Compliance Question of the Week

In today’s banking environment as soon as one big new regulation is implemented another pops up. Our compliance resources help your community bank stay one step ahead of the regulators.

Regulations and Guidance

Question: Which compliance regulations require training?

ANSWER: 

While training is highly suggested for all compliance regulations, several regulations specifically have the training requirement codified.

While the frequency of training may vary, examples of when most banks commonly train include: annual training for all applicable employees; when monitoring dictates lack of knowledge or violations; as required for changes to policies and procedures; when the security program is revised or updated, when regulations are updated, and when new products or services are released by the bank. Regulations that require training include:

Regulation CC;
Bank Secrecy Act;
Bank Protection Act – the act that handles robbery and physical security of bank and employees;
Privacy - Interagency Guidelines Establishing Information Security Standards
Fair Credit Reporting Act for Identity theft red flags 
SAFE Act

Reference: Regulation CC: 12 CFR 229.19(f) Bank Secrecy Act: 1020.210 Bank Protection Act (Minimum Security Devices and Procedures): FDIC 12 CFR 326.3; FED 12 CFR 208.61; OCC 12 CFR 21 Privacy - Interagency Guidelines Establishing Information Security Standards Fair Credit Reporting Act – Interagency Guidelines Concerning the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies; ID theft red flag rules SAFE Act 12 CFR 1008

 

 
 

 

 


 

Q&A Archives

ANSWER:

In general, compliance with Regulation E (12 CFR Part 1005) is deemed to satisfy the disclosure requirements of Regulation DD 1030.3, such as when:

  • An institution changes a term that triggers a notice under Regulation E, and uses the timing and disclosure rules of Regulation E for sending change-in-term notices.
  • Consumers add an ATM access feature to an account, and the institution provides disclosures pursuant to Regulation E, including disclosure of fees (see 12 CFR 1005.7.)
  • An institution complying with the timing rules of Regulation E discloses at the same time fees for electronic services (such as for balance inquiry fees at ATMs) required to be disclosed by this part but not by Regulation E.
  • An institution relies on Regulation E's rules regarding disclosure of limitations on the frequency and amount of electronic fund transfers, including security-related exceptions.
But any limitations on “intra-institutional transfers” to or from the consumer's other accounts during a given time period must be disclosed, even though intra-institutional transfers are exempt from Regulation E.

Reference: Official Staff Interpretation 1030.3(c).



 

 

 

 

ANSWER:

The FDIC addresses letters of credit in its Risk Management manual of examination polices.

Letters of Credit are also addressed under 12 CFR 337.

Also see FFIEC call report instructions.

Reference: Off-Balance Sheet Activities (12-04) 3.8-2 DSC Risk Management Manual of Examination Policies Federal Deposit Insurance Corporation FDIC 12 CFR 337.



 

 

 

 

ANSWER:

The Homeowners Protection Act addresses failures by a provider, in part it states:

In general, with respect to a residential mortgage transaction, the failure of a servicer to comply with the requirements of this chapter due to the failure of a mortgage insurer or a mortgagee to comply with the requirements of this chapter, shall not be construed to be a violation of this chapter by the servicer.

Reference: Homeowners Protection Act: 12 USC 490(c)



 

 

 

 

ANSWER:

The bank provides a reasonable means to exercise the right to opt out, if the bank:

1. designates check-off boxes in a prominent location on the opt out notice;

2. includes a a reply form with the opt out notice;

3. provides an electronic means to opt out (e.g. a from that can be sent via e-mail or a process on the bank's website, if the consumer agrees to receive information electronically); or

4. provides a toll-free telephone number.

Reference: 12 CFR 1016.7(a)



 

 

 

 

ANSWER:

Yes, consistent with the other assessment methods in the regulation, examiners will consider both loans originated and purchased by the institution. Likewise, examiners may consider any other loan data the small institution chooses to provide, including data on loans outstanding, commitments, and letters of credit.

Reference: CRA: Interagency Q&As Regarding Community Reinvestment; Guidance, 07/25/2016.



 

 

 

 

ANSWER:

No. Section (c) specifically states: This section shall not apply to bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business.

Note: Although compensation under this section is not considered bribery, other regulations and acts do prohibit compensation depending on circumstances – e.g., RESPA Section 8.

Reference: Bank Bribery Act 18 USC 215(c)



 

 

 

 

ANSWER:

No, the consumer cannot indicate intent to proceed until after receipt of the Loan Estimate. 

Reference: §1026.19(e)(2)(i)(A)



 

 

 

 

ANSWER:

The OCC has identified some indications that could be considered abusive lending practices:

Collateral or Equity “Stripping” - loans made in reliance on the liquidation value of the borrower’s home or other collateral, rather than the borrower’s independent ability to repay, with the possible or even intended result of foreclosure or the need to refinance under duress;

Pricing and terms, whether interest rates or fees, that far exceed the true risk and cost of making the loan; 

Targeting persons, such as the elderly, women, minorities, and persons living in low- or moderate-income areas, who are perceived to be less financially sophisticated or otherwise vulnerable to abusive loan practices;

Inadequate disclosure of the true costs and risks of loan transactions;

Lending practices that are fraudulent, coercive, unfair, deceptive or otherwise illegal;

Loan terms and structures, such as negative amortization, when designed to make it more difficult or impossible for borrowers to reduce their indebtedness;

Aggressive marketing tactics that amount to deceptive or coercive conduct;

Padding/Packing - charging customers unearned, concealed or unwarranted fees;

“Balloon” payment loans that may conceal the true burden of the loan financing and may force borrowers into costly refinancing or foreclosure situations;

Flipping - frequent and multiple refinancings, usually of mortgage loans, requiring additional fees which strip equity from the borrower; and/or

Collection of up-front single-premium credit insurance - life, disability, or unemployment, when the consumer does not receive a net tangible financial benefit.

Reference: OCC Advisory Letter 2000-7.



 

 

 

 

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