Banks are the pillars of their communities, supporting businesses and families as they grow and prosper. One common way is through financial education. While most banks see financial literacy as critically important for their customers and communities, supporting the financial education of consumers also benefits the bank. Dedication to financial literacy creates better customers, supports the bank's mission and/or brand, and continues strong partnerships within the community. The key to reaping these additional benefits of financial literacy is for banks to view it as an opportunity to set themselves apart while making a difference, said Jeff McCarthy, VP – marketing director at First Bank Financial Centre, Oconomowoc, and vice chair of the 2018-2019 WBA Marketing Committee. "At the end of the day, community banking is about supporting our community businesses and families, and what better way than by addressing this knowledge gap?"

"Teach Them Early"

Financial education intersects with the banking industry because good bank customers—commercial and consumer alike—are also financially literate. "Providing educational seminars, participating in school programs, and promoting efforts of financial literacy organizations remains a must for all community banks, as the children we influence will someday be our depositors and borrowers – our future customers," explained Cathy Couey, chief retail officer at Security Financial Bank, Eau Claire, and a member of the Wisconsin Bankers Foundation Board of Directors. Starting early with financial education is an effective way to grow future customers for the bank, said Frank Habib, interim executive director of EconomicsWisconsin, a not-for-profit which has been delivering quality teacher training in economics and financial literacy in a free market and free enterprise environment for the past 55 years. "Invariably, the more those students learn, the better graduates and employees they'll become because of that early investment," he explained. "Teach them early. They'll become a well-informed and good customer."

Unfortunately, today many consumers don't receive the early education in money management that they need in order to thrive and avoid financial pitfalls. "A lot of people don't know what they don't know about their finances," said McCarthy. "And even when they know they don't know everything, people are afraid to ask questions because they don't want to look dumb. There's a large knowledge gap, but people are intimidated. People feel like they should know and they're a little embarrassed that they don't, so we try to create an atmosphere where people can ask questions."

The difference between understanding personal finance and never learning those skills can be dramatic. "It's very important to teach these life skills," said Habib. "Your choices will have a long-term impact on your life, and unfortunately, the costs of not understanding this are exorbitant sometimes." But financial literacy isn't all stick, no carrot. Michael Frohna, president of Junior Achievement of Wisconsin, which has been inspiring and preparing young people for success in a global economy for 78 years in Wisconsin (and for 100 years in the United States), summarized the ultimate goal of financial education: "Financial literacy allows people to pursue a life that's unique and meaningful to them," he said. 

"Make Lives Better"

That quest for betterment is what ties financial education to a bank's mission or brand. For most financial institutions, at least part of their mission or vision is to help their customers and their community. That goal can be nuanced and look different depending on the institution's niche or geographic location, but it's one that many banks share. "I personally feel it is a banker's responsibility to aid consumers in making the best financial decisions," said Couey. "Offering and/or participating in financial literacy proves your dedication in helping your customer reach their financial goals."

"We feel it's incumbent on us to expose people to these topics and issues so they can be set up for success in the long term," McCarthy agreed. First Bank Financial Centre (FBFC) sees financial literacy as part of the bank's strategy to live out its mission, rather than another marketing channel or way to prospect for potential customers. "It's not really about ROI," McCarthy clarified. "It's more about investment in our mission, which is 'Make Lives Better.' It's an investment in the people in our communities as a way to make lives better. It's a proof point to support our overall mission and support our brand."

In addition to the financial benefits of being educated about money, banks can also enhance their brands or missions by inspiring and mentoring young people through their financial literacy outreach. Frohna explained that of all the curriculum Junior Achievement presents to a class, the students probably only retain about a quarter of it. "The other 75 percent of what they remember is the volunteer talking about their own experience," he said. "Bankers have a tremendous ability to go into a classroom and tell stories that augment the curriculum and really bring it to life." Another reputational/brand benefit of demonstrating a banker's job and banking to students early: a recent national study revealed that 20 percent of Junior Achievement students chose a career path based on the career field of their classroom mentor. "It pays to volunteer, because you can change perceptions of what bankers do," said Frohna. 

Building Vibrant Communities 

As the financial cornerstone of their communities, banks also fill key partner roles with many local organizations, including the chamber of commerce, schools, and other entities. "Ultimately, I think organizations like ours and entities like banks really have the vibrancy of our communities at the heart of what we do," said Frohna. "Finding more ways we can partner and reach people who don't have all the tools they need to thrive will benefit everyone in the long-run by creating communities who are financially literate and responsible."

Partnering with an organization dedicated to financial education can be an effective, efficient way for banks to act out their mission to benefit customers and the community. "We align ourselves with best-in-class organizations and tools," McCarthy explained (FBFC is a Ruby level partner with Junior Achievement). "We participate in reality stores at our local high schools, and our online component is powered by EverFi, which is a nationally recognized leader in financial education." 

One of the primary reasons banks gain efficiencies through these partnerships is because no new contacts or infrastructure need to be built in order to deliver financial education in the bank's market. "What's important is banks don't need to create anything," Habib explained. "There are enough solution-oriented agencies to do that." He recommended lending facilities, such as meeting rooms, and hosting or sponsoring events through those agencies as a better use of the bank's resources than creating new materials. Serving on the boards of these organizations is also a valuable way for bank executives, in particular, to give back.

Whichever strategy Wisconsin banks utilize for their financial education efforts, the Wisconsin Bankers Association and Foundation have both dedicated resources to help bankers provide the education needed in their communities, Couey explained. "They promote Money $mart Week and Teach Children to Save Day by providing Reading Raises Interest Kits to communities within Wisconsin, and provide the online resource MyMazuma.com," she said. "All of this aids bankers in providing resources to help educate consumers on financial development." 

By, Amber Seitz

FDIC has added a new, online Information and Support Center to the agency’s existing educational resources. Consumers can use the Center to easily check the status of inquiries or complaints they have made about a financial institution. Also included is a new FDIC Knowledge Center, which provides easy-to-find answers to questions about banking and lending. The notice may be viewed at: https://www.fdic.gov/news/news/press/2019/pr19013.html 


OCC issued a bulletin to notify banks about key data fields that OCC has determined examiners will typically use to test and validate the accuracy and reliability of home mortgage loan data collected beginning in 2018. The bulletin may be viewed at: https://www.occ.gov/news-issuances/bulletins/2019/bulletin-2019-12.html


CFPB issued a report titled Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends. The report analyzes a non-public data set to shed light on the volume and characteristics of elder financial exploitation. The study explores the Suspicious Activity Reports (SARs) filed with the federal government by financial institutions such as banks and money services businesses, finding that SAR filings on elder financial exploitation quadrupled from 2013 to 2017. The report may be viewed at: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/cfpb_suspicious-activity-reports-elder-financial-exploitation_report.pdf


FRB has released December 31, 2018, compiled quarterly data on depository institutions that participate in the Treasury’s Minority Bank Deposit Program. The data may be viewed at: https://www.federalreserve.gov/releases/mob/current/default.htm 


In anticipation of the effective date for its prepaid rule, CFPB has developed a number of guides and tools, including a new electronic submission system that allows an issuer to submit its required prepaid account agreements online. The resources may be viewed at: https://www.consumerfinance.gov/data-research/prepaid-accounts/


FFIEC issued a policy statement on the report of examination to promote consistency, clarity and ease of reference for the presentation of information in examination reports. The policy statement may be viewed at: https://www.ffiec.gov/guidance/PolicyStatement030619.pdf


CFPB announced that that 40 new organizations have joined the 2019 Your Money, Your Goals cohort. Each year, organizations that are selected for the cohort receive training and technical assistance on how to use the Your Money, Your Goals tools to help them discuss money topics with the people they serve in their communities. The announcement may be viewed at: https://www.consumerfinance.gov/about-us/blog/2019-your-money-your-goals-cohort/


CFPB has developed a program titled “Get Homebuyer Ready,” an email course to educate consumers on the homebuying process and equip them with resources. The course may be viewed at: https://www.consumerfinance.gov/about-us/blog/buying-home-sign-our-buying-house-newsletter/


FRB has voted to affirm the Countercyclical Capital Buffer (CCyB) at the current level of 0 percent. In making this determination, FRB followed the framework detailed in the Board’s policy statement for setting the CCyB for private-sector credit exposures located in the United States. The buffer is a macroprudential tool that can be used to increase the resilience of the financial system by raising capital requirements on internationally active banking organizations when there is an elevated risk of above-normal future losses and when the banking organizations for which capital requirements would be raised by the buffer are exposed to or are contributing to this elevated risk–either directly or indirectly. The buffer could also help moderate fluctuations in the supply of credit. The CCyB is designed to be released when economic conditions deteriorate, in order to support lending and economic activity more broadly. The announcement may be viewed at: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20190306c.htm


CFPB has posted an article on IRS imposter scams. The article outlines how to identify if the call is a scam and ways consumers can protect themselves. The article may be viewed at: https://www.consumerfinance.gov/about-us/blog/tax-season-protect-yourself-irs-imposter-scams/ 


FTC announced that imposter scams topped the list of consumer complaints submitted in 2018 to the Federal Trade Commission’s nationwide Consumer Sentinel database, driven in part by a jump in reports about government imposter scams. In all, the FTC received nearly three million complaints from consumers in 2018. Consumers reported losing nearly $1.48 billion to fraud in 2018—38 percent more than the year before. Debt collection complaints dropped to the number two spot after topping the FTC’s list of consumer complaints for the previous three years. The report may be viewed at: https://www.ftc.gov/news-events/press-releases/2019/02/imposter-scams-top-complaints-made-ftc-2018


CFPB has issued the small entity compliance guide for the Payday Lending Rule. The guide may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_payday_small-entity-compliance-guide.pdf 


FRB presented its semiannual Monetary Policy Report to Congress. The report indicated that Economic activity in the United States appears to have increased at a solid pace, on balance, over the second half of 2018, and the labor market strengthened further. Inflation has been near the Federal Open Market Committee’s (FOMC) longer-run objective of 2 percent, aside from the transitory effects of recent energy price movements. The report may be viewed at: https://www.federalreserve.gov/monetarypolicy/2019-02-mpr-summary.htm 


OFAC’s Office of Compliance and Enforcement (OCE) is issuing OCE’s Data Delivery Standards Guidance: Preferred Practices for Productions to OFAC. OCE’s Data Delivery Standards provides guidance regarding submissions and the technical standards for the preferred format in which to submit electronic document productions to OCE, including administrative subpoena responses, self-disclosures, and other documents or reports. The guidance may be viewed at: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Documents/ofac_data_delivery.pdf


CFPB has announced an initiative to help promote the importance of savings among Americans. The Start Small, Save Up initiative offers tips, tools and information to help consumers build a basic savings cushion and saving habit, as a foundation for securing their financial futures. More information on the initiative may be viewed at: https://www.consumerfinance.gov/start-small-save-up/


FHFA reported that Fannie Mae and Freddie Mac completed 245,620 refinances in the fourth quarter of 2018, compared with 253,135 in the third quarter. FHFA’s fourth quarter Refinance Report also shows that 1,390 loans were refinanced through the Home Affordable Refinance Program (HARP), bringing the total number of HARP refinances to 3,494,395 since inception of the program in 2009 and completion in Dec. 31, 2018. The report may be viewed at: https://www.fhfa.gov/Media/PublicAffairs/Pages/Fannie-Mae-and-Freddie-Mac-Refinance-Volume-Decreases-In-4th-Quarter-2018.aspx 


FTC will host a forum on small business financing on May 8, 2019, to examine trends and consumer protection issues in this marketplace, including the recent proliferation of online loans and alternative financing products. The forum, which is free and open to the public, will be at the Constitution Center, 400 7th St., SW, Washington, D.C. It will be webcast live on the FTC’s website. A full schedule and other details on the forum will be announced. Information on the forum may be viewed at: https://www.ftc.gov/news-events/events-calendar/strictly-business-ftc-forum-small-business-financing

By, Ally Bates

The below article is the Regulatory Spotlight section of the March 2019 Compliance Journal. The full issue may be viewed by clicking here.

Agencies Finalize Current Expected Credit Losses Methodology for Allowances.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) are adopting a final rule to address changes to credit loss accounting under U.S. generally accepted accounting principles, including banking organizations’ implementation of the current expected credit losses methodology (CECL). The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In addition, the final rule revises the agencies’ regulatory capital rule, stress testing rules, and regulatory disclosure requirements to reflect CECL, and makes conforming amendments to other regulations that reference credit loss allowances. The final rule is effective 04/01/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-14/pdf/2018-28281.pdf. Federal Register, Vol. 84, No. 31, 02/14/2019, 4222-4250.

Agencies Extend Comment Period for Standardized Approach for Calculating the Exposure Amount of Derivatives Contracts.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) published a proposal in the Federal Register on 12/17/2018 to amend the agencies’ capital rule to implement the Standardized Approach for Calculating the Exposure Amount of Derivatives Contracts. The agencies have decided to extend the comment period for the proposal. The new comment due date is 03/18/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-26/pdf/2019-03249.pdf. Federal Register, Vol. 84, No. 38, 02/26/2019, 6107.

CFPB Proposes Rescinding Parts of Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule.

The Bureau of Consumer Financial Protection (CFPB) is proposing to rescind certain provisions of the regulation promulgated by the Bureau in November 2017 governing Payday, Vehicle Title, and Certain High-Cost Installment Loans. The provisions of the rule which CFPB proposes to rescind provide that it is an unfair and abusive practice for a lender to make a covered short-term or longer-term balloon-payment loan, including payday and vehicle title loans, without reasonably determining that consumers have the ability to repay those loans according to their terms; prescribe mandatory underwriting requirements for making the ability-to-repay determination; exempt certain loans from the mandatory underwriting requirements; and establish related definitions, reporting, and recordkeeping requirements. Comments are due 05/15/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-14/pdf/2019-01906.pdf. Federal Register, Vol. 84, No. 31, 02/14/2019, 4252-4298.

CFPB Proposes Delay of Compliance Date for Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule.

CFPB is proposing to delay the 08/19/2019 compliance date for the mandatory underwriting provisions of the regulation promulgated by the Bureau in November 2017 governing Payday, Vehicle Title, and Certain High-Cost Installment Loans by 15 months to 11/19/2020. Comments are due 03/18/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-14/pdf/2019-01905.pdf. Federal Register, Vol. 84, No. 31, 02/14/2019, 4298-4305.

CFPB Announces Technical Specifications for Submissions to the Prepaid Account Agreements Database.

CFPB announced that beginning on 04/01/2019, prepaid account issuers are required to submit their currently-offered prepaid account agreements to CFPB, to be posted on CFPB’s website. CFPB is issuing technical specifications for those submissions, including the URL for the website at which issuers (or their designees) can register and submit their prepaid account agreements. The  announcement relates to a final rule published in the Federal Register on 11/22/2016, as amended on 04/25/2017 and 02/13/2018, regarding prepaid accounts under Regulations E and Z. The requirement is effective 04/01/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-06/pdf/2019-03852.pdf. Federal Register, Vol. 84, No. 44, 03/06/2019, 7979-7980.

CFPB Requests Comment on Residential PACE Financing.

CFPB is soliciting information relating to residential Property Assessed Clean Energy (PACE) financing. CFPB will consider the information it receives in implementing section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). In relevant part, EGRRCPA section 307 amends the Truth in Lending Act (TILA) to mandate that CFPB prescribe certain regulations relating to PACE financing. Specifically, the regulations must carry out the purposes of TILA’s ability-to-repay (ATR) requirements, currently in place for residential mortgage loans, with respect to PACE financing, and apply TILA’s general civil liability provision for violations of the ATR requirements CFPB will prescribe for PACE financing. The regulations must “account for the unique nature” of PACE financing. The notice solicits information to better understand the PACE financing market and the unique nature of PACE financing. Comments are due 05/07/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-08/pdf/2019-04177.pdf. Federal Register, Vol. 84, No. 46, 03/08/2019, 8479-8482.

CFPB Requests Comment on Information Collection.

CFPB announced it seeks comment on the information collection titled Bureau of Consumer Financial Protection Speaker Request Form. CFPB also gave notice that it sent the collection to OMB for review. Comments are due 04/15/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-13/pdf/2019-02101.pdf. Federal Register, Vol. 84, No. 30, 02/13/2019, 3795.

FRB Finalizes Amendments to Policy Statement on the Scenario Design Framework for Stress Testing.

The Board of Governors of the Federal Reserve System (FRB) is adopting amendments to its policy statement on the scenario design framework for stress testing. As revised, the policy statement clarifies that the Board may adopt a change in the unemployment rate in the severely adverse scenario of less than 4 percentage points under certain economic conditions and institutes a guide that limits procyclicality in the stress test for the change in the house price index in the severely adverse scenario. The amendments are effective 04/01/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-28/pdf/2019-03504.pdf. Federal Register, Vol. 84, No. 40, 02/28/2019, 6651-6664.

FRB Finalizes Stress Testing Policy Statement.

FRB is adopting a final policy statement on the approach to supervisory stress testing conducted under FRB’s stress testing rules and FRB’s capital plan rule. The statement is effective 04/01/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-28/pdf/2019-03503.pdf. Federal Register, Vol. 84, No. 40, 02/28/2019, 6664-6671.

FRB Finalizes Enhanced Disclosure of the Models Used in the Federal Reserve’s Supervisory Stress Test.

FRB is finalizing an enhanced disclosure of the models used in the Federal Reserve’s supervisory stress test conducted under FRB’s Regulation YY pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and FRB’s capital plan rule. The final rule is effective 04/01/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-28/pdf/2019-03505.pdf. Federal Register, Vol. 84, No. 40, 02/28/2019, 6784-6787.

FRB Finalizes Corrections to Regulations K and LL.

FRB published a final rule in the Federal Register on 11/21/2018 regarding the Large Financial Institution Rating System. That document included two typographical errors in “Appendix A—Text of Large Financial Institution Rating System” relating to the description of the conditionally meets expectation rating. FRB is now correcting those typographical errors. The correction is effective 02/15/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-15/pdf/2019-02516.pdf. Federal Register, Vol. 84, No. 32, 02/15/2019, 4309-4310.

FRB Proposes Amendments to Company-Run Stress-Testing Requirements.

FRB issued a proposed rule that would amend FRB’s  company-run stress test and supervisory stress test rules, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). Specifically, the proposed rule would revise the minimum threshold for state member banks to conduct stress tests from $10 billion to $250 billion, revise the frequency with which state member banks with assets greater than $250 billion would be required to conduct stress tests, and remove the adverse scenario from the list of required scenarios. The proposed rule would also make conforming changes to FRB’s company-run and supervisory stress test requirements for bank holding companies, U.S. intermediate holding companies of foreign banking organizations, and nonbank financial companies supervised by FRB, FRB’s Policy Statement on the Scenario Design Framework for Stress Testing, and the stress testing requirements for certain savings and loan holding companies that were proposed for public comment on 10/31/2018. Finally, the proposed rule would revise the scope of applicability of the company-run stress testing requirements for certain savings and loan holding companies that were proposed for public comment on 10/31/2019. Comments are due: 02/19/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-14/pdf/2019-00484.pdf. Federal Register, Vol. 84, No. 31, 02/14/2019, 4002-4012.

FRB Issues Correction to Proposed Amendments to Company-Run Stress-Testing Requirements.

FRB issued a proposed rulemaking issued in the Federal Register on 02/14/2019 regarding amendments to company-run stress testing requirements which included the wrong end date for it’s comment period. FRB is now correcting the notice, the correct comment due date for the proposal is 03/21/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-20/pdf/2019-02976.pdf. Federal Register, Vol. 84, No. 34, 02/20/2019, 5014.

FRB Requests Comment on Information Collections.

  • FRB announced it seeks comment on the information collection titled The Uniform Application for Municipal Securities Principal or Municipal Securities Representative Associated with a Bank Municipal Securities Dealer. FRB also gave notice that it sent the collection to OMB for review. Comments are due 05/06/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-05/pdf/2019-03874.pdf. Federal Register, Vol. 84, No. 43, 03/05/2019, 7902-7904.
  • FRB announced it seeks comment on the information collection titled Disclosure Requirements of Regulation Y Associated with Minimum Requirements for Appraisal Management Companies. FRB also gave notice that it sent the collection to OMB for review. Comments are due 05/06/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-06/pdf/2019-04068.pdf. Federal Register, Vol. 84, No. 44, 03/06/2019, 8098-8100.

FDIC Requests Comment on Information Collections.

  • The Federal Deposit Insurance Corporation (FDIC) announced it seeks comment on the information collection titled Furnisher Information Accuracy and Integrity (FACTA 312). FDIC also gave notice that it sent the collection to OMB for review. Comments are due 03/15/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-13/pdf/2019-02173.pdf. Federal Register, Vol. 84, No. 30, 02/13/2019, 3775-3776.
  • FDIC announced it seeks comment on the information collection titled Procedures for Monitoring Bank Protection Act Compliance. FDIC also gave notice that it sent the collection to OMB for review. Comments are due 03/15/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-13/pdf/2019-02177.pdf. Federal Register, Vol. 84, No. 30, 02/13/2019, 3777-3778.
  • FDIC announced it seeks comment on the information collection titled Notices Required of Government Securities Dealers or Brokers. FDIC also gave notice that it sent the collection to OMB for review. Comments are due 03/15/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-13/pdf/2019-02180.pdf. Federal Register, Vol. 84, No. 30, 02/13/2019, 3776-3777.
  • FDIC announced it seeks comment on the information collection titled National Survey of Unbanked and Underbanked Households. FDIC also gave notice that it sent the collection to OMB for review. Comments are due 03/25/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-21/pdf/2019-03001.pdf. Federal Register, Vol. 84, No. 35, 02/21/2019, 5434-5435.
  • FDIC announced it seeks comment on the information collection titled Registration of Mortgage Loan Originators (SAFE Act). FDIC also gave notice that it sent the collection to OMB for review. Comments are due 04/08/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-07/pdf/2019-04139.pdf. Federal Register, Vol. 84, No 45, 03/07/2019, 8330-8332.

FDIC Extends Comment Period for Information Collection.

FDIC is extending the public comment period for its request for information on the FDIC’s deposit insurance application process from 02/11/2019 to 03/31/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-13/pdf/2019-02100.pdf. Federal Register, Vol. 84, No. 30, 02/13/2019, 3778-3779.

OCC Proposes Amendments to Stress Testing Rules.

The Office of the Comptroller of the Currency (OCC) issued a proposed rule that would amend the OCC’s company-run stress testing requirements for national banks and Federal savings associations, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). Specifically, the proposed rule would revise the minimum threshold for national banks and Federal savings associations to conduct stress tests from $10 billion to $250 billion, revise the frequency by which certain national banks and Federal savings associations would be required to conduct stress tests, and reduce the number of required stress testing scenarios from three to two. The proposed rule would also make certain facilitating and conforming changes to the stress testing requirements. Comments are due 03/14/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-12/pdf/2018-27875.pdf. Federal Register, Vol. 84, No. 29, 02/12/2019, 3345-3349.

OCC Requests Comment on Information Collections.

  • OCC announced it seeks comment on the information collection titled Annual Stress Test Rule. OCC also gave notice that it sent the collection to OMB for review. Comments are due 03/13/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-11/pdf/2019-01720.pdf. Federal Register, Vol. 84, No. 28, 02/11/2019, 3279-3280.
  • OCC announced it seeks comment on the information collection titled Identity Theft Red Flags and Address Discrepancies under the Fair and Accurate Credit Transactions Act of 2003. OCC also gave notice that it sent the collection to OMB for review. Comments are due 03/13/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-11/pdf/2019-01719.pdf. Federal Register, Vol. 84, No. 28, 02/11/2019, 3280-3282.
  • OCC announced it seeks comment on the information collection titled Regulation C—Home Mortgage Disclosure. OCC also gave notice that it sent the collection to OMB for review. Comments are due 04/15/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-14/pdf/2019-02328.pdf. Federal Register, Vol. 84, No. 31, 02/14/2019, 4129-4131.
  • OCC announced it seeks comment on the information collection titled Interagency Appraisal Complaint Form. OCC also gave notice that it sent the collection to OMB for review. Comments are due 05/03/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-04/pdf/2019-03843.pdf. Federal Register, Vol. 84, No. 42, 03/04/2019, 7415-7417.

FEMA Issues Final Rules on Suspensions of NFIP Community Eligibility.

The Federal Emergency Management Agency (FEMA) issued a final rule which identifies communities in the state of Illinois, where the sale of flood insurance has been authorized under the National Flood Insurance Program (NFIP) that are scheduled for suspension on the effective dates listed within the final rule because of noncompliance with the floodplain management requirements of the program. If FEMA receives documentation that the community has adopted the required floodplain management measures prior to the effective suspension date given in the final rule, the suspension will not occur and a notice of this will be provided by publication in the Federal Register on a subsequent date. The effective date of each community’s scheduled suspension is the third date listed in the third column of the tables in the final rule. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-12/pdf/2019-02015.pdf. Federal Register, Vol. 84, No. 29, 02/12/2019, 3338-3340.

FEMA Issues Notice of Changes in Flood Hazard Determinations.

FEMA has issued a notice which lists communities in the states of Michigan, and Wisconsin, where the addition or modification of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or the regulatory floodway (hereinafter referred to as flood hazard determinations), as shown on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports, prepared by FEMA for each community, is appropriate because of new scientific or technical data. The flood hazard determinations will become effective on the dates listed in the table in the notice and revise the FIRM panels and FIS report in effect prior to the determination for the listed communities. From the date of the second publication of notification of these changes in a newspaper of local circulation, any person has ninety (90) days in which to request through the community that the Deputy Associate Administrator for Mitigation reconsider the changes. The flood hazard determination information may be changed during the 90-day period. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-12/pdf/2019-01934.pdf. Federal Register, Vol. 84, No. 29, 02/12/2019, 3479-3481.  

FEMA Issues Proposed Flood Hazard Determinations.

  • FEMA has requested comments on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the state of Ohio. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 05/16/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-15/pdf/2019-02564.pdf. Federal Register, Vol. 84, No. 32, 02/15/2019, 4515-4516.
  • FEMA has requested comments on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the state of Iowa. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 06/03/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-05/pdf/2019-03860.pdf. Federal Register, Vol. 84, No. 43, 03/05/2019, 7922-7924.
  • FEMA has requested comments on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the states of Illinois, Minnesota, Nebraska, and Ohio. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 06/03/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-05/pdf/2019-03866.pdf. Federal Register, Vol. 84, No. 43, 03/05/2019, 7920-7922.

Treasury Finalizes Civil Penalty Assessment for Misuse of Names, Symbols, etc.

The Department of the Treasury (Treasury) amends regulations that provide civil penalties for misuse of Department of the Treasury names, symbols, etc. to implement the Federal Civil Penalties Inflation Adjustment Act of 1990. In particular, the rule adjusts for inflation the maximum amount of the civil monetary penalties that may be assessed under its regulations, and updates the inflation adjustments through 2018 in accordance with instructions from OMB. In addition, the regulation is amended to reflect changes in Treasury organizational structure. The rule is effective 04/12/2019, comments are due 03/13/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-11/pdf/2019-01926.pdf. Federal Register, Vol. 84, No. 28, 02/11/2019, 3105-3107.

Treasury Issues Amendment to Guarantee Application Deadline.

Treasury issued a Notice of Guarantee Availability for the Community Development Financial Institutions Fund in the Federal Register on 11/06/2018 announcing the availability of up to $500 million in Guarantee Authority. Treasury is now amending the Guarantee Application deadline from 02/26/2019 to 03/26/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-25/pdf/2019-03204.pdf. Federal Register, Vol. 84, No. 37, 02/25/2019, 6043.

Treasury Requests Comment on Information Collection.

Treasury announced it seeks comment on the information collection titled Certain Cash or Deferred Arrangements and Employee and Matching Contributions under Employee Plans: Retirement Plans; Cash or Deferred Arrangements. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 05/03/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-04/pdf/2019-03729.pdf. Federal Register, Vol. 84, No. 42, 03/04/2019, 7417-7418.

FHFA Finalizes Federal Home Loan Bank Capital Requirements.

The Federal Housing Finance Agency (FHFA) is issuing a final rule to adopt as its own portions of the regulations of the Federal Housing Finance Board pertaining to the capital requirements for the Federal Home Loan Banks (Banks). The final rule carries over most of the existing Finance Board regulations without material change, but substantively revises the credit risk component of the risk-based capital requirement, as well as the limitations on extensions of unsecured credit. The principal revisions to those provisions remove requirements that the Banks calculate credit risk capital charges and unsecured credit limits based on ratings issued by a Nationally Recognized Statistical Rating Organization (NRSRO), and instead require that the Banks use their own internal rating methodology. The final rule also revises the percentages used in the tables to calculate the credit risk capital charges for advances and non-mortgage assets. FHFA retains the percentages used in the existing table to calculate the capital charges for mortgage-related assets, but revises the approach to identify the appropriate percentage within the table. FHFA also has revised the table numbers in the final rule to align with the Federal Register’s new formatting standards, which were revised after publication of the proposed rule. The final rule is effective 01/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-20/pdf/2018-27918.pdf. Federal Register, Vol. 84, No. 34, 02/20/2019, 5308-5333.

FHFA Finalizes Amendments to Uniform Mortgage-Backed Security.

FHFA is issuing a final rule to improve the liquidity of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) To-Be-Announced (TBA) eligible mortgage-backed securities (MBS) by requiring the Enterprises to maintain policies that promote aligned investor cash flows for both current TBA-eligible MBS, and, upon its implementation, for the Uniform Mortgage-Backed Security (UMBS)—a common, fungible MBS that will be eligible for trading in the TBA market for fixed-rate mortgage loans backed by one-to-four unit (singlefamily) properties. The final rule codifies alignment requirements that FHFA implemented under the Fannie Mae and Freddie Mac conservatorships. The rule is integral to the successful transition to and ongoing fungibility of the UMBS. FHFA has announced that the Enterprises will begin issuing UMBS in place of their current TBA-eligible securities on 06/03/2019. The rule is effective 05/06/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-05/pdf/2019-03934.pdf. Federal Register, Vol. 84, No. 43, 03/05/2019, 7793-7801.

SEC Issues Civil Monetary Penalty Inflation Adjustments.

The Securities and Exchange Commission (SEC) sets forth the annual inflation adjustment of the maximum amount of civil monetary penalties administered by SEC under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and certain penalties under the Sarbanes-Oxley Act of 2002. These amounts are effective beginning on 01/15/2019, and will apply to all penalties imposed after that date for violations of the aforementioned statutes that occurred after 11/02/2015. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-20/pdf/2019-02699.pdf. Federal Register, Vol. 84, No. 34, 02/20/2019, 5122-5124.

FASB Proposes Federal Financial Accounting Technical Release.

The Federal Accounting Standards Advisory Board (FASB) has released an exposure draft of a proposed Federal Financial Accounting Technical Release (TR) titled Conforming Amendments to Technical Releases for SFFAS 54, Leases: An Amendment of SFFAS 5, Accounting for Liabilities of the Federal Government and SFFAS 6, Accounting for Property, Plant, and Equipment, for public comment. The proposed TR is available on the FASB website at https://www.fasab.gov/documents-forcomment/. Copies can be obtained by contacting FASB at (202) 512–7350. Comments are due 04/01/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-01/pdf/2019-03702.pdf. Federal Register, Vol. 84, No. 41, 03/01/2019, 7049.

FASB Proposes Statement of Federal Financial Accounting Standards Omnibus Amendments.

FASB has issued an exposure draft of a proposed Statement of Federal Financial Accounting Standards (SFFAS) titled Omnibus Amendments: Rescinding Statement Of Federal Financial Accounting Standards 8 And Amending Statements Of Federal Financial Accounting Standards 5, 6, And 49. The exposure draft is available on the FASB website at https://www.fasab.gov/documents-forcomment/. Copies can be obtained by contacting FASB at (202) 512–7350. Comments are due 04/23/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-01/pdf/2019-03702.pdf. Federal Register, Vol. 84, No. 41, 03/01/2019, 7049.

NCUA Proposes Amendments to Supervisory Committee Audits and Verifications.

The National Credit Union Administration (NCUA) proposes to amend its regulations governing the responsibilities of a federally insured credit union (FICU) to obtain an annual supervisory committee audit of the credit union. The proposal implements recommendations outlined in the NCUA’s Regulatory Reform Task Force’s Regulatory Reform Agenda (Agenda) and will provide additional flexibility to FICUs. Comments are due 04/26/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-25/pdf/2019-03164.pdf. Federal Register, Vol. 84, No. 37, 02/25/2019, 5957-5960.

NCUA Requests Comment on Information Collections.

NCUA announced it seeks comment on the information collection titled Organization and Operations of Federal Credit Unions—Loan Participation. NCUA also gave notice that it sent the collection to OMB for review. Comments are due 03/14/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-12/pdf/2019-02091.pdf. Federal Register, Vol. 84, No. 29, 02/12/2019, 3503.

SSA Finalizes Rule Prohibiting Persons With Certain Criminal Convictions From Serving as Representative Payees.

The Social Security Administration (SSA) finalized regulations on conducting background checks to prohibit persons convicted of certain crimes from serving as representative payees under the Social Security Act, as required by the Strengthening Protections for Social Security Beneficiaries Act of 2018. The final rule is effective 03/18/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-02-15/pdf/2019-02483.pdf. Federal Register, Vol. 84, No. 32, 02/15/2019, 4323-4326.

VA Requests Comment on Information Collection.

The Department of Veterans Affairs (VA) announced it seeks comment on the information collection titled Loan Analysis. VA also gave notice that it sent the collection to OMB for review. Comments are due 05/06/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-03-06/pdf/2019-03985.pdf. Federal Register, Vol. 84, No. 44, 03/06/2019, 8154. ■

By, Ally Bates

The below article is the Special Focus section of the March 2019 Compliance Journal. The full issue may be viewed by clicking here.

On February 12, 2019 the Federal Financial Institutions Examination Council published a final rule on loans in areas having special flood hazards (2019 final rule). The 2019 final rule amends the flood regulations for the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the National Credit Union Administration (Agencies). The Agencies issued the 2019 final rule to implement the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act). The 2019 final rule was published in the Federal Register on February 20, 2019 and compliance is manditory on July 1, 2019; however, lenders may begin following the rule now.

Background

The Biggert-Waters Act includes a statutory definition of private flood insurance and directs the Agencies to implement acceptance through rulemaking. In 2013 the Agencies proposed a rule requiring the acceptance of private flood insurance pursuant to the statutory definition. The proposed rule generated interpretive uncertainties that ultimately resulted in the Agencies issuing a revised proposed rule in 2016. The 2019 final rule is an attempt to clarify the definition of private flood insurance under the Biggert-Waters Act.

2019 Final Rule

In addition to attempting to clarify the statutory definition of private flood insurance, the 2019 final rule includes a compliance aid to enable institutions to identify acceptable private policies. Additionally, subject to certain restrictions, it permits institutions to exercise discretionary acceptance of flood insurance policies that do not meet the definition of private flood insurance. Finally, the rule specifies how lenders may accept policies issued by “mutual aid societies” such as certain Amish Aid Plans.

Definition of Private Flood Insurance

The statutory definition of private flood insurance under the Biggert-Waters Act incorporated factors from the Federal Emergency Management Agency’s Mandatory Purchase of Flood Insurance Guidelines. The 2019 final rule attempts to clarify this statutory definition. As such, institutions familiar with the statutory definition will notice slight variations when compared to the 2019 final rule’s definition. For purposes of this article, the analysis will focus on the 2019 final rule’s definition and not make a comparison.

Under the 2019 final rule, private flood insurance means an insurance policy that: 

  1. Is issued by an insurance company that is: 
    • Licensed, admitted, or otherwise approved to engage in the business of insurance by the insurance regulator of the State or jurisdiction in which the property to be insured is located; or 
    • Recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the State or jurisdiction in which the property to be insured is located in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property; 
  2. Provides flood insurance coverage that is at least as broad as the coverage provided under a Standard Flood Insurance Policy (SFIP) for the same type of property, including when considering deductibles, exclusions, and conditions offered by the insurer. To be at least as broad as the coverage provided under an SFIP, the policy must, at a minimum: 
    • Define the term “flood” to include the events defined as a “flood” in an SFIP; 
    • Contain the coverage specified in an SFIP, including that relating to building property coverage; personal property coverage, if purchased by the insured mortgagor(s); other coverages; and increased cost of compliance coverage; 
    • Contain deductibles no higher than the specified maximum, and include similar nonapplicability provisions, as under an SFIP, for any total policy coverage amount up to the maximum available under the National Flood Insurance Program (NFIP) at the time the policy is provided to the lender; 
    • Provide coverage for direct physical loss caused by a flood and may only exclude other causes of loss that are excluded in an SFIP. Any exclusions other than those in an SFIP may pertain only to coverage that is in addition to the amount and type of coverage that could be provided by an SFIP or have the effect of providing broader coverage to the policyholder; and 
    • Not contain conditions that narrow the coverage provided in an SFIP; 
  3. Includes all of the following:
    • A requirement for the insurer to give written notice 45 days before cancellation or non-renewal of flood insurance coverage to:  
      • The insured; and 
      • The lending institution that made the designated loan secured by the property covered by the flood insurance, or the servicer acting on its behalf; 
    • Information about the availability of flood insurance coverage under the NFIP; 
    • A mortgage interest clause similar to the clause contained in an SFIP; and 
    • A provision requiring an insured to file suit not later than one year after the date of a written denial of all or part of a claim under the policy; and
  4. Contains cancellation provisions that are as restrictive as the provisions contained in an SFIP.

Compliance Aid

Pursuant to the above definition, a national bank or Federal savings association must accept private flood insurance in satisfaction of the flood insurance purchase requirements. Thus, a financial institution is required to accept private flood insurance and must also ensure it meets the above definition. However, the 2019 final rule provides a compliance aid to assist in that mandatory acceptance. Pursuant to the compliance aid, a financial institution may determine that a policy meets the definition of private flood insurance without reviewing the policy, if the following statement is included within the policy or as an endorsement to the policy:

“This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.”

While the compliance aid provides a safe harbor to financial institutions that accept policies containing the above language, there is no requirement for insurers to include the compliance aid language. Furthermore, because the 2019 final rule prescribes mandatory acceptance of private flood insurance that meets the above definition, financial institutions must accept policies that meet the above definition whether it includes the compliance aid or not. Meaning, a financial institution cannot reject a policy for the sole reason that it does not contain the compliance aid language.

Discretionary Acceptance

The 2019 final rule provides financial institutions the discretionary ability to accept or reject policies that do not meet the above definition of private flood insurance. Lenders may accept such policies, at their own discretion, if the policy:

  1. Provides coverage in the amount required by the NFIP; 
  2. Is issued by an insurer that is licensed, admitted, or otherwise approved to engage in the business of insurance by the insurance regulator of the State or jurisdiction in which the property to be insured is located; or in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property, is issued by a surplus lines insurer recognized, or not disapproved, by the insurance regulator of the State or jurisdiction where the property to be insured is located; 
  3. Covers both the mortgagor(s) and the mortgagee(s) as loss payees, except in the case of a policy that is provided by a condominium association, cooperative, homeowners association, or other applicable group and for which the premium is paid by the condominium association, cooperative, homeowners association, or other applicable group as a common expense; and 
  4. Provides sufficient protection of the designated loan, consistent with general safety and soundness principles, and the national bank or Federal savings association documents its conclusion regarding sufficiency of the protection of the loan in writing.

Mutual Aid Societies

In order to meet the mandatory acceptance provisions for private flood insurance, the 2019 final rule permits lenders to accept policies written by mutual aid societies if:

  1. The applicable supervisory agency has determined that such plans qualify as flood insurance for purposes of the Act; 
  2. The plan provides coverage in the amount required by the NFIP; 
  3. The plan covers both the mortgagor(s) and the mortgagee(s) as loss payees; and
  4. The plan provides sufficient protection of the designated loan, consistent with general safety and soundness principles, and the national bank or Federal savings association documents its conclusion regarding sufficiency of the protection of the loan in writing.

In addition, the rule defines mutual aid society to mean an organization:

  1. Whose members share a common religious, charitable, educational, or fraternal bond; 
  2. That covers losses caused by damage to members’ property pursuant to an agreement, including damage caused by flooding, in accordance with this common bond; and
  3. That has a demonstrated history of fulfilling the terms of agreements to cover losses to members’ property caused by flooding.

Conclusion

With the 2019 final rule becoming effective July 1, 2019, and optional compliance available under the 2019 final rule now, WBA recommends financial institutions review their policies on acceptance of private flood insurance. Financial institutions will need to understand the definition of private flood insurance policies pursuant to the rule, even if they had previously adhered to the statutory definition, as the 2019 final rule implements slight changes. Furthermore, institutions should be prepared to understand the relation of the compliance aid to the mandatory acceptance requirements.

The 2019 final rule may be found here: https://www.govinfo.gov/content/pkg/FR-2019-02-20/pdf/2019-02650.pdf

By, Ally Bates

The March 2019 edition of the WBA Compliance Journal has been published.

This month's Special Focus article discusses FFIEC's recent final rule on private flood insurance.

Click to download the March 2019 Compliance Journal.

By, Ally Bates

The Wisconsin Bankers Association offers for your use the following consumer education column. Your bank is free to use this as a community column in your local newspaper, a letter to the editor, a press release or in any other way you see fit. The purpose is to give our members an easy-to-use tool for promoting the banking industry to Wisconsin's communities. An archive of Consumer Columns is available, as well.

This biggest misconception about saving money is that many people think it's something you do at the end of the month with what you have left over after all of your expenses. The truth is, nobody ever has leftover money. There's always something to spend it on. The better way to think about saving is as something you do first, before you spend anything. This is often called the "pay yourself first" method. Here are a couple of strategies for paying yourself first to build up your savings. 

Create a budget. Perhaps the most important "save first" technique is to figure out how much you can afford to put away each month. Add up all of your essential expenses for the month (bills, loan payments, etc.) and then subtract that amount from your total income. The bottom number tells you how much money you don't need to spend each month. Use that number to decide on the amount you want to "pay yourself" at the beginning of each month. Remember: Don't try to save every penny available. Leave yourself some wiggle room by only committing to saving half or a third of that bottom number. 

Make it automatic. Many Americans with a savings account also have a checking account, and vice versa. Link your accounts together and set up an automatic transfer from checking to savings on the day of or the day after your payday. That way, the money you want to save will never appear in your checking account, making it easier to avoid the temptation to spend. Start small, with amounts in the $25 – $50 range, then gradually build it to $100 – $150 as you find ways to cut your spending each month.

Use direct deposit. If you're not already taking advantage of paycheck deductions through your employer, start as soon as possible. Many employers offer direct deposit to their employees, and one option is to earmark a portion of each paycheck for a savings account, CD, or IRA. Even if you only save $25 each paycheck this way, that money will go directly into your savings fund. 

Consider a CD. No, not the thing "old people" used to play music on back in the days before iPods and smartphones… Certificate of Deposit accounts are federally insured (so you cannot lose the money, even if the financial institution is sold or fails) and mature after a specific period of time (usually one month to five years). Not only is it more difficult to withdraw funds from these accounts, most CDs earn much higher interest rates than savings accounts. They can be a great tool if you find yourself dipping into your savings account on a regular basis for unnecessary expenses.

To find the best way for you to save, talk to your local banker. They'll be able to set you up with the right combination of financial products to help you reach your savings goal, whether it's early retirement or next year's vacation.

An archive of Consumer Columns is available here on WBA's website.

Visit MyMazuma for the latest financial education resources for consumers, including budgeting tools and advice for paying down debt.

 

By, Amber Seitz

Q: Can a power of attorney act on an IRA or Trust Account?

A: Yes, but only if the power of attorney (POA) agreement permits it.

The extent of an agent’s authority to act under a POA agreement will always depend on the language within the agreement.

Wisconsin’s Uniform Power of Attorney for Finances and Property Act under Chapter 244 governs POA agreements in Wisconsin. Chapter 244 provides for general authority with respect to banks and other financial institutions. One general power granted under statute permits an agent certain actions on an account. Account is a defined term under Wis. Stat. 705.01(1). That definition is broad enough to include an IRA.

For a trust account, an additional consideration to make is that of granting authority. A trust is a separate legal entity from an individual, meaning it has its own interests and authorities distinct from that of an individual person. A power of attorney agreement creates authority between a principal (the person granting authority) and an agent (the person granted authority). A POA agreement giving authority to act on the finances of a natural person principal does not automatically mean the agent can act on accounts owned by a trust, even if the principal is a trustee of the trust. Because a trust account has its own authority and ownership interests, the principal must grant an agent authority to act through their powers as trustee. Authority to do so is derived from the trust agreement.

If a financial institution is unsure about its interpretation of the scope of an agent’s authority within a POA agreement, WBA recommends working with an attorney to receive a legal opinion.

By, Scott Birrenkott