4-19-18 eNews

SDBA eNews

April 19, 2018

Innovate, Inspire, Ignite at 2018 NDBA/SDBA Annual Convention

2018 NDBA/SDBA Annual Convention As the banking industry continues to evolve, there is increasing pressure on banks to remain competitive. To chart the course for the future, bankers must explore new pathways, seek innovative partners and motivate people--all while focusing on bottom-line performance.

The 2018 NDBA/SDBA Annual Convention on June 10-12 in Fargo will offer new ideas in new formats and an opportunity for all to engage in finding practical, real-world solutions for success in today's environment. Join with counterparts from the Dakotas for three days of learning, networking, fun and friendships. You'll go back to work with a refreshed perspective and a renewed passion for banking.

Registration for the 2018 Annual Convention is now open. Register by May 17 and save on your fee to attend. See the full agenda and register to attend.

ABA, ICBA Write to Lawmakers in Support of 2018 Farm Bill

In a joint letter with the Independent Community Bankers of America on Tuesday, the American Bankers Association wrote to leaders of the House and Senate Agriculture Committees thanking them for their efforts to craft the 2018 Farm Bill. “Given the sharp reduction in the net farm income of more than 50 percent since 2013, a new Farm Bill is vital to the economic viability of our nation’s farmers and ranchers and our rural communities,” the associations said.

Acknowledging that many changes are likely as the bill moves through Congress, ABA and ICBA noted their support for a strong and robust commodities title, protecting and improving the crop insurance program, and enhancements to and greater flexibility for the United States Department of Agriculture’s guaranteed farm loan programs. They also urged the committee not to consider any expansion for the Farm Credit System in the bill. Read the letter.

SEC Proposes Best Interest Regulations for Broker-Dealers, Investment Advisers

In a long-awaited move, the Securities and Exchange Commission yesterday proposed two new rules and an interpretation to improve investors’ understanding of their relationships with investment advisers and broker-dealers. The new proposals would represent a different approach from the Labor Department’s fiduciary rule, which was recently vacated in its entirety by a federal appeals court.

Under the SEC’s proposal, a broker-dealer making a recommendation to a retail investor would have a duty to act in the best interest of that customer at the time the recommendation is made. Broker-dealers can demonstrate their compliance with this duty with three specific obligations: an obligation to disclose key facts about the relationship, including material conflicts of interest; a care obligation that requires broker-dealers to exercise reasonable diligence, care, skill and prudence in understanding products and the customer’s best interest; and a conflict-of-interest obligation that requires policies to identify, disclose and mitigate or eliminate conflicts.

The SEC approved a proposal to require investment advisers and broker-dealers to provide retail investors with a “relationship summary,” a standardized disclosure with a maximum of four pages that would highlight differences in services offered, legal standards that apply to each, possible fees and conflicts of interest. The proposal would also require clarity from investment advisers and broker-dealers and their employees in communications with current or prospective investors.

The commission also proposed an interpretation reaffirming that investment advisers have a fiduciary duty toward their clients. ABA staff are closely reviewing the lengthy proposals and will provide comments to the SEC. Comments are due within 90 days. Read more. For more information, contact ABA's Tim Keehan.

Senate Votes to Overturn CFPB Indirect Auto Lending Guidance

The Senate yesterday employed a little-used legislative procedure to reverse the Consumer Financial Protection Bureau’s 2013 guidance on indirect auto lending. In a 51-47 vote, the Senate passed a Congressional Review Act resolution that would invalidate the guidance, which sought to impose limits on how and what indirect lenders pay car dealers who provide financing and how much discretion dealers have to set loan terms and rates.

In a letter on Tuesday urging senators to vote for the resolution, ABA noted that the “the regulatory and enforcement uncertainty caused by this guidance has caused many banks to exit or curtail their indirect auto lending, which limits consumer choice and increases the cost of credit.”

Normally the CRA can only be used to invalidate regulatory actions issued within the previous 60 legislative days, but late last year, the Government Accountability Office formally ruled that the guidance constituted a rule, which--even though it was issued without notice and comment--was a general statement of policy with general applicability. That ruling restarted the CRA clock.

“ABA strongly believes that every automobile customer deserves to be treated fairly, and that there is no room for illegal discrimination of any kind in automobile financing,” the association added. “However, the [guidance] was issued without the opportunity for public comment on its legal underpinnings, critical review of its assumption and bases, and its impact on consumer access to convenient and affordable credit.” Read ABA's letter.

Trump Announces Federal Reserve Board Nominees

President Trump on Monday announced the nomination of Michelle Bowman to fill the designated community bank seat on the Federal Reserve Board of Governors--the first time the position has been filled since it was created by Congress during the Obama administration. A fifth-generation banker, Bowman held a senior role at Farmers and Drovers Bank in Council Grove, Kan., for more than six years prior to assuming her current role as Kansas Bank Commissioner in 2017.

“It’s essential to have someone on the Federal Reserve Board with community banking experience, and President Trump made an excellent choice in Miki Bowman,” said ABA President and CEO Rob Nichols said. “Her background both as a fifth-generation banker and a state regulator in Kansas will provide the Federal Reserve with valuable perspective as the Board sets monetary and regulatory policy.”

Trump also announced the nomination of economist and monetary policy specialist Richard Clarida to serve as Federal Reserve vice chairman. Clarida is currently a global strategic advisor at Pimco, an American investment firm, and previously served as assistant Treasury secretary for economic policy under the George W. Bush administration.

“Rich Clarida is an ideal choice to serve as vice chairman. He is a widely respected economist with a keen understanding of monetary policy and financial markets,” Nichols said. “As a former colleague of mine in the Treasury Department, I also know Rich is a dedicated public servant who will work well with his Board colleagues.” Nichols urged the Senate to advance both nominations swiftly.

Agencies Issue Warning About Russian Cyber Attacks

In a joint technical alert issued on Monday, the Department of Homeland Security, Federal Bureau of Investigation and the United Kingdom’s National Cyber Security Centre warned of malicious Russian cyber activity targeting government and private-sector entities, critical infrastructure owners and operators, and the Internet service providers supporting these sectors.

Recent Russian cyber attacks have targeted network infrastructure devices, such as routers, switches and firewalls, in an attempt to use compromised systems to “support espionage, extract intellectual property, maintain persistent access to victim networks, and potentially lay a foundation for future offensive operations,” the agencies said.

The alert provided information that these entities can use to help determine whether their systems have been compromised and recommended steps organizations can consider taking to reduce their exposure to this threat. In the event malicious cyber activity is suspected, organizations are encouraged to notify the National Cybersecurity and Communications Integration Center or their local FBI field office. View the alert.

Reserve Your Seat at the 2018 Dakota School of Banking

Through the use of highly-qualified instructors and a challenging curriculum, the Dakota School of Banking provides a multi-dimensional educational experience in banking. Sponsored by the NDBA and endorsed by the SDBA, the 2018 Dakota School of Banking will be held June 17-22 at the University of Jamestown in Jamestown, N.D.

By completing two, one-week summer sessions and intersession projects, students develop a range of skills to enhance current performance and qualify them for advancement. First-year courses provide a banking foundation and overview, and second-year courses provide a practical application of concepts and incorporate a banking simulation. Classroom lectures, case studies, role-playing, a computer-based simulation, networking and teamwork activities enhance learning and promote student networking.

Learn more and register to attend.

IRS Encourages 'Paycheck Checkup' for Taxpayers to Check their Withholding

The Internal Revenue Service is encouraging taxpayers to do a “paycheck checkup” to make sure they have the right amount of tax taken out of their paychecks for their personal situation.

To help taxpayers understand the implications of the Tax Cuts and Jobs Act, the IRS has unveiled several new features to help people navigate the issues affecting withholding in their paychecks. The effort includes a new series of plain language tax tips, a YouTube video series and other special efforts to help people understand the importance of checking their withholding as soon as possible.

The IRS emphasizes the new tax law changes make it especially important for specific groups of taxpayers to visit the Withholding Calculator on IRS.gov. This includes people in households with two or more jobs, who have children or dependents, who itemize their taxes, or who have high incomes or complex tax situations. The Withholding Calculator can help prevent employees from having too little or too much tax withheld from their paycheck.

The IRS encourages banks to share this information with their employees, business customers and individual customers.

Question of the Week

Question: Are we allowed to charge for periodic mortgage statements if we are a “small servicer” for mortgage servicing purposes, per Regulations X and Z?

Answer: Possibly, but we wouldn’t recommend it.

12 CFR §1024.12 of Regulation X (RESPA) states, “No fee shall be imposed or charge made upon any other person, as a part of settlement costs or otherwise, by a [mortgage] lender . . . or by a servicer . . . for or on account of the preparation and distribution of the HUD-1 or HUD-1A settlement statement, escrow account statements required pursuant to section 10 of RESPA (12 U.S.C. 2609), or statements required by the Truth in Lending Act (15 U.S.C. 1601 et seq.) [emphasis added].” Regulation Z does have a small servicer exemption from the periodic statement requirement (12 CFR §1026.41(e)(4))—accordingly, periodic statements are not a required statement for small servicers under TILA. Nevertheless, charging for periodic mortgage statements raises UDAAP concerns, and may draw the unwanted attention of bank auditors or examiners. Mortgage statement fees should only be assessed, if at all, by small servicers that can demonstrate the fees are necessary to compensate the bank for an unusual cost or burden.

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