Compliance Questions & Answers

Closed end credit transactions will be subject to an adjustment if the violation resulted from a clear pattern of practice or gross negligence and is identified during the current examination.

Loans containing the violation which were consummated since the date of the preceding examination are subject to adjustment.

Open end credit transactions will be subject to an adjustment if the violation occurred within two years of the current exam.

Reference: https://www.fdic.gov/regulations/laws/rules/5000-300.html

A bank must begin to accrue interest or dividends on funds deposited in an interest bearing account no later than the business day on which the bank receives the credit for the funds.

For the purposes payment of interest, the bank may:

Rely on the availability schedule of its Federal Reserve Bank, Federal Home Loan Bank, or correspondent bank to determine the time credit is actually received; and

Accrue interest or dividends on funds deposited in interest-bearing accounts by checks that the depositary bank sends to paying banks or subsequent collecting banks for payment or collection based on the availability of funds the depositary bank receives from the paying or collecting banks.

Reference: 12 CFR 229.14

Many banks use vendor software to generate consumer disclosures for various loan and deposit products.

After amendments to disclosure regulations in the last several years, some vendors failed to update their software, resulting in various errors on disclosure forms.

Problems of this nature occur when bank management relies solely on the vendor without conducting its own independent review of disclosure requirements to ensure that the required changes are implemented.

Reference: Fed. Consumer Compliance Outlook, 4th Quarter 2012.

A financial institution should conduct customer due diligence that includes:

(i) verifying with the appropriate state authorities whether the business is duly licensed and registered;

(ii) reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;

(iii) requesting from state licensing and enforcement authorities available information about the business and related parties; (

iv) developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers);

(v) ongoing monitoring of publicly available sources for adverse information about the business and related parties;

(vi) ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and

(vii) refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.

Reference: BSA Expectations Regarding Marijuana-Related Businesses, FinCEN FIN-2014-G001.

The general aggregate limit specified in paragraph (d)(1) of this section does not apply to the following:

• Extensions of credit secured by a perfected security interest in bonds, notes, certificates of indebtedness, or Treasury bills of the United States or in other such obligations fully guaranteed as to principal and interest by the United States;
• Extensions of credit to or secured by unconditional takeout commitments or guarantees of any department, agency, bureau, board, commission or establishment of the United States or any corporation wholly owned directly or indirectly by the United States;
• Extensions of credit secured by a perfected security interest in a segregated deposit account in the lending bank; or
• Extensions of credit arising from the discount of negotiable or nonnegotiable installment consumer paper that is acquired from an insider and carries a full or partial recourse endorsement or guarantee by the insider, provided that:
• The financial condition of each maker of such consumer paper is reasonably documented in the bank's files or known to its officers;
• An officer of the bank designated for that purpose by the board of directors of the bank certifies in writing that the bank is relying primarily upon the responsibility of each maker for payment of the obligation and not upon any endorsement or guarantee by the insider; and
• The maker of the instrument is not an insider.

The exceptions in paragraphs (d)(3)(i)(A) through (d)(3)(i)(C) of this section apply only to the amounts of such extensions of credit that are secured in the manner described therein.

Reference: 12 CFR 215.4(d)(3). Q&A provided by Chaotic Solutions, 11/23/2016.

No, a financial institution complies by reporting that the requirement is not applicable for a covered loan to, or an application from, its employee to protect the employee's privacy, even though the institution relied on the employee's income in making the credit decision.

Note: This data field is required for all HMDA reporting institutions.

Reference: 12 CFR 1003.4(a)(10)(iii); Comments 4(a)(10)(iii)-3. A Guide to HMDA Reporting Getting it Right, 2020 edition.