April 30, 2021
ABA Calls For Banker Feedback On Beneficial Ownership Database
As the Financial Crimes Enforcement Network prepares to create a new beneficial ownership registry, the American Bankers Association is urging bankers to provide feedback on the procedures and standards FinCEN should incorporate.
Banks consistently cite Bank Secrecy Act/anti-money laundering compliance as one of the most costly and burdensome regulations they face. The new registry has the potential to simplify, streamline and strengthen the customer due diligence process, but banker input is critical at this early stage to ensure that registry will meet the needs of financial institutions and law enforcement and facilitate a seamless partnership to combat illicit finance in America.
As they craft their messages, bankers are urged to incorporate real-world examples that demonstrate how FinCEN’s proposal will affect their institution. Comments are due to FinCEN by Wednesday, May 5, and will be made public in accordance with federal rulemaking procedure.
ABA Calls For Withdrawal Of NCUA CUSO Proposal
The American Bankers Association urged the National Credit Union Administration to withdraw a proposed rule that would expand the range of permissible lending activity for credit union service organizations. The proposed rule would allow CUSOs to originate any type of loan a federal credit union may originate, including auto and payday loans. NCUA also proposed to broaden federal credit unions’ investment authority in CUSOs. As CUSOs may serve people who are not members of a credit union, the expanded authority would further undermine credit union field-of membership restrictions, which is one of the central justifications for their tax-exempt status.
ABA also raised concerns that the proposal would give rise to numerous safety and soundness and consumer protection risks, given that the NCUA has no examination or oversight authority over CUSOs and no mechanism exists to hold them accountable for unsafe and unsound practices or violations of federal consumer financial protection laws. The proposal would jeopardize the National Credit Union Share Insurance Fund and potentially imperil retail borrowers, particularly those in underserved areas and low-to-moderate income communities, ABA noted.
The association urged NCUA to:
- refrain from any CUSO-related rulemaking until it is given statutory authority to supervise and examine CUSOs
- perform an economic analysis to ensure safety and soundness risks can be addressed
- withdraw — and refrain from taking any further action on — the proposal’s granting of authority to approve CUSO activities and services outside of the formal rulemaking process and broadening credit unions’ investment authority
Biden Unveils Tax Proposals
The “American Families Plan” unveiled by President Biden this week is an $1.8 trillion proposal that calls for significant federal spending on education, children and families, nutrition and other initiatives through direct expenditures and targeted tax credits.
The administration proposes to pay for the president’s plan through:
- an increase of the top individual rate to 39.6% from 37%
- elimination of the capital gain rate preference for taxpayers with income of more than $1 million
- elimination of certain real estate 1031 exchanges
- an increase in Internal Revenue Service enforcement
Two proposals within the plan that the American Bankers Association will scrutinize closely include an end to the practice of “stepped-up” basis for assets at death (with certain exceptions for businesses and farms) and requiring financial institutions to provide additional information to the IRS to bolster tax compliance.
The proposed tax code changes are in addition to others floated by the Biden administration earlier this year as part of a plan for overhauling the nation’s infrastructure.
CFPB Delays General QM Rule Effective Date
The Consumer Financial Protection Bureau issued
a final rule
extending the mandatory effective date for its general Qualified Mortgage rule from July 1, 2021, to Oct. 1, 2022. With this action, the CFPB also extended the temporary “GSE patch” until the new mandatory compliance date or until Fannie Mae and Freddie Mac exit conservatorship, whichever comes first.
However, the bureau noted that “the practical availability of the temporary GSE QM loan definition may be affected by policies or agreements created by parties other than the bureau, such as the Preferred Stock Purchase Agreements, which include restrictions on GSE purchases that rely on the Temporary GSE QM loan definition after July 1, 2021.” (This statement followed an announcement from Fannie Mae and Freddie Mac earlier this month stating that any loans purchased by the GSEs after July 1, must conform to the requirements outlined in the QM final rule—effectively ending the GSE patch.)
FHFA: GSEs To Offer New Refinance Option For Low-Income Families
To help more borrowers take advantage of historically low mortgage interest rates, the Federal Housing Finance Agency announced a new refinance option
for low-income borrowers who have single-family mortgages backed by Fannie Mae or Freddie Mac. Borrowers that take advantage of this option could save an average of between $100 and $250 per month, FHFA said.
Under the new option, the lender must provide a savings of at least $50 in the borrower’s monthly mortgage payment and at least a 50-basis point reduction in the borrower’s interest rate and provide a maximum $500 credit for an appraisal if the borrower is not eligible for an appraisal waiver.
It also allows for a waiver of the 50-basis point “adverse market refinance fee” — a controversial fee imposed by FHFA on refinance transactions that was strongly opposed by the American Bankers Association — for loans that have balances under $300,000.
“Our primary concern has always been that the refinance fee negatively affected borrowers, particularly lower-income borrowers,” said ABA Senior Vice President Joe Pigg. “We welcome this action by the FHFA which will limit the scope of homeowners impacted.”
To qualify for the new refinance option, a borrower must meet the following.
- have an enterprise-backed, one-unit single-family mortgage that is owner-occupied
- have an income at or below 80% of the area median income
- have not missed a payment in the past six months
- has no more than one missed payment in the past 12 months
- does not have a mortgage with a loan-to-value ratio greater than 97%, a debt-to-income ratio above 65% or a FICO score lower than 620
Rule Proposed Requiring Tax Allocation Agreements For Consolidated Returns
The Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corporation proposed
requiring that national banks, state banks and savings associations that file tax returns as part of a consolidated tax filing group be required to enter into tax allocation agreements with their holding companies and other members of the consolidated group that file a consolidated group tax return.
According to the Federal Register notice
, the proposal would “promote safety and soundness by preserving depository institutions’ ownership rights in tax refunds and ensuring equitable allocation of tax liabilities among entities in a holding company structure.” The proposal also would describe two mandatory provisions in these tax allocation agreements, including provisions addressing the ownership of tax refunds received.
If adopted, the proposal would replace an interagency policy statement on tax allocation agreements that was issued in 1998 and supplemented in 2014. Comments are due 60 days from the Federal Register
FDIC Proposes Rule On Misrepresenting Deposit Insurance Status
The Federal Deposit Insurance Corporation proposed a rule
implementing its authority to prohibit misrepresentations about deposit insurance or misusing the FDIC’s name or logo. The proposed rule
also would create a central point of contact where the public could report or make inquiries about potential violations.
The Federal Deposit Insurance Act already prohibits misuse of the FDIC's name or logo, the FDIC said, adding that the proposed rule will “further clarify its procedures for identifying, investigating, and where necessary taking formal and informal action to address potential violations of Section 18(a)(4).”
The FDIC said the rule is in response to an increase of the number of incidents where agency’s name or logo has been misused to claim a product is FDIC-insured. Comments on the proposed rule are due 60 days after it is published in the Federal Register
Article Examines ADA Digital Compliance
The attention paid to digital compliance with the Americans with Disabilities Act has risen in recent years. In 2016, there were about 260 private-party lawsuits under the ADA and related state laws. In 2021, there are likely to be around 4,600 of these lawsuits filed. A new article
from ABA Risk and Compliance
looks at what banks can do to reduce the risk of these lawsuits and enable a strong, defensive position should such an accusation arise.
The article covers how banks seeking to comply with the requirements of the ADA can focus on several aspects of their website and mobile app, including system compliance and process compliance. System compliance relates to how a website or app was built and asks does it work for a person with disability. Process compliance involves looking at the policies, practices and procedures of the organization to determine if accessibility compliance can be maintained on an ongoing basis.
Article Highlights How To Stop Customers From Switching Banks
As banks race to adopt new digital technology and transform their online capabilities, one area they might look is how many customers are vulnerable to switching financial services providers. An article
in the ABA Banking Journal
D.J. Haskins, senior director of marketing at TimeTrade SilverCloud, cautions that “nearly 25% of households” are in this position.
“By identifying the reasons that customers want to switch, and marketing to your strengths in association with those pain points, financial institutions will be able to attract vulnerable customers into their financial institution,” Haskins writes. A recent survey found that customer experience was a key factor for many customers when deciding whether to switch banks.
“As lack of proactivity across digital and human channels and bad technology training when asking for digital support stand as two of the top reasons that customers switch, financial institutions should consider how their own customer experience matches these pain points,” the article notes. “By delivering better service, support and customer experience, financial institutions can avoid the loss of customers primed to leave, while attracting those seeking an improved customer experience.”
Study: Consumer Satisfaction With Banks Improves Amid Pandemic
Despite the challenges of the COVID-19 pandemic, retail bank satisfaction improved four points year-over-year to 817 (on a 1,000 point scale), according to J.D. Power’s annual retail banking satisfaction study
. The study noted that the rise in satisfaction was driven by increased frequency of communication provided to customers, improved relevance of communications and banks’ efforts to help customers navigate fees and display genuine concern when they encounter problems.
Nearly two-thirds of retail bank customers, 63%, said their banks “completely supported them during the pandemic,” specifically by waiving charges, supporting the community, offering additional guidance and providing late payment forgiveness.
The study is based on responses from about 95,000 retail banking customers of the largest banks in the country.