Transcript Compliance hot topics - Utah's Credit Unions

COMPLIANCE HOT
TOPICS
What The
Board Needs
to Know
STILL A LOT
TO DO
LATELY, COMPLIANCE FEELS LIKE THIS . .
..
IMPLEMENTED DURING 2010
 New RESPA Disclosures
 New Credit Card Disclosures, Processing Rules and Fee
Restrictions
 Shorter Allowable Hold Periods on Deposits
 New Overdraft Opt-in, Disclosures and Restrictions
 Overhaul of Open-end Credit Reg Z Disclosures
 New Uniform Privacy Disclosures
IMPLEMENTED DURING 2011
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New Risk-Based Pricing Notices
New Closed-End Mortgage Reg Z Disclosures
New Mortgage Loan Of ficer Compensation Rules
SAFE Act Registration
Financial Literacy Requirements (Federal Credit Unions)
COMING UP SOON
 Changes to Online Banking Authentication Systems
 Consumer Financial Protection Bureau
BOARD RESPONSIBILIT Y FOR
COMPLIANCE
BOARD RESPONSIBILITIES
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Board Support
Resources
Approve Policy and Programs
Review Status Reports
KEY CURRENT ISSUES
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CARD Act
Overdraft Protection Opt -in
Reg Z Open-End Disclosures
Mortgage Disclosures
Loan Of ficer Compensation
SAFE Act Registration
Financial Literacy Training
Vendor Due Diligence
Flood Insurance
Bank Secrecy Act
Online Banking Authentication Systems
Consumer Financial Protection Bureau
CARD ACT
Ru l e o f T h u m b :
A ny t i me a
r e g u l a t io n
m a ke s i t i n to
m a i n s t r e am
n ew s m e d i a ,
it’s a big deal.
CARD ACT
 Prohibitions on raising interest rates on existing balances
(except for variable rate cards and some penalty rates)
 Elimination of a floor on variable rate cards
 New periodic statement disclosures
 Payment due dates on the same day every month
 Opt-in for over-the-limit fees
 New rules for card issuance to members under 21
 Card agreements posted on the credit union’s website
 Six month rate increase reviews
 Fee restrictions
OVERDRAF
T OPT-IN
Fe e I n c o m e :
An endangered
species
OVERDRAFT OPT-IN
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Applies to one-time debit card and ATM transactions only
Member must opt-in for service
Regulatory mandated disclosure
Credit Union confirmation required
No discrimination against members who do not opt -in
REG Z OPENEND LOAN
DISCLOSURES
A major
o v e r h a ul . . . .
REG Z OPEN-END LOAN DISCLOSURES
 New disclosures for applications and solicitations (applies to
credit cards only)
 New account opening disclosures
 New periodic statement disclosures
 New change-in-terms notifications
 New underwriting and procedural changes for credit unions
that of fer Multi-feature Open-ended Lending (MFOEL)
MORTGAGE
DISCLOSURES
More important
t h a n ev e r . . . .
MORTGAGE DISCLOSURES
 RESPA:
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New standardized Good Faith Estimate
Changes to HUD-1 Settlement Statement
Comparison of fees disclosed on both documents
Limitation on the amount fees can change from application to closing
 Regulation Z TIL Statement Changes:
 New payment disclosures
 Statement that the borrower may not be able to refinance
LOAN
OFFICER
COMPENSATION
The end of
yield-spread
p r e m i um s .
LOAN OFFICER COMPENSATION
 Applies to compensation related to the origination of
mortgage loans.
 Prohibits any loan originator or mortgage broker
compensation based on the terms or conditions of the
transaction other than the amount of credit extended.
 Prohibits payment of compensation by any other party if the
consumer is directly compensating the loan originator.
 Prohibits loan originators from steering applicants to loan
products based on the fact that the loan of ficer will receive
greater compensation for the loan.
SAFE ACT
RE G ISTRATION
Yo u c a n ’ t m a ke
mortgage loans
w i t h o ut i t . . .
SAFE ACT REGISTRATION
 All Mortgage Loan Originators (MLOs) should have been
registered by July 29, 2011 .
 After the registration deadline MLOs cannot originate
mortgage loans without their identification number.
 The Board must approve a written SAFE Act Policy.
 All newly hired MLOs must be registered before acting as an
MLO.
FINANCIAL
LITERACY
TRAINING
Re q u i r em e n t
f o r Fe d e r a l
Credit Unions
O n l y.
FINANCIAL LITERACY TRAINING
 Directors must have the following financial skills:
 Working familiarity with basic finance and accounting practices
 Ability to read and understand the credit union’s balance sheet and
income statement
 Ability to ask substantive questions of management and auditors
 Level of financial knowledge should be consistent with the
size and complexity of the credit union.
 Directors appointed prior to January 27, 2011 should have
acquire necessary skills by July 27, 2011 .
 Directors appointed after January 27, 2011 will need to
acquired necessary skills within six months of their
appointment.
VENDOR
DUE
DILIGENCE
D o yo u r e a l l y
k n o w yo u r
vendors?
VENDOR DUE DILIGENCE
 Third party arrangements should be evaluated for possible
risks and managed in a manner commensurate with the credit
union’s size, complexity and risk profile.
 Credit Union management should complete the following
tasks:
 Risk Assessment and Planning
 Due Diligence
 Risk Measurement, Monitoring and Controls
 A plan should be in place to evaluate all new vendors, monitor
existing relationships and manage risk.
FLOOD
INSURANCE
Yo u n ev e r t h i n k
about it until
i t ’ s to o l a te .
FLOOD INSURANCE
 Large fines are possible
 Credit Unions must do the following:
 Determine the flood zone of all real property securing a loan each
time the credit union makes, increases, extends or renews a loan
 Notify property owners in flood zones of insurance requirements
within a reasonable time (10 days) prior to consummation
 Ensure adequate flood insurance is in place prior to consummation
 Track insurance coverage through the life of the loan
 Force place insurance when necessary
BANK
SECRECY
ACT
An oldie, but a
g o o d ie . . . .
BSA PROGRAM REQUIREMENTS
 Independent testing of BSA compliance.
 A specifically designated person or persons
responsible for managing BSA compliance (BSA
compliance officer).
 Training for appropriate personnel.
 A system of internal controls to ensure ongoing
compliance.
BSA BOARD RESPONSIBILITIES
•Approve the BSA Program annually
•Appoint a BSA Of ficer
•Review the BSA Risk Assessment as applicable
•Review periodic BSA program updates
•Ensure BSA of ficer has adequate staf fing and resources
•Review reports of filed Suspicious Activity Reports
•Champion policy and procedure
ONLINE
BANKING
AUTHENTICATION
Changing
r e q u i r em e n t s
for a changing
world.
UPDATED ONLINE BANKING
AUTHENTICATION SYSTEMS
 Changes should be completed by January 1 , 2012.
 Required by the supplement to the FFIEC’s “Authentication in an
Internet Banking Environment.”
 Examiner expectations include:
 Risk Assessments (updated at least every 12 months or as membership,
products, services, or on-line threats change)
 Increased authentication for higher risk transactions (member initiated
ACH withdrawals, business accounts)
 Implementation of layered security for online banking
 Re-evaluation of authentication techniques (username/password/cookie
and simple challenge questions will no longer be considered adequate)
 Member Awareness and Education Program
 Assistance and cooperation from your online banking provider is
critical. Status updates should be provided to the board.
CFPB
Still a lot of
unknowns . . .
CONSUMER FINANCIAL PROTECTION
BUREAU
 Direct examination authority only for financial institutions
with $10 billion or more in assets.
 The Bureau has rulemaking authority for many consumer
protection regulations.
 The Bureau can go on joint examinations with the NCUA if
there is practice the NCUA is concerned about.
 Even beneficial changes mean more work for credit unions:
 New forms
 New procedures
 New training
Heather Line
Compliance Specialist
Utah Credit Union Association
801-599-2168
[email protected]
THANK YOU