{Regulatory Compliance Update.} December 10, 2014

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1 {Regulatory Compliance Update.} December 10, 2014

2 Presenter Elizabeth Snyder, CRCM, Regulatory Compliance Manager Elizabeth leads Plante Moran s regulatory compliance team. As a compliance specialist with more than 25 years of banking experience, she provides regulatory compliance and enterprise wide risk management guidance for financial institutions. Her knowledge of maintaining efficient operations while designing and implementing internal controls, policies, and procedures for complying with applicable local, state, and federal laws and regulations is an invaluable resource for the industry. 2

3 Fair Lending Emerging risks & regulatory concerns Use of discretion for: Pricing Underwriting Account maintenance Servicing Loss mitigation Intense regulatory focus on fair servicing issues Lending policies that may have a disparate impact such as: Minimum loan amounts Not grossing up non-taxable income Requesting excessive documentation to consider disability income 3

4 Fair Lending Emerging risks & regulatory concerns Non-HMDA reportable loans Consumer, credit card, student, indirect, and small business Use of proxies Return of redlining New mortgage rules and restricted credit 4

5 Unfair/Deceptive/Abusive Acts & Practices Emerging risks & regulatory concerns Fairness expectation Understandability Predictability Value Appropriateness Single practice can concurrently be a violation of federal regulation AND a violation of UDAAP 5

6 Unfair/Deceptive/Abusive Acts & Practices Emerging risks & regulatory concerns Under scrutiny Add-on products Debt collection Disclosure of fees especially continuous overdraft fees Consumer Reg E claims Incentive compensation or commission-based sales Third-party service providers 6

7 Third-Party Risk Management Emerging risks & regulatory concerns Increased use of third parties for: Credit cards Prepaid cards High-yield checking accounts Overdraft payment programs Add-on products o Debt protection o Identity theft protection o Credit score tracking 7

8 Third-Party Risk Management Emerging risks & regulatory concerns Common problems Lack of independent risk assessment or failure to assess risk Lack of due diligence Inadequate contract structuring Failure to perform independent review of agreements, marketing, and disclosures Failure to provide ongoing oversight Failure to perform ongoing due diligence Failure to require review and approval before any changes are made to the product or service being offered 8

9 Bank Secrecy Act & Anti-Money Laundering Emerging risks & regulatory concerns Lack of compliance resources Incomplete identification of high-risk customers Inadequate enhanced due diligence Failure to monitor, identify, and report suspicious activity for all customer relationships on an institutionwide basis Inadequate scope of periodic reviews failure to identify systemic BSA/AML compliance program deficiencies Weakness or failure to validate the automated monitoring systems Lack of succession plan 9

10 Bank Secrecy Act & Anti-Money Laundering Emerging risks & regulatory concerns Under scrutiny Tax evasion and tax fraud Third-party payment processors Stored value card relationships Remote deposit capture International transactions Electronic channels Virtual currency Conflicting state and federal marijuana laws On the horizon FinCEN Beneficial Ownership Rule 10

11 Alternative Delivery Annual Privacy Notice Effective October 28, 2014 Allows financial institutions that meet certain criteria to post their annual privacy notices online rather than delivering them individually. To be eligible to use alternative delivery method a financial institution must: Not provide customers with a right to opt-out Not have changed information sharing practices since the most recent annual privacy notice Use the model form Specific conditions required to use alternative delivery method: Must be posted continuously on website Must allow access to notice without logging on or other similar steps Mail noticed when requested within 10 calendar days Once a year provide notice about privacy notice is posted 11

12 RESPA-TILA Integrated Disclosure Rule Combines certain disclosures required under Regulation Z (TILA) and Regulation X (RESPA) Mandates two new disclosures effective for applications received AFTER August 1, 2015 Loan estimate Combines and replaces Good Faith Estimate (GFE) and initial Truth-in-Lending Disclosure Summary of: o Contemplated loan terms o Estimated loan costs o Other estimated closing costs o Additional application disclosures Changes triggers and timing 12

13 RESPA-TILA Integrated Disclosure Rule Closing disclosure Combines and replaces final Truth-in-Lending Disclosure and the HUD-1 Summary of: Actual loan terms Loan costs Other settlement costs Additional closing disclosures Significant changes to timing requirements 13

14 RESPA-TILA Integrated Disclosure Rule Implementation plan Form implementation team to map out compliance plan Understand obligations under rule Identify affected products, departments, and staff Identify process, operational, and technology changes necessary Identify impact on key service providers and business partners Consider practical implementation issues Amend policies and procedures Train affected employees Test and validate 14

15 Q&A Q&A 15

16 Thank You 16