Top Story Compliance Related

The FDIC has announced a meeting of its Advisory Committee on Community Banking on Wednesday, July 12. Senior staff will discuss and provide updates on supervisory issues such as liquidity risk, de novo applications, appraisals, Call Reports, capital and examination processes. There also will be presentations on post-crisis community bank performance and outlook, as well as supervision policy issues, including the implementation of the Home Mortgage Disclosure Act rule and flood insurance. The meeting is open to the public and will be held from 9 a.m. to 3 p.m. EDT in the FDIC's main building at 550 17th Street, N.W., Washington, D.C. The meeting also will be webcast live.

The following products have been released by the FFIEC:

• The FFIEC Online Census Data System (formerly FFIEC Census Reports) provides census data for Metropolitan and Non-Metropolitan areas, counties, and census tracts.

• The FFIEC Census Information Sheets are summaries of how the census data have changed from previous years and guidance on how to combine the census data with the appropriate year(s) of HMDA and CRA data.

• The FFIEC Census Windows Application is a downloadable Windows-based tool that allows you to search and export data, and to create reports using the census data that are published in the HMDA and CRA aggregate and disclosure reports.

• The FFIEC Estimated Median Family Income Report is a list of FFIEC Estimated Median Family Incomes for each MSA and for the non-metropolitan areas of each state.

In addition to the data available from the links above, certain census data are included in the HMDA LAR & TS Raw Data Application. Included with the raw data are Population, Minority Population Percent, MSA Median Family Income, Census Tract MFI to MSA MFI Percent, Number of Owner Occupied Housing Units, and Number of One to Four Family Units. Also, the 2017 Geocoding System has been updated with the 2017 Census demographic data based on the 2011–2015 five year estimated American Community Survey (ACS).

The OCC has reported strategic, credit, operational, and compliance risks remain top concerns for the federal banking system in its Semiannual Risk Perspective for Spring 2017. Highlights from the report include:

• Strategic risk remains elevated as banks make decisions to expand into new products or services or consider new delivery channels and continue merger and acquisition activity. Banks face competition from nonfinancial firms, including financial technology companies entering the traditional banking industry. This competition is causing changes in the way customers and financial institutions approach banking.
• Credit underwriting standards and practices across commercial and retail portfolios remain an area of OCC emphasis. Over the past two years, commercial and retail credit underwriting has loosened, showing a transition from a conservative to an increasing risk appetite as banks strive to achieve loan growth and maintain or grow market share.
• Operational risk continues to challenge banks because of increasing cyber threats, reliance on concentrations in significant third-party service providers, and the need for sound governance over product service and delivery.
• Compliance risk remains high as banks continue to manage money-laundering risks and implement changes to comply with the amended customer protection requirements under the Military Lending Act and integrated mortgage disclosure rules.

Remarks from Acting Comptroller Noreika were also released.

The CFPB has announced the appointment of new consumer experts from outside the federal government to its Consumer Advisory Board, Community Bank Advisory Council, Credit Union Advisory Council, and Academic Research Council.

The Department of Justice has agreed to a settlement with COPOCO Community Credit Union, Bay City, Michigan. In a July 26, 2016, lawsuit, the Department alleged that COPOCO violated the Servicemembers Civil Relief Act by repossessing cars owned by servicemembers without first obtaining court orders as required by the SCRA. Under the agreement, COPOCO must change its policies and compensate four servicemembers whose cars COPOCO unlawfully repossessed.

The agreement requires COPOCO to provide $10,000 in compensation to each of three of the affected servicemembers, plus any lost equity in the vehicle with interest. One servicemember and his wife had their car returned to them the day after the repossession at the DOJ’s request. They will receive $7,500. COPOCO also must repair the credit of all affected servicemembers and pay a $5,000 civil penalty to the United States. The agreement also contains provisions ensuring that all eligible servicemembers will receive the benefit of the SCRA’s six percent interest rate cap on their auto loans.

For additional information, see our Penalties page.

The CFPB announced on Friday a final rule updating its "Know Before You Owe" mortgage disclosure rule (a/k/a the TILA-RESPA Integrated Disclosure or TRID rule) with amendments that are intended to formalize guidance on the rule, and provide greater clarity and certainty. The CFPB is also releasing a limited follow-up proposal to address an additional implementation issue.

In addition to the clarifications and technical corrections, the final rule amendments also address other issues, including:

• Tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge
• Adjustments to expand the provision granting a partial exemption from disclosure requirements of certain housing assistance loans
• Extension of the rule's coverage to all cooperative units
• Provisions allowing the sharing disclosures with real estate brokers and other agents, and clarifying how a creditor may provide separate disclosure forms to the consumer and a seller.

The final rule will be effective 60 days after it is published in the Federal Register, with compliance optional (except for compliance with the amended escrow cancellation notice requirement under § 1026.20(e) and the partial payment policy disclosure requirement under § 1026.39(d)(5)) for any application received before October 1, 2018. Compliance will be mandatory for any application received on or after October 1, 2018, and for all loans with respect to the amended escrow cancellation notice and disclosure of partial payment policy beginning October 1, 2018.

UPDATE: The final rule was published at https://www.federalregister.gov/d/2017-15764 in the 8/11/2107 Federal Register, with an October 10, 2017, effective date. See above for the mandatory compliance date.

The CFPB is also issuing a proposal addressing when a creditor may use a Closing Disclosure or corrected Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith and within tolerance. Apparently, the changes in this area included in its 2016 proposal were interpreted in two very different ways. Comments on the revised proposal will be due 60 days after its publication in the Federal Register.

UPDATE: The proposal was published at https://www.federalregister.gov/d/2017-15763 in the 8/11/2017 Federal Register, with a comment period ending October 10, 2017.

• Final Rule amending the TRID Rule
• Proposal on use of closing disclosure
• Executive Summary

The Treasury Department's Office of Foreign Assets Control has taken action against two groups of individuals and entities. OFAC designated eight individuals involved in organizing or supporting the creation of Venezuela's Constituent Assembly. Those designated include seven current and former officials of the Venezuelan Government and one individual who has participated in actions or policies that undermine democratic processes or institutions in Venezuela. As a result of today's actions, all assets of these individuals subject to U.S. jurisdiction are frozen, and U.S. persons are prohibited from dealing with them.

OFAC also identified Mexican national Raul Flores Hernandez and the Flores Drug Trafficking Organization (Flores DTO) as Significant Foreign Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act). In addition to Flores and the Flores DTO, OFAC also designated 21 Mexican nationals and 42 entities in Mexico for providing support to the narcotics trafficking activities of Raul Flores Hernandez and the Flores DTO and/or for being owned or controlled by the Flores DTO, its members, and trusted associates. As a result of today's action, all assets of the individuals and entities designated that are under U.S. jurisdiction or are in the control of U.S. persons are frozen, and U.S. persons are generally prohibited from engaging in transactions with them.

For identification of the individuals and entities targeted in these two actions, see our OFAC Update.

The FATF published its report ‌to the July 2017 G20 Leaders’ Summit on strengthening the FATF's institutional basis, governance and capacity; tackling terrorist financing and improving transparency and availability of beneficial ownership information.

NCUA Chairman McWatters has sent a letter to CFPB Director Cordray requesting that the CFPB provide a conditional exemption for credit unions with assets of more than $10 billion from its examination and enforcement authority. Citing credit unions’ unique role in the financial system by virtue of their being not-for-profit institutions owned and controlled by members, McWatters said shifting examination and enforcement authority to NCUA offers numerous benefits from the current system, in which credit unions face unnecessary examination burdens and aggressive punitive fines. Six federally insured credit unions—Navy Federal Credit Union, State Employees’ Credit Union, Pentagon Federal Credit Union, Boeing Employees Credit Union, Schools First Federal Credit Union, and The Golden 1 Credit Union—have assets of $10 billion or more.

FinCEN published a Notice of Proposed Rulemaking in the July 7, 2017, Federal Register under Section 311 of the USA PATRIOT Act, that would prohibit the opening or maintaining of a correspondent account in the United States (the fifth special measure in Section 311) for, or on behalf of, Bank of Dandong. Comments on the proposal will be accepted through September 5, 2017. FinCEN has found that Bank of Dandong, located in China, is a financial institution of primary money laundering concern because it serves as a conduit for North Korea to access the U.S. and international financial systems, including by facilitating millions of dollars of transactions for companies involved in North Korea’s weapons of mass destruction and ballistic missile programs.