April 6, 2023

Luetkemeyer Criticizes FinCEN’s Beneficial Ownership Registry Reporting Proposal

Congressman Blaine Luetkemeyer is calling for the Financial Crimes Enforcement Network to amend beneficial ownership information reporting requirements set to take effect next year. Luetkemeyer is among a bipartisan group of 12 lawmakers saying FinCEN’s rulemaking deviates from congressional intent by allowing beneficial owners to withhold identifying information.

FinCEN established a BOI registry last year pursuant to the Corporate Transparency Act. The new regulations would mandate that many corporations, limited liability companies and other entities created in or registered to do business in the U.S. to report information about their beneficial owners to the agency.

In their letter, lawmakers said they were disappointed that FinCEN instead created an “escape hatch” to the reporting requirements by allowing “unable to identify … unable to obtain” or “unknown … not able to obtain” determinations in the registry. The CTA clearly states that the registry must include the name, date of birth, address and other identifying information about beneficial owners, they said.

“Allowing these options in any final rule will degrade the benefits of the registry to law enforcement and to financial institutions and provide an opportunity for bad actors to obscure the identity of the company applicant or beneficial owner,” the lawmakers said. “The result is that the registration form itself will undermine the underlying, bipartisan goals of the CTA.”

CFPB Establishes Help Line for Small Business Reporting Rule Compliance

The Consumer Financial Protection Bureau has launched a dedicated regulatory and technical support program to help financial institutions comply with its final rule implementing Section 1071 of the Dodd-Frank Act, which requires the collection and reporting of credit application data for small businesses. SBLHelp will provide oral and written assistance to financial institutions regarding their data collection and reporting obligations under the rule, the agency said.

Under the final rule, a covered financial institution is defined as a financial institution that originated at least 100 “covered credit transactions” for small businesses in each of the two preceding calendar years. In addition, a “small business” is defined as one with gross revenue of $5 million or less in the last fiscal year. Financial institutions can submit questions to SBLHelp through the CFPB’s website and expect an answer within 24 to 48 hours during normal business hours, although some answers may take longer, according to the agency.

The CFPB said it plans to publish additional resources to help financial institutions comply with the final rule. MBA staff is currently analyzing the final rule to prepare educational sessions and other resources for MBA members. Please contact MBA Senior Vice President Carol Barnett with any questions.

OCC’s Hsu Says Regulators Seek Fairness in Overdraft Protection

Fees for overdraft services present a variety of risks for banks, but the goal of regulators is to make the fees more friendly to consumers, not to eliminate them, Acting Comptroller of the Currency Michael Hsu said. Speaking at a recent economic conference in Washington, D.C., Hsu didn’t label overdraft fees “junk fees,” unlike President Joe Biden and Consumer Financial Protection Bureau Director Rohit Chopra in recent remarks. But he reiterated his belief that many banks should “update” their overdraft protection programs.

Overdraft fees can present regulatory risks, but “not all overdraft practices are equally risky, so some precision here is warranted,” Hsu said. One risky practice identified by Hsu was assessing overdraft fees on debit card transactions authorized when a consumer’s available balance is positive but later posts to the account when the available balance is negative, commonly known as “authorize positive, settle negative.” Another is the practice of charging multiple nonsufficient funds fees when a transaction is presented multiple times against insufficient funds in the customer’s account.

Hsu also cited a third potential risk: overdraft programs with no limits on the cumulative fees that may be assessed. “A high limit, or a lack of a limit, on the number of overdraft and NSF fees that can be charged in a single day has contributed to determinations that banks’ overdraft protection programs as a whole were unfair,” he said.

Still, Hsu said the goal of regulators isn’t to force banks to stop offering overdraft protection. “Many customers tell their banks, as well as groups that have studied overdraft practices, that this banking service helps them meet payments when they come due,” he said. “What we are all trying to do is improve the fairness of these programs by making them more pro-consumer, not to eliminate them. More fairness means more financially healthy communities, which means more trust in banking.”

MBA is hosting a free webinar from 9 to 10:30 a.m. Tuesday, April 25, on mitigating supervisory and litigation risk for NSF fees on representments and authorizing positive settle negative overdrafts. Kersten Holzhueter and Bryant Lamer, partners with the Spencer Fane law firm, will present the webinar, which is for MBA members only.

CFPB Defines Illegal Abusive Acts in Proposed Guidance

Proposed guidance from the Consumer Financial Protection Bureau addresses “abusiveness” standard as defined by the Consumer Financial Protection Act. The guidance summarizes previous actions to enforce the abusiveness standard and offers insight into how the agency, under its current leadership, plans to analyze the statutory elements of abusiveness to identify violative acts or practices.

Notably, the CFPB asserted that the statutory language prohibiting abusiveness includes acts or practices that “obscure, withhold, de-emphasize, render confusing, or hide information relevant to the ability of a consumer to understand terms and conditions.” The agency also noted that such acts or practices could include buried disclosures, physical or digital interference, prominently placing certain content to interfere with the comprehension of other content (known as “overshadowing”) and various other means of “manipulating consumers’ understanding.”

Further, the CFPB said institutions may not take “unreasonable advantage” of consumers’ lack of understanding of the risks, costs or conditions of a product or service; the inability of the consumer to protect their interests in using or selecting a consumer financial product or service; or reasonable reliance by the consumer that the institution will act in the consumer’s interest. The agency asserted that “advantages” can include market share, revenue, cost savings, profits, reputational benefits and other operational benefits.

“Evaluating unreasonable advantage involves an evaluation of the facts and circumstances that may affect the nature of the advantage and the question of whether the advantage-taking was unreasonable under the circumstances,” the CFPB said. “Such an evaluation does not require an inquiry into whether advantage-taking is typical or not. And even a relatively small advantage may be abusive if it is unreasonable.”

Public comments on the guidance are due Monday, July 3.

NextGen Kicks Off April With Teach Children To Save Challenge

MBA’s Next Generation is Banking is once again holding a Teach Children To Save Challenge in which MBA member banks could win $250 for local schools or organizations in their communities.

The challenge celebrates National Financial Literacy Month in April. Throughout the month, Missouri bankers will teach basic savings principles to students in their communities. Bankers who share photos of their presentations with students on their banks’ Facebook, Twitter or Instagram accounts and tag MBA (Facebook, Twitter or Instagram) will automatically be entered into a drawing to win $250 for a school or community youth organization from MBA.

“MBA will award four $250 prizes,” said MBA Vice President Emily Lewis. “We also encourage the winning banks to match this amount, giving a school or organization an opportunity to win as much as $500!” 

The challenge ends Sunday, April 30. Photos must be posted on social media channels, as well as tagging MBA, by 5 p.m. Monday, May 2.

For resources on presentations to students, the American Bankers Association Foundation is hosting a free webinar at noon Tuesday, April 11, to help banks prepare for Teach Children to Save Day on April 27. The foundation also offers a range of free resources to help banks advance financial literacy in their communities.

Donations to Support Mississippi Tornado Relief Efforts

The American Bankers Association Foundation is collecting donations through its Disaster Relief Program to help aid relief efforts in Mississippi after a series of deadly tornadoes swept through the region March 24. The storms killed at least 21 people and destroyed homes and businesses. At the request of the Mississippi Bankers Association, all donations will be directed to the Heart of the Delta Foundation, which is supporting rural communities in the Delta region, and the CREATE Foundation, which is aiding relief efforts in northeast Mississippi.

MBA is donating to the relief efforts and encourages banks to consider a donation. Local bank employees were among those directly affected by the storms in Mississippi. Two Bank of Anguilla employees suffered significant injuries from the tornado that hit the town of Rolling Fork, and several bank employees lost their homes. Employees working for banks in northeast Mississippi also were affected by the storm, and bank branches sustained damage as well.

Donations will be accepted until Friday, May 12.