SDBA eNews: July 27, 2017

In This Issue

Enrollment Deadline Nearing for GSB Financial Managers School

The Graduate School of Banking at the University of Wisconsin-Madison will hold its Financial Managers School Sept. 10-15 in Madison, Wis.

Designed by experienced CFOs especially for financial managers, this week-long school goes beyond the basics to present best practices and provide community financial institution financial managers the tools to build a solid foundation in asset/liability management.

Learn the unique concepts and terminology of bank finance and asset/liability management along with the practical implementation tools to profitably manage a financial institution's balance sheet, develop effective strategies and communicate strategies to the board and senior management that ensure effective decision-making.

The enrollment deadline is Aug. 10. Learn more and register.

Community Bank Return Preparation Course

The Community Bank Return Preparation Course will be offered Oct. 23-24 in Omaha, Neb.The objective of the course is to offer a training session on the preparation of bank income tax returns for the employees of independent CPA firms and of community banks who prepare their returns in-house.

Day one will focus on accounting methods for income and expenses in both C corporation and S corporation returns. Day two will address the ethics of tax return preparation.

The class will be presented by John Cederberg. The Nebraska Board of Public Accountancy has in previous years approved 16 CPE hours, including two ethics hours. Learn more.


Question of the Week

Do we violate regulation if we charge for cash advances?

Answer: There’s not a specific federal regulatory prohibition that would be related to that--there isn't one in Regulation Z. Visa and MasterCard, however, have their own set of rules that banks must comply with if the bank has an agreement with either of those brands.

Another common question related to VISA and MasterCard rules is about accepting credit card payments for loan payments--again, Visa and MasterCard rules would be the deciding factor and not federal regulation.

Finally, related to debit card fraud and liability limits.That’s also an area where these private entities can and do have rules that are stricter and beyond the scope of Regulation E. Thus, it’s important to be aware of what rules the bank is bound by via an agreement and usage of those cards. For information on Visa and MasterCard rules and policies, you can visit their respective websites.

Compliance rules and regulations change quickly. For timely compliance updates, subscribe to Compliance Alliance’s email newsletters.

Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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

House Votes to Overturn CFPB's Arbitration Rule

House lawmakers on Tuesday voted to overturn the Consumer Financial Protection Bureau’s controversial final arbitration rule by a vote of 231 to 190, exercising their authority under the Congressional Review Act to reject new federal regulations within 60 legislative days of publication in the Federal Register.

Leading the effort in the House were House Financial Services Committee Chairman Jeb Hensarling (R-Texas), Rep. Keith Rothfus (R-Pa.), and other members of the House Financial Services Committee. A similar measure has been introduced in the Senate by Banking Committee Chairman Mike Crapo (R-Idaho).

The rule--which was finalized earlier this month--drastically limits the use of mandatory arbitration clauses for financial products and services, which are frequently used by banks of all sizes to manage the unpredictable costs of class action lawsuits and ensure prompt resolution of disputes. ABA previously pointed out that this could impose a significant burden on customers whose claims cannot be resolved through class actions, as it would require them to go to court for minor, non-systemic disputes.

ABA President and CEO Rob Nichols welcomed Tuesday's action, calling it a win for consumers. “In class-action lawsuits, the spoils go overwhelmingly--and sometimes exclusively--to a small group of highly-motivated trial lawyers who specialize in filing a large volume of often frivolous litigation,” Nichols said, adding that overturning the rule “is critical to ensuring the bureau doesn’t provide trial lawyers with a regulatory windfall at consumers’ expense.” Read ABA's statement.

Labor Department Seeks Comments on Stalled Overtime Rule

The Department of Labor on Tuesday released an anticipated request for information on the Obama administration’s final overtime rule, which would have doubled the salary needed for employees to be exempt from overtime pay. That rule, which was to be effective on Dec. 1, 2016, was stalled at the last moment by a preliminary injunction from a Texas federal district court that remains in place while litigation continues.

The RFI--published in the Federal Register yesterday morning--is widely seen as a first step in a possible rewrite of the rule, and it raised a number of broad issues including how a new salary level should be calculated, whether there should be multiple salary levels and whether the duties tests should change. DoL also sought input on how employers made personnel changes to comply with the rule, as well as their responses to the injunction.

Comments on the RFI are due by Sept. 25. Just as the ABA reached out to its members, state bankers associations and other groups to collect data in opposition to the final rule, the association is again seeking input from members on the overtime rule’s impact. This gives the banking industry the opportunity to build upon the previous concerns ABA has raised, such as how this rule is particularly harmful to community banks and those with branches in rural areas.

ABA Calls for Changes to USDA Loans in 2018 Farm Bill

In a statement for the record in a Senate Agricultural Committee hearing on commodities, credit and crop insurance, ABA on Tuesday called on lawmakers to reform the U.S. Department of Agriculture’s guaranteed farm loan programs in the 2018 Farm Bill.

Highlighting the important role that banks play in supplying credit to the nation’s producers, ABA noted that many utilize USDA’s loan programs to make credit more widely available to borrowers. The association called for increases to the current loan limit on Farm Service Agency guaranteed loans, adding that the formula for indexing the programs have not kept up with the rising cost of agriculture. ABA has endorsed legislation introduced by Rep. Mike Bost (R-Ill.) that would increase the cap from $1.4 million to $3.5 million and double the size of direct operating and ownership loans from $300,000 to $600,000.

ABA also urged lawmakers to take steps to modernize technology and increase staffing at FSA, consider bringing back FSA’s interest assistance programs and re-examine regulations that have been put in place surrounding confined animal feeding operations for FSA loan programs. Finally, the association recommended that Congress reform Farmer Mac by removing the current 1,000-acre limitation and considering whether to allow Farmer Mac to purchase all guaranteed loans from USDA. Read the statement.

DOJ Postpones Plans for Website Accessibility Rulemaking

Website accessibility is no longer a top priority for the Department of Justice, according to the Trump administration's recently released rulemaking agenda for the remainder of 2017 and 2018. DOJ had announced previously that it would propose regulations in 2018 regarding website accessibility under Titles II and III of the Americans with Disabilities Act. However, these actions were categorized as “inactive” on the updated rulemaking schedule and no longer reflect a target date.

While DOJ may no longer be actively pursuing new website accessibility standards, ABA encourages its members to continue to work toward accessibility, as plaintiffs’ attorneys will likely continue to pursue lawsuits against companies with inaccessible websites.

Ely: FCS Overreaches by Offering Cash Management Services

In the latest issue of ABA's Farm Credit Watch yesterday, Bert Ely explained how Farm Credit System institutions were able to create a legal justification that allows them to effectively accept consumer deposits by accepting funds as part of the cash management services they offer to their members and borrowers. Ely pointed out that in doing so, FCS has once again overstepped the limitations placed on it by Congress.

Unlike banks, Farm Credit System institutions are not authorized to accept deposits, however, the four FCS banks are permitted to issue bonds individually and collectively through the Federal Farm Credit Banks Funding Corporation, Ely explained. In addition, the Treasury Department in 1990 granted an exemption that allows each FCS bank to sell bonds directly to FCS members and borrowers.

“An FCS association acts as agent in selling the bonds of the bank that funds it. Funds deposited with an association are immediately forwarded to the bank to purchase the bank’s bonds with a face value equal to the amount deposited with the association,” he wrote. “Consequently, the association has no liability for the deposits it accepts,” and the bonds are not guaranteed by the government or any other entity.

Ely noted that at the end of 2016, AgriBank had $939 million of member investment bonds outstanding and CoBank had $1.5 billion of “cash investment services payable” outstanding.

“Presumably the exemption the Treasury Department approved in 1990 enhanced the ability of the FCS banks to fund their balance sheets directly to complement the funds raised through the Funding Corporation,” he added. “However, today more and more associations, in cooperation with the FCS banks, are using that exemption for an entirely different purpose--to compete against commercial banks in offering cash-management services. Offering cash management is not why Congress created the FCS.” Read Farm Credit Watch.

FDIC Updates Exam Communication Guidance

The FDIC yesterday issued a revised examination manual implementing key directives from the FDIC board of directors. The board moved to expand banks' rights to appeal exam decisions and to improve regulatory consistency last year after a blistering independent report criticizing the agency for inappropriate exam processes.

In the new manual, examiners are instructed that supervisory recommendations must address meaningful concerns, be communicated clearly and in writing in a report of examination or on official FDIC letterhead and discuss corrective action. Supervisory recommendations in ROEs are to be communicated in post-exam materials.

ABA supports bipartisan exam fairness legislation in both houses of Congress that would provide an independent appeals option to financial institutions along with safeguards to protect against retaliation. Read more.