Managing 2017 Compliance Prioritiescontent.aba.com/briefings/3015339.pdfAmerican Bankers Association Briefing Managing 2017 Compliance Priorities Wednesday, December 14, 2016 2:00

ABA BRIEFING | PARTICIPANT’S GUIDE

Managing 2017 Compliance Priorities

Wednesday, December 14, 2016 Eastern Time

2:00 p.m.–4:00 p.m. Central Time

1:00 p.m.–3:00 p.m. Mountain Time

12:00 p.m.–2:00p.m. Pacific Time

11:00 a.m.–1:00 p.m.

American Bankers Association Briefing Managing 2017 Compliance Priorities Wednesday, December 14, 2016 ▪ 2:00 – 4:00 p.m. ET

DISCLAIMER This Briefing/Webcast will be recorded with permission and is furnished for informational use only. Neither the speakers, contributors nor ABA is engaged in rendering legal nor other expert professional services, for which outside competent professionals should be sought. All statements and opinions contained herein are the sole opinion of the speakers and subject to change without notice. Receipt of this information constitutes your acceptance of these terms and conditions.

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Please call 1-800-BANKERS if you have any questions about this resource or ABA membership.


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Table of Contents

TABLE OF CONTENTS ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II

SPEAKER & ABA STAFF LISTING ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III

SPEAKER BIOGRAPHIES ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-VI

PROGRAM OUTLINE ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-VIII

CONTINUING EDUCATION CREDITS INFORMATION ... . . . . . . . . . . . . . . . . . . . . . . . . IX

CPA SIGN-IN/SIGN-OUT SHEET ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X

INSTRUCTIONS FOR RECEIVING CERTIFICATES OF ATTENDANCE ... . . XI

PROGRAM INFORMATION ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENCLOSED

PLEASE READ ALL ENCLOSED MATERIAL PRIOR TO BRIEFING. THANK YOU.

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Speaker and ABA Staff Listing

Speakers Center for Regulatory Compliance Toni Cannady Senior Research Assistant (202) 663-5078 [email protected] Nessa Feddis Senior Vice President and Deputy Chief Counsel (202) 663-5433 [email protected] Rick Freer Senior Director, Exam and Compliance Programs (202) 663-5056 [email protected] Anjali Phillips Senior Counsel (202) 663-5338 [email protected] Robert G. Rowe III Vice President and Associate Chief Counsel (202) 663-5028 [email protected] Jonathan Thessin Senior Counsel (202) 663-5016 [email protected] Financial Institution Policy and Regulatory Affairs and Mortgage Markets Rod Alba Senior Vice President, Real Estate Finance and Senior Regulatory Counsel (202) 663-5592 [email protected] Krista Shonk Vice President and Senior Regulatory Counsel, Mortgage Finance (202) 663-5014 [email protected]

Moderator/Speaker Virginia O’Neill Senior Vice President and Director, Center for Regulatory Compliance (202) 663-5073 [email protected] ABA Briefing/Webcast Staff Cari Hearn Senior Manager (202) 663-5393 [email protected] Linda M. Shepard Senior Manager (202) 663-5499 [email protected]

American Bankers Association 1120 Connecticut Avenue, NW Washington, DC 20036 www.aba.com

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Speaker Biographies

VIRGINIA O’NEILL (Moderator/Speaker) Senior Vice President Virginia “Ginny” O’Neill is Senior Vice President and Director of the Center for Regulatory Compliance at the American Bankers Association where she is responsible for coordinating ABA’s advocacy and member outreach on a broad range of regulatory compliance matters. Prior to joining the ABA staff in March 2008, Ginny served as the Compliance and Bank Secrecy Act Officer for a de novo financial institution located in Washington, D.C. and practiced law with firms located in Washington, D.C. and Indianapolis, Indiana. Ginny graduated from Duke University with a B.A. in Economics (Phi Beta Kappa, summa cum laude). She received her J.D. from Georgetown University Law Center (magna cum laude). Ginny is admitted to the Bars of the District of Columbia and State of Indiana. ROD ALBA Senior Vice President, Real Estate Finance and Senior Regulatory Counsel Rod is ABA’s lead staff on mortgage origination issues and regulatory implementation efforts. Rod is the ABA staff liaison to the Mortgage Markets Committee, responsible for policy formulation on issues affecting real estate finance. Prior to ABA, he served as Legislative Counsel to the Mortgage Bankers Association, advising and coordinating the industry’s state and federal legislative efforts. Rod also served as the Mortgage Bankers Association’s Senior Director of Government Affairs. In this capacity, Rod was lead counsel on all legal and regulatory issues affecting residential real estate finance issues. Rod served as head of the MBA’s Regulatory Compliance and Legal Issues Committees, where he organized the advisory and advocacy activities of the industry’s legal and regulatory experts. Before joining MBA, Rod was an attorney with the Department of Housing and Urban Development, in the Office of General Counsel, GSE/RESPA Division. As Senior Attorney for RESPA, Rod participated in the drafting and development of every rule and administrative interpretation under RESPA and Regulation X from 1994 to 2000. Rod is a frequent speaker on panels and conferences relating to legal and regulatory developments in mortgage lending. In his experience with the mortgage industry, Rod has held roles in both public and private sectors. From 2004 to 2007, Rod served as Vice President for Federal and Regulatory Affairs with ACC Capital Holdings, in Washington, DC. In addition, Rod served as special projects counsel to National Council of La Raza, the largest Latino civil rights organization. Rod has received numerous recognition awards in his years with MBA and HUD. Prior to that, Rod was recognized with a Congressional Fellowship and served in a legal capacity in various federal administrative agencies. He serves as board member in non-profit organizations focusing on emerging market issues. His education includes a Juris Doctor (1993) from Syracuse University College of Law and a B.A. in Economics (1990) from the University of Maryland, College Park Campus. TONI CANNADY Senior Research Assistant, Compliance Toni Cannady is the Senior Research Assistant of the Center of Regulatory Compliance at the American Bankers Association, where she conducts research for the Center’s compliance experts and is responsible for ABA’s enforcement database and matters regarding the Americans with Disabilities Act. Prior to joining ABA in July 2014, Toni served as a clerk in the Washington D.C. office of Greenberg Traurig, LLP.


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Toni graduated from Spelman College with a B.A. in English and received her paralegal certificate from Georgetown University. She is currently a J.D. candidate at Catholic University in Washington, D.C. with an expected graduation date of May 2019. NESSA FEDDIS Senior Vice President and Deputy Chief Counsel Nessa Feddis is Senior Vice President and Deputy Chief Counsel of Consumer Protection and Payments to the ABA’s Government Relations Division. She focuses on consumer banking, fraud prevention, and payment system issues both in the federal legislative and regulatory arenas. Her responsibilities include relaying ABA’s position on such issues to Congress and government agencies and educating bankers on new laws and regulations. She has testified before Congress on behalf of the banking industry. In recent years, she has been involved with regulatory and legislative matters relating to and consumer credit, credit and debit cards, privacy, deposit accounts, payments systems, emerging electronic payment systems, and credit card and check fraud. She received her law degree from Catholic University and is a member of the Washington, D.C. Bar. She is also former President of the American College of Consumer Financial Services Lawyers and former Chair of the Subcommittee on Electronic Fund Transfers of the American Bar Association’s Consumer Financial Services Committee. Her articles discussing regulatory and legislative developments in consumer banking matters have appeared in ABA Banking Journal and ABA Bank Compliance. RICK FREER Senior Director, Exam and Compliance Programs Rick joined the ABA in December 2011 having recently retired from the Office of the Comptroller of the Currency (OCC) in February 2011. Rick works on a variety of issues including fair lending, UDAAP, flood, and HMDA, and teaches at schools and conferences. Prior to his retirement he served from July 2000 to February 2011 as a national bank examiner and senior compliance specialist in the Compliance Policy Division at the OCC. He handled compliance regulations, including fair and responsible lending, UDAP, and HMDA, and compliance risk management initiatives and training activities. He also represented the OCC on the ABA’s Compliance Schools Advisory Board and the ABA’s Editorial Advisory Board. He is a teacher at the ABA compliance schools, has spoken at numerous national and state banking conferences, has authored co-authored seven articles for the ABA’s Bank Compliance Magazine, and provided expert advice in the development of the ABA Fair Lending Toolbox. Rick joined the OCC in 1969 as an assistant national bank examiner. He was commissioned a national bank examiner in 1976. From 1976 through 1978 he served as a regional training officer and regional director for the Human Resources Division. From 1978 through 1990, he held various positions in the OCC’s Washington office: Special Project Coordinator in the Chief National Bank Examiner’s Office; National Recruitment Coordinator and associate director in the Human Resource Division; and acting director in the Training and Development Division. From 1990 through 1997, he was the director for Compliance Management and handled CRA and fair lending examination programs, consumer complaints, compliance training and administrative programs. In 1997, he joined the OCC’s Resource Cadre. He was a senior internal consultant and handled such tasks as CRA and fair lending appeals with the OCC’s Ombudsman’s Office, large bank CRA exams, developing the CRA examination approach for limited purpose and wholesale banks, the OCC’s contract examiner hires program, and developing examination handbooks and policy positions for the Community and Consumer Policy Division. ANJALI PHILLIPS Senior Counsel Anjali Phillips is a Senior Counsel in the Center for Regulatory Compliance at the American Bankers Association. She joined ABA in March 2015 and focuses on flood insurance compliance issues, UDAAP, and debt collection. Before joining ABA, Anjali worked as a lawyer at Allen & Overy LLP and O’Melveny & Myers, LLP, focusing on regulatory matters. She clerked for Judge Surrick on the Eastern District of Pennsylvania. Anjali has an B.A., cum


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laude, in Communications from the University of Pennsylvania. She has a J.D. from the University of Pennsylvania Law School. She is a member in good standing of the bars of Maryland and the District of Columbia. ROBERT G. ROWE III Vice President and Associate Chief Counsel Rob joined the American Bankers Association in October 2008 and represents the association’s members on Bank Secrecy Act/Anti-Money Laundering compliance, Community Reinvestment Act, fair lending and privacy issues. Rob serves as the ABA representative to Treasury’s Bank Secrecy Act Advisory Group and for several years chaired the International Banking Federation’s Financial Crimes Working Group. Before joining ABA, Rob was with another association where he represented community banks on many regulatory issues. He also has over ten years of experience as a banker, working on a wide variety of matters from personal trust to commercial lending. Rob has an A. B., summa cum laude, Phi Beta Kappa, from Bowdoin College. He holds a Juris Doctor, cum laude, from Boston University and a master of laws from Georgetown University. Rob is a member in good standing of the bars of Pennsylvania, Massachusetts, and the District of Columbia. KRISTA SHONK Vice President and Senior Regulatory Counsel, Mortgage Finance Krista Shonk is Vice President, Mortgage Finance and Senior Regulatory Counsel for the American Bankers Association. She oversees ABA’s advocacy on mortgage servicing issues and works on vendor risk management matters. Ms. Shonk is a recognized expert on financial institution regulatory, compliance and policy issues, and has represented the banking industry before federal regulatory agencies and Congressional staff. Prior to joining ABA, She served as Associate General Counsel for Freddie Mac where she advised on statutory and regulatory requirements for new products and new activities and managed regulatory filings for new business initiatives. She also worked on bank regulatory matters during her previous tenure at the ABA and America’s Community Bankers. Ms. Shonk earned a B.A. from Bridgewater College and a J.D. from West Virginia University College of Law. She is a member of the Virginia Bar and serves on the President’s Advisory Council for Bridgewater College. JONATHAN THESSIN Senior Counsel Jonathan Thessin is Senior Counsel with the American Bankers Association’s Center for Regulatory Compliance. He advises bankers and advocates before the Bureau of Consumer Financial Protection, the banking agencies, and other federal agencies on matters relating to the Telephone Consumer Protection Act, small dollar lending, overdraft, and the Bureau’s Consumer Complaint Database. Jonathan joined ABA after spending seven years working for Members of the United States Senate and House of Representatives. He served as Counsel to a senior Member of the Senate Judiciary Committee and, earlier, as Senior Legislative Counsel to a Member of the House of Representatives, where he advised the Member on banking issues and staffed him on the House Judiciary and Education Committees. Earlier in his career, Mr. Thessin served as an Associate with the law firm Wilmer Cutler Pickering Hale and Dorr LLP and as a Law Clerk to Judge Robert B. King on the U.S. Court of Appeals for the Fourth Circuit.

Mr. Thessin is a graduate of Harvard Law School and Yale University.


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PROGRAM OUTLINE

TIMES SESSION AND SPEAKERS 1:45 – 2:00 p.m. ET

Pre-Seminar Countdown

2:00 – 2:05 p.m.

Welcome and Introduction 1Source International

2:05 – 2:12 p.m.

Opening Remarks Ginny O’Neill

2:12 p.m. – 2:22 p.m.

Mortgage Lending Implementation of the latest servicing amendments Making sense of TRID and RESPA Section 8 Krista Shonk Rod Alba

2:22 – 2:26 p.m.

Mortgage Lending (continued) HMDA—preparing for the new disclosure regime Rick Freer

2:26 – 2:42 p.m.

Promoting Inclusion/Fair Lending Dodd-Frank Act section 1071-- Small Business Lending Data Collection Rule Fair Lending Enforcement and CRA Performance—lessons learned from

recent cases Diversity Self-Assessments Rob Rowe

2:42 – 2:48 p.m.

Promoting Inclusion/Fair Lending (continued) Americans with Disabilities Act (ADA)—requirements for accessible websites

and mobile Apps Toni Cannady

2:48 – 2:53 p.m.

Questions and Answers

2:53 – 2:57 p.m.

Consumer Lending Military Lending Act

Nessa Feddis 2:57 – 3:02 p.m.

Consumer Lending (continued) Small dollar lending and overdraft Jonathan Thessin


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PROGRAM OUTLINE TIMES SESSION AND SPEAKERS

3:02 – 3:06 p.m.

Debt Collection Anjali Phillips

3:06 – 3:09 p.m.

Prepaid Final Rule Nessa Feddis

3:09 – 3:13 p.m.

Vendor Management Implications of the FDIC proposed third-party lending guidance Krista Shonk

3:13 – 3:18 p.m.

Questions and Answers

3:18 – 3:23 p.m.

BSA/AML/OFAC Customer Due Diligence (CDD) and sanctions Rob Rowe

3:23 – 3:28 p.m.

UDAAP Lessons learned from recent enforcement actions Rick Freer

3:28 – 3:33 p.m.

Flood Insurance Proposed rule for private insurance policies and prospects for NFIP reauthorization Anjali Phillips

3:33 – 3:37 p.m.

Telephone Consumer Protection Act (TCPA) Prospects for reform? Jonathan Thessin

3:37 – 3:47 p.m.

Additional Matters Consumer Compliance Matrix CFPB proposal to amend its confidentiality rules Privacy Sales Practices/Incentive Compensation Rick Freer Krista Shonk Ginny O’Neill

3:47 – 4:00 p.m. ET

Questions and Answers Closing Remarks


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Continuing Education Credits Information

The Institute of Certified Bankers™ (ICB) is dedicated to promoting the highest standards of performance and ethics within the financial services industry.

The ABA Briefing/Webcast, “Managing 2016 Compliance Priorities” has been reviewed and approved for 2.5 continuing education credits

towards the CRCM designation.

To claim these continuing education credits, ICB members should visit their ICB Certification Manager on the ABA’s Learning Management System (LMS) at https://aba.csod.com/client/aba/default.aspx. You will need your

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American Bankers Association is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org.

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12/9/2016

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aba.com 1-800-BANKERS

Managing 2017 Compliance PrioritiesPresented By: ABA Center for Regulatory Compliance

ABA Briefing/WebcastWednesday, December14, 20162:00 – 4:00 p.m. ET


Disclaimer

This Briefing will be recorded with permission and isfurnished for informational use only. Neither the speakers,contributors nor ABA is engaged in rendering legal norother expert professional services, for which outsidecompetent professionals should be sought. All statementsand opinions contained herein are the sole opinion of thespeakers and subject to change without notice. Receipt ofthis information constitutes your acceptance of these termsand conditions.

12/9/2016

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Presenters

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Virginia O’Neill, Senior Vice President

Nessa Feddis, Senior Vice President and Deputy Chief Counsel

Rod Alba, Senior Vice President and Senior Regulatory Counsel

Robert Rowe, Vice President and Associate Chief Counsel

Krista Shonk, Vice President and Senior Regulatory Counsel

Jonathan Thessin, Senior Counsel

Anjali Phillips, Senior Counsel

Rick Freer, Senior Director

Toni Cannady, Senior Research Assistant


Briefing Agenda

1. Introduction2. Mortgage Lending

Implementation of the latest servicing amendments

Making sense of TRID and RESPA Section 8

HMDA—preparing for the new disclosure regime

3. Promoting Inclusion/Fair Lending Dodd-Frank Act section 1071—Small Business Lending Data Collection

Rule

Fair Lending Enforcement and CRA Performance—lessons learned from recent cases

Diversity Self-Assessments

Americans with Disabilities Act (ADA) requirements for accessible websites and mobile Apps

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Briefing Agenda, Cont’d

4. Consumer Lending Military Lending Act Small dollar lending and overdraft

5. Debt collection6. Prepaid final rule 7. Vendor management Implications of the FDIC proposed third-party lending

guidance7. BSA/AML/OFAC Customer Due Diligence (CDD) and sanctions

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Briefing Agenda, Cont’d

8. UDAAP Lessons learned from recent enforcement actions

9. Flood insurance Proposed rule for private insurance policies and Prospects for

NFIP reauthorization

10.Telephone Consumer Protection Act (TCPA) Prospects for reform?

11.Additional Matters Consumer Compliance Rating Matrix

CFPB proposal to amend its confidentiality rules

Privacy

Sales Practices/Incentive Compensation

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Introduction

• This briefing is NOT a regulation training session; it is designed to help bankers prepare for 2017.

• The change in Administration makes this more challenging than ever. Unknowns include:– Congressional priorities

– President-elect Trump’s priorities

– When we will see leadership changes at the banking agencies and the CFPB

• The impact of PHH v. CFPB

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Agency Leadership – Key Positions to Watch

• FDIC Chairman: Chairman Gruenberg’s term expires November 15, 2017. – There is a general pattern of FDIC chairmen departing soon after a

change in party at the White House, though Chairman Gruenberg has made no announcement about his plans. It would not be unusual for him to seek to complete his term, affording time for an orderly process of identifying and confirming a successor in 2017.

• Comptroller of the Currency: Comptroller Curry’s term expires at the end of March 2017. – The law allows him to continue to serve until replaced. Given the

near approach of the end of his term, he may not seek to depart early, and there is a tradition of Comptrollers serving out their terms, regardless of change in administration. He may not choose to serve much after the end of his term, however.

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Agency Leadership – Key Positions to Watch, Cont’d

• CFPB Director: Director Cordray’s term does not end until July 16, 2018. – The outcome of PHH v. CFPB, the fact that new regulations

by the Bureau are vulnerable to repeal by Congress under the Congressional Review Act, and the possibility that the Bureau may be restructured by Congress all may affect Cordray’sability or willingness to serve the rest of his term.

• FinCEN Director: This position has been vacant since early summer. The new Treasury Secretary will have the opportunity to appoint a new Director.

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Mortgage Lending

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Mortgage Servicing

• Amendments published 10/19/19

• A mix of substantive changes, clarifications, and technical corrections

• Nine major topics

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Successors in Interest Definition of Delinquency

Information Requests Force‐Placed Insurance

Early Intervention Loss Mitigation

Prompt Payment Crediting Periodic Statements

Small Servicer Exemption


Mortgage Servicing, Cont’d

• Two Effective Dates– April 19, 2018: Provisions regarding periodic statements for

borrowers in bankruptcy and successors in interest

– October 19, 2017: All other provisions

• Key To Do’s– Allocate budget and staffing resources

– Communicate with providers of statements (and coupon books), technology providers, and bankruptcy trustees

– Conduct survey of state laws in states where mortgaged property is located to determine documents necessary to establish ownership

– Review policies, procedures, and processes for compliance

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Mortgage Origination

• CFPB Proposed Amendments to Federal Mortgage Disclosure Requirements under the Truth in Lending (TILA-RESPA Integration Rule, Know Before You Owe, or KBYO)—81 C.F.R. 54318-54387 (August 15, 2016)

• ABA Comments submitted October 2016http://www.aba.com/Advocacy/commentletters/Documents/cl-KBYO-2016Oct.pdf

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Mortgage Origination

• Major Industry Concerns– Extend current “Good Faith Compliance” examination policy– Clarify liabilities and cure provisions– Retain KBYO sample forms and afford them Safe Harbor

status– Allow creditors to use corrected Closing Disclosure to “reset”

good faith tolerances– Exclude construction Loans from KBYO coverage– Other

• Final Rule: Expected issue date

• Looking Ahead

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12/9/2016

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RESPA Section 8

• PHH Corporation v. CFPB: A three-judge panel of the United States Court of Appeals for the District of Columbia rejected expansive interpretation of RESPA Section 8 by CFPB, but did not invalidate traditional application of Federal anti-referral and anti-kickback provisions.

• Section 8 continues to apply to marketing or advertising services arrangements, mortgage brokering arrangements, correspondent agreements, joint venture or affiliated business arrangements, mortgage “in a box” arrangements.

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RESPA Section 8

• Summary of Dispute: – CFPB: RESPA Section 8(c)(2), which provides

that nothing in Section 8 prohibits reasonable payments in return for goods, facilities or services actually provided, is not a substantive exception to RESPA’s anti-kickback provisions.

– D.C. Circuit: Under Section 8(c)(2), fair market value payments are not prohibited payments for referrals if services are actually provided.

• Appeal: CFPB has asked the D.C. Circuit to rehear the panel’s determination on Section 8

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HMDA

• Hopefully You Have Planned Well – Not Just Starting

• Manage Your Implementation Plan

• Know the Filing Instructions Guide – 2017 (FIG)

– File, Data Submission, Edit Specification Processes

– Validating the Edit Report and Officer Certification Process

• Apply for Your Legal Entity Identifier– www.gmeiutility.org

http://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/hmda-implementation/

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HMDA Rule Dates Timeline

2016 2017 2018 2019 2020

Effective

Dates

Data

Collection

Data

Submission

No new regulatory requirements go into effect

1/1Effective date for excluding low volume Depository institutions from coverage

1/1Effective date for most provisions related to institutional and transactional coverage, and data collection, recording, reporting, and disclosure

1/1Effective date for changes to enforcement provisions and additional amendments to reporting provisions

1/1Effective date for quarterly reporting provisions

Q1 – Q4Collect 2016 data as required under the current rule (for reporting in 2017)

Q1 – Q4Collect 2017 data as required under the current rule1 (for reporting in 2018)

Q1 – Q4Collect 2018 data as required under the new rule (for reporting in 2019)

Q1 – Q4Collect 2019 data as required under the new rule2 (for reporting in 2020)

Q1 – Q4Collect 2020 data as required under the new rule2 (for reporting in 2021 and, if FI is quarterly reporter, 2020)

1/1 – 3/1Submit 2015 data as required under the current rule,1

and submit to the Federal Reserve Board

1/1 – 3/1Submit 2016 data as required under the current rule,1 and submit to the Federal Reserve Board

1/1 – 3/1Submit 2017 data as required under the current rule,1 and submit to the CFPB

1/1 – 3/1Submit 2018 data as required under the new rule,2 and submit to the CFPB

1/1 – 3/1Submit 2019 data as required under the new rule,2 and submit to the CFPB

4/1 – 5/30Quarterly FI reporters report Q1, 2020 data as required under the new rule,2 and submit to the CFPB

.

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Promoting Inclusion/Fair Lending

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Small Business Data Collection

• Dodd-Frank amended the Equal Credit Opportunity Act to require collection of data on applications and lending to: – Women-owned businesses

– Minority-owned businesses

– Small businesses

• The goal is to help enforce fair lending laws & ensure access to credit for these businesses

• Where feasible, underwriters should not have access to the information

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12/9/2016

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Small Business Data Collection

• On April 11, 2011, the Consumer Financial Protection Bureau issued guidance stating that, “financial institutions’ obligations under section 1071 do not go into effect until the Bureau issues necessary implementing regulations.” http://files.consumerfinance.gov/f/2011/04/GC-letter-re-1071.pdf

• April 12, 2016, the Bureau announced a new Assistant Director for the Office of Small Business Lending Markets

• November 30, 2016, the Bureau announced it is in the beginning phase of rule-writing, currently focusing on outreach and research to better understand the market

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Fair Lending Enforcement

• Fair lending continues to be a key focus of regulators– Regulators continue to assess use of alternative credit data

and other steps to expand financial inclusion

– New data will provide additional information for fair lending, particularly small business data and HMDA data

– Examiners continue to look for instances of redlining

– Indirect auto lending is still being investigated, particularly as agencies identify concerns about automobile lending in general

– Gender inclusion?

• Financial Fraud Enforcement Task Force

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• Key cases from 2016 covered:– Mortgage loan servicing and workouts

– Higher interest rates charged to minorities

– Redlining and disparate treatment

– Disability

• Three common themes emerge from the cases:– Importance of market footprint/presence

– Importance of policies & procedures and training

– Influence of loan officer discretion in underwriting

23



• On September 28 – DOJ settled with a Texas bank that allegedly charged Hispanic borrowers higher interest rates for car title loans. Loan officers had significant discretion in setting rates (up to 3% up or down).

• On August 23 – DOJ filed suit referred by HUD against a series of related companies for discrimination involving mortgage loan servicing. The companies, which targeted Hispanic borrowers, charged a $5,000 fee for unnecessary and ineffective loan audits & encouraged borrowers to stop making loan payments.

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• On June 29, DOJ settlement with a Tennessee bank – The bank was alleged to have redlined by not having a

presence in minority communities or marketing to minorities (peer comparison)

– Loan officers were told to treat minority loan applications differently

– CFPB used matched-pair testing to identify discriminatory practices

– The bank agreed to set aside funds to compensate borrowers and neighborhoods, open new branches in minority communities, update policies & procedures, and train employees

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• On February 2, DOJ settled with a large car lender– Allegations included:

• Underwriters were permitted significant discretion

• African-Americans and Asian/Pacific Islanders paid higher rates ($200 average over the life of the loan for African-Americans and $100 average over the life of the loan for Asian/Pacific Islanders)

– Under the settlement agreement, the permitted upcharge is limited to 125 basis points (100 basis points for loans over 60 months)

– New policies & procedures have been implemented, but monitoring and compliance systems must be improved

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Community Reinvestment Act

• The agencies continue to update CRA guidance

• July 2016, updated FAQs were published to:– Address expectations on the availability and effectiveness of

retail banking services

– Clarify which activities qualify for community development

– Offer additional guidance on what is meant by responsive and what is meant by innovative

• CRA and fair lending continue to work hand-in-hand

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• The Dodd-Frank Act added a new provision that requires each regulator to create an Office of Women and Minority Inclusion– The goal is to increase diversity at the agencies

– Each agency is also required to assess the diversity policies and practices of the entities regulated by the agency

• June 2015, the agencies issued standards: https://www.fdic.gov/news/news/press/2015/pr15047.html

• August 2016, the agencies issued FAQs: https://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160802b1.pdf

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• The agencies are finalizing self-assessment templates

• Key Points– The agencies encourage disclosure and self-assessments

– The assessments are NOT part of the examination process

– Compliance is completely voluntary

29


Americans with Disabilities Act

Title III Obligations —

ADA requires public accommodations, including banks to provide:

• Equal access to goods and services

• Auxiliary aids and services at no additional charge to ensure effective communication– Amended in 2010 to include “accessible electronic information

technology”– DOJ has not published a legally binding definition of “accessible” website

or mobile apps

• Affirmative Defenses: Fundamental Alteration and Undue Burden

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ADA, Cont’d

Demand Letters —

• Thousands of demand letters threatening litigation from private plaintiff’s firms

• Letters allege companies violated the ADA by failing to provide an accessible website and:

– Seek injunctive relief and attorneys fees and costs;

– Request that the recipient of the letter respond within 21 days; and

– Provide a table alleging the amount of pages and percentage of the website that is inaccessible

• Since 2015, more than 244 federal lawsuits filed against banks

– Not easily dismissed and virtually all matters settle

31


ADA, Cont’d

WCAG 2.0 —

• Guidelines published by the Worldwide Web Consortium (“W3C”)

• AA is the intermediate standard (A, AA, AAA)

– Web page must satisfy all Level A and Level AA Success Criteria

• Standard DOJ requires companies to comply with in settlement agreements, standard for federal agency websites, proposed standard for state and local government websites

• Anticipated standard for public accommodations

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ADA, Cont’d

WCAG 2.0 —

• 4 Principles – Perceivable, Operable, Understandable, and Robust

• Covers diversity of web users

– Blind, color blind, low vision

– Deaf or hard of hearing

– Physical disabilities (motor disabilities)

– Epilepsy

– Cognitive and neurological disabilities

33


ADA, Cont’d

Mobile Apps —

• No indication that DOJ is considering a standard for mobile apps, although it did seek comments in the Title III SANPR

• No generally accepted standard

• Need for mobile apps to be accessible has been included in DOJ settlement agreements

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ADA, Cont’d

Recommendations:

1. Adopt accessibility policy and standard

2. Audit website for accessibility

3. Appoint people to oversee all electronic information technology accessibility and issues and review new technology for accessibility

4. Train website team

5. Direct department to create an implementation plan

6. Create accessibility webpage with information about access

7. Require accessibility in vendor contracts

8. Conduct annual audits for conformance with standard

35


How to Submit Questions

If you are participating on the Web:Enter your Question in the “Questions” Box

and Press ENTER / SUBMIT

If you are participating by Phone:Email your question to: [email protected]

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Consumer Lending

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Military Lending Act

• Effective: October 3, 2016• Bumpy implementation:

– Verification of status –• Last minute verification systems• Confusion with SCRA• Inconsistency between MLA and SCRA databases• MLA database down

– Late-arriving Interpretive Rule• Useful clarifications• Further confusion

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Areas of uncertainty:

– Purchase money loans exempt unless “cash-out’– Lot loans – covered if under $54,600– MAPR if zero balance

• Annual fee permitted if l$100 or less• Fees not in MAPR may be charged

– MAPR for open-end credit• Treats annual fee as if imposed monthly

– Loans secured by bank account– Right of offset– Oral disclosures – in person or toll-free number only

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• Going forward

– Meetings with DoD

– Application to credit cards• Effective October 2017

• Issues remain re fees included in MAPR

– Looking to amend/clarify the regulation

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Small Dollar Lending

• The proposed rule would apply to loans that:

– Have a term of 45 days or less; or

– Have a term of more than 45 days, have a “total cost of credit” that exceeds 36%, and provide the lender with a “leveraged payment mechanism” or “vehicle security.”

• The “all-in” APR parallels the proposed Military Lending Act APR and includes not only interest, but also fees, finance charges, and add-on product charges.

– Example: Loan of $1,000 with a 15% interest rate, 180-day term, and $100 documentation fee has an all-in APR of 36.778%.

41



• Proposed rule presents significant costs, complexity, and compliance risks.

• Requirements:– “Ability-to-repay” evaluation– Record retention– Maximum number of unsuccessful withdrawal attempts– Development of written policies and procedures

• Proposed rule includes three conditional exemptions from ability-to-repay requirement, but a loan must still comply with the proposed rule’s other requirements.

• ABA proposed an exemption for banks that make a limited number of small dollar loans and comparably proportionate exclusions for larger banks’ lending.

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• Bureau is expected to need a number of months to process and review the comments it received.

• Reportedly, over one million comments were filed

• Final rule will be impacted by the change of administration.

43


Overdraft

• Bureau’s Fall 2016 Regulatory Agenda states that Bureau is “continuing to engage in additional research” on overdraft and “has begun consumer testing . . . relating to the opt-in process.”

• It establishes a pre-rule activity date of January 2017, which we believe is the target date for publication of another “data point” reporting on the Bureau’s analysis of the overdraft data requested of the core providers in 2015.

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Overdraft

• If Bureau proceeds with rulemaking, proposed rule unlikely to be issued before late 2017, if not sometime in 2018. – Rulemaking will begin with small entity review process

• ABA’s advocacy has encouraged the Bureau to focus on:

– Increasing overdraft disclosures; and

– Imposing rules regarding order for processing payments that trigger overdrafts.

45


Debt Collection

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Debt Collection

• In July 2016, the Bureau commenced the rulemaking process to update the FDCPA by issuing the third-party outline of proposals.– Small entity review meeting occurred in August, and

since then the Bureau has been conducting follow up meetings with larger entities to solicit feedback on the outline.

– Among other things the outline provides insight into the Bureau’s thinking about:

• Consumer contact limits

• Substantiation requirements

• Validation notice requirements and disclosures

47


Debt Collection

• In July, the Bureau noted that first-parties would be addressed on a “different track.”‒ The Bureau’s Regulatory Agenda states that the small

entity review of first-party rules will commence in the first half of 2017.

• It is unclear whether the Bureau will propose one rule or two on debt collection. ‒ We are unlikely to see a proposed rule before the second half of

2017, if the Bureau moves forward with one rule.

‒ If the Bureau separates the rules, we may see a third-party proposal sooner.

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Prepaid Final Rule

49


Prepaid Final Rule

• Final rule released Oct. 5, published Nov 22, 2016

• Overview:

– Officially subjects “prepaid” cards to Reg. E, including consumer protections

– Defines “prepaid cards”

– Requires special short-form and long-form disclosures

– Generally prohibits overdraft (with exceptions)

• Effective October 1, 2018

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Prepaid Final Rule

• Definition

1. Account marketed or labeled “prepaid, redeemable at unaffiliated merchants for goods or services or usable at ATM”

2. An “account”• Issued on prepaid basis, or not, but capable of being loaded• With “primary” purpose of conducting transactions with unaffiliated

merchants, at ATMs, or P to P and• That is not a checking, share draft, or NOW account

3. Payroll account

4. Government benefit account

51


Prepaid Final Rule

• Pre-acquisition disclosures

– Short form• Periodic fee

• Per purchase fee

• ATM withdrawal fee

• Cash reload fee

• ATM balance inquiry fee

• Customer service fee

• Inactivity fee

(continued)

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Prepaid Final Rule


– Short form• Statements regarding number of additional fees• 2 fees generating most revenue unless already disclosed

(unless they generate less than 5% total revenue for card)• Statement re overdraft• Statement re registration and FDIC/NCUA insurance• Statement re Bureau website and phone number• Statement regarding information on all fees and services (long

form)• Additional content for payroll

53


Prepaid Final Rule

• Pre-acquisition disclosures– Disclosures outside the short form disclosure

• Name of financial institution• Name of prepaid account program• Purchase price for account• Fee for activating prepaid account

– If not “retail setting” must in close proximity to short form

– If retail location, on exterior of the packaging material except purchase price must be either on exterior of or in close proximity to packaging material

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Prepaid Final Rule


– Long form• Title and statement that form contains all fees

• All fees

• Statement re FDIC/NCUA insurance coverage & registration

• Statement regarding overdraft credit features

• Contact information

• Statement regarding Bureau website and phone number

• Reg Z disclosures for overdrafts

55


Prepaid Final Rule

• Periodic statements: none required if bank makes available:

o Account balance through phoneo Electronic history of transactions, e.g. through website, with 12

months of historyo Written history of transactions provided promptly upon request that

covers 24 months

• Modified limitations on liability and error resolution requirements

• Internet posting of agreements including fees

• Submission of agreements, including fees, to Bureau

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Prepaid Final Rule

• Significant requirements if credit or overdraft feature

– “Hybrid prepaid-credit cards”

• Defined as prepaid account that allows access to credit feature or feature structured as a negative balance on the prepaid account

• Are treated as credit cards subject to Regulation Z

57


Vendor Management

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Vendor Management / Third-Party Lending Guidance

• On 7/29/16, the FDIC proposed draft guidance on third-party lending relationships that would:

– Establish safety and soundness and consumer compliance measures when lending through a third-party

– Supplement existing Guidance for Managing Third-Party Risk (which applies to all third-party arrangements)

59


Vendor Management / Third-Party Lending Guidance Cont’d

• What’s New? – Detail regarding minimum third-party lending program policies and

procedures;

– Specific metrics for analyzing ongoing monitoring of the third party;

– Bank analysis and understanding of third-party underwriting models;

– Increased emphasis on bank control of underwriting standards;

– Increased emphasis on bank oversight of third-party compliance with consumer protection laws and regulations;

– Additional specificity regarding desired contractual terms and the third party’s use of subcontractors;

– Increased supervisory attention for institutions that engages in significant lending activities conducted through third parties; could include a 12-month examination cycle

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• Key Issues:– What third-party relationships are covered?

• Proposed definition of third-party lending: An arrangement that relies on a third party to perform “a significant part of the lending process,” such as marketing; borrower solicitation; credit underwriting; loan pricing; loan origination; retail installment sales contract issuance; customer service; consumer disclosures; regulatory compliance; loan servicing; debt collection; and data collection, aggregation or reporting.

• How would participations, correspondent lending, indirect lending, mortgage brokers, small-dollar lending, marketplace lending, LOS & GSE underwriting systems be impacted?

– What will prompt increased supervisory attention?

– What risks are unique or new with respect to third-party lending relationships?

– Proposal would apply only to FDIC-regulated institutions, but may influence how other regulators approach third-party risk management

– Coordinated inter-agency approach is necessary

61



• Key Takeaways:

– Guidance is proposed, but still an issue to watch in 2017

– Be aware of potential for themes in the guidance to be incorporated into examinations (even if not finalized)

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63


BSA/AML/OFAC

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Customer Due Diligence

• May 2016, FinCEN issued a final rule on customer due diligence (CDD)

• The rule will require banks to– Identify one individual who controls a legal entity customer &

– Identify any individual who owns 25% or more equity of the customer

• Banks will need to determine how to collect the information and what to do with it

• Companion legislation, if adopted, would create a registry for law enforcement of those individuals

65


CDD and FATF Mutual Evaluation

• December 1, FATF issued the Mutual Evaluation of the United States

• The country, and the banking industry, were generally found to have good systems in place

• Beneficial ownership is still a problem, although the new rule will partially address that issue

• The report noted other deficiencies, including oversight and expectations for gatekeepers and some financial institutions, including investment advisers and money services businesses

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Sanctions and FATF Mutual Evaluation

• The FATF mutual evaluation commended the United States sanctions efforts

• OFAC continues to hold outreach meetings with the industry

• Challenges remain, notably transactions involving certain areas, particularly Iran, North Korea and Cuba

• Determining when a sanctioned entity owns more than 50% of a customer of the bank continues to be a challenge

67


UDAAP—Lessons learned from recent

enforcement actions

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UDAAP – Recent Actions

• Debt Collection Practiceshttp://www.consumerfinance.gov/policy-compliance/enforcement/actions/navy-federal-credit-union/

• Product Sales Practiceshttp://www.consumerfinance.gov/policy-compliance/enforcement/actions/wells-fargo-bank-2016/

• Overdraft and Non-Sufficient Fund Fee Calculations https://www.occ.gov/static/enforcement-actions/ea2016-089.pdf

• Add-On Products and Credit Monitoring Serviceshttp://www.consumerfinance.gov/policy-compliance/enforcement/actions/first-national-bank-omaha/

69


UDAAP – Recent Actions

• Sales Calls and Affirmatively Opting-In – Overdrafts https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/20160714_cfpb_Consent_Order.pdf

• Data Security Practiceshttp://files.consumerfinance.gov/f/201603_cfpb_consent-order-dwolla-inc.pdf

• Deposit Discrepancieshttp://files.consumerfinance.gov/f/201408_cfpb_consent-order-rbs-citizens.pdf

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Flood Insurance

71


Flood Insurance

• Private Proposal:– November 2016, the agencies re-proposed the Biggert-Waters Act

provision governing the acceptability of private flood insurance (i.e., non-NFIP policies).

• Proposed rules were initially published for comment in 2013; ABA commented.

• It is clear that the banking industry’s comments informed the new proposal.

– The proposed rules have three components:• A compliance aid• Potential lender discretion• Guidelines for accepting flood insurance from mutual aid societies.

– ABA is currently working on a comment letter, due January 6, 2017.

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Flood Insurance

• Reauthorization:

– The NFIP must be reauthorized by September 30, 2017.

– Rep. Blaine Luetkemeyer, chairman of the Housing and Insurance Subcommittee of the House Financial Services Committee recently released draft principles which show a focus on, among other things:

• Reauthorization without any lapse

• Redefining private flood insurance

• Excluding large commercial loans

• Updated mapping

– Reauthorization discussions may also address the current debt of the NFIP.

73


Telephone Consumer Protection Act

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TCPA

• Nine parties are challenging key aspects of FCC’s 2015 Order.

• D.C. Circuit Court of Appeals heard oral argument in October. Decision expected in early 2017.

• Three issues under review:– Definition of “autodialer”– Liability for calls to reassigned numbers– Revocation of consent

75


TCPA

• In 2015 order, FCC granted exemptions that ABA had sought for four types of time-sensitive messages:– Suspicious activity alerts

– Data security breach notifications

– Steps consumers can take to prevent or remedy data breaches

– Actions needed to receive a money transfer

• However, financial institutions may send these messages only to a wireless number provided by the customer.

• ABA filed a Petition for Reconsideration to remove this “provided number” condition. Petition remains pending.

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39


TCPA

• Bipartisan congressional interest in stopping unwanted calls to reassigned numbers.

– Engagement by wireless carriers to help banks and other companies determine when a customer’s number has been reassigned to another consumer.

– Leading wireless carriers provide “disconnect” information to four data aggregators: Danal, Payfone, Zumigo, and Syniverse.

• Potential legislation to reform TCPA? Landscape remains challenging.

77


Additional Matters

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Revised Uniform Interagency Consumer Compliance Rating System

• Rating System – 1 through 5

• Risk Approach Focus

• Incents strong proactive compliance systems

– Prevention

– Self-identification

– Address violations and weaknesses

79


Revised Uniform Interagency Consumer Compliance Rating System

• Examiners Evaluate:

– Board and Management Supervision

– Compliance Programs

– Violations of Law and Consumer Harm

• Category Descriptions – No Rating Description

• Effective for Exams – March 31, 2017

• https://www.ffiec.gov/press/pr110716.htm

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CFPB Proposal to Amend its Rules Governing the Disclosure of Records and Information

• Proposal to permit the Bureau to share confidential supervisory information not only with Federal and state agencies “having jurisdiction over the supervised financial institution” as expressed in the Dodd-Frank Act, but with any agency if it would be “relevant to the exercise of the Agency’s statutory or regulatory authority.” – If adopted, the sharing permitted by the proposal would

undermine legal privileges, including the attorney-client privilege, and expose banks to increased safety and soundness, litigation, and reputational risks.

81


Privacy

• December 2015, Congress passed the FAST Act• The statute included a provision that amended the Gramm-

Leach-Bliley Act and the requirement to send an annual privacy notice

• If a bank only discloses customer information in accordance with one of the established exceptions AND has not changed it’s information sharing practices since the last notice to the customer, the annual notice is not required

• The provision took effect when the President signed the law (December 4, 2015)

• A rule to implement the provision is pending but banks do not need to wait for the rule to be finalized

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Sales Practices/Incentive Compensation

• CFPB and banking agencies are examining the sales practices and incentive compensation programs of mid-size and large institutions.– Currently, no intention to conduct similar examinations

of community bank programs.

– However, it would be prudent for all institutions to review their sales practice and incentive compensation programs to identify potential issues.

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Sales Practice Reviews

• The review should encompass: – Sales practices and account opening procedures related to all accounts,

products, and services offered to consumers or small businesses – The channels through which they are offered (including third-party sales)– By product and channel, controls designed to identify noncompliance with

account opening policies and procedures– By product and channel, controls used to review/assess account closings for

potentially inappropriate account opening activity– Incentive program and payments (including non-cash awards) made to bank

employees each quarter by product/service– Training programs and supporting documentation, by product and channel, for

employees who sell products and services– Employee terminations (voluntary and involuntary) and turnover trends or

concerns – Concerns raised by whistleblowers or through ethics hotlines – SAR filings– Consumer complaints

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85

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