Compliance Perspectives Carl Pry November 19, 2015 CFPB Supervisory Highlights Covers exam findings from May 2015 to August 2015 Non-public CFPB supervisory actions resulted in $107 million in restitution to more than 238,000 consumers Supervisory observations in consumer reporting, debt collection, mortgage origination, mortgage servicing, student loan servicing, and fair lending Recognizes that certain efforts were made to improve compliance: Mortgage servicers made improvements to compliance audits and conducting information technology reviews Student loan servicers alerted borrowers of unpaid balances remaining after borrowers attempt to pay off their loans but fall short Also discusses CFPB s revised exam appeals process, which includes changes to the supervisory appeals process: Revised exam appeals process extends expected time to issue a written decision on appeals from 45 to 60 days Prevents an institution from appealing adverse findings or an unsatisfactory rating related to a recommended or pending investigation or public enforcement action until the enforcement investigation or action has been resolved. 1 of 18 1
Complaints CFPB s monthly complaint report; this month on credit card complaints Over 79,000 credit card-related complaints since July 2011 Specific complaint topics: Confusion over how late fees are assessed Confusion about how to dispute inaccuracies in billing statements Accounts being closed without consent Inability to allocate payments as consumers desire NCUA established a portal to receive correspondence from the Consumer Assistance Center about complaints, to send responses and complaint information, and to check the status of complaints 2 of 18 Diversity CFPB s 5-year Diversity and Inclusion Strategic Plan Objectives: Recruit a diverse workforce Enable individuals to contribute to their full potential Ensure sustainability of the plan Increase opportunities for minority and women owned businesses Assess diversity practices of regulated entities CFPB will use interagency policy standards to assess regulated entities diversity and inclusion policies and procedures and collect baseline data that will serve as a survey of best practices for institutions (through Office of Minority and Women Inclusion) 3 of 18 2
Cyber-Extortion FFIEC statement notifying institutions of increasing frequency and severity of cyberattacks involving extortion Urges institutions to take steps to ensure effective risk management programs Conduct ongoing information security risk assessments Perform security monitoring, prevention, and risk mitigation Implement and regularly test controls around critical systems Participate in industry information-sharing forums. 4 of 18 FFIEC Management Booklet FFIEC revised its Management Booklet 1 of 11 that make up FFIEC s Information Technology Examination Handbook Outlines principles of overall sound governance, including IT Board of directors sets tone and direction of IT program: Review and approve IT strategic plan that aligns with overall business strategy Includes information security strategy to protect from ongoing and emerging threats, including related to cybersecurity Oversee process for approving third-party vendors Approve policies to report significant security issues to the board, steering committee, government agencies, and law enforcement (as necessary) Hold management accountable for identifying, measuring, and mitigating IT risks Provide independent, comprehensive, and effective audit coverage of IT controls 5 of 18 3
FTC-VA Agreement FTC has signed a Memorandum of Agreement with VA to provide mutual assistance to prevent fraudulent and deceptive acts by institutions of higher learning and other establishments that offer training targeting U.S. servicemembers, veterans, and dependents using military education benefits FTC warned servicemembers about for-profit schools: That may make unrealistic promises and pressure them to enroll in unnecessary courses, or Take out loans they may not be able to pay off 6 of 18 Mobile Financial Services CFPB report, "Mobile Financial Services" to summarize the results of a June 2014 Request for Information on opportunities and challenges associated with the use of mobile financial services (MFS) by traditionally underserved consumers 44% of unbanked individuals own a smartphone, so MFS has potential to be a promising tool for underbanked and unbanked consumers to manage their finances Consumers using MFS save time and money since they can check balances any time and have access to tools that help them manage money Remote Deposit Capture highlighted as particularly attractive to unbanked consumers because it allows them to take a picture of and deposit checks remotely, reducing the limitations of branch hours and locations MFS would likely be most effective for underserved consumers if paired with consultative or assistance services Privacy and security concerns remain a significant risk Digital access and digital financial literacy need improvement 7 of 18 4
OCC Floorplan Lending OCC updated its Floor Plan Lending booklet of the Comptroller s Handbook Summarizes basics of floorplan lending for examiners, including a description of indirect dealer lending and the regulatory and legal foundation for floor plan lending Sound risk management practices and regulatory risk rating guidelines Expanded exam procedures section with examples of risk rating cases and factors for determining quantity of credit risk and the quality of credit risk management. 8 of 18 Student Loans Department of Education final regulations on how students access Federal student aid Addresses access to Federal student aid: Protects students against excessive fees to access aid Requires institutions to give greater choice and information to students about how to receive aid Prohibits institutions from requiring students to open certain accounts for the deposit of student aid refunds (among other things) Also limits amount of information institutions can share with third party institutions providing campus debit and prepaid cards to students under partnerships with schools and require schools to disclose on their websites the terms of those partnerships Second rule establishes an expanded Pay As You Earn program Caps payments at 10% REPAYE plan covers 5 million more Direct Loan borrowers, without regard to when the borrowers first obtained their loans 9 of 18 5
Planning for Retirement CFPB Planning for Retirement online tool to help older consumers make informed decisions about Social Security retirement benefits Uses SSA formulas to help consumers estimate how their age will affect their Social Security retirement benefits Provides claiming tips relevant to a consumer s specific situation Provides suggested action steps to help consumers plan retirement CFPB report, Issue Brief: Social Security Claiming Age and Retirement Security Many consumers decide to collect benefits at earliest possible age of 62 without: Knowing full retirement age range of 66 to 67, depending on the person s birth year Understanding effects of collecting Social Security claims before the full retirement age, such as the substantial reduction of monthly benefits Treasury also launched myra, a simple, safe and affordable new savings option for those who don t have access to a retirement savings plan at work Multiple ways for people to start saving 10 of 18 Operation Collection Protection FTC coordinated federal, state, and local initiative to combat alleged abusive and deceptive debt collection practices, Operation Collection Protection https://www.ftc.gov/news-events/press-releases/2015/11/ftc-federal-state-local-lawenforcement-partners-announce Authorities listing 30 new actions, including 5 enforcement actions by FTC Number of actions taken under the Operation Collection Protection initiative to 115 and total number of participating law enforcement partners to 70 Targets Extracting payments from consumers by using intimidation and inaccurate representations Impersonating servers or attorneys and threatening arrest or litigation Collecting on debts that never existed or had already been paid 11 of 18 6
Enforcement Trends Fed and NY DFS enforcement action against a bank for alleged deficiencies in BSA/AML compliance program http://www.federalreserve.gov/newsevents/press/enforcement/enf20151110a1.pdf Bank agreed to prepare written policies and procedures on governance, MIS on BSA/AML, OFAC, and state regs, revised BSA/AML compliance program, written CDD plan, SAR reporting policy, and OFAC program Fed and NY DFS combined $258 million penalty against a global bank for violations in connection with transactions on behalf of countries and entities subject to U.S. sanctions. http://www.federalreserve.gov/newsevents/press/enforcement/20151104a.htm Bank failed to implement adequate risk management and compliance policies and procedures to ensure that activities conducted at offices outside the United States complied with applicable OFAC Regulations and were timely reported in response to inquiries by the Federal Reserve Bank of New York. 12 of 18 Enforcement Trends DOJ proposed settlement with a bank for allegedly violating bankruptcy rules by not providing homeowners with required notices that would have allowed them to challenge the accuracy of increased mortgage rates http://www.justice.gov/opa/pr/us-trustee-program-reaches-816-millionsettlement-wells-fargo-bank-na-protect-homeowners Bank failed to file payment change notices 21 days before adjusting a debtor s monthly mortgage payment and perform timely escrow analyses More than $80 million in restitution to homeowners in bankruptcy that were affected Required to update its internal procedures to prevent further violations, including improving its employee training and its quality control processes 13 of 18 7
Enforcement Trends CFPB administrative order against an auto lender specializing in extending credit to servicemembers http://www.consumerfinance.gov/newsroom/cfpb-orders-servicemember-auto-loancompany-to-pay-3-28-million-for-illegal-debt-collection-tactics/ Allegations that company engaged in unfair, abusive, and deceptive debt collection practices: Contacting and threatening to contact servicemembers commanding officers to inform them of delinquencies and alleged military violations requiring discipline Exaggerating potential disciplinary actions, such as demotion, loss of promotion, and discharge, that servicemembers may face if they failed to make payments Representing that the company could commence an involuntary allotment or wage garnishment without obtaining a court judgment Threatening legal action when company did not intend to take legal action at the time Company must refund or credit over $2 million to consumers and pay $1 million civil money penalty 14 of 18 Others OCC updated credit card lending Comptroller s Handbook Fed: Revised Reg. D tranche levels for 2016 Issued 6 th annual payments study FDIC: Updated Brokered Deposit FAQs Updated guidance on purchased loans and participations NCUA: Cybersecurity video Auto lending webinar (11/18) 15 of 18 8
Others CFPB: Lists of counties determined to be rural and "rural or underserved" during 2015 for Reg. Z purposes Reminder to servicemembers on areas where they may run into issues with financial issues and providers VA guidance on spousal status matches previous Treasury guidance on same-sex marriages SEC rules on crowdfunding Investor limits and disclosure requirements FHA condo requirements eased New guidelines to increase affordable housing options for first-time and low- to moderateincome homebuyers Temporary guidance to streamline condo recertification process and expand eligibility of acceptable owner-occupied units to include second homes that are not investor-owned 16 of 18 Examiner Hot Topics Compliance Management Systems (CMS) BSA/AML program, CIP TRID Third parties Vendor management, risk assessments, sales practices UDAAP/UDAP Complaints programs, definitions Fair lending Non-mortgage products (proxies/bisg) Servicing Mortgage servicing Servicemember issues 17 of 18 9
Contact Information Compliance Questions: Carl Pry Treliant Risk Advisors PryCompliance@hotmail.com Webinar/Registration Questions: Mark Bennett Total Training Solutions PO Box 310 Waunakee, WI 53597 1-800-831-0678 www.bankwebinars.com mbennett@ttstrain.com Upcoming Webinars Excel Explained: Introduction to Spreadsheets Dec. 2 Reg E - How Expensive Is A Compliance Mistake? Dec. 2 Notary Public Dec. 3 Dealing with Appraisals: Regulations and Requirements Dec. 3 New Business Account Interview Dec. 8 Understanding Commercial Loan Documentation Dec. 9 UCC 3 and 4 Issues for Tellers Dec. 9 Accounting Principles for Lenders Dec. 10 BSA Red Flags for Money Laundering: Frontline Annual Training Dec. 10 New Federal Rules Target Student Bank Accounts - Top 10 Issues Dec. 14 Using Personal Tax Returns for Global Cashflow: What's Cashflow and What Isn't Dec. 15 Perspectives in 2015: Dec. 17 18 of 18 10