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The CFPB has raised recent concerns about ODP programs. This is a link to a press release in January: https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-launches-initiative-to-save-americans-billions-in-junk-fees/
The OCC also spoke about ODP concerns and POSSIBLE reforms at this link: https://www.occ.treas.gov/news-issuances/news-releases/2021/nr-occ-2021-129.html
This is a link to the basic ODP requirements: https://www.consumerfinance.gov/rules-policy/regulations/1005/17/#c-1
My best suggestion is to check directly with YOUR primary regulator regarding this question. The FDIC has additional requirements, for example.
Generally speaking, regulators have cited enforcement actions for ODP that focused on UDAAP, unfair, deceptive, and abusive acts and practices. These actions are issued when the deposit agreement and ODP agreement aren’t sufficiently clear for a consumer to anticipate how fees are assessed.
As this regulatory shift plays out, industry watchers say that it is probable that at least five limitations are likely:
(1) restrictions on the total dollar amount of fees per day regardless of the number of overdrafts or the amount of account shortage;
(2) allowance of only one fee per overdraft even if the payee re-submits the transaction;
(3) a ban of return check fees (NSFs) when a separate overdraft fee is charged;
(4) prohibition of interest charges on overdraft fees that remain unpaid; and
(5) disallowance of an institution closing an account based solely on repeated overdraft experiences.
In addition to the above, other possible modifications include such things as:
•restrictions on marketing of ODPs and the changes to the prior practices — such as a Pew Trust industry-style-explanatory warning box on monthly account statements;
•regulatory examination of overdrafts as extensions of credit and requiring TILA, ECOA compliance;
•formalized regulatory examination of ODP practices which may include required reporting of fee waivers and refunds in the Call Reports of banks larger than $1 billion in assets (not a current requirement);
•special protections for customers/communities of color which bear the most impact from such fees. Indeed, a recent Financial Health Network study has estimated that Hispanic households paid $3.1 billion in fees in 2020 and Black households paid $1.4 billion;4 and
•discontinuance of immediate recapture in full of ODP fees upon the first deposit made to the accounts and possible repayment periods of 3 months for these fees.
The Bureau’s comment period for new rules closes March 31, 2022. The identified timetable for action is considered to be mid-2022, and many of the larger financial institutions have decided to get ahead on this issue and to voluntarily make changes.I agree with Robin’s comments about that a banner qualifies as outdoor media, and is exempted from additional advertising requirements under 1030.8. Since overdraft rules have become under more regulatory scrutiny in recent years, I would strongly encourage you to ask YOUR primary regulator for additional guidance. In addition to the Reg DD rules, there is always a concern about potential UDAAP challenges. At a minimum you may want to include a statement on the banner that “fees may apply and that consumers should contact an employee for further information about applicable fees and terms”. (NOTE: this is a direct quote from 1030.11 (2)(4) and exception for INDOOR signs.
As Robin noted, the specific requirements for overdraft advertising are in 1030.11. This is the exception for INDOOR signs (not for a banner outside of the branch):
1030.11 (b)(4)
(4) Exception for indoor signs. Paragraph (b)(1) of this section does not apply to advertisements for the payment of overdrafts on indoor signs as described by § 1030.8(e)(2) of this part, provided that the sign contains a clear and conspicuous statement that fees may apply and that consumers should contact an employee for further information about applicable fees and terms. For purposes of this paragraph (b)(4), an indoor sign does not include an ATM screen.The 1030.8 rules for advertising DO have an exemption for outdoor media. However, it limits the additional information to these categories
(e) Exemption for certain advertisements. (1) Certain media. If an advertisement is made through one of the following media, it need not contain the information in paragraphs (c)(1), (c)(2), (c)(4), (c)(5), (c)(6)(ii),(d)(4), and (d)(5) of this section:It does not specifically exempt 1030.8 (f) for the additional disclosures in connection with the payment of overdrafts.
It’s always best to ask permission, rather than forgiveness, from your regulator when advertising for overdraft plans.
HERE ARE THE REQUIREMENTS FOR ADVERTISING ODP:
1030.11 b – NOTE – This could be very challenging to include on an outside banner(b) Advertising disclosures for overdraft services. (1) Disclosures. Except as provided in paragraphs (b)(2) through (4) of this section, any advertisement promoting the payment of overdrafts shall disclose in a clear and conspicuous manner:
(i) The fee or fees transactions for which a fee for paying an overdraft may be imposed;
(iii) The time period by which the consumer must repay or for the payment of each overdraft;
(ii) The categories of
cover any overdraft; and
(iv) The circumstances under which the institution will not pay an overdraft
I agree with Robin’s comments about that a banner qualifies as outdoor media, and is exempted from additional advertising requirements under 1030.8. Since overdraft rules have become under more regulatory scrutiny in recent years, I would strongly encourage you to ask YOUR primary regulator for additional guidance. In addition to the Reg DD rules, there is always a concern about potential UDAAP challenges. At a minimum you may want to include a statement on the banner that “fees may apply and that consumers should contact an employee for further information about applicable fees and terms”. (NOTE: this is a direct quote from 1030.11 (2)(4) and exception for INDOOR signs.
As Robin noted, the specific requirements for overdraft advertising are in 1030.11. This is the exception for INDOOR signs (not for a banner outside of the branch):
1030.11 (b)(4)
(4) Exception for indoor signs. Paragraph (b)(1) of this section does not apply to advertisements for the payment of overdrafts on indoor signs as described by § 1030.8(e)(2) of this part, provided that the sign contains a clear and conspicuous statement that fees may apply and that consumers should contact an employee for further information about applicable fees and terms. For purposes of this paragraph (b)(4), an indoor sign does not include an ATM screen.The 1030.8 rules for advertising DO have an exemption for outdoor media. However, it limits the additional information to these categories
(e) Exemption for certain advertisements. (1) Certain media. If an advertisement is made through one of the following media, it need not contain the information in paragraphs (c)(1), (c)(2), (c)(4), (c)(5), (c)(6)(ii),(d)(4), and (d)(5) of this section:It does not specifically exempt 1030.8 (f) for the additional disclosures in connection with the payment of overdrafts.
It’s always best to ask permission, rather than forgiveness, from your regulator when advertising for overdraft plans.It’s difficult to comment on the author’s position about loss of the automatic renewal exception without seeing the same article. I recommend that you ask your primary regulator for additional guidance.
If Smith Siding Company, LLC changes their name to Sam Smith Siding Company, LLC it is reasonable to assume that they would file new documents with the Secretary of State or similar office. It would be reasonable to require a new Beneficial Ownership Certification in that scenario. If your bank’s current CIP procedures require that the information is updated for a name change, it would be reasonable to follow this requirement under the Beneficial Ownership rules. Question #4 in the April 3, 2018 FAQs probably comes closest to addressing this question. Here are SOME portions of the FAQ:
Question 4: Identification and Verification: Methods of verifying
beneficial ownership information
What means of identity verification are sufficient to reliably confirm beneficial
ownership under the CDD Rule?
A. Covered financial institutions must verify the identity of each beneficial owner
according to risk-based procedures that contain, at a minimum, the same
elements financial institutions are required to use to verify the identity of
individual customers under applicable Customer Identification Program (“CIP”)
requirements. This includes the requirement to address situations in which the
financial institution cannot form a reasonable belief that it knows the true identity
of the legal entity customer’s beneficial owners.2
2. Under the CIP rules, a financial institution’s CIP must include procedures for responding to
circumstances in which the financial institution cannot form a reasonable belief that it knows the true
identity of a customer. These procedures should describe: (1) when the institution should not open
an account; (2) the terms under which a customer may use an account while the institution attempts
to verify the customer’s identity; (3) when it should close an account, after attempts to verify a
customer’s identity have failed; and (4) when it should file a Suspicious Activity Report in accordance
with applicable laws and regulations. See, e.g., 31 CFR 1020.220(a)(2)(iii).
Although the CDD Rule’s
beneficial ownership verification procedures must contain the same elements
as existing CIP procedures, they are not required to be identical to themFinCEN gave this guidance in the FAQ’s issued on July 15, 2016:
Question 24: Section 314(a) Requirements
Q: Do covered financial institutions now have additional obligations under Section 314(a) for beneficial ownership information?
A: FinCEN does not expect the information obtained under the CDD Rule to add additional 314(a) requirements for financial institutions. The regulation implementing section 314(a) does not require the reporting of beneficial ownership information associated with an account or transaction matching a named subject in a 314(a) request. Covered financial institutions are required to search their records for accounts or transactions matching a named subject and report whether a match exists using the identifying information provided in the request.
THIS IS A LINK TO THE FAQ’s (FIN-2016-G003)from 2016: https://www.fincen.gov/resources/statutes-regulations/guidance/frequently-asked-questions-regarding-customer-due-diligence
I am not aware of any additional FinCEN guidance on this issue. As with all BSA issues, it’s a good idea to ask your primary regulator for any additional guidance.
FinCEN will be releasing exam procedures for CDD at a future date (no known date has been mentioned); there may be additional 314(a) updates in the procedures.
(Additional FAQ’s were issued on April 3, 2018; FIN-2018-G001 at: https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf )Posted by Susan Costonis
Additional clarification of a loan “renewal” has been requested from FinCEN. Most regulators have agreed that a new note is a new loan (for HMDA reporting purposes). FinCEN should be releasing new BSA Exam Procedures for Beneficial Ownership and CDD (they have not indicated a release date, but you can sign-up for FinCEN notifications). Pending further clarification, these are some possible steps:
1. Check with YOUR primary regulator for guidance.
2. Contact FinCEN directly and ask for guidance.
3. Establish procedures for loan renewal that would include asking for certification that the previous beneficial ownership information is “accurate and up-to-date” (as stated in FAQ #12).
4. Consider implementing an agreement that the customer will notify you of any change in beneficial ownership information (as state in FAQ #12).Thanks for your question. While FAQ #12 does address the fact that a CD renewal IS a new account if it renews on or after May 11, 2018, the FAQ does not expressly outline expectations that a renewed CD should be closed if the customer doesn’t respond to the request for updated information. This link is to a thoughtful article written on April 23rd in the ABA Banking Journal: https://bankingjournal.aba.com/2018/04/what-you-may-not-know-about-the-beneficial-ownership-rule/
When in doubt, CHECK WITH YOUR PRIMARY REGULATOR for guidance. I believe that the rules give us 3 options:
1. Identify and verify the beneficial ownership information for the legal entity.
2. Use existing information and confirm that it is still accurate.
3. Execute and agreement with the legal entity that they will notify you of any changes from THAT customer for THAT product. (Note – the agreement is only valid for that particular product & customer; it is not a blanket agreement for all accounts).It is true that the CDD procedures should identify when an account should be closed because there are issues with the beneficial ownership information and that “warning” was on the first page of the FAQ’s as shown below. However, it does seem that FinCEN does acknowledge CD renewals are typically a lower risk account.
