By: Kyle Davis, CRCM, CAMS

On September 7, 2018, FinCEN finalized permanent exceptive relief from the beneficial ownership requirements for certain rollover products and services.  The ruling is in response to industry feedback to question 12 found in the April 3, 2018 frequently asked questions.  See the FAQs here. 

Question 12 defined the term “account” consistent with previously issued CIP guidance which states that each loan renewal or CD rollover establishes another formal banking relationship. Per this definition, question 12 directed institutions to collect beneficial ownership upon the first renewal or rollover after May 11, 2018.  Additionally, question 12 allowed institutions to rely upon customer certification that the bank would be notified of any changes in beneficial ownership information. 

​After the FAQs were published, financial institutions responded that it is industry practice not to treat such rollovers and renewals as the opening of a new account.  In response, on May 16, 2018, FinCEN issued a 90-day temporary and limited exceptive relief, retroactive to May 11, 2018, and which FinCEN extended an additional 30 days.  Based upon discussions with stakeholders and industry personnel during the 120 days, FinCEN is providing permanent exceptive relief for these products.
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The relief from the requirements of the beneficial ownership rule applies only when a legal entity customer opens a new account under the following scenarios:

• A rollover of a certificate of deposit (CD);
• A renewal, modification, or extension of a loan (e.g., setting a later payoff date) that does not require underwriting review and approval; 
• A renewal, modification, or extension of a commercial line of credit or credit card account (e.g., a later payoff date is set) that does not require underwriting review and approval; and
• A renewal of a safe deposit box rental.

​The exception affects the accounts described in this ruling in two ways: by removing the obligation to collect beneficial ownership information when an account opened before May 11, 2018 rolls over or renews after May 11, 2018, as if it were a new account, and by removing that same obligation for rollovers, modifications, extensions, and renewals of such accounts opened after May 11, 2018.
 
There are a few important details to highlight from the ruling.  FinCEN notes that current industry practice for renewing or extending these types of account relationships is generally automated and does not require an affirmative action from the customer.  This narrow definition appears to eliminate the relief for instances where a business customer deposits funds to a CD during a grace period.  It appears that the ruling views a deposit during a grace period as an interaction with a legal entity customer and an opportunity to obtain or re-certify the beneficial ownership information.

The ruling with regards to credit products also presents additional questions.   The guidance does not define the terms underwriting and approval.  These definitions are left to institution’s specific loan policies and processes. Typically, underwriting and/or approval is required for most loan renewals. Further, there are limited credit products with automatic renewal features that require no action from the customer. 

However, FinCEN does provide an example of relief in the ruling with respect to credit card accounts, “the financial institution may change certain terms of a commercial line of credit or of a credit card, such as the credit limit, without requiring the affirmative assent of the customer.”  Institutions may also determine that, depending on bank policy, other short-term loan extensions do not require underwriting and approval.  It is recommended that institutions review their internal underwriting and approval policy and processes to determine instances, if any, where this relief would be applicable.

The final ruling can be found here.

 By: Brad Washburn, CRCM, CAMS

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) was enacted into law. Section 104(a) of the Act amends section 304(i) of the Home Mortgage Disclosure Act (HMDA) by adding partial exemptions from HMDA's requirements for certain insured depository institutions and insured credit unions. Specifically, a covered institution does not need to collect or report certain data with respect to closed-end mortgage loans if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years.  Similarly, the Act provides that a covered institution does not need to collect or report certain data with respect to open-end lines of credit if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years. 

Financial institutions have raised questions about the new partial HMDA exemptions and how the exemptions affect collection and reporting of data for transactions with final action taken in 2018 or subsequent years. On August 31, 2018, the Bureau issued an interpretive and procedural rule that implements and clarifies section 104(a) of the Act and effectuates the purposes of the Act and HMDA. 

Primarily, the rule:

1. Clarifies that insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data;
2. Clarifies that only loans and lines of credit that are otherwise HMDA reportable count toward the thresholds for the partial exemptions;
3. Clarifies which of the data points in Regulation C are covered by the partial exemptions;
4. Designates a non-universal loan identifier for partially exempt transactions for institutions that choose not to report a universal loan identifier; and
5. Clarifies the exception to the partial exemptions for negative Community Reinvestment Act examination history.

This rule is effective as of September 7, 2018.  The new rule can be reviewed in its entirety here.

In addition, an executive summary of the rule which includes some helpful tables can be viewed here. 

The Bureau has indicated it intends to initiate a notice-and-comment rulemaking to incorporate these interpretations and procedures into Regulation C and further implement the Act.  Stay tuned for additional details about these changes as they come available. 
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 By: Kyle Davis, CRCM, CAMS

The CFPB issued its final rule amending Regulation P to align with its authorizing statute, the Gramm-Leach-Bliley Act (GLBA). On December 4, 2015, Congress amended the GLBA as part of a transportation bill known as the FAST Act. This amendment added a new GLBA section 503(f) which provides an exception under which financial institutions meeting certain conditions are not required to provide annual privacy notices to customers. 

To qualify for the annual notice exception the following two conditions must be met: (1) the institution only discloses consumer information under certain circumstances which do not trigger consumer opt-out rights (cannot share with unaffiliated third parties) and (2) the institution has not changed its policies and practices concerning disclosing consumer information since its most recent notice sent to consumers.   The CFPB is clear that the annual notice exemption has been available to institutions since passage in December 2015.

Most notably, the final rule amends Regulation P by implementing timing requirements for delivery of annual privacy notices in the event that a financial institution that previously qualified for the annual notice exception later changes its policies or practices in such a way that it no longer qualifies for the exception.  The CFPB proposed these re-disclosure amendments to Regulation P in July 2016 and is largely adopting the rule as proposed. 
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We highly recommend reviewing the regulation if changes are made to privacy sharing as the requirements may vary based on the change, but the new rules provide essentially two options: the institution must  issue an annual privacy notice either: (1) before implementing the changes in the policy or practice which trigger the obligation to send a revised privacy notice or (2) within 100 days after adopting a policy or practice that eliminates the financial institution's notice exception but the changes did not trigger the obligation to send a revised privacy notice.
It is important to note that the regulation defines the phrase, “policy and practice” as those items disclosed under sections 1016.6(a)(2), 1016.6(a)(3), 1016.6(a)(4), 1016.6(a)(5), and 1016.6(a)(9).  T

​This means that the only privacy notice changes that will not trigger an annual disclosure requirement are relative to information collection as defined under 1016.6(a)(1) and confidentiality and security as defined under 1016.6(a)(8).

The CFPB is further removing the Regulation P provision that allows for use of the alternative delivery method for annual privacy notices.  The alternative delivery method was implemented in 2014 and allowed for delivery via the institution’s website. The CFPB believes the alternative delivery method will no longer be used in light of the annual notice exception. However, the final rule is clear to state that continuing alternative delivery methods such as notifying customers of the availability of the notice on the website is permitted. 

Again, the annual notice exemption has been available to institutions since passage of the FAST ACT in December 2015. The final rule implementing the re-disclosure requirements and removal of the alternative delivery method was published in the Federal Register on April 17, 2018 and will be effective September 18, 2018. 

The complete final rule may be found here.