In This Issue

• Des Moines, Seattle FHLBs to Consider Merger
• CFPB Issues Report on Overdraft Fees
• Bankers Urged to Take Brief Survey on Campus Banking
• FDIC Announces Youth Savings Pilot Program
• OCC Guidance Addresses Debt-Sale Arrangements
  
• Agencies Decline ABA Request for Flood Insurance Guidance

Des Moines, Seattle FHLBs to Consider Merger

The Federal Home Loan Banks of Seattle and Des Moines, Iowa, said last week that they are considering a merger. A potential combined entity would serve 1,500 financial institutions in 13 upper Midwestern and northwestern states plus Pacific island territories.

A combined bank would remain a member-driven cooperative, the FHLBs said, and it would likely be headquartered in Des Moines. Once announced, any merger would require approval from the other FHLBs and the Federal Housing Finance Agency.

FHFA Director Mel Watt last Friday said it would work with the Des Moines and Seattle banks and that it viewed the potential tie-up as “consistent with the mission of the Federal Home Loan Bank System and with the safe and sound operation of each Federal Home Loan Bank.” Read more.

CFPB Issues Report on Overdraft Fees

The Consumer Financial Protection Bureau last week issued a report on trends in overdraft fees. Drawing on data from several banks with more than $10 billion in assets, the bureau said that overdraft and non-sufficient funds fees represent the majority of fees that checking account customers incur, a figure that rises to 75 percent for customers who have opted in to overdraft protection. The vast majority of customers -- 69.8 percent -- never overdraw their accounts, and an additional 12.5 percent overdraw only one to three times per year, averaging less than $30 in fees.

Overdrafts are thus concentrated among a small subset of account holders, with 8 percent of customers accounting for three-quarters of overdraft revenues. The median debit card transaction leading to an overdraft is $24. Those who opt into overdraft protection are more likely to use the product by incurring overdrafts.

ABA quickly responded to the report. “No one in America has debit card and ATM overdraft protection today who did not affirmatively opt in after receiving a one-page summary of the service and fees,” said ABA SVP Nessa Feddis. “They receive written verification of their choice, multiple reminders when they overdraw and can opt out at any time. Consumers have multiple tools to manage and can check their accounts day and night to avoid overdrawing.”

In issuing the report the bureau did not accelerate its rulemaking calendar, so any proposed regulations on overdraft fees are not expected until next year at the earliest. Read the report.

Bankers Urged to Take Brief Survey on Campus Banking

ABA invites all bankers to take a brief survey indicating their level of involvement in offering financial services to college students or on college campuses.

The survey responses will help inform ABA’s advocacy on campus banking issues as the Department of Education weighs an expansive rulemaking on the subject and as members of Congress turn their attention to the issue.

Take the survey. For more information, contact ABA’s Nick Podsiadly.

FDIC Announces Youth Savings Pilot Program

The FDIC on Monday invited banks to participate in a pilot program aimed at identifying the best approaches to bank-school programs that combine financial education with access to low-cost savings accounts.

"Insured financial institutions have committed significant volunteer resources to promote financial education and account formation in schools, and we hope this pilot identifies promising programs and adds valuable insight in understanding what works best in this area," said FDIC Chairman Martin Gruenberg.

The first phase of the pilot is open to institutions currently working with schools or nonprofit organizations that help students open savings accounts in conjunction with financial education programs. The second phase will include banks that will begin new savings programs with schools in the 2015-16 school year. Banks have until Aug. 22 to express interest in participating in phase one. Read more.

OCC Guidance Addresses Debt-Sale Arrangements

The OCC on Monday released guidance on managing risks associated with debt-sale arrangements. The guidance, which is based on best practices identified by large bank examiners, details the agency’s supervisory concerns and expectations for structuring arrangements that are consistent with consumer protection and safety and soundness.

Among other things, the guidance advises banks to: ensure appropriate internal policies and procedures are in place to govern arrangements consistently across the bank; perform appropriate due diligence when selecting debt buyers; and provide accurate and comprehensive information regarding each debt sold. Read the guidance.

Agencies Decline ABA Request for Flood Insurance Guidance

The federal financial regulators last week told ABA they would not be able to provide requested information to facilitate compliance with the 2012 Biggert-Waters flood insurance reform law and this year’s Homeowner Flood Insurance Affordability Act, which addressed affordability problems in Biggert-Waters.

ABA had written the agencies in April asking for timetables and implementation plans and agency expectations for flood insurance changes. The association also asked the agencies to work with FEMA to update and maintain Mandatory Purchase of Flood Insurance Guidelines, a publication that is widely relied on by the industry.

Acknowledging “[t]he importance of information and guidance to institutions in light of the various statutory changes,” the interagency letter nevertheless disavowed responsibility for updating the guidance because “much of the information contained in the [Guidelines] pertained to flood insurance matters outside of the Agencies’ authority.”

In the same letter, the agencies announced that “provisions pertaining to detached structures [HFIAA §13] became effective upon enactment.” HFIAA §13 permits a bank to exercise its discretion not to require a flood policy covering detached, non-residential structures. ABA has long sought such clarity on when this pro-consumer provision became effective and welcomed the statement.

• Read ABA’s letter.  
• Read the agencies’ response.
• For more information, contact ABA’s Ginny O’Neill.