SDBA eNews

January 24, 2019

USDA to Restore Full-Time Operation of Farm Service Agency

As the government shutdown enters its fifth week, the Department of Agriculture announced that it will temporarily resume full-time operations of its Farm Service Agency offices nationwide. Beginning today, FSA offices will be open daily until Feb. 8. Should the government shutdown extend beyond that date, offices will be open Tuesdays, Wednesdays and Thursdays if needed to provide administrative services, USDA said.

Under this new plan, the FSA will be able to offer more administrative services to farmers and ranchers, including: making new direct and guaranteed operating loans; signing documents related to “assignment of guarantee” and two-party checks; and processing transactions related to the Margin Protection Program and disaster payments to producers whose applications have already been approved. Additionally, all existing programs under Farm Production and Conservation will continue to operate.

Farmers will not be able to sign up for any new Farm Bill programs, such as dairy or commodity programs. FSA will also be unable to make new direct and guaranteed farm ownership loans during this time. Read more. For more information, contact ABA's Ed Elfmann

ABA: Banks of All Sizes Helping Borrowers Affected by Shutdown

Responding to a recent inquiry from House Financial Services Committee Chairman Maxine Waters (D-Calif.) about the financial industry’s response to the government shutdown, ABA President and CEO Rob Nichols yesterday highlighted the many ways that banks across the nation are working to support federal employees that are currently facing financial difficulties.

“Banks of all sizes have proactively stepped up to help their customers during this challenging period” by offering various forms of assistance, including fee waivers, loan modifications, payment deadline extensions, payroll advances and low- or zero-rate loans, Nichols said. He added that ABA is documenting these efforts through its dedicated webpage,

Nichols also reiterated the association’s call for Congress and the Trump administration to bring the shutdown to an end. “Our member banks across the country report that the shutdown is starting to take a toll on local communities, preventing customers from securing mortgage approvals and small business loans, while threatening even more harm if the impasse continues.” Read ABA's letter

ABA last Friday joined 384 other national and local trade associations representing all sectors of the U.S. economy in calling for an end to the government shutdown. “On behalf of the American business community, we urge Congress and the administration to immediately take steps to restore the full operation of the federal government,” said the letter, which was spearheaded by the U.S. Chamber of Commerce. “The current shutdown--now the longest in American history--is causing significant and in some cases lasting damage to families, businesses, and the economy as a whole.”

The groups urged Congress and the president to seize one of many compromise paths that have been floated by Republicans and Democrats. “Failing to seize on one of those compromises that can pass Congress and be signed into law is unacceptable,” they said. Read the joint letter.

ABA Supports Proposals to Tailor Regulatory Framework for Regional Banks

ABA on Tuesday offered its support for two proposals designed to tailor enhanced prudential standards for banking firms with $100 billion or more in assets. The Association noted that the proposals are “a welcome recognition” that existing regulations do not sufficiently distinguish among banks with varying risk profiles.

Incorporating feedback from several banker-led working groups, ABA also offered several recommendations for further improving the enhanced prudential standards framework. For example, while the Association agreed that the factors used to sort banks into categories were appropriate, it emphasized that these factors--including asset size, cross-jurisdictional activity, off-balance sheet exposures and others--should be “as precise and aligned to actual risk exposure as we can reasonably realize.” ABA called for these factors to be indexed to account for changes in firms’ relative potential systemic risk level.

ABA also encouraged the agencies to continue to review how the current set of prudential standards can be improved. The review should include the Basel III liquidity standards, the amendments related to tailored resolution and capital plans, as well as an ongoing effort to monitor and refine existing prudential standards, the Association said. Read the letter. For more information, contact ABA's Hugh Carney, Hu Benton or Alison Touhey

ABA Urges FDIC to Rescind Guidance on Deposit Advance Services

In a comment letter to the FDIC on Tuesday, ABA reiterated its call for the agency to rescind its 2013 guidance on direct deposit advance services. The letter came in response to a request for information on how the FDIC can encourage banks to offer small-dollar credit products that are economically sustainable while meeting the needs of bank customers.

The 2013 guidance established prescriptive supervisory expectations for underwriting, credit risk monitoring and limits on customer usage that caused almost all banks to discontinue those services, ABA noted, adding that it “stands as a significant barrier for banks that seek to establish or expand a single-payment credit program, a product that meets many consumers’ needs for short-term sources of funds.”

As the FDIC reconsiders its approach to small-dollar products, ABA also urged it to create a regulatory framework that permits banks to use automated, efficient underwriting and to reject a regulatory approach that imposes prescriptive underwriting standards, relies on use of an APR to assess the affordability of short-term small dollar credit or imposes arbitrary limitations on reborrowing. Read the letter. For more information, contact ABA's Jonathan Thessin

IRS Issues Final Rules on Pass-Through Deduction for S-Corp Banks

The IRS last Friday issued its final rules providing guidance on how Subchapter S corporations may calculate the 20 percent deduction for pass-through entities included in the 2017 tax reform law. ABA staff continue to review the 247-page package. While generally positive, preliminary analysis suggests mixed results for a few issues of concern to S-corp banks.

In line with the rules as proposed, core banking activities like taking deposits and making loans qualify for the deduction. The rules also clarified that most income from originated loan sales qualifies. However, the IRS declined to issue a blanket qualification for all activities of a regulated bank--as ABA, the Independent Community Bankers of America and the Subchapter S Bank Association repeatedly advocated in letters and meetings with key staff.

The IRS also declined to increase the de minimis levels for non-qualifying activities, but it clarified that non-qualifying activities exceeding a de minimis level only disqualify net income from that activity, not all income of the bank. This will require S-corp banks with non-qualified activities, including some wealth management functions, to maintain records and determine the gross and net income from those activities.

ABA staff will soon issue a more detailed analysis and host a webinar to provide further information. Read the final rules. For more information, contact ABA's John Kinsella or Curtis Dubay

SDBA Provides Weekly Legislative Update Podcast

The SDBA is now providing its weekly Legislative Update as a podcast. The Legislative Update is a recap of weekly key legislative action by SDBA President Curt Everson on Fridays during session. 

You can listen to the podcast via a direct link or your favorite podcast app. Search for "SDBA Legislative Update." Listen to last week's Legislative Update Podcast. Or listen to the podcast via Anchor.

The SDBA will continue to also provide the weekly Legislative Update as a pdf file. You can find all of the SDBA's publications during session posted on the SDBA's website. Questions, contact the SDBA's Alisa Bousa

Keynote Speakers Announced for ABA Washington Summit

Donna Brazile, former chairman of the Democratic National Committee, and Republican strategist Alex Castellanos have been announced as keynote speakers for ABA’s Washington Summit, to be held April 1-3 in Washington, D.C. Brazile has been a contributor to ABC News and CNN, and has worked on every presidential campaign since 1976. Castellanos has served as communications consultant to seven U.S. presidential campaigns and is also an ABC News contributor.

The Summit is the largest annual gathering of banking leaders in the nation’s capital, giving bankers a unique opportunity to advocate for meaningful changes that grow the economy and give bank customers more choices.

Registration is free for bankers, bank directors and trustees and ABA service members. Attendees are also encouraged to register for ABA’s Mutual Community Bank Forum, Emerging Leaders Forum and Women’s Leadership Forum, all of which are held in conjunction with the Summit. The SDBA offers a $500 stipend to help with the travel expenses of one person from each SDBA member bank to attend the Summit. The SDBA will issues stipends following the event. Learn more and register

Hacker Hour: Key Components of Your Annual GLBA Report

The Gramm-Leach Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, mandates that financial institutions protect the confidentiality and security of customer personally identifiable financial information. Communicating to the Board of Directors what was truly accomplished during the past year in an annual state-of-information-security report allows them to understand and approve how the organization is complying with GLBA. Creating a repeatable, specific GLBA report template will improve the efficiency of the reporting process and relieve some of the stress of aggregating all the data needed for a comprehensive report. 

Join SBS for Hacker Hour: Key Components of Your Annual GLBA Report on Wednesday, Jan. 30, as they outline a comprehensive and repeatable template that can be used to build your own annual GLBA report. SBS will walk through the essential report components and troubleshoot common issues. The free webinar will be held at 2 p.m. CST. Learn more and register

Compliance Alliance

Question of the Week

Question: We have some confusion in regards to using a closing disclosure to reset the tolerance on a “0” tolerance item (origination charge) if there is a bona fide change in circumstance. On Nov. 8, 2018, the customer requests an increase in the loan amount to $115,000, which is approved since the appraisal would allow for additional funds. The initial closing disclosure had not been delivered before this requested change in circumstance. The processor prepares an initial closing disclosure using a loan amount of $115,000 and shows the increased origination charge and a closing date of Nov. 19, 2018. This was given to the borrower in person. My question is, since there was adequate time before the closing date of Nov. 19, 2018, should we have not issued a new loan estimate on Nov. 8, 2018, showing the increased loan amount and origination charge since the CD did not have to go out on Nov. 8, 2018?

Answer: Under the recent "black hole" amendments, the bank would be allowed to "reset" these on the CD rather than the LE. Note, however, that it still has to be given within three business days of the changed circumstance and that may or may not have been the case from what you described above, as set out here:

…The creditor must provide the consumer with the closing disclosure reflecting the revised estimate at or before consummation and within three business days of receiving information sufficient to establish that the changed circumstance or other triggering event has occurred. …

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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 Bousa, SDBA, at 800.726.7322 or via email.