking topics, including consumer protection questions.
Federal Reserve Consumer Help (FRCH) processes consumer complaints and inquiries centrally. In 2021, FRCH processed 37,011 cases. Of these cases, 19,658 were inquiries and the remainder (17,353) were complaints, with most cases received directly from consumers and involving financial institutions other than state member banks supervised by the Federal Reserve. Approximately 9 percent of cases were referred to the Federal Reserve from other federal and state agencies.
Consumers contacted FRCH by a variety of different channels: 51 percent of the FRCH consumer contacts occurred by telephone, and 47 percent (17,438) of complaint and inquiry submissions were made electronically (via email, online submissions, and fax). The online form page received 41,788 visits during the year.
Complaints against Federal Reserve regulated entities totaled 5,814 in 2021. Of the total, 93 percent (5,422) were closed, and 7 percent were still under investigation.
Approximately 6 percent of the closed complaints were pending the receipt of additional information from consumers, referred to another regulatory agency, or withdrawn by the consumer.
Complaints about Products and Practices
During 2021, the Federal Reserve monitored consumer complaints by product and common subjects of complaint (see table 6.1).
Table 6.1. Complaints against state member banks and selected nonbank subsidiaries of bank holding companies by product and subject of complaint, 2021
|Product/subject of complaint||Percent|
|Deposit error resolution||21|
|Funds availability not as expected||17|
|Inability to withdraw funds on the card||20|
|Credit card accounts||19|
|Inaccurate credit reporting||30|
|Identity theft concerns||18|
|Request to validate the debt owed||9|
|Real estate loans||2|
Note: Other products include commercial products, non-deposit products, vehicle loans, customer service, and bank services. Real estate loans include adjustable-rate mortgages, residential construction loans, open-end home equity lines of credit, home improvement loans, home purchase loans, home refinance/closed-end loans, and reverse mortgages.
The Board also tracked complaints that cite discrimination. Twenty-six complaints alleging credit discrimination on the basis of prohibited borrower traits or rights were received in 2021. Seventeen discrimination complaints were related to the race, color, national origin, or ethnicity of the applicant or borrower. Five discrimination complaints were related to either the age or sex of the applicant or borrower. The remainder were related to handicap and public assistance income. Of the closed complaints alleging credit discrimination based on a prohibited basis in 2021, there were three with a violation; however, they were not related to illegal credit discrimination.
In 44 percent of investigated complaints against Federal Reserve regulated entities, evidence reviewed did not reveal an error or violation. Of the remaining 56 percent of investigated complaints, 12 percent were identified errors that were corrected by the bank; 5 percent were deemed violations of law; and the remainder included matters involving litigation, externally and internally referred complaints, complaints resolved by the bank after the consumer filed the complaint with FRCH, or information was provided to the consumer.
Consumer Laws and Regulations
Throughout 2021, the Board continued to administer its regulatory responsibilities with respect to certain entities and specific statutory provisions of the consumer financial services and fair lending laws. This included drafting regulations and issuing compliance guidance for the industry and the Reserve Banks and fulfilling its role in consulting with the CFPB on consumer financial services and fair lending regulations for which the CFPB has rulemaking responsibility.
Interagency Questions and Answers for Flood Insurance Proposal
In March, five federal regulatory agencies, including the Board, issued for public comment new Interagency Questions and Answers Regarding Private Flood Insurance.20 These proposed Interagency Questions and Answers supplement new and revised Interagency Questions and Answers the agencies proposed in July 2020.21
The proposal is intended to help lenders comply with the agencies' 2019 rule to implement the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012.
The proposal included new questions and answers in the following three areas:
- Mandatory acceptance
- Discretionary acceptance
- Private flood insurance general compliance
The agencies plan to consolidate these proposed private flood insurance questions and answers with the questions and answers proposed in July 2020 to issue one set of Interagency Questions and Answers Regarding Flood Insurance.
Updating Annual Indexes for Consumer Regulations
Annual Indexing of Exempt Consumer Credit and Lease Transactions
In December 2021, the Board and the CFPB announced that the dollar thresholds in Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) that will apply in 2022 for determining exempt consumer credit and lease transactions will increase from $58,300 in 2021 to $61,000 for 2022. These thresholds are set pursuant to statutory changes enacted by the Dodd-Frank 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). Transactions at or below the thresholds are subject to the protections of the regulations.22
Annual Indexing of Threshold for Small Loan Exemption from Appraisal Requirements for Higher-Priced Mortgage Loans
In December 2021, the Board, the CFPB, and the OCC announced that the threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans would increase from $27,200 for 2021 to $28,500 for 2022.23 The Dodd-Frank Act amended TILA to add special appraisal requirements for higher-priced mortgage loans, including a requirement that creditors obtain a written appraisal based on a physical visit to the home's interior before making a higher-priced mortgage loan. The rules implementing these requirements contain an exemption for loans of $25,000 or less and also provide that the exemption threshold will be adjusted annually to reflect increases in the CPI-W.
Annual Adjustment to Community Reinvestment Act Asset-Size Thresholds for Small and Intermediate Small Banks
In December 2021, the Board and the FDIC announced the annual adjustment to the asset-size thresholds used to define small bank and intermediate small bank under the CRA
Financial institutions are evaluated under different CRA examination procedures based on their asset-size classification. Those meeting the small and intermediate small bank asset-size thresholds are not subject to the reporting requirements applicable to large banks unless they choose to be evaluated as a large bank.
Annual adjustments to these asset-size thresholds are based on the change in the average of the CPI-W, not seasonally adjusted, for each 12-month period ending in November, with rounding to the nearest million.
As a result of the 4.73 percent increase in the CPI-W for the period ending in November 2021, the definitions of small bank and intermediate small bank for CRA examinations were changed as
- Small bank means a bank that, as of December 31 of either of the prior two calendar years, had assets of less than $1.384 billion.
- Intermediate small bank means a small bank with assets of at least $346 million as of December 31 of both of the prior two calendar years and less than $1.384 billion as of December 31 of either of the prior two calendar years.
These asset-size threshold adjustments took effect on January 1, 2022.
Consumer Research and Analysis of Emerging Issues and Policy
Throughout 2021, the Board analyzed emerging issues in consumer financial services practices in order to understand their implications for the consumer risk analyses and supervisory policies that are core to the Federal Reserve's functions. This research and analysis also provided insight into consumer financial decisionmaking.
Researching Issues Affecting Consumers and Communities
In 2021, the Board explored various issues related to consumers and communities by convening experts, conducting original research, and fielding surveys as part of its continuing commitment to gain insights into consumers' financial and communities' economic development experiences. This work during 2021 was essential to informing the Board's policymaking in responding to the COVID-19 emergency, particularly as these efforts were aimed at ameliorating conditions for economically vulnerable households and areas.
Household Economics and Decisionmaking
In order to better understand consumer decisionmaking in the rapidly evolving financial services sector, the Board conducts regular internet panel surveys to gather data on consumers' experiences and perspectives on various issues of interest through the Survey of Household Economics and Decisionmaking.
The Board first launched the survey in 2013 to better understand consumer decisionmaking in the wake of the Great Recession, with the aim of capturing a snapshot of the financial and economic well-being of U.S. households. In doing so, the SHED collects information on households that is not readily available from other sources or is not available in combination with other variables of interest.
Results of the Board's eighth annual SHED were published in the report Economic Well-Being of U.S. Households in 2020, released in May 2021.25 The survey results reflected the self-reported financial conditions of 11,648 respondents at the end of 2020. This report also included discussion of the trajectory of financial well-being over the course of the pandemic, as measured through the full annual survey in November 2020 as well as smaller surveys conducted in April and July 2020.
The survey asked respondents about specific aspects of their financial lives, including the following areas:
- employment and informal work
- income and savings
- economic preparedness
- banking and credit
- housing and living arrangements
- K-12 education and higher education
- education debt and student loans
The 2020 survey reflected how the pandemic caused substantial disruptions to many people's finances as well as how public policy responses appear to have muted many of the effects. Even though nearly one-fourth of adults said they were worse off financially than they had been in 2019, most still said that, despite these setbacks, they were managing at least okay financially near the end of the year and, across several measures, appeared to have financial resources similar to those observed a year earlier. At the time of the survey, 75 percent of adults reported either doing okay or living comfortably financially, which was unchanged from 2019 after having fluctuated through the year. Similarly, 64 percent of adults said they would pay a hypothetical $400 expense using cash or a cash equivalent, nearly unchanged from 2019.
Although most people were faring reasonably well financially, the results also highlighted areas of persistent challenges and economic disparities across financial measures, including the substantial disparities in overall well-being by race, ethnicity, and education. See box 6.1 for how SHED measured the pandemic's impact by race and gender.
The survey also explored long-run financial circumstances, including returns to education, housing satisfaction, and retirement savings, as well as several new questions to explore topics that had not been asked in previous years of the survey. These new topics included experiences with K-12 education and education disruptions, housing changes due to COVID-19, telework experiences, layoffs, and challenges faced when conducting banking transactions. Additionally, the survey continued to monitor emerging issues that may be important to the economy in the future, such as experiences working in the gig economy.
In addition to fielding and analyzing these surveys, economists in the Division of Consumer and Community Affairs published articles throughout the year in various publications and journals, contributing to a body of research exploring issues impacting consumers and communities.26
Community Development Research Seminar Series
In 2021, the Board and the Reserve Banks reimagined the biennial Federal Reserve System Community Development Research Conference as a new seminar series. This long-running forum convenes researchers, policymakers, and practitioners across sectors to consider important issues that low- to moderate-income people and communities face, exploring the latest research to inform effective strategies to advance opportunity for economically vulnerable households and areas. See box 6.1 to learn more about how the series' three sessions considered the 2021 theme, Toward an Inclusive Recovery.
The seminars featured keynote remarks by Governor Michelle Bowman, Federal Reserve Bank of Kansas City President Esther George, and Federal Reserve Bank of Atlanta President Raphael Bostic.
Analysis of Emerging Issues
Board staff analyze data and anticipate trends, monitor legislative activity, form working groups, and organize expert roundtables to identify emerging consumer risks and inform supervision, research, and policy.
In 2021, the Board analyzed a broad range of issues in financial services markets that potentially pose risks to consumers. Topics of interest included
- assessing consumer risk during and after the pandemic,
- tracking housing trends, and
- monitoring credit for small businesses.
The staff hosted a series of virtual events about innovative approaches to financing postsecondary education and conducted outreach with Black and Hispanic small business associations. The Division of Consumer and Community Affairs also convened a consumer risk-focused workshop series for staff from the Board, Reserve Banks, and other federal agencies in July and August. The discussion considered pandemic resiliency as well as credit products and policy decisions that help consumers and small businesses recover from financial shocks. In addition to analyzing the small-dollar mortgage market, staff also participated in the Interagency Task Force on Property Appraisal and Valuation Equity, an initiative to address inequity in home appraisals. In addition, Division of Consumer and Community Affairs subject matter experts examined credit availability for smaller firms that may lack the financing options and in-house resources of larger companies.
See box 6.1 to learn more about the Board's Gender and the Economy Conference, a virtual symposium that explored how gender can influence economic and financial outcomes over an individual's lifetime, with particular emphasis on COVID-related impacts.
The Federal Reserve System's Community Development function promotes economic growth and financial stability for underserved households and communities through research and public outreach. Community Development is a decentralized function within the Federal Reserve System, and the Community Affairs Officers at each of the 12 Reserve Banks design strategies to respond to the specific needs in their respective Districts. Board staff provide oversight for alignment with Board objectives and coordination of System priorities.
Perspectives from Main Street
Through its work, the Community Development function works to ensure that the voices of consumers and communities inform policy and research and solicits diverse views on issues affecting the economy and financial markets. These perspectives help improve research, policies, and
To that end, the Board partnered with the Reserve Banks and eight national partners on the 2021 Perspectives from Main Street survey. Through a convenience sampling method that relied on contact databases, the online survey compared conditions in August 2021 with the peak of pandemic economic distress. Announced in October 2021, the findings provided insight into how COVID-19 was affecting low- to moderate-income people and entities that serve them on the dates the survey was administered.27 Of respondents, 86 percent indicated COVID-19 was a significant disruption to the economic conditions of the communities they served, while 44 percent reported that significant disruptions had continued.
Similarly, the Federal Reserve promotes access to credit and financial services for lower-income communities of color by understanding and promoting the viability of minority depository institutions (MDIs). In collaboration with the Division of Supervision and Regulation, the Division of Consumer and Community Affairs issued SR/CA letter SR 21-6/CA 21-4, "Highlighting the Federal Reserve System's Partnership for Progress Program for Minority Depository Institutions and Women's Depository Institutions" in March 2021. This letter offered policy guidance about how the Partnership for Progress program defines and supports diverse banks and financial services providers, including eligibility, technical assistance, training, and outreach.28 The Board also released Promoting Minority Depository Institutions in July 2021, an annual report informing the public about Federal Reserve research, events, and other initiatives to preserve and support MDIs.29 During the semiannual Community Advisory Council (CAC) meetings, council members noted the importance of credit access for women and minority business owners. The Council also shared perspectives on local credit and economic conditions in housing, labor markets, and small businesses.30
1. The Federal Reserve has examination and enforcement authority for federal consumer financial laws and regulations for insured depository institutions with assets of $10 billion or less that are state member banks and not affiliates of covered institutions, as well as for conducting CRA examinations for all state member banks regardless of size. The Federal Reserve also has examination and enforcement authority for certain federal consumer financial laws and regulations for insured depository institutions that are state member banks regardless of asset size, while the CFPB has examination and enforcement authority for many federal consumer financial laws and regulations for insured depository institutions with over $10 billion in assets and their affiliates (covered institutions), as mandated by the Dodd-Frank Act. For data on state member banks and other institutions supervised by the Federal Reserve (including number and assets of), see section 4, "Supervision and Regulation." Return to text
3. Agency and branch offices of foreign banking organizations, Edge Act corporations, and agreement corporations fall under the Federal Reserve's purview for consumer compliance activities. An agreement corporation is a type of bank chartered by a state to engage in international banking. The bank agrees with the Federal Reserve Board to limit its activities to those allowed by an Edge Act corporation. An Edge Act corporation is a banking institution with a special charter from the Federal Reserve to conduct international banking operations and certain other forms of business without complying with state-by-state banking laws. By setting up or investing in Edge Act corporations, U.S. banks can gain portfolio exposure to financial investing operations not available under standard banking laws. Return to text
5. During 2021, Governor Lael Brainard released a FedCommunities blog about the necessity of CRA reform and participated in a podcast conversation about CRA modernization with Federal Reserve Bank of Atlanta President Raphael Bostic. See https://fedcommunities.org/necessity-cra-reform/ and https://www.atlantafed.org/news/conferences-and-events/conferences/2021/01/08/modernizing-the-community-reinvestment-act/podcast.aspx. Return to text
6. For more information, see termination announcement at https://www.federalreserve.gov/newsevents/pressreleases/enforcement20210105a.htm. Return to text
7. For more information, see termination announcement at https://www.federalreserve.gov/newsevents/pressreleases/enforcement20210610a.htm. Return to text
8. To view the webinar, see "Consumer Compliance Outlook Live" at https://consumercomplianceoutlook.org/outlook-live/archives/. Return to text
9. To view press releases for enforcement actions, see https://www.federalreserve.gov/newsevents/pressreleases.htm. Return to text
10. In October 2015, the Federal Reserve issued guidance providing further explanation on its criteria for waiving or conducting such pre-merger or pre-membership examinations. For more information, see https://www.federalreserve.gov/supervisionreg/srletters/SR1511.htm. Return to text
11. To access the Board's Orders on Banking Applications, see https://www.federalreserve.gov/newsevents/pressreleases.htm. Return to text
12. For these reports, see https://www.federalreserve.gov/supervisionreg/semiannual-reports-banking-applications-activity.htm. Return to text
17. For more information and to download the seminars, see https://consumercomplianceoutlook.org/outlook-live/. Return to text
19. An overview of the Federal Reserve System's Examiner Commissioning Program for assistant examiners is set forth in supervision and regulation (SR)/community affairs (CA) letter SR 17-6/CA 17-1, "Overview of the Federal Reserve's Supervisory Education Programs." See https://www.federalreserve.gov/supervisionreg/srletters/sr1706.htm. Return to text
20. The agencies are the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the FDIC, the NCUA, and the OCC. Return to text
21. For more information, see Federal Register notice 86 Fed. Reg. 14,696 (March 18, 2021) at https://www.govinfo.gov/content/pkg/FR-2021-03-18/pdf/2021-05314.pdf and the press release at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210311a.htm. Return to text
22. For more information, see https://www.federalreserve.gov/newsevents/pressreleases/bcreg20211201b.htm. Return to text
23. For more information, see https://www.federalreserve.gov/newsevents/pressreleases/bcreg20211201a.htm. Return to text
24. For more information, see https://www.federalreserve.gov/newsevents/pressreleases/bcreg20211216a.htm. Return to text
25. For the report and related data from the Survey of Household Economics and Decisionmaking, see https://www.federalreserve.gov/consumerscommunities/shed.htm. Return to text
26. For papers by the Federal Reserve Board, see Robert M. Adams, Kenneth P. Brevoort, and John C. Driscoll, "Is Lending Distance Really Changing? Distance Dynamics and Loan Composition in Small Business Lending," Finance and Economics Discussion Series 2021-011 (Washington: Board of Governors of the Federal Reserve System, December 2020), https://www.federalreserve.gov/econres/feds/is-lending-distance-really-changing-distance-dynamics-and-loan-
composition-in-small-business-lending.htm; Nathan Blascak and Anna Tranfaglia, "Decomposing Gender Differences in Bankcard Credit Limits," Finance and Economics Discussion Series 2021-072 (Washington: Board of Governors of the Federal Reserve System, November 2021), https://www.federalreserve.gov/econres/feds/decomposing-gender-differences-in-bankcard-credit-limits.htm; J. Michael Collins, Jeff Larrimore, and Carly Urban, "Does Access to Bank Accounts as a Minor Improve Financial Capability? Evidence from Minor Bank Account Laws," Finance and Economics Discussion Series 2021-075 (Washington: Board of Governors of the Federal Reserve System, October 2021), https://www.federalreserve.gov/econres/feds/does-access-to-bank-accounts-as-a-minor-improve-financial-capability.htm; Katherine Lim and Mike Zabek, "Women's Labor Force Exits during COVID-19: Differences by Motherhood, Race, and
Ethnicity," Finance and Economics Discussion Series 2021-067 (Washington: Board of Governors of the Federal Reserve System, September 23, 2021), https://www.federalreserve.gov/econres/feds/womens-labor-force-exits-during-covid-19-differences-by-motherhood-race-and-ethnicity.htm; and Jeff Larrimore, Jacob Mortenson, and David Splinter, "Earnings Shocks and Stabilization During COVID-19," Finance and Economics Discussion Series 2021-052 (Washington: Board of Governors of the Federal Reserve System, June 29, 2021), https://www.federalreserve.gov/econres/feds/earnings-shocks-and-stabilization-during-covid-19.htm. Return to text
28. See https://www.federalreserve.gov/supervisionreg/srletters/SR2106.htm. For more information about the Federal Reserve System's Partnership for Progress, see https://fedpartnership.gov/. Return to text
30. Records of the meetings of the CAC are available at https://www.federalreserve.gov/aboutthefed/cac.htm. Return to text