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Compliance Update with Amy K by Amy Kleinschmit, Chief Compliance Officer CFPB & UDAAP The Consumer Financial Protection Bureau (CFPB) recently announced that it is rescinding a policy statement issued January 24, 2020 relating to how the agency was exercising its supervisory and enforcement authority to address abusive acts or practices. The January 2020 policy statement included three principals that the CFPB would follow, including that the CFPB would focus on citing conduct as abusive in supervision or challenging conduct as abusive in enforcement if the CFPB concluded that the harms to consumers from the conduct outweighed its benefits to consumers. Another of the principles included that the CFPB generally did not intend to seek certain types of monetary relief for abusiveness violations where the covered person was making a good-faith effort to comply with the abusiveness standard. The CFPB is now rescinding this statement and the principles stated in January 2020. Among the reasons include, “In particular, the policy of declining to seek certain types of monetary relief for abusive acts or practices—specifically civil money penalties and disgorgement—is contrary to the Bureau’s current priority of achieving general deterrence through penalties and other monetary remedies and of compensating victims for harm caused by violations of the Federal consumer financial laws through the Bureau’s Civil Penalty Fund.” [Emphasis added] Current leadership at the CFPB has determined that it should exercise the full scope of its supervisory and enforcement authority to identify and remediate abusive acts or practices. Section 1031(d) of the Dodd-Frank Act provides the CFPB with its authority to declare when something is an abusive act or practice. Specifically, section 1031(d) states that the CFPB shall have no authority under this section to declare an act or practice abusive in connection with the provision of a consumer financial product or service, unless the act or practice: (1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (2) takes unreasonable advantage of: (A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service; (B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or (C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer. EIP3 Round three of the economic impact payments (EIP3) is well underway. As credit unions are aware the first wave of direct deposits made their way to accounts earlier this week. A second wave of EIP3s is slated to be transmitted on March 19 with effective and settlement dates of March 24, 2021. Taxpayers may qualify for the full amount of the EIP3 if they have an adjusted gross income of up to $75,000 for singles and married persons filing a separate return, up to $112,500 for heads of household and up to $150,000 for married couples filing joint returns and surviving spouses. Payment amounts are reduced for filers with incomes above those levels. Those eligible will automatically receive an Economic Impact Payment of up to $1,400 for individuals or $2,800 for married couples, plus $1,400 for each dependent. Remember, if an account is closed, according to information in the U.S. Treasury’s Green Book (page 4-2), the RDFI should return the payment. The Green Book states in Chapter 4 that all ACH payments must be returned in accordance with the Nacha Operating Rules and Guidelines, including when an account is closed or does not exist. Most ACH returns to the IRS will result in a paper check being issued; therefore, RDFIs must make appropriate use of Return Reason Codes. When the checks do start coming, which it is estimated check volume is approximately 5 to 7 million checks per week, the check symbol will be 40447 and will be displayed in the MICR line. Fiscal Service encourages financial institutions to verify the security features of a U.S. Treasury check, and to determine the status of EIP checks by using the Treasury Check Verification System (TCVS). More information the EIP Treasury Checks can be found here. Your member may also receive the EIP debit cards; once activated, the EIP Card can be used anywhere Visa® Debit Cards are accepted in-store, online or by phone. In addition, there are multiple ways to transfer the funds from an EIP Card to an existing bank/credit union account at no cost to the recipient. Please refer to the EIP Card FAQs for more information on ways consumers can transfer the funds from their EIP Cards to their credit union accounts. NACHA has issued several FAQs with regard to EIP3 which you can find here. The IRS also provides a number of FAQs and fact sheets available here. CFPB & EIP3 The CPFB also issued a statement on Wednesday to encourage financial institutions to allow EIP3 to reach the consumer. CFPB Acting Director Dave Uejio stated: “The Consumer Financial Protection Bureau is squarely focused on addressing the impact of the COVID-19 pandemic on economically vulnerable consumers and is looking carefully at the stimulus payments that millions are now receiving through the American Rescue Plan. The Bureau is concerned that some of those desperately needed funds will not reach consumers, and will instead be intercepted by financial institutions or debt collectors to cover overdraft fees, past-due debts, or other liabilities.” The CFPB also issued this consumer advisory that provides guidance to consumers on how to ensure the “full benefit of those funds [EIP3] by protecting them from bank and credit union setoff if your account is overdrawn.” Compliance Solution Highlight – AffirmX Reduce compliance workload, anxiety and costs for your credit union with this proven solution from DakCU and CURisk Intelligence. The Regulatory Compliance Solution is serviced by AffirmX and can help extend your credit union's compliance resources when it comes to adhering to government regulations in a proactive and cost-efficient manner. This patented, cloud-based platform can be customized for you. This regulatory monitoring covers: Advertising and Marketing; Bank Secrecy Act; Compliance Management; Deposit Operations; Lending (Consumer and Real Estate); and Operations. In addition, this valuable tool combines easy-to-use workflows with expert reviews along with remediation of findings. This solution has a risk-based dashboard to help your team stay on top of a variety of compliance issues. Just looking for a specific audit? AffirmX is completely customizable for your credit union including offering stand-alone audits such as: BSA Independent Audit, Annual ACH Independent Audit; Annual SAFE Act Independent Audit, or Website Compliance Review. Schedule a free demo with Amy Kleinschmit today!
Compliance Update with Amy K
by Amy Kleinschmit, Chief Compliance Officer
CFPB & UDAAP
The Consumer Financial Protection Bureau (CFPB) recently announced that it is rescinding a policy statement issued January 24, 2020 relating to how the agency was exercising its supervisory and enforcement authority to address abusive acts or practices. The January 2020 policy statement included three principals that the CFPB would follow, including that the CFPB would focus on citing conduct as abusive in supervision or challenging conduct as abusive in enforcement if the CFPB concluded that the harms to consumers from the conduct outweighed its benefits to consumers. Another of the principles included that the CFPB generally did not intend to seek certain types of monetary relief for abusiveness violations where the covered person was making a good-faith effort to comply with the abusiveness standard.
The CFPB is now rescinding this statement and the principles stated in January 2020. Among the reasons include, “In particular, the policy of declining to seek certain types of monetary relief for abusive acts or practices—specifically civil money penalties and disgorgement—is contrary to the Bureau’s current priority of achieving general deterrence through penalties and other monetary remedies and of compensating victims for harm caused by violations of the Federal consumer financial laws through the Bureau’s Civil Penalty Fund.” [Emphasis added]
Current leadership at the CFPB has determined that it should exercise the full scope of its supervisory and enforcement authority to identify and remediate abusive acts or practices. Section 1031(d) of the Dodd-Frank Act provides the CFPB with its authority to declare when something is an abusive act or practice. Specifically, section 1031(d) states that the CFPB shall have no authority under this section to declare an act or practice abusive in connection with the provision of a consumer financial product or service, unless the act or practice: (1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (2) takes unreasonable advantage of: (A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service; (B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or (C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.
EIP3
Round three of the economic impact payments (EIP3) is well underway. As credit unions are aware the first wave of direct deposits made their way to accounts earlier this week. A second wave of EIP3s is slated to be transmitted on March 19 with effective and settlement dates of March 24, 2021.
Taxpayers may qualify for the full amount of the EIP3 if they have an adjusted gross income of up to $75,000 for singles and married persons filing a separate return, up to $112,500 for heads of household and up to $150,000 for married couples filing joint returns and surviving spouses. Payment amounts are reduced for filers with incomes above those levels. Those eligible will automatically receive an Economic Impact Payment of up to $1,400 for individuals or $2,800 for married couples, plus $1,400 for each dependent.
Remember, if an account is closed, according to information in the U.S. Treasury’s Green Book (page 4-2), the RDFI should return the payment. The Green Book states in Chapter 4 that all ACH payments must be returned in accordance with the Nacha Operating Rules and Guidelines, including when an account is closed or does not exist. Most ACH returns to the IRS will result in a paper check being issued; therefore, RDFIs must make appropriate use of Return Reason Codes.
When the checks do start coming, which it is estimated check volume is approximately 5 to 7 million checks per week, the check symbol will be 40447 and will be displayed in the MICR line. Fiscal Service encourages financial institutions to verify the security features of a U.S. Treasury check, and to determine the status of EIP checks by using the Treasury Check Verification System (TCVS). More information the EIP Treasury Checks can be found here.
Your member may also receive the EIP debit cards; once activated, the EIP Card can be used anywhere Visa® Debit Cards are accepted in-store, online or by phone. In addition, there are multiple ways to transfer the funds from an EIP Card to an existing bank/credit union account at no cost to the recipient. Please refer to the EIP Card FAQs for more information on ways consumers can transfer the funds from their EIP Cards to their credit union accounts.
NACHA has issued several FAQs with regard to EIP3 which you can find here.
The IRS also provides a number of FAQs and fact sheets available here.
CFPB & EIP3
The CPFB also issued a statement on Wednesday to encourage financial institutions to allow EIP3 to reach the consumer. CFPB Acting Director Dave Uejio stated: “The Consumer Financial Protection Bureau is squarely focused on addressing the impact of the COVID-19 pandemic on economically vulnerable consumers and is looking carefully at the stimulus payments that millions are now receiving through the American Rescue Plan. The Bureau is concerned that some of those desperately needed funds will not reach consumers, and will instead be intercepted by financial institutions or debt collectors to cover overdraft fees, past-due debts, or other liabilities.”
The CFPB also issued this consumer advisory that provides guidance to consumers on how to ensure the “full benefit of those funds [EIP3] by protecting them from bank and credit union setoff if your account is overdrawn.”
Compliance Solution Highlight – AffirmX
Reduce compliance workload, anxiety and costs for your credit union with this proven solution from DakCU and CURisk Intelligence. The Regulatory Compliance Solution is serviced by AffirmX and can help extend your credit union's compliance resources when it comes to adhering to government regulations in a proactive and cost-efficient manner. This patented, cloud-based platform can be customized for you.
This regulatory monitoring covers: Advertising and Marketing; Bank Secrecy Act; Compliance Management; Deposit Operations; Lending (Consumer and Real Estate); and Operations. In addition, this valuable tool combines easy-to-use workflows with expert reviews along with remediation of findings. This solution has a risk-based dashboard to help your team stay on top of a variety of compliance issues.
Just looking for a specific audit? AffirmX is completely customizable for your credit union including offering stand-alone audits such as: BSA Independent Audit, Annual ACH Independent Audit; Annual SAFE Act Independent Audit, or Website Compliance Review.
Schedule a free demo with Amy Kleinschmit today!