SDBA eNews: June 1, 2017

In This Issue

FDIC, OCC Issue CRA Exam Schedules for Next Two Quarters

The FDIC and OCC yesterday released Community Reinvestment Act examination schedules for the third and fourth quarters of 2017. The agencies said they will now release CRA schedules for an additional quarter in advance to provide additional time for interested parties to file comments as part of an institution's CRA review. View the FDIC schedule. View the OCC schedule.

FinCEN to Hold Technical Webinar on CTR Changes

The Financial Crimes Enforcement Network in August will make technical updates to the Currency Transaction Report used for Bank Secrecy Act reporting through the agency’s e-filing system. In preparation for the update, FinCEN will host a technical webinar on June 21 to provide an overview of the new specifications for transmitting CTR data. Register for the webinar. Learn more.


Question of the Week

A local club is having a fundraiser to bring a famous basketball team to town. The club would like the bank to be a place where people in the community can purchase tickets to see the team play. Is this OK, since they are paying for and receiving something of value?

Answer: As long as this is for the purchase of tickets to the game itself and not for lottery or raffle tickets to win seats at the game, this is permissible. Even if the bank is receiving something of value, if there's no chance or skill involved for a shot at a prize--in other words, anyone can come in and pay for a ticket, which allows them to go to the game--it does not raise issues with the anti-lottery restrictions.

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Contact Alisa DeMers, SDBA, at 800. 726.7322 or via email.

Updates to Reg CC Encourage Faster Check Processing, Include Electronically-Created Items

The Federal Reserve yesterday announced long-awaited changes to certain sections of Regulation CC, which implements the Expedited Funds Availability Act. The changes will update the check collection framework to reflect a system that is now largely electronic-based. The amendments do not address the sections of Regulation CC regarding funds availability schedules or related customer notices.

The final rule modifies the current check return requirements by requiring that all returned checks, both paper and electronic, be returned by 2 p.m. on the second business day and eliminating the “forward collection” option. In addition, the rule adds a condition that the depositary bank must have arrangements to accept returned checks electronically in order to make a claim for damages due to a late return. The final rule also applies the return requirements to electronic images of checks, including images that are not derived from a paper check (i.e., electronically-created items). It also creates new indemnities for losses caused by unauthorized or duplicate electronically-created items. Finally, the rule adds a new indemnity that indemnifies a depositary bank that received a deposit of an original paper check if the item is returned unpaid after being deposited using a remote deposit capture service.

In addition to the final rule, the Fed is also seeking comments on proposed amendments to address situations involving a dispute about whether portions of an electronic check have been altered or whether the item is a forgery. In cases where the original paper check is not available, for purposes of determining the burden of proof, it would be assumed that the item has been altered rather than forged. Comments on the proposal are due 60 days after the notice is published in the Federal Register.

ABA has long sought updates to Reg CC to promote a more efficient check processing system that reflects the changes in technology that have taken place over the past several years. The association is carefully reviewing the proposed amendments and will provide feedback to the Federal Reserve. Read more. For more information, contact ABA's Nessa Feddis.

Agencies Remind Banks of Appraisal Waiver Process

With financial institutions--especially those in rural areas--facing a critical shortage of qualified appraisers that is slowing down closing times, the federal banking agencies yesterday issued a reminder of two existing approaches that they said institutions can use to ease the crunch.

The first approach, temporary practice permits, allows state-certified or licensed appraisers to provide services in other states. The second involves a temporary waiver request. A financial institution facing documented scarcity of appraisers that has led to “significant delays” in appraisals on federally-related transactions in a specific geographic area may apply to the Appraisal Subcommittee for a temporary waiver of the requirement to use a state-certified or licensed appraiser. (Other appraisal requirements, such as those calling for appropriate valuation education or experience with the type of property being appraised, would still apply.)

The agencies said they will work through their representatives on the ASC and the Federal Financial Institutions Examination Council, which must also approve waiver requests, to “streamline the process” for submitting requests. The ASC is required to issue decisions on waiver requests within 15 days after the close of a 30-day public comment period.

ABA has been working closely with regulatory agencies, Congress and the Appraisal Qualifications Board to obtain meaningful relief from stringent appraisal requirements and will continue to seek further improvements. Read the notice. For more information, contact ABA’s Sharon Whitaker.

ABA Files Motion for Summary Judgment in Credit Union Field of Membership Case

ABA on Friday filed a motion for summary judgment in its case challenging the National Credit Union Administration’s final rule expanding community-based credit union fields of membership far beyond the limitations imposed by Congress. The rule allows community credit unions--which Congress by statute limited to serving a single “well-defined local community, neighborhood or rural district”--to serve large regions encompassing multiple metropolitan areas with populations in the millions.

ABA specifically challenged the inclusion of Combined Statistical Areas--which encompass multiple Metropolitan Statistical Areas--as “local communities”; the ability of credit unions to serve Core-Based Statistical Areas without serving the urban core that defines the area; the ability to add “adjacent areas” to existing community fields of membership; and the dramatic expansion of what constitutes a rural district.

In its motion, ABA argued that this expansion of taxpayer-subsidized financial institutions is inconsistent with the limited scope of credit union operations envisioned by Congress, that it authorizes fields of membership that federal courts have previously rejected and that it undermines the ability of taxpaying banks to serve their communities. ABA is seeking a declaration that the rule exceeded the agency’s statutory authority and is arbitrary and capricious, as well as an injunction prohibiting any community charter expansions pursuant to the challenged portions of the rule. Read the motion. For more information, contact ABA’s Sabrina Bergen.

ABA and Washington Federal Seek Summary Judgment in Fed Dividend Case

ABA and Washington Federal last week filed a motion for summary judgment in their class action lawsuit seeking over $1.1 billion in damages resulting from the United States’ improper reduction in dividends paid to Federal Reserve member banks. The cut to the long-established dividend contract was part of the 2015 highway spending bill, which reduced the annual dividend for Fed member banks with more than $10 billion in assets by two-thirds.

In the motion, ABA and Washington Federal asked the U.S. Court of Federal Claims to enter judgment for Washington Federal on its contract claims. Specifically, the Seattle-based bank asked the court to find that it had entered into a contract with the United States when it subscribed to Federal Reserve Bank stock and that the United States breached this contract by paying a dividend of approximately 2 percent in 2016.

Washington Federal alternatively asked the court to find that the government breached its implied covenant of good faith and fair dealing by depriving Washington Federal of its expected 6 percent dividend under the contract. Finally, ABA and Washington Federal asked the court to deny the previously filed U.S. motion to dismiss and for partial summary judgment.

In February, ABA and Washington Federal sued in the Court of Federal Claims, seeking to reimburse banks for improper reductions of the dividend payment. The complaint asserted breach of contract and taking of private property without just compensation in violation of the Fifth Amendment to the Constitution. In 2016, banks lost $1.1 billion to the taking, an amount estimated to balloon to $17 billion over 10 years. Read the motion. For more information, contact ABA’s Tom Pinder.

CFPB to Assess Effectiveness of Qualified Mortgage Rule

The Consumer Financial Protection Bureau last week released a plan to assess the effectiveness of its final Ability-to-Repay/Qualified Mortgage rule. The bureau’s review of the effectiveness of the rule is required by the Dodd-Frank Act, and comments on the plan will be accepted for 60 days after publication in the Federal Register.

The proposed assessment process would examine the rule’s effects on mortgage costs, origination volumes, approval rates and loan performance. The bureau also said it would consider how creditors’ underwriting policies and procedures have changed as a result of the rule. Of special interest are outcomes related to self-employed borrowers, borrowers with seasonal or intermittent income, borrowers seeking smaller-than-average loan amounts, borrowers who use asset-derived income to repay the loan, borrowers with debt-to-income ratios above 43 percent, lower-income borrowers, minority borrowers and borrowers in rural areas.

To conduct its assessment, the CFPB said it is planning “a limited request of data directly from creditors and other stakeholders” in addition to other data sources. The plan also includes interviews with creditors on their compliance activities. ABA will carefully review the CFPB’s proposed assessment plan and will submit comments. Read the assessment plan.

2017 Quad States Convention Opens on Sunday

The 2017 Quad States Convention, which includes bankers from South Dakota, North Dakota, Montana and Wyoming, will kick off on Sunday, June 4, in Rapid City at the Rushmore Plaza Civic Center. The four-state event will run through Tuesday, June 6.

The SDBA Office will be closed during the convention as all staff will be at the event.

To see the full list of events, visit the event website.