SDBA eNews: July 20, 2017

In This Issue

CFPB Proposes Temporary Adjustments for HMDA Reporting Requirements

The Consumer Financial Protection Bureau last Friday issued a proposal to raise the threshold at which banks are required to report data on home equity lines of credit (HELOCs). Under the rule, banks originating more than 100 HELOCs are generally required to report under HMDA. The proposal would raise that threshold to 500 HELOCs for the calendar years 2018 and 2019, giving the CFPB time to determine if it will make the adjustment permanent. Comments on the proposal are due by July 31. Read the proposal. For more information, contact ABA's Rod Alba.

ABA, CFPB to Host Free Webinar on HMDA Submission Tool

ABA’s Center for Regulatory Compliance and the Consumer Financial Protection Bureau (CFPB) will offer a free webinar on the new Home Mortgage Disclosure Act (HMDA) submission tool on Aug. 8, 2017, at 1 p.m CDT.

The program will provide an overview of the new tool and the data collection process that all financial institutions will use to submit HMDA data beginning Jan. 1, 2018, for data collected in 2017 and after. CFPB experts will demonstrate the new HMDA platform and discuss other tools designed to help with filing.

During the program, participants will see the new Web application for uploading data files, learn how they will receive feedback on file format, syntax and validity edits and learn how they can approve the conditions in quality and macro edits. This webcast is designed for compliance, operations and loan processing professionals. Register now.


Question of the Week

I have a check written to John Smith and Jane Doe, but only John is a customer at the bank. Can we accept the check and deposit it into John’s account?

Answer: Yes, you can, BUT there is some potential risk here. To take the check, you would have to be sure that it was properly endorsed by both John and Jane. The problem here is that Jane is not your customer, so you would have some extra due diligence in making sure that she endorsed it over to John and allowed John to deposit the check at your bank. The risk here is that if the check is not properly endorsed--if Jane’s signature was forged--then the bank could be liable to the paying bank or the real Jane. Before taking this type of check, be sure to review your bank policies on taking third-party or non-customer checks.

Remember, the paying bank has 24 hours to return the check once it is received for payment. Also, forged endorsement claims can be made by the customer from the paying bank up to 30 days after the statement cycle.

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

Registration Open for SDBA 2017 Bank Technology Conference

Photo of digital banking.Sessions, solutions, vendors, products, networking and more. To help you lead your bank in this ever-changing world of technology, the SDBA will offer the 2017 Bank Technology Conference Sept. 19-20 at the Ramkota Hotel in Sioux Falls

Leaders and innovators in the field will provide sessions on cybersecurity, vendor management, regulatory issues and director education. In addition to the impressive line-up of industry experts, this conference will provide an opportunity to network and share resources with others in your field and a chance to visit with exhibitors to see and experience the latest in products and services.  

FDIC's Revised Exam Appeal Guidelines Reflect ABA-Advocated Changes


The FDIC on Tuesday issued revised guidelines to expand banks’ rights to appeal exam decisions and improve consistency with other agencies’ appeal processes. Specifically, the revised guidelines allow banks to appeal a determination of compliance with an existing formal enforcement action and a determination to initiate an informal enforcement action. They also modify when formal enforcement actions become unappealable and provide additional Supervision Appeals Review Committee appeal rights.

In response to comments from ABA, the FDIC clarified that material supervisory determinations include decisions to initiate formal enforcement actions. FDIC also expressly stated that matters requiring board attention are material supervisory determinations that may be appealed under the guidelines.
ABA acknowledged that the revised guidelines are a positive step forward, but continues to support efforts to establish an independent appeals option to financial institutions, along with safeguards to protect against retaliation. Read the revised guidelines. For more information, contact ABA's Shaun Kern.

Fed Seeks Comments on Proposed Reporting Changes for Bank Holding Companies

The Federal Reserve is seeking comments on a proposal to revise the FR-Y9 report that bank holding companies with more than $1 billion in assets are required to file. The proposed changes are nearly identical to those made to the Call Report and include the elimination of several data items and a more streamlined questions for reporting on complex or specialized activities. Comments are due Sept. 18.

While the regulatory agencies have made a number of changes to the Call Report in recent years in an effort to reduce the compliance burden on banks, the FR-Y9 report has not been adjusted accordingly.
In previous comments, ABA pointed out that not updating the holding company report has undermined the goal of a streamlined reporting process and has instead created additional confusion and burden due to a lack of harmony between the forms.

ABA has been working with the Fed to better align the two reports and welcomed the proposed changes. Read the proposal. For more information, contact ABA's Alison Touhey.

ABA, Washington Federal Rebut Government Claims in Fed Dividend Case

In advance of oral arguments scheduled for July 27, ABA and Washington Federal on Monday filed a reply brief supporting their motion for summary judgment in their legal challenge to the United States’ improper reduction in dividends paid to Federal Reserve member banks. ABA and Washington Federal are seeking more than $1.1 billion in damages resulting from the cut to the long-established dividend contract in 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 May, ABA and Washington Federal filed for summary judgment. Monday's brief rebuts the government’s inaccurate response that the annual dividend payments are simply government benefits that Congress may unilaterally adjust however it wants. The reply brief explains why the plain language of the Federal Reserve Act provides for stock subscription agreements with member banks and uses other contracting language.

Additionally, ABA and Washington Federal noted, the plain language of the contract documents executed by Washington Federal demonstrate the parties’ intent to contract. Moreover, they said, the government’s argument ignores that the six percent annual dividend is not an isolated, unearned benefit but rather part of a longstanding, mutual exchange of benefits and burdens between member bank stockholders and their regional Federal Reserve Banks.

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 brief. For more information, contact ABA's Tom Pinder.

State Bankers Associations Urge Congress to Take Action to Block Arbitration Rule

State bankers associations from all 50 states and Puerto Rico last Friday wrote to Senate leadership urging lawmakers to use their Congressional Review Act authority to stop the Consumer Financial Protection Bureau’s final arbitration rule from taking effect. Under the CRA, Congress has the ability to reject new federal regulations within 60 legislative days of publication in the Federal Register.

The controversial final rule prohibits customers from waiving their ability to participate in class action suits and limits drastically the use of mandatory arbitration agreements for financial products and services. The groups pointed out that the rule “would create a windfall for unscrupulous class-action attorneys, provide little or no relief to harmed consumers, and effectively eliminate an accessible alternative to the often-daunting judicial system.”

Members of Congress earlier this week signaled willingness to move forward to overturn the rule. Senate Banking Committee Chairman Mike Crapo (R-Idaho) indicated he would lead the effort, and Senate Majority Leader Mitch McConnell (R-Ky.) also signaled support for moving the process forward. Read the letter.

Bipartisan Group of Lawmakers Calls for Better Exam Coordination

In a letter to Treasury Secretary Steven Mnuchin last week, a group of bipartisan lawmakers led by Reps. Scott Tipton (R-Colo.) and Kyrsten Sinema (D-Ariz.) urged Treasury to prioritize policy changes that would increase coordination between regulatory agencies conducting bank examinations to help reduce the compliance burden on financial institutions.

“Financial holding companies and their affiliates are annually subject to a number of different examinations, including capital adequacy, liquidity, cybersecurity, vendor management, the Volcker Rule, Bank Secrecy Act/anti-money laundering requirements, and business continuity planning,” the lawmakers wrote. “Institutions subject to multiple exams on the same issue results in a never-ending cycle of examinations, which diverts critical resources and detracts from the real work of the institution to serve its customers, develop innovative ideas and defend against cyberattacks.”

In its recent report on financial regulation, Treasury raised similar concerns about the examination process and made recommendations on how it could be better streamlined. The lawmakers said that they intend to evaluate the department’s recommendation for assigning a lead regulator on issues where agencies have conflicting or overlapping jurisdiction, adding that the agencies themselves should also take action to address the issue. They also welcomed Treasury’s recommendation calling for increased coordination, transparency and accountability between the regulatory agencies. Read the letter.