On August 10, 2018 the Bureau of Consumer Financial Protection (CFPB) completed the nearly three year process of issuing relatively minor amendments to implement legislation that allows financial institutions that meet certain requirements to be exempt from sending annual privacy notices to their customers. The Gramm-Leach-Bliley Act (GLBA) generally requires that financial institutions send annual privacy notices to customers.

In December 2015, Congress amended the GLBA as part of the Fixing America’s Surface Transportation Act (FAST Act). This amendment to the GLBA provides financial institutions that meet certain conditions an exemption to the requirement under the GLBA to deliver an annual privacy notice. A financial institution can use the annual notice exception if it limits its sharing of customer information so that the customer does not have the right to opt out, and has not changed its privacy notice from the one previously delivered to its customer.

The final rule implements this legislation and establishes deadlines for institutions resuming annual privacy notices if their practices change and they therefore cease to qualify for the exemption.

The rule is effective 30 days after publication in the Federal Register, which is expected soon. A copy of the 55-page final rule is available at:  https://files.consumerfinance.gov/f/documents/bcfp_glba-privacy-notices_final-rule_amendment_2018-08.pdf

On August 8, 2018 Financial Crimes Enforcement Network (FinCEN) announced a 30-day extension to the limited exception to the Beneficial Ownership Rule

On May 16, 2018, FinCEN issued a 90-day limited exceptive relief to covered financial institutions from the obligations of the Beneficial Ownership Rule for Legal Entity Customers (Beneficial Ownership Rule) for certain financial products and services (i.e., certificate of deposit or loan accounts) that were established before the Beneficial Ownership Rule’s Applicability Date, May 11, 2018. FinCEN issued the 90-day limited exception in order to determine whether, and to what extent, a further exception would be appropriate for such products and services. The exception expires on August 9, 2018, but may be extended, modified or revoked at FinCEN’s discretion

FinCEN is extending the limited exception for an additional 30 days, up to and including September 8, 2018, from the obligations of the Beneficial Ownership Rule for rollover or renewal of certain financial products and services (i.e., certificate of deposit or loan accounts) that were established before May 11, 2018 to further consider the issue.

For more information regarding the Beneficial Ownership Rules :

• The original extension 
• Upcoming Beneficial Ownership Rules webinar on August 28th 

On July 31, 2018 President Trump signed S. 1182, the “National Flood Insurance Program Extension Act of 2018,” which reauthorizes the Federal Emergency Management Agency to enter into new contracts for flood insurance and borrow from the Treasury up to specified amounts through November 30, 2018.

The House Amendment to S. 1182 extends the National Flood Insurance Program, which was set to expire July 31, 2018, through November 30, 2018. This amendment does not include any reforms to the program; it is only a short-term extension.

The NFIP was originally set to expire on September 30, 2017. On September 8, 2017, Congress passed a short-term extension set to expire on December 8, 2017.

Recognizing the program is broken and in need of repair, Congressman Sean Duffy (R-WI) introduced the 21st Century Flood Reform Act (H.R. 2874), a collection of seven bills approved by the House Financial Services Committee that would reauthorize the NFIP for five years, introduce private market competition, and provide programmatic reforms to help policyholders.

In the wake of massive storms, including hurricanes Harvey, Irma, and Maria, on November 14, 2017, the House overcame its points of contention and passed the 21st Century Flood Reform Act. The Senate, however, did not act on this legislation.

As a result, on December 8, 2017, the NFIP received a second short-term extension through December 22, 2017 and a third short-term extension through January 19, 2018. The NFIP lapsed between January 20, 2018 and January 22, 2018, but received a fourth short-term reauthorization through February 8, 2018. The NFIP lapsed for approximately eight hours during a brief government shut-down in the early morning of February 9, 2018. However, the NFIP received an extension in the omnibus spending bill through July 31, 2018.

With the July deadline approaching, on June 28, 2018, the U.S. Senate approved its version of the farm bill, which includes an amendment that would extend the authorization of the NFIP for six months. The House opposes a six-month extension because it would leave the fate of the program up to the 116th Congress. The House Amendment to S. 1182 only extends the program until November 30, 2018, maximizing pressure on Congress to enact a permanent solution that makes necessary reforms and provides certainty for insurance providers and housing markets.

When the flood insurance program was broken in 2005 it took Congress seven years to fix it. It has been broken again for about 12 months. How long will it take to complete the repairs this time?

As promised earlier this month on July 27th, 2018, FinCEN released the following changes to the BSA E-Filing System production environment:

1. FinCEN posted the new discrete entry form version (v1.2) of the FinCEN Suspicious Activity Report (SAR) for download/submission;
2. FinCEN began accepting batch files containing the new FinCEN SAR in the new FinCEN 2.0 XML schema format;
3. FinCEN updated the FinCEN CTR XML batch schema to prohibit certain unwanted characters/formatting for all elements values in the batch, specifically leading and trailing spaces, carriage returns, line feeds, and horizontal tabs. If any value contains one or more instances of the above unwanted characters/formatting, the batch submission will be REJECTED by the application beginning July 27th, 2018 (these restrictions will also be applied to FinCEN SAR and FinCEN FBAR XML batch submission).

FinCEN will continue to accept the existing FinCEN SAR discrete form as well as the existing ASCII based batch format; however, beginning on January 1, 2019, FinCEN will only accept the new FinCEN SAR discrete form and the new XML based batch format.

 FinCEN SAR Discrete Filer Impact

On July 27th, 2018, the new discrete entry form (v1.2) replaces the existing form (v1.1) on the BSA E-Filing System. To access the new discrete entry form, login to the BSA E-Filing System, select “Report 111 – SAR, and click “Open New Form”. FinCEN will continue to accept all previously downloaded versions of the discrete entry SAR form (v1.0-1.1) until January 1, 2019, at which time only the new version of the form (v1.2) will be accepted.

 FinCEN SAR Batch Filer Impact

On July 27th, 2018, a new batch entry form (v1.2) designed to accept a FinCEN SAR batch file in XML format is available on the BSA E-Filing System. To access the new batch entry form, login to the BSA E-Filing System, select “Report 111 – SARXBatch, and click “Open New Form”. FinCEN will continue to accept the existing FinCEN SAR in ASCII batch format (Report 111 – SARBatch) until January 1, 2019, at which time only the new FinCEN SAR in XML batch format (Report 111 – SARXBatch) will be accepted.

Deborah Crawford will provide detailed information about the new form in a webinar on September 24, 2018 entitled Suspicious Activity Reporting: New Form and Developing Issues. For more information or to register please visit https://www.jackscomplianceresource.com/event-registration/?ee=185

On July 26, 2018 the Federal Reserve Board issued a consent order against Community Trust Bank, Inc. of Pikeville, Kentucky, for unfair and deceptive practices, requiring the bank to pay approximately $4.75 million in restitution to approximately 11,000 consumers and make certain consumer compliance enhancements. The practices were in effect from 1997 to present.

It appears that the bank violated section 5 of the Federal Trade Commission Act in its offering of deposit account add-on products to consumers. The bank represented to consumers that all of the add-on product benefits would be effective upon enrollment when, in fact, consumers had to take additional steps to receive some of their benefits. The bank did not adequately disclose the additional steps prior to enrollment and did not explain to consumers that they would be billed regardless of benefit activation.

The bank must begin making restitution payments to consumers after regulatory non-objection to the restitution plan, which is due within 60 days of the issuance of the consent order.

A copy of the consent agreement is available at: https://www.federalreserve.gov/newsevents/pressreleases/files/enf20180726b1.pdf

On July 16, 2018 the Federal Emergency Management Agency (FEMA) proposed revisions to its flood regulations. FEMA proposes to amend parts 59, 61, and 62 of 44 CFR. These parts contain regulations implementing the NFIP. In addition, FEMA proposes to amend Appendices A(1) – A(3) of part 61, containing the three forms of the SFIP: The Dwelling Policy Form, the General Property Form, and the Residential Condominium Building Association Form.

FEMA proposes this rulemaking for three purposes.

• First, it intends to make several non-substantive changes designed to improve the readability, uniformity, and clarity of the NFIP regulations.
• Second, FEMA proposes to make several non-substantive updates to regulations to align with the requirements of Biggert-Waters Flood Insurance Reform Act (BW Act) and Homeowner Flood Insurance Affordability Act (HFIAA).
• Third, FEMA proposes two substantive, albeit minimally so, changes to its regulations codifying the requirements of BW Act and HFIAA.

Please understand these are not the flood regulations issued by the prudential bank regulatory agencies that directly impact flood insurance compliance. The proposal impact FEMA regulations that indirectly impacts your flood compliance efforts.

A copy of the 60-page proposal is available at:  https://www.gpo.gov/fdsys/pkg/FR-2018-07-16/pdf/2018-13292.pdf

 On June 25, the Board of Governors of the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (the agencies) announced the availability of the 2018 list of distressed or underserved nonmetropolitan middle-income geographies, where revitalization or stabilization activities are eligible to receive Community Reinvestment Act (CRA) consideration under the community development definition. The agencies apply a one-year lag period for geographies that were listed in 2017 but are no longer designated as distressed or underserved in the current release. Revitalization or stabilization activities in these geographies are eligible to receive CRA consideration under the community development definition for 12 months after publication of the current list.

The 123-page list is available at: https://www.fdic.gov/news/news/press/2018/pr18038.pdf

Recently a member of our Compliance Masters Group inquired, “It looks like the CFPB has dropped their case with Zillow according to a statement by Zillow.  We had a lot of our lenders wanting to co-market with realtors on Zillow.  Now what?”

Good question.

What we do know – Zillow Group received a letter from the CFPB on June 22 stating that the CFPB “had completed its investigation, that it did not intend to take enforcement action, and that the Company was relieved from the document-retention obligations required by the Bureau’s investigation.”

What is not clear – What were the CFPB’s concerns with Zillow Group’s co-marketing program? What adjustments did Zillow make to eliminate the CFPB’s concerns? If Zillow did not make adjustments, why was the investigation terminated?

What we need – Guidance from the CFPB explaining how to set up a co-marketing arrangement that fully complies with Section 8 of the Real Estate Settlement Procedures Act would be a good start.

CFPB’s investigation placed a stain on Zillow. Some lenders have avoided entering arrangements with Zillow because of fears of getting caught up in the investigation. Now the investigation has ended. It is unlikely that the CFPB will issue an “all-clear” announcement that it is safe to do business with Zillow or to issue clarifying guidance any time soon.

Now What? – Anyone in an arrangement with Zillow should be more comfortable with that relationship this month, than they were last month. Anyone contemplating an arrangement with Zillow would be well advised to obtain a legal opinion from counsel. It is likely that Zillow will create a “comfort package” that explains why it is now safe to do business with them.

Every day that goes by without the CFPB, or one of the prudential regulators, taking action against Zillow, or those who do business with Zillow, should increases the comfort level for everyone. Slow and cautious makes sense now.

On July 5, 2018 both the Office of the Comptroller of the Currency (OCC Bulletin 2018-19) and the Consumer Financial Protection Bureau issued statements regarding the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) amendments to the Home Mortgage Disclosure Act (HMDA).

The President signed the EGRRCPA on May 24, 2018. Section 104 of the law amends HMDA. The EGRRCPA provides exemptions from certain HMDA requirements for insured depository institutions, with satisfactory or outstanding Community Reinvestment Act ratings, and for insured credit unions. The partial exemptions are generally available:

• For closed-end mortgage loans if the institution originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years.
• For open-end lines of credit if the institution originated fewer than 500 open-end lines of credit in each of the two preceding calendar years.

The partial exemption eliminates the requirement to collect, record, and report some, but not all, of the data points specified in current Regulation C. The data points from Sections 304(b)(5) and (6) are eliminated for this select group of financial institutions.

For all institutions filing HMDA data collected in 2018, the Act will not affect the format of the LARs:

• LARs will be formatted according to the previously-released 2018 Filing Instructions Guide for HMDA Data Collected in 2018 (2018 FIG).
• If an institution does not report information for a certain data field due to the Act’s partial exemptions, the institution will enter an exemption code for the field specified in a revised 2018 FIG.
• All LARs will be submitted to the same HMDA Platform. A beta version of the HMDA Platform for submission of data collected in 2018 will be available later this year for filers to test.

At some unspecified date, later this summer, the  CFPB expects to release the revised 2018 FIG and to provide further guidance on the applicability of the Act to HMDA data collected in 2018.

For more about the EGRRCPA read: https://www.jackscomplianceresource.com/regulatory-relief-on-the-way/; or purchase a two-hour webinar on the topic at:  https://www.jackscomplianceresource.com/product/the-economic-growth-regulatory-relief-and-consumer-protection-act-immediate-compliance-concerns-webinar-recording/

The OCC Bulletin is available at: https://www.occ.gov/news-issuances/bulletins/2018/bulletin-2018-19.html

The CFPB statement is available at:  https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-issues-statement-implementation-economic-growth-regulatory-relief-and-consumer-protection-act-amendments-home-mortgage-disclosure-act/

If you will recall from my recap of Day 1, I’m not typically an early riser.  My day started as early as the conference would allow me with a Power Hour session provided by Treliant.  The speakers for “Seven Steps to Avoid Redlining” were Carl Pry and Susanna Tisa.  This session had a lovely continental breakfast provided, and lots of really informative discussion about…you guessed it, avoiding redlining!  I think my favorite takeaway from this session was that you don’t want your mapping to look like a pastry.  If your mapping area looks like a croissant or doughnut, you are probably at risk for a redlining violation of some sort.

Once my breakfast had been consumed and I had learned the broad points of how to do the right thing, I headed to the general session.  The speaker in the gigantic ballroom was ABA President Rob Nichols.  Rob spent some time telling us about the conference and the way the industry is heading as a whole.  He also gave us a demonstration involving their new website www.grow.aba.com.  This website is dedicated to showing how banks all over the country impact their state and the American economic system.  As Rob said, “United States banks are the cardiovascular system for the most dynamic economic system in the world.”  He also talked about the Economic Growth, Regulatory Relief and Consumer Protection Act as just about everyone here has.  He summed up what the consensus has been…we don’t really know quite yet what it means, but now is not a time to relax.   He wrapped up with this quote, “Regulatory changes will take time and compliance is more important now.  Double down on compliance!”

What do 2,000+ bankers do when they finish listening to the ABA President?  I thought you’d never ask.  The answer is coffee.  A lot of coffee.  Day 2 seemed to have a lot more “down time” than day 1, and this is an example of that.  The Marketplace is an interesting animal.  If you’ve ever been to this sort of event, in any industry, you know exactly what I am talking about.  There are rows of booths with vendors hoping that the passerby will show some sort of interest.  Strategically placed swag, flashy videos, and prizes are just a few examples of strategies they will employ in hopes of getting your contact information.  It’s not an easy job and I feel for them as I walk past.  However, that’s not the only purpose for the Marketplace.  Hundreds of attendees can be found inside exchanging stories and business cards with their colleagues.  As a first time attendee, this puts me in a little bit of an interesting spot because I have few contacts here.  I did see a lot of our Compliance Masters Group members, but I will talk more about them in a bit!

Following the “coffee break”, I made my way to my first break out session.  “Troubleshooting Your CDD Program: Where Are We?” was presented by Robert Rowe III, Megan Hodge and Daniel Stipano.  This session certainly moved at a brisk pace and it was clear that all three speakers knew the subject matter very well.  They spent a significant amount of time talking about the new Beneficial Ownership Rules as they apply to rollovers and renewals.  They spoke about the 90-day limited exceptive relief and the need to have policies and procedures in place in the event that a customer refuses to provide beneficial ownership on renewal of a CD.  Obviously, they spent time speaking on trigger events which led to possibly the line of the sessions when Daniel Stipano said, “Death is the ultimate triggering event!”.  The parting thoughts were to not lose sight of the bigger picture and know your customer.

That brings us all the way up to lunch which was a little bit different than yesterday’s box lunch.  We had two hours blocked in the gigantic ballroom for a seated luncheon with Jennifer Tescher, President and CEO of the Center for Financial Services Innovation.  First, let me talk about the lunch setting.  The portions, for anyone that has every played Oregon Trail, could only be described as meager.  They have to serve 2,000 people in the course of an hour before the speaker begins, so I can understand I suppose.  I was a bigger fan of the sandwich on Day 1.  Also, as a person with a slight bit of misophonia, the sound of thousands of people using forks and knives against plates was a bit overwhelming.  If you aren’t familiar with misophonia it is defined as “a strong reaction to specific sounds” and it is REAL!  Jennifer Tescher gave a wonderful presentation about the state of financial health for individuals all over our country.  You’re not just in compliance business, you’re not just in the banking business, you’re in the financial health business.

The luncheon was followed by some nice chess pie in the Marketplace and the same hobnobbing and networking that I discussed prior.  Then, I made my way straight towards my next session on Fair Lending Hot Topics.  The session was moderated by Cara James and was a Q&A style presentation by Anand Raman, Andrea Mitchell, Melanie Brody and Paul Hancock.  These four attorneys waded through a variety of hot topics in the Fair Lending area.  Redlining was a frequent topic visited throughout the session and was part of the conversation while speaking on the Bureau moving away from auto loans, the DOJ using publicly available information and Fintech.  They also mentioned that acting director Mulvaney suggests that the Bureau will reopen Reg B to address Disparate Impact Theory of Liability in respect to Inclusive Communities.  The overriding theme for this topic was, “Try to do the right thing”.

The final session of the day for me was a HMDA flash session presented by Robert Rowe III.  Flash sessions are 45 minutes and it was over before I realized it.  Basically, don’t get too excited about these HMDA exemptions for smaller institutions until we know what they actually mean.  Do not change anything.  Are you thinking about selling these loans at a later date?  Well, you may run into an issue if you haven’t been collecting all the data.  What happens if you are selling to an institution who is required to collect ALL of the data?

I thought when I started to put together this blog post that it wouldn’t be quite as long as yesterday’s.  I guess I was wrong about that, but I cannot wrap this up without talking about the low key cocktail hour that we hosted for our Compliance Masters Group members.  This was by far my favorite part of the conference!  I talk to these people over the Internet at least three times a month, and it was so wonderful to be able to put faces with names.  I’ve spent my week trying to figure out who is saying, “Hi, Brent!”.  It is so odd to be in a scenario where people know your face, but you only know them by name…maybe by voice.  I don’t think I could have had more fun spending time with somewhere between 15-20 of our members at Barlines in the Omni Hotel.  I loved hearing all of the stories that they shared as friends who had attended these conferences together for years.  As I look forward to my final day of my first ABA RCC, this was added another level of excitement for future attendance that I hope to be blessed with in the coming years.  There are a lot of good people here, and I feel lucky to have some of the best of those people right in our own Compliance Masters Group.  I’m heading to bed as I prepare to, once again, wake up much earlier than I would like to.