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I think this is certainly something we’ll all be considering until we have clarification from the regulators. I don’t know what the regulators intentions are on this but they did not mention any effect of this change on Regulation CC holds in the interim final rule; however, we all know that doesn’t necessarily mean anything. So maybe they just didn’t think of that when they amended Reg D/might get to it later… I have contacted two inviduals at the FRB for clarification but haven’t heard anything yet. I will post here when I get a response.
Here’s my thinking right now, but I’m certainly not insisting this is correct and I’d like to others’ thoughts. Since savings accounts are still carved out of the definition of account for holds under Reg CC (language below… exclusion of savings account as defined under Reg D still in Reg CC definition and definition of savings under Reg D has been updated) I’m leaning toward it still doesn’t apply if it meets the definition of savings deposit under Reg D. Again, I’m not saying this is correct just my thoughts at this time. See q&a #4 below from the Fed… perhaps it will come down to how the bank classifies the account. ?? I will post here any information I receive from the Fed. Please do the same if you get any info. Thanks!
Reg CC definition of account:
(a) Account.
(1) Except as provided in paragraphs (a)(2) and (a)(3) of this section, account means a deposit as defined in 12 CFR 204.2(a)(1)(i) that is a transaction account as described in 12 CFR 204.2(e). As defined in these sections, account generally includes accounts at a bank from which the account holder is permitted to make transfers or withdrawals by negotiable or transferable instrument, payment order of withdrawal, telephone transfer, electronic payment, or other similar means for the purpose of making payments or transfers to third persons or others. Account also includes accounts at a bank from which the account holder may make third party payments at an ATM, remote service unit, or other electronic device, including by debit card, but the term does not include savings deposits or accounts described in 12 CFR 204.2(d)(2) even though such accounts permit third party transfers. An account may be in the form of–
(i) A demand deposit account,
(ii) A negotiable order of withdrawal account,
(iii) A share draft account,
(iv) An automatic transfer account, or
(v) Any other transaction account described in 12 CFR 204.2(e).
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Reg D definition of savings deposit:
(d)(1) Savings deposit means a deposit or account with respect to which the depositor is not required by the deposit contract but may at any time be required by the depository institution to give written notice of an intended withdrawal not less than seven days before withdrawal is made, and that is not payable on a specified date or at the expiration of a specified time after the date of deposit. The term savings deposit includes a regular share account at a credit union and a regular account at a savings and loan association.
Revised 4/24/20:
2) The term “savings deposit” also means: a deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account (MMDA), that otherwise meets the requirements in paragraph (d)(1) of this section and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor may be permitted or authorized to make transfers and withdrawals to another account (including a transaction account) of the depositor at the same institution or to a third party, regardless of the number of such transfers and withdrawals or the manner in which such transfers and withdrawals are made.
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FAQ #4 states: https://www.federalreserve.gov/supervisionreg/savings-deposits-frequently-asked-questions.htm
May depository institutions continue to report accounts as “savings deposits” on their FR 2900 reports even after they suspend enforcement of the six-transfer limit on those accounts?
Yes. Depository institutions may continue to report these accounts as “savings deposits” on their FR 2900 reports after they suspend enforcement of the six-transfer limit on those accounts.I don’t have definitive information for you on this, but here are my thoughts… I don’t think it is outright prohibited, but there are concerns specifically related to UDAAP and fair lending that would need to be addressed. I would want to review the interagency overdraft guidance very carefully, especially related to ECOA and safety and soundness. Also, you should provide sufficient warning/notifications so the customer isn’t caught off guard and negatively impacted by funds being eliminated or reduced – I’d also suggest this be included in the initial disclosures like I’m sure you have language about the product being eliminated if used excessively. If you’re implementing this as a new policy, I’d suggest providing revised OD program disclosures. Also, you’d want to ensure consistent application (e.g. criteria for pgoram, recuction, etc. associated with the limits) and strictly adhere to is to ensure no fair lending concerns.
My main concern with the ones already lowered would be how/when were cusomters notified, did the action negatively affect the customer if sufficient notice wasn’t given, and could there be any fair lending issues? It’s a good idea to run a new policy, especially on a issue that regulators scrutinized so heavily, by examiners before implementing.
Yes, that’s correct. I’ve bolded some text below to highlight.
38(a)(3)(vii) Sale price.
1. No seller. In transactions where there is no seller, such as in a refinancing, § 1026.38(a)(3)(vii)(B) requires the creditor to disclose the appraised value of the property. To comply with this requirement, the creditor discloses the value determined by the appraisal or valuation used to determine approval of the credit transaction. If the creditor has not obtained an appraisal, the creditor may disclose the estimated value of the property. Where an estimate is disclosed, rather than an appraisal, the label for the disclosure is changed to “Estimated Prop. Value.” The creditor may use the estimate provided by the consumer at application but, if it has performed its own estimate of the property value for purposes of approving the credit transaction by the time the disclosure is provided to the consumer, the creditor must disclose the estimate it used for purposes of approving the credit transaction. For transactions involving construction where there is no seller, the creditor must disclose the value of the property that is used to determine the approval of the credit transaction, including improvements to be made on the property if those improvements are used in determining the approval of the credit transaction.If this is a loan covered by Reg Z as a consumer purpose loan, then rescission would apply since you are securing the loan with the consumer’s principal residence.
Rules for refi/consilitation in 1026.23(f)(2):
(2) A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer’s principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.I believe what they are basing this on is 37(g)(4) and its commentary, which requires “amounts in connection with the transaction that the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay…” to be disclosed on the LE. If this is a fee that you know the customer will pay or if it is a fee that is customary in your area for non-purchase loans then I would say they are correct.
P. 233 and 234 of the final rule discusses owner’s title. https://www.govinfo.gov/content/pkg/FR-2013-12-31/pdf/2013-28210.pdf
It all comes back to, does is qualify under Reg E as an error. With each scenario that is questionable you need to ask if is the result of an error under Reg E (e.g. unauthortized, incorrect amount, etc.). Knowing that, plus the info linked above should answer your question. A customer that is unsatisfied with the product is not unauthorized, an incorrect amount, or any other “error” under Reg E. If the customer returned a product and was still charged, that could possibly be deemed an error depending on the sitution.
If you can’t decide if Reg E applies then it would be safer to comply when it isn’t needed than to not comply when it is required.
Generally, if the customer has authorized the transaction but has a problem/unsatisfied with the goods or services they received that is not a Reg E error. The FRB has done a good job of giving us some info on this topic. Take a look at this FRB resource: https://www.consumercomplianceoutlook.org/assets/outlook-live/2019/121219-transcript.pdf?la=en (p. 18 addresses merchant disputes) and this https://www.consumercomplianceoutlook.org/2016/first-issue/credit-debit-card-issuers-obligations-consumers-displute-transactions/.
If it fits into one of these categories then Reg E would apply. Reg E, 1005.11(a), says these are errors:
(i) An unauthorized electronic fund transfer;(ii) An incorrect electronic fund transfer to or from the consumer’s account;
(iii) The omission of an electronic fund transfer from a periodic statement;
(iv) A computational or bookkeeping error made by the financial institution relating to an electronic fund transfer;
(v) The consumer’s receipt of an incorrect amount of money from an electronic terminal;
(vi) An electronic fund transfer not identified in accordance with § 1005.9 or § 1005.10(a); or
(vii) The consumer’s request for documentation required by § 1005.9 or § 1005.10(a) or for additional information or clarification concerning an electronic fund transfer, including a request the consumer makes to determine whether an error exists under paragraphs (a)(1)(i) through (vi) of this section.
Even if Reg E doesn’t apply your contract with the credit card company likley does, so review what you are required to do per that contract.
It seems the safest approach is to disclose it as a lender credit which may mean you might want to rethink how the funds are provided. I’ve heard that the CFPB has said that if it isn’t part of the transaction/legal obligation (customer knew nothing about gift prior to consummation – it was not advertised or even discussed) it might not need to be disclosed this way, but this is third hand info and we haven’t heard anything like directly from any regulotor. We recommend you contact your bank’s regulator or the CFPB to get their thoughts.
229.13(e)(2) is where you’ll see that overdraft notice language requirement.
(e) Reasonable cause to doubt collectibility:
(2) Overdraft and returned check fees. A depositary bank that extends the time when funds will be available for withdrawal as described in paragraph (e)(1) of this section, and does not furnish the depositor with written notice at the time of deposit shall not assess any fees for any subsequent overdrafts (including use of a line of credit) or return of checks of other debits to the account, if–
(i) The overdraft or return of the check would not have occurred except for the fact that the deposited funds were delayed under paragraph (e)(1) of this section; and
(ii) The deposited check was paid by the paying bank.
Notwithstanding the foregoing, the depositary bank may assess an overdraft or returned check fee if it includes a notice concerning overdraft and returned check fees with the notice of exception required in paragraph (g) of this section and, when required, refunds any such fees upon the request of the customer. The notice must state that the customer may be entitled to a refund of overdraft or returned check fees that are assessed if the check subject to the exception is paid and how to obtain a refund.You see this language being included in model form C-13 (form for Reasonable Cause Hold) and also in C-12 which can be used for the Reasonable Cause hold. My suggestion is to include what is included in the model form. You won’t go wrong with that.
Ҥ 339.3 Requirement to purchase flood insurance where available.
(a) In general. An FDIC-supervised institution shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan. The amount of insurance must be at least equal to the lesser of the outstanding principal balance of the designated loan or the maximum limit of coverage available for the particular type of property under the Act. Flood insurance coverage under the Act is limited to the building or mobile home and any personal property that secures a loan and not the land itself…
(c) Private flood insurance–(1) Mandatory acceptance. An FDIC-supervised institution must accept private flood insurance, as defined in § 339.2,
- in satisfaction of the flood insurance purchase requirement in paragraph (a) of this section
if the policy meets the requirements for coverage in paragraph (a) of this section.”
Because of the way this is worded, my understanding is that if it is to satisfy the flood insurance requirement in the regulations then the private flood rules would apply. Under the private flood rules, you are doing the private flood review to find out if you “must” accept a private flood policy because it is adequate compared to and NFIP policy. Since this policy is in addition to the policy you have for the required amount, it is isn’t required by the regulations to satisfy the minimum purchase amountso you are not needing to review to determine whether you “must” accept it. With that said, a review to determine it is adequate should be done and I’d suggest it may be the best decision for the bank to review the policy as you would a private policy for satisfying the requirements of the flood regulations (e.g. ensure adequate policy for safety and soundness, consistent process is less for staff, etc.).
I saw this announcement this morning. Since we don’t have any guidance to the contrary, I’d suggest sticking with your normal adverse action procedures. If you have a loan application that was submitted while you were still offering this type of loan then I think you send an AA and put that the SBA PPP funding has been depleted and the program is not currently available in the “other” slot. If the program is not longer available and you receive an application (not common I assume since your lenders will likely have a conversation before an app is submitted), I don’t think it would be considered AA (see below) because the program isn’t available and you don’t offer the credit requested; however, I think I would prefer to go ahead and send an AAN to these customers as well for consistentcy and documentation.
1002.2(c):
Adverse action. (1) The term means:(i) A refusal to grant credit in substantially the amount or on substantially the terms requested in an application unless the creditor makes a counteroffer (to grant credit in a different amount or on other terms) and the applicant uses or expressly accepts the credit offered;
(ii) A termination of an account or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor’s accounts; or
(iii) A refusal to increase the amount of credit available to an applicant who has made an application for an increase.
(2) The term does not include:
(i) A change in the terms of an account expressly agreed to by an applicant;
(ii) Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account;
(iii) A refusal or failure to authorize an account transaction at point of sale or loan, except when the refusal is a termination or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor’s accounts, or when the refusal is a denial of an application for an increase in the amount of credit available under the account;
(iv) A refusal to extend credit because applicable law prohibits the creditor from extending the credit requested; or
(v) A refusal to extend credit because the creditor does not offer the type of credit or credit plan requested.
(3) An action that falls within the definition of both paragraphs (c)(1) and (c)(2) of this section is governed by paragraph (c)(2) of this section.
Answer by Jholzknecht:
It appears that your planned response is consistent with our recommendation. Keep your procedures the same. If you run in to a situation where the borrower intends to renew a FEMA policy, but is running in to a COVID related delay, such as the agent’s reduced office hours, then on a case-by-case basis you could rely of the delay provision. Still we recommend following your normal procedures in such a situation; force place the insurance. If the borrower obtains the coverage at a later date then the force-placed policy can be cancelled and FEMA will issue a full refund of the premiums.If an employee contracts covid what should we do?
The CDC guidane for businesses states:
Additional Measures
Centers for Disease Control (CDC)
Additional Measures in Response to Currently Occurring Sporadic Importations of the COVID-19:
• Employees who are well but who have a sick family member at home with COVID-19 should notify their supervisor and refer to CDC guidance for how to conduct a risk assessment of their potential exposure.
• If an employee is confirmed to have COVID-19, employers should inform fellow employees of their possible exposure to COVID-19 in the workplace but maintain confidentiality as required by the Americans with Disabilities Act (ADA). Employees exposed to a co-worker with confirmed COVID-19 should refer to CDC guidance for how to conduct a risk assessment of their potential exposure.I apologize we overlooked your question earlier. Thanks for your patience.
1024.17(f)(1)(ii) states:
“The servicer may conduct an escrow account analysis at other times during the escrow computation year. If a servicer advances funds in paying a disbursement, which is not the result of a borrower’s payment default under the underlying mortgage document, then the servicer shall conduct an escrow account analysis to determine the extent of the deficiency before seeking repayment of the funds from the borrower under this paragraph (f).”My understanding is that it would be before you seek an increase as that would be their repayment. Their normal payment would not be repayment of the funds advanced.
Here’s a blog article we did on this guidance back in 2014: https://mycomplianceresource.com/interagency-guidance-on-helocs-nearing-their-end-of-draw-periods/.
We state in the article: “Most creditors renew or refinance the HELOC as the draw period comes to an end. Normally this is a smooth process, but in some cases borrowers may have difficulty meeting higher payments resulting from principal amortization or interest rate reset, or renewing existing loans due to changes in their financial circumstances or declines in property values. These are the situations addressed by the interagency guidance.”
I think approach you want to take is to consider the entire guidance as a risk management guidance. It is designed to address situations where the borrower might experience difficultes, but there may be certain aspects you’ll want to apply to all HELOCs and some that will apply to those that may have trouble. I dont’ believe the guidance gives specific timing of a maturity notice – if I missed it please let me know.
I hope this helps. Please let us know if you have other questions.
