Mike Klumpp and Jesse Block Appointed to SDBA Board of Directors

Mike Klumpp, Citibank, Sioux Falls, and Jesse Block, First Fidelity Bank, Platte, have been appointed to the SDBA Board of Directors.

Photo of Mike Klumpp Klumpp was appointed to the SDBA Board to represent banks in the Maximum Dues-Paying Bank Category. He fills a seat previously held by Craig Hansen, which has a term of two years remaining. As site president for Citibank in Sioux Falls, Klumpp is responsible for driving and executing site governance, people strategy, site culture and community involvement. As an SDBA director, Klumpp wants to continue Citi’s tradition of active engagement and contribution to the SDBA.

Photo of Jesse Block Block was appointed to the SDBA Board to represent the SDBA Emerging Leaders Work Group. This is a new seat on the SDBA Board of Directors created this year, and the term for the Emerging Leaders Work Group seat is for one year. Block serves as a vice president at First Fidelity Bank and manager of its Platte branch. He is also a member of the bank’s Board of Directors. Block’s goal as an SDBA Board member is to continue to grow emerging leaders programming and strengthen ties with emerging industry leaders to the SDBA and the banking industry as a whole.

House Votes to Extend Paycheck Protection Program

The House last night approved by unanimous consent legislation extending authorization for the Small Business Administration’s Paycheck Protection Program through Aug. 8, 2020. The bill would also decouple PPP authorization from the SBA’s 7(a) lending program, allowing regular 7(a) lending to continue once the PPP has reached its authorization cap. The Senate approved the extension on Tuesday, and the bill now moves to the President for signature.

ABA noted in a tweet following the bill’s passage that with the extension, “America’s banks can continue to support small business customers with this financial lifeline. We will work with Congress to ensure the program continues to meet the evolving needs of borrowers and lenders.”

Fed Launches Task Force to Address Coin Shortages During Pandemic

The Federal Reserve announced on Tuesday that it is forming a task force to address the issue of low coin inventories during the coronavirus pandemic—an issue that several ABA members have raised in recent days. The task force—which includes representatives from the Fed, the U.S. Mint, armored carriers and several industry stakeholders including ABA—will work to identify and implement potential solutions to reduce these disruptions. The task force will hold its first meeting in early July, with the goal of creating its first set of recommendations by the end of the month.

With many physical retail businesses and other firms closed during the pandemic, the Fed noted that the coin supply chain has seen significant disruption in recent days. “The Federal Reserve is working on many fronts with our industry partners, including the U.S. Mint, to minimize supply constraints and maximize coin production capacity,” the Fed noted. “We are encouraging depository institutions to order only the coin they need to meet near-term customer demand and to remove barriers to customer coin deposits.” Read more . For more information, contact ABA’s Steve Kenneally.

State AGs Express Support for Bill to Create Beneficial Owner Registry

Forty-two state attorneys general, including South Dakota's, wrote to Senate Banking Committee leaders on Tuesday in support of S. 2563, the Illicit Cash Act, a bipartisan bill that would create a secure beneficial ownership registry of legal entities, to be overseen by the Financial Crimes Enforcement Network and the Treasury Department. The bill also requires FinCEN to share beneficial ownership information with local, tribal, state or federal law enforcement, national security and intelligence agencies.

“Storing beneficial ownership information in a centralized location is good,” the state AGs wrote. “Sharing it with law enforcement is even better. With access to comprehensive beneficial ownership information, law enforcement can put an end to unlawful use of our financial institutions by criminals and terrorists.”

The ABA has long advocated for the creation of a beneficial ownership registry and noted that the bill would help keep bad actors out of the financial system. Read the letter.

Supreme Court: CFPB Director Must Be Removable 'At Will'

The Supreme Court on Monday held that the Consumer Financial Protection Bureau (CFPB) may continue to operate, but ruled that the Bureau’s single powerful director must be able to be removed at will by the President. The court said that the current legal framework under which the director may only be removed “for cause” is unconstitutional.

The court issued its ruling in a case involving a debt relief company called Seila Law, which asked the Supreme Court to hear its appeal of a 2017 civil investigative demand from the Bureau. Seila Law resisted the CID on the grounds that the Bureau’s structure is unconstitutional. The Ninth Circuit Court of Appeals upheld the CFPB’s structure in Seila Law, as did the full D.C. Circuit Court of Appeals in a separate 2018 ruling.

“Today’s decision from the U.S. Supreme Court on the constitutionality of the CFPB’s leadership structure resolves important questions surrounding the Bureau’s design and its future,” said ABA President and CEO Rob Nichols. “We still believe that Congress has an opportunity to strengthen the CFPB over the long term by converting the Bureau into a five-member, bipartisan commission as envisioned in drafts of the Dodd-Frank Act."

Nichols added that "this important change would balance the Bureau’s needs for independence and accountability, while broadening perspectives on rulemaking and enforcement. It would also ensure the CFPB's long-term stability, which would benefit consumers, financial institutions and the broader economy.” Read the Supreme Court’s decision.‌

OCC Warns of Compliance Risk as Banks Adapt to COVID-19 Changes

The OCC on Monday cautioned banks to be vigilant about compliance risks that could arise as a result of their response to the coronavirus pandemic. In its Semiannual Risk Perspective—which was compiled between April and June as state and local economies began to reopen—the OCC noted that “compliance risk is elevated due to a combination of operations, employees working remotely and the requirement to operationalize new federal, state and proprietary programs designed to support consumers,” including the Paycheck Protection Program and other relief efforts.

“The volume of change and short timelines for implementing changes placed additional strains on banks already operating in a stressed environment,” the OCC noted. “Bank risk management programs should maintain effective controls for third-party due diligence and monitoring and other oversight processes, operational errors, heightened cyber security risks and potential fraud related to stimulus programs.”

The OCC acknowledged that banks were well-positioned at the outset of the pandemic. However, the report noted that credit risk has increased sharply as economic conditions deteriorated earlier in the year, stressing banks’ balance sheets. “Banks should update their portfolio management practices regarding stress tests to incorporate both the direct and indirect impacts of changing economic and market conditions,” the OCC said.

The OCC also flagged interest rate risk, operational risks related to banks’ COVID-19 response, heightened cyber risks and compliance risks related to BSA/AML, consumer compliance and fair lending as areas of concern. Read the report.

Agencies Propose New, Revised Questions and Answers on Flood Insurance

The banking agencies last Friday released several new interagency questions and answers on flood insurance compliance, as well as a major reorganization of and certain revisions to pre-existing Q&As. The proposed changes are intended to address statutory changes, regulatory modernization and industry requests for clarity, the agencies said.

The proposed new Q&As would cover escrow of flood insurance premiums (and the small lender exemption), lender placement of flood insurance, the detached structures exemption, private flood insurance, borrower disputes, flood insurance for units in cooperative buildings and lender participation in a multi-tranche credit facility.

Comments on the proposed additions to the interagency Q&As are due 60 days after they are published in the Federal Register. Read the proposed Q&As. For more information, contact ABA’s Diana Banks

BankTalentHQ Partners with America's Job Exchange

BankTalentHQ, which is dedicated to connecting talent in the financial services industry, has announced a partnership with America’s Job Exchange (AJE) to make connecting even easier for banks. BankTalentHQ is committed to keeping diversity and inclusion at the forefront of the recruiting process. America’s Job Exchange provides niche diversity sites and community-based recruiting to reach the candidates banks need to succeed.

AJE’s Diversity Recruitment solution offers intelligent job distribution across a highly-targeted network of diversity and niche industry sites. And since effective diversity recruiting is all about making connections, AJE also provides the tools needed for effective outreach and local community-based recruiting.

AJE has created a comprehensive Diversity Recruitment Package solely focused on providing banks the tools to build a diverse workforce. AJE’s Diversity Recruitment Package was designed purposefully to maximize bank job postings and expand visibility to employment seeking individuals from a large assortment of backgrounds. With AJE, banks can leverage the job distribution expertise and established industry relationships to meet their staffing goals. Learn more.

Compliance Alliance

Question of the Week

Question: If our customer is on a COVID-19-related forbearance plan (and she was current before the bank agreed to the plan), do we use special comment code AW (affected by natural or declared disaster) and code CP (account in forbearance) and will either affect her credit score?

Answer: The bank may report AW or CP if it chooses, but our understanding is that this would not affect the credit score and would only provide additional insight as to the valid reason for the deferment. The CDIA also reflects this in its FAQs here:

If I report using the recommended FAQ 58 or FAQ 45 guidance and report Special Comment AW or CP, how will the consumers' credit scores be affected?

The country's leading score developers, VantageScore and FICO note that forbearance and deferred payment scenarios have a neutral impact on a consumer's credit score so consumers in one of these programs, as reported to the nationwide credit bureaus, should have no negative impact as a result of Coronavirus. FICO noted that "the placement and reporting of an account in forbearance or a deferred payment plan in and of itself does not negatively impact a FICO(r) Score." VantageScore makes clear that "[a] loan placed in a deferred payment or forbearance plan will not result in a negative impact." The same is true for a natural disaster coding: "[t]he net impact is that a consumer's VantageScore credit score will not go down, either because negative information is neutralized because of the natural disaster..."
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In addition, our CARES Act Credit Reporting Summary also provides additional detail here:
https://compliancealliance.com/find-a-tool/tool/covid-19-credit-reporting-summary

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