Eleven Financial Services Practice members at FORVIS recently attended the American Bankers Association Regulatory Compliance Conference in Orlando, Florida. Over the course of five days, our experienced professionals shared our forward vision and key service offerings with conference attendees and gained valuable insight into current compliance issues faced by financial institutions.
Below are some key takeaways from the conference for your institution’s compliance and management teams to consider in 2022.
Overdraft Programs – There has been enhanced scrutiny by federal regulators on overdraft programs and fees.12 Now is a great time to revisit your institution’s program to make sure it aligns with regulator expectations. Some items to consider include:
- Re-Presentment NSF Fees – If your institution charges additional nonsufficient funds (NSF) fees for an item that is re-presented and the account does not have the funds to cover the re-presentment, you may need to update your account disclosures. Ensure your account agreement and fee schedule clearly state that a customer may be charged multiple NSF fees for the same transaction if the item is re-presented. Discuss with your vendors to develop a clear understanding of your disclosure parameters.
- Daily and Extended Overdraft Fees – Consider the appropriateness of these fees and how they are designed. Are your institution’s fees structured in a way that provides a valuable service to your customers rather than a detriment?
- It may be beneficial to do a full analysis on your overdraft program and fee income and consider the risk and additional scrutiny on overdraft, NSF, and other related fees. Take into account the customer base of your institution when developing your overdraft program.
Updated Flood Interagency Questions & Answers & Risk Rating 2.0 – On May 11, 2022, the federal agencies released revised Interagency Questions and Answers (Q&As) Regarding Flood Insurance.3 These revised Q&As consist of 144 questions and answers reorganized into designated categories, including three new categories related to private flood insurance. A couple of notable changes to the Q&As are highlighted below, but your institution should review the full revised Q&As to assess the impact on your flood compliance program.
- Risk Rating 2.0 no longer requires lenders to reconcile or be concerned with a discrepancy between the flood zone designation on the flood determination form and the flood zone associated with a flood insurance policy (Q&A Zone 1).
- A lender may accept a blanket flood insurance policy or blanket multi-peril policy covering multiple buildings that includes a per-occurrence deductible, regardless of whether any single building covered by the policy has an insurable value lower than the amount of the deductible (Q&A Amount 10).
Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) Program Risks – UDAAP risk is always a high-priority consideration for financial institutions and requires a risk-based approach—it isn’t one size fits all! On March 16, 2022, the Consumer Financial Protection Bureau (CFPB) announced an expansion of oversight and enforcement of covered persons to all consumer finance products and services, regardless of whether they involve an extension of credit. This means any decision-making process within a financial institution will now be subject to review under a UDAAP lens. While this may seem overwhelming, consider the following steps as a starting point for internal analysis:
- Review complaints your financial institution has received over the previous 18 to 24 months for recurring trends. Have you determined the root cause of these similar complaints? What controls are in place to mitigate these risks?
- Review exception and/or discretion tracking logs within the lending service line for trends. Evaluate proper monitoring and reporting to executive management (and shareholders) for appropriateness. Is the number of exceptions/discretions permissible or appropriate?
- Review the deposit products/services offered to consumers. Is your financial institution meeting consumer/community needs?
Conclusion
FORVIS understands that the ever-evolving world of regulatory compliance presents unique challenges for financial institutions. For more in-depth information on the topics above, as well as other hot topics in regulatory compliance, FORVIS will present its 2022 Regulatory Compliance Midyear Update on July 27, 2022. You can register now for the webinar, which offers CPE credit.
If you have any questions, please reach out to a financial services professional at FORVIS or submit the Contact Us form below.