Compliance Corner


The Consumer Financial Protection Bureau (CFPB), Board of Governors of the Federal Reserve System (Fed), Office of the Comptroller of the Currency (OCC), and other regulatory authorities in the financial industry are focusing on several key areas this year, and compliance professionals should take note. Recent trends in compliance have found enforcement changes in everything from previously released final rules to annual letters and financial data.

 

  • New Mortgage Rule Implementation Page. The Consumer Finance Protection Bureau (CFPB) has announced the release of its new Regulatory Implementation web page. The new webpage consolidates the new 2013 mortgage rules and related implementation materials in one user-friendly area to ensure that the mortgage industry is prepared to comply with new borrower protections. The implementation page can be found here. 
  • OCCFinalized Lending Limits Interim Final Rule. The Office of the Comptroller Currency (OCC) is finalizing its interim final rule, which:
    • Consolidates the lending limits rules applicable to national banks and savings associations
    • Removes the separate OCC regulation governing lending limits for savings associations
    • Implements section 610 of the Dodd-Frank Wall Street Reform and Consumer Protection Act

The effective date of the amendatory instruction of this final rule is July 1, 2013. The effective date of the remaining amendments is October 1, 2013. For more information, see the news release on the OCC’s website.

  • EscrowEscrow Requirements under Truth in Lending Act Rule. On June 1st, the CFPB’s Escrows Rule exempting higher-priced mortgage loans (HPMLs) made by certain small creditors went into effect. The rule requires certain creditors to create escrow accounts for a minimum of five years for HPMLs. The rule also defines rural counties using the USDA Economic Research Service’s urban influence codes. Find more information on the CFPB’s website.
  • New Financial Crimes Enforcement Network (FinCEN) Guidance. FinCEN has posted new guidance for those who have issues with timely BSA and/or FBAR report submission due to natural disasters, emergency situations, or other systemic issues, as well as for filers in remote areas without Internet access. During these occasions, FinCEN  requests that financial institutions contact FinCEN’s Regulatory Helpline 1 800-949-2732 to make FinCEN aware of the compliance concerns and to determine possible alternatives for timely BSA reporting. Find more information on the guidance here.

 

Looking Ahead

Keep an eye on further updates in the next quarter!

 

Fair Credit Reporting Act (FCRA). The most recent change by the CFPB has been to mandate changes to the forms used in the background checking process which are required by the FCRA. These changes reflect that end users, consumers, and furnishers of information obtained in the background check process will now contact the CFPB instead of the FTC for FCRA related information. 

Lending – Appraisals. The revisions to Regulation Z, published in February and effective January 18, 2014, implement a new provision requiring appraisals for “higher-risk mortgages.” For mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage, the final rule requires creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used. T

Telephone Consumer Protection Act (TCPA). The new TCPA rules, effective October 16, 2013, offer additional protections for consumers concerning unwanted autodialed and/or robocalls. The changes include required prior express written consent, with certain exceptions, as well as no “established business relationship” exemptions. 

 

Trends to Watch


SpyglassOur compliance and regulatory subject matter experts have been closely monitoring important trends in the financial community.

 

  • Foreign Account Tax Compliance Act (FATCA). This Act may be the most important financial crime law of this and the next generation.  The IRS FATCA regulations are not very clear about the restrictions of disclosing the personal financial data the IRS receives from foreign financial institutions.  If a US person who has an account in another country believes that his or her problems with US agencies from disclosure of non-US accounts will be limited to tax issues they are mistaken. US tax code, Title 26, Section 6103 opens up several possibilities through which US government agencies, and even the US Congress, could navigate to obtain tax and bank account information. Information the IRS may receive from foreign financial institutions (FFI) under FATCA is disclosable under the FATCA regulations.  Section 6103(i) permits disclosure of tax “return information” to “any federal agency” for use in virtually any matter in which the agency has jurisdiction.  The access by these US agencies, including intelligence agencies and Congress, is not limited to tax-related matters but extends to other criminal and administrative matters.

The collected information may be shared with US intelligence agencies for their use in investigation, collection or analysis of information, in what is being coined “threat finance.” The work not only includes the pursuit of terrorism cases but also cases involving other national security threats, including trafficking in nuclear materials, weapons of mass destruction, humans, narcotics, and foreign corruption.  Subsection (i) allows disclosure of tax “returns and return information” for use in criminal investigations. The information may be obtained through an ex parte order* by a federal district court or magistrate judge. The order may allow inspection and disclosure to employees of any federal agency who are “personally and directly engaged” in a federal case involving the enforcement of any federal criminal law.  Virtually any federal prosecutor may seek such an order from a federal district or magistrate judge. Therefore, more awareness to such regulations is recommended to financial institution employees.

* An ex parte judicial proceeding is conducted for the benefit of only one party. Ex parte may also describe contact with a person represented by an attorney, outside the presence of the attorney. The term ex parte is used in a case name to signify that the suit was brought by the person whose name follows the term (from the Free Online Legal Dictionary).