SDBA eNews

November 4, 2021

Report: IRS Reporting Provision Pulled from House Budget Bill 

With bipartisan opposition growing for a controversial proposal that would require financial institutions to report information on gross inflows and outflows on all customer accounts above a certain de minimis level, House Democrats have reportedly omitted the provision from their current draft of the budget resolution. This news came late last week after an intense advocacy push by ABA, state associations, bankers and bank customers.

ABA President and CEO Rob Nichols welcomed the news. “Americans should honor their tax obligations, but forcing financial institutions to share private financial data from millions of customers with the IRS was the wrong way to reduce the tax gap,” Nichols said. "We want to thank the many lawmakers in both parties who understood the significant privacy concerns with the proposal and fought to keep it out of the reconciliation bill. We will continue to stay vigilant and educate members on this flawed proposal as the bill proceeds through the House and Senate.”

While the proposal has been dropped from the House bill, there is still a possibility that it could be added back in at a later point in the legislative process. The ABA is urging banks and their customers to keep the pressure on lawmakers to ensure the proposal remains off the table in the days ahead. Call Congress now.


Dusty Pinske Appointed to SDBA Board of Directors

Photo of Dusty PinskeDusty Pinske, First Interstate Bank, Rapid City, has been appointed to the SDBA Board of Directors. SDBA Chair Kristina Schaefer, First Bank & Trust, Sioux Falls, appointed Pinske to fill a vacant seat on the SDBA Board of Directors through April 30, 2022.

Pinske has been with First Interstate Bank for 24 years (12 with First Western Bank and 12 with First Interstate Bank). She has worked at numerous First Interstate Bank locations in South Dakota and has held many positions including mortgage lending, small business lending and branch management. Pinske’s current role is VP, Retail Manager III for the bank’s Rapid City market. She enjoys building strong teams that work well together to achieve common goals.

“Banking has given me wonderful career opportunities that have allowed me to be the leader I am,” Pinske said. “I will use this opportunity to grow personally and professionally by collaborating with my peers on issues that impact our industry. I will embrace this experience to support the South Dakota financial services industry through education, training and advocacy.    

“I believe it takes a diverse group of bankers with a wide range of experiences to come together to address issues that face the banking community. I look forward to supporting members by working to promote and engage on issues that impact us and move our interests forward.” Read more about Pinske


ABA Asks OCC to Minimize Burden on Banks During CRA Regulatory Transition  

ABA urged the OCC last Friday to minimize the burden and confusion for banks that would result if the agency were to rescind its 2020 Community Reinvestment Act rule and replace it with rules the agency adopted jointly with the Federal Reserve and the FDIC in 1995. ABA also submitted a separate joint letter with several financial trade groups to the OCC, echoing similar concerns.

In its comment letter to the OCC, ABA thanked the agency for acknowledging the challenges associated with the 2020 rule. The Association also cautioned that banks have already implemented some of the provisions from the 2020 rule and that reverting entirely back to the 1995 rule temporarily would be “disruptive and wasteful, particularly since banks will still need to implement a future interagency rule.”

The Association also urged the OCC to maintain the 2020 rule’s size thresholds until an interagency rule is issued. Community banks have limited staff and are acutely affected by regulatory change, ABA wrote, adding that temporarily reverting to the 1995 rule’s asset classifications and reporting requirements “would subject many community banks to unnecessary regulatory churn.”

ABA also recommended that the OCC allow banks to continue using the qualifying activities definitions under the 2020 rule for their strategic plan goals. The scope of the 1995 rule is narrower than activities recognized in the 2020 rule and that could make it difficult for banks to meet strategic plan goals, resulting in a lower CRA rating and possibly harming the reputation of the bank, ABA said. Both letters were supportive of the creation of a single harmonized CRA rule between the federal banking regulators. 


Report: Stablecoins Should be Issued Only by Insured Depository Institutions 

In a highly-anticipated report on Monday, President Biden’s Working Group on Financial Markets—in conjunction with the FDIC and the OCC—examined potential risks and regulatory gaps around stablecoins and offering recommendations for mitigating these risks. Stablecoins are typically backed by fiat currencies and carry the expectation that they can be redeemed upon request. However, the report notes that there are currently no standards in place regarding stablecoin reserve assets, which could lead to vulnerabilities.

“Failure of a stablecoin to perform according to expectations would harm users of that stablecoin and could pose systemic risk,” the report said. “The mere prospect of a stablecoin not performing as expected could result in a ‘run’ on that stablecoin. . . . Fire sales of reserve assets could disrupt critical funding markets, depending on the type and volume of reserve assets involved. Runs could spread contagiously from one stablecoin to another, or to other types of financial institutions that are believed to have a similar risk profile.”

The report calls for a “consistent and comprehensive regulatory framework” to “increase transparency into key aspects of stablecoin arrangements and to ensure that stablecoins function in both normal times and in stressed market conditions.” Specifically, it calls for legislation that would require stablecoins to be issued only by insured depository institutions and for providers of custodial wallets to be subject to “appropriate federal oversight,” including required compliance with risk management, liquidity and capital requirements.

While Congress considers stablecoin legislation, the report calls for the Financial Stability Oversight Council to also consider steps for addressing risks, such as designating certain activities conducted within stablecoin arrangements as—or as likely to become—systemically important payment, clearing and settlement activities, which would subject them to an examination and enforcement framework. Finally, the working group recommended that stablecoin issuers should “comply with activities restrictions that limit affiliation with commercial entities” to maintain the separation of banking and commerce. Read the report. For more information, contact ABA’s Rob Morgan.


Survey: Banks Continue to Offer More Products Favorable for Older Customers

As older Americans—those born before 1965—hold 65% of deposit balances in the U.S., banks have continued to offer more products with terms that are favorable to them, according to the ABA Foundation’s 2021 Older Americans Benchmarking Report released yesterday.

The survey found that 60% of responding banks offer favorable products for older customers, an increase from 53% in 2019. Banks with less than $1 billion in assets are most likely to offer those products at 67%. The products offered to older customers include no-fee checking accounts, no-minimum balances and senior savings accounts with no fees. Many banks also waive fees for providing paper statements on senior accounts, as some older customers may be less likely than younger ones to use online banking, the survey found.

To help prevent elder fraud, almost all banks—93%—reported that they file suspicious activity reports, flag accounts, close accounts or report to Adult Protective Services when they suspect elder financial exploitation. The survey found that banks filing reports to Adult Protective Services increased to 78% in 2021 from 62% in 2017. A majority of banks—86%—are also providing training to customer service representatives on how to detect and report elder financial exploitation.

The ABA Foundation will host a free webinar on Nov. 16 at 1 p.m. CST to review the report and its findings. Download the reportRegister for the webinar.


State Announces Funding for Health Services for Farmers and Ranchers

The South Dakota Department of Agriculture and Natural Resources (DANR) has allocated $500,000 to support mental and behavioral health programs for rural areas and specifically farmers and ranchers across the state. DANR is partnering with the Department of Social Services (DSS), Avera Health and South Dakota State University (SDSU) Extension to fund new and existing programs.

DSS will receive $120,000 to support its Behavioral Health Voucher Program through 605 Strong, and DANR will receive $35,000 to promote the expansion of the program. Farmers and ranchers will now be eligible to receive mental health or substance use disorder counseling at no cost by calling 211 or visiting https://www.605strong.com/#voucher-program.

Avera will receive $100,000 to support its Farm and Rural Stress Hotline, which farmers and ranchers can reach at 800.691.4336. In addition, SDSU Extension will receive $245,000 to support new and existing mental health programs targeting producers. 

“Months of drought in addition to low prices for our cattle producers has taken a toll on farmers and ranchers across the state,” said DANR Secretary Hunter Roberts. “I strongly encourage our producers to take advantage of these resources and reach out for assistance if you need it. No one should wait to be in crisis to seek the care they need.” Learn more


FDIC to Hold Webinar on Bank Account Access in Native American Communities

The Federal Deposit Insurance Corporation (FDIC) is hosting a webinar to highlight the need for access to safe and affordable bank accounts in Native American communities on Wednesday, Nov. 10, from 10:30 a.m. to noon CST. Presenters from the Oklahoma Native Assets Coalition (ONAC) and two financial institutions that serve Native American communities will discuss why bank account access is critical for Native Americans, detail ONAC’s national effort to bring Native Americans into the financial mainstream and offer strategies for reaching unbanked Native American households. The FDIC’s #Get Banked Initiative and How America Banks Survey will also be discussed. Register for the webinar


Save the Date for NDBA/SDBA Bank Management Conference

Save the date for the 2022 NDBA/SDBA Bank Management Conference to be held Feb. 18-19, 2022, at The Westin Kierland Resort and Spa in Scottsdale, Ariz. Be watching for more details. Click here to make your resort reservation


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Question of the Week

Question: We are considering an arrangement with our construction builder customers where they would get a set amount of “credit” (points) for every spec loan closed with us. The points would be eligible to apply discounts associated for an annual trip with the bank’s travel club. In other words, each spec loan booked with us will give them credit to use on the trip cost. The obvious consideration here is RESPA Section 8, but I do not feel like it is applicable. Although this involves residential construction, since they will all be spec loans, these will all be commercial customers and transactions.

Answer: The main concern here would be RESPA Section 8, but you are also correct that if these are commercial or business purpose transactions, they are exempt from RESPA. Otherwise, there is not a prohibition in a referral program for commercial loans. The bank would want to thoroughly document the program, as always, and be sure to monitor for any potential consumer loans and Fair Lending or UDAAP issues. 

No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person."

Regulation X, § 1024.14(b) – https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1024/14/#b

An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by 12 CFR 1026.3(a)(1) of Regulation Z. Persons may rely on Regulation Z in determining whether the exemption applies.

Regulation X, § 1024.5(b)(2) – https://www.consumerfinance.gov/rules-policy/regulations/1024/5/#b-2

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Questions/Comments
Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.