Posts

The Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) jointly issued a new guide created with the intention to help community banks conduct due diligence on financial technologies companies (a/d/a fintechs). Use of the guide is voluntary and it does not anticipate all types of third-party relationships and risks. Therefore, a community bank can tailor how it uses relevant information in the guide, based on its specific circumstances, the risks posed by each third-party relationship, and the related product, service, or activities offered by the fintech company. While the guide is written from a community bank perspective, the fundamental concepts may be useful for banks of varying size and for other types of third-party relationships.  

Due diligence is an important component of an effective third-party risk management process, as highlighted in the federal banking agencies’ respective third-party, vendor guidance. During due diligence, a community bank collects and analyzes information to determine whether third-party relationships would support its strategic and financial goals and whether the relationship can be implemented in a safe and sound manner, consistent with applicable legal and regulatory requirements.  

The scope and depth of due diligence performed by a community bank will depend on the risk to the bank from the nature and criticality of the prospective activity. Banks may also choose to supplement or augment their due diligence efforts with other resources as appropriate, such as use of industry utilities or consortiums that focus on third-party oversight. The guide focuses on six key due diligence topics, including relevant considerations, potential sources of information and illustrative examples. There may be other topics, considerations, and sources of information to consider, depending on the unique relationship and the role of the fintech company.

Access the Guide on the Fed's website.

By, Cassie Krause

Upcoming education opportunities for Wisconsin bankers

Fall has arrived and schools are back in session, and that means your WBA banking schools are back in session as well! Each school offers in-depth learning experiences for various roles of staff within your bank. Each school will be held at the WBA office in Madison in our new Engagement Center! Visit www.wisbank.com/education for more information about these schools and register online to secure your teams’ seats in the schools.

Commercial Lending School | September 27-29, on-demand content starts September 1
This school was developed as an advanced-level program, assuming participants have work experience and prior training in commercial lending and/or financial statement analysis. Case studies, in-class work, instructor-led discussions and facilitation, and on-demand virtual courses are all elements of this school with an emphasis on cash flow, financial analysis, and structure.

Supervisor Boot Camp | October 4-5
This two-day dynamic, interactive workshop is just what all supervisors need – both new and experienced supervisors will benefit! The program includes exploring the coaching and leadership skills that lay out a plan for your success as a highly effective supervisor. You will find this experiential training opportunity invigorating, motivating, and applicable to managing and supervising others. Attendees will work and learn, share and listen, and go back eager to implement and make a difference.

Auditing Real Estate Loans Boot Camp | October 12-14
This program will cover everything an internal audit team needs to know in order to successfully fulfill their role. The purpose of this school is to cover all relevant aspects of the regulations impacting mortgage lending. As mortgages are the main risk area for most banks, internal audit (before the examiners arrive) is more essential than ever.

Deposit Compliance School | November 2-3
This school is designed to give you a strong foundation of the various deposit regulations affecting your bank, the current trends in compliance, and the resources you need following the school. Bank retail and branch staff will benefit from this school, in addition to compliance and audit staff.

Personal Banker School | November 8-9
This school has been designed to get your personal bankers up to speed quickly by providing them with the techniques and knowledge they need to successfully sell, cross-sell, refer, and service the banking industry's ever-expanding list of financial products. Attendees will leave the school better equipped to provide your customers with exceptional product knowledge and customer service.

Consumer Lending Boot Camp | November 18-19
This program was developed to help bankers build the foundational skills necessary to become a successful consumer lender or processor. Students will learn the process of basic lending and then put it into practice through various exercises and case studies.

Save the Date – Spring 2022 Schools!

Loan Compliance School | March 7-11, 2022

Real Estate Compliance School | March 9-11, 2022

Introduction to Commercial Lending School | March 14-16, 2022

Residential Mortgage Lending School | March 29 – April 1, 2022

School of Bank Management | May 9-13, 2022

Questions? Contact the WBA education team via email at wbaeducation@wisbank.com

 

By, Lori Kalscheuer

Bankers are often adept at spotting scams and quick to identify a suspicious situation. There are many different schemes designed to target bank customers, and maintaining an awareness of such methods is important not only to recognizing scam attempts, but also helping customers to do the same before it’s too late. The Wisconsin State Bar recently warned that attorneys should be on the lookout for scams targeting lawyer trust accounts. As such accounts must be maintained at insured financial institutions, it is important for banks to be aware of such scams in order to help thwart these attempts. 

Under rules of the Wisconsin Supreme Court, lawyers and law firms are required to establish interest-bearing “Interest on Lawyers Trust Accounts” (IOLTA) for client funds that are so nominal in amount or which are expected to be held for such a short period of time that it is impractical to earn and account for income on individual deposits. The lawyer or law firm determines whether the account should be established as an IOLTA account, or other — so take note that you may see other types of lawyer trust accounts as well. 

WBA has heard stories from lawyers and its members of scammers attempting to infiltrate these types of accounts. Typically, these schemes are directed at the attorney or law firm and involve email correspondence representing itself as a legitimate business. The scammer requests assistance with a transfer of funds (this could be for purchase of goods, outstanding debt or other collection, etc.) from another party, in exchange for a fee. 

Because these scammers correspond with the attorney or law firm, it can be difficult for banks to spot. However, if bank notices something suspicious, it can help combat these schemes by communicating with its customers and providing further education about common trust account scams. For example, a simple phone call from the attorney to the alleged representative might reveal the nature of the scam quite blatantly. Note that not every scam will follow the same pattern, however, and WBA has heard of scams of varying degrees of sophistication. 

Lastly, another method that might help bank’s lawyer and law firm customers combat these scams, is to clearly communicate its policies and procedures for remitting trust account funds. For example, if a law firm remits payment pursuant to the instructions of a scammer, and your institution has a policy of making lawyer trust account funds available immediately, there is little time to respond. If bank’s customer understands its funds availability policy, it might be better able to establish procedures of its own for processing client funds. 

In conclusion, the best way to combat scams of all kinds is to be aware of common schemes, signs, and how to spot them. Communication and education with bank customers is an important aspect in stopping scammers. 

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com

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, Cassie Krause

There are several banking relationships that might involve minors. Be it an adult who wants their child to learn about finances through a deposit account or even a loan, a fourteen year old who just got their first job at the local grocery store, or a custodial account set up by Grandpa and Grandma for college savings, banking relationships involving minor customers is no minor matter. With that pun out of the way, this article will discuss the serious considerations that bank must make, depending on the nature of the account relationship. 
 
The first question that WBA often receives regarding minors is: can minors open an account? Or to phrase it more broadly: can minors enter into a contract? The answer to both is: yes, banks can do business with minors, including opening deposit accounts and extending credit. Minors can enter into a contract. However, a minor can escape liability under the contract. Meaning, a minor could avoid liability from a bank seeking to hold a minor accountable for terms under the contract. This means that while a bank can contract with minors, doing so presents unique risks and liabilities. 
 
The ability of a minor to escape, or void, liability under a contract is often referred to as the doctrine of incapacity. Generally speaking, the theory is that a minor has not developed enough to understand the significance of contracting and thus, may void the contract. It is also worth mentioning that a court could find that someone who has attained the age of 18, or older, still hasn't matured enough to understand that significance and might be permitted to void the contract. For the above reasons, banks should consult with their policies and procedures regarding contracting with minors. 

When setting such policies, banks should consider the risks associated with opening accounts for minors. This is a matter for every bank to decide, as a matter of business. Perhaps this means that the bank does not contract with minors. Or, perhaps the bank is willing to open accounts for minors, under certain circumstances, and does so on a case-by-case basis. The bank might also find a compromise and require an adult joint owner. The theory of joint ownership would be that even if the minor can void the contract, the bank might be comfortable seeking to hold the adult liable, if the account agreement provides for joint and severable liability. Again, this is a matter that the bank must decide based upon how comfortable it is entering into contract. 

When it comes to minor accounts, WBA generally recommends that banks consider the use of a WUTMA account. A WUTMA account is created under Wisconsin’s Uniform Transfers to Minors Act, which provides certain requirements, procedures, and responsibilities. Thus, it creates a means for a bank to open an account with an understanding of what rules apply to the relationship between the minor, the adult custodian, and the bank. While WUTMA provides for this certainty, banks should be careful before opening custodial accounts which are not governed by WUTMA, as it would leave questions as to how the account would be handled. 

WUTMA describes certain types of transfers which may be made under the Act. Generally speaking, it is the custodian’s responsibility to understand the nature of the transfer, and when the funds should be released to the minor, not the bank’s. That said, there may be certain situations that a bank may need to evaluate. For example: payroll. Because payroll is income, it would not be appropriate for payroll to be deposited to a WUTMA account. 

Additionally, payment to a beneficiary who is a minor payable on death (P.O.D.) beneficiary must be done under WUTMA. Thus, banks must be aware that if a minor is named as a beneficiary, then upon death of the owner(s) of the account, the transfer must be made under WUTMA. If a custodian is not named, or is deceased with no successor custodian, then in most situations, a specific procedure must be followed. Generally speaking, in such a situation, if the minor has attained the age of 14, he or she may appoint a custodian within 60 days. If there is no custodian or successor custodian and the minor is not 14 or did not appoint a conservator within 60 days of the custodian's death, an individual must petition the court for appointment as custodian. 
 
Because the law requires P.O.D. funds to a minor to be paid under WUTMA, WBA recommends that banks encourage their customers who make such designations to indicate a custodian and potentially even a successor custodian upon designation.  

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com

Birrenkott is WBA assistant director – legal.

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, Cassie Krause

As previously reported on in WBA’s Wisconsin Banker Daily, FRB, FDIC, and OCC have collectively proposed to update interagency guidance on managing risks associated with third-party relationships. The proposal is significant as final guidance will replace each agency’s existing guidance: FRB’s 2013 guidance, SR Letter 13–19/CA Letter 13–21, “Guidance on Managing Outsourcing Risk’” (December 5, 2013, updated February 26, 2021);  FDIC's 2008 guidance, FIL–44–2008, “Guidance for Managing Third-Party Risk” (June 6, 2008);  and OCC's 2013 guidance and its 2020 FAQs, Bulletin 2013–29, “Third-Party Relationships: Risk Management Guidance” and OCC Bulletin 2020–10, “Third-Party Relationships: Frequently Asked Questions to Supplement OCC Bulletin 2013–29.”  

Third-party vendor management is a significant part of most banks’ risk management efforts so as to protect against harm caused to bank customers or the bank itself as result of actions taken, or failed to be taken, by third-party vendors. Third-party vendor management is also a significant area of review by examiners. Depending upon how the agencies finalize the guidance, banks may need to update their third-party vendor management policies and procedures in the near future. Banks should be aware of what the agencies have proposed and should consider sharing comments with the agencies of where the guidance need be improved upon, further clarified, or narrowed in scope or coverage.  

The agencies intend the proposed guidance to provide a framework based on sound risk management principles that banks may use to address the risks associated with third-party relationships. The proposed guidance describes third-party relationships as business arrangements between a bank and another entity, by contract or otherwise. As is currently agency expectation, the proposed guidance stresses the importance of banks appropriately managing and evaluating the risks associated with each third-party relationship. The proposed guidance also continues existing agency expectations that banks’ use of third parties does not diminish their responsibilities to perform an activity in a safe and sound manner and in compliance with applicable laws and regulations.  Banks are to adopt third-party risk management processes that are commensurate with the identified level of risk and complexity from the third-party relationships, and with the organizational structure of each bank.  

The proposed guidance is intended for all third-party relationships and is especially important for relationships that a bank relies on to a significant extent, relationships that entail greater risk and complexity, and relationships that involve critical activities. The proposed guidance defines “critical activities” as significant bank functions or other activities that: (a) could cause a bank to face significant risk if the third party fails to meet expectations; (b) could have significant customer impacts; (c) require significant investment in resources to implement the third-party relationship and manage the risk; or (d) could have a major impact on bank operations if the bank has to find an alternate third party or if the outsourced activity has to be brought in-house. 

The proposed guidance provides examples of third-party relationships, including the use of independent consultants, networking arrangements, merchant payment processing services, services provided by affiliates and subsidiaries, joint ventures, and other business arrangements in which a bank has an ongoing relationship or may have responsibilities for the associated records.  

The agencies seek comment on all aspects of the proposed guidance, including responses to the several specific questions throughout the proposed guidance. Comments are due Sept 17. The proposed guidance may be viewed here.

WBA will be commenting on the proposed guidance. Please share your suggestions, concerns, or other general thoughts regarding the proposal with WBA Legal at 608-441-1200 or at wbalegal@wisbank.com.

By, Cassie Krause

Has your bank been wondering what to do with all those old boxes of documents in storage? Perhaps you’ve decided to go digital, and scan all those old files, or perhaps you already have, and are now wondering what to do with the originals. WBA has recently received a number of questions regarding record retention, specifically, when it comes to deciding what to keep and what to destroy. While this decision is largely one that should be made as a business decision, there are some legal aspects to consider, as well as practical matters, that are discussed below. 
 
As a starting point, if your bank is considering scanning certain documents and destroying the originals, it should consider Wisconsin Statue sections 220.285. Within that section, you will find a rather broad grant that banks may use a variety of means to image any or all records, and dispose of the originals. Furthermore, the Wisconsin Department of Financial Institutions has given blanket permission to destroy its records, so long as reasonable precautions have been taken with respect to confidentiality, and the destruction is done in a manner consistent with prudent business practices (See DFI-Bkg 9.01). In summary, bank is permitted to make a business decision as to what originals it wishes to keep or destroy. 
 
So, theoretically, any document could be imaged, and the original destroyed. However, the analysis doesn’t end there. In making this assessment, bank should consider that at time of publication of this article, WBA is not aware of any Wisconsin case law which tests or otherwise discusses the admissibility of documents stored on electronic, optical disks, etc. after destruction of the original. This leaves open the possibility that a court may be persuaded in the future that the original paper document should be produced. For example, perhaps because a question may be raised about the authenticity of the original, about the validity or accuracy of the copy, or because it would be unfair to admit the duplicate in questions of fraud or in cases where the signature is at issue. 
 
Thus, a bank must make a risk-based business decision regarding whether it wants to destroy an original and rely on a reproduction from its imaging system. Banks might consider the matter on a per-document basis. For example, certain documents might carry higher risk, a higher chance of liability, or a higher probability of litigation, where bank should consider whether it would prefer to keep the original in order to prove an issue, or whether it would be comfortable relying on an optical image or duplicate as sufficient. 
 
As a practical matter, banks should also consider the aspect of how well it is able to reproduce an image. This will depend upon the quality of the original, the type of technology available, and the process used for reproduction. It should also consider what its policy covers. Staff will need to be trained to understand what should be destroyed and what should be kept, and how the technology is used, in order to create an accurate copy. For example, if some process or technology results in a blurry, distorted, or otherwise misrepresented image, that could create issues if the original was destroyed. 

In conclusion, the decision of whether to image and destroy documents, or to keep the original, is a matter of making a risk assessment on a per document basis. The thoughts above are presented as general considerations, but don’t necessarily consider every aspect of the decision. For that reason, banks should give careful thought to those originals they do decide to destroy. 
 
For additional record retention resources, WBA has created a revised, 2021 version of its Record Retention Guide here.

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com. 

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, Cassie Krause

Q: May a Person Use the Name, Logo, or Symbol of a Bank in Marketing Material?

A: Not if it is deceptive. More specifically, Wis. Stat. section 221.0404 provides, in summary, that no person may use the name, logo, or symbol of a bank, or such that is deceptively similar to that of a bank, in any marketing material provided to another person in a manner that a reasonable person may believe that the marketing material originated from the bank.

WBA is aware that potentially deceptive letters have recently circulated. Such letters often take the form of mortgage relief offers, solicited by individuals unassociated with the bank. Similar letters have also been seen by Paycheck Protection Program participants. Depending on the nature of these letters, they may violate section 221.0404. The Wisconsin Department of Financial Institutions (DFI) has enforcement authority over this section, including the ability to issue cease and desist orders, and penalties. Banks that encounter such letters are encouraged to contact WBA, and DFI.

Note that to be a violation, the letter must be deceptive, meaning that a reasonable person reading the letter could believe it originated from the bank. A letter is not a violation if a reasonable person should recognize that it did not originate from the bank. This includes letters which display a disclaimer, such as to indicate that the sender is not affiliated with the bank. WBA has also spoken with DFI recently and learned that a letter might be deceptive based upon its envelope. Specifically, envelopes with a “window,” which reveals a portion of the letter including bank’s name. Even if there is a disclaimer in the letter inside, if it’s not visible on the envelope or through the “window,” it could be considered deceptive.

Even if a letter is not deceptive, banks might hear complaints from their customers. In such situations, banks might consider discussing with its customers how and when it will issue correspondence. This way, customers can easily identify what originates from the bank. Additionally, banks might consider discussing this matter with its customers at time of loan closing so they can be better prepared to identify these letters as not originating from the bank.

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com.

Birrenkott is WBA assistant director – legal.

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, Cassie Krause

By Rose Oswald Poels

As many of you may already know, I began my career as an attorney on WBA’s legal team over 30 years ago. Lightening the burden of ever-changing regulations on member banks is a priority of the association that I continue to have a keen appreciation for in my role as president and CEO.

In addition to our Legal Call Program, WBA works to provide members with resources including articles, training events, and webinars to help you to stay compliant with regulations and perform your work efficiently.

The latest resource WBA’s legal team has compiled is the Regulation Z Ability to Repay: Revised General QM Loan Definition Toolkit, which is designed for use by financial institutions in understanding the 2020-2021 revisions to the Regulation Z general qualified mortgage (QM) definition. WBA aims to provide readers with a perspective of the rule change in relation to their operation, and prepare for implementation of revised loan policy and underwriting procedures, both in terms of practical and compliance considerations.

The toolkit serves as a template for banks to customize to their specific situation prior to its implementation and use.

As always, WBA is here to support our members with regulatory compliance, so you are able to dedicate more of your focus directly to serving your customers and communities.

The Wisconsin Supreme Court (Court) recently decided two cases to allow the Wisconsin Department of Natural Resources (DNR) to place permit restrictions on large livestock farms and high-capacity wells as a way to protect Wisconsin’s water. The issue in both cases is whether DNR had the authority under Wisconsin law to issue permits with conditions. 

In both cases, the Court looked to language used in Sec. 227.10(2m) Wis. Stats. and determined that (1) agencies’ actions under administrative law need be supported by explicit, not specific, statutory or regulatory authority; and (2) that explicit authority can be broad in scope. As a result of the two decisions, DNR was given broader authority than many believed was permissible since enactment of 2011 Wisconsin Act 21 (Act 21) because the agency actions authorized by the Court are not specifically stated in the statute sections in question. The following is a summary of the two cases.   

Kinnard Farms  

In the first case, Kinnard operates a large, concentrated animal feeding operation (CAFO). Kinnard wanted to expand its dairy operations by building a second site and adding 3,000 dairy cows. The expansion required Kinnard to apply to DNR for reissuance of its Wisconsin Pollutant Discharge Elimination System (WPDES) permit to include both the original site and the proposed expansion. DNR approved the application and reissued Kinnard’s WPDES permit.  

Persons (petitioners) living near the CAFO sought review of the reissued WPDES permit because of their proximity to the farm, had private drinking wells, and were concerned the proposed expansion would exacerbate current groundwater contamination issues. The petitioners alleged that the reissued WPDES permit was inadequate because, among other things, it did not set a “maximum number of animal units” or “require monitoring to evaluate impacts to groundwater.”  

DNR granted the petitioners a contested case hearing and the matters were referred to an administrative law judge (ALJ). Kinnard filed for summary judgment alleging DNR lacked statutory authority to impose the conditions, citing Act 21. The ALJ denied the motion and conducted a four-day evidentiary hearing during which community members who lived or worked near the CAFO testified about contamination of well water and the impact the contamination had on their businesses, homes, and daily lives. Based upon evidence presented by residents and experts, the ALJ determined that DNR had “clear regulatory authority” to impose the two conditions disputed upon Kinnard’s reissued WPDES permit.  

Ultimately the matter was argued to the Court. The issue in the case involved sec. 227.10(2m), Wis. Stats., which dictates that “[n]o agency may implement or enforce any standard, requirement, or threshold…unless that standard, requirement, or threshold is explicitly required or explicitly permitted by statute or by a rule that has been promulgated in accordance with this subchapter.” (emphasis added). The parties disputed the meaning of “explicitly required or explicitly permitted” in the context of DNR imposing conditions upon Kinnard’s reissued WPDES permit.  

Kinnard asserted that explicit means specific, and that in the absence of statutory or administrative authority, DNR must first promulgate a rule in order to impose the conditions upon its reissued WPDES permit. The DNR and petitioners counter that such a reading of “explicitly required or explicitly permitted” was too narrow, and that Kinnard had overlooked the explicit, but broad, authority given to DNR in Secs. 283.31(3) – (5) Wis. Stats. to prescribe such conditions.  

The Court first looked to dictionary definitions of the term “explicit” and revised Sec. 227.10(2m) in context and determined explicit authority can be broad in scope. The court next examined the text of Secs. 283.31(3) – (5), and related regulations, to determine whether DNR had explicit authority to impose an animal unit maximum and off-site groundwater monitoring conditions upon Kinnard’s reissued WPDES permit. The Court held that while the statute sections do not specifically state an animal unit limit or off-site ground water monitoring, DNR did have explicit authority to prescribe both conditions when it reissues the WPDES permit.  

The Court determined that (1) agencies’ actions under administrative law need be supported by explicit, not specific, statutory or regulatory authority; and (2) that explicit authority can be broad in scope.   

High-Capacity Wells 

In a second case, the Court also reviewed whether Sec. 227.10(2m) Wis. Stats. allowed for DNR to consider the potential environmental effects of proposed high-capacity wells when such consideration is not required under Sec. 281.34(4) Wis. Stats.  

For some types of wells, DNR is required to follow a specific process in its environmental review of a well application. For other types of wells, a specific process is not required; however, DNR often still considers the potential environmental impact of a proposed well when considering a well application. Eight well applications in dispute in the case where the type that no specific environmental review was required. DNR did have information that the wells would negatively impact the environment. DNR approved the eight applications knowing of the wells impact having concluded it did not have the authority to consider the proposed wells’ environmental impact. 

Clean Wisconsin and the Pleasant Lake Management District (collectively, Clean Wisconsin) appealed DNR’s action arguing DNR’s decision was contrary to the Court’s decision in the Lake Beulah Management District v. DNR (2011 WI 54, 335 Wis. 2d 47, 799 N.W.2d 73) case. In Lake Beulah, the Court held that DNR had the authority and discretion to consider the environmental effects of all proposed high-capacity wells under the public trust doctrine when it determined that a proposed well would harm other waters in Wisconsin.  

DNR argued the Lake Beulah court case was no longer good law because Act 21 had since become law and the law limits an agency’s action to only those “explicitly required or explicitly permitted to state or by a rule.” The eight well applications were for the type of wells for which there was no formal environmental review under Sec. 281.34 Wis. Stats. DNR had also relied on a past Attorney General opinion which stated the agency could not rely on the public-trust authority and could not rely upon the Lake Beulah case as that would not withstand the requirements under Wis. Stats. Sec. 227.10(2m) (OAG-01-16).   

With respect to the high-capacity well applications, the Court ruled in favor of Clean Wisconsin having determined DNR has explicit authority, based upon its broad public trust authority under Secs. 281.11 and 281.22 Wis. Stats., to determine the environmental impact of high-capacity wells despite the fact that Sec. 281.34 does not specifically state such requirement. The Court’s finding reaffirmed the Court’s Lake Beulah decision despite enactment of Act 21.  

Take Away from Cases 

The interesting and concerning parts of the decisions is that after the passage of Act 21, many took the revised language of Sec. 227.10(2m) Wis. Stats. to mean that for an agency to act, the action had to be specifically stated or provided for within statutory language or administrative rule. If the action was not within such language, the agency would first have to promulgate a rule or otherwise change statutory language for the agency to take the actions desired.  

However, given how the Court has interpreted “explicit” in the two cases, that may not be the case. It is possible that because of the two Court decisions, an agency make act regardless of the action not being stated within statutory language or administrative rule. Instead, it is possible an agency may rely on its broader authority for action.  

Financial institutions should keep the decisions of the two Court cases in mind when considering whether an agency has the authority to act in a particular manner. Financial institutions should be cautious that just because an action is not specifically found within statute or rule, the action may still be authorized under a broader, explicit authority. Despite the passage of Act 21, agency action could be broad.  

As is often the case, one should read the dissenting opinions of both cases. The dissenting opinions outline the concerns of many regarding how broad an agency may act despite Act 21, despite the fact the agency’s actions were not specifically stated within statute or administrative rule in connection with reissuing an WPDES permit or when approving the type of well applications involved in the high-capacity well case, and despite the Court’s previous decision under Tetra Tech EC Inc. v. Wisconsin Dep’t of Revenue, 2018 WI 75, 373 Wis.2d 2387, 890 N.W.2d. 598. The decisions appear to give back to agencies potentially broad authority.  

Conclusion 

In both cases, the Court looked to language used in Wis. Stats. Sec. 227.10(2m) and determined that (1) agencies’ actions under administrative law need be supported by explicit, not specific, statutory or regulatory authority; and (2) that explicit authority can be broad in scope. As a result of the two decisions, DNR was given broader authority than many believed was permissible since enactment of Act 21 and Tetra Tech. Financial institutions need be aware of the Court decisions and be cautious that just because an action is not specifically found within statute or rule, the action may still be authorized under an agency’s broader, explicit authority. 

Clean Wisconsin et. Al v. Wis. Dep’t of Natural Resources, 2021 WI 71 (Kinnard Farm) decision may be viewed at: https://www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=386188  

Clean Wisconsin and Pleasant Lake Mgmt. Dist. v. Wis. Dep’t of Natural Resources, 2021 WI 72 (High-Capacity Wells) decision may be viewed at: https://www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=385454  

By, Ally Bates

Q: Are Additional Agreements Recommended for Mortgages of Condominium Properties? 

A: Yes. While it is ultimately a matter of bank loan policy, WBA generally recommends that banks consider obtaining additional covenants and agreements from both the mortgagor and the condominium association, such as through a condominium rider.

Condominiums often include common areas and common interests that are shared by parties beyond bank’s mortgagor. In order to protect its security interest in consideration of these additional rights, bank might consider obtaining certain agreements drafted through a condominium rider. Such riders might include agreements on behalf of the condominium association. WBA is aware that, frequently, the condominium association may be unwilling to sign such an agreement. In these cases, bank will need to review the loan and make a determination as to whether it is comfortable proceeding without obtaining such rights.

When obtaining a condominium rider, bank will generally want to obtain the appropriate signatures, and attach the agreements to the mortgage to be filed together. Bank will want to review its forms to determine what agreements may be available. If using FIPCO forms for example, the WBA 428 Condominium Rider has ben drafted for the purposes described above. 

If you have any questions on this topic or other matters of compliance, contact WBA’s legal call program at 608-441-1200 or wbalegal@wisbank.com.

Birrenkott is WBA assistant director – legal.

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, Ally Bates

Events

Virtual Seminar Dates
July 26 & 27, 2022
9:00 a.m. – 12:00 p.m. Each Day

Program Information

Wisconsin Bankers Association (WBA) is pleased to sponsor the annual Community Bankers for Compliance Program (CBC), one of the most successful and longest running compliance training programs in the country.

The CBC Program will provide your bank with up-to-date information on the ever-changing bank regulations, as well as guidance for structuring and maintaining your in-bank compliance program. In addition, it provides a forum where those responsible for regulatory compliance can discuss issues and exchange ideas with other community bankers.

Who Should Attend?

Compliance officers, lending management, lenders and processors, and any others with responsibilities for lending should attend. Additionally, audit personnel will find this session useful.

Session 3 Topics:

Third Quarter 2022 Community Bankers for Compliance Program

Unfair, Deceptive Acts and Abusive Practices and Flood FAQ

During our third quarter presentation, we are going to discuss two diverse subjects. Both of these choices are the result of recent actions from the federal regulators.

UDAAP: Although the UDAAP rule itself has not changed significantly in recent years, there is a very intense and renewed emphasis regarding this particular rule. As part of that emphasis, the regulators have issued new interagency examination procedures, which are much more detailed than the previous versions of examination procedures. The new procedures now include items that many normally would not think about when considering UDAAP. All the regulators are getting very specific regarding fair lending, UDAAP, and similar rules to determine if your organization is doing anything that might have a negative impact on consumers. You need to respond directly to these issues by assuring that your bank does not have an issue, and that will now mean thinking “outside the box” to avoid UDAAP issues.

Flood FAQs: The second subject will be the new (over 100) Flood FAQs. In previous manuals, we have left flood questions in the manual, even though we knew that they might be slightly out of date. The last time the questions were updated was 2011, and the rule has changed a number of times since then. In this new version, some questions remain the same as they were before, but many of them have changed – and offer clarifications and give lenders an opportunity to understand exactly what is expected.

They have also reorganized the questions into subject categories, which makes it easier to find answers. The old approach was to just simply number the questions without regard to subject. As there is significant new material in the FAQs, we will work our way through each question, focusing on those questions where the answers have changed significantly from previous versions. The FAQs offer a great deal more information than the actual regulation. So, they will be worth our time and effort to make sure that everyone is completely up-to-date regarding flood issues.

The subjects for the regulatory update will be determined by circumstances and releases from the various agencies.\

 

Bank Member Registration:

CBC Program Members:

  • $0 – CBC Program Members
  • $150 – each additional representative (single session)

Individual CBC Seminar Session Fees:

  • $375 – 1st representative (single session)
  • $150 – each additional representative (single session)

Refund Policy: A refund, less a $25 administrative fee, is provided for cancellations requested on or before Thursday, July 21, 2022.

Denying access to a checking account because the individual is of a particular race could be an unfair practice even in those instances where ECOA may not apply.

The CFPB will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits.

What does that mean to you? Do we discriminate in the deposit area? Let’s run our that audit and see what we do that could be unfair!

What You’ll Learn

  • Account opening procedures
  • Account closing procedures
  • Issuance of debit cards and reissuance charges
  • Overdraft fees and waivers
  • Time Deposit/Certificate of Deposit Waivers
  • Are customers treated fairly
  • When it could be considered favoring one customer over another
  • Self Auditing

Who Should Attend
Compliance Officers, Deposit Operations, Branch Administration, BSA Officers, Management, Risk Management and everyone who opens and closes accounts.

Presenter Bio
Deborah Crawford is the president of Gettechnical Inc., a Virginia based training company. She specializes in the deposit side of the financial institution and is an instructor on IRAs, BSA, Deposit Regulations and opening account procedures. She was formerly with Hibernia National Bank (now Capital One) and has bachelor’s and master’s degrees from Louisiana State University. She has 30+ years of combined teaching and banking experience.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

Even with legislation stalling, the IRS is beginning to weigh-in on the marijuana business. This is big business! Banks are making a great deal of revenue from customers in the marijuana industry. This program is an update and a review on your legal requirements for marijuana related businesses.

What You’ll Learn

  • Definition of marijuana in your state
  • Understanding the business of marijuana
  • How marijuana related businesses work with the IRS
  • Review key requirements for SARs, CIP and CDD
  • IRS FAQs for marijuana
  • Using third party vendors
  • Building your business plan to handle customers in the industry
  • Is it time to move ahead with or without legislative support on the federal level

Who Should Attend
Bank Management, BSA, Compliance, Marketing, Operations.

Presenter Bio
Deborah Crawford is the president of Gettechnical Inc., a Virginia based training company. She specializes in the deposit side of the financial institution and is an instructor on IRAs, BSA, Deposit Regulations and opening account procedures. She was formerly with Hibernia National Bank (now Capital One) and has bachelor’s and master’s degrees from Louisiana State University. She has 30+ years of combined teaching and banking experience.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

The TRID rules are complicated and can be quite daunting for those who are new to TRID in general. This webinar is a great opportunity to introduce those “newbies” to TRID at the ground level. You might even have a few seasoned loan officers that need a refresher. Attendees will learn the basics and the general concepts found throughout the TRID requirements. Not only will they gain confidence as they learn the ins and outs in plain English but they will get started off on the right track.

What You’ll Learn

  • Covered Transactions
  • What is a “TRID” Loan Application
  • The “Good Faith” & “Due Diligence” Expectations
  • The Tolerance Buckets
  • The Loan Estimate & Closing Disclosure Concepts
  • An Introduction to Changed Circumstances
  • The “Good Faith” & “Due Diligence” Expectations
  • The Tolerance Buckets
  • The Loan Estimate & Closing Disclosure Concepts
  • An Introduction to Changed Circumstances

Who Should Attend
This webinar is designed for consumer real estate loan officers, loan processors, and compliance and audit personnel.

Presenter Bio
Jerod Moyer is the leader of Banker’s Compliance Consulting’s training productions. He is a nationally recognized speaker. Whether it’s a conference, seminar, school, webinar or luncheon, it’s easy to stay engaged when he presents due to the amount of passion and energy he brings to each and every compliance topic. Jerod has spoken on behalf of the American Banker’s Association, BankersOnline, many state banking associations, private compliance groups and financial institutions. He is a Certified Regulatory Compliance Manager (CRCM) and BankersOnline Guru.

Moyer likes to spend his time (between reading regulations and producing compliance training!) relaxing at the lake with his wife and three children, following their activities or engaged in something sports related!

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

Do you understand what an ACH Exception is and the ACH requirements around them? Many exceptions are rare, and you may find yourself second guessing what you should do. Gain a better understanding of exception processing from returns to notifications of changes to DNE and more. You’ll want to make sure you understand your responsibilities as a Receiving Depository Financial Institution so you can manage your risk.

We’ll discuss the timeline for handling the different exceptions. We will also address reinitiated entry rules and the return rate reporting that ODFI’s are required to do.

What You Will Learn

  • Ways to identify exceptions as an RDFI and ODFI and determine the best course of action
  • Understanding the timeframes for exception processing
  • Best practices for limiting your liability
  • An understanding of the importance of using the correct return and NOC codes

Who Should Attend
This course is designed for ACH personnel, operations personnel, and compliance and risk personnel.

Presenter Bio
Mary Kate Cole, AAP, CAE, principal of MK Cole Consulting, has nearly two decades of bank operations experience. Cole is an experienced ACH Auditor as well as speaker on payments related topics. She was VP of the Upper Midwest ACH Association for over 15 years. At that time, she was responsible for member education, ACH Audits and problem solving as well as ACH Development projects. Cole has been active in several National ACH Association Rules Work Groups over her career. She is a popular speaker at both local and national conferences on electronic payments related topics.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

During this program, we will do a line-by-line review of the forms and the subsequent tax reporting to the IRS. This program will focus on what a U.S. financial institution has to do from the tax reporting and documentation process to be prepared for FATCA. We will also look at the impact on 1042S reporting changes for nonresident aliens. Your job as a withholding agent has never been so important and the forms emphasize your importance in the tax reporting chain that affects this country and accounts for U.S. persons overseas.

What You’ll Learn

  • Exemption codes on the W-9 and FATCA exemption codes
  • SSNs, ITINs and EINs who needs what
  • IRS reporting on the 1099 Int and the 1042S
  • What happens when name and TIN do not match?
  • B notices and fines
  • How does the IRS set up name control files?
  • What is a nonresident alien? What if there is no country address?
  • Documenting GIIN for foreign financial institutions

Who Should Attend
This webinar is designed for deposit operations, deposit compliance, new accounts, bookkeeping, IRS reporting specialist and any person who opens accounts or reports interest to the IRS.

Presenter Bio
Deborah Crawford is the president of Gettechnical Inc., a Virginia based training company. She specializes in the deposit side of the financial institution and is an instructor on IRAs, BSA, Deposit Regulations and opening account procedures. She was formerly with Hibernia National Bank (now Capital One) and has bachelor’s and master’s degrees from Louisiana State University. She has 30+ years of combined teaching and banking experience.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

Consumer collections used to be rather straightforward. When a consumer went delinquent their lender typically picked up the telephone and the parties came up with a plan to bring the account current. However, times have changed and it is more difficult than ever to simply reach out to a delinquent customer to discuss their account. Now, consumers are ignoring your phone calls or not giving you consent to contact them on their cell phones. Consumer attorneys are parsing your collection letters to see if they are in violation of a myriad of consumer protection laws, and individuals are employing the services of out-of-state debt settlement/consolidation companies.

During this informative 90-minute presentation there will be a wide-ranging discussion of topics faced by all lenders engaging in the world of consumer collections. These topics will range from early default prevention and resolution tips to enhancing collections through the legal process. Other areas to be discussed include specific topics such as repossession letter requirements, SCRA protections, TCPA due diligence, FCRA compliance and the impact of bankruptcy on the collections process.

What You’ll Learn

  • Default Prevention & Resolution;
  • Cease and Desist Letters;
  • Debt Settlement Companies;
  • Enhancing Collections Through the Legal Process;
  • Repossessions and Repossession Letters;
  • SCRA Protections;
  • TCPA Due Diligence;
  • FCRA Compliance;
  • Bankruptcy and Collections

Who Should Attend
The program is designed for individuals who are regularly involved in the consumer collection process including Vice Presidents of Lending, lending managers, collection managers and collection representatives/agents. Other individuals such as in-house counsel and compliance officers who establish and oversee collection polices will benefit from this broad-based presentation.

Presenter Bio
Matthew D. Urban is a shareholder who manages the Pittsburgh Local Law Office and oversees credit union work across Pennsylvania. In addition, he practices in the area of Consumer Collections, focusing on a wide variety of collection and compliance matters. Urban regularly speaks on issues such FCRA compliance and the proper handling of writs of executions. Urban earned a B.A. magna cum laude in history from West Virginia University in 2000, and a J.D. from Duquesne University School of Law in 2003. He is licensed in Pennsylvania and is admitted to practice before the U.S. District Court for the Western and Middle Districts of Pennsylvania. He serves on the Board of Directors for the Pennsylvania Creditors’ Bar Association.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

This program will look at who has the right to endorse the back of a check, and where is proper endorsement placement. We’ll also look at what happens if a check is not endorsed properly, when it may be best not to accept the check at all due to missing or problem endorsements, why we do not put business checks into personal accounts, and why we do not give less cash on business accounts. Many “tricky” issues will be discussed, such as deceased account holders, business accounts, endorsements for minors, income tax check endorsements, trustee endorsements and endorsements by powers of attorney. Learn the safe way to handle checks and be sure that you and your financial institution can be protected from loss on the negotiable instruments. You won’t want to miss this session! The information provided will produce confidence and a thorough understanding of the legal issues of endorsements.

What You’ll Learn

  • What is a valid endorsement
  • Bearer versus Order Checks
  • Ambiguous endorsements
  • Endorsements for minors, deceased parties, business accounts
  • Witnessed endorsements
  • Endorsements on income tax checks
  • Trustee and power of attorney endorsements
  • Postdated, stale-dated, erasures, alterations, and more lessons we need to learn
  • Negligence rule and the bank statement rule
  • Treasury checks, postal money orders, and other special checks
  • Why we absolutely do not give cash back, cash or deposit into personal accounts checks made payable to a business

Who Should Attend
This informative session is for tellers, head tellers, cashiers, managers, branch operations, bookkeeping, compliance officers who okay checks and deposit representatives who work with checks and accounts.

Presenter Bio
Deborah Crawford is the president of Gettechnical Inc., a Virginia based training company. She specializes in the deposit side of the financial institution and is an instructor on IRAs, BSA, Deposit Regulations and opening account procedures. She was formerly with Hibernia National Bank (now Capital One) and has bachelor’s and master’s degrees from Louisiana State University. She has 30+ years of combined teaching and banking experience.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

The Real Estate Settlement Procedures Act (Regulation X) has contained rules for administering escrow accounts for many years. Both the Truth in Lending Act (Regulation Z) and the interagency flood regulations contain provisions that require escrows in connection with certain loans. The Real Estate Settlement Procedures Act and Regulation X have requirements for establishing and maintaining escrow accounts. We will explain how those rules are changing.

Higher-Priced Mortgage Loans — On January 19, 2021, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending section 1026.35 of Regulation Z to implement a requirement of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The final rule exempts certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs).

It exempts from the HPML escrow requirement any loan made by an insured depository institution or insured credit union and secured by a first lien on the principal dwelling of a consumer if:

  • The institution has assets of $10 billion or less;
  • The institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year;
  • and Certain of the existing HPML escrow exemption criteria are met.

Flood Insurance Frequently Asked Questions — On May 11, 2022, the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency (jointly, the agencies) issued revised questions and answers (Q&As) regarding federal flood insurance law and the agencies’ implementing regulations. The Q&As address a number of flood related topics including escrow rules. The revised Q&As were effective upon publication

This webinar covers all of the escrow rules, including the long standing and the recently revised requirements of the flood regulations, Regulation X and Regulation Z.

What You’ll Learn

  • Which loans are required by Regulation Z and the flood regulations to have escrow accounts, and which are exempt;
  • The limitations on the amount of the required escrow payments at origination and over the life of the loan;
  • How to conduct an escrow analysis;
  • How to determine an escrow account computation year;
  • The rules for preparing the initial escrow account disclosure statement;
  • The TRID rules regarding the escrow notices required in the Closing Disclosure;
  • The expanded Flood Hazard Notice for Escrow information;
  • The flood insurance option to escrow notice;
  • How to prepare the annual escrow account statement;
  • How to resolve a surplus, a deficiency or a shortage;
  • Regulation X rules for timely escrow payments and treatment of escrow balances;
  • Regulation Z rules regarding escrow cancellation notices;
  • The recordkeeping rules for escrow accounts;
  • The penalties for the failure to submit an initial or annual escrow account statement; and
  • The revisions to the Regulation Z rules made by the EGRRCPA

Who Should Attend
The program is designed for compliance officers, operations personnel, mortgage loan officers, loan originators and others involved in opening and maintaining escrow accounts for mortgage loans.

Presenter Bio
Jack Holzknecht is the CEO of Compliance Resource, LLC. He has been delivering the word on lending compliance for 44 years. In 39 years as a trainer over 147,000 bankers (and many examiners) have participated in Holzknecht’s live seminars and webinars. Holzknecht’s career began in 1976 as a federal bank examiner. He later headed the product and education divisions of a regional consulting company. There he developed loan and deposit form systems and software. He also developed and presented training programs to bankers in 43 states. Holzknecht has been an instructor at compliance schools presented by a number of state bankers associations. As a contractor, he developed and delivered compliance training for the FDIC for ten years. He is a Certified Regulatory Compliance Manager and a member of the National Speakers Association.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person

We will look at risk assessments, crimes, the new tone in the FFIEC Exam manual, and many more issues.

What You’ll Learn

  • National Risk Assessments
  • Consent Orders
  • Beneficial Ownership rule
  • CTR hot spots
  • Completing the SAR and making the decision
  • Cannabis? SAFE Banking Act where are we?
  • Online Account Opening CIP
  • Check Fraud
  • Exam hot spots

Who Should Attend
BSA Officers, Compliance Officers, Internal Auditors, any person within the bank who has responsibility for setting BSA policy and procedure.

Presenter Bio
Deborah Crawford is the president of Gettechnical Inc., a Virginia based training company. She specializes in the deposit side of the financial institution and is an instructor on IRAs, BSA, Deposit Regulations and opening account procedures. She was formerly with Hibernia National Bank (now Capital One) and has bachelor’s and master’s degrees from Louisiana State University. She has 30+ years of combined teaching and banking experience.

Registration Options

Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts $279

  • Available Upgrades:
    • 12 Months OnDemand Playback + $110
    • 12 Months OnDemand Playback + CD + $140
    • Additional Live Access + $75 per person