SDBA eNews

May 20, 2021

Quad States Convention Early Bird Registration Extended Through Friday

Quad States Convention GraphicIf you haven’t yet registered to attend the 2021 Quad States Convention on June 14-15 in Rapid City, S.D., the SDBA has extended the early bird registration deadline through this Friday, May 21.

In addition, both golf courses for the convention golf tournament are filling up quickly. If you are planning to golf and haven't yet signed up, register as soon as possible to reserve your spot.  

See the convention agenda and register to attend. Email your registration to [email protected] or fax it to 605.224.7835, and the SDBA will invoice you at the early bird rate through this week.  

Questions, contact the SDBA at [email protected] or 605.224.1653.

OCC to 'Reconsider' CRA Revamp; Pauses Compliance for Certain Providers

The OCC on Tuesday said it will formally “reconsider” the agency’s June 2020 final rule revising the agency’s Community Reinvestment Act rules and that banks subject to the rule may pause efforts to comply with it. “While this reconsideration is ongoing, the OCC will not object to the suspension of the development of systems for, or other implementation of, provisions with a compliance date of Jan. 1, 2023, or Jan. 1, 2024, under the 2020 CRA rule,” the agency said.

ABA President and CEO Rob Nichols welcomed the news. “By reconsidering its CRA Rule, the OCC provides an opportunity for the regulatory agencies to pursue a joint rulemaking in this area,” he said. “We still believe there is a compelling need to modernize CRA rules so they reflect the modern banking system and meet the needs of communities. Today's action by the OCC can help us get there.”

However, covered banks must continue to comply with provisions of the CRA modernization rule that had a Oct. 1, 2020, compliance date, the agency said. These provisions were explained and interpreted in a 2020 OCC bulletin.

The OCC also added that it does not plan to finalize a December 2020 proposed rule on how the agency will evaluate CRA compliance under the new rule and that it will discontinue the CRA data collection published that month. ABA and nine other trade groups earlier this month urged the OCC either to withdraw or formally delay compliance with the new rule, noting the likelihood that the next Senate-confirmed comptroller may pursue a different CRA modernization path. Read more. For more information, contact ABA’s Krista Shonk.

OCC's Hsu Says Fintech Firms Should Be Chartered in 'Safe and Sound Way'

Testifying before the House Financial Services Committee yesterday, Acting Comptroller of the Currency Michael Hsu said that the OCC needs to determine how to charter fintech firms in a “safe and sound way, where we can adapt to the innovation.”

“Some are concerned that providing charters to fintechs will convey the benefits of banking without its responsibilities,” Hsu said. “Others are concerned that refusing to charter fintechs will encourage growth of another shadow banking system outside the reach of regulators. I share both of these concerns. We must find a way to consider how fintechs and payment platforms fit into the banking system, and we must do it in coordination with the FDIC, Federal Reserve and the states.”

The OCC has been focusing on encouraging innovation through initiatives like updating the framework for chartering national banks and trust companies, Hsu said, but added that his “broader concern is that these initiatives were not done in full coordination with all stakeholders. Nor do they appear to have been part of a broader strategy related to the regulatory perimeter.”

Meanwhile, Rep. French Hill (R-Ark.) pressed FDIC Chairman Jelena McWilliams on the issue of credit union acquisitions of community banks, which have resumed after an M&A lull during the pandemic. “We always have a lot of questions when there’s an acquisition of a community bank, especially when that community bank is located in a rural area,” McWilliams responded. “My concerns have not changed.” Watch the hearing.

FDIC Solicits Feedback on Banks' Digital Asset Activities

With a request for information posted in the Federal Register on Monday, the FDIC is looking for feedback on insured depository institutions’ current and potential digital asset activities.

According to the agency, there are “novel and unique considerations” related to digital assets—often called digital currency or cryptocurrency—and “given that banks are increasingly exploring the emerging digital asset ecosystem,” information gathered will help inform FDIC’s understanding of industry and consumer interests.

“At the FDIC, we are laying the foundation for the next chapter of banking by ensuring we have a regulatory framework that allows responsible innovation to flourish,” said FDIC Chairman Jelena McWilliams. “Digital assets is one area in which we have seen rapid expansion and innovation in recent years. This RFI gives us an opportunity to gain additional insight into the market, and what role banks might play in the future.” Comments are open 60 days from publication in the Federal Register. Read the RFI. For more information, or to contribute feedback for ABA’s comment letter, contact Matt Daigler.

ABA, Trade Groups Urge Support for CDFI Funding Increase

ABA and five other trade groups last Friday urged House and Senate appropriations leaders to support $1 billion in funding for the Community Development Financial Institutions Fund (CDFI) in fiscal year 2022, with $100 million allocated for the Bank Enterprise Award Program.

The groups noted that an increase in funding is warranted “and it is justified by the significant demand, over subscription of the program, and dire need of the nation as we recover from the COVID-19 health and economic crisis.” They added that the proposed $330 million in budget proposals released by the Biden administration is only “a modest increase which does not begin to meet the needs of the underserved communities it supports.”

“The $1 billion request represents a modest 0.47% of total CDFI industry assets. This capital, however, is critically important at this time,” the letter said. “The monies will leverage up to 12 times the $1 billion in private capital (or $12 billion) that will be channeled to local businesses, nonprofits and others to help vulnerable communities recover from the devastating effects of the recession and begin rebuilding.” Read the letter.

ABA Seeks Stories for America's Banks Campaign

ABA is currently looking for stories for its America’s Banks campaign about how banks are supporting efforts to get Americans vaccinated, including using their branches as vaccination sites. The America’s Banks website features real stories and data about bank's positive impact on the people and places they serve. The website highlights the industry's role in building careers, providing Paycheck Protection Program loans to support small businesses and other ways banks are making a difference in their communities through philanthropy, investment, innovation and personal service. Visit the siteShare your story.

ABA to Host Webinar on Core Platforms Committee Update

ABA will host a free webinar on June 9 at 11:30 a.m. CDT about the work of its Core Platforms committee. Attendees will learn about the progress the committee has made over the last two years in identifying and acting on actions that can strengthen the relationship between banks and core providers so banks can deliver the innovative products and services customers want and need. Register now.

Bank Compliance School To Be Held Next Week

The 2021 Bank Compliance School will be held on May 24-27 in Bismarck, N.D., and virtually. Compliance Alliance is offering the school in partnership with the South Dakota Bankers Association, North Dakota Bankers Association, Montana Bankers Association and Wyoming Bankers Association. 

Lending compliance will be covered on May 24-25, and operations compliance will be covered on May 26-27. Attendees can register for the entire school or the lending or operations modules. Compliance officers, internal audit staff and any employee who assists with compliance management should attend the school. Learn more about the school and register


Question of the Week

Question: What is the line between relying on the National Automated Clearing House Association (NACHA) warranty and Regulation E requirements in resolving disputes unauthorized transaction disputes?

Answer: Regulation E and NACHA are two requirements that while each govern electronic transactions, run parallel to each other, but never intersect. NACHA requirements can never supersede Regulation E provisions in resolving disputes, the regulatory timelines requirements, or the requirement to provide credit to a consumer.

Regulation E, § 1005.11, requires the bank to investigate upon learning of a dispute within the definition of Regulation E. Additionally, the Regulation allows consumers to make a dispute in any manner, orally or in writing. If the bank learns of a dispute, the duty arises to either investigate and act accordingly or provide credit without an investigation.

The above is in contrast with some of the NACHA requirements. For example, NACHA requires the bank to obtain a Written Statement of Unauthorized Debit (WSUD) for the bank to recover funds from the ODFI, the institution that made the debit. This may create a conflict with Regulation E, as under the regulation, the bank cannot condition conducting investigation or issuing a provisional credit on the consumer executing a WSUD. Regulation E only allows not providing provisional credit in the event the consumer does not provide a written confirmation of a claim. However, the duty to investigate and provide a reimbursement in the event of an unauthorized transaction remains.

When a bank (RDFI) submits a breach of warranty claim to the bank making the debit (ODFI), the ODFI may refute the warranty claim, by showing that the RDFI’s customer did in fact authorize the transaction. This may result in conflicting outcomes under Reg E and NACHA. For example, if the RDFI’s customer does not execute an WSUD fast enough, the RDFI may have no choice but to provide credit, and later learn that the transaction was not unauthorized after the time to revoke provisional credit lapses.

The best course of action is for the bank to require a written confirmation of unauthorized credit under Regulation E, which would allow the bank to avoid providing provisional credit, if the customer fails to provide such a confirmation. Such a confirmation may be in the form of WSUD, but it is sufficient that the customer confirms in writing, without specifically executing a WSUD. Otherwise, the bank must continue investigating upon learning of a Reg E dispute.

Not a member? Learn more about membership with Compliance Alliance by attending one of our live demos:

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 and ask for our Membership Team.

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Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.