By: Jeremy Clifton, CRCM, CAMS

On May 31, 2022, all five federal agencies issued a revised Q&A regarding flood insurance coverage. The Q&A is largely a context reorganization of the July 2020 Proposed Q&A and the March 2021 Proposed Q&A to make it easier for the compliance community to research topics regarding flood insurance requirements. The new Q&A supersedes the 2009 and 2011 Q&A responses which have been revised based on updated responses and recommendations from the compliance and banking community. For more information, please refer to the Federal Register entry at: https://www.federalregister.gov/documents/2022/05/31/2022-10414/loans-in-areas-having-special-flood-hazards-interagency-questions-and-answers-regarding-flood
 
The FDIC will be hosting an interagency webinar to discuss the 2022 Interagency Questions & Answers Regarding Flood Insurance on July 27, 2022. Registration is required and questions can be submitted for consideration before the presentation. For more information and registration see the FDIC’s bulletin: https://content.govdelivery.com/accounts/USFDIC/bulletins/31e467f

By: Steve Shepherd, CRCM

On July 7, 2022, the CFPB (Consumer Financial Protection Bureau) issued an advisory opinion on permissible purposes for obtaining and providing credit reports under section 604 of the FCRA (Fair Credit Reporting Act). The advisory opinion primarily focused on the information submitted to a credit reporting bureau by institutions requesting credit bureau information. The CFPB opinion made it clear that users and agencies have a responsibility to protect the privacy of consumer data.

Under the FCRA, users of consumer reports may request a consumer report only under the enumerated “permissible purposes” outlined within section 604 of the FCRA. That purpose is certified by section 607 of the FCRA through a general or specific purpose. Users of consumer reports submit certain information to the credit reporting bureau to ensure that the request pertains to the consumer of which the information is requested. The institution should ensure that the information identifiers being used contain sufficient information to conduct a search that would avoid obtaining a credit report on a different party or multiple parties. For example, if the institution obtains credit reports by inputting only the name of the party, the institution should develop stronger safeguards to ensure that the credit report belongs to the intended party. Some credit reporting agencies only use the name search options based on information placed in the request portal. The Bureau noted that such credit reports often contain a disclaimer indicating that the consumer report was obtained based on name only matching. The CFPB clarified that such disclaimers do not cure a permissible purpose issue.

Lastly, section 619 of the FCRA imposes criminal penalties on any person who knowingly and willfully obtains information from a consumer reporting agency under false pretenses. 

For more information, please visit the following link: https://www.consumerfinance.gov/rules-policy/final-rules/fair-credit-reporting-permissible-purposes-for-furnishing-using-and-obtaining-consumer-reports/

By: Hunter Brown, Financial Institution Specialist
 
On July 6, 2022, the FED, FDIC, FinCEN, NCUA, and OCC (collectively, the Agencies) released a joint statement clarifying their stance on the risk-based approach currently employed by financial institutions to satisfy customer due diligence requirements. The Agencies state that not all customers of a particular type present a uniform risk level. Instead, additional risk factors should be evaluated to generate a holistic risk-profile. The Agencies once again noted that financial institutions should consider risk at a customer level instead of declining to provide banking services to entire categories of customers (e.g. PATM, NRA, NGO, and MSB).
 
To read the full statement, please follow this link:
 
https://www.fincen.gov/sites/default/files/2022-07/Joint%20Statement%20on%20the%20Risk%20Based%20Approach%20to%20Assessing%20Customer%20Relationships%20and%20Conducting%20CDD%20FINAL.pdf

By Steven Shepherd, CRCM

HUD (Housing and Urban Development) has revised the SCRA notices that are generally sent along with mortgage loan statements and/or mortgage delinquency notices.  Financial institutions should ensure that the current revised form is being utilized. The revised version of the SCRA notice has an updated URL address to provide resources to members of the military and contains an updated expiration date of November 30, 2024.  The new notice contains all the original provisions designed to alert eligible servicemembers of their rights to exercise legal protections, including interest rate reductions. The form also provides instructions for servicemember dependents to obtain relief under the Servicemember Civil Relief Act. The revised HUD-92070 can be found on HUD’s form website at:
 
https://www.hud.gov/program_offices/administration/hudclips/forms/hud9
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By: Kyle Tucker, Financial Institution Specialist

The Community Reinvestment Act (CRA) requires financial institutions to help meet the credit needs of the communities in which they do business. This rule, enacted in 1977, encourages lending to low- and moderate-income neighborhoods. A joint proposal has been developed by the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board (FRB), and Office of the Comptroller of the Currency (OCC) which is open for comment until August 5, 2022.

On May 5th, 2022, a Notice of Proposed Rulemaking (NPR) was issued that would amend regulations that were last updated in 1995. The updates include:

• Expanding access to credit, investment, and basic banking services in low– and moderate–income (LMI) communities, which are CRA’s core goals;
• Adapting to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch–based areas;
• Providing greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluation and clarifying eligible CRA activities focused on LMI communities and under–served rural communities;
• Tailoring CRA rules and data collection to bank size and business model; and
• Maintaining a unified approach among the regulators.

For more information on the proposed rulemaking please visit the link below:

https://www.fdic.gov/news/financial-institution-letters/2022/fil22018.html  

By: R. Matthew Waters, Financial Institution Specialist

On March 31, 2022, the FDIC issued its Consumer Compliance Supervisory Highlights which covered the five most frequently cited Level 2 and Level 3 violations, examination observations, regulatory developments, and consumer complaint trends. A notable concern in the supervisory highlights was the re-presentment of unpaid transactions.

Financial institutions are increasingly being scrutinized for charging multiple non-sufficient funds (NSF) fees on the same item without clearly disclosing the effects of multiple presentments.  Further, some institutions provide on initial disclosures that one NSF fee will be charged “per item” or “per transaction” but do not clearly define those terms. The FDIC states that “there is risk of unfairness if multiple fees are assessed for the same transaction in a short period of time without sufficient notice or opportunity for consumers to bring their account to a positive balance.”

The FDIC also issued a number of risk-mitigating activities that financial institutions have employed including eliminating NSF fees altogether, charging only one NSF fee for the same transaction, and disclosing all conditions in which an NSF fee may be assessed.  It is recommended that institutions review their account agreements and consider changes to enhance the explanations of how overdraft and NSF fees are assessed. 

Your account agreement vendor may already have an enhanced account agreement that provides the additional information needed. Vendors generally offer several account agreement updates during the year as a result of litigation within the financial institution industry.  Any updates to account agreements must be sent to current account holders to inform them of the changes.  Simply providing the updated account agreement to new account holders going forward is insufficient. 

To see the full article, click the following link: Consumer Compliance Supervisory Highlights (fdic.gov)

By: Kyle Tucker, Financial Institution Specialist

On June 1, 2021, an interagency initiative was launched to combat bias in home appraisals. The Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) has been directed to evaluate the causes, extent, and consequences of appraisal bias and establish a transformative set of recommendations to root out racial and ethnic bias in home valuations. The Task Force believes that if the Federal Government advances equity in the appraisal process, it can also make substantial progress toward closing the racial homeownership and wealth gap.

Director Rohit Chopra issued a statement on March 23, 2022, regarding the final report of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE). For more information on Directory Chopra’s statement and the action plan of PAVE, please follow the link below:
​
https://pave.hud.gov/actionplan#summary

By: Kyle Tucker, Financial Institution Specialist

The CFPB has announced that it will use UDAAP to target discriminatory conduct. CFPB examiners are being directed to apply the Consumer Financial Protection Act’s unfairness standard to conduct considered to be discriminatory if it is not covered by the Equal Credit Opportunity Act.

The CFPB has broad authority in protecting consumer from unfair, deceptive, or abusive acts and practices. The CFPA defines an act or practice as “unfair” if (1) it causes or is likely to cause substantial injury to customers, (2) the injury is not reasonably avoidable by consumers, and (3) the injury is not outweighed by countervailing benefits to consumers in competition.

In its official press release, the CFPB states:
"The CFPB will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits.  CFPB examiners will require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups.  CFPB examiners will look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA."

For an updated exam manual for evaluating UDAAPs, please follow the link below:
​
https://files.consumerfinance.gov/f/documents/cfpb_unfair-deceptive-abusive-acts-practices-udaaps_procedures.pdf

By: Brian Taylor, Financial Institution Specialist

Due to the events unfolding in the Ukraine and the removal of Russia from SWIFT, Russian elites have been attempting to move large amounts of currency through world banking channels in subversive ways. In an attempt to thwart the evasion of such sanctions, FinCEN has released an advisory that details possible red flags for Russian sanctions evasion. FinCEN also asks that any SARs filed for Russian sanctions evasion reference the alert in SAR field 2 and the narrative with the following key term “FIN-2022-RUSSIASANCTIONS”. Financial institutions were encouraged to utilize 314(b) information sharing to help identify hidden Russian and Belarusian assets. See the attached alert for more details.
 
https://www.fincen.gov/sites/default/files/2022-03/FinCEN%20Alert%20Russian%20Sanctions%20Evasion%20FINAL%20508.pdf

By: Jeremy Clifton, CRCM, CAMS

On March 10, 2022, the Financial Action Task Force (FATF) published its most current lists of Jurisdictions under Increased Monitoring (grey list countries) and High-Risk Jurisdictions Subject to a Call for Action (black list countries). Financial institutions should ensure that transactions to or from these geographic areas are monitored and that AML system parameters are updated as needed. You can read the full press release here:

Financial Action Task Force Identifies Jurisdictions with Anti-Money Laundering and Combating the Financing of Terrorism and Counter-Proliferation Deficiencies | FinCEN.gov