SRMD white.png
Lighthouse _2_.jpg

ONLINE COMPLIANCE CONSULTING

MAY 2023 NEWSLETTER

What's New?

The Online Compliance Consulting Dashboard has been enhanced!

NEW REGULATORY LINKS

Direct Links to Supervisory Letters, Advisories, & Bulletins

UPDATED COMPLIANCE CALENDAR

Effective Date for CFPB's Int. FR on LIBOR Transition

UPDATED KNOWLEDGE BASE

New Q&As on Small Business Lending Data Rule

UPDATED COMPLIANCE ALERT

Reg. Z LIBOR Transition Rule

NEW TRAINING RESOURCE

New Quick Bite - Targeting High-Risk Transactions

UPDATED HOT TOPICS

Visit compliance.smslp.com for more information.

Calendar Items

05/15 - CFPB Int. Final Rule Supporting LIBOR Transition Effective

05/30 - HMDA LAR Quarterly Submission (Large Filers)

Featured Content

New Consumer Financial Protection Circular

On May 10th, the CFPB published a new Consumer Financial Protection Circular 2023-02.

 

The Circular addresses the reopening of deposit accounts that were previously closed


What guidance is provided?

 

Circular 2023-02 does provide extensive background and analysis on the topic. However, a high-level summarization of this guidance was provided in the form of the following Q&A:

 

Q – “After consumers have closed deposit accounts if a financial institution unilaterally reopens those accounts to process a debit (i.e., withdrawal, ACH transaction, check) or deposit, can it constitute an unfair act or practice under the Consumer Financial Protection Act (CFPA)?”

 

A – “Yes. After consumers have closed deposit accounts, if a financial institution unilaterally reopens those accounts to process debits or deposits, it can constitute an unfair practice under the CFPA. This practice may impose substantial injury on consumers that they cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or competition.”

 

So what's a financial institution to do?


An important first step is for Deposit Operations, Compliance, and other stakeholders to review the CFPB’s Circular, while also considering the institution’s process for handling transactions that are presented after an account is closed. 

 

As the Circular highlights, the process of account closure takes time and effort and can vary between institutions. The CFPB noted that the closure can take several steps to process and an institution “typically returns any funds remaining in the account to the consumer at closure and the consumer typically must pay any negative balance at closure.” However, they also note that some institutions “require customers to provide a certain period of notice (e.g., a week) prior to closing the account to provide time for the financial institution to process any pending debits or deposits.”

 

Going forward, institutions should have a clear understanding of their own process. That process should be clearly documented so that there is no ambiguity amongst employees as to handling account closure and how transactions are handled after that closure. Also, determine whether your account agreement addresses the account closure process so you will have an understanding of what has been disclosed to your customer.

 

As the Circular contains an analysis of situations that have constituted a violation of the prohibition on unfair acts or practices, any review should maintain a focus on any practices that could cause substantial injury to consumers that the consumers cannot reasonably avoid.



Interested persons may find the CFPB’s Circular 2023-02 here.

Another SAFE Act?

As reflected in recent news, those in the financial industry have likely heard new discussions about the SAFE Act. And, those in compliance might have thought to themselves…We already comply with the SAFE Act, which mandates a nationwide licensing and registration system for residential mortgage loan originators. What is going on?

 

Don’t get confused!

 

The current topic of discussion relates to the “SAFE Banking Act of 2023,” as represented in H.R. 2891. This bill, introduced in April, is currently in the House and was referred to the Subcommittee on Economic Opportunity earlier this month. So what is this bill? As shared in its text, the bill’s purpose is:

 

To create protections for financial institutions that provide financial services to State-sanctioned marijuana businesses and service providers for such businesses, and for other purposes.”

 

As financial institutions are aware, the provision of services in connection with marijuana-related businesses can be problematic as certain activities can be legal in some states, while being illegal under federal law. 

 

While H.R. 2891 is in its infancy, it can be a welcome support for institutions that provide such services. While the bill addresses a variety of items in 15 sections, the current version includes a “safe harbor” for depository institutions which prohibits a federal banking regulator from terminating or limiting deposit or share insurance because an institution provides or has provided services to a “State-sanctioned marijuana business or service provider.”

 

Institutions that support, or our considering supporting, the provision of services to marijuana-related businesses should remain aware of developing actions related to this bill. Interested persons can follow the progression of the bill, and sign up for alerts, here.  

Attn.: BSA Officers - Updated FATF Assessments

The Financial Action Task Force (FATF) global focus is on tackling money laundering and terrorist financing.  Their research on laundering and funding of terrorism is used to mitigate risk by promoting global standards. They also assess actions taken by countries to combat such activities and mitigate risk.

 

Persons that are unfamiliar with FATF and would like to see a short video clip about what they do, can access that information here


At the end of April, FATF issued their report providing Consolidated Assessment Ratings. As highlighted on the FATF website: “Through its nine FATF-Style Regional Bodies (FSRBs), the FATF brings together a global network of 205 jurisdictions that have each committed at the highest political level, to implementing the FATF Recommendations. FATF and FSRBs conduct peer reviews on an ongoing basis to assess how effectively their respective members' AML/CFT measures work in practice, and how well they have implemented the technical requirements of the FATF Recommendations.”

 

Information in the Consolidated Assessment Ratings provides updated information on country ratings for effectiveness and compliance. 

 

Interested persons may find FATF’s issuance here.

CFPB's 1071 Final Rule Challenged

On April 26th, the Texas Bankers Association (TBA) and Rio Bank filed a formal complaint in the U.S. District Court for the Southern District of Texas, McAllen Division, related to the CFPB’s final rule to amend Reg. B to implement changes of 1071 of the Dodd Frank Act.

 

As shared in the complaint, the plaintiffs contend that efforts to bolster loans made to minority and women-owned businesses will be hindered by the new rule. Further, the complaint alleges:

 

“That is because the agency took the original three pages of legislation and the 13 reporting data points required by the statute and turned them into almost 900 pages of rulemaking — a new Final Rule that requires banks to develop and implement new software and compliance mechanisms to comply with over 80 reporting requirements that have been exponentially grown by the CFPB since the Act requiring this Rule was passed.”

 

Interested persons may find related information on the TBA website here. Of note, the sharing of information about this legal action is not intended to convey that an institution should pause any efforts to prepare for and implement the provisions of the new final rule.  

Convenient and Affordable Compliance Assistance

Do you know someone that needs help preparing for the upcoming regulatory requirements? As you know, we can help with our Online Compliance Consulting Services, which combines the ease of online tools with the guidance of a compliance expert.

 

Clients have access to an online compliance expert who:

  • Answers compliance questions;
  • Reviews new policies and disclosures for compliance; and
  • Trains Boards of Directors on upcoming regulatory requirements.

 

Clients also receive access to our online tools, including:

  • Our Compliance Calendar;
  • Our Regulatory Deadline resources and Implementation Checklists enable our clients to determine what steps they need to take to comply with new requirements and track progress as they implement them;
  • Our exclusive Knowledge Base of compliance Q&As; and
  • FREE access to our quarterly Be Prepared! webinar series.

 

For anyone interested in a free Demo, please have them contact Rhonda Coggins at 

(512) 703-1509.

ACCESS THE DASHBOARD