NAFCU Compliance Blog

Grab Bag

Posted by Anthony Demangone

While the proposed changes to Regulation Z have grabbed our attention, other compliance issues continue to come up.  With that in mind, here are a few things that have happened recently that I wanted to mention.  We'll get back to Reg Z tomorrow.

• Everyone continues to ask HUD to delay implementation of its RESPA rule, due to take affect January 1, 2010.  RESPA keeps saying, thanks, but no thanks.

• The CFPA debate continues to rage on the Hill.  The latest development?  An amendment that would exempt credit unions under $1.5 billion in assets.  Stay tuned.

• The Fed continues its check processing restructuring.  Yesterday, the Fed issued a final rule to implement recent changes.  In this notice, I saw something of note.  The Fed gave us a heads up that they'll need to tinker with Reg CC's rules.  I'm not sure what those changes will look like, but here's why they'll need the changes.  Due to the consolidation of check processing centers, next year at some point...all checks will be considered local. 

• OTS issued a CEO memorandum that does a great job of summarizing how the recently enacted HOEPA rules affect HMDA reporting.  In short, OTS has amended their HMDA examination procedures, and this CEO memo addresses those changes.  It is a concise, clear overview.

• The revised model privacy form is coming. Soon.

• FinCEN has released the latest issue of its SAR Activity Review, Trends, Tips and Issues.   This document is a BSA goldmine.  In this issue, there's an article on SAR completion tips from law enforcement and another on how to avoid errors in SAR filings.

• Also, we hear that FinCEN is planning to release its rule to put stored value cards under its BSA requirements in February.

There. That's more than enough for a Monday.

HOEPA - Sections 226.17 .19; This and that

Posted by Anthony Demangone

I'll handle these two sections rather quickly.  As I mentioned earlier, the Fed first issued their HOEPA regulations in 2008.  But then Congress passed MDIA, which overtook the HOEPA regs in several areas.  Well, the overlapped areas affect the two sections noted above in this post's title.

Sections 226.17 (general disclosure requirements) and .19 (certain mortgage and variable rate transactions) were amended by the Fed in 2008, but were superseded by the MDIA amendments to Reg Z.  When you begin working toward compliance for HOEPA, remember this important distinction.  The FDIC created thisgreat side-by-side chart that details how MDIA widened and strengthened the disclosure requirements.

With all the important compliance work we're going to have to do, I didn't want you heading down alleyways that are no longer relevant.

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Here are a few things kicking around my in-box.

• Prescreened offers are important.  Just ask this mortgage company that forgot to include the all-important prescreen opt-out notice.   A mistake that cost them $20,000.
• NCUA issued a legal opinion recently offering guidance to a credit union that was trying to offer loan servicing and collection services to a non-profit entity.    It is an interesting read, as it brings up a credit union's charitable donation powers in a way that had not occurred to me.  The letter also offers guidance relating to nonmember services and CUSOs.
• FinCEN issued a ruling to issue guidance on this situation: what do you do when four customers/members get together to have an armored car service to deliver cash to your institution in amounts greater than $10,000?  Well, I won't answer that question, because it is fairly complicated - and the ruling does a good job of walking you through the process.  But here's a great idea for training: ask a group of tellers how they would treat the transaction, and see if the come up with the same answer as FinCEN.  (Just don't tell them that it was my idea.)
• The OCC has issued an updated version of its "Other Consumer Protection Laws and and Regulations.  While not every reg in the massive document apply to federal credit unions, many do.  And there are audit checklists for each one.  Two words for this, my friends.  Good stuff.

Have a great weekend, everyone.

HOEPA Wins; Fair Lending; Freebie/Shameless Plug

Posted by Anthony Demangone

Happy Friday, everyone.  When I asked what folks wanted us to focus on next, the response was overwhelming: HOEPA.  And that makes sense, as the compliance deadline kicks in October 1.  In second place came RESPA.  So, we'll focus on HOEPA first.  Once we finish that, we'll move on to RESPA. 

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The GAO has issued a report critical of federal regulator enforcement of fair lending laws.  Here are a few things I noted:

• First, I became aware of this issue after receiving a press release from the House Committee on Financial Services.  In other words, those with the power to lean on regulators and hold hearings are drawing attention to the report.
• The report points to inconsistencies in enforcement.  One line, on page 41, really caught my attention.  

  Finally, depository institutions under the jurisdiction of FDIC, Federal Reserve, and OTS were far more likely to be subject to referrals to DOJ for potentially being at heightened risk for fair lending violations than those under the jurisdiction of NCUA and OCC.

What does this mean?  It is hard to say.  But if regulators start getting beat up over this report, you can bet that there will be greater attention on this issue.  And that mean potentially more fair lending exams.

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• Thanks to those who responded to my call for help regarding their most recent BSA exam.  I've received a good number of emails, which will certainly help me prepare for the September 30 BSA roundup.  (The session is available to all, including non-NAFCU members.) But I'd love to hear from more of you!
• Here's a freebie that might interest some of you.  On Tuesday, August 25, I'll conduct a webinar to give an overview of NAFCU's new Volunteer and New Staff Online Training program.  The webinar is free, and those who sign up will get a free 3-day trial subscription to kick the training program's tires. And all are welcome to take advantage - including non-NAFCU members. The program does have a BSA module for volunteers and new employees. 

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Have a great weekend, everyone! 

HELOCs; I need your help

Posted by Anthony Demangone

The Federal Reserve Board recently published a consumer-oriented list of "tips" regarding HELOCs.  Specifically, the Fed issued the 5 tips to help consumers understand their rights and lender responsibilities when HELOC lines are frozen or reduced.  Access the Fed's press release here, which contains a link to the "tips." 

I mention this because this is the type of thing that will be picked up by financial columnists and news wire services.  Your members very well could read this tip sheet, so you should as well.  Tip #2 directs consumers to contact their lender should their line be frozen or reduced.  I would read this document closely if your credit union has or will reduce or freeze HELOCs.  And be sure your front-line staff can respond to these tips assuming members will read them and then contact your shop.

Regarding HELOCs, don't forget that the Fed has a proposed rule out there to amend its HELOC rules.

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I need your help in two areas. 

• I'll be presenting a "BSA Update" for NAFCU on September 30.  Go here to see what I'll yabba dabba about and to sign up, if you are so inclined.   As part of the webcast, I'd love to hear what your examiner stressed over during the BSA portion of your most recent exam.  I've spoken with folks at NCUA and FinCEN to get their take, but I always like to hear it from you.  I'll take the responses and share what I learn.  Feel free to email me (respond to the daily email or email me at ademangone (at) nafcu.org.).
• What should we focus on next within this Blog?  The HOEPA changes that take effect in October?  RESPA?  Something else? Let me know your thoughts.  Either email us or leave a comment on the blog.

Credit CARD Act - Section 202; By the Numbers Training Trick

Posted by Anthony Demangone

The effective date for all of the following subsections is February 22, 2010.  This is a fun section, as Subsections (A) and (C) apply to credit cards, while Subsection (B) applies to all open-end credit. (That last sentence was to be read with your "sarcasm" voice.)

Late payment deadlines.  Section 202 amends the Truth in Lending Act to require credit card issuers to disclose the due date by which a payment must be received to be on time.  You'll need to disclose the late fee as well.  Note that Regulation Z's July 1, 2010 amendments would have addressed this - but for all open-end lending.  (Link to Reg Z, 226.7 as it will look on July 1, 2010.  Scroll down to 226.7(b)(11) for the gory details.)

Penalty rates.  Subsection (B) of Section 202 requires credit unions to disclose the penalty rate that will apply to the account if a payment is not received by the due date. Now, this section applies to all open-end credit, not just credit cards.  Again, Reg Z would have addressed this.  Using the link above, See 12 C.F.R. § 226.7(b)(11)(b). 

Branch payments.  Subsection (C) of Section 202 requires that credit unions credit payments made in person at a branch of the credit union as of the date on which the payment is made. This section only applies to credit cards.  In other words, if a member makes a credit card payment at the credit union’s branch on his/her due date – the credit union would not be able to charge a late fee even if the payment is not processed until a later date.

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OK, enough of the Credit CARD Act for today.  How about a little BSA training tip?

I give a number of talks each year.  From my talks, I have learned one thing: people love graphs and data.  People can say this or that, but a graph, pie chart, bar chart, etc., with hard numbers - well - that tends to legitimize your talk.

Where can you get tons of info for your charts?  FinCEN's SAR Activity Review: By The Numbers.  FinCEN produces this data compilation twice a year, and they just released the latest version.  If you do BSA training or provide BSA data to your board and management team, this document is simply awesome.

I urge you to go into the document, and click on the Section 1 hyperlink.  The tabs on the bottom break down SAR filings by type, state, financial charter, etc.  Using this data, you can create great charts, PowerPoint slides, etc.  

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Have a great weekend, everyone!

314(a) Requests

Every so often, FinCEN issues a 314(a) fact sheet update.  Here's the most recent edition, which FinCEN issued yesterday.

In case you thought the process was a huge waste of time, it has nailed some bad dudes.

To date, the 314(a) Program Office has processed 979 requests submitted by twenty-two Federal agencies. Federal law enforcement organizations have submitted cases in the conduct of the following significant criminal investigations:

Terrorism/Terrorist Financing – 302 cases

Money Laundering – 677 cases

These requests included 9,105 subjects of interest. Of these, financial institutions have responded with 61,817 total subject matches: 60,779 positive and 1,038 inconclusive.

If you have questions on how to complete 313(a) requests, this chapter of the BSA manual does a good job of providing a basic overview.  But I've been told that the best instructions actually are included with the 314(a) transmittal sheet itself.  So, the next time you process the request, keep the instructions portion of the 314(a) transmittal sheet.  It might come in handy if you need to address 314(a) issues on the fly.

BSA E-Filer FAQ; Reg Z; The Hill; Whoops

Posted by Anthony Demangone

You know how much I love FAQs.  Well, here's another.  FinCEN has issued an FAQ document for BSA E-Filers.  You can access it here.  The FAQ also is a transition document to help E-Filers transition to the world of "Adobe."

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Last week, the Federal Reserve issued final regulations to implement the Mortgage Disclosures Improvement Act.  NAFCU Today wrote a nice article about the changes here.  Yesterday, the Fed published the final rule and commentary in the Federal Register.  Access the Federal Register Notice here.  Access the Fed's press release about the changes here.

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Yesterday was a big day on the Hill.  The House passed a Credit Union Stablilization bill, and the Senate passed a credit card reform bill.  Read more about those developments here.

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I was out with Kate and Briggs recently.  As you can see, I sort of forgot about that pig flu thing.  Luckily, this pig said he had his flu shots this year.

A Little of This, A Little of That

Posted by Anthony Demangone

There's just a ton of stuff to talk about.  Tons.

RESPA.  Despite push back from virtually every possible direction, HUD promises to move forward with RESPA reform.  Note that HUD is withdrawing its "Required Use" provision.  They indicate that they'll replace it with something else.  Also remember that there is some Congressional movement toward forcing HUD's hand on this issue (withdrawing its current reform efforts), but whether that succeeds remains to be seen.

MSBs.  FinCEN announces that they've issued a proposed change to the definition of a money services business.

Currently, to meet one definitional threshold of an MSB a person must conduct $1,000 of transactions per person per day. This applies to all categories of MSBs except for "money transmission." This NPRM solicits comment on either raising or lowering the definitional threshold. If a person meets the definition for an MSB, they are subject to the applicable recordkeeping and reporting requirements of the BSA rules. An entity that engages in money transmission in any amount is subject to the BSA rules and the solicitation for comment on revising the threshold is directed to the other categories of MSB. FinCEN will address regulation changes concerning stored value providers in a future rulemaking. In this rulemaking, however, FinCEN solicits comments on stored value issues in an effort to have a better-informed subsequent rulemaking confined to providers of stored value.

Discrimination.  The FTC has issued a complaint against a lender claiming discrimination against Hispanic borrowers.

The complaint alleged that the company’s policy and practice of allowing loan officers to charge discretionary overages resulted in Hispanics being charged higher prices because of their national origin – price disparities that are “substantial, statistically significant, and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.”

BSA Blast.  Hey NAFCU members: The May 2009 BSA Blast is available.

SAR Buzzer Beaters; Online Training

With all the games taking place in the never-ending NBA postseason, I thought I'd pass along this question and answer that touches upon the timing of SAR filings.  So, when does the dreaded clock start ticking?  From the date of the alleged suspicious activity?  Or from the date when you learn about it?  Read on... 

Question: There is some confusion within our credit union as to when the clock starts ticking for suspicious activity reporting. We have 30 days to file a Suspicious Activity Report (SAR). Is that 30 days from the day of the actual transaction or 30 days from when we determine we need to file a report?

 Answer: The Bank Secrecy Act (BSA) file rules require credit unions to file a SAR no later than 30 calendar days from the date of the initial detection of facts that indicate a SAR is required. The Financial Crimes Enforcement Network (FinCEN) notes that the 30-day (or 60-day, if the suspect cannot be identified) period does not begin until a credit union has conducted an appropriate review and determined that the transaction under review is “suspicious” within the meaning of the BSA regulations. FinCEN has further clarified that the “initial detection” of suspicious activity “does not necessarily occur on the date of the transaction(s), the date when an automated system generates a notice or red flag alert or the date when an employee initially reviews the transaction(s).” See  FinCEN SAR Activity Review – Trends, Tips & Issues, (Issue 14, October 2008), pages 37-38. Once a credit union has made its review and determined that the activity does not appear to have a business or lawful purpose and is therefore suspicious, the credit union then has 30 days from that date of determination to file a SAR.

    However, FinCEN reminds credit unions that any reviews of suspicious activity should be completed within a reasonable period of time. Issue 14 of FinCEN’s SAR Activity Review – Trends, Tips & Issues provides three excellent examples illustrating that the date of the initial detection does not necessarily trigger the 30 day filing period. You can access it here.

 

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NAFCU is getting ready to launch a new online training program that I designed.  Get some details about it here.  I had a lot of fun with this project, and I'm very excited about it.  Then again, I'm hugely biased.

 

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I know it is a Monday.  But cheer up.  As this photo points out, Summer cannot be far away.  I just have to find a way to keep flip-flops on their feet.  My idea of duct tape was quickly shot down by Mandy.  I told her I was kidding, but I think Mandy has her doubts.

 

September 18, 2009; CTR Exemption Guidance

Posted by Anthony Demangone

Look at the date above.  Does it ring any bells?  That's the implementation deadline for the new International ACH Transaction (IAT) rules.  Here's a good resource for you if ACH compliance is one of your responsibilities - NACHA's IAT webpage.

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FinCEN has released guidance to help credit unions and other financial institutions comply with CTR exemption requirements.  Specifically, the guidance should help you determine what supporting information is suitable for determining what portion of a business member's annual gross revenues is derived from activities that are ineligible for CTR exemptions.  Read the press release and access the guidance here.  Here's a snippet from the guidance.

The Financial Crimes Enforcement Network (FinCEN) is issuing this guidance to assist banks in determining the appropriateness of exempting from currency transaction reporting requirements non-listed business customers that derive some portion of their annual gross revenues from ineligible business activities.

Kudos to FinCEN.  I've always thought that there isn't enough guidance on CTRs, while we are buried in SAR-related documents. I hope this signals a new trend.