SDBA eNews

March 7, 2019

FFIEC Issues Policy Statement on Examination Reports

As part of its ongoing exam modernization initiative, the Federal Financial Institutions Examination Council yesterday issued a policy statement aimed at promoting clarity and consistency of examination reports. The policy statement—which is intended to reduce regulatory burden for community banks—includes principles that “set forth minimum expectations of what should be included in all reports of examination.”

Among other things, the principles establish that all ROEs should present conclusions and issues in order of importance; document the condition and risk profile of the institution; discuss the adequacy of the institution’s risk management practices; and document issues of supervisory concern or warranting prompt corrective action.

Concurrently, the agencies are rescinding their 1993 Interagency Policy Statement on the Uniform Core Report of Examination. Read the policy statement.

Fed Floats Rule Change Targeting 'Narrow Bank' Concept

The Federal Reserve yesterday sought public comment on whether it should reduce the rate of interest paid on excess reserves for banks with a so-called “narrow” model that involves holding a large proportion of its assets on reserve at the Fed. Specifically, the Fed floated an approach of paying zero interest on the the excess balances of these institutions.

The advance notice of proposed rulemaking appeared to take aim at the narrow bank model, which involves taking deposits from institutional investors and holding virtually all of them at the Federal Reserve Banks--and passing on the IOER rate to depositors, less a small spread to cover operational expenses. The New York Fed has not approved the membership application of a narrow banking firm called TNB; that matter is currently in litigation.

“The Board is concerned that [pass-through investment entities], by maintaining all or substantially all of their assets in the form of balances at Reserve Banks and having the ability to attract very large quantities of deposits at a near-IOER rate, have the potential to complicate the implementation of monetary policy,” the Fed said. In addition, the Board is concerned that PTIEs could disrupt financial intermediation in ways that are hard to anticipate and could also have a negative effect on financial stability.” Comments on the ANPR are due 60 days after it is published in the Federal Register. Read the ANPR.

ABA Opposes CFPB's Premature Debt Collection Data Survey

In a letter to the Consumer Financial Protection Bureau on Tuesday, ABA objected to the bureau’s request to the Office of Management and Budget to conduct a debt collection survey, citing the need for the CFPB to solicit public feedback before moving forward. The CFPB’s survey, which attempts to measure consumer understanding of model debt validation notices and model debt collection disclosures, has not been subjected to broad public comment as required under the Paperwork Reduction Act, ABA pointed out.

“We support the bureau drafting and releasing a ‘model’ validation notice, which would promote consumer understanding while curtailing frivolous litigation regarding the sufficiency of these notices,” ABA said. “However, the content and form of the notice should be considered as part of the rulemaking process.” The association added that consumer testing should only move forward once the CFPB has heard from all interested parties via a notice and comment process.

ABA has opposed the bureau’s previous two attempts to conduct a debt collection survey and has broadly opposed CFPB attempts to collect data without providing the public a meaningful opportunity to comment on the utility and feasibility of the data being collected. Read the comment letter. For more information, contact ABA’s Diana Banks.

CFPB Seeks Public Comment on PACE Loans

The Consumer Financial Protection Bureau on Monday requested public feedback on Property Assessed Clean Energy (PACE) loans, a controversial type of financing that allows homeowners to pay for energy-efficient retrofitting—such as solar panels and high-efficiency air conditioners—through their property tax assessments, and which often take lien priority over the first mortgage lien.

S. 2155, the regulatory reform law enacted last year, requires the CFPB to apply the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to PACE loans. ABA has long raised concerns about these loans over their lack of full consumer protections and supported efforts to enhance that protection.

The Bureau specifically requested examples of PACE loan documentation, current origination standards and practices, to which parties to a PACE loan TILA’s civil liability provisions should apply, unique features of PACE loans and potential implications of regulating PACE loans under TILA. Comments are due 60 days after the advance notice of proposed rulemaking is published in the Federal Register. Read the ANPR. For more information, contact ABA’s Joseph Pigg.

U.S. Bank Awards Cybersecurity Scholarships

In response to the growing need for well-trained cybersecurity experts across the industry, U.S. Bank grants cybersecurity scholarships each year to educate future technology leaders. Twelve such scholarships were recently awarded, providing funds for education and training in all areas of cybersecurity—from information security, to big data, business and beyond.

“We are facing a significant talent shortage in the cybersecurity field across all industries,” said U.S. Bank Chief Information Security Officer Jason Witty. “In order to maintain safety and soundness, we need well-trained cybersecurity leaders in our businesses. That is why we are excited to once again provide these scholarships across the country to help further these students’ education and training.”

To learn more about how America’s banks are developing security and convenience capabilities in the financial services sector, visit Bankers are encouraged to share the website, facts and figures, stories and videos with their lawmakers and customers and are invited, when sharing on social media, to use the hashtag #AmericasBanks . For more information, contact ABA's Amy Wertlieb.

Survey: Gen X, Boomers Drive Broader Adoption of P2P

Fifty percent of first-time person-to-person payments users are aged 45 or older, according to survey data released yesterday by Early Warning Services. The increase in usage among the older generations is seen as a reflection of growing confidence in payments solutions, with 52 percent of Generation X respondents and 46 percent of baby boomers saying they “trust” P2P payments—and are interested in using available solutions.

When survey respondents were asked for their reasons behind trying a P2P solution, 76 percent of Gen Xers and 74 percent of boomers ranked “offered through a financial institution they trust” as a top reason.

“Consumers above the age of 45 are overcoming their skepticism of P2P,” said Ravi Loganathan, chief data officer at Early Warning, the network operator for the bank-backed P2P solution Zelle. “Generation X and boomers have a high degree of trust in their financial institutions. The increase in trial can be attributed to solutions, such as Zelle, being included within the banking apps these consumers are comfortable using.” Read more.

Fed Presidents, Mike Murphy Added to ABA Summit Lineup

The ABA Washington Summit, to be held April 1-3 in the nation’s capital, will feature a general session panel with three Federal Reserve Bank presidents: Tom Barkin of the Richmond Fed, Raphael Bostic of the Atlanta Fed and Esther George of the Kansas City Fed.

Barkin, Bostic and George join a speaker lineup that also includes Senate Banking Committee Chairman Mike Crapo (R-Idaho) and a political panel of Mike Murphy, a longtime Republican political consultant, and Donna Brazile, former chairman of the Democratic National Committee.

ABA’s Washington 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 individual from each SDBA member bank to attend. Register now.

ABA Foundation, FTC Release Infographic on Phishing Threat

As phishing becomes a top cyber threat—with losses growing to nearly $30 million in 2017 from $8 million in 2015, according to the FBI—ABA and the Federal Trade Commission yesterday released a new infographic highlighting this growing problem.

Phishing scams typically involve emails, texts or calls that come from seemingly trusted sources that attempt to trick victims into clicking a link or handing over personal information. Once a scammer has the information, they can use it to steal the victim’s money, identity or gain access to their computer.

The infographic provides tips for consumers on how to spot potential scams, how to protect themselves against phishing attempts and how to notify the proper authorities. “One of the best ways to combat phishing is to implement multi-factor authentication, which is a second step to verify you are you, like sending a text to your phone with a confirmation code,” said ABA SVP Paul Benda. “We encourage consumers to use MFA for any of their accounts that support it, especially email and financial accounts.” View the infographic.

Compliance Alliance

Question of the Week

Question: We have a question on a loan that is a refinance of a purchase of a second home and is adding funds to pay off personal credit cards. Should be report the HOEPA Status as "Code 3 - NA"?

Answer: Assuming the loan is just secured by the second home and is not also secured by the principal dwelling, then yes, it should be reported as "Code 3 - NA" like you said. The reason for this is that HOEPA only applies to:

...a high-cost mortgage, which is any consumer credit transaction that is secured by the consumer's principal dwelling...

So the HOEPA rules do not apply to this particular loan and, thus, it would be reported as not applicable for HMDA purposes.

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