Top Story Compliance Related

Our monthly review of the Federal Reserve Board's archive of Community Reinvestment Act evaluations has revealed that the Reserve Banks released 23 evaluations in March 2024. Of those evaluations, 21 received "Satisfactory" ratings. Two banks — First State Bank Southwest, Pipestone, Minnesota; and FirstBank, Lakewood, Colorado — received "Outstanding" ratings.

The OCC has released a list of 19 Community Reinvestment Act performance evaluations that became public during the month of March 2024. Two of the listed evaluations are rated "Needs to Improve," 13 are rated "Satisfactory," and the following four are rate "Outstanding":

• The Clinton National Bank, Clinton, IA
• Native American Bank, National Association, Denver, CO
• Rosedale FS & LA, Baltimore, MD
• TD Bank USA, National Association, Wilmington, DE

The NCUA has announced it issued two prohibition notices and one consent order in March 2024, permanently prohibiting individuals from participating in the affairs of any federally insured depository institution.

• Sarah C. Conley, a former employee of Summit Federal Credit Union, Rochester, New York, received a notice of prohibition, having been convicted of grand larceny in connection with illegal activities at the credit union
• Carlene Bartley, formerly employed by Municipal Credit Union, New York, New York, was issued a notice of prohibition, having pleaded guilty to, and having been convicted on, charges of grand larceny
• Esther A. Olson, a former assistant branch manager of Educational Employees Credit Union, Fresno, California, received a consent order of prohibition, after a finding that she had embezzled funds from member accounts, including the withdrawal of over $60,000 from four different members' share accounts

Bloomberg Law has reported that a federal judge in Texas has blocked banking regulators’ rewrite of their Community Reinvestment Act rules, giving banks a reprieve from new regulations that had been set to take effect today.

The Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency went beyond the bounds of the 1977 Community Reinvestment Act in their final rules issued last October, Judge Matthew J. Kacsmaryk of the U.S. District Court for the Northern District of Texas said in a ruling on Friday.

The court enjoined the agencies from enforcing the regulations pending the resolution of a lawsuit brought in February by the ABA, the U.S. Chamber of Commerce and five national and state associations, and pushed back the April 1, 2024, effective date, along with all other implementation dates, day for day, for each day the court's injunction remains in place.

The FDIC has updated the following sections of its Consumer Compliance Examination Manual (CEM):

• Communicating Findings (II-6.1): Updated to clarify when the self-identification of violations is considered a strength of a bank’s Compliance Management System
• Expedited Funds Availability Act (VI-1.1): Updated with technical changes related to regulatory dollar-amount thresholds and large deposit hold times
• FTC Rule - Preservation of Claims and Defenses (VII-2.1): Removed an invalid exception in a chart

The CFPB has released its 2023 Consumer Response Annual Report. The report indicates that during 2023, the Bureau sent more than 1.3 million complaints to over 3,400 companies for review and response.

The report shows a continued increase in credit or consumer reporting complaints, with more than one million of them sent to the three nationwide consumer reporting companies — Equifax, Experian, and TransUnion.

Consumers also raised issues about fraudulent activity in nearly every product category, including credit or consumer reporting, debt collection, checking or savings accounts, and credit cards.

The FDIC has released a list of enforcement actions it took in February 2024.

• Guaranty Bank and Trust Company, Belzoni, Mississippi, was assessed an $80,500 civil money penalty for a pattern or practice of flood insurance-related violations
• Robert Christopher Rodgers, former president of The Citizens Bank, Hickman, Kentucky, received a Removal/Prohibition Order with assessment of a $7,000 civil money penalty after a finding that he exceeded his lending authority by originating unsecured loans and approving overdrafts for a customer of the bank; continuing to approve overdrafts despite the customer's failure to pay loans and existing overdrafts, and failing to inform the bank's board of the extent of the overdrafts, resulting in a loss to the bank of over $800,000.
• Rhenae K. Risher, a former employee of Bank of Morton, Morton, Mississippi, was issued a Removal/Prohibition order after a finding that she manipulated the bank's general ledger accounts to cash and pay checks of her son's trucking company to avoid overdrawing his business checking account, causing a loss to the bank of over $255,000.

The FDIC yesterday issued FIL-16-2024 to publish its Spring 2024 issue of Consumer Compliance Supervisory Highlights to provide an overview of consumer compliance issues identified through the FDIC’s supervision of state non-member banks and thrifts in 2023. It includes:

• A description of the most frequently cited violations and other consumer compliance examination observations;
• Information on regulatory developments;
• A summary of consumer compliance resources and information available to financial institutions; and
• An overview of consumer complaint trends.

The most frequently cited violations (representing approximately 74 percent of the total violations cited in 2023) involved:

• the Truth in Lending Act (TILA) and Regulation Z;
• the Flood Disaster Protection Act (FDPA) and Part 339;
• the Electronic Fund Transfers Act (EFTA) and Regulation E;
• the Truth in Savings Act (TISA) and Regulation DD; and
• Section 5 of the Federal Trade Commission Act.

While this list contains the same laws and regulations from the 2022 Highlights, Section 5 of the FTC Act violations dropped from the second most frequently cited violation to the fifth most frequently cited violation.

FDIC Financial Institution Letter FIL-15-2024, issued yesterday in coordination with today's FinCEN Federal Register request for information and comment, is an advisory to reemphasize the requirements under the Customer Identification Program (CIP) Rule as it relates to collecting identifying information from customers. The advisory reminds institutions of the information required to be collected from the customer prior to account opening. The CIP rule has been in effect for more than 20 years (since October 1, 2003).

• The CIP Rule requires a bank to implement a program that includes risk-based verification procedures that enable the bank to form a reasonable belief that it knows the true identity of its customers. These requirements exist regardless of whether the bank establishes this relationship directly with the customer or through an intermediary.
• These procedures must include collecting, at a minimum, the customer’s name, date of birth (for an individual), address, and identification number.
• A bank is required to collect the taxpayer identification number (TIN) from a customer that is a U.S. person prior to account opening or another approved identification from a non-U.S. person. This applies to all accounts with the exception of credit card accounts.

FinCEN has published [89 FR 22231] in this morning's Federal Register a notice and request for information and comment regarding the Customer Identification Program (CIP) Rule requirement for banks to collect a taxpayer identification number (TIN), among other information, from a customer who is a U.S. person, prior to opening an account (the “TIN collection requirement”).

Generally, for a customer who is an individual and a U.S. person (“U.S. individual”), the TIN is a Social Security number (SSN). FinCEN specifically seeks information to understand the potential risks and benefits, as well as safeguards that could be established, if banks were permitted to collect partial SSN information directly from the customer for U.S. individuals and subsequently use reputable third-party sources to obtain the full SSN prior to account opening. FinCEN seeks this information to evaluate and enhance its understanding of current industry practices and perspectives related to the CIP Rule's TIN collection requirement, and to assess the potential risks and benefits associated with a change to that requirement.

The notice also serves as a reminder from FinCEN, and staff at the Agencies, that banks must continue to comply with the current CIP Rule requirement to collect a full SSN for U.S. individuals from the customer prior to opening an account (“SSN collection requirement”).

Comments will be accepted for 60 days, through May 28, 2024.