September 2019 Compliance Journal: Compliance Notes

The below article is the Compliance Notes section of the September 2019 Compliance Journal. The full issue may be viewed by clicking here.

NCUA released interim guidance on serving hemp businesses, which discusses how federally insured credit unions may provide certain financial services to legally operating hemp businesses. The guidance may be viewed at: https://www.ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/serving-hemp-businesses


FDIC released its August 2019 FDIC Consumer News featuring an article warning about scams involving fake checks. The article also included a number of tips for spotting fake checks and steps a consumer should take if a bogus check scam is suspected. The article may be viewed at: https://www.fdic.gov/consumers/consumer/news/august2019.pdf


FFIEC announced the availability of data on mortgage lending transactions at 5,683 U.S. financial institutions covered by the Home Mortgage Disclosure Act (HMDA). Covered institutions include banks, savings associations, credit unions, and mortgage companies. Released are loan-level HMDA data covering 2018 lending activity that were submitted on or before August 7, 2019.  The announcement may be viewed at: https://www.consumerfinance.gov/about-us/newsroom/ffiec-announces-availability-2018-data-mortgage-lending/


FDIC updated it Risk Management Manual of Examination Policies to incorporate a new section titled Risk-Focused, Forward-Looking Safety and Soundness Supervision. The latter describes the FDIC’s long-standing philosophy and methods for supervising institutions by focusing on the areas presenting the greatest risks. The new section has been included in the new Part VI of the Manual titled “Appendix: Examination Processes and Tools,” and describes communication and risk-tailoring principles followed during safety and soundness examination activities. The notice may be viewed at: https://www.fdic.gov/news/news/financial/2019/fil19047.html


CFPB launched the American Consumer Financial Innovation Network (ACFIN), a network to enhance coordination among federal and state regulators to facilitate financial innovation. CFPB invited all state regulators to join ACFIN, and the initial members of ACFIN are the Attorneys General of: Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah. The announcement may be viewed at: https://www.consumerfinance.gov/about-us/newsroom/bureau-state-regulators-launch-american-consumer-financial-innovation-network/


OCC issued a bulletin to remind banks of the new registration requirement for appraisal management companies (AMC) that became effective on August 10, 2019. Under this requirement, AMCs must register with the state or states in which they do business and must be subject to state supervision. Federal law bars AMCs from providing appraisal management services to financial institutions for consumer credit transactions secured by a consumer’s principal dwelling that are federally related transactions if the AMCs are not registered as required. This bulletin discusses considerations for banks with regard to confirming AMC registration as part of sound third-party risk management and suggests alternatives that banks can use when no registered AMCs are available. The bulletin may be viewed at: https://www.occ.gov/news-issuances/bulletins/2019/bulletin-2019-43.html


ABA released an article on preparing for a lapse in flood insurance. When the NFIP lapses, either due to a shutdown of the federal government or because Congress does not reauthorize it, many loan closings in these areas are delayed or otherwise complicated, resulting in additional costs and borrower frustrations. Unfortunately, the potential for lapse has become increasingly common, with 10 short-term extensions of the program and two brief lapses since 2016. The current authorization for the NFIP will expire at midnight on Monday, Sept. 30, 2019. The article may be viewed at: https://bankingjournal.aba.com/2019/09/how-banks-should-prepare-for-a-flood-insurance-lapse/. FRB, FDIC, OCC, and FCA also have issued an interagency statement on lapses in the NFIP. The statement may be viewed at: https://www.fdic.gov/news/news/press/2018/pr18106.html 


FDIC released results of its annual survey of branch office deposits for all FDIC-insured institutions as of June 30, 2019. The FDIC’s Summary of Deposits (SOD) provides deposit totals for each of the more than 86,000 domestic offices operated by more than 5,300 FDIC-insured commercial and savings banks, savings associations, and U.S. branches of foreign banks. The results may be viewed at: https://www5.fdic.gov/sod/sodMarketBank.asp?barItem=2


FHFA announced a revised cap structure on the multifamily businesses of Fannie Mae and Freddie Mac (the Enterprises).  The new multifamily loan purchase caps will be $100 billion for each Enterprise, a combined total of $200 billion in support to the multifamily market, for the five-quarter period Q4 2019 – Q4 2020.  The new caps apply to all multifamily business – no exclusions. The announcement may be viewed at: https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Revises-Multifamily-Loan-Purchase-Caps-for-Fannie-Mae-and-Freddie-Mac.aspx


FTC charged the operators of two similar student loan debt relief schemes, and a financing company that assisted them, with bilking millions of dollars from consumers. The defendants allegedly charged illegal upfront fees that they led consumers to believe went towards consumers’ student loans, and falsely promised that their services would permanently lower or even eliminate consumers’ loan payments or balances. The defendants also signed customers up for high-interest loans to pay the fees without making required disclosures. The notice may be viewed at: https://www.ftc.gov/news-events/press-releases/2019/09/ftc-takes-action-against-operators-student-loan-debt-relief


FDIC posted its state profile for second quarter 2019. FDIC State Profiles is a quarterly summary of banking and economic conditions in each state. The profiles may be viewed at: https://www.fdic.gov/bank/analytical/stateprofile/


HUD announced a significant expansion of its Rental Assistance Demonstration (RAD) to facilitate capital investment in senior housing developments assisted through HUD’s Section 202 Supportive Housing for the Elderly Project Rental Assistance Contracts (PRAC). Expanding RAD to include Section 202 PRAC units will now allow nonprofit housing developers to access capital investment to revitalize their aging properties and to ensure sustainable affordability for their very low-income elderly residents. There are approximately 120,000 units across 2,800 properties that will now become eligible to participate in RAD. The notice may be viewed at: https://www.hud.gov/sites/dfiles/OCHCO/documents/2019-09hsgn.pdf


NCUA Chairman Rodney E. Hood issued the following detailed statement in response to the Aug. 20, 2019, D.C. Circuit Court of Appeals decision in American Bankers Association v. National Credit Union Administration: “In response to the D.C. Circuit’s ruling, which largely upholds the NCUA’s field-of-membership rules, the NCUA will take a phased approach to implementing this decision. Such a phased approach is necessary because the D.C. Circuit’s ruling remains subject to requests for further review. With respect to credit unions serving rural districts, the NCUA Board will permit federal credit unions to submit applications seeking expanded rural districts serving geographic regions that encompass up to one million people and that meet the other requirements set forth in the agency’s field-of-membership rules. The NCUA will act on such applications at the appropriate time. The D.C. Circuit upheld the portion of NCUA’s 2016 rule, which allowed charters serving Combined Statistical Areas or a portion thereof, subject to a 2.5-million person limit. We will announce further guidance on this issue shortly. In the near future, the NCUA Board will consider a limited proposal that will address another issue raised by the D.C. Circuit regarding the definition of local community that includes portions of Core-Based Statistical Areas that do not include the urban core. The format of this proposal will be a notice of proposed rulemaking with public comment.” The announcement may be viewed at: https://www.ncua.gov/newsroom/press-release/2019/chairman-hood-ncua-will-take-phased-approach-implement-fom-rule


CFPB released the results of a pilot study, Planning for tax-time savings, launched with the tax preparation company H&R Block that shows that simple messages encouraging customers to use their prepaid card to save at tax time increased the likelihood that they would do so. The pilot study, conducted during the 2017 tax filing season, randomly assigned a subset of H&R Block’s prepaid card customers to one of three groups. One group was sent an email with a message encouraging them to save using a savings feature on the prepaid card, one was sent an email message offering them a $5 incentive to save on the card, and one was not sent any savings message. The study may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_planning-for-tax-time-savings_report.pdf


FHFA announced it is expanding its foreclosure prevention options to allow borrowers in Presidentially Declared Major Disaster Areas (PDMDAs) with delinquent FHA-insured mortgages to bring their mortgages current without increasing their interest rates or principal and interest payments. The notice may be viewed at: https://www.hud.gov/press/press_releases_media_advisories/HUD_No_19_132


FRB released the latest issue of the Consumer Compliance Outlook. This issue features articles on effective change management, and vendor considerations for flood insurance requirements. The issue may be viewed at: https://consumercomplianceoutlook.org/    


FinCEN has launched its Global Investigations Division (GID), which will be responsible for implementing targeted investigation strategies rooted in FinCEN’s unique authorities under the Bank Secrecy Act (BSA) to combat illicit finance threats and related crimes, both domestically and internationally. FinCEN Director Kenneth A. Blanco announced that Matthew Stiglitz, a former Principal Deputy Chief in the Department of Justice’s Criminal Division, will lead GID. The announcement may be viewed at: https://www.fincen.gov/news/news-releases/new-fincen-division-focuses-identifying-primary-foreign-money-laundering-threats


FDIC updated its Risk Management Manual of Examination Policies (the Manual) to incorporate a new section titled Risk-Focused, Forward-Looking Safety and Soundness Supervision. The latter describes the FDIC’s long-standing philosophy and methods for supervising institutions by focusing on the areas presenting the greatest risks. The new section has been included in the new Part VI of the Manual titled “Appendix: Examination Processes and Tools,” and describes communication and risk-tailoring principles followed during safety and soundness examination activities. The announcement may be viewed at: https://www.fdic.gov/news/news/financial/2019/fil19047.html


CFPB released its fourth biennial report on the state of the credit card market for the period 2017-2018. In 2009, the Credit Card Accountability Responsibility and Disclosure Act (Act) made substantial changes to the legal requirements applicable to the credit card market, with Section 502 of the Act also requiring that a report be issued every two years with respect to the market. The report may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2019.pdf


FRB conducted a floating-rate offering of term deposits through its Term Deposit Facility on August 22, 2019. The operation offered seven-day term deposits with the rate set equal to the sum of the interest rate paid on excess reserves plus a fixed spread of 1 basis point. The results of the offering may be viewed at: https://www.federalreserve.gov/newsevents/pressreleases/monetary20190822a.htm


OCC will host two workshops at the OCC Central District Office in Chicago, October 1 and 2, for directors of national community banks and federal savings associations supervised by the OCC. The workshops are taught by experienced OCC staff and are two of the 24 offered nationwide to enhance and expand the skills of national community bank and federal savings association directors. Registration information may be viewed at: https://www.occ.gov/news-issuances/news-releases/2019/nr-occ-2019-96.html


OFAC and FinCEN announced coordinated actions to bring additional financial pressure upon those who manufacture, sell, or distribute synthetic opioids or their precursor chemicals. The announcement may be viewed at: https://home.treasury.gov/news/press-releases/sm756

By, Ally Bates