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:
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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:
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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

By: Kyle Tucker, Financial Institution Specialist

An interagency statement has been issued to remind creditors of the ability under the Equal Credit Opportunity Act (ECOA) and Regulation B to establish special purpose credit programs to meet the credit needs of specified classes of persons. This applies to all FDIC-supervised financial institutions.
 
On December 21, 2020, an Advisory Opinion was issued by the CFPB to clarify what type of research and data that may be appropriate to inform a for-profit organization’s determination to establish a special purpose credit program to benefit a specified class of persons.
 
The U.S. Department of Housing and Urban Development released guidance on December 7, 2021 concluding that special purpose credit programs instituted in conformity with the ECOA and Regulation B generally do not violate the FHA. The agencies do not determine whether a program qualifies for special purpose credit status, but creditors may consult their regulatory agencies for questions about any aspect of ECOA and Regulation B’s special purpose credit provisions.
 
For more information on this topic, please follow the link below:
https://www.fdic.gov/news/financial-institution-letters/2022/fil22008a.pdf
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By: Brian Taylor, Financial Institution Specialist

On December 8, 2021, a proposal was published to the Federal Register concerning the implementation of beneficial ownership information reporting provisions, Section 6403, under the Corporate Transparency Act (CTA). Anyone who has been involved in the account opening process over the past few years has probably heard their fill concerning Beneficial Ownership. This proposed rulemaking may be a sign of good news to come. The proposed rulemaking calls for the beneficial ownership information to be submitted at the time the entity is created by the “company applicant”, or the individual filing for the creation of the entity. It also calls for a centralized database to be created in order to house this information. These proposed actions could lead to the burden of obtaining beneficial ownership information at account opening being removed from the financial institution.

Before we celebrate, we also need to understand that FinCEN is responsible for maintaining the information obtained via section 6403, and under 6403, financial institutions are required to assist FinCEN in meeting their customer due diligence requirements. Thankfully, FinCEN is also required to revise its current CDD requirements which include the beneficial ownership rule. This will be done in three sets of rulemaking. The first will cover beneficial ownership reporting requirements, the second will cover access protocols and disclosure for beneficial ownership information maintained, and the last will be the steps taken to revise the existing CDD rule.

As things currently stand, there will be no changes related to the CDD Rule, processes involved, and how it affects community banking, but there are possible changes on the horizon that you should be aware of. Additional information can be found at the link below.

Beneficial Ownership Information Reporting Notice of Proposed Rulemaking

By: R. Matthew Waters, Financial Institution Specialist

On December 13, 2021, the Consumer Financial Protection Bureau posted an update to its Compliance Aid, “Electronic Fund Transfers FAQs”.  The update covered new or updated frequently asked questions for EFT disputes regarding coverage for transactions and financial institutions as well as additional guidance on error resolution. 

The updates for transaction coverage largely pertained to person-to-person (“P2P”) payments and when they are considered EFTs.  Similarly, the updates for financial institution coverage chiefly centered on non-bank P2P payment providers.  The FAQs responses for error resolution reinforced financial institution obligations for handling EFT disputes.  Further error resolution guidance was provided on topics including unauthorized EFTs, consumer liability, P2Ps, consumer negligence, and multiple EFT dispute scenarios. 
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To see the full update, click the following link: Electronic Fund Transfers FAQs.

By: Steve Shepherd, CRCM

On October 22nd, 2021, the Justice Department announced new initiatives to help combat redlining.  The new initiatives will be led by the Civil Rights Division’s Housing and Civil Enforcement Section in partnership with the U.S. Attorney’s Office.  According to the press release, the actions will:

• Utilize U.S. Attorneys’ Offices as force multipliers to ensure that fair lending enforcement is informed by local expertise on housing markets and the credit needs of local communities of color.
• Expand the department’s analyses of potential redlining to both depository and non-depository institutions. Non-depository lenders are not traditional banks and do not provide typical banking services but engage in mortgage lending and now make the majority of mortgages in this country. 
• Strengthen their partnership with financial regulatory agencies to ensure the identification and referrals of fair lending violations to the Department of Justice.
• Increase coordination with State Attorneys General on potential fair lending violations.

The following link provides more information: 
https://www.justice.gov/opa/pr/justice-department-announces-new-initiative-combat-redlining