Conventional wisdom says the regulatory pendulum has begun to swing in the opposite direction, with businesses of all types seeing some relief from post-recession government oversight. Banks and credit union compliance professionals can be forgiven for not yet raising a toast, however. The parade of new mandates and rule changes impacting financial services firms continues largely unabated. Ironically, even the occasional regulation reduction leads to short-term pain as banking technology and operational processes must be revamped and potentially recoded.
Here are some recent changes we believe should be on your compliance radar. While ARGO regularly updates its software to support such mandates, we also track items beyond those impacting our own products in an effort to keep our customers informed.
The Home Mortgage Disclosure Act (HMDA) requires banks and credit unions to collect info on 110- data fields. In a recent bulletin, the OCC identified the 37 key fields on which examiners from various agencies will focus for testing and validation. While this does not eliminate the need to track all 110, any good student knows to place added attention on items the teacher has signaled will be on the test.
Another important component of HMDA reporting involves Higher Priced Mortgage Loans (HPMLs). ARGO is updating its ADE decision engine software to provide a pair of HPML spreads allowing bankers to more easily assess compliance with Regulation Z. Lenders must confirm that each loan’s APR is within a certain range of the Average Prime Offer Rate (APOR) in order to be compliant. Naturally, such validation is most efficiently and accurately performed using automated tools.
Small Business Burdens
There is good news on the small business front, where the Trump administration has placed much of its deregulation emphasis. The Dodd Frank Act (Section 1071) calls for financial institutions to collect data on a wide array of business activities involving small, women- and minority-owned businesses. Last fall, however, the CFPB reclassified this mandate as a long-term action item. Some of this data may serve compelling business needs and, if so, is likely already being captured. Banks have bought some extra time to implement other collection projects, however, and can therefore redeploy resources toward higher-value projects.
The CFPB extended another olive branch with regard to its rule governing prepaid account reporting. Beginning this month, financial institutions must file copies of prepaid account agreements (including fee information) with the CFPB; however, it has now launched an electronic submission portal to streamline the process.
Late last year the Department of Labor also issued a proposal notice to allow small businesses to pool resources for the purpose of offering 401(k)-like retirement plans to their employees. The comment window has closed, but this initiative bears watching as it poses both opportunities and threats for banks’ relationships with their small business clients.
Rule 370, or 370 Rules?
The FDIC’s Rule 370 aims to ensure the timely return of insured depositor funds in the event of a large bank failure. All financial institutions with more than 2 million deposit accounts must comply with these new rules by April 2020. Compliance requires the capture of 31 specific data elements as well as demonstrated implementation of a program to deliver on the rule’s objectives. We are working with our clients to help them meet these goals.
We can safely assume that ongoing changes like these will persist for as long as there are banks and credit unions (and legislators). As an active partner to the financial services sector, we at ARGO will do our best to communicate the items we believe will impact your institution’s data strategy.
For more information, check out the full compliance bulletin below.