Tennessee Bankers

This Week Newsletter

September 25, 2017 - Issue No. 1738

TN Comptroller Wilson Requests AG Opinion on Credit Unions Accepting Public Deposits

Tennessee Comptroller Justin P. Wilson requested an opinion from State Attorney General Herbert Slatery on the constitutionality of credit unions accepting deposits of local governments. The basis for the question falls under Article 2, Section 29 of the Constitution, which prohibits local governments from becoming a “stockholder with others in any company, association, or corporation…”

If the AG rules that it is constitutional, TBA expects the credit union industry will bring legislation in 2018 to allow them to begin accepting public deposits.

Credit unions, which are exempt from state and federal taxes, have no place in accepting public deposits. If the AG rules this is constitutional, we will do everything in our power to stop any legislation allowing them to do so.

House Appropriations Bill Subjects FDIC, Fed to Appropriations Process

The House, on Sept. 14, passed an appropriations bill for FY2018, which included a provision that would bring the FDIC and the nonmonetary functions of the Federal Reserve under the appropriations process. Notably, the NCUA was originally included under the provision but an amendment on voice vote exempting them from this.

TBA expressed concern to Sen. Corker's office with this measure, including that such a change could disrupt the current fee structure that banks have incorporated into their business plans, potentially requiring them to divert additional resources away from serving customers.

ABA and ICBA also sent a joint letter to the Senate Appropriations Committee leadership urging them to reject this provision. Read the letter.

CFPB Harmonizes Regs B and C

The CFPB last Wednesday modified the Equal Credit Opportunity Act (Regulation B) to provide flexibility for lenders around the collection of applicants’ demographic data under HMDA (Regulation C). Reg B previously prohibited creditors from collecting information on consumers’ race or ethnicity, except to the extent required to monitor compliance with ECOA or comply with HMDA. The permissible inquiries under Reg B included only aggregate racial and ethnic categories. However, under the new HMDA rules, banks must permit applicants and borrowers to self-identify using disaggregated ethnic and racial categories.

The bureau’s changes permit creditors to self-identify using disaggregated categories beginning on Jan. 1, 2017, enabling institutions to use Fannie Mae and Freddie Mac’s new Uniform Residential Loan Application prior to January 2018. The rule includes other optional model forms to assure compliance with Regulation B requirements. It also allows institutions not subject to HMDA reporting requirements to choose on an “application-by-application basis” between two approaches to collecting personal demographic data: either under Reg B or Reg C. Read more.

CFPB Issues Guide on Arbitration Rule

The CFPB on Sept. 15 released a small entity compliance guide on the bureau’s final rule that restricts the use of mandatory arbitration agreements in consumer financial contracts. The rule took effect Sept. 18, and compliance is required on or after March 19, 2018. The compliance guide explains who is covered by the rule, required language in revised pre-dispute arbitration agreements, submission of records, and other topics.

TBA and other state and national trade groups are supporting ongoing efforts in the Senate to pass a resolution disapproving of the rule under the Congressional Review Act. The House passed a disapproval resolution in July.

If the Senate passes this measure in the coming weeks and, as expected, President Trump signs it, the final rule will be voided and compliance will not be required. Download the compliance guide.

CFPB Proposes Guidance on Public Disclosure of HMDA Data

The CFPB also last week issued policy guidance on the loan-level HMDA data it will make available to the public under the revised HMDA data collection rules, which take effect in 2018.

Noting concerns over consumer identity protection, the CFPB is proposing to not publicly disclose a number of data points, including the universal loan identifier, the application date, the date of action taken by the bank on a covered loan or application, the address of the property securing the loan, and the credit score or scores relied on in making the credit decision.

The bureau also proposed changes that would reduce the precision of values reported for several data fields, such as the amount of the covered loan applied for, the age of an applicant or borrower, or a borrower’s debt-to-income ratio.

Fed to Begin Reducing Balance Sheet Next Month

The Federal Open Market Committee said it will begin reducing the Fed’s balance sheet in October, according to a statement from the committee released last week. The balance sheet is swollen with $4.5 trillion in securities purchased as part of quantitative easing programs between 2008 and 2014. The committee also decided to hold rates at 1 to 1.25 percent, citing “realized and expected labor market conditions and inflation.”

FOMC members acknowledged that the recent hurricanes “will affect economic activity in the near term,” but that growth will temper by the medium term. Consequently, they said that they expect to see economic activity expand at a “moderate” pace. They also agreed that the timing and size of future rate hikes will follow "careful” monitoring of economic conditions and “will depend on the economic outlook as informed by incoming data.” As with previous statements, the committee expects “that economic conditions will evolve in a manner that will warrant gradual increases.”

Internal Bank Audit Takes Place Oct. 3 & 4

TBA is conducting this timely, internal audit programming in conjunction with Crowe Horwath LLP. This overview program is for internal auditors and senior staff. This two-day program, which will take place October 3 and 4 at Nashville's TBA Barrett Training Center, will provide an overview of the internal audit function, along with audit concepts and techniques to aid in identifying risk in areas common to all financial institutions.

Program Topics

  • Auditing Electronic Funds Transfer
  • Auditing the Deposit Function
  • Auditing the Branch Operations Function
  • Updates to the Internal Audit Profession
  • Enterprise Risk Management and Internal Auditing
  • Data Analytics
  • Recent Trends in Financial Institution Fraud

Webinar: Implementing Evolve for In-House Evaluations

Join Eric Collinsworth and Jason Bennett on Tuesday, September 26 at 10 a.m. CST/11 a.m. EST for a 30 minute, introductory webinar to TBA’s newest endorsed product, Evolve for in-house, web based evaluations. In addition to a demonstration of the platform, this complimentary webinar will cover the minimum requirements of an evaluation, provide an in-depth overview of when use of an evaluation is allowed, and the proper qualifications of the evaluator. Click here to register. For more information about the Evolve webinar or TBA’s endorsed partnerships contact Stacey Langford.

FPSI This Week: What's Next With The Equifax Breach

The Equifax data breach, affecting 143 million people, is reported as the “largest ever recorded” compromise of social security numbers. According to Equifax, the breach lasted from mid-May through July with hackers accessing names, social security numbers, birth dates, addresses and, in some instances, driver's license numbers.

At this point, we do not know the full extent of the hack or what the hackers intend to do with the compromised information. Until the full extent of the attack is understood, there are some steps you and your staff can take as precautions to help combat the potential increase in identity fraud:

  • Because most of the private data compromised were social security numbers and drivers’ license numbers, be extremely cautious of any transaction or procedure that relies on that data for identification or verification.
  • Increase oversight for wire transfer or other transaction requests.
  • Be skeptical of remote attempts to change existing account information, such as addresses, email, telephone contact numbers, etc.
  • Be prepared to answer questions from customers regarding account security and your bank’s policies and procedures for handling personally identifiable information; steps customers can take to minimize their own risk (monitoring accounts, freezing credit, filing taxes early, etc.); and resources available to victims, like services offered by Equifax, free credit reports, and information from ftc.gov/idtheft.

For more information, please contact FinancialPSI's Jon Goodson or Ted Frizen.

TBA On the Road

  • Join TBA in Circle Park to tailgate the Tennessee v. Georgia game this Saturday, hosted by SouthEast Bank. For details contact Stacey Langford.
  • Stacey Langford visits members in East Tennessee and joins the North Carolina Bankers Association as a guest for their Young Bankers Convention.

See where TBA goes while "on the road" by following @TNBankers.