Agencies Issue Overdraft Guidance

The FDIC and OCC issued supervisory guidance on consumer compliance risks associated with bank overdraft protection programs.

 

Authorize Positive, Settle Negative: Both agencies address “authorize positive, settle negative” transactions, in which institutions assess overdraft fees on a transaction that was authorized against a positive balance but settled against a negative balance. The agencies say these transactions are unfair, cannot be reasonably avoided by the consumer, and pose risks of violating Section 5 of the Federal Trade Commission Act.

 

Re-presentment Fees: The OCC guidance also addresses re-presentment fees, in which institutions charge disclosed non-sufficient-funds fees for the same transaction when a merchant re-presents an ACH payment or check more than once after the transaction has been declined. The OCC guidance says disclosures may be deceptive if they do not clearly explain that multiple or additional fees may result from multiple presentments of the same transaction, while bank practices may also be unfair under Section 5 if consumers cannot reasonably avoid harm.

FDIC Supervisory Guidance on Multiple Re-Presentment NSF Fees

OCC Guidance on Overdraft Protection Programs

CFPB: Methodology for Determining Average Prime Offer Rates

The Consumer Financial Protection Bureau (CFPB) announced a revised version of its “Methodology for Determining Average Prime Offer Rates.” The revised methodology describes the calculations used to determine average prime offer rates (APOR) for purposes of federal mortgage rules. APORs are annual percentage rates derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage loans that have low-risk pricing characteristics.

The methodology statement has been revised to address the upcoming unavailability of certain data the CFPB previously relied on to calculate APORs. On or after April 21, 2023, the CFPB began using ICE Mortgage Technology data and the CFPB’s revised methodology to calculate APORs.

Notice of Availability of Revised Methodology for Determining Average Prime Offer Rates

Methodology for Determing Average Prime Offer Rates

Small Business Review Panel for Personal Financial Data Rights Rulemaking

In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed the Consumer Financial Protection Bureau (CFPB) to adopt regulations governing consumers’ rights to access certain financial information. Section 1033 generally requires a covered person to make available to a consumer, upon request, information in the control or possession of the covered person concerning the consumer financial product or service that the consumer obtained from such covered person. The information must be made available in an electronic form usable by consumers.

The CFPB is now in the process of writing regulations to implement section 1033. Under the process established by Congress in the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), the CFPB is required to obtain feedback on the potential impacts of the proposals the CFPB is considering from representatives of small entities likely to be directly affected. For additional materials, see:

https://www.consumerfinance.gov/personal-financial-data-rights/

https://www.consumerfinance.gov/rules-policy/small-business-review-panels/

https://www.consumerfinance.gov/rules-policy/small-business-review-panels/small-business-review-panel-for-personal-financial-data-rights-rulemaking/

https://files.consumerfinance.gov/f/documents/cfpb_1033-data-rights-rule-sbrefa-panel-report_2023-03.pdf

What's New: IRA Changes for 2023 and Beyond

On December 29, 2022, the Consolidated Appropriations Act of 2023 (HR 2617) was signed into law. The Act includes important provisions affecting retirement savings plans which are intended to build upon the 2019 SECURE Act. These provisions, collectively referred to as SECURE 2.0, offer many new benefits to employers and employees which are designed to make it more attractive for employers to offer retirement plans and to improve retirement outcomes for employees.

The topics below are linked to updated sections of The Gold Book: 

RMD age increased to 73

RMD Penalty Reduced

Expanded Penalty Exceptions

Qualified Charitable Distribution Expansion

529 Rollovers to Roth IRAs

QLAC Premium Increases

Savers Credit Replaced by Savers Match

What's New? New NYS Check Cashing Law

Effective March 30, 2023 new Banking Law Section 9-Z requires New York State chartered financial institutions to cash certain checks drawn on the institution if certain conditions are met. Read more here in The Gold Book.

What's New? Re-Presentment Fees

FDIC released guidance on charging multiple NSF (Non-Sufficient Fund) fees on re-presented items — a topic that has generated questions from a number of financial institutions. Read more in The Gold Book here.

What's New? Digital Banking

Digital banking poses many opportunities as well as threats to the financial industry. As the digital economy continues to evolve, cybersecurity is increasingly a serious concern. Utilizing methods and procedures created to safeguard data is essential for a successful digital revolution. The effectiveness of cybersecurity in banks influences the safety of personal information, whether it be an unintentional breach or a well-planned cyberattack. 

Accordingly, Electronic Banking section of The Gold Book has been renamed Digital Banking and includes sections addressing cybersecurity, virtual currency. Click here to go to the Digital Banking chapter.

What's New? DFS Removes Mandatory Two-Week Absence Requirement

New York State Department of Financial Services (DFS) has provided new guidance effective immediately to update and replace guidance issued by the New York State Banking Department in 1996 addressing Vacation Policy as an Internal Control Safeguard. Read more under NYS Vacation Policy in the Human Resources chapter of The Gold Book

Fee Practices: UDAAP Violations

The CFPB has issued new guidance for “junk fee” practices by banks that are likely to violate the prohibition against unfair, deceptive, and abusive acts or practices (“UDAAP”) in Section 1036 of the Consumer Financial Protection Act (“CFPA”). The CFPB’s Consumer Financial Protection Circular 2022-06, published on October 26, discusses how unanticipated overdraft fee assessment practices may violate the CFPA. According to the circular, overdraft fees assessed by banks on transactions that a consumer would not reasonably anticipate likely constitute UDAAP violations of the CFPA. The circular includes examples of situations that may cause unexpected overdraft fees that violate the CFPA, such as “authorize positive, settle negative” transactions.

What's New? 2023 Dollar Thresholds for Reg Z

The Consumer Financial Protection Bureau, the Federal Reserve Board, and the Office of the Comptroller of the Currency today announced that the 2023 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $28,500 to $31,000.

The threshold amount will be effective January 1, 2023, and is based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W, as of June 1, 2022.

The Dodd–Frank Wall Street Reform and Consumer Protection Act added special appraisal requirements for higher-priced mortgage loans, including that creditors obtain a written appraisal based on a physical visit to the interior of the home before making a higher-priced mortgage loan. The rules implementing these requirements contain an exemption for loans of $25,000 or less, adjusted annually to reflect CPI-W increases.

Read more about the Appraisal Rule in The Gold Book under Higher Priced Mortgages in the Truth-in-Lending (Reg. Z) chapter.

Office of Financial Technology

The OCC announced it will establish an Office of Financial Technology early next year to enhance the agency’s expertise and ability to adapt to a rapidly changing banking landscape. The Office of Financial Technology will build on and incorporate the Office of Innovation, which the OCC established in 2016 to coordinate agency efforts to support responsible financial innovation.

Beneficial Ownership Reporting

The  Financial  Crimes  Enforcement  Network  issued a final rule  establishing  a  beneficial ownership  information  reporting  requirement.  The  rule will require most U.S. corporations, limited  liability  companies,  and  other  entities  to  report  to  FinCEN information about their  beneficial  owners—those  who  ultimately  own  or  control  the company. The rule enacts provisions  of  the  Corporate  Transparency  Act—passed  as  part  of  the  Anti-Money  Laundering  Act—to  strengthen  national  security  and  the integrity  and  transparency  of  the  U.S.  financial  system. 

Read this and more about the Beneficial Ownership rules here.

CFPB Warns that Digital Marketing Providers Must Comply with Federal Consumer Finance Protections

Tech firms that use behavioral targeting of individual consumers regarding financial products are liable for Digital Marketing violations as per new interpretive ruling fy the CFPB. 

Read more in Digital Marketing in The Gold Book. 

FedNow Service Releases Guidance

In anticipation of the launch of FedNow, recently released is: Operating Circular 8 Funds Transfers through the FedNow Service, effective September 21, 2022. The circular also references another document, version 1.0 of the FedNow Service Operating Procedures.

National Banks Not Required to Comply with a New York State Law

A federal appeals court has ruled that national banks are not required to comply with a New York State law requiring mortgage lenders to pay a two per cent minimum annual interest rate on mortgage escrow accounts established for owner-occupied, one-to-six family residences.  The decision by the United States Court of Appeals for the Second Circuit in Cantero v. Bank of America, N.A., held that the New York law is preempted by the National Bank Act of 1864, which among other things grants national banks the power to establish and fund escrow accounts.  While the decision expressly applies only to national banks, it provides a strong basis for arguing that preemption would also apply to other federally-chartered financial institutions.  However, the Court’s ruling directly conflicts with a 2019 decision by a federal appeals court in California which reached the opposite conclusion, making the issue ripe for potential review and resolution by the Supreme Court should a further appeal be made

What's New? Crypto Currency and the FDIC

To address certain misrepresentations about FDIC deposit insurance by some crypto companies, the FDIC is issuing an Advisory to FDIC-insured institutions Regarding Deposit Insurance and Dealings with Crypto Companies (FDIC Crypto Advisory).  Additionally, a Fact Sheet on What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies (Deposit Insurance Fact Sheet) is available. Read more in The Gold Book under Crypto Currency.

Computer Security Final Rule and Information Webinar

On November 23, 2021, the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (the Agencies) announced the approval of a final rule on computer-security incident notification to improve the sharing of information about cyber incidents that may affect the U.S. banking system. Compliance with the final rule is required by May 1, 2022. 

Read more about this rule in the Cybersecurity section of The Gold Book.

On Thursday, April 28, 2022, at 2:00 ET, the Agencies will jointly host an Ask the Regulators webinar regarding this rule. The program is intended for banking organizations and their bank service providers, as defined in the computer-security incident notification final rule. During the webinar, the Agencies will respond to questions submitted in advance from banking organizations and bank service providers. Please email questions in advance of the webinar to asktheregulators@stls.frb.org by April 20. 

Registration for the webinar is available at: https://www.webcaster4.com/Webcast/Page/584/44888 

NY Hero Act

On March 17, 2022, the designation of COVID-19 as an airborne infectious disease that presents a serious risk of harm to the public health under the HERO Act ended. Private sector employers are no longer required to implement their workforce safety plans.

NYS Remote Notary Guidance

Effective 2/25/22, remote notarization is now authorized in New York State, per section 135-c of the executive law. Visit Department of State website for details.

OSHA ETS Withdrawn

The Emergency Temporary Standard was withdrawn effective January 26, 2022. Although OSHA is withdrawing the vaccination and testing ETS as an enforceable emergency temporary standard, the agency is not withdrawing the ETS as a proposed rule. The agency is prioritizing its resources to focus on finalizing a permanent COVID-19 Healthcare Standard.