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: Is it necessary to have a policy on the American Disabilities Act to instruct personnel on how to work with customers who need assistance? If so, what should be in it?

ANSWER: 

Having written policy and procedures in place for employee actions – especially related to customer service – helps ensure consistency in employee actions and helps ensure that personnel know what is expected of them.

When developing a policy, consider the following:

  • Text from the Americans with Disabilities Act
  • The ADA guidance
  • The types of accommodations the bank has in place – e.g., braille at ATM, widened doors, ramps, someone to read aloud disclosures, etc.
  • How the bank provides accommodations for customers
  • How to approach a customer about the need for assistance
  • How to handle a complaint
  • Who to refer a customer to when there is a problem
  • How to handle a phone call
  • How to ensure that conversations are not overheard (e.g., if someone has a hearing difficulty)
  • Assisting customers with service animals
  • Providing training for personnel on communicating with customers with hearing, visions, and/or speech difficulties

Reference: https://www.ada.gov/regs2010/smallbusiness/smallbusprimer2010.htm

 
 

 

 


 

Q&A Archives

ANSWER:

Yes, consistent with the other assessment methods in the regulation, examiners will consider both loans originated and purchased by the institution. Likewise, examiners may consider any other loan data the small institution chooses to provide, including data on loans outstanding, commitments, and letters of credit.

Reference: CRA: Interagency Q&As Regarding Community Reinvestment; Guidance, 07/25/2016.



 

 

 

 

ANSWER:

No. Section (c) specifically states: This section shall not apply to bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business.

Note: Although compensation under this section is not considered bribery, other regulations and acts do prohibit compensation depending on circumstances – e.g., RESPA Section 8.

Reference: Bank Bribery Act 18 USC 215(c)



 

 

 

 

ANSWER:

No, the consumer cannot indicate intent to proceed until after receipt of the Loan Estimate. 

Reference: §1026.19(e)(2)(i)(A)



 

 

 

 

ANSWER:

The OCC has identified some indications that could be considered abusive lending practices:

Collateral or Equity “Stripping” - loans made in reliance on the liquidation value of the borrower’s home or other collateral, rather than the borrower’s independent ability to repay, with the possible or even intended result of foreclosure or the need to refinance under duress;

Pricing and terms, whether interest rates or fees, that far exceed the true risk and cost of making the loan; 

Targeting persons, such as the elderly, women, minorities, and persons living in low- or moderate-income areas, who are perceived to be less financially sophisticated or otherwise vulnerable to abusive loan practices;

Inadequate disclosure of the true costs and risks of loan transactions;

Lending practices that are fraudulent, coercive, unfair, deceptive or otherwise illegal;

Loan terms and structures, such as negative amortization, when designed to make it more difficult or impossible for borrowers to reduce their indebtedness;

Aggressive marketing tactics that amount to deceptive or coercive conduct;

Padding/Packing - charging customers unearned, concealed or unwarranted fees;

“Balloon” payment loans that may conceal the true burden of the loan financing and may force borrowers into costly refinancing or foreclosure situations;

Flipping - frequent and multiple refinancings, usually of mortgage loans, requiring additional fees which strip equity from the borrower; and/or

Collection of up-front single-premium credit insurance - life, disability, or unemployment, when the consumer does not receive a net tangible financial benefit.

Reference: OCC Advisory Letter 2000-7.



 

 

 

 

ANSWER:

While training is highly suggested for all compliance regulations, several regulations specifically have the training requirement codified.

While the frequency of training may vary, examples of when most banks commonly train include: annual training for all applicable employees; when monitoring dictates lack of knowledge or violations; as required for changes to policies and procedures; when the security program is revised or updated, when regulations are updated, and when new products or services are released by the bank. Regulations that require training include:

Regulation CC;
Bank Secrecy Act;
Bank Protection Act – the act that handles robbery and physical security of bank and employees;
Privacy - Interagency Guidelines Establishing Information Security Standards
Fair Credit Reporting Act for Identity theft red flags 
SAFE Act

Reference: Regulation CC: 12 CFR 229.19(f) Bank Secrecy Act: 1020.210 Bank Protection Act (Minimum Security Devices and Procedures): FDIC 12 CFR 326.3; FED 12 CFR 208.61; OCC 12 CFR 21 Privacy - Interagency Guidelines Establishing Information Security Standards Fair Credit Reporting Act – Interagency Guidelines Concerning the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies; ID theft red flag rules SAFE Act 12 CFR 1008



 

 

 

 

ANSWER:

The general aggregate limits do 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).

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 

 

 

 

ANSWER:

The primary purpose of the FFIEC Consumer Compliance Ratings System is to ensure that regulated financial institutions are evaluated in a comprehensive and consistent manner, and that supervisory resources are appropriately focused on areas exhibiting risk of consumer harm and on institutions that warrant elevated supervisory attention.

Reference: 81 Fed. Reg. 79473, 79477 (November 14, 2016). 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 

 

 

 

ANSWER:

The charges for the MAPR includes, as applicable to the extension of consumer credit:

(i) Any credit insurance premium or fee, any charge for single premium credit insurance, any fee for a debt cancellation contract, or any fee for a debt suspension agreement;

(ii) Any fee for a credit-related ancillary product sold in connection with the credit transaction for closed-end credit or an account for open-end credit; and

(iii) Except for a bona fide fee (other than a periodic rate) which may be excluded under paragraph (d) of this section:

(A) Finance charges associated with the consumer credit;

(B) Any application fee charged to a covered borrower who applies for consumer credit, other than an application fee charged by a Federal credit union or an insured depository institution when making a short-term, small amount loan, provided that the application fee is charged to the covered borrower not more than once in any rolling 12-month period; and

(C) Any fee imposed for participation in any plan or arrangement for consumer credit, subject to paragraph (c)(2)(ii)(B) of this section.

Reference: Military Lending Act 32 CFR 232.4

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 

 

 

 

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