Background:

Section 29 of the Federal Deposit Insurance Act (Section 29) was enacted by Congress in 1989, as part of the Financial Institutions Reform, Recovery, and Enforcement Act. Section 29 sets restrictions on the acceptance of brokered deposits by institutions with weakened capital positions. Congress intended to prevent troubled institutions from holding funds placed by third-parties whose primary business is “placing deposits or facilitating the placement of deposits of third parties” with insured depository institutions. 

Since 1989, statutory changes such as the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and the Gramm-Leach-Bliley Act of 1999, along with technological advances and market changes have significantly changed the landscape of banking models and deposit gathering. FDIC has issued a multitude of interpretations in the form of advisory opinions, FAQs, and other guidance, but has not, until now, issued regulatory updates to Section 29. 

This has created disparity between FDIC’s interpretation of Section 29 and the types of deposits Congress intended to restrict. Due to a current lack of clarity, many deposits are treated as “brokered” beyond the scope of what Congress intended. This results in classifications based on outdated legal constructs rather than actual risk.

Comment Summary: 

In a comment letter filed on June 9, WBA supported FDIC’s efforts to modernize Section 29 of the Federal Deposit Insurance Act. However, the current proposal does not go far enough toward solving the fundamental problems with the current regulations, WBA’s letter says. The current proposal’s definitions of “facilitation” and “deposit broker” remain overly broad and improperly increase the scope of deposits classified as brokered. WBA offered more precise definitions in its comment.  

Additionally, WBA urged FDIC to provide examples of persons who are not considered deposit brokers. The current proposal expands coverage of the IDI Exception (which applies to insured depository institutions) to wholly owned operating subsidiaries. WBA’s letter requests additional clarity on this exception and recommends that affiliates of IDIs be excluded as well. This would bring the proposal into alignment with how modern technologies, business, and market trends have resulted in banks and their affiliates operating as a single firm.  

Read the full comment letter here.

 

By, Amber Seitz

With the COVID-19 emergency prompting people to stay home more than usual, accessing in-person health care services has become more challenging than a few months ago. 

That has spurred a surge in telehealth appointments, with new state and federal regulations making it easier and more affordable for people to use digital devices to access medical advice related to COVID-19 and a myriad of other health issues. 

While this is a positive development, there are other potentially overlooked ways to access medical care remotely and use technology to cultivate healthier habits at home. These resources may help encourage whole-person health while reducing the risk of possible exposure to COVID-19 associated with in-person care appointments. 

Here are several strategies to consider: 

Physical Health: Nearly three-quarters (73%) of employers offer health and wellness programs, including some with virtual resources that help prevent or better manage certain chronic conditions (such as diabetes or obesity) that may be risk factors for complications related to COVID-19. People can check with their employer or health plan for virtual programs that provide personalized, interactive online weight loss support aimed at motivating individuals to improve their nutrition and get active. With many gyms and other exercise facilities currently closed, at-home support programs are increasingly valuable. Plus, people may consider telephonic programs to connect with a licensed counselor to help address various issues, including family and marriage difficulties, alcohol or substance misuse, and depression or stress. 

Eye Health: People should also take note of their eye health while spending more time at home, in part because of the link between screen use and digital eye strain. Research shows the prolonged use of computers and smartphones may cause symptoms such as headache or sore neck, shoulder or back. To help prevent these symptoms, people should consider keeping computer screens at least 30 inches away from their eyes, resting their eyes every 20 minutes, and blinking frequently to avoid dry eyes. People may consider prescription glasses that help filter "blue light," which is emitted by digital devices and may contribute to eye strain. Also, for the 150 million Americans who use corrective eyewear, online retailers enable people to order glasses from the comfort of their homes, in some cases offering "virtual mirrors" or apps that allow users to extract their prescription from their current glasses. 

Dental Health: With many dentist offices postponing routine cleanings during the COVID-19 emergency, people should consider focusing on recommended at-home hygiene habits. This includes brushing twice a day for two minutes with a fluoridated toothpaste, daily flossing, the use of an alcohol-free mouthwash, a tongue scraper, and water flosser. The recent emergence of "teledentistry" may also help people access dental advice and guidance to care, in part to avoid often unnecessary emergency room visits for oral health concerns. And, because many social events are also being postponed, now may be the time for people to improve their smiles. Teledentistry may enable people to straighten their teeth without the need for an in-person dental appointment, using direct-to-consumer clear aligners that offer improved convenience and savings for orthodontic care. 

Hearing Health: There are also online resources that may be helpful for the estimated 48 million Americans with some degree of hearing loss, a condition that may be linked to depression, dementia, and increased risk of falls. People initially can use free online screeners if they suspect signs of hearing loss but are not ready for an in-person hearing test. For people who have previously had a hearing test—but have not yet moved forward with treatment—home-delivery options may make it more convenient and affordable to order hearing aids without an in-person appointment with a health care professional. 

With a greater focus for many people on practicing healthier habits to help maintain or improve well-being during these challenging times, considering these tips and remote care strategies may prove beneficial amid the COVID-19 emergency, and in the future. 

For more information on WBA Association Health Plan go to www.uhc.com/WBA or contact Brian Siegenthaler at 608-441-1211 or bsiegenthaler@wisbank.com.

Dr. Docimo is chief medical officer at UnitedHealthcare

By, Amber Seitz

The IRS assembled a list of red flags regarding COVID-19 related programs like the Economic Impact Payments (EIP) and the CARES Act. The current list is available below.

Economic Impact Payments (EIP) based questionable/fraudulent or red flag activities:

Multiple direct deposits of EIP into the same account, particularly when the amounts of the checks are the same or approximately the same (e.g., $1,200 or $2,400)

Deposits of multiple paper checks into the same bank account, particularly when the amounts of the checks are the same or approximately the same (e.g., $1,200 or $2,400)

Cashing of multiple emergency assistance checks by the same individual

Deposits of one or more emergency assistance checks, when the accountholder is a business and the payee/endorser is an individual other than the accountholder

Opening of a new account with an emergency assistance check, where the name of the potential accountholder is different from that of the depositor of the check

Individual accounts opened within the last 60 days receiving multiple US Treasury checks or direct deposits from the US Treasury

Rapid transfers of funds that consolidate deposits -or- large subsequent counter withdrawals in cash -or- serial ATM withdrawals for the maximum allowable amount -or- large amounts of funds withdrawn in the form of cash back at retail establishments using prepaid debit cards from individual accounts receiving COVID-19 assistance

Other tax relief under the CARES Act questionable/fraudulent or red flag activities:

Opening of a new business account to receive a direct deposit of assistance funds or apply for a loan

The business does not appear to have a lengthy history (e.g., established within the last few months), a physical presence or address, or an Employer Identification Number

The business displays some discrepancies with the address, or it is located in a high-risk jurisdiction or an area that is not usually associated with the merchandise they are selling

The business has an unclear business model and it is difficult to determine the true nature of the company and its operations.

The business is receiving payroll protection relief without history of payroll activity

The business receives a payment/credit from Treasury in addition to a loan from SBA – businesses can be eligible for only one

Deposit to the business is solely from CARES act assistance

Additional red flags to look out for:

Customers could be victims of account takeover after their identity is stolen

Customer provides a document that appears to be a check from the U.S. Treasury, often in an amount less than the expected EIP, with instructions to contact the fraudulent government agency, via a phone number or online, to verify personal information in order to receive the entire benefit

The customer’s personal bank account starts to receive transactions that do not fit his or her history of typical transactions, including overseas transactions, When asked about the changes in transactions, the customer declines requests for “know your customer” documents or inquiries regarding sources of funds, and may mention COVID-19, relief work, or a “work-from-home” opportunity

The customer purchases large amounts of convertible virtual currency (CVC) or engages in fiat currency transactions

The customer opens accounts in his or her name at multiple banks so he or she may receive money from various individuals/businesses and then move the money to other accounts, as specified by the customer’s fraudulent “employer”

By, Eric Skrum

In a comment letter filed yesterday, WBA expressed support over FRB’s actions to except PPP loans from Regulation O. Due to how the term “extension of credit” is defined in Regulation O, a PPP loan made by a bank to its insider would subject the loan to the regulation. This presents operational challenges for banks and borrowers to efficiently process PPP loans.

WBA stated appreciation of FRB’s recognition that PPP loan terms and program eligibility are established by SBA, the loans are fully guaranteed by SBA and backed by the United States, and present very little risk to the eligible lender making the loan. WBA also stated support for FRB’s actions to utilize its authority, pursuant to the Housing and Community Development Act, to except PPP loans from the restrictions of section 22(h) of the Federal Reserve Act and from the corresponding provisions of Regulation O in recognition of these factors.

WBA stated that removing Regulation O obstacles will allow Wisconsin’s banks to more efficiently address the needs of their small insider-owned businesses and would help ensure eligible businesses have timely access to liquidity sources to help overcome economic hurdles resulting from the effects of COVID-19.

Read the full comment letter here

By, Amber Seitz

Congress has once again revised the Small Business Administration’s Paycheck Protection Program (PPP) through amendments made to the CARES Act by the recently enacted PPP Flexibility Act. The newest revisions, signed into law June 5, 2020, modify certain provisions related to the forgiveness of loans made under the PPP, allow recipients of loan forgiveness to defer payroll taxes, and for other purposes, including the following: 

Maturity Extended to 5 Years 

Loans under the PPP allow for the borrower to request forgiveness of that portion of the loan that was used during a covered period for certain payroll costs and business expenses. For the loan amount not forgiven under the program, the borrower had 2 years to repay the remaining balance. Under the PPP Flexibility Act, the repayment period has been extended from 2 years to 5 years after application of forgiveness.  

The applicably of new maturity term is backdated to the enactment of PPP; however, for PPP loans that have already closed, based upon language in the PPP Flexibility Act, WBA believes both lender and borrower need mutually agree to modify the loan maturity term from 2 years to 5 years before the 5-year term will apply to the previously executed PPP loan.   

Covered Period Extended  

Borrowers were permitted to spend PPP loan proceeds for 8 weeks, beginning on date of loan disbursement. This time period was referred to a the “covered period”. The PPP Flexibility Act has extended the covered period from 8 weeks to 24 weeks; the period cannot go past December 31, 2020. This provision is also backdated to the enactment of PPP, however, a borrower who previously received a PPP loan may elect keep the original 8-week covered period.  

The PPP Flexibility Act also corrected a technical issue that was created when Congress added funding to the PPP because original 8-week covered period had run beyond the original June 30, 2020 program termination date. To correct the timing issues, the PPP is now extended to the earlier of December 31, 2020 or the date program funding has expired.  

Exemption Based on Employee Availability 

New flexibility has been given to determine full-time equivalency (FTEs) for loan forgiveness calculations. During the period beginning on February 15, 2020 and ending December 31, 2020, the amount of loan forgiveness is to be determined without regard to a proportional reduction in the number of FTEs if a borrower, in good faith can document:  

  • The inability to rehire individuals who were employees of the borrower on February 15, 2020; and 
  • An inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or 
  • Is able to document an inability to return to the same level of business activity as was operating before February 15, 2020, due to compliance with requirements established or guidance issued by Secretary of Health and Human Services, the Director for CDC, or OSHA during a period beginning on March 1, 2020 and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other work or customer safety requirement related to COVID-19. 

Percentage of PPP Loan Proceeds on Payroll Costs 

Loan proceeds under PPP were to be used for certain expenses with a cap of 25% permitted for use on non-payroll costs during the covered period. The PPP Flexibility Act now allows for up to 40% of PPP loan proceeds to be used on non-payroll costs. For forgiveness, the borrower must now use at least 60% of PPP loan proceeds for payroll costs during the covered period.  

Forgiveness Application Filing and Deferral Period 

The PPP Flexibility Act requires borrower to apply for forgiveness of a covered loan within 10 months after the last day of the covered period. If borrower fails to file for forgiveness at that time, borrower will be required to make payments of principal, interest and fees, as applicable. 

The Act also revised the previously set payment deferral period to coincide with borrower’s application for forgiveness or 10 months after the last day of the covered period if borrower failed to apply for forgiveness.  

Payment of Payroll Taxes 

The PPP Flexibility Act eliminates the CARES Act exception to now allow a borrower to delay the payment of payroll taxes if the borrower has indebtedness forgiven under PPP. 

Visit WBA's Coronavirus Resource Center for more information on PPP and other pandemic-related issues.

By, Ally Bates

WBA has released a new tool for banks to use in helping their customers during the COVID-19 pandemic: a Sole Proprietor/Self-Employed Guide to PPP. The guide is a PDF, downloadable below or from WBA's Coronavirus Resource Center for consumers and small businesses (www.wisbank.com/COVID-19). It contains helpful information for self-employed individuals and sole proprietors related to PPP loan eligibility, calculating the maximum PPP loan amount allowed, permitted use of loan proceeds, documentation, forgiveness, and more. 

By, Amber Seitz