Intention of Presentation

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Jessie Carroll
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2 Intention of Presentation This is intended to be a high level presentation and not to get into the detail of each individual area. More of an overview. If there are questions or you would like to go over an area in more detail please let me know.

4 Management Thoughts (Past) Compliance Safety and Soundness

5 Management Realization (Future) Compliance = Safety and Soundness

6 Fair Lending Fair Lending laws and regulations were enacted to ensure that financial institutions do not engage in discrimination on a prohibited basis Equal Credit Opportunity Act (ECOA) and Fair Housing Act

7 Fair Lending ECOA has two principal theories of liability: Disparate Treatment Comparative Evidence Overt Discrimination Disparate Impact

8 Fair Lending A creditor shall not discriminate against an applicant on a prohibited basis regarding any aspect of a credit transaction (discouragement, level of assistance, terms of a loan, denials, servicing after a loan, etc.)

9 Why is this important? Impact of noncompliance: Damage to bank s reputation Loss of Business Intense and costly investigation Monetary penalties Denial by regulators of applications for mergers or acquisitions Costly litigation

10 Fair Lending 101 It does not have to be intentional to be grounds for a fair lending investigation.

11 Fair Lending Hot Topics Pricing Underwriting Redlining Training

12 HMDA What is HMDA? New HMDA rules effective 1/1/2018 Fields expanding from 26 to 48 data points Is your bank ready?

14 Overdrafts

15 WHAT THE NATION SEES According to the Federal Deposit Insurance Corp., last year banks in general made more than $11 billion in consumer overdraft fees. In the first quarter for this year they collected $2.78 billion in fees.

16 COMPLAINTS In April 2016, an American Banker article stated there had been over 8,000 complaints involving overdraft products.

17 What s Expected CFPB Overdraft Rule In process Could Include Disclosures Lowering overdraft fees Limiting overdraft fees Additional monitoring

18 TCF NATIONAL BANK The Bureau alleges that the bank s strategy worked and that by mid-2014, about 66 percent of the bank s customers had opted in, a rate more than triple that of other banks. TCF s senior executives were so pleased with the bank s effectiveness at convincing consumers to opt in that they had parties to celebrate reaching milestones, such as getting 500,000 consumers to sign up.

19 TCF NATIONAL BANK 1. Bonuses The Bureau s complaint alleges that TCF s strategy also consisted of bonuses to branch staff who got consumers to sign on. For example, in 2010, branch managers at the larger branches could earn up to $7,000 in bonuses for getting a high number of opt-ins on new checking accounts.

20 TCF NATIONAL BANK 2. Sales goals After the bank phased out the bonuses, certain regional managers instituted opt-in goals for branch employees. Staff had to achieve extremely high opt-in rates of 80 percent or higher for all new accounts. While the bank s official policy was that an employee could not be terminated for low opt-in rates, many employees still believed they could lose their job if they did not meet their sales goals.

22 TCF NATIONAL BANK According to the Bureau s complaint, the chief executive officer of the bank even named his boat the Overdraft.

23 MY CONCERNS 1. Companies promoting overdrafts 2. Management watching declining OD income 3. Scripts not approved by compliance 4. Goals for opt-in 5. Check procedures and customer service

24 TRID Timing Requirements Completion of Disclosures Backdating Examiners now looking harder

25 Flood

26 Flood Why is flood so important? Fines and penalties Up to $2,000 per violation, not per file

27 Flood Recent Penalties First Nebraska Bank $55,000 9/13/2017 U.S. Bank $183,920 8/16/2017 First Northern Bank of Dixon $21,000 8/14/2017 Freeland State Bank $3,600 6/21/17 First Bank & Trust $8,000 5/26/17

28 MLA/SCRA Protecting Servicemembers and their Dependents Do you have policies and procedures in place for MLA and SCRA? MLA was effective 10/1/2016

29 UDAP

30 UDAP What is UDAP? Why should I be concerned? What are examiners looking for? Examples of UDAP

31 BSA What is BSA? Importance of BSA Yes, it is still important! What are the risks of non-compliance?

32 BSA For Individuals Up to 20 years in prison per transaction Fines up to $10,000 Termination Barred from employment in the banking industry Substantial legal fees Reputation risk For the Bank Fines up to $500,000 per transaction, or two times the transaction amount Loss of charter Loss of FDIC insurance Loss of reputation Cease and Desist Order Substantial legal fees

33 BSA What Directors Need to Know Are you reviewing and approving the Program annually? Do you know the risk level of the bank? New CDD rules that are coming in March 2018 Confidentiality of SARs Are they discussing in Board or Audit Committee?

34 Complaints Do we have a complaint management program? Do we take complaints seriously? Can they help our bank? Determine the root cause

35 Questions??? Thanks! Shaun Harms Bankers Assurance, LLC

LENDING: KEY EXAMINER TRENDS

LENDING: KEY EXAMINER TRENDS 2015 Temenos USA, Inc. All rights reserved. Leah M. Hamilton Chief Compliance Officer, TriComply Services WHAT YOU WILL LEARN TRID Compliance Reprieve Common issues Regulation