The Small Business Administration along with consultation from the U.S. Treasury Department issued additional frequently asked questions about the Payroll Protection Program and how it pertains to the Bank Secrecy Act. On February 1, 2021, FinCEN published two additional frequently asked questions to provide guidance on Second Draw PPP loans.

Additionally, on February 2, 2021, FinCEN issued an advisory about an increase in health insurance fraud due to COVID-19. The advisory lists possible types of health insurance fraud, how it occurs, and red flags that may indicate possible health insurance fraud as well as a case study to help providers and financial institutions to further prevent and identify any fraud schemes.

PPP FAQs: Frequently Asked Questions (FAQs) as of February 1, 2021 (fincen.gov)
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Health Insurance Fraud Advisory: COVID-19 Health Care Advisory (fincen.gov)

 By James M. Moore, CRCM
 
One more year has passed, and we are faced with the new challenges of 2021.  Anyone with a compliance background understands there is no such thing as a fresh start for a new year.  The following is a list of reminders and updates to make sure you are heading in the right direction for the New Year. 
 
Deposit Compliance:

• Regulation CC training should have been provided during 2020 and make plans to provide Reg. CC training during 2021.
• Regulation CC hold thresholds remain at $225 (next day) and $5,525 (exception) until July 1, 2025.
• Annual privacy training should have been provided for 2020 to all employees and make sure annual privacy training is scheduled for 2021.  Furthermore, ensure that the Board of Directors has received privacy training.
• Ensure annual privacy disclosures will be mailed during 2021 or verify the institution’s exemption status for 2021.   
• Determine the number of remittance transfers under Regulation E from the previous calendar year to ensure the institution has not exceeded the threshold for “normal course of business” of 500 consumer transfers.
• Ensure the ID Theft Program administrator has reported to the Board annually on the status of the ID Theft Program.

 Loan Compliance:

• The 2020 HMDA LAR and CRA LAR for large institutions must be submitted by March 1, 2021.
• Check the historic examples for HELOC and ARM application disclosures to ensure the most recent 15 years are used in the examples.
• The CRA Public File should be updated by April 1, 2021.
• Check the accuracy of the affiliated business disclosures to ensure all affiliated businesses are disclosed along with the current range of fees and the current ownership interest of each affiliated business.
• The 2021 HOEPA points and fees test will use the following:
  • 5% of loan amounts of $22,052 or more
  • For a loan amount less than $22,052, the lesser of 8% or $1,103
• The 2021 QM points and fees test will use the following:
  • For a loan amount greater than or equal to $110,260: 3% of the total loan amount
  • For a loan amount greater than or equal to $66,156 but less than $110,260: $3,308
  • For a loan amount greater than or equal to $22,052 but less than $66,156: 5% of the total loan amount
  • For a loan amount greater than or equal to $13,783 but less than $22,052: $1,103
  • For a loan amount less than $13,783: 8% of the total loan amount
• The 2021 Truth In Lending threshold is $58,300 for loans not secured by real property and private education loans.
• The 2021 “small creditor” threshold is $2.230 billion as of December 31, 2020.
• The 2021 “small loan” exemption for HPML appraisal rules is $27,200.
• For 2021, the safe harbor credit card penalty fee is $29 for the first and $40 for subsequent late fees. 
• If the creditor allows borrowers to shop for any required services for TRID loans, it should update (as necessary) the written list provided with the Loan Estimate to identify at least one available provider for each settlement service for which the consumer is permitted to shop. 
• Ensure that employees and Directors have received fair lending and CRA training for 2020.  Training should be planned for 2021.
• Review the CRA asset size thresholds for 2021:
  • FDIC or Federal Reserve supervised institution CRA asset size thresholds for 2021 are under $330 million for small bank (based upon both of the last two calendar years), at least $330 million up to $1.322 billion for intermediate small bank (based on either of the two last calendar years), and $1.322 billion and over for large bank (based upon both of the last two calendar years).
  • OCC supervised institution CRA asset size thresholds for 2021 based on new rule are $600 million or less for small bank (based on 4 out of 5 previous quarters), $2.5 billion or less for intermediate bank (based on 4 out of 5 previous quarters), and large bank greater than $2.5 billion (based on 4 out of 5 previous quarters).
    • Note: Institutions in the transition period are evaluated as small, intermediate small, or large based upon status on October 1, 2020. 
• The HMDA asset size threshold for depository institutions for 2021 is $48 million.
• In addition to meeting the above HMDA asset threshold, an institution must have in each of the two preceding calendar years, originated at least 100 or more covered closed-end dwelling secured loans to report closed-end loans.  Dwelling secured open-end lines of credit must be reported in 2021 if a covered institution originated 500 or more covered dwelling secured open-end lines of credit in each of the previous two calendar years.  Ensure a review of 2019 and 2020 transaction data is conducted for 2021 reporting requirements. 
• Ensure procedures are in place for performing escrow account analyses and that the financial institution has implemented procedures for providing annual escrow account notices.
• Ensure loan officers completed S.A.F.E. Act license renewal procedures.
• Ensure an annual independent S.A.F.E. Act audit has been performed.
• Ensure lenders who receive compensation based on insurance sales (credit life/disability) complete license renewal procedures.
• Ensure the financial institution has documented whether they meet the definition of a small servicer and that documentation of the determination is retained for record retention.
• Ensure the financial institution has documented whether they meet the definition of a small creditor and that documentation of the determination is retained for record retention.
• Review the final list or rural or underserved counties for 2020, calculate rural or underserved status by address on the CFPB’s website for covered loans, and ensure the financial institution has documented whether or not it qualifies for the rural / underserved TILA exemption by originating at least one covered loan in a rural or underserved area and that documentation of the determination is retained for record retention.

 BSA Compliance:

• Schedule a Board review and approval of current BSA/AML and OFAC program policies.
• Update the BSA/AML and OFAC Risk Assessments.
• Ensure annual training was conducted for all employees during 2020 and is scheduled for 2021.  Furthermore, the Board of Directors should also be receiving annual BSA training, which should be documented in the Board minutes.
• Annual reviews should be conducted of all exempt customers for suspicious activity and continued eligibility.
• Update procedures for monitoring high-risk customers and reevaluate the risk levels of each customer designated as high risk.
• Ensure annual due diligence is completed for MSBs, remote deposit capture, private ATM customers, and deposit brokers in accordance with the financial institution’s BSA/AML program.

​By Steve Shepherd
 
Financial institutions that submit credit reporting data to credit bureaus are required to comply with the reporting provisions of the Fair Credit Reporting Act (FCRA).  Recently there has been enhanced scrutiny placed on information that is reported to credit reporting agencies.  Financial institutions report a minimum of 25 data points on every reported loan and 16 data points on every reported customer, with some loans containing an additional 40 fields.  These fields are required to be accurately reported to credit bureaus.
 
The 2020 CFPB Summer Supervisory Highlights noted that examiners were identifying errors with FCRA programs regarding permissible purpose for pulling credit, inadequate dispute resolution processes, and inaccurate information reported to credit bureaus. According to feedback received from other institutions, regulators have also been reviewing Metro 2 data in recent exams.  Depending on the complexity of the financial institution and the severity of errors identified, some institutions have been required to conduct significant corrections to their data and reporting processes or have been cited with level 2 violations.  Courts have also found that compliance with the Metro 2 reporting guide can serve as a valid defense for civil litigation stemming from litigants that assert a financial institution reported inaccurate information (e.g. Grossman v. Barclays Bank Delaware, Toliver v. Experian Info. Solutions).
 
Steve H. Powell & Company offers a variety of FCRA and Metro 2 compliance reviews to help identify and correct potential FCRA violations or reporting errors in Metro 2 data reported to credit agencies.  In the past year, reviews have uncovered errors in reporting information specific to loans, loan history, and customer specific data.  Frequent errors relative to Metro 2 data include, failure to report accurate transaction histories, failure to report the correct social security number of the borrower(s), errors in reporting charge-off accounts, errors in reporting correct payments, and most commonly, errors in reporting the correct loan types or payment features. 
 
For additional information about our FCRA and Metro 2 compliance review services please contact Steve Shepherd @ sshepherd@shpco.net.  

By: Jeremy Clifton, CRCM, CAMS

On June 29, 2020, FinCEN issued guidance regarding due diligence requirements under the Bank Secrecy Act for Hemp-Related Business customers to address their expectations for banks with relationships with these types of businesses. The guidance outlines FinCEN’s minimum due diligence expectations which would include obtaining a copy of federal, state, and local licenses as applicable or an attestation that the customer is in compliance with such hemp regulations. FinCEN also noted that the due diligence was to be risk-based.  Therefore, it would be a good idea to conduct a basic risk assessment of any Hemp-Related Business to determine if further due diligence was needed.  The link below will direct you to the guidance issued by FinCEN.
 
FinCEN Guidance:

​https://www.fincen.gov/sites/default/files/2020-06/FinCEN_Hemp_Guidance_508_FINAL.pdf
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By: Jeremy Clifton, CRCM, CAMS
 
As a result of the Federal Reserve Board reducing reserve requirements for transaction accounts to zero percent, the Board noted “the retention of a regulatory distinction in Regulation D between reservable “transaction accounts” and non-reservable “savings deposits” is no longer necessary.”  As a result, the Federal Reserve Board has announced an interim final rule effective on April 24, 2020 that removed Regulation D transaction limitations (six per month) from savings deposits.  The interim final rule allows, in part, financial institutions to suspend excessive activity monitoring and customer notification procedures for savings and money market accounts. 
 
Under the interim final rule, the term “savings deposit” means a deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account (MMDA), that otherwise meets the requirements in this section and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor may be permitted or authorized to make transfers and withdrawals to another account (including a transaction account) of the depositor at the same institution or to a third party, regardless of the number of such transfers and withdrawals or the manner in which such transfers and withdrawals are made.
 
In addition to the interim final rule, the Federal Reserve Board has issued technical guidance on the changes made by updating its document titled ““Savings Deposits Frequently Asked Questions”. Financial institutions should review the interim final rule and updated “Savings Deposits Frequently Asked Questions” supplement, along with its deposit account agreements and Truth in Savings disclosures for savings and money market products to determine any changes to policy and procedures as well as to determine if any action should be taken to notify customers of any possible changes that will take place as a result of the interim final rule.
 
It should also be noted this is an interim final rule with a comment period open until June 29, 2020; therefore, we expect more clarification on a few items not specifically delineated in the “Savings Deposits Frequently Asked Questions” supplement.  
 
On May 13, 2020, the Federal Reserve added additional information to its “Savings Deposits Frequently Asked Questions” supplement that covered some previously unanswered questions. The updates include FAQ #3 which indicates that removing the transaction limits from savings accounts is not expected to be a temporary measure and FAQ #13 which notes that the recent changes to Regulation D do not result in savings deposits now being covered by Regulation CC.
 

 
To access the Federal Reserve Board’s article, use the following link:
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200424a.htm

To access the “Savings Deposits Frequently Asked Questions” supplement, use the following link:
https://www.federalreserve.gov/supervisionreg/savings-deposits-frequently-asked-questions.htm  

By: Steve Shepherd, CRCM,

On May 6, 2020 the CFPB (Consumer Financial Protection Bureau) issued a compliance aid with respect to compliance with Regulation B ECOA’s notice of action taken rules and the SBA’s (Small Business Administration) Paycheck Protection Program.
 
The new compliance aid comes in the form of three questions and answers from the CFPB regarding a completed application and the financial institution’s responsibilities for applications taken under the SBA’s Paycheck Protection Program.
 
A few of the interesting areas to note are that 1) an institution does not have a completed application sufficient to issue an action taken until it has been issued a loan number by the SBA and 2) if the institution refuses to grant credit prior to receiving an SBA loan number, the financial institution has made a credit decision and a notice of action taken would be required.
 
For additional information regarding the Regulation B ECOA requirements and the Paycheck Protection Program please see the compliance aid and additional guidance the CFPB has provided located at:
 
https://files.consumerfinance.gov/f/documents/cfpb_ecoa-regulation-b_faqs-covid-19.pdf
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By James Moore, CRCM

The CFPB (Consumer Financial Protection Bureau) has recently issued an interpretive rule under Regulation Z for TRID and Right of Rescission waiting period requirements.  Under the TRID Rule, creditors generally must deliver or place in the mail the Loan Estimate to consumers no later than seven business days before consummation and consumers must receive the Closing Disclosure no later than three business days before consummation. The Regulation Z Rescission Rules also provide consumers with at least three business days from consummation to rescind certain credit obligations secured by the consumer’s principal dwelling, and creditors are required to provide consumers with a disclosure informing them of this rescission right. Under the TRID Rule and the  Regulation Z Rescission Rules, however, after receiving the required disclosure(s), a consumer may modify or waive these waiting periods if the consumer determines that he or she needs credit extended to meet a bona fide personal financial emergency.  

Under the interpretive rule, the CFPB has determined that the COVID-19 pandemic could be considered a bona fide personal financial emergency for affected consumers.  This is not a change in the regulation but clarification that COVID-19 may be a reason to waive timing requirements if a personal financial emergency has occurred such as job loss or quarantine.  The rules still require for the waiting periods to be modified or waived, the creditor must have a dated written statement by the consumer that: (1) describes the emergency, (2) specifically modifies or waives the waiting period, and (3) bears the signature of all consumers who are primarily liable on the legal obligation (for the TRID Rule) or who are entitled to rescind (for the Regulation Z Rescission Rules). 

In addition, the CFPB recognized that the pandemic may also create valid changed circumstances in some instances that would permit a creditor to provide revised disclosures to consumers to reset tolerances for closing costs.  Financial institutions should use caution and document why the pandemic caused the changed circumstance and deliver revised disclosures within three business days of learning of the changed circumstance in accordance with established TRID requirements.
​
The CFPB’s interpretive rule can be found here:
https://files.consumerfinance.gov/f/documents/cfpb_tila-respa-integrated-disclosure_rescission-pandemic-interpretive-rule.pdf

By: Matthew Waters

As a result of the Federal Reserve Board reducing reserve requirements for transaction accounts to zero percent, the Board noted “the retention of a regulatory distinction in Regulation D between reservable “transaction accounts” and non-reservable “savings deposits” is no longer necessary.”  As a result, the Federal Reserve Board has announced an interim final rule effective on April 24, 2020 that removed Regulation D transaction limitations (six per month) from savings deposits.  The interim final rule allows, in part, financial institutions to suspend excessive activity monitoring and customer notification procedures for savings and money market accounts. 
 
Under the interim final rule, the term “savings deposit” means a deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account (MMDA), that otherwise meets the requirements in this section and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor may be permitted or authorized to make transfers and withdrawals to another account (including a transaction account) of the depositor at the same institution or to a third party, regardless of the number of such transfers and withdrawals or the manner in which such transfers and withdrawals are made.
 
In addition to the interim final rule, the Federal Reserve Board has issued technical guidance on the changes made by updating its document titled ““Savings Deposits Frequently Asked Questions”.  Financial institutions should review the interim final rule and updated “Savings Deposits Frequently Asked Questions” supplement, along with its deposit account agreements and Truth in Savings disclosures for savings and money market products to determine any changes to policy and procedures as well as to determine if any action should be taken to notify customers of any possible changes that will take place as a result of the interim final rule.
 
It should also be noted this is an interim final rule with a comment period open until June 29, 2020; therefore, we expect more clarification on a few items not specifically delineated in the “Savings Deposits Frequently Asked Questions” supplement.  We will monitor for additional developments in this area and issue an updated article, as necessary. 
 
To access the Federal Reserve Board’s article, use the following link:
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200424a.htm

To access the “Savings Deposits Frequently Asked Questions” supplement, use the following link:
https://www.federalreserve.gov/supervisionreg/savings-deposits-frequently-asked-questions.htm  

 By: Steve Shepherd, CRCM

On April 16, 2020 the Consumer Financial Protection Bureau (CFPB) published a final rule which amended reporting thresholds under Regulation C, Home Mortgage Disclosure Act (HMDA).  These reporting thresholds, in part, determine the lending volumes of covered loans (i.e. loans that would be reportable under transactional requirements) to determine which financial institutions are required to collect and report HMDA data.  As a result, this change may result in additional financial institutions being exempt from HMDA data collection and reporting requirements for 2020 and moving forward. 
 
Specifically, the final rule adjusts Regulation C’s coverage thresholds for closed-end mortgage loans and open-end lines of credit.  Effective July 1, 2020, the final rule permanently raises the closed-end coverage threshold from 25 to 100 covered closed-end mortgage loans in each of the two preceding calendar years.  The final rule also adjusts the rules so that institutions have the option to report closed-end data collected in 2020 if they: (1) meet the definition of financial institution as of January 1, 2020 but are newly excluded on July 1, 2020 by the increase in the closed-end threshold, and (2) report closed-end data for the full calendar year.  The final rule also sets the permanent open-end threshold at 200 open-end lines of credit effective January 1, 2022, upon expiration of the temporary threshold of 500 open-end lines of credit.
 
What does this mean for financial institutions currently collecting information for HMDA reporting in 2020?  Essentially this means if the financial institution did not originate 100 or more covered closed-end mortgage loans in 2018 and 2019, beginning July 1, 2020 it would no longer be required to collect information and it would not be required to report closed-end mortgage applications on the 2020 HMDA LAR.  However, at its option the institution could continue to collect and report information for 2020 if it does so for the entire calendar year but will be bound to the new thresholds for reporting going forward.  Until 2022, a financial institution would continue to not report covered open-end lines of credit so long as it did not originate 500 or more covered open-end loans in each of the prior two years.  Going forward, if an institution does not exceed the closed-end mortgage and open-end lines of credit thresholds in the previous two years, it would not be subject to HMDA reporting for that year.
 
A financial institution should perform an analysis to determine if it remains a HMDA covered institution for 2020 considering these changes. Financial institutions currently subject to 2020 reporting who will be newly exempt as of July 1, 2020 should consider whether or not it would be best to continue to collect and report information for 2020 or to cease collection and reporting and update its policies and procedures accordingly. 

The CFPB provided several documents to help financial institutions with HMDA coverage questions.  See the links below for additional information.  

• Unofficial, informal redline to reflect changes to Regulation C
• Executive Summary
• HMDA Rule Key Dates Timeline 2020-2022
• HMDA institutional coverage chart, effective July 1, 2020 through December 31, 2021
• HMDA institutional coverage chart, effective January 1, 2022
• HMDA transactional coverage chart, effective July 1, 2020 through December 31, 2021
• HMDA transactional coverage chart, effective January 1, 2022

By: Jeremy Clifton, CRCM, CAMS

On April 13, 2020 FinCEN and the US Department of Treasury issued additional guidance to clarify beneficial ownership expectations for financial institutions obtaining new customers via Payroll Protection Program (PPP) loan originations.  The guidance is provided through a document titled Paycheck Protection Program Frequently Asked Questions (FAQs).  FinCEN has stated it will update this document with any additional BSA-related FAQs involving PPP loans as the need may arise in the future. 

The FAQs restate the previous guidance issued on existing customers and provide new guidance on beneficial ownership standards for financial institutions originating PPP loans for new customers.

Specifically per the FAQs: “For new customers, the lender’s collection of the following information from all natural persons with a 20% or greater ownership stake in the applicant business will be deemed to satisfy applicable BSA requirements and FinCEN regulations governing the collection of beneficial ownership information: owner name, title, ownership %, TIN, address, and date of birth. If any ownership interest of 20% or greater in the applicant business belongs to a business or other legal entity, lenders will need to collect appropriate beneficial ownership information for that entity.”

It should be noted the current SBA sample PPP borrower application requires institutions to obtain certain information from all natural persons with a 20% or greater ownership stake in the applicant business and contains fields for the above mentioned information (owner name, title, ownership %, TIN, address); however, it does not contain a field for date of birth. Institutions will be required to implement this “amended” beneficial ownership process at a 20% ownership stake to satisfy standard beneficial ownership requirements for PPP loans originated for new customers.  Moreover, procedures should also ensure the financial institution obtains the covered owner’s date of birth through the information gathering process to ensure future compliance. 
 
View the full FAQ document which addresses beneficial ownership rules for originating PPP loans for new and existing customers at the following link:
​
https://www.fincen.gov/sites/default/files/2020-04/Paycheck_Protection_Program_FAQs.pdf
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