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State AGs Call for Legal Clarity on Banking Legitimate Cannabis BusinessesIn letter to congressional leaders yesterday, a bipartisan group of 38 state attorneys general urged lawmakers to advance legislation allowing banks to serve marijuana-related businesses in states where the drug is legal. The AGs noted that limited access to financial services has forced many legal cannabis businesses to operate in cash, which creates tax-related challenges in addition to being a public safety risk. They expressed support for the SAFE Banking Act—an ABA-supported bill that was recently approved by the House Financial Services Committee—or similar legislation that would provide a safe harbor for depository institutions serving legal MRBs. “Our banking system must be flexible enough to address the needs of businesses in the various states and territories . . . while protecting the interests of the federal government,” the AGs wrote. “This includes a banking system for marijuana-related businesses that is both responsive and effective in meeting the demands of our economy.” Read the letter. ABA Calls for Broader Application of TILA to PACE LoansABA this week offered feedback to the Consumer Financial Protection Bureau on its planned rulemaking on residential Property Assessed Clean Energy loans, a controversial type of financing that allows homeowners to pay for energy-efficient retrofitting—such as solar panels and high-efficiency air conditioners—through their property tax assessments, and which often take lien priority over the first mortgage lien. S. 2155, the regulatory reform law enacted last year, requires the CFPB to apply the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to PACE loans. In its comment letter, ABA reiterated its view that PACE loans are “consumer credit” and therefore subject to Regulation Z, and urged the CFPB to apply additional aspects of TILA to these loans, including the law’s three-day right of rescission. “If PACE advocates truly believe in providing borrowers with affordable and beneficial financing options for energy efficiency and related products and services, they should be willing to provide a borrower with the right to compare financing options as afforded by this important consumer protection set forth by TILA,” ABA said. Read the letter. For more information, contact ABA’s Joe Pigg. Lawmakers Issue Bipartisan Call for CECL Implementation DelayA bipartisan group of lawmakers wrote to the Securities and Exchange Commission on Tuesday expressing concern about the adverse effect of FASB’s current expected credit loss accounting standard on banks and their customers during times of economic stress. Led by Reps. Roger Williams (R-Texas) and Vicente Gonzalez (D-Texas), the lawmakers called for CECL to be delayed until the full economic effects of the standard can be understood. The lawmakers cited data provided by ABA indicating that during a period of economic stress, CECL would cause significant spikes in certain banks’ loan loss reserves. The data was compiled from various banks that collectively hold more than 10 percent of loans in the industry. “The composite snapshot assembled by ABA suggests that credit loss allowances may be over five times the amount of today’s incurred loss estimates,” the lawmakers said. “We are concerned that banks may cut product lines and reduce lending, particularly to low- and moderate-income borrowers who are most in need of greater access to capital. This will raise costs of essential products such as the 30-year mortgage and small business loans.” Read more. ABA Urges Narrower Definition of 'Deposit Broker,' Changes to National Rate CapIn a comment letter to the FDIC on Tuesday, ABA advocated for updates to the agency’s outdated and overly broad brokered deposit rules and interpretations. ABA noted that the scope of what is classified as a brokered deposit far exceeds the original intention of Congress, which was to prevent troubled institutions from holding this kind of deposit.
In its comments, ABA called on the FDIC to significantly narrow who is considered a “deposit broker” under current rules, pointing out that many entities—including social media platforms, fintech partners and bank subsidiaries—could be classified as deposit brokers today. ABA also emphasized that relationship deposits—including affiliate and subsidiary funds, co-branded university products, or health savings accounts—should not be considered brokered, and that “penalizing these deposits is harmful to both banks and consumers.” (ABA’s Health Savings Account Council elaborated further on the brokered deposit rules as they relate to HSAs in a separate comment letter also filed Tuesday.)
As the FDIC considers changes to the brokered deposit rules, ABA also highlighted the need for changes to the national rate cap. While the rate cap is intended to prevent struggling banks from offering excessively high rates, ABA noted that it is often used as a proxy for volatile deposits at healthy banks and calculated in a way that doesn’t account for differences in local markets and how banks compete. Read the letter.
CFPB Proposes to Raise HMDA Reporting ThresholdsThe Consumer Financial Protection Bureau last Thursday issued a proposal to provide relief for smaller institutions from the Home Mortgage Disclosure Act data collection and reporting requirements. The proposal would increase the coverage threshold for closed-end mortgage loans from 25 loans to either 50 or 100. For open-end lines of credit, the CFPB is proposing to extend for another two years the current temporary coverage threshold of 500 open-end lines of credit. After that, the threshold would be permanently set at 200. ABA SVP Virginia O’Neill welcomed the proposal and said the association would “analyze these amendments to ensure they appropriately exempt smaller institutions that account for only a minor portion of the mortgage market, while preserving HMDA’s intent.” Comments are due 30 days after publication in the Federal Register.
In addition, the CFPB issued an advance notice of proposed rulemaking seeking feedback on the costs and benefits of the expanded HMDA data reporting requirements, as well as previously existing data points that were revised by the 2015 HMDA rule. Comments on the ANPR are due 60 days after publication in the Federal Register. “HMDA was always intended as an early-warning tool to assess if discrimination may be taking place in mortgage lending, and it is important to both borrowers and lenders—particularly smaller, community banks—that the information collected by the bureau is truly relevant and compliance does not end up inadvertently raising borrowing costs for consumers,” O’Neill said. “We look forward to sharing our members’ views and working with the CFPB as this process moves forward.”
Podcast: A Small Bank Tackles Rural Housing AffordabilityChristie Obenauer’s family-owned bank had a problem. Based in a rural county in western North Dakota, her community had been dealing with the prospect of population decline, but then the North Dakota energy boom brought an influx of newcomers. “It’s a wonderful problem to have.” While Obenauer’s bank—Union State Bank in Hazen, N.D.—isn’t in the oil patch directly, it serves as a bedroom community for many who commute into the oil areas. It’s also home to large coal-mining operations. In the face of the housing crunch, her bank got involved in financing homes across the western part of the state. And with a need for housing that could be deployed quickly—“We had people thinking they could live in a camper in January, which . . . no. You can’t do it,” she chuckles—she also worked with the Bank of North Dakota and a state agency to develop a secondary market for manufactured homes. On the ABA Banking Journal Podcast, Obenauer—a fourth-generation CEO—also talks about how the Bank of North Dakota—the only state-owned bank in the country—has worked with Union State Bank to expand its lending capability and bring a new $30 million critical access hospital, large day care facility and other needed projects to her hometown. Listen to the episode.
Learn the Foundational Elements of Trust Management and AdministrationThe SDBA has partnered with the Delaware Bankers Association to offer a nine-part series focused on the foundational elements of trust management and administration. Topics range from reading and interpreting a trust document, to administration of a trust, to BSA and Patriot Act best practices, to income and gift tax planning. These sessions, more than 12 hours of instruction by top professionals in the industry, are now available in synchronized audio slide format with supporting materials on one flash drive. The sessions are approved for a total of 22.5 CTFA credits (2.5 credits per session) from the ABA Institute of Certified Bankers. Learn more. Commercial Banks Report Compliance with New AML RegulationsRSM US LLP has released its Anti-Money Laundering (AML) Survey, which assesses the AML departments from more than 200 commercial banks and credit unions to gauge best practices and challenges in a changing regulatory landscape. The survey reveals 88 percent of commercial banks and credit unions are confident in their compliance with the new beneficial ownership rules, and 91 percent are confident in their overall compliance with the final customer due diligence (CDD) rule. However, challenges regarding training, technology and efficiency persist, indicating a need for increased guidance. “Regulatory scrutiny and enforcement are continuing to put pressure on anti-money laundering programs, and banks and credit unions need to continuously enhance their strategies to address these mandatory changes,” said Rob Farling, national leader of AML & regulatory compliance with RSM US LLP. “We hope that our analysis of similar institutions’ AML functional structures, specifically in relation to CDD and beneficial ownership compliance, can help banks and credit unions keep their own programs compliant and navigate the ever-changing regulatory environment with ease.” Additionally, the survey sheds light on some of the top pressures banks and credit unions are currently facing and explores opportunities for these institutions to improve their practices in these areas. Learn more. |
