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COMPLIANCEKim Stock, Compliance Analyst
Compliance Team
Kevin Christensen, CISA Vice President of Audit • Joined SHAZAM in 2004
• Oversees the Audit and Compliance Programs as well as the Risk Management Program, which includes fraud operations and chargebacks.
• Previously worked for the Federal Deposit Insurance Corp. (FDIC) for 10 years. He began as a Safety and Soundness Examiner in 1994. After becoming a commissioned examiner, Kevin shifted his attention to the information technology (IT) field, working full time in IT from 1998 to 2004.
• His diverse IT experience ranges from the community bank level to some of the largest and most complex data centers in the Midwest.
Compliance TeamKim StockCompliance Analyst• Joined SHAZAM in 2010
• Focuses primarily on lending, but also depository compliance
• Attended ABA National Compliance School in 2010
• More than 8 years of compliance experience at a large community financial institution and also a large national bank
• Formerly Assistant Vice President and served as a Compliance Officer, BSA Officer and Information Security Officer
Compliance TeamAmy Adkins, JD, CAMSCompliance Analyst• Joined SHAZAM in 2007
• Focuses primarily on depository compliance issues and network operating rule compliance
• More than 5 years of compliance experience in community financial institutions and also a large national bank
• Earned her Juris Doctorate at Gonzaga University School of Law
Sweeping Financial Industry Reforms and New Regulatory Requirements
• Mortgage Reform
• Lending Reform
• Credit Card Reform
• Overdraft Protection
• Dodd-Frank Wall Street Reform and Consumer Protection Act
Dodd-Frank Act
• Enacted into law on July 21, 2010, but will be implemented in stages
• Greatest legislative change to financial supervision since the 1930s
• Smaller institutions will face a more complicated and expensive regulatory framework.
• Requires 243 rulemakings
Dodd-Frank Act
• Creates The Financial Services Oversight Council (FSOC)
• Government Power To Liquidate Failing Financial Companies That Would Threaten The Economy
• Mortgage Lending Reform
• Federal/State Preemption
• Creates Consumer Financial Protection Bureau (CFPB) (Consumerfinance.Gov )
• Many, Many More
WHAT’S NEXT?
Garnishment
• An interim final rule, effective May 1, 2011,to implement statutory restrictions on the garnishment of Federal benefit payments. Establishes procedures that financial
institutions must follow when they receive a garnishment order against anaccount holder who receives certaintypes of Federal benefit payments bydirect deposit.
Garnishment
• Payments such as Social Security, VA, and Federal Railroad retirement benefits are exempt from garnishment.
• If the creditor is the United StatesGovernment or a State Child Support Enforcement Agency, the financial institution must tender over funds in the account.
Garnishment
• Must notify the customer that a garnishment order was received, within three business days from theday of account review unless there are no funds inthe account. Although the model notice is not required, a
financial institution is deemed to be in compliance when using it properly.
Can be found at the following link: http://www.federalregister.gov/articles/2011/02/23/2011-3782/garnishment-of-accounts-containing-federal-benefit-payments#h-41
Garnishment
• Determine the sum of such Federal benefitpayments deposited to the account during a two month period, counting back from the day preceding the account review
• Ensure that the account holder has access to an amount equal to that sum of the potential amountor to the current balance of the account, whicheveris lower
• May collect a garnishment fee only from funds inexcess of the protected amount and the fee may not be charged after the date of account review
Garnishment
• May rely on ACH identifiers that will be addedto the payments’ Batch Header Record to identify federal payments exempt from garnishment Batch Header record of the protected
payments will contain the company entry description starting with XX soc sec, XX VA, etc. The XX designates that the funds are protected and can’t be remitted in a garnishment.
SAFE Act• The Secure and Fair Enforcement For
Mortgaging Licensing Act of July 30, 2008 Requires the licensure of Mortgage
Loan Originators (MLOs) on theNational Mortgage Licensing Systemand Registry (NMLS)
All MLOs are required to submit fingerprints for submission to the FBIfor a criminal background check andare assigned a unique identifier
SAFE Act
• Mortgage loan originators(MLOs) employed by Agency-regulated institutions will have 180 daysfrom the date on which the Registry began
accepting federal registrations to complete initial registration. At present, the Agencies expect the initial
registration period to expire on July 29, 2011.After the initial registration period expires, MLOs will be prohibited from originating residential mortgage loans until they successfully complete the federal registration process.
SAFE Act
• Mortgage loan originator(MLO) Definition Takes a residential mortgage loan
application; and Offers or negotiates terms of a residential
mortgage loan for compensation or gain Exempt if originates five or fewer
residential mortgage loans in a movingtwelve month period
http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx
Reg. Z• Amendments to the Truth in Lending Act increase
the threshold for exempt consumer credit transactions from $25,000 to $50,000, effective July 21, 2011, increasing consumer protection Lenders are required to disclose important
terms of consumer loans. On or after December 31, 2011, this
threshold must be adjusted annually toreflect any annual percentage increase in the Consumer Price Index.
FDIC Guidance on Overdrafts
• Effective July 1, 2011, financial institutions will be expected to monitor accounts and take meaningful and effective action to limit overdraft use by giving customers who overdraw their accounts on more than six occasions where a fee ischarged in a twelve-month rolling period
• Offer a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage
Reg. CC
• The Dodd Frank Act contains a provisionamending the Expedited Funds Availability Act (Regulation CC) that – effective July 21, 2011 – requires financial institutions to make$200 available for withdrawal on the business day after a deposit.
Reg. CC• Account-opening notices should indicate as
of July 21, 2011, the first $200 of depositswill be available on the business day afterdeposit
• Provide a change of notice no later than 30days after the change
• Adjust bank systems so that the first $200 isavailable on the business day after deposit
FDICMost Frequently Cited Violations
• Took A Sample of 100 Examinations Conducted in the Kansas City Area from August 1, 2010 – November 12, 2010 to Determine the Most Frequently Cited Violations (Refer to Handout #1)
Equal Credit Opportunity ActRegulation B
• Failure to Collect Monitoring Information or to Make the Required Determination Based on Visual Observation
Race, Ethnicity and Sex
• Requiring a Signature When it is not Permitted
Expedited Funds Availability ActRegulation CC
• Check Processing Consolidation All checks are local now, but not reflected
in bank disclosures
• Checks Held Too Long Use Funds Availability Quick Reference
Guide - Handout #2)
Fair Credit Reporting Act
• Credit Score Disclosure Not Provided Financial institutions that use credit scores in
connection with applications for consumer purpose loans secured by 1 to 4 family residential real property must disclose the credit score, the range of possible scores, the date the score was created, and “key factors” used in the score calculation.
Flood Insurance
• Late or Missing Flood Determinations Not made prior to loan closing
• Failure to provide Notice of Flood Hazard Area to Borrowers Notices not being sent to borrowers
for renewals and extensions. A newnotice must be provided for everyloan that is made, increased,renewed or extended (MIRE). (Use Flood Insurance Flow Chart - Handout #3)
Flood Insurance
• Inadequate Flood Insurance Coverage At policy renewal, borrowers can
change their coverage amount withoutthe financial institution’s knowledge.
Loan officers are not figuring the correct amount of flood insurance.(UseFlood Insurance Coverage Form –Handout #4)
Homeownership Counseling
• Service members Civil Relief Act (SCRA) Notice Not Provided All delinquent real estate
borrowers should receive a noticebefore being 45 days late on a loanpayment. (Refer to SCRA Notice –Handout #5)
Home Mortgage Disclosure Act (HMDA)
• Civil Money Penalties Being Assessed are Only 5% error ratio allowed
• Data Integrity Errors Information entered on the Loan
Application Register (LAR) incorrectly(Refer to Handout #6)
Files being omitted
Home Mortgage Disclosure Act (HMDA)
• Most Common HMDA Reporting Errors Application Action Date Borrower Income HMDA Purpose Codes – Purchase,
Refinance and Home Improvement
Home Mortgage Disclosure Act (HMDA)
• Collection of Government MonitoringInformation Information is not being collected when
it should or is collected when it should not be collected.
Real Estate Settlement Procedures Act (RESPA)
• Late or Missing Good Faith Estimates (GFE)
• Servicing Disclosure Not Provided
• Incorrect Completion of GFE and the U.S.Department of Housing and Urban Development (HUD) Statement – Referto Handout # 7
Truth in Lending Act
• Appropriate Action Not Taken on Higher-Priced Mortgage Loans (HPMLs) Not Establishing Escrow Account Failing to Document Borrower’s Ability
to Repay
Truth in Lending Act
• Not Listing Security Interest in the Federal Reserve Board (FRB) Box Collateral is required to be in the FRB
box on the Truth in LendingDisclosure Statement (Refer to Truthin Lending Statement - Handout #8)
You are giving a security interest in: the property being purchased or other
Truth in Savings Act
• Inconsistent Terminology Different terms used on account
opening disclosures, fee schedules, periodic statements, and disclosureson the website
QUESTIONS ?
