FOR IMMEDIATE RELEASE                                                                                                            July 30, 2020 
For more information, contact: 
Eric Skrum, Wisconsin Bankers Association  
608-441-1216 | eskrum@wisbank.com 
Twitter: @wisbank 

Statement on Governor Evers’ executive order requiring face coverings from Rose Oswald Poels, president/CEO of the Wisconsin Bankers Association  

“Governor Evers’ executive order requiring face coverings offers certainty to banks and businesses across the state. For those financial institutions that had been operating in multiple jurisdictions under differing rules, this provides a uniform set of parameters for everyone to operate under. 

We also want to remind the public that each bank will have different procedures for identifying customers using their lobby. While complying with the governor’s executive order, customers may be asked to:  

  • Lower their mask for a few seconds while facing a security camera  
  • Lower their mask for a few seconds to allow staff to identify them  
  • Answer security/identification verification questions (similar to using phone banking services)  
  • Use the drive-through if they are unwilling or unable to comply with the bank’s guidelines for masks  

We encourage consumers to contact their bank directly with specific questions about wearing masks and/or other face coverings in the branch.” 

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The Wisconsin Bankers Association is the state’s largest financial industry trade association, representing nearly 235 commercial banks and savings institutions, their nearly 2,300 branch offices and 23,000 employees. 

By, Ally Bates

While some people with a COVID-19 infection may experience relatively mild symptoms (or no symptoms at all), the disease is of greater concern for the 56% of Americans that may have at least one risk factor linked to an increased chance of complications.1

Two increasingly common risk factors for COVID-19 are obesity and Type 2 diabetes, which are in some cases preventable or reversible.2 As the COVID-19 situation evolves, it is important to recognize that daily decisions related to diet and activity may make a difference in the severity of infection. Research shows people with existing diabetes whose blood sugar is well controlled may require fewer medical interventions and are more likely to recover from COVID-19.3

With health now top of mind for many Americans, hopefully these challenging times can serve as a spark to help our nation address its long-standing chronic disease epidemic, which affects more than 196 million people4 and accounts for over $3 trillion in annual health care costs.5

Here are tips to consider related to obesity and Type 2 diabetes amid the COVID-19 pandemic: 

Monitor Your Body Mass: While body mass index (BMI) has potential shortcomings, especially for athletes such as weightlifters, this calculation of height compared to weight may provide a helpful measure to monitor. In fact, people with even moderately elevated BMI levels may have an increased risk of developing complications related to diabetes.6 To monitor your BMI, check with your primary care physician or use an online calculator.

Use Interval Eating: The cliché “you are what you eat” rings true when it comes to preventing or managing obesity and diabetes, but when and how you eat also may be relevant. Also called intermittent fasting or time-restricted eating, this approach alternates periods of fasting and non-fasting during the day or across the week. Lifestyle changes to consider include waiting at least an hour after waking up before eating breakfast and avoiding food within three hours of sleep. In addition, people may consider the order in which they eat food, starting each meal with a lean protein (chicken, fish or turkey), followed by a vegetable (asparagus, broccoli or carrots) and ending with a carbohydrate (beans, brown rice or sweet potato). This ordered approach may lead to lower post-meal glucose and insulin levels for people with Type 2 diabetes.7        

After-Meal Walks: People seeking to better control their blood sugar levels and weight should also consider short walks after eating meals or snacks, especially ones with added sugars such as juice or desserts. Post-meal walks may help the body move sugar from the blood into muscle cells, helping normalize blood sugar levels. Whenever possible, make time for a 15-minute walk after each meal to help reduce the risk of blood sugar spikes.8

Take Advantage of Technology: Smartwatches and activity trackers are potential resources to help monitor various health measures, including daily steps, sleep patterns and blood sugar levels. Recently, some people with diabetes have started using continuous glucose monitors. This technology, which uses a sensor often worn on the abdomen, continuously reads glucose levels and transmits the data to a smartphone. This may give users and health care providers important information in real time, helping reveal relationships between eating, exercise and blood sugar that may be difficult to observe with only test strips and a glucose meter. While these devices may cost $500 or more and require a prescription, some health plans in Wisconsin are starting to provide these at no additional cost to members as part of diabetes management programs. 

COVID-19 may be creating stress for many Americans, especially people with chronic health conditions. By considering these tips, these challenging times may serve as a catalyst for people to improve their health and reduce the possible risk of complications from COVID-19.

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

1. MedRxiv, 2020, https://www.medrxiv.org/content/10.1101/2020.05.02.20088781v1
2. Newcastle University, 2017, https://www.sciencedaily.com/releases/2017/09/170913084432.htm 
3. Cell Metabolism, 2020, https://www.cell.com/cell-metabolism/fulltext/S1550-4131(20)30238-2
4. Rand Corporation, 2017, https://www.rand.org/pubs/tools/TL221.html
5. Centers for Disease Control & Prevention, 2020, https://www.cdc.gov/chronicdisease/about/costs/index.htm
6. Southern Medical Journal, 2015, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4457375/
7. Weill Cornell Medical College, 2015, https://news.weill.cornell.edu/news/2015/06/food-order-has-significant-impact-on-glucose-and-insulin-levels-louis-aronne
8. Borror, A., Zieff, G., Battaglini, C., & Stoner, L. (2018). The effects of postprandial exercise on glucose control in individuals with type 2 diabetes: a systematic review. Sports Medicine, 48(6), 1479-1491.

By, Ally Bates

The below article is the Special Focus section of the July 2020 Compliance Journal. The full issue may be viewed by clicking here.

The Bureau of Consumer Financial Protection (CFPB) issued an interim final rule in late June to amend Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA), to temporarily permit mortgage servicers to offer a loss mitigation option based on the evaluation of an incomplete loss mitigation application. This article provides a summary of the interim rule.  

Background and Rationale for New Rule 

A general understanding of the current compliance requirements of loss mitigation and recent mortgage servicing activity which has resulted due to the pandemic is necessary to better understand the nuances for the newly created mitigation option under the interim final rule. As a requirement of the Dodd-Frank Act, Regulation X (Reg X) was revised in 2013 to create a uniform set of procedures that mortgage servicers must follow when offering loss mitigation options to borrowers who have failed to meet the contractual obligations of their mortgage loan. The loss mitigation procedures are found in Reg X section 1024.41.  

Under current Reg X loss mitigation procedures, servicers are required to first obtain a complete loss mitigation application from the borrower before evaluating a borrower for a loss-mitigation option, such as a loan modification or short sale. Reg X defines a “complete loss mitigation application” to mean an application in connection with which a servicer has received all the information that the servicer requires from a borrower in evaluating applications for the loss mitigation options available to the borrower. A servicer is required to exercise reasonable diligence in obtaining documents and information to a complete loss mitigation application; failure to do so could result in compliance exam violations and potential civil money penalties.  

Reg X compliance requirements aside, financial institutions have now had to deal with various responses to the national emergency due to the novel coronavirus disease (COVID-19) including actions taken by mortgage owners, investors, and insurers of mortgage loans under payment forbearance programs. In particular, the Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Company (Freddie Mac), Federal Housing Administration (FHA), Federal Home Loan Bank Chicago, and other owners or insurers of mortgage loans previously announced forbearance loan programs to assist borrowers with mortgage payments knowing many would not be able to work due to the steps taken under the COVID-19 national emergency. These parties also then created payment deferral programs for borrowers once they exit forbearance to help those borrowers who are unable to afford full reinstatement or a repayment plan at that time.  

Additionally, section 4022 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows borrowers who are experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency and who have a federally-backed mortgage to have access to payment forbearance programs if the borrower submits a request to their mortgage servicer and affirms that they are experiencing a financial hardship during the COVID-19 emergency. Unfortunately, the CARES Act does not specify how borrowers who received a CARES Act forbearance must repay forborne payments. 

Given the actions by Fannie Mae, Freddie Mac and other investors/insurers to utilize forbearance and deferral programs and the requirements under the CARES Act, mortgage servicers need to reconcile those actions and requirements with the Reg X loss mitigation compliance rules to ensure no compliance violations are cited.  

As stated above, Reg X requires mortgage servicers to offer loss mitigation options only after the servicer has evaluated a complete loss mitigation application. To further ensure servicers comply with the requirement, Reg X section 1024.41(c)(2)(i) contains what is generally referred to as the “anti-evasion” rule whereby mortgage servicers cannot evade the requirement to evaluate a complete loss mitigation application for all loss mitigation options available to the borrower by offering a loss mitigation option based upon the evaluation of any information provided by a borrower in connection with an incomplete loss mitigation application except for in only two instances: 

  1. borrower delays completing a loss mitigation application for a significant period of time; and
  2. for a “short-term” mitigation plan.  

The programs being offered by mortgage owners/insurers and under the CARES Act were typically programs that would not fall within the Reg X 1024.41(c)(2) exceptions to allow a mortgage servicer to offer a loss mitigation option after review of an incomplete loss mitigation application.  

The federal banking supervisory agencies attempted to bring clarity to the issue in a joint statement issued on April 3, 2020. In that statement, the agencies, in recognizing the impact the COVID-19 emergency was having on borrowers and on the operations of mortgage servicers, explained that, when a borrower requests a CARES Act forbearance and reaffirms that the borrower has experienced financial hardship during the COVID-emergency, it constitutes an incomplete loss mitigation application under Reg X. The agencies further stated that although receipt of an incomplete loss mitigation application generally triggers a mortgage servicer’s good faith obligations under Reg X sec. 1024.41, the joint statement provided that a CARES Act forbearance qualifies as a short-term payment forbearance program under Reg X, so certain loss mitigation requirements under Reg X do not apply. This position, however, was only in a jointly issued statement, not in Regulation.

In recognizing the unique environment created as a result of COVID-19 and all that has been outlined above, CFPB has amended the Reg X loss mitigation rules to create a third exception. New Reg X section 1024.41(c)(2)(v) allows a mortgage servicer to offer a loss mitigation option that meets certain criteria based on the evaluation of an incomplete application, and that servicers need not comply with certain Reg X requirements once a borrower accepts that option. To participate, the interim final rule requires certain criteria be met as is outlined next; CFPB structured its criteria to align with Fannie Mae/Freddie Mac COVID-19 payment deferral and other comparable programs, including FHA’s COVID-19 partial claim. 

Eligibility Requirements of New Exception 

The interim final rule conditions eligibility for the new exception on the loss mitigation option satisfying three criteria:  

  • First, the loss mitigation option must permit a borrower to delay paying certain amounts until the mortgage loan is refinanced, the mortgaged property is sold, the term of the mortgage loan ends, or for a mortgage insured by FHA, the mortgage insurance terminates.  

    These amounts include, without limitation, all principal and interest payments forborne under the payment forbearance program made available to borrowers experiencing a financial hardship due directly or indirectly to COVID-19 emergency, including one made pursuant to the CARES Act.   

    These amounts also include, without limitation, all other principal and interest payments that are due and unpaid by the borrower experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency.  

    For this criterion, the term of mortgage loan means the term of the mortgage loan according to the obligation between the parties in effect when the borrower is offered the loss mitigation option.
     

  • Second, any amounts that the borrower may delay paying through the loss mitigation option do not accrue interest; servicer does not charge any fee in connection with the loss mitigation option; and the servicer waives all existing late charges, penalties, stop payment fees, or similar charges promptly upon the borrower’s acceptance of the loss mitigation option. The interim final rule provides no definition or clarity by what is meant by “or similar charges” under this criterion. 
     
  • Third, the borrower’s acceptance of the loss mitigation offer must resolve any prior delinquency.  

Reg X Mitigation Steps Servicer is Exempt From Under New Rule  

If a borrower accepts an option offered pursuant to the new exception, the servicer is not required to continue the reasonable diligence efforts under Reg X section 1024.41(b)(1) or send the acknowledgment notice Reg X section 1024.41(b)(2) would otherwise require for those who are not considered a small servicer under Reg X loss mitigation rules.  

Items Mortgage Servicers Should Consider 

There are a number of items compliance officers of mortgage servicers may want to consider in connection with CFPB’s interim final rule. First being that the rule was effective July 1st. Is the bank ready to implement the interim final rule should it determine the interim rule is a desired process? If bank decides the option is something it will implement, for which mortgage loans will the option be made available? The interim rule allows the new mitigation option for Fannie Mae or Freddie Mac loans as well as other loans, including bank’s own portfolio loans.  

Also, note that it is not a requirement that the bank offer this option to its borrowers. The bank can certainly follow its normal loss mitigation process established under Reg X section 1024.41 and proceed to collect a complete loss mitigation application and follow its normal protocol established to meet its reasonable diligence in obtaining documents and information to a complete loss mitigation application from borrowers.  

If implementing the new mitigation option, how will bank record or validate that the borrower’s financial hardship is COVID-19 related? A criterion is that the deferred amounts are not to accrue interest, how will bank code or program its loan operating system to ensure that treatment is applied? What steps will be implemented to ensure those fees that are required to be waived under the rule are waived?  
While the rule is effective now, will bank wait until a final rule is issued before it implements this option? If implementing now, bank will need to reevaluate when the rule is finalized to ensure any change made in the promulgation process are implemented into bank’s own procedures.  

Conclusion 

CFPB has created a new exemption under Reg X loss mitigation rules to allow mortgage servicers to offer a particular loss mitigation option to borrowers so long as the criterion in the interim final rule are met, including waiving fees and bringing the loan current. The rule allows servicers to offer the loss mitigation option without having to first receive a complete loss mitigation application. The interim final rule is effective July 1, 2020 and may be viewed at this link. Comments regarding the new option are due August 14th.  

By, Ally Bates

The below article is the Special Focus section of the July 2020 Compliance Journal. The full issue may be viewed by clicking here.

On December 20, 2018, the Agriculture Improvement Act of 2018 (2018 Farm Bill) was signed into law. Previously, under the 2014 Farm Bill, production of hemp was permitted for research purposes only. Many States, including Wisconsin, implemented research programs under the 2014 Farm Bill. The 2018 Farm Bill contains provisions clarifying the status of hemp, transitioning it from a research crop to a commodity. The 2018 Farm Bill thus necessitates revision to existing programs regulating hemp production. 

In Wisconsin, hemp production continues to be legal under existing State programs, implemented under the 2014 Farm Bill. However, financial institutions should be aware that those requirements are shifting, and policy adjustments should be made accordingly. This article provides a background and reminder of hemp’s status under the law, timelines of the shift to 2018 Farm Bill programs, practical considerations, and recent activity from the Financial Crimes Enforcement Network (FinCEN) and the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP). 

Background and Status of Hemp in Wisconsin 

The 2018 Farm Bill clarifies the legality of hemp and sets all pilot programs established under the 2014 Farm Bill to expire on October 31, 2020. Late last year, the United States Department of Agriculture (USDA) published an interim final rule specifying regulations governing the production of hemp in accordance with the 2018 Farm Bill. Wisconsin also responded with 2019 Wisconsin Act 68 (Act 68) to make several changes to its laws governing industrial hemp. USDA’s rule establishes a Federal program governing hemp production nationally. It also outlines provisions under which States may submit their own plan for approval under the Federal program. Thus, States are automatically subject to the Federal program, unless their program is approved. Wisconsin Act 68 directs DATCP to write new rules, and the expectation is for DATCP to submit its plan to USDA for approval under the Federal program. 

Previously, the 2017 Wisconsin Act 100 implemented Wisconsin’s current program (pilot program), pursuant to the 2014 Farm Bill, and DATCP wrote EmR1807 (prior rule) in 2018 implementing the pilot program. DATCP issued licenses beginning late last year under the pilot program, and hemp can be grown and produced legally during Wisconsin’s 2020 hemp season by meeting existing program requirements, as discussed in more detail below. DATCP expects to begin a new program under the 2018 Farm Bill, pending USDA’s approval, in 2021. 

DATCP’s Emergency Rule 

DATCP’s prior rule implementing the pilot program expired on July 1, 2020. Before expiration, on June 27, 2020, DATCP issued EmR2016 (emergency rule) to maintain the program until October 31, 2020, when the pilot program terminates. The emergency rule also makes the following changes to the program to conform to the 2018 Farm Bill and Act 68: 

  • Updates the definition of hemp.
  •  Adds definitions for the terms “THC” and “decarboxylated” to clearly state regulatory testing requirements and to provide additional clarity that THC content includes THC-A, consistent with state and federal law, and existing testing requirements.
  • Uses the term “lot” instead of “crop” to more clearly explain how regulatory sampling and testing requirements apply to all hemp.
  •  Uses the term “growing location” instead of “field” and “greenhouse” to refer to where hemp is grown. 
  • Clarifies that after a failed initial test, the entire lot must be destroyed within 10 days after service of DATCP’s destruction order unless the grower requests a re-test prior to the expiration of the 10 days.
  • Clarifies that a grower cannot request a re-test of the original sample, but that a grower can request a new sample be collected for re-testing by DATCP.
  • Clarifies that a lot must be sampled prior to harvest, but that a lot does not need to be tested prior to harvest. 
  • Clarifies that a fit for commerce certificate must be obtained by a grower prior to the hemp being transported from the growing location. Allows for movement of harvested hemp within, but not from, a growing location. 
  • Clarifies that hemp found without a required fit for commerce certificate is subject to destruction.
  • Clarifies that a grower with unpaid invoices may not annually register and may be subject to license suspension.
  • Updates requirements for the planting report and final report to meet current program practices.
  • Updates requirements that a licensee must notify DATCP in writing of the variety of hemp they intend to plant before planting. Licensees may plant only approved varieties.
  • Updates the dates and deadlines for transitioning to a new hemp program under the USDA. 

The emergency rule will remain in effect until Wisconsin’s hemp pilot research program expires on October 31, 2020. At that time, DATCP will transition to a new program under the USDA interim final rule. WBA will provide updates as more information from DATCP becomes available on the transition. 

FinCEN Guidance Regarding BSA Due Diligence Requirements 
 
On June 29, 2020, the Financial Crimes Enforcement Network (FinCEN) issued guidance on Bank Secrecy Act (BSA) requirements for hemp-related business customers. The guidance provides that, in addition to conducting customer due diligence (CDD) on hemp-related businesses at time of application, financial institutions must establish risk-based procedures for conducting ongoing CDD. Specifically, for customers who are hemp growers, financial institutions may confirm the hemp grower’s compliance with state, tribal government, or the USDA licensing requirements, as applicable, by either obtaining: 

  1. A written attestation by the hemp grower that they are validly licensed, or
  2. A copy of such license. 

Financial institutions might also consider seeking additional information based upon their assessment of potential risk posed by each customer. FinCEN suggests that additional information might include crop inspection or testing reports, license renewals, updated attestations from the business, or correspondence with the state, tribal government, or USDA. It is important for financial institutions to know the nature of their customer’s business to best determine their risk profile.  

The guidance also clarifies that because hemp is no longer a Schedule I controlled substance, financial institutions are not required to file a Suspicious Activity Report on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. 

Lastly, the guidance confirms that financial institutions must report currency transactions in connection with hemp-related businesses in the same manner they would for any other customers. 

Practical Considerations 

A key takeaway is that the 2018 Farm Bill removed hemp from the definition of marijuana in the Controlled Substances Act. These changes shift toward treating hemp as a regulated commodity. The new regulatory framework starts with USDA’s interim final rule, which sets the stage for State programs. WBA published an article that explores USDA’s interim final rule in greater detail, which is included below. 
 
From a Wisconsin standpoint, as discussed above, Wisconsin will continue to operate under the pilot program (as revised by emergency rule) until October 31, 2020. It is important to note that 2019 Act 68, and DATCP’s emergency rule does not relate specifically to financial institutions. However, as seen in FinCEN’s guidance, financial institutions are expected to conduct due diligence on hemp-related businesses. Thus, it is important to understand how the industry operates, and is regulated. 
 
DATCP’s emergency rule offers clarity in areas not covered under its previous rule. The extent to which a financial institution will need to be familiar with these requirements depends on its customer base. For example, a customer might be looking to just try hemp on a small field they have available. Another might have a large production operation that involves the purchase of large quantities of different seed varieties, and the harvest and shipping of hemp for uses of both oil and fiber. The extent to which a financial institution gathers information in either scenario may depend on the perceived risk of each business’ operation. 
 
In either case, financial institutions should start with licensure, knowing that is FinCEN’s minimum requirement, and work from there. Next steps will likely involve a discussion with the customer to better understand their operation. This way, a financial institution can gather information to make its own business decisions, and meet BSA requirements. Some financial institutions may wish to accomplish this by obtaining certifications from their customers. For financial institutions looking to use this method, WBA has created a hemp questionnaire and certification available through FIPCO, which has been designed with DATCP’s program requirements in mind. 

Conclusion 

Wisconsin’s pilot program, under which currently licensed growers and processors currently operate, expires on October 31, 2020. Hemp-related businesses may continue to operate under the existing program, but later this year, DATCP will provide new information on a transition to a new program under the USDA interim final rule. While WBA does not anticipate the new program will place any new requirements on financial institutions, it is important to be aware of the changes when they occur from a know-your-customer standpoint for both the business and BSA considerations discussed above. WBA will report upon the details of the new program when they become available. 

Additional Resources 

DATCP Notice to Stakeholders 
DATCP Emergency Rule Text 
DATCP Table of Changes 
FinCEN Guidance 
WBA Article on USDA Interim Final Rule 

By, Ally Bates

Thursday, July 23, 2020, SBA issued a new Procedural Notice to lenders outlining the forgiveness process and providing some instructions as to the new portal that is being created for PPP lenders to use for submitting decisions on PPP borrower loan forgiveness applications to SBA and requesting payment of the forgiveness amount determined by the lender.  

The loan forgiveness process outlined in the Procedural Notice is generally repetitive of a culmination of interim final rules previously issued by SBA. The Procedural Notice does clarify that PPP lenders are required to service PPP loans in accordance with 7(a) rules as found in SBA SOP 50 57, as amended. The SOP may be viewed here. After submission of a forgiveness decision to SBA, the lender must continue to service the loan as required. 

SBA has partnered with a financial services technology provider – Goldschmitt-CRI – to make available a secure SaaS platform (the PPP Forgiveness Platform) to accept loan forgiveness decisions, supporting documentation, and requests for forgiveness payments. This platform makes available a user interface for Lenders to upload required data and documentation, monitor the status of the forgiveness request, and respond to SBA in case of an inquiry or if SBA selects the loan for review. SBA will post a link to the PPP Forgiveness Platform on its website. The PPP Forgiveness Platform will go live and begin accepting Lender submissions on August 10, 2020, subject to extension if any new legislative amendments to the forgiveness process necessitate changes to the system.  

All PPP Lender Authorizing Officials (AOs) currently in the CAFS/ETRAN system will receive a welcome email from SBA (PPPForgivenessRequests@SBA.gov) with instructions on how to access this new platform. If an AO does not receive a welcome email, it should contact SBA’s PPP Lender Hotline at 833-572-0502 for instructions. AOs will automatically be empowered to create up to 10 additional users in the platform for purposes of submitting and monitoring forgiveness requests.  

This platform will also allow Lenders to monitor the status of forgiveness payments and support Lender reconciliation. The Lender will use the platform to provide ACH credit information for the account owned by the lender of record (as listed in the SBA ETRAN system) where the lender wishes to receive the PPP forgiveness payments. If the ACH credit information or the routing number is invalid, the Lender will not receive a forgiveness payment.   

Lenders are encouraged to read the full Procedural Notice, which can be found here

In the meantime, WBA will continue its advocacy requesting Congress pass legislation to automatically forgive PPP loans where the loan amount is $150,000 or less. While separate bi-partisan legislation on this matter has been introduced, it is more likely that this automatic forgiveness legislation will be included as part of a CARES 2.0/Phase IV package deal. WBA understands that the Senate Majority Leaders and the Trump Administration have continued negotiations on this today and we are hopeful that something will be released soon. WBA is advocating along with the national trade groups on several aspects of this package deal including automatic forgiveness for loans $150,000 or less and an intermediate forgiveness process for loans under $1 million. Once the full package details are released, WBA will immediately share the information with members.  

By, Ally Bates

In today’s business world, no company is entirely self-sufficient. Niche expertise and product specialization have created a competitive landscape where interdependencies lead to growth and efficiency. In order to reach your bank’s strategic goals, you rely on third-party providers for a growing list of products and services so that you can focus on being there for your customers.  

While you’re busy being there for your customers, WBA Associate Members will be there for you.  

As your association, WBA is constantly building products, services, and partnerships that will help our member banks achieve their goals. WBA’s Associate Membership program is one of the key ways in which we support our member banks. “The WBA’s Associate Members play a very intricate role in the Wisconsin banking industry,” explained Nick Loppnow, WBA director – associate member and education services (pictured, left). “Most of it is behind the scenes, and it’s all to help enhance the banks’ ability to serve their customers and deepen their relationships.” 

WBA currently has 150 associate member companies in industries ranging from law, risk management, accounting, and correspondent banking to insurance, IT, marketing, and architecture. This broad spectrum of members means there’s a WBA Associate Member for every third-party partnership your bank relies on to serve your customers. “The WBA’s Associate Membership program offers banks the opportunity to look for companies to fit their specific needs,” said Loppnow. “All of the associate members go through an approval process to ensure that the WBA recommends high-quality companies to its bank members.” 

In addition to this staff vetting, the WBA Board of Directors is informed of all new associate members and asked for any feedback on the companies. In fact, many new associates join WBA at the recommendation of a current customer that is a WBA Member Bank.  

Do you work with a company that’s not a current WBA Associate Member, but is a great partner for the industry? Refer them to Nick Loppnow

Through this review process, WBA and its directors strive to accept membership only from companies which are dedicated to serving the banking industry and provide exceptional products, services, and customer support. While our associate member companies pay dues, just like bank members do, the program is not a free-for-all. “Many of our associate members go above and beyond simply paying their dues by supporting the association's efforts to educate and bring bank members together at events,” said Loppnow. “Our associate members thrive on sharing their expertise by presenting on hot topics and supplying articles, white papers, and resource websites as well as dedicating funds through sponsorships to help enhance the bankers’ experiences at WBA events.” 

WBA Associate Members, through their membership, demonstrate the same dedication to customers and the Wisconsin banking industry that WBA Member Banks show their own clients and communities through their exceptional service. 

The WBA Associate Membership program offers three membership package levels in addition to the standard membership: Gold, Silver, and Bronze. Through their investment in a package-level membership, these WBA Associate Members not only streamline their involvement with the association through advertising, sponsorships, and exhibit opportunities, they further demonstrate their commitment to supporting Wisconsin’s banking industry as a whole. Click here to learn more about the WBA Associate Member Packages.

Visit www.wisbank.com/resources/associate-members for a searchable index of all WBA Associate Members. 

By, Amber Seitz

FinCEN issues guidance regarding due diligence requirements

Q: Has there been clarification on BSA requirements for hemp-related businesses?

A: Yes. FinCEN recently issued guidance regarding due diligence requirements for hemp-related business customers.

On June 29, 2020 the Financial Crimes Enforcement Network (FinCEN) issued guidance on the requirements under the Bank Secrecy Act for hemp-related business customers. The guidance provides that, in addition to conducting customer due diligence (CDD) on hemp-related businesses at time of application, financial institutions must establish risk-based procedures for conducting ongoing CDD. Specifically, for customers who are hemp growers, financial institutions may confirm the hemp grower's compliance with state, tribal government, or the USDA licensing requirements, as applicable, by either obtaining:

1. A written attestation by the hemp grower that they are validly licensed, or

2. A copy of such license.

Financial institutions might also consider seeking additional information based upon their assessment of potential risk posed by each customer. FinCEN suggests that additional information might include crop inspection or testing reports, license renewals, updated attestations from the business, or correspondence with the state, tribal government, or USDA. It is important for financial institutions to know the nature of their customer's business to best determine the risk profile. 

The guidance also clarifies that because hemp is no longer a Schedule I controlled substance, financial institutions are not required to file a Suspicious Activity Report on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations.

Lastly, the guidance confirms that financial institutions must report currency transactions in connection with hemp-related businesses in the same manner they would for any other customers.

FinCEN Guidance

Birrenkott is WBA assistant director – legal. For legal questions, please email wbalegal@wisbank.com.

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.

By, Amber Seitz

Amendments to facilitate transition to new index

Q: Has CFPB Proposed Changes to Facilitate the LIBOR Transition?

A: Yes. CFPB has Proposed Changes to Regulation Z that Generally Become Effective on March 15, 2021.

Sometime after 2021, LIBOR is expected to end. Financial institutions are developing their approach to the LIBOR transition, including how to transition existing accounts from LIBOR to another index and selecting new indices for new originations going forward. This includes documentary and contractual considerations, and for certain consumer financial products and services, statutes and regulations may have requirements that are triggered or impacted by the LIBOR transition and any accompanying index change.

The Consumer Financial Protection Bureau (CFPB) has issued a proposed rule (proposal) to amend Regulation Z to facilitate the LIBOR transition for open-end and closed-end credit. A high-level summary of some select provisions are featured below.

For HELOCs, open-end reverse mortgages, and credit cards the proposal would:

  • Require the change-in-terms notice to include the replacement index and any adjusted margin, regardless of whether the margin is being reduced or increased. 
  • Permit creditors to transition from LIBOR on or after March 15, 2021 (in addition to the option of using the current "no longer available" standard). 
  • Identify December 31, 2020, as the date used for selecting the index values for the LIBOR index and the replacement index to compare the rates, rather than using the index values on the date the original index becomes unavailable.

For closed-end mortgages, student loans, and other closed-end consumer loans the proposal would:

  • Provide an example of an index that is a "comparable index" to LIBOR for closed-end products in order to assist in determining whether a transaction must be completed as a refinance. 

In addition to the proposal, CFPB has published a fact sheet and FAQ to help understand the regulatory effect of the LIBOR transition.

CFPB's proposed rule

CFPB's FAQ

CFPB's Fast Facts

Birrenkott is WBA assistant director – legal. For legal questions, please email wbalegal@wisbank.com.

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.

By, Amber Seitz

"Penny pincher" may take on new meaning in the coming weeks as the nation faces a shortage of coins.

Of all the crises the COVID-19 pandemic is responsible for, a coin shortage seems pretty low on the "what's keeping me up at night" scale. However, businesses across the country that deal in cash—banks, retailers, grocers, etc.—are feeling the break in the coin supply chain.

A "Temporary" Problem

On June 17, Federal Reserve Chair Jerome Powell confirmed the shortage during his testimony before the House Financial Services Committee, saying the flow of coins through the economy "kind of stopped." 

"The places where you go to give your coins and get credit at the store and get cash, you know, folding money, those have not been working," Powell said. "Stores have been closed, so the whole system has … come to a stop." Powell said the Fed is aware of the issue and working with the U.S. Mint to address the issue. He also indicated it is a "temporary shortage" and coins will begin to move again as the economy reopens. 

What if there's a second wave?

With COVID-19 cases spiking across the country—Wisconsin has seen a spike in average new cases per day at the time of this writing—many states are shutting down again. Consumer activity is likely to slow, as well, as people return to voluntarily sheltering in place, which will again reduce the amount of coins in circulation. 

Part of the problem with the initial shortage is that the Mint's actions to protect employees reduced its coin production capacity. At the same time the Mint slowed production in order to sufficiently separate workers, it began seeing higher demand for newly minted coin due to the decrease in circulation. If similar staffing changes become necessary again, the country's coin supply chain may stutter.

Still in Short Supply

On June 30, the Federal Reserve sent a letter to member banks with an update on the coin supply. While there is an adequate supply of coins in the economy ($47.8 billion, up from $47.4 billion last year), the letter states the "dramatic deceleration of coin circulation … has meant that sufficient quantities of coin are not readily available where needed." 

In the letter, the Fed encourages banks to order only the supply of coin they need to meet their customers' near-term needs and to remove barriers to customer coin deposits. 

Additionally, the Fed will convene a group of industry leaders in July for the first meeting of the U.S. Coin Task Force. The task force is, according to the letter, "a limited-scope, limited duration task force" designed to "identify, implement, and promote actions to reduce the consequence and duration of COVID-19 related disruptions to normal coin circulation." 

What Banks Can Do

In the efforts to get coin moving again, banks can help in four ways: 

1: Only order the coins you need to meet short-term needs.

2: Encourage your business clients to offer gift cards instead of coins for change, if possible. Businesses can also help by encouraging check or credit card payments. 

3: Encourage your customers to bring in any change jars or household coin cache they have to either deposit or exchange for bills. Parents can use it as a teachable moment, explaining about coin circulation while their child empties the piggy bank. 

4: Use your social media accounts to raise awareness and encourage coin circulation with the hashtag #GetCoinMoving. 

In addition, banks can draw on their connection to their communities to respond. For example, Brookfield-based North Shore Bank announced in early July it was opening up its free coin-counting service to non-customers. The campaign has generated a lot of interest, according to Susan Doyle, the bank's senior vice president of retail banking. "When we first received the notice of the shortage through the Fed and our currency provider, we looked at the opportunity," Doyle said. "We thought we could offer free coin counting service, which we already offered to our customers, to the whole community." 

With this additional source of coins, Doyle says the bank has, thus far, been able to continue meeting the coin supply needs of its customers. One reason for the success is the community connection; North Shore Bank has done this before. "We've offered our coin counters to non-customers in the past, typically for a fundraiser of some sort," Doyle explained. The bank would open the counters to the community and match the dollars counted up to a certain amount, with the funds going to a local non-profit or other charitable cause. "We knew people in the community responded well to coin-counting initiatives," Doyle said. "Our branches are open, so we put the word out for people to come on in."

Bank efforts will help improve coin circulation in the short term, giving federal efforts time to materialize results. "The Federal Reserve is working quickly to tie up the mismatch between supply and demand that's currently happening," said Doyle.

The Future of Coin

Is the current shortage an indicator that cash is no longer king? Or at the very least, that the penny and nickel (which both cost more to produce than they're worth) are on the way out? 

While they could disappear eventually, cash and coin aren't going away anytime soon. It is an essential financial tool for millions of unbanked Americans and those who prefer to keep their transactions private; no monetary vehicle is more easily anonymous than cash. 

However, in a time when personal space is paramount (six feet of it) and touching something another person has touched requires gloves or hand sanitizer, using cash seems like a risky form of payment. As a result, many American are turning to digital payments. According to its Q1 earnings report, PayPal, which also owns Venmo, saw the largest single day of transactions in the company's history on May 1—outstripping both Black Friday and Cyber Monday of 2019. 

While some consumers will return to using cash after the pandemic is over, many will continue their socially distant digital payment habits. Fintech companies are primed to take advantage of this shift, but the movement to digital also presents opportunities for banks. As consumer spending habits change, so will their banking preferences. Branch visits will likely continue to decline as customers favor mobile or online banking to in-person interactions for many banking activities. 

Banks can take advantage of this opportunity by leveraging their digital channels to deepen existing relationships and highlight local investment. 

Seitz is WBA operations manager and senior writer.

By, Amber Seitz

Effective July 15, 2020, the City of Milwaukee will require any person 3 years and older who is present in the City of Milwaukee to wear a protective mask covering the nose and mouth for the duration of the ‘Moving Milwaukee Forwards” Health and Safety Orders.  

Persons are to have possession of a face covering when the person leaves home or other place of residence and shall wear the face covering whenever the person is in a building open to the public, including: any structure or premises licensed by the City of Milwaukee or used in whole or in part as a place of resort, assemblage, lodging, trade, traffic, occupancy, or other use by the public. Persons are also required to wear a face covering whenever the person is in an outdoor public space and within 6 feet of any other person who is not a member of the person’s family or household. 

Exceptions for face coverings will be made under the following circumstances: 

  • Persons who fall into CDC’s guidance for those who should not wear face coverings due to a medical condition, mental health condition, developmental disability, or for whom no other accommodation can be offered under the Americans with Disabilities Act. 
  • Persons who have upper-respiratory chronic conditions, silent or invisible disabilities, or are communicating with an individual who is deaf or hard of hearing and communication cannot be achieved through other means. 
  • Persons in settings where it is not practical or feasible to wear face coverings when obtaining or rendering goods or services to the extent necessary to obtain or render such goods or services, including but not limited to the: receipt of dental services, medical treatments, or consuming food or beverages. 
  • Whenever federal, state, or local law otherwise prohibit wearing a face mask or where it is necessary to evaluate or verify an individual’s identity. 
  • Persons whose religious beliefs prevent them from wearing a face covering. 
  • Persons present in government facilities closed to the public, institutions of higher education, public and private K through 12 schools, and childcare or youth facilities that have a mitigation strategy approved by the commissioner of health. 

Milwaukee’s Health Department is responsible for enforcement of the ordinance. The owner or operator of any building open to the public shall ensure all persons present in his or her building open to the public comply with wearing a face covering. The owner or operator of any building open to the public has the right to refuse entry or service to any person for failure to comply with wearing a face covering.  Any owner or operator of a building open to the public that permits a person to violate the order in their building will be subject to a forfeiture of not less than $50 or more than $500. The Commissioner of Health and the City Attorney have authority to revoke a license or order closure of a building open to the public for failing to require persons present to abide by the face covering ordinance.   

As the ordinance allows for removal of a face covering where it is necessary to evaluate or verify an individual’s identity, banks in the City of Milwaukee can require customers remove their masks for identification purposes. Customers who are not comfortable complying with the bank’s request may utilized the bank’s drive-thru facilities or on-line and other electronic banking services.  

By, Eric Skrum