Compliance Monthly is intended to keep you informed of regulatory changes in advance of their effective date so your institution can have the necessary policies, procedures and processes in place to be compliant at the time of enactment.
January Monthly Compliance Newsletter
The Fair Lending Risk Assessment – The Finale
The fair lending risk assessment is an integral component of and the springboard for your fair lending program. It is a critical risk management tool that enables the institution to identify and measure the risk inherent in the institution, measure the risk inherent in the bank’s lending s lending processes and to determine what control and
processes and to determine what control and monitoring mechanisms are in place to protect monitoring mechanisms are in place to protect against illegal discrimination.
Why do I need to do a risk assessment?
As with all risk assessments, the intent is to identify the inherent risk (risk without internal control) and to evaluate the control mitigants to determine their effectiveness in addressing the inherent risk. Residual risk is the remaining risk that the institution must review to determine if it is acceptable to the institution or if it is indicative of additional gaps in the lending process that require further mitigation. The institution’s fair lending program is built from this foundation.
So where is fair lending risk hiding in my institution?
Fair lending risk can occur throughout the lifecycle of the lending relationship and is typically due to policies and practices which may be overtly discriminatory; application of a nondiscriminatory policy that has an inadvertent discriminatory effect or the use of discretion in the lending function relative to a prohibited bases with adverse impact. It is also important to include any affiliates or subsidiaries which are part of the lending process and lifecycle.
December 2020 Compliance Newsletter
- Fair Lending Risk Assessment. The Fair Lending Risk Assessment identifies specific areas of risk to the financial institution, the adequacy of controls to mitigate that risk, and resultant residual risk. Based on the results of the Fair Lending Risk Assessment, the financial institution can implement a plan to address high risk areas and further mitigate moderate risk. At the very least, the fair lending risk assessment should speak to:
- The CRA Assessment area and the Institution’s market area;
- Branch and Loan Production offices and strategies;
- Patterns of HMDA mortgage applications and originations in the CRA assessment area and/or credit market area for at least a 3-year period; and,
- Strategies for marketing and outreach.
November 2020 Compliance Newsletter
The Fair Lending and HMDA Conundrum
Earlier this year, many smaller institutions were elated at the prospect that they
would no longer be subject to the HMDA data collection and report rules as of July 1,
On April 16, 2020, the Consumer Financial Protection Bureau (Bureau) issued a final
rule amending Regulation C. This final rule adjusted Regulation C’s institutional and
transactional coverage thresholds for closed-end mortgage loans and open-end lines
• Effective July 1, 2020, the final rule permanently raises the closed-end coverage
threshold from 25 to 100 closed-end mortgage loans in each of the two
preceding calendar years.
• Effective January 1, 2022, when the temporary threshold of 500 open-end lines
of credit expires, the final rule sets the permanent open-end threshold at 200
open-end lines of credit in each of the two preceding calendar years.
October 2020 Compliance Newsletter
CFPB Highlights Regulatory Observations
In its Summer edition of Supervisory Highlights, the CFPB has highlighted regulatory observations in several areas. These observations resulted from examination activity during the fourth quarter of 2019.
As you prepare for 2021, it is a great time to review internal policies and practices regarding the highlighted topics to ensure that we are meeting the spirit and intent of the regulatory requirements. Training programs should be enhanced to incorporate these observations as well as focusing on the specific regulatory requirements that have been mentioned. Also, review your compliance monitoring programs and internal audit programs to ensure that the scope of testing is sufficiently detailed to detect instances noncompliance or compliance weaknesses.Download
September 2020 Compliance Newsletter
Have you Kicked the Tires on Your Overdraft Program Lately?
In light of the recent TD Bank Consent Order concerning its overdraft activities, it may be a good time to revisit your institution’s overdraft program. Overdraft programs continue to be a major focus of the regulators and are on Accume’s compliance “hot topics” honor roll!
So, what did TD Bank do wrong? The CFPB examination disclosed the following violations regarding TD’s overdraft program, deeming it to have “deceptive” enrollment practices:
- Failure to obtain the consumers’ affirmative consent to enroll in its overdraft-protection service and subsequently charging those consumers overdraft fees regarding that service;
- Engaging in abusive acts or practices while offering the program to consumers in person; deceptive acts or practices while offering DCA to consumers in person, over the phone, and through mailed solicitations;
- Failure to establish and implement reasonable written policies and procedures concerning the accuracy and integrity of information the Bank furnished to consumer reporting agencies; and
- Failure to conduct timely investigations of indirect disputes concerning consumer reporting agency furnishing.
August 2020 Compliance Newsletter
Pandemic Frauds, Scams, and Other Schemes
Over the past few months, FinCEN, the FTC and other regulatory agencies have been alerting financial institutions to various frauds, schemes and other illegal activity brought about by the COVID-19 pandemic. This article highlights some of the recent scams.
Impostor Scams. In impostor scams, criminals impersonate organizations such as government agencies, non-profit groups, universities, or charities to offer fraudulent services or otherwise defraud victims. While impostor scams can take multiple forms, the basic methodology involves an actor (1) contacting a target under the false pretense of representing an official organization, and (2) coercing or convincing the target to provide funds or valuable information, engage in behavior that causes the target’s computer to be infected with malware, or spread disinformation. These scams are used to defraud and deceive the vulnerable, including the elderly and unemployed, through the solicitation of payments (such as digital payments and virtual currency), donations, or personal information via email, robocalls, text messages, etc.
Red Flags to be alert to:
- Contact from a person claiming to represent a government agency by phone, or electronic means for personal or bank account information to verify, process, or expedite EIPs, unemployment insurance, or other benefits.
- Receipt of a document that appears to be a check or a prepaid debit card from the U.S. Treasury for less than anticipated EIP with instructions to contact a fraudulent agency to gain personal information.
- Unsolicited communications from purported trusted sources or government programs related to COVID-19 requiring the viewer to click on a link to provide personal information or E-mails addresses that do not match the name of the sender.
- Donation solicitations from organizations that are not associated or affiliated with reputable charities.
- Charities that do not have a history, IRS returns or financial statements.
Read more below.Download
July 2020 Compliance Newsletter
OCC Issues Updated Booklet “Unfair or Deceptive Acts or Practices and Unfair, Deceptive, or Abusive Acts or Practices“
On June 29, 2020, the OCC released its updated examination procedures concerning the UDAP/UDAAP booklet. The booklet provides expanded procedures to assist examiners in evaluating UDAP and UDAAP risks and in assessing associated risk management (including evaluating a bank’s CMS). This booklet is structured consistent with inter-agency consumer compliance and is a good guide for updating and establishing a UDAP/UDAAP risk management program for your institution.
The risks associated with UDAP and UDAAP are compliance, credit, operational, strategic, and reputation. The consequences of engaging in UDAP or UDAAP can include litigation, enforcement actions (including civil money penalties [CMP]), and monetary restitution.
Some of the UDAP/UDAAP red flags discussed in the booklet include:
- Customer complaints. Complaints can reveal a weakness in a particular product or service or can identify customers’ dissatisfaction with or lack of understanding of products or services, including products offered or services performed by third parties.
- Whistleblower referrals. Examples of whistleblower referrals that would indicate increased UDAP or UDAAP risk or the likelihood of potential UDAP or UDAAP issues include those that focus on the institution’s marketing or sales practices or disclose the failure of the institution to deliver products or services as promised.
Read more about the UDAP/UDAAP red flags below.Download
June 2020 Compliance Newsletter
HMDA Changes Are Coming…What Does it Mean?
On April 16, 2020, the Consumer Financial Protection Bureau (Bureau) issued a final rule amending Regulation C. This final rule adjusts Regulation C’s institutional and transactional coverage thresholds for closed-end mortgage loans and open-end lines of credit. Effective July 1, 2020, the final rule permanently raises the closed-end coverage threshold from 25 to 100 closed end mortgage loans in each of the two preceding calendar years. Effective January 1, 2022, when the temporary threshold of 500 open-end lines of credit expires, the final rule sets the permanent open-end threshold at 200 open-end lines of credit in each of the two preceding calendar years.
Closed-End Coverage Threshold Facts
The final rule permanently raises the closed-end coverage threshold from 25 to 100 closed-end mortgage loans in each of the two preceding calendar years, effective July 1, 2020. This threshold applies to both depository and non-depository institutions. If you are newly impacted, read the June Compliance Newsletter to find out what the changes may mean for you.Download
May 2020 Compliance Newsletter
Regulation D Limitations Suspended…What Does it Mean?
On Friday, April 24th, the Board of Governors of the Federal Reserve System published the amended Regulation D (Reserve Requirements of Depository Institutions) to eliminate transaction limitations on certain kinds of transfers and withdrawals that may be made each month from “savings deposits.” The amendments are intended to allow depository institution customers more convenient access to their funds and to simplify account administration for depository institutions.
There are no mandatory changes to deposit reporting associated with the amendments. The effective date was April 23, 2020. Regulation D distinguishes between reservable “transaction accounts” and non-reservable “savings deposits” based on the ease with which the depositor may make transfers (payments to third parties) or withdrawals (payments directly to the depositor) from the account. Prior to this interim final rule, Regulation D limited the number of certain convenient kinds of transfers or withdrawals that an account holder may make from a “savings deposit” to not more than six per month (six transfer limit).Download
March 2020 Compliance Newsletter
Military Lending Act Limitations on Terms of Consumer Credit Extended to Service Members and Dependents
In July 2015, the DOD issued a final rule amending its regulation implementing the Military Lending Act (MLA) primarily for the purpose of extending the protections of the MLA to a broader range of closed-end and open-end credit products, rather than the limited credit products that had been defined as “consumer credit.” Among other amendments, the July 2015 Final Rule modified provisions relating to the optional mechanism a creditor may use when assessing whether a consumer is a “covered borrower,” modified the disclosures that a creditor must provide to a covered borrower and implemented the enforcement provisions of the MLA.
The DOD has received requests to clarify its interpretation of points from the July 2015 Final Rule with an Interpretive Rules issued August 2016 and December 2017. The February 2020 Interpretive Rule amends and seeks to answer the following questions:Download
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