NAFCU Compliance Blog

Member Complaints; NAFCU's 2012 Regulatory Compliance Seminar

Written by Steve Van Beek

Consumer and member complaints are at the forefront of quite a few conversations right now (including quite a few news articles).  The CFPB's promotion of their complaint process is one reason for this uptick in discussion as is the centralized complaint process for financial products.  

The CFPB issued their 2011 Annual Report on Consumer Complaints and it is full of useful information to review.  Here is a snapshot of the results:

"Between July 21 and December 31, 2011 the CFPB received 13,210 consumer complaints, including 9,307 credit card complaints and 2,326 mortgage complaints.

Forty-four percent of all complaints were submitted through the CFPB's website and 14.7 percent via telephone calls.  Referrals from other regulators accounted for 34.9 percent of all complaints received.  The rest were submitted by mail, email, and fax."

Future reports will include even more details - including complaints in new areas such as private student loans, auto loans and checking accounts.  Be sure to review the full report or pass it along to the appropriate person at your credit union.   

NCUA.  The March 2012 edition of the NCUA Report also included an article on Trends in Member Complaints and Consumer Inquiries.  Of note, the article indicates that of the complaints received in 2011 less than 1 percent involved a consumer compliance violation.  Of that 1 percent, half of those were related to timing issues related to the error resolution process under Regulation E.  

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NAFCU Regulatory Compliance Seminar.  October seems like a long way off but it will be here before you know it.  We are in the process of putting together the content and agenda - so please feel free to send in any comments, ideas or suggestions.  We love your input and this conference is really about you all so let us know what you need.

Here is what we are tentatively looking at so far (topics are subject to change, of course):

• TILA/RESPA Mortgage Disclosures
• Upcoming Mortgage Servicing Requirements
• The Latest on Overdraft Protection
• Remittance Transfers under Regulation E
• CUSOs
• Loan Participations
• Bank Secrecy Act Changes
• Social Media
• NCUA Update
• CFPB Update

I think that is a pretty good start - but let us know what you are looking for and how we can make NAFCU's 2012 Regulatory Compliance Seminar even better than the past.  

Recertification for NCCOs.  Remember, attending Regulatory Compliance Seminar is the best way to recertify your NAFCU Certified Compliance Officer (NCCO) designation.  Seminar offers 24 CEUs which is enough to fully recertify for two years.

Seattle, Washington.  Did I mention Seminar was in Seattle?  Right Downtown?  Well, now I have.  Hope to see you October 23-26, 2012!    

OFAC Search Tool; NCUA OSCUI Training; NAFCU Member Call-In

 Written by Sarah Zimmermann

• OFAC has announced the release of SDN Search. This is an online search tool that allows the user to search the SDN list. Of course OFAC maintains in the fine print that searches are conducted at the risk of the user and use of the tool does not constitute an official confirmation on its part of the existence (or nonexistence) of a match.

 

• NCUA's Office of Small Credit Union Initiatives (OSCUI) has announced its first free training video. OSCUI is planning a series of training videos, and this is the first in the series. This video is a bit of an overview of the role of the office within NCUA, and various programs that are available to small credit unions. The announcement details how credit unions may access the video, online or via DVD.

 

• NAFCU held its year-end member call-in yesterday. The call-in is free for members and is a great way to catch up on what NAFCU is up to. If you weren't able to tune in yesterday it will be available on the website in a few days. The call provided legislative, regulatory and economic updates, including a look ahead to what to expect in 2012. Topics included tax reform, Richard Cordray's CFPB nomination blocked by the Senate, MBL and data security legislation; the status and activities of NCUA and the CFPB; and Steve discussed a few hot compliance topics including member online authentication guidelines, ADA and ATMs, and NCUA's advertising rule.

 

• NAFCU members, our December Compliance Monitor is now available, and includes an article on free checking analysis.

 

CFPB; OFAC

Posted by Anthony Demangone

Does the CFPB even need a director?  Last week, I would have said that the answer to that question was quite clear. Today, I'm not so sure.

When U.S. Congressmen voted on the Dodd-Frank legislation regarding the CFPB, it was understood that the new agency would be run by a director that had to pass through the Senate confirmation process.  That was a very important concept, because those Congressmen who were on the fence about whether the new CFPB would have too much power could calm their fears knowing that the Director was subject to confirmation.  If a possible director had some flaw or had ideas that made too many Senators uncomfortable, that person would not be confirmed, or more likely - would not even be put forward into the confirmation process.

The naming of Elizabeth Warren as a Special Advisor to the President did ruffle some feathers, as that move seemed to run counter to the Dodd-Frank confirmation process. This trend has been exacerbated by recent news that the officials from Treasury Department  are confident that the CFPB can run just fine without a confirmed Director - even after the official transfer date has come and gone. Read more about this development here. (Bank Lawyer's Blog.) 

This development is a bit troubling.  Having a Senate-confirmed director is a well-designed example of "checks and balances."  Anyone who sat in Civics 101 can tell you that the fewer checks and balances you have, you'll see a greater likelihood for shenanigans.  Checks and balances: good.  Shenanigans: bad.  I know that a Director will eventually be named, but the longer the CFPB is allowed to function without one…well…shenanigans.  That’s all I can say.

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OFAC.  OFAC has issued guidance on "Weak AKAs"  or "weak aliases."  If you look at the SDN list, you'll see that many entries have AKAs or "known aliases" included with the entry.  OFAC notes that many of these are "weak," as they'll trigger a few false positives.  OFAC is now noting which AKAs are weak. For example, in the .pdf version of the SDN list, weak AKAs are inside double quotations.   Here are some FAQs about weak AKAs:

Am I required to screen for weak aliases (AKAs)? 
OFAC’s regulations do not explicitly require any specific screening regime.  Financial institutions and others must make screening choices based on their circumstances and compliance approach.  As a general matter, though, OFAC does not expect that persons will screen for weak AKAs, but expects that such AKAs may be used to help determine whether a “hit” arising from other information is accurate. 

Will I be penalized for processing an unauthorized transaction involving a weak alias (AKA)?
A person who processes an unauthorized transaction involving an SDN has violated U.S. law and may be subject to an enforcement action.  Generally speaking, however, if (i) the only sanctions reference in the transaction is a weak AKA, (ii) the person involved in the processing had no other reason to know that the transaction involved an SDN or was otherwise in violation of U.S. law, and (iii) the person maintains a rigorous risk-based compliance program, OFAC will not issue a civil penalty against an individual or entity for processing such a transaction.

 

There's No Substitute for Reading; This and That

Posted by Anthony Demangone

As we look toward 2011, here's another thought. Read.  

A good compliance officer has to devote some time each day for reading.  The reading list might include new regulations, guidance documents, blog postings, newsletters, and the like.  Background reading is a must.  If you ignore it long enough, you'll eventually say things such as..."When did NCUA issue that?"  Hopefully not last year. 

Here are some thoughts along those lines:

• Turn off the phone, and shut your door.  Give yourself the right reading environment, or the time you spend reading may end up being time wasted.
• Perhaps one day a week, come in early.  I've found that I can accomplish more between the hours of 6 and 9 a.m. than I can the rest of the day. 
• If something is interesting, but not time sensitive, add it to a reading list or pile.  When time presents itself, which may be in 2014, pick up the pile and start digging through it. 

I don't think you'll ever have enough hours in the day to read everything that you want, but the more time and effort you can devote to this task, the better off you'll be. 

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Here are some other items of interest:

OFAC.  They recently issued civil money penalties against two financial institutions. 

Regulation Z.  Last week the Fed issued an interim final rule to clarify a few issues regarding another recent interim final rule regarding MDIA requirements. 

Interchange.  Hey NAFCU members, we've created an overview of the Fed's recent proposal concerning debit card interchange fees.  

Things I Think that I Think

Posted by Anthony Demangone

Here are seven things that I think that I think.  But I'm not completely sure yet...

1. I think the days of lazy summers for compliance officers are over, if they ever existed.  People like to hold on to myths, and I think this is one of them.  
2. I think we should all be nice to anyone responsible for mortgage compliance issues. 
3. I think we should impose a page limitation on proposed regulations. If you can't get it done in 200 pages, perhaps the document is a wee bit complicated for general consumption.
4. I think that regulators expect a lot when they issue five rule-makings in one day.  It is hard to comply with things when there isn't enough time in the day to read proposals, let alone analyze them. 
5. Now that I think about it, I think there should be an issue limit on top of the "page limit" for regulators.  It is impossible for organizations to comply with scores of new laws, regulations and guidance documents when they are issued on top of each other.  I wonder what our world would be like if each regulator was only allowed to issue five major rule-makings or guidance documents each year? 
6. I think regulators should point to existing guidance documents first whenever possible, rather than creating new documents.  If existing guidance is adequate, enforce it. 
7. I think that's enough thinking for today.

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Here are a few items of interest.

Regulation and the cost of credit.  We warned folks that added layers of consumer protection and regulatory restrictions would drive up the cost of credit.  It looks like we may be right.  Your honor, I'd like to enter into evidence Exhibits One (CNN.com) and Two (WSJ.com).

OFAC.  A bank has paid roughly $92,000 to settle claims of OFAC violations. The original fine was more than $200,000, but the bank self-reported the violation.  I'm seeing an up-tick of OFAC violations.  It is hard to know whether this is a general trend or whether the issues were specific to the affected financial institutions.  In any event, it is something to track.

Reg Z.  The Fed issued Consumer Affairs letter CA 10-10 to announce bank examiner procedures for the August 22, 2010 Reg Z changes. 

This and That

Posted by Anthony Demangone

We'll get back to Regulation CC tomorrow.  Today, I'd like to share some items that have been getting dusty in my e-mail in-box.

• The Fed makes it official regarding the completion of the check processing restructuring.
• Have you seen the Ally Bank "pony" ad?  Cute and funny, right? Well, perhaps not for everyone. Read ICBA's take on this.  They were outraged that Ally implied that most banks are unethical and misleading.  Their letter is a strong reminder that other people see your advertisements.  Before you throw a competitor or a class of institutions under the bus in an advertisement, make sure you understand the risks.
• OFAC released its Annual Terrorist Assets Report.  It is a fairly interesting read, and it shows just how much has been blocked.  The charts/data could come in handy if you had to make an OFAC training presentation to staff.
• FEMA issued this letter last week to give folks a heads up that Congress was close to letting the National Flood Insurance Program lapse. (It has now officially lapsed, although action may be taken soon to fix the problem.) The letter includes a link to "guidelines" that FEMA created to address what happens in such "lapse" situations. 

• Rob Rutkowsi has put together a "best of issue" for the Current Issues in Credit Unions podcast.

A Little of This, A Little of That

This week, Representative Barney Frank introduced two bills that would ease burdens on financial institutions in the area of internet gambling.  Read all about it here.  I thought you might like to read about efforts to take stuff off of our plates.

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You may have heard FDIC Chairman Sheila Bair talk about the creation of a national systemic risk council.  NCUA Chairman Fryzel isn't against the idea, as long as NCUA keeps its independence.

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Hey NAFCU members: We put together a contact sheet to help you reach us.  It contains all the relevant email addresses and phone numbers.   Download Contacting NAFCU Compliance.  It also contains advice to ensure you get what you need.  Enjoy, enjoy!

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I love FAQ's.  Especially OFAC's.  For example, what do you do when someone who is on the SDN list tries to open an account at your credit union?  Check out the answer.

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Mandy and I celebrate our first anniversary this weekend.  Holy cow!  What a difference a year can make.

Here are five random things I learned this year:

1. "Absolutely!" is the best answer to any question from your spouse. 
2. Children are a blessing.  An expensive, sleep-depriving blessing.
3. Life can exist without a daily dose of ESPN.
4. I should buy stock in any company that makes diapers or baby formula.
5. I never thought getting someone else to burp would play such a major part in my day.

  For all you moms, Happy Mother's Day!  Enjoy your weekend, stay safe, and stay compliant.

Mortgage Fraud; OFAC Guidance

Yesterday, FinCEN released its latest mortgage fraud analysis.  In short, SARs filed on suspected mortgage fraud increased 44 percent in the 12 months ending in June 2008.

(Great.  More bad news.  One of these days, NBC news will lead with this shocker: Today, no depressing, dismal news to report. Now, on to Sports.  Unfortunately, today is not that day.)

Access the FinCEN report here.  If your credit union does mortgage lending, this would be a good read.

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OFAC has issued an FAQ regarding financial institutions' obligations with regard to property that is owned, directly or indirectly, 50% or more by persons whose property and property interests in property are blocked pursuant to an Executive Order or regulations administered by OFAC.  Access it here.

 

Frequently Asked Questions; delicious

Anthony has mentioned the value of Frequently-Asked-Questions documents in past blog postings here and here.  These documents can help compliance officers weave through convoluted regulations and find answers to common issues.  Here are a few that I've found useful in the past: 

Bank Secrecy Act

Anti-Money Laundering Compliance FAQs

FinCEN Answers to FAQs on BSA

FAQs on Final CIP Rule - February 2004

FAQs on Final CIP Rule - May 2005

FAQs Relating to BSA and Hurricane Katrina

OFAC

OFAC Q&As Prepared by Treasury

Privacy

FAQs on the Privacy Regulation

Share Insurance

FAQs from NCUA's October 7, 2008 Webinar on Share Insurance Changes

NCUA's FAQs on NCUSIF and Share Insurance

HMDA

FAQs on Regulation C (HMDA Reporting)

RESPA

FAQs on RESPA for Industry

Appraisals

FAQs on Appraisal Regulation and Interagency Statement*

*Note:  The Agencies recently announced a proposal to replace this interagency statement.

Third Party Due Diligence

FAQs from NCUA's January 29, 2008 Webinar on Third-Party Relationships

Flood Insurance

2008 Proposal on Interagency Q&As on Flood Insurance (would replace 1997 Q&As)

1997 Interagency Q&As on Flood Insurance

Servicemembers Civil Relief Act (SCRA)

HUD's Q&As for Lenders Regarding SCRA

Judge's Guide to SCRA - including Q&As

Health Savings Accounts

Q&As on Health Savings Accounts - IRS Notice 2004-50

Q&As on Health Savings Accounts - IRS Notice 2008-59

Check 21 Act

Consumers FAQs on Check 21

FAQs for Financial Institutions on Check 21

Check 21 FAQs on Financial Institutions Requirements - from ABA

Accounting for Loan and Lease Losses (ALLL)

Questions and Answers on Accounting for Loan and Lease Losses

Online Banking

FFIEC Guidance on Authentication in an Internet Banking Environment

Savings Bonds

FAQs on Savings Bonds

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You never know when these FAQ's will come in handy.  That is why I have mine bookmarked on my delicious page.

If you are wondering what delicious is, take a look at the user guide and slides I prepared for a talk on Organizing the Compliance Information Flow at NAFCU's 2008 Regulatory Seminar.

If you know of other valuable FAQ documents, please let us know by adding a comment to this post. 

OFAC Issues New Enforcement Guidelines

On Monday, OFAC published new enforcement guidelines in the federal register.  You can access them here.  These guidelines supersede earlier enforcement guidelines issued in 2003 and 2006.  The are effective immediately.

In short, OFAC wanted to share the process it navigates when it decides whether to punish an entity for OFAC violations, or whether to do anything at all.  From my reading, these guidelines are designed to reward institutions with strong OFAC compliance programs, and especially those that voluntarily disclose the violation to OFAC.  Conversely, those violations that are deemed to be reckless, willful, etc., will be treated more harshly.  An egregious case (yes, that's defined) where there was no voluntary self-disclosure could end up with a $250,000 penalty.

If you are in charge of your credit union's OFAC program, this is a must read. 

Here are some other OFAC resources:

• Other blog postings on OFAC.
• The BSA Manual's OFAC Chapter.
• OFAC's Official FAQ (Treasure Trove!)