The October 2023 WBA Compliance Journal is now available. In this edition, WBA Legal provides a reminder of FinCEN’s BOI Reporting Rule which becomes effective January 2024 and lists resources made available by FinCEN. Also, as disbursements from escrows will begin shortly, readers can review an FAQ to freshen-up on state and federal escrow requirements. The “Regulatory Spotlight” section once again provides a summary of rules, proposals, and notices issued by federal agencies, and the “Compliance Notes” section reports on other important compliance-related updates for bankers, including new CFPB opinions and FRB’s latest Consumer Compliance Outlook regarding representment fees.
Posts
By Scott Birrenkott
One of the consumer protection rights afforded by Truth in Lending is the right of rescission. While there are no changes to this rule, it is a frequent topic for questions received through the Wisconsin Bankers Association’s (WBA) Legal Call Program. It is important that bankers understand and consider various aspects of this rule.
The right of rescission can be found under Regulation Z for both closed-end and open-end credit. Generally speaking, rescission applies in a credit transaction secured by a consumer’s principal dwelling. For purposes of rescission, each consumer whose ownership interest is subject to the security interest shall have the right to rescind the transaction, unless exempt.
One of the most common questions WBA receives is: who gets rescission?
All consumers receive the right of rescission. Reg Z defines consumer as a natural person to whom consumer credit is offered or extended. However, for purposes of rescission, the term also includes a natural person in whose principal dwelling a security interest is, or will be, retained or acquired, if that person’s ownership interest in the dwelling is or will be subject to the security interest. In short, any consumer with an ownership interest in the dwelling taken as security receives the right of rescission. This could include a non-borrower.
For example, consider a situation where a borrower’s parents pledge their house as security for a covered transaction. The parents are not borrowers and thus, not obligated to the transaction. However, because their ownership interest in the house is subject to the security interest, they must be provided with the right of rescission.
It is also worth noting that sometimes a trust can be considered a consumer for purposes of rescission. Credit extended to trusts established for tax or estate planning purposes or to land trusts is considered to be extended to a natural person for purposes of the definition of consumer. In the case where the property is held by a trust, lenders should make sure to review Reg Z to see whether the trust might be a consumer for purposes of rescission.
Another common question WBA receives is whether a consumer can waive the right to rescind. In certain rare circumstances this is possible, but only in the case of a bona fide personal financial emergency.
The rule does not provide examples, but the situation must present a true emergency. For example, during the COVID pandemic, there may have been truly bona fide personal financial emergencies which warranted a need to receive credit without a waiting period. As a result, whether such an emergency exists is a fact-specific question. WBA has heard of situations where the borrowers are going on vacation and want to close without a waiting period, or where the seller is growing anxious and does not want to wait any longer. Such situations are not emergencies. A true, bona fide financial emergency must exist for it to be possible to waive rescission.
While rescission is not a new rule nor have there been any changes, the above article covers some of the more frequently asked questions.
For reference, also consider the following citations to Regulation Z:
- Rescission for open-end-credit: 1026.15
- Rescission for closed-end-credit: 1026.23
- Definition of consumer: 1026.2(a)(11)
- Discussion of trusts, which may be a consumer, for purposes of rescission: 1026.3(a)-10
As autumn arrives, so too does the September 2023 WBA Compliance Journal. In this edition, WBA Legal answers the frequently asked question of who signs a real estate mortgage and how to complete the WBA 428 Real Estate Mortgage. Within the “Regulatory Spotlight” section, bankers can review summaries of rules and notices recently published by various federal agencies. See the “Compliance Notes” section for important compliance-related updates, including a FinCEN alert regarding a new virtual currency investment scam, a reminder of a new resource meant to help banks handle check fraud claims more efficiently, and another update to FDIC’s Equal Housing Lender Poster.
The August 2023 WBA Compliance Journal is now available. In this edition, readers will find an article regarding the new tax exemption for banks that provide certain business- and agricultural-purpose loans to Wisconsin customers written by Jessica Schwantes, CPA and partner with Wipfli LLP, a WBA Silver Associate Member. Readers will also find an article regarding FTC’s recently updated guide concerning the use of endorsement and testimonials in advertising and of new WBA-created resources for members. The publication also includes a summary of recently published agency rules and notices, other important compliance-related updates for bankers, and a WBA Education Calendar which lists upcoming training events. Don’t miss out on seeing Tom Omdahl, vice president – BSA/compliance, Bank First as Morrie the Sea Creature from past BSA training videos as he shares his insights as a compliance officer.
By Rose Oswald Poels
As part of the Wisconsin Bankers Association’s (WBA) mission to support bankers across the state, our team — often in collaboration with the membership — regularly creates resources to assist WBA-member bankers in expanding their knowledge and expertise. Recently, WBA launched several valuable compliance resources that your staff will find useful in maneuvering the ever-changing banking compliance landscape. Our objective with these services is to continue to make training accessible and more flexible for all WBA members at a reasonable cost.
I am excited to announce our new WBA Legal In-House Compliance Training resource. Member banks are encouraged to take advantage of this opportunity to bring compliance training by the WBA Legal team directly to your bank. The training may be conducted in-person or as a virtual meeting and will be customized to your bank’s needs. All training will be conducted by WBA Legal; the presenter selected is dependent on the topic and timing of the training.
Additionally, I am excited to share that the new WBA Account Titling Video Series is now available. This series is designed for your bank to use as a new employee onboarding tool or a refresher for frontline retail staff. The series is built upon WBA’s longstanding and popular, comprehensive account titling workshop and is meant to help frontline staff develop an awareness of the laws related to account titling, analyze a variety of deposit account ownerships and fiduciary roles of deposit account relationships, recognize the legal and practical importance of an account title, and identify various documents which make up a deposit contract and understand their significances.
The new series provides information about account titling in short, topic-specific videos. Each video is supported by written materials. When utilizing the videos as training, there are also exercises to illustrate concepts shared within the videos. Managers are encouraged to supplement the information in the series with bank-specific policies, procedures, and operational requirements, so frontline staff know of any additional actions bank management expects frontline staff to execute.
The new resource consists of 11 modules, covering 60 topics with over five hours of video material! Each video ranges between two and 10 minutes in length — making training very flexible. Also included are manager/trainer resources such as a viewing sequence listing, tracking resource, examples, and test questions with an answer key.
As our legal team has provided for decades, new materials and resources are routinely added to the WBA Compliance page on the WBA website, so I encourage your compliance team to monitor this site and our e-publications for updates. The newest release is a Lender’s Guide to the Marital Property Act. The guide answers frequently asked questions lenders have regarding the Act and is just one of several other available guides for members. Other such resources include a Banker’s Guide to LLCs and a Transfer by Affidavit Guide.
Finally, many other resources created by bankers serving on various WBA Sections and Committees may be found in the WBA Best Practices Library on our website. The Best Practices Library is password protected. If you do not have the password, please reach out to WBA Legal.
WBA strives to provide comprehensive compliance resources for its members. If you have requests for new content or other materials, please let me know and we will incorporate all feedback into our new product development process.
The July 2023 WBA Compliance Journal is now available. In this edition, WBA Legal provides a recap of business-related provisions from the 2023–2025 Wisconsin Budget, also known as 2023 Wisconsin Act 19. The edition also includes a summary of the recently updated Policy Statement on Prudent CRE Loan Accommodations and Workouts released by supervisory agencies earlier this month, and a WBA Legal created FAQ regarding the state tax-exemption for income earned from certain business and ag purposes loans. The monthly publication also provides summaries of recently issued agency rules, guidance, and notices. Be sure to read the “compliance notes” section for other important compliance-related updates for bankers, including about the availability of ABA’s new online directory of bank contact information for the filing of a check warranty breach claim. The directory is available to ABA members and non-members.
WBA’s top marital property questions
The Wisconsin Marital Property Act presents unique community property considerations for Wisconsin banks. While nothing has changed in this area of law, its nature gives rise to some frequently asked questions. Below are two of the most commonly received questions through the Wisconsin Bankers Association’s (WBA) Legal Hotline.
Question 1: Is a bank permitted to pull credit on a non-signing spouse?
Answer 1: Yes. When dealing with married Wisconsin residents, a bank is permitted to pull credit on a non-signing spouse and may even be required to do so.
Wisconsin Section 766.56(1) requires creditors to consider all marital property available to satisfy the debt when evaluating a married Wisconsin resident’s application for family purpose credit. Where there is an obligation in the interest of the marriage or family, being a “family purpose” obligation, the creditor must consider all marital property available to satisfy the obligation in the same manner that it considers the availability of property of an unmarried applicant. While the law does not define “family purpose,” the presumption is that an obligation incurred by a spouse during marriage is family purpose. Additionally, income would be presumed to be marital property unless there is a marital property agreement indicating otherwise. Because the Wisconsin Marital Property Act requires creditors to consider all marital property available to satisfy the debt, a bank may be required to do so.
Regulation B Section 1002.5(c)(2) allows the bank to request information about the applicant’s spouse if the applicant resides in a community property state or is relying on property located in such a state as a basis for repayment of the credit requested. As Wisconsin is a community property state, banks are permitted to pull credit on a non-signing spouse.
Question 2: How does the Homestead Rule Affect Mortgages for Married Wisconsin Residents?
Answer 2: Wis. Stat. Section 706.02(1)(f) requires that each spouse with homestead rights must sign the mortgage for it to be valid unless an exception applies. In this context, homestead means the dwelling, and so much of the land surrounding it as is reasonably necessary for use of the dwelling as a home, but not less than one-fourth acre, if available, and not exceeding 40 acres. It is WBA’s understanding that title companies are typically able to provide an indication of whether the property would be considered a homestead under this definition.
Once a bank has determined the pledged property as a homestead, the bank must consider Section 706.02(1)(f). If the mortgage alienates any interest of a married person in a homestead, then each married individual must sign the mortgage in order for it to be valid. The only exceptions to this rule are for conveyances between spouses and for purchase-money mortgages.
Question 3: What is a “Marital Purpose Statement?”
Answer 3: Many software platforms will provide what is called a “marital purpose statement” or otherwise incorporate some type of statement to the fact that an application for a loan is in the interest of the marriage or family. While the use of such a statement depends on the specific statement produced by bank’s software system as well as policy and procedure, there are some general concepts under Wisconsin’s Marital Property Act which help in understanding it.
Per Wis. Stat. section 766.55, an obligation incurred by a spouse during marriage is presumed to be incurred in the interest of the marriage or the family and a statement separately signed by the obligated or incurring spouse at or before the time the obligation is incurred stating that the obligation is or will be incurred in the interest of the marriage or the family is conclusive evidence that the obligation to which the statement refers is an obligation in the interest of the marriage or family.
Because the separately signed marital purpose statement provides conclusive evidence of this fact, WBA generally recommends that when bank is extending credit to a married Wisconsin resident, whether solely or joint credit, that bank should obtain this statement.
Without having such separately signed statement, if the loan were to go into default and bank is seeking to collect against marital assets, bank must first prove that the debt was marital obligation, incurred in the interest of the marriage or family — by bank having such separately signed statement, it is conclusive evidence for the bank to prove this fact.
Question 4: What are the Wisconsin “Tattletale Notice” Requirements?
Answer 4: Wis. Stat. section 766.56(3)(b) requires certain notices be provided to a borrower’s spouse for loans governed by the Wisconsin Consumer Act involving marital property.
More specifically, the requirements apply when a creditor extends credit to a spouse in a credit transaction governed by chs. 421 to 427 and the extension of credit may result in an obligation described under s. 766.55(2)(b). In this, “Tattletale Notices” apply to transactions governed by the Wisconsin Consumer Act, and an obligation incurred by a spouse in the interest of the marriage or the family. A loan transaction that is governed by the Wisconsin Consumer Act is one that is: (1) consumer, family or household purpose; (2) $25,000 or less; and (3) not secured by first lien or equivalent security interest in the borrower’s principal residence.
In such a situation, the lender must provide a copy of the instrument, document, agreement, or contract evidencing the obligation to pay or any required credit disclosure which is given to the applicant spouse, or by providing a separate writing briefly describing the nature of the credit extended.
Question 5: What is a “Spousal Consent to Guaranty?”
Answer 5: Some software providers may make available a spousal consent to guaranty form. For example, WBA and FIPCO have a form created to protect the creditor’s ability to collect on the guaranty from all marital property belonging to the couple. This form is based upon the fact that the Wisconsin Marital Property Act generally limits gifts of marital property to third parties by one spouse acting alone to $1,000 per calendar year unless the spouses act together in making the gift (See: Wis. Stat. Section 766.53.)
While WBA does not necessarily view payments on guaranties as gifts to the third party, in the event a court characterized the payment as a gift, by obtaining the non-guarantor spouse’s consent to the guaranty, the creditor would then not be limited to the $1,000 per calendar year amount.
Additionally, while spouses may act together to make a gift, WBA strongly cautions against requiring the signature of a guarantor’s spouse on the loan. Regulation B prohibits a creditor from requiring the signature of a guarantor’s spouse just as it prohibits requiring the signature of an applicant’s spouse. Thus, a creditor cannot require the guarantor’s spouse to sign the guaranty to protect its interest. Instead, the creditor should obtain the non-guarantor spouse’s consent to the guaranty by execution of a form such as the one described above.
Question 6: What is a “Spousal Consent to UCC Filing?”
Answer 6: The Uniform Commercial Code (UCC) provides rules for perfecting of security agreements. One method of perfecting a security agreement is through the filing of a financing statement. However, as a general matter of the UCC, a creditor can only file a financing statement if authorized by the debtor. In the event that a creditor — such as a bank — does not have such authorization, the filing is not valid, and bank could be penalized. Debtor means a person having an interest in the collateral. Generally, this is a borrower — but it could be a third-party pledgor or include non-signing spouse as well.
Authorization is given when signing the security agreement. Thus, a debtor does not need to give separate authorization because they will sign the security agreement. If the spouse is a “debtor,” and also signs the security agreement, then they have also given authorization and separate authorization is also not necessary. However, if the spouse is a “debtor” and does not sign the security agreement, then separate authorization is required, so the consent is required. In this situation, many software platforms will provide a means to accomplish this through a form such as a “spousal consent to UCC filing/financing statement.”
If you have any additional questions regarding Wisconsin’s Marital Property Act, or any other legal question, please contact WBA’s legal team.
Connect with peers, expand your compliance knowledge
As the Wisconsin Bankers Association (WBA) enters the 2023–2024 fiscal year, do not forget to renew or join the membership of the WBA Compliance Forum. Whether you are looking for more opportunities to connect with your compliance peers or would like to gain CLE and other compliance certifications*, WBA’s annual Compliance Forum membership provides various opportunities to expand your network and further develop your understanding of state-specific and national compliance matters.
The registration fee includes attendance of all three forums for two individuals from each bank. Additionally, these two primary members will also gain access to the highly active WBA Compliance Forum Google group. All Wisconsin bank compliance professionals and bank legal counsel are encouraged to attend each of the sessions to gain in-depth information on key compliance issues. Any additional bank staff can be registered by the bank’s primary contacts for an additional fee.
“WBA’s Compliance Forum is the place to get updates on recent trends, hear from experts on emerging topics, and connect with other compliance professionals,” says Scott Birrenkott, WBA director – legal and session speaker. “Each session provides great networking opportunities and the ability to share experiences.”
WBA’s Compliance Forum is WBA’s premier Wisconsin-specific program focused on presenting updates and addressing the latest hot topics in compliance. The first session, to be held on June 20 at the Holiday Inn and Convention Center in Stevens Point, will include discussions on areas such as the Section 1071 final rule and related implementation action plans, as well as how to respond when a vendor gets hacked.
“As a subject matter, banking compliance is unique in that it manages to be simultaneously vast, yet also nuanced. It can be tough to sift through, which is why opportunities to meet, stay abreast of trends, and discuss with peers are so valuable,” adds Birrenkott.
Those interested in joining a passionate group of compliance bankers or renewing their membership for WBA’s 2023–2024 Compliance Forum should visit wisbank.com/2023forum. Questions regarding membership opportunities or upcoming Compliance Forum sessions can be directed to Anna Lorang, WBA education and event coordinator.
*Submission of education program material to the Board of Bar Examiners does not guarantee CLE credit will be granted. Bankers with the CCBCO designation can self-submit this program for credit using the agenda provided at the forum.
By Rose Oswald Poels
In the last year, bankers from around the state have made an incredible effort to make the most of their membership with the Wisconsin Bankers Association (WBA). When 2022–2023 Chair Dan Peterson began his term last June and spearheaded the member-wide initiative to increase engagement, it was impressive to see the multitude of ways in which bankers chose to connect with both their peers and the Association as a whole.
June, the beginning of WBA’s fiscal year, is the perfect time to reassess your involvement in the Association and uncover the programs, groups, and opportunities available for all. I encourage bank leaders to continue to emphasize the employee benefits brought forth by WBA and support all members of the bank in finding the engagement opportunities that are the most meaningful for their professional growth.
The WBA Advocacy Officer program connects individuals with an interest in public policy to opportunities to act and provide input on legislative and regulatory policy items. Working alongside members of the WBA Government Relations team and other Advocacy Officers from throughout Wisconsin, these banker volunteers regularly communicate with bank officers and directors, coordinate advocacy programs such as “Take Your Legislator to Work” days and fundraising initiatives, as well as stay abreast of the latest legislative and governmental issues.
BOLT, or Building Our Leaders of Tomorrow, members represent Wisconsin’s current and emerging bank leaders. The free program is focused on providing bankers with the opportunity to learn, network, and expand their leadership in the banking industry. In addition, bankers are encouraged to attend the leadership summits — held twice per year — to make connections, discuss challenges, and explore new opportunities for personal and professional development.
The CEOnly and CFOnly Network is open to all CEOs and CFOs currently employed at a Wisconsin-chartered bank. The group, which focuses on networking and idea sharing related to Wisconsin’s banking industry, provides bankers with the platform to anonymously ask questions and receive advice as well as connect with peers at up to three in-person networking events.
The newest benefit — WBA’s Diversity, Equity, & Inclusion (DEI) Employee Resource Group (ERG) — was formed in 2022 as a safe space for bankers of historically underrepresented backgrounds to meet and hold open-forum discussions. The ERG, led by a popular speaker at WBA events, Dr. Alonzo Kelly, provides a virtual space to share ideas and experiences, ask questions, and learn from others.
WBA’s Compliance Forum is the Association’s premier Wisconsin-specific program focused on presenting updates and addressing the latest hot topics in compliance. In addition to gaining in-depth information on key issues, members have the opportunity to attend several Compliance Forum events throughout the year to connect with peers, gain CLE and other compliance certifications (subject to approval), and gain access to the Forum’s Google Group.
WBA Connect is a collection of banker-only peer groups designed to keep bankers connected and help one another grow. The free benefit — currently representing bankers with interests in DEI, enterprise risk management, human resources and organizational development, marketing, retail banking, and technology and operations — provides excluive access to the related Google Group as well as the possibility to coordinate in-person networking meetings.
Not to mention the various digital resources — including, but not limited to, the Best Practices Library, Legal Call Program, and Banconomics.com — our Association works to ensure that you and your staff have the resources relevant with the work you do each day and the opportunities to get involved, stay informed, and make an impact both in your community and throughout the banking industry.