Compliance Monthly Newsletter

July 2019 Compliance Newsletter

Interagency Private Flood Insurance Rule

The Interagency Private Flood Insurance rules requiring that lenders must accept private flood insurance if the policy meets certain requirements were effective July 1, 2019. The rule addresses:

• Mandatory Acceptance Requirements
• The Compliance Aid
• Discretionary Acceptance
• Mutual Aid Society Plans

May Monthly Compliance Newsletter

FFIEC Issues 2019 Guide to HMDA Reporting
The FFIEC issued its 2019 A Guide to HMDA Reporting: Getting it Right! This edition is effective as of January 1, 2019, for HMDA submissions due March 1, 2020. The guide includes information regarding a HMDA reporter’s responsibilities and requirements, directions for assembling the necessary tools, and instructions for reporting HMDA data. The guide was developed by the member agencies of the FFIEC. The updated edition incorporates changes that the Economic Growth, Regulatory Relief, and Consumer Protection Act made to HMDA, as well as the CFPB’s related 2018 HMDA interpretive and procedural rule. Additionally, the guide continues to include appendices developed by the member agencies regarding compliance materials useful for navigating HMDA requirements, such as the CFPB’s HMDA Small Entity Compliance Guide and various summary charts (regarding items like institutional coverage and transactional coverage).

April Compliance Newsletter

The Federal Trade Commission (FTC) has proposed amendments to its 2003 Safeguards Rule and 2000 Privacy Rule, applicable to financial institutions under the Gramm Leach Bliley Act (GLBA).  The proposed changes are intended to keep pace with technological developments.  The Safeguards Rule requires a financial institution to develop, implement, and maintain a comprehensive information security program. The Privacy Rule requires a financial institution to inform customers about its information-sharing practices and allow customers to opt out of having their information shared with certain third-parties.  Some of the proposed changes to the Safeguards Rule include:

• Encryption of all consumer data;
• Implementing access controls to prevent unauthorized users from accessing consumer information;
• Implementing multifactor authentication to access consumer data, and
• Requiring periodic reports submitted to the Board to ensure compliance.

The proposed amendments would require covered financial institutions to encrypt all customer data held or transmitted by the institution both in transit over external networks and at rest. The proposed amendments would also require the use of multi-factor authentication for any individual accessing customer information on the institution’s internal networks. Covered financial institutions would need to submit periodic reports to their Boards of Directors.

March Compliance Monthly Newsletter

Banks and Credit Unions now have a better opportunity to ensure that they meet consumers’ needs for short-term, small-dollar loans. The CFPB has proposed to remove the underwriting provisions from the small-dollar (payday) lending rule it issued in October 2017. The rule imposes an ability-to-pay test on a wide range of small-dollar loans of 45 days or less, including payday loans, auto title loans and bank-provided loans with balloon payments. The CFPB’s proposal maintains the complete exemption in the rule for banks and other depository institutions that made 2,500 or fewer small-dollar loans in each of the current and previous years and for which these loans account for less than 10 percent of revenues. The CFPB is also proposing to delay the August 19, 2019 compliance date for the mandatory underwriting provisions of the 2017 final rule to November 19, 2020. The extension is intended to help lenders avoid expending unnecessary resources to comply with provisions that the CFPB has proposed to rescind. Comments on the proposal to delay the compliance date for the ATR provisions are due on or before March 18, 2019. Comments on the proposal to rescind the ATR provisions are due on or before May 15, 2019.

February Compliance Monthly Newsletter

The long-awaited private flood insurance rule is now here.  The Biggert-Waters Act of 2012 required the Agencies to issue a rule to direct regulated lending institutions to accept private flood insurance, as defined by the Biggert-Waters Act, and to notify borrowers of the availability of flood insurance coverage issued by private insurers.  There was an original proposal in 2013 regarding private flood insurance, which was later re-proposed in November 2016.  The November 2016 Proposed Rule significantly revised the October 2013 Proposed Rule.  The final rule is effective July 1, 2019.

January Compliance Monthly Newsletter

Agencies Update CRA Asset-Size Thresholds

The financial regulatory agencies announced the annual adjustment to the asset-size thresholds they will use to differentiate small and intermediate banks and savings associations under the Community Reinvestment Act.  A “small bank” or “small savings association” will be defined as an institution that, as of December 31st of either of the prior two calendar years, had assets of less than $1.284 billion.  An “intermediate small bank” or “intermediate small savings association” will be defined as a small institution with assets of at least $321 million as of December 31st of both of the prior two calendar years, and less than $1.284 billion as of December 31st either of the prior two calendar years. These adjustments will be effective January 1, 2019.

December Compliance Monthly Newsletter

New Rating System for Large Financial Institutions

The Federal Reserve finalized a new supervisory rating scale for large bank holding companies to better align the ratings system with its existing supervisory program. The new rating system will apply to all domestic bank holding companies and non-insurance, non-commercial savings and loan holding companies with $100 billion or more in total consolidated assets, which is a change from the $50 billion threshold originally proposed. The new rating system will also apply to U.S. intermediate holding companies of foreign banking organizations with $50 billion or more in total consolidated assets.  The new scale assigns ratings for capital planning, liquidity risk management and governance and controls.  Banks will be assigned ratings in each category, rather than receiving a standalone composite rating, and each category must be highly rated for the bank holding company to be considered “well-managed.”  The rule is effective February 1, 2019.

November Compliance Monthly Newsletter

Agencies Provide CIP Relief for Premium Finance Loans

On September 28, 2018, FinCEN and the Federal Reserve Board, FDIC, NCUA, and OCC have jointly issued an order granting an exemption from customer identification program requirements for premium finance loans. The exempted transactions are extended by banks and Credit Unions and their subsidiaries to commercial customers to facilitate purchases of property and casualty insurance policies (premium finance loans or premium finance lending).

October Compliance Monthly Newsletter

Permanent Relief from Beneficial Ownership Rule for Certain Transactions

FinCEN issued a ruling (FIN-2018-R003) granting permanent exceptive relief from Beneficial Ownership requirements for legal entity customers for certain account rollovers, renewals, modifications and extensions. The permanent relief broadens the scope of relief provided by the temporary ruling, but maintains strict definitional limits on which accounts are affected.  Financial institutions will continue to be required to identify and verify the identity of beneficial owners of legal entity customers at the initial account opening of all accounts (including those affected by the exceptive relief) occurring on or after May 11, 2018.  The exceptive relief applies to:

• A rollover of a certificate of deposit that does not allow additional deposits during its term;
• A renewal, modification, or extension of a loan (e.g., setting a later payoff date) that does not require underwriting review and approval;
• A renewal, modification, or extension of a commercial line of credit or credit card account (e.g., a later payoff date is set) that does not require underwriting review and approval; and
• A renewal of a safe deposit box rental.

September Compliance Monthly Newsletter

CFPB Clarifies HMDA Partial Exemptions

The CFPB issued an interpretive rule clarifying several changes to Home Mortgage Disclosure Act regulations made under S. 2155, the bipartisan regulatory reform law. The rule is intended to address concerns raised by banks about S. 2155’s partial exemptions for certain financial institutions from reporting an expanded set of HMDA data points.  The CFPB also published an executive summary on the rule and updated the Filing Instructions Guide for HMDA data collected in 2018 and the Regulatory and Reporting Overview Reference Chart.  The rule will be effective upon publication in the Federal Register.