SDBA eNews

August 2, 2018

SBA to Hold Rural Lending Event in Pierre

The U.S. Small Business Administration and U.S. Department of Agriculture Rural Development will present  a panel on rural small business lending and technical assistance on Wednesday, Aug. 8, in Pierre. 

The audience will learn about assistance and loans offered by the SBA, USDA Rural Development, Federal Deposit Insurance Corporation, U.S. Economic Development Administration, Governor’s Office Economic Development and representatives of banking associations that can assist entrepreneurs start or grow a business. The session will also provide valuable information for lenders wanting to assist rural entrepreneurs. 

The event, which is free and open to the public, will be held at the USDA facility at 1717 N. Lincoln. Ave. in Pierre. Registration begins at 8:30 a.m., with opening remarks at 9 a.m.  Sen. Mike Rounds' Office will also provide remarks. The Rural Lending Roundtable Panel will be held at 9:55 to 11 a.m., followed by a resource partner mingle. 

Entrepreneurs, agricultural-based businesses, businesses in rural areas, lenders and other organizations interested in learning about programs and services to assist rural businesses are encouraged to attend. Space is limited so pre-register to attend by emailing Jennifer Kelly

Treasury Recommends Pro-Innovation Updates to Fintech Regulation

The Treasury Department on Tuesday issued a long-awaited report recommending changes to laws and regulations affecting non-bank financial providers and the broader fintech environment. The fourth in a series of reports issued in response to President Trump’s executive order on core principles for financial regulation, this report includes several recommendations long advocated by ABA as part of its efforts to enhance financial innovation.

“We are encouraged to see that the Treasury Department’s fintech report recognizes the innovative technologies banks have already deployed and will continue to develop, both on their own and in partnership with others,” said ABA President and CEO Rob Nichols. “We continue to review the recommendations in the report, but we appreciate that many of the ideas are consistent with the principles set forth in the white paper ABA sent to Treasury earlier this year.”

Reflecting the ongoing evolution of technology, Treasury specifically recommended:

  • Removing “legal and regulatory uncertainties” related to consumer data access in order to move away from the controversial practice of “screen scraping”
  • Modernizing the Telephone Consumer Protection Act
  • Setting consistent data security standards for banks and non-banks
  • Codifying the “valid-when-made” doctrine
  • Encouraging small-dollar, short-term lending and rescinding the Consumer Financial Protection Bureau’s payday lending rule
  • Modernizing the IRS system to get tax transcripts through an application programming interface
  • Harmonizing state-level money transmitter requirements

Treasury also recommended that regulators at the state and federal levels enhance their cooperation by streamlining and coordinating examinations and clarifying guidance on bank partnerships with nonbank fintech companies. It also urged the OCC to continue pursuing its special-purpose national bank charter for fintech companies, and it recommended the creation of a “regulatory sandbox” that would allow companies to test innovative services while maintaining consumer protections.

“We welcome the flexibility Treasury recommends in allowing banks to partner with financial start-ups to deliver new products through trusted channels and the need for sensitive customer financial data to remain protected,” Nichols added. “ABA will carefully review Treasury’s payments recommendations to ensure they reflect the market-based approaches that serve customers so well today.”

OCC to Move Forward with Plans for Fintech Bank Charter

In related news, the OCC will move ahead with plans--first announced under Comptroller Joseph Otting’s predecessor--to consider applications from fintech companies for special-purpose national bank charters, the agency said Tuesday. The OCC released a policy statement in tandem with the Treasury Department’s report on fintech following a two-year process of collecting input from the public, including extensive engagement by ABA staff and leaders.

“On the heels of the Treasury report, we are pleased to see the Office of the Comptroller of the Currency moving forward with their new fintech charter that maintains the strict safety and soundness requirements all banks face today,” said ABA President and CEO Rob Nichols. “Today’s OCC announcement supports a dynamic banking industry where all players must meet the same high standards, face the same regulatory oversight and share the same affirmative responsibility to serve their communities.”

The OCC’s announcement comes as the financial industry sees accelerating technological change. “[C]ompanies that engage in the business of banking in new and innovative ways should have the same opportunity to obtain a national bank charter as companies that provide banking services through more traditional means,” the agency said. “The OCC will require these new entrants to the national banking system to adhere to the same high standards that apply to all national banks.”

Specifically, the OCC said that any special-purpose charters granted will be required to “demonstrate a commitment to financial inclusion,” meeting “a high standard similar to the Community Reinvestment Act’s expectations for national banks that take insured deposits.” The agency’s revised licensing manual describes the supervisory, capital, liquidity and contingency planning requirements it will impose. “[T]he OCC will not approve proposals that are contrary to applicable law, regulation, policy, or safety and soundness,” the agency said. “Exercising the OCC’s existing authority to grant special purpose charters does not alter existing barriers separating banking and commerce.” Read the OCC policy statement. Read the licensing manual supplement

Senators Urge FCC to Issue New TCPA Rules

Seven members of the Senate Commerce Committee--including Chairman John Thune--last week urged the Federal Communications Commission to issue new rules to ensure that consumers can receive important communications from their banks and other businesses. The letter was submitted as the FCC considers issuing new Telephone Consumer Protection Act rules after a federal appellate court in March struck down two key aspects of the FCC’s prior rules. 

“The FCC must make it more workable for legitimate businesses to stay in communication with consumers in a timely and effective manner,” the senators wrote. “It is imperative that the FCC develop an updated TCPA framework that both protects consumers and provides those calling in good faith with a reasonable means of communicating with their customers.” 

The senators urged the FCC to issue a new interpretation of an “automatic telephone dialing system” that would limit TCPA restrictions only to dialing equipment that generates telephone numbers in random or sequential order. ABA, the U.S. Chamber of Commerce and several other industry trade groups have asked the FCC to adopt this definition in a recently filed joint petition. Read the letter. For more information, contact ABA's Jonathan Thessin

Senate Passes ABA-Backed Flood Insurance Extension

With hours to spare, the Senate on Tuesday passed an ABA-supported measure extending the National Flood Insurance Program through Nov. 30, providing certainty for lenders and borrowers during this year’s hurricane season. The 86-to-12 vote sent the extension to President Trump ahead of the program's scheduled expiration at midnight on Tuesday.

ABA President and CEO Rob Nichols welcomed the Senate’s action. “Avoiding a lapse in program authority will protect borrowers from closing delays, additional costs and other complications,” he said. ABA will continue to work with lawmakers to secure a long-term NFIP reauthorization and reforms. 

WSJ Article Spotlights Big Credit Union's Attempts to Test Limits

A story in yesterday’s Wall Street Journal examined efforts by Pentagon Federal Credit Union to grow significantly and in the process “test regulatory limits,” as the headline put it. The CEO of PenFed--the nation’s third-largest credit union, with more than $23 billion in assets--describes a “no speed limit” philosophy and a goal of growing to $75 billion in assets by 2025, “pressing up against regulatory boundaries,” the reporter wrote.

For example, despite a compliance officer’s concerns about “operational risk,” PenFed had five pending mergers in January 2017, prompting the National Credit Union Administration to “privately warn PenFed off new deals,” according to the Journal. PenFed pursued this growth with an advertising tagline called “Great Rates for Everyone.” PenFed allows anyone outside its military fields of membership to join by paying a one-time $17 fee to a nonprofit organization.

The article also quotes a chief executive at a smaller credit union expressing concern that an “anything goes” approach to credit union membership risks the industry’s reputation. ABA shared the story with congressional offices yesterday to highlight the need for Congress to review the tax-exempt status of large credit unions. Read the article (subscription required) 

Fed Holds Rates Steady

As expected by analysts, the Federal Open Market Committee unanimously voted to maintain the federal funds rate at its current range of 1.75 to 2 percent. The committee's statement remained similar to that of its June meeting, when it raised rates, in noting that "further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term." Read the FOMC statement

SDBA to Hold Bank Technology Conference

The SDBA Bank Technology Conference set for Sept. 11-12 in Sioux Falls is designed to provide support as you keep on top of technology trends and scams, navigate the business of banking, and build and sustain your bank’s technology strategy. This conference will provide you with an opportunity to learn from industry experts, network with other IT colleagues, and visit with exhibitors to see and experience the latest in products and services.

Sessions will cover cybersecurity, website design, incident response plans, trends and developments, preparing for your next exam, recruitment and retention of IT personnel and much more. Presenters include Lee Wetherington, who will provide the bottom line on fintechs, bigtechs, branches, blockchain and more and how to navigate the most strategically important challenges and opportunities ahead and Dave DeFazio, who will talk about the Amazon Prime effect and surviving in the new subscription society. See the full agendaRegister to attend.

 There is also an opportunity for business partners to exhibit and sponsor at this year's conference. Learn more.

Compliance Alliance

Question of the Week

Question: Do we collect the government monitoring information for a temporary construction loan where the loan purpose was to purchase a lot and construct home?

Answer: As long as both the lot purchase money and the construction money will be permanently financed with a later loan, the entire loan is considered “temporary financing,” and therefore government monitoring information should not be collected.

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Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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Contact Alisa DeMers, SDBA, at 800.726.7322 or via email.