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Top Story Compliance Related

11/25/2020

JPMorgan Chase Bank pays $250M for lax controls

The OCC has announced it has issued a Consent Order to JPMorgan Chase Bank, National Association (Columbus, Ohio) to pay a $250 million civil money penalty, based on the bank's failure to maintain internal controls and internal audit over its fiduciary business.

For additional information and a link to the Consent Order, see "OCC hits JPMorgan Chase with $250M CMP" in the BankersOnline Penalty pages.

11/25/2020

Navy FCU settles OD fees class action suit for $16M

The CreditUnionTimes reports the Navy Federal Credit Union will settle a class action suit for $16 million that will reimburse an estimated 700,000 current and former members who were charged fees for overdrafts.

An Alexandria, Virginia, U.S. District Court judge has issued a preliminary approval for the settlement in Lambert v. Navy Federal Credit Union, with final approval expected in March.

The suit was brought by Ruby Lambert in January 2019 after she was charged a second $29 NSF fee when a $96 check on her account was presented a second time after it was bounced to her insurance company. Although Lambert acknowledged that Navy Federal was allowed to charge her a single NSF fee, she argued in court documents that the credit union breached terms of member account agreements when it charged her a second NSF fee for the same insurance check payment.

Lambert's suit was dismissed in August 2019 because Navy Federal's account agreement gave the CU a contractual right to charge an NSF fee each time an NSF check is presented. Lambert appealed to the U.S. District Court for the Eastern District of Virginia. Navy Federal and Lambert's lawyers agreed to settle the suit.

The $16 million cash fund will pay for $5.2 million in attorney fees, a $5,000 “service award” for Lambert, and millions in NSF fee reimbursements for an estimated 700,000 current and former Navy Federal members who were assessed a second or third NSF fee for a single payment transaction that was rejected because of insufficient funds in their accounts from January 28, 2014, to October 27, 2020. Navy Federal will separately pay all settlement administration costs.

11/24/2020

Final IRS regs on like-kind exchanges of real property

Treasury and the IRS yesterday issued final regulations relating to section 1031 like-kind exchanges. These final regulations address the definition of real property (RP) under section 1031 and also provide a rule addressing the receipt of personal property that is incidental to real property received in a like-kind exchange.

11/24/2020

OCC updates Activities and Operations rules

The Office of the Comptroller of the Currency has announced a final rule that updates the agency's rules for national bank and federal savings association activities and operations, with amendments affecting 12 CFR parts 4, 5, 7, 145, and 160. The rule, which takes effect April 1, 2021, is part of the OCC’s continuous effort to modernize its rules and remove unnecessary requirements to relieve banks of unnecessary burdens, encourage economic opportunity, and promote the safe, sound, and fair operation of the federal banking system. The final rule changes 12 CFR part 7 to update or eliminate outdated regulatory requirements that no longer reflect the modern financial system and to clarify and codify recent OCC interpretations. The Rule includes changes:

  • incorporating and streamlining interpretations addressing permissible derivatives activities for national banks;
  • codifying interpretations to permit national banks and federal savings associations to engage in certain tax equity finance transactions;
  • codifying interpretations regarding national bank membership in payment systems and clarifying that federal savings associations are subject to the same requirements as national banks;
  • expanding the ability of national banks and federal savings associations to choose corporate governance provisions under state law;
  • clarifying the extent to which national banks may adopt anti-takeover provisions permissible under state corporate governance law;
  • clarifying when national bank participation in a financial literacy program on the premises of, or a facility used by, a school or other organization would not be a branch;
  • codifying interpretations of the National Bank Act relating to capital stock issuances and repurchases; and
  • applying rules relating to finder activities, indemnification, equity kickers, postal services, independent undertakings, and hours and closings to federal savings associations.

11/23/2020

FDIC proposes temporary rule to temper CECL transition effect

FDIC FIL-107-2020, issued November 20, 2020, announces an FDIC proposed rulemaking that would address the temporary deposit insurance assessment effects resulting from certain optional regulatory capital transition provisions relating to the implementation of the current expected credit losses (CECL) methodology. The proposal would remove the double counting of a specified portion of the CECL transitional amount or the modified CECL transitional amount, as applicable, in the calculation of certain financial measures that are used to determine assessment rates for large and highly complex insured depository institutions (IDIs).

The proposal would affect only those institutions with $10 billion or more in total assets. In order to implement these adjustments, the proposal would require large and highly complex IDIs that elect a CECL transition provision to report one additional, temporary item on the Consolidated Reports of Condition and Income (Call Report).

Comments on the proposed rule will be accepted for 30 days after publication in the Federal Register.

11/23/2020

CFPB settles deceptive sales practice case

The Bureau has announced it has issued a consent order against U.S. Equity Advantage, Inc. (“USEA”), a nonbank located in Orlando, Florida, and its owner, Robert M. Steenbergh. The Bureau found that the company’s disclosures and advertisements of its auto loan payment program contained misleading statements in violation of the Consumer Financial Protection Act of 2010’s prohibition against deceptive acts or practices.

The consent order imposes a judgment against them requiring them to pay $9,300,000 in consumer redress and contains requirements to prevent future violations. The ordered redress amount was suspended upon payment of $900,000 and a $1 civil money penalty to the Bureau. The suspension of the full payment for redress, as well as the $1 civil penalty, is based on USEA’s and Steenbergh’s demonstrated inability to pay more based on sworn financial statements.

11/23/2020

OCC proposes Fair Access to Financial Services Rule

The OCC has issued a proposed rule that would ensure fair access to banking services provided by national banks, federal savings associations, and federal branches and agencies of foreign bank organizations.The proposal would codify more than a decade of OCC guidance stating that banks should provide access to services, capital, and credit based on the risk assessment of individual customers, rather than broad-based decisions affecting whole categories or classes of customers.

The proposal would apply to the largest banks in the country that may exert significant pricing power or influence over sectors of the national economy and would require a covered bank to ensure it makes its products and services available to all customers in the community it serves, based on consideration of quantitative, impartial, risk-based standards established by the bank. Under the proposal, a covered bank’s decision to deny services based on an objective assessment of the person’s creditworthiness, ability to pay, or other quantitative, impartial, risk-based reasons would not violate the bank’s obligation to provide fair access. However, under the proposal, the bank may not deny a customer service to disadvantage, limit, or prevent the customer from entering or competing in a market or business segment, or to benefit another person or business activity.

A bank would be presumed not to meet the definition of a bank covered by the proposed rule if it has less than $100 billion in total assets.

Comments on the proposal will be accepted through January 4, 2021.

11/23/2020

Temporary reporting relief for community banks

The Federal Reserve Board, FDIC, and OCC have announced an interim final rule that provides temporary relief for certain community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the coronavirus response.

Community banking organizations are subject to different rules and requirements based on their risk profile and asset size. Due to participating in federal coronavirus response programs—such as the Paycheck Protection Program—and other lending that supports the U.S. economy, many community banking organizations have experienced rapid and unexpected increases in their sizes, which are generally expected to be temporary. The temporary increase in size could subject community banking organizations to new regulations or reporting requirements. Community banking organizations with under $10 billion in assets may have fewer resources available to prepare and comply with previously unanticipated regulatory requirements, especially during a time of economic disruption.

With regard to the requirements covered by the interim final rule, community banking organizations that have crossed a relevant threshold generally will have until 2022 to either reduce their size, or prepare for new regulatory and reporting standards. The rule applies to community banking organizations and financial institutions with less than $10 billion in total assets as of December 31, 2019. The rule will be effective immediately upon publication in the Federal Register. Comments on the interim final rule will be accepted for 60 days following publication.

11/20/2020

OCC enforcement orders

The OCC has released a list of enforcement actions against national banks, federal savings associations and individuals now or formerly affiliated with such institutions.

  • First Abu Dhabi Banks USA N.V. was assessed a $5 million civil money penalty for BSA/AML compliance program deficiencies and violations. An earlier consent order against the bank was terminated.
  • A former director and the former senior compliance and BSA officer of a New Jersey bank were assessed penalties totaling $39,000 (and the compliance/BSA officer was issued a prohibition order) for their involvement in the bank's seriously deficient BSA/AML compliance program while the bank's management was soliciting high-risk businesses as customers.
  • A former senior vice president of a Sallisaw, Oklahoma, bank was issued a default order with an order of prohibition, a cease and desist order requiring restitution of $2.3 million, and civil money penalty of $250,000. The order indicates it has been appealed to a federal court.
  • The former VP of commercial lending and chief lending officer of a Charleroi, Pennsylvania, bank has been issued a consent order to cease and desist and to pay a $12,000 civil money penalty, for inappropriately approving large overdrafts and waiving overdraft fees; and failing to ensure that the bank's credit underwriting process properly assessed the borrower's ability to repay.

11/20/2020

BSA due diligence for charities and non-profits clarified

The Federal Banking Agencies and FinCEN have issued a joint fact sheet to provide clarity to banks and credit unions on how to apply a risk-based approach to charities and other non-profit organizations. The fact sheet highlights the importance of ensuring that legitimate charities have access to financial services and can transmit funds through legitimate and transparent channels, especially during the current COVID-19 pandemic. It also reminds banks to apply a risk-based approach to customer due diligence requirements when developing the risk profiles of charities and other non-profit customers, and reaffirms that the application of a risk-based approach is consistent with existing customer due diligence and other Bank Secrecy Act/Anti-Money Laundering compliance requirements.

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