4 Reasons Why It’s Vital that Banks Communicate During Covid-19 Pandemic

With life as we know it indefinitely upended due to the Covid-19 pandemic, people want to be reassured that things will be okay. Specifically, they want to know that their physical and financial health will survive. Banks can play a crucial role in reassuring the general public about their concerns, but only if they are communicating and doing so effectively.

Here are four reasons why banks should be going the extra mile to provide consistent and credible communications right now:

Keep Employees Engaged

Your employees are one of your greatest assets, and they are under considerable strain right now. On top of doing their regular jobs, many with school-age children have suddenly and unavoidably become home-schooling parents. Those in the sandwich generation may also have the extra stress of trying to keep older parents safe and healthy. And like everyone else, they are likely worried about the long-term impacts on the economy, their jobs and their financial security.

Now, more than ever, employees need to hear frequently and openly from immediate supervisors, department managers and enterprise leadership. If you want them to stay focused and engaged with your customers and on their specific functions, develop a Covid-19 communications strategy that informs, but doesn’t overwhelm; that answers questions without raising more speculation; and that provides them with access to needed resources that can ease their current work and personal stressors.

Reassure Customers

Every one of your customers is worried about their money right now. Families wonder if they will have enough to pay this month’s household bills. Current and upcoming retirees ask if their retirement funds will still last through their lifetimes. Business owners are calculating if they’ll be able to pay their employees and other obligations, and ultimately if they’ll be able to stay in business.

A bank is a customer’s lifeline. Now is the time to make sure your customers know that their lifeline is secure by communicating with them as frequently and directly as possible. Put yourself in their shoes and think about the questions they may have and then proactively answer them in your communications, i.e., branch hours, contact numbers and processes for requesting deferments.

This will lesson customer frustration. It should also reduce the number of general questions your staff has to field, so that they can focus their efforts on specific customer situations.

Lead Your Community

Banks have always played a significant civic role in their local communities. If there was ever a time that your bank’s community needed your leadership, it is now.

In the words of Albert Einstein, “In the middle of difficulty lies opportunity.” This is not meant to be a cynical suggestion that banks take advantage of the current situation. Instead, it is the idea that this pandemic is a chance for banks to actively double down on their commitment to their communities by helping them through this.

When Covid-19 has run its course, the public will remember who stepped up and led.

Maintain Regulatory Compliance

Covid-19 has caused upheaval in almost every aspect of society. Amidst this chaos and uncertainty,  it is vital that banks maintain their regulatory compliance obligations, especially now that more employees are telecommuting and more functions are being conducted outside of bank physical facilities.

For instance, in its Covid-19 FAQ for National Banks and Federal Savings Associations, the OCC reminds banks of their GLBA requirements: “Employees working from home should use secure communications, such as a virtual private network (VPN), when working with sensitive information.”

As you communicate with your employees throughout this pandemic, remind them of the continued need to follow your existing compliance policies and procedures. If such policies and procedures are updated in light of Covid-19, make sure those changes are communicated to all relevant staff as quickly as possible.

The Bottom Line

Frequent and effective communication is one of the key ways to weather this storm.

Does your bank or organization need help communicating with employees and/or customers? Get assistance today from a virtual freelance writer by emailing marycrottywriting@gmail.com.

 

 

 

 

 

 

 

Time Is Almost Up to Comment on Two Key Proposed Rules from Financial Regulators

As Bankers Online reports, there are two key deadlines for comment on proposed rules coming up. Financial institutions interested in sharing their two-cents with financial regulators have just a few more days to do so.

Proposed Rule Regarding Residential Real Estate Appraisals

On December 7, 2018, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) published a Notice of Proposed Rulemaking regarding residential real estate appraisals in the Federal Register.

As written, the proposed rule “would increase the threshold level at or below which appraisals would not be required for residential real estate-related transactions from $250,000 to $400,000.”  Instead, such transactions would require an evaluation of real property “that is consistent with safe and sound banking practices.”

The proposed rule also proposes to conform the rural residential property appraisal exemption per the Economic Growth, Regulatory Reform, and Consumer Protection Act.

Comments are due by Tuesday, February 5, 2019.

Proposed Rules Regarding Regulation CC

On December 10, 2018, the Board and the Consumer Financial Protection Bureau (CFPB) published a Notice of Proposed Rulemaking regarding Regulation CC in the Federal Register. Regulation CC implements the Expedited Funds Availability Act (EFA Act).

The proposal contains two parts.

The first is a new rule, which proposes “a calculation methodology for implementing a statutory requirement to adjust the dollar amounts in the EFA Act every five years by the aggregate annual percentage increase in the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W) rounded to the nearest multiple of $25.”

The second part of the notice reopens the comment period on the 2011 Funds Availability Proposal, which was originally published on March 3, 2011. It proposed “amendments to encourage banks to clear and return checks electronically, add provisions that govern electronic items cleared through the check-collection system, and shorten the ‘exception’ hold periods on deposited funds.”

The electronic funds environment has undergone tremendous change since 2011, which is why the agencies have reopened the comment period on this particular issue.

Comments are due by Friday, February 8, 2019.

 

Last Chance to Save on a Freelance Writing Project

This is it; your last chance to save on a freelance writing project! Between now and October 31, 2018, bank risk and compliance writer Mary Crotty is offering new clients the following discount on their first eligible writing project:

  • 10% off a 300 to 500 word piece (approximately 2-5 hours)
  • 20% off a 501 to 1,500 word piece (approximately 5-10 hours)
  • 30% off a 1,501 to 2,500 word piece (approximately 10-20 hours)

The following writing projects qualify:

  • Blog posts
  • Internal or external emails
  • Employee messaging
  • Industry publication articles
  • Internet articles
  • White papers

Mary Crotty specializes in writing for the financial services industry and regulatory compliance arena, however, in her 17 years as a professional writer, she has also created high impact, persuasive content for software development companies, consulting firms, educational institutions, healthcare-related organizations, online public relations platforms, marketing content firms, and small businesses in a variety of industries.

To take advantage of this offer, contact freelance business writer Mary Crotty at marycrottywriting@gmail.com. Offer good through October 31, 2018.

The Latest News from Federal Financial Regulatory Agencies

Here is a quick rundown on the latest news from various federal financial regulatory agencies.

The FDIC

On August 20, the Federal Deposit Insurance Corporation (FDIC) announced that it was modifying its Statement of Policy for Section 19 of the Federal Deposit Insurance Act, which is explained in its financial institution letter, FIL-42-2018.

The OCC

On August 17, the Office of the Comptroller of the Currency (OCC) published its Enforcement Actions and Terminations for August 2018. Most notable were three actions against TCF National Bank in regard to violations of the Federal Trade Commission Act (FTCA) in connection with its ATM and one-time debit cards. The Cease and Desist Order, the Civil Money Penalty for $3 million, and the Restitution Order of $25 million were all the result of alleged deceptive acts or practices in the bank’s overdraft protection Opt-in process.

The NCUA

On August 17, the National Credit Union Administration (NCUA) named 26-year agency veteran, Matthew J. Bilouris, as the Director of its Office of Consumer Financial Protection.

The CFPB

On August 10, the Consumer Financial Protection Bureau (CFPB) published its final rule  amending the Gramm-Leach-Bliley Act, which provides an exemption from sending annual privacy notices as per Regulation P. In order to qualify for the exemption, financial institutions must meet the following two criteria:

  1. “Must not share nonpublic personal information about customers except as described in certain statutory exceptions.”
  2. “Must not have changed its policies or procedures with regard to disclosing nonpublic personal information from those that the institution described in the most recent privacy notice it sent.”

The Federal Reserve

On August 10, the Federal Reserve imposed an $8.6 million fine on Citigroup for alleged unsafe and unsound practices stemming from the “improper execution of residential mortgage-related documents” at one of its subsidiaries.

FinCEN

On August 8, the Financial Crimes Enforcement Network (FinCEN) extended its limited exception from beneficial owner requirements on legal entity customers for another 30 days. FinCEN initially instated the exception in May, just five days after the beneficial ownership rule went into effect on May 11. This relieved financial institutions from having to collect beneficial ownership information on certain financial products that automatically renew, such as certificates of deposit, that were opened prior to May 11.

That 90-day exception expired on August 9, but this latest move extends it to September 8.

 

CFPB Issues Flurry of Settlement Actions

Since June 13, the Consumer Financial Protection Bureau (CFPB) has issued five settlement notices for a total of over $361 million in restitution or redress and over $16 million in civil money penalties (CMPs). Under the administration of former CFPB director Richard Cordray, that may not have come as a surprise. But considering that under acting director Mick Mulvaney, the CFPB had only issued one other settlement notice in 2018, that of Wells Fargo, this flurry of recent activity is somewhat unexpected.

CFPB Settlements in Last Six Weeks

A review of the five settlement notices indicates that violations of the unfair, deceptive or abusive acts and practices (UDAAP) section of the Consumer Financial Protection Act (CFPA) account for the majority of issues. Violations of the Truth in Lending Act (TILA) also appear in more than one settlement.

Here is a brief synopsis of the notices:

July 20 Settlement with TCF Financial 

In early 2017, the CFPB alleged in a Complaint filed in court that this regional bank had violated Reg E and the CFPA. In September of the same year, the bank filed a Motion to Dismiss, which was only partially upheld by the court. While the Reg E claim was dismissed, the CFPA claim stood, although it was “limited to those claims to customers who opened their accounts on or after July 21, 2011.”

The CFPA claim stemmed from alleged deceptive and abusive conduct by the bank in regard to its overdraft services. Specifically, “Banks must first obtain a consumer’s consent before they can lawfully charge overdraft fees on one-time debit purchases and ATM withdrawals. When attempting to obtain this consent, TCF obscured the fees it charged and made consenting to overdraft fees seem mandatory for new customers to open an account.”

TCF was ordered to pay $25 million in restitution and a $5 million CMP, however, the CFPB agreed to accept a $3 million CMP in consideration of the correlating CMP issued by the Office of the Comptroller of the Currency (OCC).

July 19 Settlement with Triton Management Group

This small-dollar lender is alleged to have violated TILA and the CFPA by engaging in deceptive acts or practices when it misrepresented finance charges on auto loans in Mississippi. The judgment calls for equitable monetary relief in the amount of $1,522,298, which represents the amount customers paid in excess finance charges. The CFPB, however, indicated it would accept $500,000 to satisfy this obligation, in part because of the institution’s “lack of financial resources.” This was also noted as the reason for the $1 CMP imposed on Triton as part of the settlement.

July 13 Settlement with National Credit Adjusters and its CEO

The CFPB alleges that this firm engaged in “unlawful debt collection practices,” which violate the CFPA. The settlement notes that, the firm “engaged in unfair and deceptive acts or practices in the collection and sale of consumer debt.”

The firm and its former CEO were each fined $3 million, however, the CFPB said that, “full payment of those amounts is suspended” as long as National Credit Adjusters pays a $500,000 CMP and the former CEO pays a $300,000 CMP.

June 30 Settlement with Citibank

After conducting an internal review, Citibank self-identified and self-reported violations of TILA to the CFPB. Per the settlement, Citibank agreed to pay $335 million in restitution to affected customers. The CFPB did not assess a CMP because the bank discovered the violations on its own and voluntarily reported them.

June 13 Settlement with Security Group, Inc.

The settlement agreement alleges that Security Group, Inc., which provides consumer loans, “engaged in unfair acts or practices” in violation of the CFPA. The notice also alleges violations of the Fair Credit Reporting Act (FCRA).

Specifically, “Respondents visited consumers’ homes and places of employment, as well as the homes of their neighbors, to collect or attempt to collect delinquent debt.” This is alleged to have occurred over the course of 12 million visits to over 1.3 million customers. Security Group, Inc. was ordered to pay a $5 million CMP.

CFPB Settlements Do Include Some Leniency

It should be noted, that despite the unexpected flurry of settlements from the CFPB in the last six weeks, the Bureau does appear to be taking all circumstances into account and affording respondents with some leniency in terms of financial consequences. In all but the Security Group’s settlement, which reads as the most egregious, the CFPB either agreed to accept a lesser amount than originally stated or it chose to impose no CMP or only a nominal one. This likely reflects the philosophy of the current administration.

 

 

Communication: The Oft Forgotten Component of Bank Compliance

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Photo by samer daboul on Pexels.com

Banks spend enormous sums of money each year to meet their federal and state regulatory compliance requirements. They hire professionals with the requisite experience to tackle things like their Bank Secrecy Act and Information Security programs; they invest significant budget dollars in today’s sophisticated compliance software tools; and they spend countless hours developing policies, processes, and procedures to stay compliant.

But despite all that time, money, and effort, the one thing that often gets overlooked when it comes to bank compliance is communicating about it often and to everyone in the organization.

A Steady Stream of Communication

Several years ago, the Financial Crimes Enforcement Network (FinCEN) issued an Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance. While this publication was geared toward BSA programs in 2014, its logic still applies today to a bank’s enterprise approach to compliance. Just as FinCen suggested then, it still is today: “The culture of an organization is critical to its compliance.”

Building a culture of compliance requires a steady stream of communication.

Upstream Communication

Ever since the 2008 financial crisis, federal banking regulators have emphasized that bank boards are ultimately responsible for all business operations, including compliance. Often, board members come from a variety of industries. Even those with a background in financial services often do not have particular compliance expertise.

That’s why they rely on those within the Compliance or Risk Management Office with the requisite expertise to keep them abreast of changes to regulatory guidance and laws, as well as to internal or external environmental changes that could impact the bank’s ability to comply with existing or changing regulations.

Cross-stream Communication

The Compliance Office is an interdependent function of almost every other bank area, including individual business units, corporate communications, e-commerce, finance, information technology, legal, marketing, product development, operations, risk management, and even third-party service providers. An institution’s ability to effectively comply with their regulatory requirements demands an open and healthy back-and-forth line of communication between the Compliance Office and these other areas.

For instance, if marketing is working with product development to roll out a new product and its corresponding marketing collateral, the Compliance Office should be in the loop. Conversely, if a new regulation is going into effect, such as the General Data Protection Regulation did in May, then it is incumbent upon the Compliance Office to provide timely details and periodic updates to the managers of all directly and indirectly impacted functions.

Downstream Communication

The everyday task of complying with many banking regulations falls on the shoulders of employees in either customer-facing or operations roles. They cannot be expected to do a good job at such compliance if they do not have the support and information they need.

Support comes in the form of senior management emphasizing their dedication to a culture of compliance in every word and action they take. Employees only buy-in when they believe senior management is on board and leading the way.

Information should come from the Compliance Office on a timely and routine basis, so that employees understand their responsibility to specific regulations, the importance of complying with them to the overall health of the institution and its customers, and  where to go for help if they don’t understand either.

Don’t Let a Failure to Communicate Undermine Your Compliance Efforts

Sophisticated technology has certainly helped streamline bank compliance efforts, but it shouldn’t be considered a replacement for good, old-fashioned communication, which today, thanks to such technology, can be delivered in any number of ways to those who need it, so that it is at their fingertips at all times.

And by good, old-fashioned communication, I mean exactly what your sixth grade English teacher taught you. Explain the who, what, where, when, and why of the situation as concisely and yet comprehensively as possible.

The by-product of such communication is proof to bank examiners of your commitment to building a culture of compliance.

 

Federal Banking Regulators Mete Out $1.078 Billion in CMPs Since April

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Photo by Pixabay on Pexels.com

On May 25, the Federal Deposit Insurance Corporation (FDIC) published its April enforcement actions, which included four orders to pay civil money penalties (CMPs), totaling $160,000. That’s not much of a story, but further digging reveals that between the FDIC, the Office of the Comptroller of the Currency (OCC), the Financial Crimes Enforcement Network (FinCEN), the Consumer Financial Protection Bureau (CFPB), and the Federal Reserve Board (FRB), federal banking regulators handed out $1,078,384,245 in CMPs from early April to early May.

(No enforcement actions were found for this time period on the National Credit Union Administration’s website.)

A closer look at these enforcement actions adds interesting context to the hefty fine total.

Both Individuals and Institutions Fined

In addition to the FDIC’s four orders to pay a CMP, the OCC issued seven such enforcement actions, while FinCEN and the CFPB issued one each, and the FRB issued two, for a total of 17 enforcement actions involving monetary fines. Those actions break down as follows:

  • Seven levied against institution-affiliated individuals: These current and former executives and/or directors were fined a total of $410,000, with CMPs ranging from $5,000 to $175,000.
  • Seven levied against traditional financial institutions: PNC Bank and Wells Fargo were each fined twice and three other banks were fined once by various agencies for a total of $1,069,974,245 in CMPs. The OCC and CFPB-combined $1 billion fine against Wells Fargo represents the majority of the bank fines. However, two other banks were still hit with significant fines: The OCC fined PNC $15 million and the FRB fined Goldman Sachs $54.75 million.
  • One levied against a casino: Per the USA PATRIOT Act’s broader definition of “financial institution,” FinCEN fined a casino (or card club) $8 million.

The Alleged and Admitted Violations

The seven institution-affiliated individuals were fined for a variety of reasons, including conducting unsafe and unsound practices, such as masking reporting losses; violating previous consent orders or failing to correct deficiencies cited in them; understating the allowance for loan and lease losses (ALLL) leading to a false or misleading CALL Report; and causing “the Bank to pay for personal expenditures without disclosure or authorization.”

The remaining CMPs levied against institutions involve the following laws or regulations:

  • Three institutions allegedly violated flood-related regulations: This includes a $5,000 fine from the FDIC, a $12,000 fine from the FRB, and a $207,245 fine from the OCC.
  • Two institutions allegedly violated the Federal Trade Commission Act (FTCA): The OCC fined PNC $15 million for deceptive acts or practices in violation of the FTCA, and it fined Wells Fargo $500 million for unsafe and unsound practices in violation of the same.
  • One institution allegedly violated the Consumer Financial Protection Act (CFPA): The CFPB fined Wells Fargo $1 billion for unfair and deceptive acts in violation of the CFPA, however it credited the OCC’s $500 million CMP towards the satisfaction of its own fine.
  • One institution admittedly violated the Bank Secrecy Act (BSA): FinCEN’s $8 million enforcement action against the above-referenced casino was due to its failure to establish and implement an effective anti-money laundering program as per the BSA.
  • One institution allegedly conducted unsafe and unsound practices in its Foreign Exchange Trading Business: The FRB fined Goldman Sachs “for deficiencies in Goldman’s internal controls and oversight of traders who buy and sell U.S. dollars and foreign currencies for the firm’s own accounts and for customers.”

The Million and Billion Dollar Fines

If you haven’t kept count, of the eight institutional fines, five of them exceeded a million dollars, three of them consisted of multi-million dollar CMPs, and Wells Fargo’s total fine hit the $1 billion mark.

Perhaps it is worth noting that the other three institutional fines ($5,000, $12,000 and $207,245) were the flood-related violations.

While the Trump administration’s deregulation stance is providing some much welcomed regulatory relief, this month’s worth of CMPs indicates that compliance with remaining laws and regulations is still a priority for federal banking regulators.