2021 Alumni Compliance School 6/24/2021
Intellectual Property of the IBA 1
The Future of Regulatory Compliance
June 24, 2021
Topics for Discussion
Setting the “Fair Banking” Tone• UDAAP Rescission Statement
• Fair Lending
• Mortgage Servicing
• Debt Collection Watch for…• HMDA Reporting – Open-end LOCs
• More CRA Reform
• NFIP Updates
• FinCEN’s Beneficial Ownership Registry
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Intellectual Property of the IBA 2
Evolution of Fair & Responsible Banking
Deposits
Lending
Advertising
Add-on products
Overdrafts
Payment products
Loan servicing
Deposit servicing
Fair Banking
Unfair, Deceptive & Abusive Acts & Practices
Focus is on consumers
Looks beyond technical compliance to impact on consumers
Complaint driven
UDAAP
Established the CFPB
Focus on preventing consumer harm
Consumer education
Expanded scope beyond banks
Dodd Frank Act
Unfair
Deceptive
Protects consumers & businesses
UDAP
Dealer paper
Mortgage originations
Consumer installment
Credit cards
Fair Lending
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Fair & Responsible Banking• Focus of “fair banking” is preventing consumer harm
• Applicable to all product & servicing offerings
• Consumer harm can occur EVEN when bank is
technically compliant
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“Consumer Harm” is an actual or potential injury or loss to a
consumer, whether such injury or loss is economically quantifiable
(e.g., overcharge) or non-quantifiable (e.g., discouragement). It may
be caused by a financial institution’s violation of a federal consumer
protection law or regulation directly or through a third party or
reflects weaknesses in a financial institution’s compliance
management system.
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Fair & Responsible Banking
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UDAAP Policy Statement Rescission
2020 Policy Statement re: “Abusive”
- Harm must outweigh benefit
- No dual pleading of more than standard
- Monetary relief only for lack of good faith effort
2021 Rescission Statement
- Abusive is interfering with consumer’s ability to understand
- Taking advantage of vulnerable persons
- Dual pleading may be applicable
- “Vigorous” enforcement ahead
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UDAAP Policy Statement Rescission
• Think UDAAP risk (consumer harm) in every facet of
your business strategy & compliance program
• Interaction with consumers (focus on vulnerable consumers)
• Create new products & services
• Develop and update disclosures
• Consider new vendor relationships
• Engage in new marketing efforts
• Create or update new training programs
• Implement audit/monitoring programs
• Review customer complaints
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Fair Banking Fair banking is illustrated through UDAAP enforcement
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2020 UDAAP
Enforcement
Deceptive Advertising
Misleading statements re: loan
costs & terms
Loan Servicing
Mitigation & foreclosure practices
Auto loan repo practices
Payment Processing
Misleading promotion of loan
acceleration payment plans
Deposits
Account opening practices related to overdraft services & opening accounts
w/out consent
2021 Alumni Compliance School 6/24/2021
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CFPB Report to Congress
2020 Fair Lending Report to Congress
• CFPB takes risk-based approach to fair lending
supervision, focusing on areas that present substantial risk
of credit discrimination
• 13 targeted fair lending reviews in 2020
– Most common supervisory findings: weak or
nonexistent fair lending policies and procedures, risk
assessments, and training
• Future focus – ECOA & Reg. B compliance w/ rule-making
related to small business (women & minority owned) data
collection & HMDA data
June 24, 2021 2021 Alumni Compliance School 9
FDIC on Fair Lending
FDIC Fair Lending Resource Center
• https://www.fdic.gov/resources/bankers/fair-lending/
• Links to Reg. B, ECOA, FHA & exam procedures, policy statements,
training videos, webcasts, teleconferences
• New article – “Identifying and Mitigating Potential Redlining Risks”
– Understand the bank’s market area, and the demographics of
the geographies within that area
– Evaluate the methods the bank obtains loan applications,
including any marketing or outreach efforts and branches
– Assess the bank’s lending performance within the market area
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Mortgage Servicing
Mortgage Servicing COVID-19 Proposal
• April 9, 2021 Federal Register
• Comment period closed: May 10, 2021
• Final rule expected July; Proposed effective date: Aug. 31, 2021
• Goal: to provide additional assistance to homeowners
experiencing COVID-19 related hardships
• Does not change coverage of existing Mortgage Servicing Rule
– Small servicers would NOT be subject to these new provisions
• Those, who with affiliates, service 5,000 or less mortgages
in preceding year, all of which the servicer is creditor or
assignee
June 24, 2021 2021 Alumni Compliance School 11
Mortgage Servicing
Mortgage Servicing COVID-19 Proposal
• CFPB Fast Facts Summary of Proposal
– Require additional actions during early intervention live contact
– Permits services to act on incomplete loss mitigation applications for
short-term forbearance programs & requires they contact borrower to
ask if they want to complete application & proceed w/ full loss mitigation
evaluation
– Permits servicers to offer certain loan modifications based on
incomplete loss mitigation applications
– Prohibit servicer from making first filing or notice of foreclosure until
after Dec. 31, 2021 (Not limited to COVID hardships)
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Debt Collection Rules• Dodd Frank Act mandate to CFPB related to debt collection
– CFPB issued interim final rule on temporary eviction protections
• Effective May 3, 2021
– CFPB issued two final rules (Oct. and Dec. 2020) to implement DFA mandates
• CFPB plans to delay effective date to January 29, 2022
• In general terms, the rules:
– Addresses communications in connection with debt collection
– Prohibits harassment or abuse, false or misleading representations, and unfair
practices in debt collection
– Clarifies consumer disclosure requirements
– Prohibits certain practices related to time-barred debt
• First party debt collectors (banks) are exempt from rule
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Debt Collection Rules
• Call Frequency Limits
– Debt collectors may not place more than 7 collection-related
calls to person within 7 consecutive days
– After a successful telephone conversation re: the debt w/ the
debtor, debt collectors must wait 7 days before calling again
• Voicemails count toward the 7
• Subject to some exceptions:
– If debtor consents to calls
– To debtor’s attorney, credit reporting agency, etc.
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Debt Collection Rules
• Time & Place Restrictions
– Rule prohibits debt collector from communication at any unusual
time or place the debt collector knows (or should know) to be
inconvenient
• Emails and text messages are covered
• Before 8 am and after 9 pm in consumer’s time zone are
presumed to be “inconvenient”
• Debtor can designate other “inconvenient” times/places
• Prohibition on contact applies whether on work phone or
debtor’s cell line while at work
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Debt Collection Rules• Validation Information Requirements and
Disclosures
• Prohibition related to Time-Barred Debt
– Rule prohibits taking threatening legal action
on time-barred debts
– Time-barred debts – a debt for which the
applicable statute of limitations has expired
• Generally 7 years in Iowa
• Such debts may still be collected using
other practices such as telephone calls and
sending letters
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Debt Collection Rules
Question of the day:
If the CFPB debt collection rule prohibits certain practices
by third-party debt collectors it views as abusive,
harassment or unfair, how does your bank justify the same
practices as acceptable?
• Could this be the future of UDAAP?
• How do your debt collection procedures align w/ rule concepts?
• If you hire debt collectors, does your oversight incorporate
monitoring for the CFPB’s new rule?
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HMDA Reporting Open-end LOCs
• HMDA Open-end Threshold is Lowered to 200
– Starting 2022 reporting year
• Applications w/ final action dates on our after Jan. 1, 2022
• For LAR to be filed by March 1, 2023
– Must exceed threshold 2 consecutive years to trigger reporting
• Originated 200 or more reportable dwelling-secured open-
end LOCs in BOTH 2021 and 2020
• Open-end = ability to advance, pay down, advance again
– Don’t count closed-end, multiple advance loans
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HMDA Reporting Open-end LOCs
Reportable Dwelling-Secured Open-end LOCs
Consumer purpose LOCs
• Dwelling secured
• For ANY consumer
purpose
Business purpose LOCs
• Dwelling secured
• Limited to Home
Purchase, Refinance or
Home Improvement
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Subject to normal exceptions:• Original loan amounts less than $500
• Temporary loans
• Ag purpose or secured by dwelling located on property used for ag purpose
CRA Reform
• Per May 18, 2021 OCC Bulletin, the OCC:
– Will “reconsider” June 2020 Final Rule
– Permit suspension of development of systems to implement
rule provisions that would be effective Jan. 1, 2023 & Jan. 1,
2024
– Does not plan to finalize Dec. 2020 proposed rule that would
set exam benchmarks, testing thresholds, etc.
– Is discontinuing CRA information collection efforts related to
Dec. 2020 Federal Register notice
• New director of OCC to be appointed by Biden
– Interagency rule-making effort anticipatedJune 24, 2021 2021 Alumni Compliance School 20
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CRA Reform• Does not affect rule requirements that went into effect
on October 1, 2020 for National Banks:
– New CRA Public Notice requirements (per June 2020 rule)
– CRA Public File contents
• Eliminates requirement for:
– CRA Disclosure Statements (Large/ISBs)
– HMDA Disclosure Statement Notice of Availability
– Quarterly Loan-to-Deposit ratios (Small Banks)
• Requires map of each AA showing boundaries of area
and identify counties or county equivalents (rather than
census tracts)
June 24, 2021 2021 Alumni Compliance School 21
CRA Reform• Federal Reserve ANPR
– Issued October 19, 2020. Comment period closed
– Fact Sheet
• Goals– Strengthen regulation to ensure LMI banking needs are met
– Promote financial inclusion
– Address changes to banking industry
– Bring clarity, consistency, and transparency to tailored PEs
– Minimize data collection and reporting burden
– Clarify and expand eligible CRA activities focused on LMI
communities
– Recognize special circumstances for small banks in rural areasJune 24, 2021 2021 Alumni Compliance School 22
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NFIP Update
• Two pending set of Flood FAQ
– Update / Reorganization of existing Interagency Flood FAQ
• Issued June 2020, Comment period closed
– New Private Flood Insurance FAQ
• Issued March 2021, Comment period closed
– Anticipate final FAQ for both will be released together
– Likely in November or December
• Reauthorization of NFIP
– NFIP set to expire Sept. 30, 2021
– Senate Banking Hearing on May 18 on reauthorization
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NFIP Update
FEMA Risk Rating 2.0
• Updates National Flood Insurance Risk Rating Methodology
• New rating methodology based on flood risk variables
2021 Alumni Compliance SchoolJune 24, 2021 24
August 1, 2021
NFIP policy holders can
contact insurance
company for info
October 1, 2021
New policies will be subject
to the new rating
methodology
October 1, 2021
Existing policy holders
eligible for renewal can
utilize decreased premiums
April 1, 2022
Remaining policies
renewed on or after this date will be subject to new rating methodology
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NFIP Update
Key Points:
• Rate increases limited to 18% per year, in general
• Premium discounts available for pre-FIRM subsidized and newly
mapped properties
• Transfers of discounts still allowed when policy is assigned to new
owner
• Discounts still available in communities participating in the
Community Rating System
• Risk Rating 2.0 Fact Sheet
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Expired! No problem!
Standard Flood Hazard
Determination Form• Expired 10/31/18
• According to FEMA website,
updated version is pending approval
• Use version with 10/31/18 expiration
date until further notice
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Beneficial Ownership Registry
• FinCEN/Treasury issued ANPR 4/5/21. Comment period
closed.
• FinCEN is required to:
– Establish Beneficial Ownership Registry per Corporate
Transparency Act of 2020 (Part of National Defense Act for
Fiscal Year 2021)
– Maintain collected information in confidential, secure and non-
public database
– Disclose collected information to certain government agencies
for purposes defined in CTA and to FIs to assist in meeting CDD
obligations
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Beneficial Ownership Registry
• CTA establishes new framework for reporting,
maintenance, and disclosure of Beneficial Ownership
Information
• Timeline:
– Within one year of CTA enactment (1/1/2022)
• Prescribe procedures / standards governing reporting of Beneficial
Ownership info and identifier
• Specify info required to be reported and reporting method
• Specify method of reporting changes to Beneficial Owners
• Specify reporting requirements for exempt subsidiaries and exempt
grandfathered entities that cease to be exempt
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Beneficial Ownership Registry Exemptions
Reporting Companies
Highly Regulated
Sectors
501(c) Entities
Companies with at Least
Mid-Size Operations
Inactive Companies
Entities that
must register
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Beneficial Ownership Registry• Timeline (cont.):
– On or after 1/1/2022
• Form and manner info must be provided by FinCEN to FI for CDD
purposes
• Protocols to protect security and confidentiality of BO info
• Safe harbor for persons seeking to amend previously submitted info
that is inaccurate
• Challenges:
– Registration method and timing
– Consent of reporting entity required prior to FI access
– Some definitions different between CTA and CDD rule
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Anti-Money Laundering Act of 2020• More to come
– Immediate increase in penalties
• Double the maximum for repeat violations
• Three times violator’s profit resulting from violation
• Repayment of profits / bonuses
• Bars individuals convicted of egregious violations of BSA from
serving on BOD for 10 years
– Expanded purpose to emphasize preventative measures
• Includes antiquities dealers
• Covers virtual asset service providers
– Promotes information sharing between public and private sectors
• Requires examination of FI’s efforts to incorporate national
AML/CFT priorities into risk-based programJune 24, 2021 2021 Alumni Compliance School 31
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