Skip to main content

Ensure your Advertising is Complete, Clear, and Compliant

Written by admin on . Posted in Compliance & Regulations.

In today’s competitive environment, getting the word out about your products and services is crucial. Do your ads meet regulatory expectations, include all advertising terms, and clearly explain what your products and services are to your customers and potential customers?

Get peace of mind with Young & Associates’ Advertising Review Service.

It’s Easy!
As part of the advertising review engagement, Young & Associates will:

  • Review all print and electronic advertising material provided by the bank. *
  • Respond to each submitted item in writing within 2 business days, presenting any compliance issues that may be present in the ad.
  • There is no minimum or maximum number of advertisements in a year. Submit advertisements that require that “second look.”
    * The review will not include verification of any APR or APY.

Trusted Guidance
Young & Associates provides an unmatched depth of practical expertise. Our compliance consultants are comprised of former banking executives, compliance regulators, and tenured finance professionals. We’re uniquely qualified to understand and solve your challenges, because we have personally experienced those same issues. For more information on this service, contact Karen Clower at kclower@younginc.com or 330.422.3444.

To submit your ad for review click here.

Considering Anti-Money Laundering Software for Your Institution

Written by admin on . Posted in Compliance & Regulations, Information Technology.

By: Edward Pugh, CAMS, Consultant

For many financial institutions, one of the most impactful purposes of the Anti-Money Laundering Act of 2020 is the encouragement of technological innovation and the adoption of new technology by financial institutions to more effectively counter money laundering and the financing of terrorism. While a requirement to adopt technology in the AML space is not spelled out, the encouragement is being meted out in regulatory exams. Industry professionals have noted that the asset-size thresholds for scrutiny of the adoption of technology (or lack thereof) is decreasing.

Aside from regulatory expectations, there are many advantages in adopting AML technology solutions, which include better detection capability, more efficient workflows, better information flow, and many others. There is a plethora of providers in the marketplace offering a wide range of products and capabilities. However, the aim of this article is to lay out some considerations once the decision to adopt new technologies has been made. Here are some things to consider:

  • Risk Assessment. Your institution’s BSA/AML risk assessment should drive the technology selection process. It is important to be able to demonstrate that the technology does in fact mitigate the risks that were assessed. The risk assessment can also serve as a guide in determining the sophistication of the software needed; a lot of products in the market may offer many features and options that may not be necessary.
  • Data. Data quality is the most important aspect of implementing AML software technology. Any implementation will require time to be devoted to data cleansing and mapping. Most vendors offer varying levels of assistance depending on your needs. Whether this part of the process is handled in-house or through a vendor, there will be costs associated with data preparation.
  • Future-proof. While no technology can be “future-proof,” it is important to have a platform that is robust and can handle upgrades or changes in your institution’s core software and any ancillary systems that may be feeding data into the AML software. There should also be a clear process for updates as regulations, laws, and criminal typologies change or are discovered.
  • Maintenance. BSA/AML evolves constantly. Financial institutions and their customers continually change. Over time, fine-tuning scenarios and thresholds is an important periodic activity. Some software allows the institution to conduct changes to the model while others require more vendor involvement. It’s an important area to consider when choosing between the numerous options.
  • Efficiency. Properly implemented, quality AML platforms will reduce the compliance burden in your institution. However, it is important to note that there will be “growing pains” in the beginning. One of the most common surprises is the often-dramatic increase in alerts generated. This is usually due to new scenarios being monitored, and much more transaction data being monitored. It can also be due to data quality issues that can arise during implementation. This surge in alerts is temporary. The efficiency comes as the system is fine-tuned and staff becomes more acquainted with the platform and its capabilities.

One final thought: Think big, start small. AML platforms can be customized and upgraded. For many institutions, the choices are overwhelming. Of course, there are many other factors that must be taken into account, especially cost. Having a clear understanding of the above-mentioned considerations will help weigh the cost considerations in choosing between the many options available in the marketplace.

For more information on the selection of AML software, contact us at
mgerbick@younginc.com or 330.422.3482. And if your institution has AML software in place, please read the following article, AML Validation & Review, to learn more about how we can assist your financial institution in the validation and review of your existing AML software. Our BSA team is uniquely qualified to guide you through this often complicated and technical process, and we look forward to working with you to achieve your goals.

AML Validation & Review

Written by admin on . Posted in Compliance & Regulations, Information Technology, Uncategorized.

The increasing sophistication of Anti-Money Laundering/Combating the Funding of Terrorism (AML/CFT) software and modeling techniques and the broader application of these models have played an undeniable role in the enhanced effectiveness of AML/CFT programs in financial institutions.

The regulatory agencies are utilizing more analytical and statistical specialists in BSA examinations. Additionally, recent BSA examinations demonstrate that the de facto threshold for regulatory scrutiny of AML models continues to decrease. All AML models must follow the guidance of OCC Bulletin 2011-12 and the subsequent Interagency Statement on Model Risk Management for Bank Systems Supporting Bank Secrecy Act/Anti-Money Laundering Compliance (4/9/21), which outline the expectations for model risk management, especially the need for independent review and model validations.

Young & Associates can assist you with our AML Validation and Review.
Customized for your institution and as required by the regulators, our AML validation and review addresses:

  • Conceptual Soundness. We focus on the design, methodology, and construction of the model. This includes analysis and review of the model documentation, assumptions and limitations, data quality and completeness, and implementation
  • Ongoing Monitoring. We make sure that the model is working efficiently and as intended to meet your institution’s business objectives, and ensure that it is tailored to the institution’s Risk Assessment (AML Program Management). This includes model tuning and calibration, which is driven by several Key Performance Indicators (KPIs).
  • Outcomes Analysis. We examine the model’s output, including alerts generated from transaction monitoring, along with the supporting information used for investigation. Above-the-line and below-the-line testing is conducted to ensure that alerts are accurate and complete. Monitoring rules and parameters are also assessed.

Young & Associates collaborates with many of the AML software providers throughout the validation and review to make the process as seamless to your institution as possible.

Trusted Guidance in BSA/AML Compliance
Young & Associates provides an unmatched depth of practical expertise. Our BSA compliance team includes former banking executives, compliance regulators, and tenured finance professionals who hold the CAMS (Certified Anti-Money Laundering Specialist) designation. We’re uniquely qualified to understand and solve your challenges, because we have personally experienced those same issues. For more information on how we can assist you with your AML validation and review, contact us at mgerbick@younginc.com or 330.422.3482.

The UDAAP Hammer Drops

Written by admin on . Posted in Compliance & Regulations, Uncategorized.

By: William J. Showalter, CRCM, CRP, Senior Consultant

In our last issue, we discussed what UDAAP is and how to set up a program in your bank to avoid trouble in this important area. Our title admonished you, “Don’t Let UDAAP Spook You, Take Control.” If you have not yet taken control of UDAAP compliance, you may have been spooked by developments over the past 12 months or so. There have been three big UDAAP enforcement actions involving three financial service providers of all sizes during that time.

Background
Section 5 of the Federal Trade Commission (FTC) Act has been around for over 70 years and prohibits “unfair or deceptive acts or practices” (UDAP), the predecessor to UDAAP. Banking regulators have had the responsibility to enforce bank and thrift compliance with UDAP rules, while the FTC had the authority to interpret the statute and write any rules. The Federal Reserve Board (FRB) was given interpretive and rule-writing authority when this part of the FTC Act was amended in 1975 but continued largely to defer to the FTC.

Title X of the Dodd-Frank Act (DFA) codified UDAP law specifically for financial institutions, eliminated the FRB’s rule-writing authority, added an “abusive” standard, and moved rule-writing authority to the CFPB. The acronym became UDAAP – unfair, deceptive, or abusive acts or practices.

What are We Dealing With?
All these standards or characteristics are quite subjective. The elements of unfairness and deception have been established by statute, as well as interpretation over the years by the FTC in various enforcement actions and interpretive documents. The element of being abusive was established, in general terms, in statute by the DFA.

To be unfair, an act or practice must cause or be likely to cause substantial injury to consumers that the consumers cannot reasonably avoid or that is not outweighed by countervailing benefits. Substantial harm usually involves monetary harm, including a small monetary harm to each of a large number of consumers. A three-part test is used to determine whether a representation, omission, act, or practice is deceptive. First, the representation, omission, act, or practice must mislead or be likely to mislead the consumer. Second, the consumer’s interpretation of the deception must be reasonable under the circumstances. And, lastly, the misleading representation, omission, act, or practice must be material. “Material” means that it is likely to affect a consumer’s decision regarding a product or service. An abusive act or practice materially interferes with the ability of the consumer to understand a term or condition of a consumer financial product or service. Such an act or practice also includes one that takes unreasonable advantage of: the consumer’s lack of understanding of material risks, costs, or conditions of a product or service; the consumer’s inability to protect his interests in selecting or using a financial product or service; or the consumer’s reasonable reliance on the “covered person” (including a banker) to act in the interests of the consumer.

Recent UDAAP Enforcement Actions
In about the year 2000, banks first saw significant enforcement of UDAP (now UDAAP) from the banking agencies when the Office of the Comptroller of the Currency (OCC) took the lead. The OCC concluded that it had authority to address a violation of the FTC Act even regarding a challenged practice that was not specifically prohibited by regulation.

The three bank-related UDAAP enforcement actions to which we referred above are:

  • The Consumer Financial Protection Bureau (CFPB) issued a Consent Order to Discover Bank (Greenwood, DE) and two subsidiaries ordering Discover to pay at least $10 million in consumer redress and a civil money penalty (CMP) of $25 million for violating a 2015 CFPB Order, the Electronic Fund Transfer Act, and the Consumer Financial Protection Act of 2010. The 2015 Order was based on the CFPB’s finding that Discover misstated the minimum amounts due on billing statements as well as tax information consumers needed to get federal income tax benefits. The agency also found that Discover engaged in illegal debt collection practices. The 2015 Order required Discover to refund $16 million to consumers, pay a penalty, and fix its unlawful servicing and collection practices.
    However, more recently the CFPB found that Discover violated the 2015 order’s requirements in several ways – misrepresenting minimum loan payments owed, amount of interest paid, and other material information. Discover also did not provide all the consumer redress the 2015 Order required. In addition, the CFPB found that Discover engaged in unfair acts and practices by withdrawing payments from more than 17,000 consumers’ accounts without valid authorization and by cancelling or not withdrawing payments for more than 14,000 consumers without notifying them. The agency also found that Discover engaged in deceptive acts and practices in violation of the CFPA by misrepresenting to more than 100,000 consumers the minimum payment owed and to more than 8,000 consumers the amount of interest paid. Some consumers ended up paying more than they owed, others became late or delinquent because they could not pay the overstated amount, while others may have filed inaccurate tax returns
  • The Federal Deposit Insurance Corporation (FDIC) issued an order to Umpqua Bank (Roseburg, OR) that the bank pay a CMP of $1,800,000 following the FDIC’s determination that the bank engaged in violations of Section 5 of the Federal Trade Commission Act in the commercial finance and leasing products issued by its wholly owned subsidiary, Financial Pacific Leasing, Inc. According to the FDIC, these violations included engaging in deceptive and/or unfair practices related to certain collection fees and collection practices involving excessive or sequential calling, disclosure of debt information to nonborrowers, and failure to abide by requests to cease and desist continued collection calls.
  • The FDIC also issued an order to pay a CMP of $129,800 to Bank of England (England, AR). The bank consented to the order without admitting or denying the violations of law or regulation.
    The FDIC determined that the bank violated Section 5 of the Federal Trade Commission Act because bank loan officers located in the Bloomfield, MI loan production office (LPO) misrepresented to consumers that certain Veterans Administration (VA) refinance loan terms were available when they were not, and that the bank’s misrepresentations at the Bloomfield LPO regarding terms for VA refinancing loans were deceptive, in violation of Section 5.

How to Deal with These Issues
As we advised in our previous article, banks and thrifts should be proactive in addressing areas prone to UDAAP issues. You can anticipate potential problems by, in part, tracking enforcement actions as indicators of where regulators are looking for issues (and finding them).

The steps we spelled out to help in this proactive approach are:

  • Establish a positive compliance culture by positive words, actions, and attitudes from the top down.
  • Enforce compliance performance which, coupled with the overt support from the top, makes it clear to all that this is a crucial element in the success of the organization and any related individual rewards (bonuses, raises, promotions, etc.)
  • Involve compliance early in product design, marketing planning, and so forth.
  • Focus on vulnerable customers, including the young, less educated, immigrants, elderly, etc., within your community, paying particular attention to how your marketing, product recommendations, and disclosures are directed to such populations

It is much easier – and less expensive – to plan and lay appropriate groundwork to avoid problems than it is to repair damages after inappropriate and illegal actions blow up. The reactive approach can cause the bank immeasurable reputation harm, which is much more costly than any monetary penalties, and much more difficult to recover from.
For more information on how the Young & Associates compliance team can assist with your UDAAP compliance, contact us at mgerbick@younginc.com or 330-422-3482.

SAFE Act a Decade On

Written by admin on . Posted in Compliance & Regulations, Lending & Loan Review.

By: William J. Showalter, CRCM, CRP, Senior Consultant

We have been dealing with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) since 2010, and yet questions surface or confusion still exists over SAFE Act requirements.

“A loan clerk quotes loan rates from a non-public rate schedule, along with payment amounts for inquiring consumers. Should she be registered?” (Maybe, she is performing a function of a mortgage loan originator, MLO.)

“Our head of lending is our SAFE Act Officer. He also handles some mortgage loans, with his name on loan documents. However, his background is in commercial lending and he has never been registered with the NMLSR. Do we have a problem?” (Yes, if he is involved in more than five mortgage loans per year, he must be registered.)

“How often do we have to get criminal background checks for our MLOs? How about when their fingerprints expire?” (Criminal background checks are required only on initial registration. The fingerprint expiration date is only relevant for existing MLOs who are coming into the bank as new employees. No updating of fingerprints for ongoing MLOs is required.)

These queries reveal that confusion still exists over what the requirements are and how they impact banks and thrifts.

A Little Background

Congress enacted the SAFE Act in July 2008 to require states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators, and to provide for the establishment of a nationwide mortgage licensing system and registry for the residential mortgage industry.

The SAFE Act required all states to provide for a licensing and registration regime for mortgage loan originators who are not employed by federal agency-regulated institutions within one year of enactment (or two years for states whose legislatures meet biennially).

In addition, the SAFE Act required the federal banking agencies, through the Federal Financial Institutions Examination Council (FFIEC), and the Farm Credit Administration (FCA) to develop and maintain a system for registering mortgage loan originators employed by agency-regulated institutions.

The Dodd-Frank Act moved responsibility for the SAFE Act rules to the Consumer Financial Protection Bureau (CFPB), which rolled these rules into its Regulation G (12 CFR 1007).

Licensing vs. Registration

Most of the confusion at the outset seemed to center on the issue of licensing versus registration of mortgage loan originators (MLOs). The issue is really deceptively simple.

  • MLOs that work for federally supervised banks, thrifts, and credit unions (as well as FCA lenders) must register with the national registry (NMLSR).
  • MLOs employed by other mortgage lenders (mortgage companies, etc.) must navigate the state licensing and registry system, a much more time consuming, expensive, and burdensome process which also carries a continuing education requirement.

Coverage

A “mortgage loan originator” is an individual who both takes residential mortgage loan applications and offers or negotiates terms of a residential mortgage loan for compensation or gain.

The term “mortgage loan originator” does not include individuals that perform purely “administrative or clerical tasks” (the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry) and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan. Also excluded are individuals that perform only real estate brokerage activities and are duly licensed, individuals or entities solely involved in extensions of credit related to timeshare plans, employees engaged in loan modifications or assumptions, and employees engaged in mortgage loan servicing.

“Compensation or gain” includes salaries, commissions, other incentives, or any combination of these types of payments.

MLO Registration

An MLO must be federally registered if the individual is an employee of a depository institution, an employee of any subsidiary owned and controlled by a depository institution and regulated by a federal banking agency, or an employee of an institution regulated by the FCA.

The final rule, as required by the SAFE Act, prohibits an individual who is an employee of an agency-regulated institution from engaging in the business of a loan originator without registering as a loan originator with the national registry, maintaining that registration annually, and obtaining a unique identifier through the registry. Employer financial institutions must require adherence to this rule by their employee MLOs.

MLOs may submit their registration information individually or their employer institution may do it for them (by a non-MLO employee). The decision of which approach to take should be made by management to ensure consistency within the institution, especially since there is prescribed institution information that also must be submitted to the registry.

This MLO information must include financial services-related employment history for the 10 years before the date of registration or renewal, including the date the employee became an employee of the bank – not just the time they have worked for their current employer.

MLOs and their employers need to remember that registrations have to be renewed annually for as long as an individual operates as an MLO. The renewal period opens on November 1 and ends on December 31 each year. If an MLO or bank registration lapses, it may be reinstated during a reinstatement period that opens on January 2 and closes on February 28 each year.

Other Requirements

Bank and thrift managers also should remember that there are specific requirements in this rule for the institution to have policies and procedures to implement SAFE Act requirements, as well as regarding the use of a unique identifier (NMLS number) by MLOs.

At a minimum, the bank’s SAFE Act policies and procedures must:

  • Establish a process for identifying which employees have to be registered MLOs
  • Require that all employees who are MLOs are informed of the SAFE Act registration requirements and be instructed on how to comply with those requirements and procedures
  • Establish procedures to comply with the unique identifier requirements
  • Establish reasonable procedures for confirming the adequacy and accuracy of employee registrations, including updates and renewals, by comparisons with its own records
  • Establish reasonable procedures and tracking systems for monitoring compliance with registration and renewal requirements and procedures
  • Provide for independent testing for compliance with this part to be conducted at least annually by covered financial institution personnel or by an outside party
  • Provide for appropriate action in the case of any employee who fails to comply with SAFE Act registration requirements or the bank’s related policies and procedures, including prohibiting such employees from acting as MLOs or other appropriate disciplinary action
  • Establish a process for reviewing SAFE Act employee criminal history background reports, taking appropriate action consistent with applicable federal law, and maintaining records of these reports and actions taken with respect to applicable employees, and
  • Establish procedures designed to ensure that any third party with which the bank has arrangements related to mortgage loan origination has policies and procedures to comply with the SAFE Act, including appropriate licensing and/or registration of individuals acting as MLOs

The bank or thrift also must make the unique identifiers (NMLS numbers) of its registered MLOs available to consumers “in a manner and method practicable to the institution.” The bank has latitude in implementing this requirement. It may choose to make the identifiers available in one or more of the following ways:

  • Directing consumers to a listing of registered MLOs and their unique identifiers on its website
  • Posting this information prominently in a publicly accessible place, such as a branch office lobby or lending office reception area, and/or
  • Establishing a process to ensure that bank personnel provide the unique identifier of a registered MLO to consumers who request it from employees other than the MLO

In addition, a registered MLO must provide his or her unique identifier to a consumer:

  • Upon request
  • Before acting as a mortgage loan originator, and
  • Through the MLO’s initial written communication with a consumer, if any, whether on paper or electronically (often by incorporating it into the signature information for standard letter and e-mail formats)

Banks, thrifts, and their registered MLOs often also make their NMLS numbers available in other ways – such as including them in advertising or on business cards.

As with any compliance rule, banks and thrifts need to make sure that they have systems in place to ensure compliance with SAFE Act requirements, including appropriate training for employees involved in the mortgage origination process.

For information on how Young & Associates can assist your bank with the SAFE Act requirements, contact Dave Reno at 330.422.3455 and dreno@younginc.com.

Regulation B Interpretive Rule on Sexual Orientation and Gender Identity

Written by admin on . Posted in Compliance & Regulations, Lending & Loan Review, News.

March 2021

The Bureau of Consumer Financial Protection (Bureau) issued an interpretive rule to clarify that, with respect to any aspect of a credit transaction, the prohibition against sex discrimination in the Equal Credit Opportunity Act (ECOA) and Regulation B, which implements ECOA, encompasses sexual orientation discrimination and gender identity discrimination, including discrimination based on actual or perceived nonconformity with sex-based or gender-based stereotypes and discrimination based on an applicant’s associations.

The interpretive rule became effective upon publication in the <i>Federal Register</i>.

At Young &amp; Associates, we have been teaching for years that this is the correct approach. The reality is that an applicant’s sexual orientation or gender identity has absolutely nothing to do with whether they will be able to repay the loan. The focus of all bankers should be on the same things that are important in all credit decisions – cash, collateral, and credit. Nothing else really matters.

The Equal Credit Opportunity Act (ECOA) makes it “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction,” on several enumerated bases, including “on the basis of … sex …” Likewise, Regulation B prohibits a creditor from discriminating against an applicant on a prohibited basis (including “sex” ) “regarding any aspect of a credit transaction,” and from making “any oral or written statement to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application.”

Before this interpretive rule, twenty states and the District of Columbia prohibited discrimination on the bases of sexual orientation and/or gender identity either in all credit transactions or in certain (e.g., housing-related) credit transactions. This interpretive rule now makes this the new national standard. So financial institutions must recognize sexual orientation and/or gender identity to be protected classes and must incorporate practices that prohibit discrimination on these bases.

This interpretive rule addresses any regulatory uncertainty that may still exist under ECOA and Regulation B as to the term “sex” to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and communities and to ensure that consumers are protected from discrimination. It serves a stated purpose of Regulation B, which is to “promote the availability of credit to all creditworthy applicants without regard to … sex …”

As an interpretive rule, it is exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act.

To learn more about how we can assist your organization with your compliance efforts, contact Dave Reno, Director – Lending and Business Development, at dreno@younginc.com or 330.422.3455.

www.younginc.com
Email: dreno@younginc.com
Phone: 330.422. 3455

Managing Compliance

Written by admin on . Posted in Compliance & Regulations.

By: William J. Showalter, CRCM, CRP, Senior Consultant

We have been told repeatedly over the years that we need to manage compliance, just like all aspects of our business. This maxim is particularly true in today’s escalating compliance environment. There are so many new and changed rules that have been added to the mix over the past decade that we could easily be overwhelmed if we did not proactively manage the compliance process.

Over the years, supervisory agencies have shared general outlines of compliance management systems with the financial institutions they regulate. They have been quick to point out that there is no one “right” way to manage compliance, but that there are certain basic needs that must be met by any such program.

Compliance Management Systems
The Consumer Financial Protection Bureau (CFPB) and other agencies view compliance management as vital to the prevention of violations of federal consumer financial laws and the resulting harm to consumers. In its Supervisory Highlights publication, the CFPB spelled out its expectations for an effective compliance management system (CMS) – which mirror those from other supervisory agencies.

The CFPB states that it expects every entity it supervises (large financial institutions and nonbank financial firms) to have an effective CMS adapted to its business strategy and operations. According to the CFPB, a CMS is how a supervised entity:

  • Establishes its compliance responsibilities
  • Communicates those responsibilities to employees
  • Ensures that responsibilities for meeting legal requirements and internal policies are incorporated into business processes
  • Reviews operations to ensure responsibilities are carried out and legal requirements are met
  • Takes corrective action, and
  • Updates tools, systems, and materials, as necessary

No agency requires financial institutions to structure their CMS in any particular manner. They recognize the differences inherent in an industry comprised of banking organizations of different sizes, differing compliance profiles, and a wide range of consumer financial products and services. In addition, some financial firms outsource functions with consumer compliance-related responsibilities to service providers, requiring adaptations in their CMS structure.

However compliance is managed, financial entities are expected by all the federal supervisory agencies to structure their CMS in a manner sufficient to comply with federal consumer financial laws and appropriately address associated risks of harm to consumers.

CFPB Findings
The CFPB has found that the majority of banks it has examined have generally had adequate CMS structures. However, several institutions have lacked one or more of the components of an effective CMS, which creates an increased risk of noncompliance with federal consumer financial laws.

The most common weakness identified during CFPB reviews of banks’ CMS is a deficient system of periodic monitoring and independent compliance audits. The CFPB has noted that an effective CMS implements an effective internal compliance review program as an integral part of an overall risk management strategy. Such a program has two components – both periodic monitoring reviews and an independent compliance audit. These two types of controls are not interchangeable. They must be complementary.

The periodic monitoring reviews are more frequent and less intensive than the audits, focusing on areas that carry the most risk – where mistakes should not be allowed to go uncorrected too long. Monitoring is an ongoing process, conducted by either the individual business lines or the compliance officer/department on a relatively frequent basis, and allows the bank to self-check its processes and ensure day-to-day compliance with federal consumer financial laws.

The independent compliance audit is a review of all operations impacted by consumer laws. An audit is performed on a less frequent basis, usually annually, to ensure that compliance is ongoing, that the CMS as a whole is operating properly, and that the board is aware of consumer compliance issues noted as part of these independent reviews. Audits are best performed by an independent party – usually either an internal auditor or an outside consultant.

The CFPB notes that an entity lacking periodic monitoring increases its risk that violations and weaknesses will go undetected for long periods of time, potentially leading to multiple regulatory violations and increased consumer harm. Additionally, these entities increase the risk that:

  • Insufficiencies in the periodic monitoring process may not be identified
  • The board is not made aware of regulatory violations or program weaknesses, or
  • Practices or conduct by employees within the business lines or compliance department that are unfair, deceptive, abusive, discriminatory, or otherwise unlawful could go undetected

CMS Elements
Although the CFPB states that it does not require any specific CMS structure, it notes that supervisory experience has found that an effective CMS commonly has four interdependent control components, elements that have been advocated by all regulatory agencies over the years:

  • Board of directors and management oversight. An effective board of directors communicates clear expectations and adopts clear policy statements about consumer compliance for both the bank itself and its service providers. The board should establish a compliance function, allocating sufficient resources and qualified staffing to that function, commensurate with the entity’s size, organizational complexity, and risk profile. The board should ensure that the compliance function has the authority and accountability necessary to implement the compliance management program, with clear and visible support from senior management, as well. Management should ensure a strong compliance function and provide recurring reports of compliance risks, issues, and resolutions to the board or to a committee of the board.
  • Compliance program. The CFPB and other federal financial institutions supervisors expect supervised entities to establish a formal, written compliance program, generally administered by a chief compliance officer. A compliance program includes the following elements: policies and procedures, training, monitoring, and corrective action.

The agencies assert that a well-planned, implemented, and maintained compliance program will prevent or reduce regulatory violations, protect consumers from noncompliance and associated harms, decrease the costs and risks of litigation affecting revenues and operational focus, and help align business strategies with outcomes.

  • Consumer complaint management program. Financial service providers are expected to be responsive to complaints and inquiries received from consumers. In addition, financial institutions should monitor and analyze complaints to understand and correct weaknesses in their programs that could lead to consumer risks and violations of law.

Key elements of a consumer complaint management program include establishment of channels through which to receive consumer complaints and inquiries (e.g., telephone numbers or email addresses dedicated to receiving consumer complaints or inquiries); proper and timely resolution of all complaints; recordation, categorization, and analysis of complaints and inquiries; and reviews for possible violations of federal consumer financial laws.

The agencies expect financial firms to organize, retain, and analyze complaint data to identify trends, isolate areas of risk, and identify program weaknesses in their lines of business and overall CMS.

  • Independent compliance audit. A compliance audit program provides a board of directors or its designated committees with a determination of whether policies and standards are being implemented to provide for the level of compliance and consumer protection established by the board. As noted above, these audits should be conducted by a party independent of both the compliance program and the business functions. The audit results should be reported directly to the board or a board committee.

The agencies expect that the audit schedule and scope will be appropriate for the entity’s size, its consumer financial product offerings, and structure for offering these products. The compliance audit program should address compliance with all applicable federal consumer financial laws, and identify any significant gaps in policies and standards.

When all of these four control components are strong and well-coordinated, the CFPB states that a supervised entity should be successful at managing its compliance responsibilities and risks.

To learn more about Young & Associates, Inc. and how we can assist your organization in developing a strong Compliance Management System, visit our website, or contact Dave Reno, Director – Lending and Business Development.

www.younginc.com
Email: dreno@younginc.com
Phone: 330.422. 3455

About Young & Associates, Inc.
Young & Associates, Inc. has provided consulting, training, and practical products for community financial institutions for over 43 years. We strive to provide the most up-to-date solutions for our clients’ needs, while remaining true to our founding principles and goals – to ease the management of your organization, reduce the regulatory burden, improve your bottom line, and increase shareholder value.

 

 

Handle ARM Adjustments with Care

Written by admin on . Posted in Compliance & Regulations, Lending & Loan Review.

By William J. Showalter, CRCM, CRP, Senior Consultant

Adjustable-rate mortgages (ARM) have not been much of an issue for many banks and thrifts in recent years since fixed rates have been so low. But they are still an important tool for serving those customers who cannot meet the secondary market qualifications applied to most fixed-rate loans. And, many institutions have a portfolio of existing ARM loans that they service. One potential complication for some lenders is the impending discontinuance of the LIBOR index, requiring them to find another comparable index for their ARMs.

ARMs were in the spotlight over 10 years ago because of problems in the subprime market. Many subprime products have variable interest rates, which shift the interest rate risk from lender to borrower. Besides the issues raised then over putting borrowers into inappropriate products, there also are concerns over errors in ARM rate changes.

Do an internet search for “ARM errors” or similar terms and you will come up with numerous firms offering loan audit and information services to borrowers. These firms tell borrowers that their companies can correct ARM errors, bring loans into compliance, and get the borrower a mortgage refund.

Background

The initial furor over these mistakes arose over a report on ARM adjustment errors prepared by a former Federal Savings and Loan Insurance Corporation employee in 1989. His assertions sent a tremor through the mortgage industry. The report concluded that miscalculations in periodic adjustments to rates on ARM instruments resulted in significant overcharges. He found ARM adjustment errors in about 50 percent of the loans he sampled. From these results, he estimated the potential overcharges to be up to $15 billion for ARMs nationwide at the time. This figure has been estimated as high as $50-60 billion in recent years.

The controversy was further stoked by a study from the Government Accountability Office (GAO) released in September 1991 which found between 20 and 25 percent of the ARM loans at the time contained interest rate errors. Such errors occurred when the related mortgage servicer selected the incorrect index date, used an incorrect margin, or ignored interest rate change caps.

The damaging studies kept coming. In July 1994, Consumer Loan Advocates, a non-profit mortgage auditing firm announced that as many as 18 percent of ARMs had errors costing the borrower more than $5,000 in interest overcharges. And, another government study in December 1995 concluded that 50 to 60
percent of all ARMs contained an error regarding the variable interest rate charged to the homeowner. The study estimated the total amount of interest overcharged to borrowers was in excess of $8 billion. Inadequate computer programs, incorrect completion of documents, and calculation errors were cited as the major causes of interest rate overcharges.

Even though no other government studies have been conducted into ARM interest overcharges to date, the potential issue continues to simmer below the surface and lenders need to be vigilant so that it does not erupt into a veritable supervolcano of enforcement actions and lawsuits.

Types of Errors

The kinds of errors lenders are said to make in implementing ARM rate and payment adjustments run the gamut from calculation mistakes to carelessness, including:

  • Mistakes in original loan set up/data input
  • Miscalculation of payment amount
  • Improper allocation of payments between interest and principal (amortization)
  • Use of the wrong index
  • Selection of incorrect index value
  • Application of incorrect interest rate caps
  • Failure to adjust in some years
  • Use of incorrect margins
  • Improper rounding methods (e.g., rounding up instead of rounding to the nearest 1/8th of 1 percent)
  • Math mistakes causing an incorrect rate
  • Use of incorrect loan balance

Banking regulators point out that these errors may be considered breaches of contract and could expose the financial institution to legal action.

Extent of Errors

Since ARMs involve changing index values periodically and oftentimes complex computer calculations, they seem to attract human and software errors. Mortgage audit firms point out that leading publications such as The Wall Street Journal, MONEY, Forbes, and Newsweek have warned borrowers about miscalculations occurring in up to 50 percent of ARMs.

  • The firms get borrowers’ attention by pointing to figures of lender overcharges and borrower refunds like these:
  • Average borrower refund of over $1,500
  • 21 percent of refunds ranging from $3,500 to $10,000
  • 13 percent of errors exceeding $10,000

Reasons for Errors

The calculation of ARM rate changes is a complex process and errors can occur in a variety of ways. Add to this the fact that many lenders offer, and servicers support, a variety of ARM products with different rate adjustment intervals, indices, margins, and other terms. Another potential complicating factor is the widespread practice of transferring loan servicing, presenting another opportunity for human mistakes and software mismatches to cause errors.

In addition, some of the mortgage audit firms assert that ARM rate and payment adjustment errors have been linked to:

  • Lack of training, supervision, and experience of loan servicing personnel
  • Simple human error
  • Computer data entry or software errors
  • Clerical or calculation errors
  • Fraud
  • Sale or transfer of the loan to a different company
  • Rider, handwritten changes, or other irregularities in the note
  • Very complex calculations, use of an unusual index, or interest rate
  • Dissolution or merger of the original loan institution

How to Avoid These Problems

The federal banking supervisors began encouraging financial institutions back in 1991 to perform reviews of their adjustable-rate loan systems to ensure that interest rate information is correctly ascertained and administered, and that rates are adjusted properly.

Banks and thrifts should have effective internal controls and procedures in place to ensure that all adjustments are made according to the terms of the underlying contracts and that complete, timely, and accurate adjustment notices are provided to borrowers. Also, a system for the ongoing testing of adjustments should be in place to ensure that adjustments continue to be made correctly.

A critical component of any successful loan servicing program, including correctly implementing rate and payment adjustments, is a thorough training regime for lending personnel involved in the process. Those involved must be given the appropriate tools – including knowledge – to succeed in their jobs.

Any review of ARM adjustments should include documentation indicating the basis for interest rate adjustments made to a lender’s ARM loans, showing whether changes have been made consistent with the underlying contracts.

If a lender finds that it has made errors in the adjustments for interest rates which have resulted in interest overcharges on ARMs, the supervisory agencies expect that you will have in place a system to correct the overcharges and properly credit the borrower’s account for any interest overcharges. In general, undercharges cannot be collected from borrowers.

Young & Associates, Inc. offers a variety of compliance management and review services that are proven effective for institutions of all types and sizes. For more information on this topic or how Young & Associates, Inc. can assist your institution, contact Bill Showalter at wshowalter@younginc.com or 330.422.3473.

Written by admin on . Posted in Compliance & Regulations.

By: Bill Elliott, CRCM, Senior Consultant and Director of Compliance Education, and William J. Showalter, CRCM, CRP, Senior Consultant

For years banks have had pandemic policies, and have done some level of testing, but never really thought the day would come when it would represent more than another examiner-required policy. Then came COVID-19, and in a matter of days, the world changed.

Managing Bank Policies and Procedures

When we teach in live seminars, we always ask, How many of you believe that your policies are up to date? That always gets some hands, but not 100 percent of attendees. Then we ask, How many of you believe that your procedures are up to date? Seldom does anyone raise their hand. These two situations are revealing.

Keeping policies current is the easier of the two. But many banks rubber stamp policies that could be much more effective. If it is a Regulation B policy, it usually follows the regulation and indicates that the bank intends to comply. That is fine for that type of policy. But other policies, notably operations and loan policies, need to do more than restate a regulation they need to be a document that can be read and used. And, a pandemic policy needs to cover a wide range of subjects and issues.

It might be time to review these types of policies and add significant language as to how you will address situations such as we have experienced lobbies closed or restricted, limited staff, staff working from home, and the same job to be completed. At a minimum, these policies should address:

How jobs are done in an off-site world

How electronic solutions are to be used

Safeguards that must be used to protect customer data

What types of paper documents can be used at home by staff working off site

Proper disposal and the safekeeping of any documents that are off site

Other protections, such as how the computers being used at home are protected from intrusion

With a little brainstorming, we are sure that you can add to this list.

Procedures are more difficult to maintain. A consultant from our company was recently in a bank and was examining procedures. Most of the procedures could be summed up as Bill takes care of that. As long as Bill is there, things probably work well. But if Bill is out sick, is working from home, on vacation, or no longer there, how does someone accomplish the task?

Procedures are always changing. It is far too easy to tell the three people that need to know about the change and then make a mental note to update the procedures someday. That elusive someday often never materializes. We believe that each bank should have a formal procedures review at least annually, and for some areas, maybe more often. For many banks, the inadequate procedure manuals that they have will not offer sufficient information for anyone to complete a task correctly. And with the staff more scattered, this can really complicate the situation.

The Future

Many banks have switched to imaging all files and documents. The banks that have made that decision generally are in a little better shape for off-site work, as it is easier to send employees home and still get the work done in a timely manner. If your bank has not made the transition to electronic files, this may be your cue to consider the advantages of this technology. We have talked to numerous banks recently that in the past have said NEVER to imaging only to discover that never may not have been the right answer.

As the world becomes more electronic, and the cost of maintaining offices and buildings continues to increase, this may also be a time to reconsider the locations from which employees work. This may be especially critical if your brick and mortar buildings are getting close to capacity. Many tasks, with the right policies, procedures, equipment, and software, can easily be done from home, saving wear and tear on your building, perhaps reducing occupancy costs, and maybe, as a side benefit, resulting in happier and more productive employees.

Of course, everyone working from home is not going to be effective for banks. But it can be a great tool. For instance, you have a long-term excellent employee who does a job that could be done from home. While they are currently working in the office, their spouse gets transferred 300 miles away. In the past, that probably meant a resignation. But, properly managed, there may be no reason why you could not retain that employee by just letting them work from home even if that home is not local.

The authors of this article are most aware of compliance officers. Over the last several years, we have seen more and more situations where compliance officers work from home, with some compliance officers going south for the winter and continue to work remotely, etc. In our company, none of our compliance consultants work in our office, even in normal times.

Conclusion

So we encourage you to reimagine the bank to the extent possible. Face-to-face customer contact employees need to be local, but much or the rest of the staff may not really need to be in the building, at least not every day. We encourage you to use this mind set for the future and let it help your bank thrive.

For more information, contact Bill Elliott, Director of Compliance Education, at bille@younginc.com or 330.422.3450, or William Showalter at wshowalter@younginc.com or 330.422.3473.

Off-Site Reviews, Virtual/Teleconference Training, and Management Consulting Support

Written by admin on . Posted in Compliance & Regulations, Information Technology, Lending & Loan Review, Management & Planning.

Young & Associates, Inc. remains committed to keeping our employees, clients, and partners safe and healthy during the COVID-19 pandemic. During this difficult and unprecedented time, we have continued to successfully leverage technology to fulfill our commitments to our clients and partners through secure remote access for reviews, virtual/teleconference training, and other management consulting support.

Young &Associates’ commitment to virtual/teleconference training and remote access reviews date back well over five years. We see this ability as a win-win for everyone – the review and training get completed in a timely manner and the bank avoids paying any travel expenses. Concerned about security, please be assured that we use the latest secure technology.

We remain committed to helping our clients with all areas of their operations through off-site reviews and providing the most current regulatory updates through our virtual/teleconferencing training.

Contact one of our consultants today for more information about our off-site reviews or virtual/teleconferencing training:

Bill Elliott, Director of Compliance Education:
bille@younginc.com or 330.422.3450

Karen Clower, Director of Compliance:
kclower@younginc.com or 330.422.3444

Martina Dowidchuk, Director of Management Services:
mdowidchuk@younginc.com or 330.422.3449

Bob Viering, Director of Lending:
bviering@younginc.com or 330.422.3476

Kyle Curtis, Director of Lending Services:
kcurtis@younginc.com or 330.422.3445

Aaron Lewis, Director of Lending Education:
alewis@younginc.com or 330.422.3466

Dave Reno, Director – Lending and Business Development:
dreno@younginc.com or 330.422.3455

Ollie Sutherin, Manager of Secondary Market QC Services:
osutherin@younginc.com or 330.422.3453

Jeanette McKeever, Director of Internal Audit:
jmckeever@younginc.com or 330.422.3468

Mike Detrow: Director of Information Technology Audit/Information Technology:
mdetrow@younginc.com or 330.422.3447

Young & Associates, Inc.’s consultants provide a level of expertise gathered over 42 years. In our consulting engagements, we closely monitor the regulatory environment and best practices in the industry, develop customized solutions for our clients’ needs, and prepare detailed and timely audit reports to ease implementation moving forward. With backgrounds and experience in virtually all areas of the financial services industry, our consultants bring a broad knowledge base to each client relationship. Many of our consultants and trainers have come to the company directly from positions in financial institutions or regulatory agencies where they worked to resolve many of the issues that our clients face daily.

We look forward to working with you as you work to obtain your goals in 2021 and beyond.

Dealing with Pandemic Disruption

Written by admin on . Posted in Compliance & Regulations.

By: Bill Elliot, CRCM, Director of Compliance Education, and William J. Showalter, CRCM, CRP, Senior Consultant, Young & Associates, Inc., Kent, Ohio

For years banks have had pandemic policies, and have done some level of testing, but never really thought the day would come when it would represent more than another examiner-required policy. Then came COVID-19, and in a matter of days, our world changed.

Managing Bank Policies and Procedures
When we teach in live seminars, we always ask, “How many of you believe that your policies are up to date?” That always gets some hands, but not 100 percent of attendees. Then we ask, “How many of you believe that your procedures are up to date?” Seldom does anyone raise their hand. These two situations are revealing.

Keeping policies current is the easier of the two. But many banks rubber stamp policies that could be much more effective. If it is a Regulation B policy, it usually follows the regulation and indicates that the bank intends to comply. But other policies, notably operations and loan policies, need to do more than restate a regulation – they need to be a document that can be read and used. And, a pandemic policy needs to cover a wide range of subjects and issues.

Given the current situation, it might be time to review these types of policies and add significant language as to how you will address situations such as we have now – lobbies closed or restricted, limited staff, staff working from home, and the same job to be completed. At a minimum, these policies should address:

  • How jobs are done in an off-site world
  • How electronic solutions are to be used
  • Safeguards that must be used to protect customer data
  • What types of paper documents can be used “at home” by staff working off site
  • Proper disposal and the safekeeping of any documents that are off site, and
  • Other protections, such as how the computers being used at home are protected from intrusion

With a little brainstorming, we are sure that you can add to this list.

Procedures are more difficult to maintain. A consultant from our company was recently in a bank and was examining procedures. Most of the procedures could be summed up as “Bill takes care of that.” As long as Bill is there, things probably work well. But if Bill is out sick, on vacation, or no longer there, how does someone accomplish the task?

Procedures are always changing. It is far too easy to tell the three people that need to know about the change and then make a mental note to “update the procedures someday.” That elusive “someday” often never materializes. We believe that each bank should have a formal procedures review at least annually, and for some areas, maybe more often. For many banks, the inadequate procedure manuals that they have will not offer sufficient information for anyone to complete a task correctly.

Many banks have switched to imaging all files. The banks that have made that decision generally are in a little better shape for off-site work, as it is easier to send employees home and still get the work done in a timely manner. If your bank has not made the transition to electronic files, this may be your cue to consider the advantages of this technology.

As the world becomes more electronic, and the cost of maintaining offices and buildings continues to increase, this may also be a time to reconsider the locations from which employees work. This may be especially critical if your brick and mortar buildings are getting close to capacity. Many tasks, with the right equipment and software, can easily be done from home, saving wear and tear on your building, perhaps reducing occupancy costs, and maybe, as a side benefit, resulting in happier and more productive employees.

Regulators and COVID-19 Loan Modifications
On March 22, 2020, all of the prudential banking regulators, along with other agencies, released the
Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. The full text can be found on many websites, however, the Federal Deposit Insurance Corporation (FDIC) has it at:

https://www.fdic.gov/news/news/press/2020/pr20038a.pdf

The document states, “The agencies understand that this unique and evolving situation could pose temporary business disruptions and challenges that affect banks…businesses, borrowers, and the economy. The agencies encourage financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19. The agencies view loan modification programs as positive actions that can mitigate adverse effects on borrowers due to COVID-19. The agencies will not criticize institutions for working with borrowers and will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings (TDRs).”

The agencies also offered comments on the issue of TDRs. They state that, “Modifications of loan terms do not automatically result in TDRs…The agencies have confirmed with staff of the Financial Accounting Standards Board (FASB) that short-term modifications made on a good faith basis in response to COVID- 19 to borrowers who were current prior to any relief, are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.”

Many banks have in place or are considering modifications to meet the needs of their customer base. It would appear that the regulators are going to react positively, provided the actions of the bank are reasonable and logical. The pronouncement states, “The agencies’ examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected by COVID-19, including those considered TDRs. Regardless of whether modifications result in loans that are considered TDRs or are adversely classified, agency examiners will not criticize prudent efforts to modify the terms on existing loans to affected customers.”

The pronouncement also discusses Past Due Reporting, Nonaccrual Status and Charge-offs, and Discount Window Eligibility. You should consult the Interagency Statement for details.

When implementing your program to deal with this crisis, compliance cannot be ignored. Regulations that need to be considered include:

  • Regulation B (Equal Credit Opportunity Act) – This applies to both consumer and commercial loans.
  • Flood insurance regulations – If you extend maturity dates, a new determination may be required. This also applies to both consumer and commercial loans.
  • Regulation O (Loans to Insiders) – If anyone who is an “insider” is requesting payment or other forms of relief.
  • Regulation X (Real Estate Settlement Procedures Act) – You need to consider the impact of non-payment into required escrow accounts.

CRA Credit Possible
The Community Reinvestment Act (CRA), in part, requires banks to take good care of the credit needs in their communities. Keeping good records of exactly what you did during this crisis could certainly be shared with your CRA examiners at your next CRA examination. While it may not directly impact the examination, remember that the CRA rating is at least partly based on their opinion of your bank.

The FDIC, Federal Reserve Board (FRB), and Office of the Comptroller of the Currency (OCC) issued a Joint Statement on March 19 stating that the agencies will favorably consider retail banking services and retail lending activities in a financial institution’s assessment area(s) that are responsive to the needs of low- and moderate-income (LMI) individuals, small businesses, and small farms affected by COVID-19 and that are consistent with safe and sound banking practices. The agencies emphasize that prudent efforts to modify the terms on new or existing loans for affected LMI customers, small businesses, and small farms will receive CRA consideration and not be subject to examiner criticism.

Impact of Accommodating Distressed Customers
There will be long-term consequences for any decision you make to alter a contract. For instance, if you allow a customer to skip a payment completely and do not change the maturity date, you will have a balloon at maturity. And since interest continues to accrue for that extra month(s), the principal/interest calculation will likely not be quite correct. So even if you do extend a maturity date, you may have a balloon simply because of the principal and interest calculation.

Having that discussion with your customer now seems preferable to fighting about it in a few years. The only real solution to assure that the loan amortizes correctly is to do the analysis to determine what payment amount will be required to avoid a balloon. And even then, things may still go awry at maturity.

Future Developments
As with many things today, this whole issue continues to evolve. The agencies had planned to present a webinar on this interagency statement on March 27, but have postponed it as of this writing. Keep on the lookout for further word from the agencies on when this will be available.

There is also a Frequently Asked Questions (FAQ) document available at https://www.fdic.gov/coronavirus/faq-fi.pdf, to provide some clarification regarding the interagency statement.

Conclusion
We hope that this article helps you to address these issues. We encourage you to consider what your situation will be post-crisis, as it will likely have lasting impacts on your bank. Try to assure that the lasting impacts are positive, as we all learn from the experience how to handle future disruptions (should they occur) with even more professionalism.

Assessing your Compliance Training

Written by admin on . Posted in Compliance & Regulations.

By: Bill Elliott, CRCM, Director of Compliance Education

Last fall, the Consumer Financial Protection Bureau (CFPB) updated their Regulatory Agenda for the next few months. As has been the reality for a while, there does not seem to be any particular rush to accomplish many final rules. The Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCP Act) was signed into law in May 2018. In that law, there are a number of required changes that should be fairly easy to implement – if the CFPB would just do so. But in the short term, there appears little likelihood that the changes dictated by the law (or many other changes) will be placed into regulation. But change is still in our future – it is just a question of the timing.

Part of the problem is the regulatory process. Although all banks are not subject to the Home Mortgage Disclosure Act, it is an excellent example. The “new version” of Regulation C was published as a final rule, effective January 2018. Before the 2018 date, the CFPB changed the regulation. With the passage of the EFRRCP Act, many of the new required fields were eliminated for smaller reporters. Although a fairly simple series of changes were necessary, many months passed before the regulation was updated (October 2019). And when those changes were made final, there were still some outstanding issues in HMDA that needed to be addressed, and remain open at this writing. So even with all the changes, it is not “final” yet. The latest Small Entity Guide for HMDA (which will have to be modified again) is Version 4.

This complicates the life of any bank, regardless of size. When the regulatory process is poor and disjointed, it makes training and implementation more difficult. But the reality is that regardless of how confusing the regulatory process is, banks still have to comply.
Training is a necessary expense, as a failure to train, especially when things are in flux, opens the bank to regulatory scrutiny and/or fines for non-compliance. And keeping your policies and procedures current with the latest changes is always a challenge.

Banks should assess how information is disseminated throughout the bank as these changes occur to assure that training dollars are spent effectively. And the time to assess is now, while things are relatively “calm.” Many banks have delegated training to electronic or web-based systems, and there are many good choices available. But, because of the nature of this type of training, they focus on the facts and requirements, but usually do not include information on what to expect of your employees, or the implementation strategies of your bank. Be wary of buying a training system and then assuming all your training needs are met.

We do not market electronic or web-based systems. But Young & Associates, Inc. offers a wide variety of personalized training opportunities, including:

  • Live seminars with some of our state association partners
  • Live in-bank training
  • Conference calls
  • Private webinars
  • Virtual Compliance Consultant program, which includes a monthly telephone call that can be used for compliance support and/or training sessions as well as policy support, and any other personalized training that you may need

In this period of relative quiet, take this time to assess your training methods and your training needs for the future. Eventually the regulators will begin to issue more regulation, and Young & Associates, Inc. stands ready to assist. To discuss how we can help, please contact Karen Clower at 330.422.3444 or kclower@younginc.com.

Connect with a Consultant

Contact us to learn more about our consulting services and how we can add value to your financial institution

Ask a Question