Compliance Outlook: 2018

February 28, 2018

By: Bill Elliott, CRCM, Manager of Compliance Services

For those of us who are news junkies, the current environment is interesting. Unfortunately, the environment is also so toxic that it is difficult to determine what actually may or may not happen during 2018.

We do know that some items that are being considered. For instance, bills are pending regarding issues like HMDA, flood, qualified mortgages, and call reports for smaller institutions. It remains to be seen whether any of these bills (or any of the other bills pending) actually will become law, or whether Congress will continue the infighting that has resulted in a haphazard and uncertain regulatory and law environment.

Home Mortgage Disclosure Act (HMDA)
Based on the questions we have received at Young and Associates, Inc., it would appear that that the 2018 HMDA implementation (so far) is going fairly well. However, we have received numerous questions regarding issues that were not addressed directly in the “HMDA Instructions.” This is not new or surprising, as not every situation can be covered in a rule as massive as HMDA.

For HMDA, as with every other new/updated regulation, preparation was the key. The regulatory world is getting so complicated that it is necessary for banks to really consider all processes and procedures to avoid either duplication of work or unnecessary work.

Customer Due Diligence
Speaking of duplication and unnecessary work, one of the items that must be addressed quickly is the new Customer Due Diligence rule under the Bank Secrecy Act, effective May 11, 2018. While many regulations can be handled by only one division of the bank, this regulation will impact almost everyone, as it requires updates regarding the ownership of a business every time a new account is opened. Accounts can be loans, deposits, safe deposit boxes, or any other kind of account that you may offer. It will require the customer to inform you of all individuals who own at least 25% of the business, as well as indicating a control person for the business.

For new loans, this will most likely be an inconvenience, although driver’s licenses and/or other methods of identification will be required every time a new commercial loan to a business with at least one 25% or more owner (LLC, partnership, corporation, etc.) is opened.

For deposits or other account types, this may mean what is now a 30-minute procedure to open a new account will become a multi-day ordeal, as the person opening the account may well not be the only owner, and certainly will not have identification information for all 25% owners and control persons with them (including identification). The only saving grace is that every financial institution will have to deal with this issue, so there will be no competitive advantage or disadvantage. With a May time limit, if your institution has not started the implementation process, time is running short.

Consumer Protection
As you well know, there has been a change in the administration of the Consumer Financial Protection Bureau (CFPB). With Mr. Cordray’s recent exit from the agency, it is likely that’s the CFPB will consider new approaches to the issue of consumer protection. To this end, the CFPB has announced steps to request information from the public and review how things are done, how they actually impact or help the consumer, and how they impact and create costs for the industry.

Some of the requests will be more useful than others. The first request to be issued by the CFPB will seek public comment on Civil Investigative Demands (CIDs), which are issued during an enforcement investigation. Comments received in response to this RFI and all others that follow will help the Bureau evaluate the existing framework and determine whether any changes are warranted. Make sure you are part of the process by commenting or otherwise making your voice heard.

If we can offer you training, implementation assistance, or any other compliance related service, please contact Karen Clower, Compliance Operations Manager, at [email protected] or 330.422.3444.

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