Compliance Question of the Week

In today’s banking environment as soon as one big new regulation is implemented another pops up. Our compliance resources help your community bank stay one step ahead of the regulators.

Regulations and Guidance

Question: What are the record retention requirements under the E-Sign Act?

ANSWER: 

Under the E-Sign Act, if a financial institution is legally required to maintain copies of a contract or other records of a transaction, the institution may rely on an electronic record of the information that accurately reflects the information in the contract or other record, and that remains accessible to all persons who are legally entitled to access the information in a form that can later be reproduced.


Reference: Fed. Consumer Compliance Outlook, 4th Quarter 2009; 15 U.S.C. 7001(d).

Q&A Archives

ANSWER:

Under section 229.13(c), the depository bank may delay the availability of funds from a check if the check had previously deposited and returned unpaid.

The exception does not apply to:

To a check that has been returned due to a missing indorsement and redeposited after the missing indorsement has been obtained, if the reason for return indication on the check states that it was returned due to a missing indorsement; or

To a check that has been returned because it was postdated, if the reason for return indicated on the check states that it was returned because it was postdated, and if the check is no longer postdated when redeposited.

Reference: 12 CFR 229.13(c).

ANSWER:

Bank should have policies and procedures to evaluate the fair lending risk for marketing initiatives.

The fair lending review should not be limited to the content of the marketing but should also include a review of the geographic reach of the marketing. More specifically, banks should monitor and evaluate whether the marketing reaches the whole of the credit market area, including the minority areas.

Finally, banks should consider affirmative marketing in minority areas, especially if the bank’s lending record reflects a lack of lending in minority areas.

Reference: Fed. Outlook Live Webinar: 2016 Interagency Fair Lending Hot Topics.

ANSWER:

The Community Reinvestment Act was amended to no longer require financial institutions to maintain a copy of the disclosure statement as long as the HMDA disclosure statement is available on the CFPB website.

An institution that is required to report, must include in its public file, a written notice that the institution's HMDA Disclosure Statement is available on the Bureau's website at www.consumerfinance.gov/hmda.

Reference: OCC 12 CFR Chapter I FED 25.43; 12 CFR 228.43; FDIC 12 CFR 345.43

ANSWER:

The agencies regulations require employees to know their responsibilities and conduct during and after a robbery, burglary or larceny.

When determining the level of testing required, consider the following:     

  • Is the bank in a higher crime area (e.g., when was the last robbery to the bank or a neighboring establishment)? ·   
  • Does the bank have new personnel or part time personnel that have not been through more than one training session?
  • How does the bank measure how well each employee knows the responsibilities and conduct required?
  • Does the bank provide training more than once if the procedures are revised?

Reference: Bank Protection Act: OCC: 12 CFR 21 FED: 12 CFR 208.61 FDIC: 12 CFR 326

ANSWER:

The following were typical overdraft protection practices analyzed by examiners and other FDIC staff for compliance with the FTC Act during this period:

  • Including the available balance of an overdraft line of credit (ODLOC) when disclosing a deposit account balance, particularly at automated teller machines (ATMs).
  • Failing to disclose accessibility of ODLOC via ATMs, point-of-sale (POS) transactions, online banking, or preauthorized transfers.
  • Erroneously disclosing inaccessibility of ODLOC via ATMs, POS transactions, online banking, or preauthorized transfers.
  • Promoting overdraft protection services without informing the depositor of (or overstating) the maximum dollar amount of protection or without disclosing fees associated with service.
  • Using the word "free" (when charges are imposed) and other misleading representations in overdraft protection advertisements.
  • Enrolling depositors in overdraft protection programs without their knowledge or consent and, subsequently, approving withdrawals at ATMs that overdraw a depositor's account, resulting in the imposition of fees.

Reference: FDIC Supervisory Insights Winter 2006

ANSWER:

Yes. An annual disclosure is required.

If private mortgage insurance is required in connection with a residential mortgage transaction, the servicer shall disclose to the mortgagor in each such transaction in an annual written statement—

(A)the rights of the mortgagor under this chapter to cancellation or termination of the private mortgage insurance requirement; and

(B)an address and telephone number that the mortgagor may use to contact the servicer to determine whether the mortgagor may cancel the private mortgage insurance.

Reference: Homeowners Protection Act: 12 USC 4903(a)(3)

ANSWER:

For the successor to receive communications, a successor must execute and return an 

acknowledgement form.

Under 1024.32, RESPA states that upon confirmation of a successor, a servicer may provide a confirmed successor who is not liable on the mortgage with a written notice together with a separate acknowledgement form that meets the requirements of 1024.32(c)(1)(iv).

The Official staff interpretation for this section states that: A servicer may identify in the acknowledgement form examples of the types of notices and communications such as periodic statements and mortgage servicing transfer notices. The examples provided should be the types of notices or communications that would be available to a confirmed successor in interest if the confirmed successor executed the acknowledgement and returned it to the servicer. 

If the successor fails to execute the acknowledgement form, a servicer is not required to provide to the confirmed successor any written disclosure required by 1025.17 “Escrow Accounts”, 1024.33  “Mortgage Servicing Transfers”, 1024.34 “Timely Escrow Payments and Treatment of Escrow Account Balances”, 1024.37 “Force-placed insurance”, 1024.39 “Early Intervention Requirements for Certain Borrowers” or comply with the live contact requirements until the successor either assumes the mortgage loan obligation or executes an acknowledgement and provides it to the servicer.

Reference: Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) Federal Register, October 19, 2016, page 72371, effective April 18, 2018. Real Estate Settlement Procedures Act 1024.32(c)(1) and (c)(2). Official Staff Interpretation 1024.32(c)(1) and (c)(2)

ANSWER:

IDIs are not required to take down physical FDIC official signs attached to ATMs.  For an IDI's ATM  or like device that receives deposits but does not offer access to non-deposit products, except as described below, the final rule provides flexibility to meet the signage requirement by either (1) displaying the FDIC official digital sign electronically on the ATM screens (consistent with the image as described in 12 CFR 328.5), or (2) displaying the physical official sign by attaching or positing it to the ATM.

However, IDI's ATMs, or like devices that accept deposits and are put into service after January 1, 2025, must display the official digital sign electronically (with no option to satisfy the requirement through display of the physical official sign.)

Reference: 12 CFR 328.4(e) FDIC Q&As Part 328 Final Rule Question II.D.1

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