Fincen Rules on Armored Car Services

Capitol Comments

July 2013

C A P I T O L C O M M E N T S J U L Y 2 0 1 3 Page 1

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Recent News

FinCEN rules on armored car services

FinCEN issued an administrative ruling (FIN-2013-R001[i]) in response to issues and concerns related to FinCEN ruling FIN-2009-R002[ii]. The 2009 ruling clarified that, when an armored car service (“ACS”) is contracted to conduct transactions on behalf of a customer of a financial institution, the financial institution’s CTR filing requirements would be the same as they would be with any other third-party facilitating a transaction for a customer. Although FIN-2009-R002 is consistent with current and past policy, financial institutions and the armored car services industry raised issues that have led FinCEN to provide an exception to CTR data collection and aggregation requirements. This exception applies only when ACS employees conduct transactions that debit or credit the account of a financial institution’s customer pursuant to instructions received from the customer or from a third party.

Comment: According to the Administrative Ruling, it supersedes FIN-2009-R002. Financial institutions that are ready to submit CTRs in accordance with this Administrative Ruling may start taking advantage of this relief immediately. Those financial institutions may need to modify systems to file CTRs appropriately pursuant to FinCEN’s regulation

Interchange fee standards: Small issuer exemption

To facilitate compliance with the debit card interchange fee standards,the Board publishedtwo lists[iii] of institutions using data available to the Board. These lists are intended to help payment card networks and others determine which issuers qualify for the statutory exemption from the interchange fee standards. The statute exempts any debit card issuer that, together with its affiliates, has assets of less than $10 billion. The lists have been generated from the set of institutions in existence on December 31, 2012, according to the available data.

Institutions have been grouped into two categories: Exempt and Not Exempt. Institutions in the Exempt category have been determined to have, together with their affiliates, reported assets of less than $10 billion, and therefore are exempt from the interchange fee standards under the statute. Institutions in the Not Exempt category have been determined to have, either individually or together with their affiliates, reported assets of $10 billion or more, and therefore are not exempt from the interchange fee standards under the statute.

A small number of debit card issuers may not appear on either of these lists, such as institutions for which the Board has incomplete affiliate data, de novo institutions for which the Board did not have financial data as of December 31, 2012, and issuers without federal deposit insurance. If an issuer does not appear on either of these lists and is exempt from the interchange fee standards, it should so certify to its participating payment card networks.

Comment:If you believe that information in these lists is not accurate, you may submit a request for a correction of the information by filing a correction request using the email box providedhere.[iv]

CFPB rulemaking agenda

The CFPB posted its semi-annual update of their rulemaking agenda. This is part of the Office of Management and Budget’s initiative to publish a Unified Agenda of federal regulatory and deregulatory actions across the federal government. The CFPB agenda includes a number of rulemakings mandated by the Dodd-Frank Act.

Comment: In its announcement about its rulemaking agenda, the CFPB said that it expects to issue a final rule on the streamlined federal mortgage disclosures this fall. The CFPB said that it would not expect implementation work to begin until after the January 2014 effective date for the earlier mortgage rules. The CFPB also expects to issue a proposal regarding privacy notices. In fact, in the announcement they mention that: “A number of commenters had suggested that eliminating the annual privacy notices where there has been no change in policies would reduce unwanted paperwork for consumers and unnecessary regulatory burdens, at least where a financial institution limits the sharing of information with third-parties.” Banks and their customers alike hope the CFPB listens to these commenters.

FDIC: June Call Report changes

The Call Report for the June 30, 2013, report date must be received by Tuesday, July 30, 2013. As discussed in FIL-29-2013[v], dated June 28, 2013, this quarter's Call Report includes revisions to the data reported by large institutions and highly complex institutions (generally, institutions with $10 billion or more in total assets) for deposit insurance assessment purposes. (FIL-30-2013[vi])

Final list of rural and underserved counties for use in 2014

Several CFPB rules have provisions related to mortgage loans made by creditors that during the preceding year operated predominantly in “rural” or “underserved” counties or mortgage loans made in “rural” counties. In general, for purposes of these provisions, “rural” counties are defined annually by using the USDA Economic Research Service’s urban influence codes, and “underserved” counties are also defined annually by reference to data collected under the HMDA. The CFPB recently posted the 2014 list[vii].

Comment: The list of rural or underserved counties adds Lamar, Mason, Moore, San Jacinto counties. Unfortunately, Erath, Falls, Howard, Lynn, Martin, Newton, Uvalde, and Willacy counties were on the 2013 list, but are not on the 2014 list.

Realizing that the definitions of “rural” and “underserved” may need refining, the CFPB issued this statement with the final 2014 list:

To alleviate these concerns and to facilitate lending by small creditors while we consider whether and how to refine the definitions, we are taking a number of steps to amend the affected rules:

First, as noted above, our recently finalized ATR Concurrent Rule extends the ability to originate balloon QMs to certain small creditors that do not operate predominantly in rural or underserved areas during the period from January 10, 2014, to January 10, 2016, to facilitate transitioning from balloons to adjustable rate mortgages. That means small creditors that do not operate predominantly in counties on the Bureau’s list can still take advantage of the balloon QM provision if they meet the rule’s other criteria.

Second, we also recently proposed to extend the same treatment to these small creditors for purposes of the high-cost mortgage balloon exemption. If adopted, this proposed change also would allow small creditors not operating predominantly in rural or underserved counties to take advantage of the exemption from the high-cost mortgage balloon restrictions.

Third, we also proposed to extend eligibility for the rural or underserved exemption from the escrows requirement to creditors that operated predominantly in rural or underserved counties in any of the previous three years. Under this proposed change, creditors that operated predominantly in rural or underserved counties in 2012 (and also meet the other criteria and thus are eligible for the exemption during 2013) would not lose eligibility during 2014 as a result of any differences between the 2013 list and the 2014 list that we are posting today (or in 2015 if a county’s status changes next year).

These proposals should allow many community banks to continue to make mortgage loans while the CFPB works on its definitions of rural and underserved. Hopefully, Congress will enact legislation that will exempt in-portfolio loans.

FinCEN warns of fraudulent correspondence

FinCEN has been receiving calls and reports of financial scam attempts conducted via telephone. In this scam the caller represents himself/herself as an employee of FinCEN and asks for the victim by name, either at the victim's home or work number. The caller will identify an outstanding debt; this debt may be actual or bogus. The caller will provide the victim with the victim's account, Social Security or other similar number and demand that immediate payment be made. The caller's knowledge of the victim's name, telephone number, account description and personal information serve to legitimize the caller.

FinCEN also has become aware of another financial scam conducted via e-mail and telephone in which an individual claiming to be a representative of the U.S. Department of the Treasury or FinCEN informs the victim that he/she has received a large Treasury Department grant. To obtain the grant, the victim is instructed to provide bank account information and make some type of initial payment or donation.

CFPB publishess mortgage rules “readiness guide”

The CFPB published the 2013 CFPB Dodd-Frank Mortgage Rules Readiness Guide[viii] (the Guide) to help financial institutions come into and maintain compliance with the new mortgage rules. The CFPB designed this guide for use by institutions of all sizes. The Guide summarizes the mortgage rules finalized by the CFPB in January 2013.

CFPB bulletin on responsible conduct by those subject to enforcement investigations

The stated purpose of the bulletin (CFPB Bulletin 2013-06[ix]) is to encourage providers of consumer financial products and services to do certain things that have real consumer benefits and contribute to the CFPB’s work in protecting consumers. The bulletin states that providers engaging in responsible conduct can help the CFPB detect illegal behavior more quickly, use the CFPB resources more efficiently, and increase the effectiveness of their enforcement investigations. In some cases, responsible conduct may also mean injured consumers receive money — or other meaningful remedies — more quickly from those who hurt them.

Comment: The bulletin states that four categories of conduct are considered when determining whether some form of credit is warranted in an enforcement investigation: Self-policing, self-reporting, remediation, and cooperation during the CFPB’s enforcement investigation. The bulletin says that it may take other activity into consideration.

OCC: Change in submitting information through assessment account designation form

The OCC issued a bulletin (OCC 2013-16[x]) to inform all national banks, federal savings associations, and federal branches and agencies of foreign banks (collectively, banks) of a change to the process of submitting information through the assessment account designation form. The change is effective July 31, 2013.

As of July 31, banks will no longer be able to submit assessment account designation forms by fax. The forms will be processed through BankNet, the OCC’s secure electronic system for national banks and federal savings associations.

FDIC releases second installment of technical assistance videos

The FDIC today announced the release of the second installment in a series of technical assistance videos to provide useful information to bank directors, officers, and employees on regulatory issues and proposed regulatory changes.

The six videos are a virtual version of the FDIC's Directors' College Program delivered by regional offices throughout the year. The curriculum includes interest rate risk, third-party risk, corporate governance, the Community Reinvestment Act, information technology, and the Bank Secrecy Act.

The FDIC's technical assistance videos and additional information can be accessed at

FinCEN guidance on difficulties submitting electronic reports

As of July 1, 2013, financial institutions are required to file the Report of Foreign Bank and Financial Accounts (FBAR) electronically. FinCEN issued guidance (FIN-2013-G002)[xi] recognizing that financial institutions may, on limited occasions, have administrative difficulties submitting the FBAR electronically within the required timeframes. If this happens to your institution, you should contact FinCEN’s Regulatory Helpline at 1-800-949-2732 to make FinCEN aware of the problem and determine possible alternatives.

CFPB Blogs

New ways to combat harmful debt collection practices[xii]

Rulemaking agenda[xiii] (See full article)

Consumer advisory: You don’t have to pay someone to help with your student loan[xiv]

Final list of rural and underserved counties for use in 2014[xv] (See full article)

What you should know about military allotments[xvi]

Encouraging “responsible conduct” in enforcement[xvii] (See full article)

Explainer: Changes to student loan interest rates[xviii]

Starting a small business when you have student debt[xix]

Using the National Flood Hazard Layer Web Map Service in Google EarthTM

New KMZ files for revised Stay Dry and National Flood Hazard Layer services were released and must be downloaded from the links provided to view the NFHL in Google Earth. FEMA Mapping Information Platform[xx].
Free Webinar: Indirect Auto Lending – Fair Lending Considerations

On Tuesday, August 6, at 10:30 a.m. Central, the Fed, the CFPB, and the DOJ are hosting a discussion on fair lending considerations related to indirect auto lending programs.Maureen Yap, special counsel and manager of the Federal Reserve’s Fair Lending Enforcement Section; Coty Montag, deputy chief of the Department of Justice’s Housing and Civil Enforcement Section of the Civil Rights Division; and Patrice Ficklin, assistant director of the CFPB’s Office of Fair Lending and Equal Opportunity, will cover topics including:

CFPB Bulletin 2013-02 Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act (ECOA)

• Definition of a “Creditor” under ECOA
• Supervisory Guidance
• Examination Procedures
• Public Settlements
• Emerging Issues

They will respond to audience questions after the presentation. In addition to taking questions during the webinar, please consider sending in questions via e-mail in advance of the event to facilitate the Q&A segment. Log-in and e-mail information will be provided with registration confirmation. Please click on this URL or copy and paste it into your browser to register:

Publications, reports, studies, testimony & speeches

Fed, FDIC, OCC issue New Capital Rule, Community Bank Guide

The Fed, FDIC, and OCC have jointly released a guide entitled New Capital Rule, Community Bank Guide[xxi] to help small, non-complex community banking organizations understand the sections of the recently adopted capital rule most relevant to their operations.

Fed publication quantifies cost or increased regulation on community banks

In an Economic Policy Paper entitled Quantifying the Costs of Additional Regulation on Community Banks[xxii], the Minneapolis Fed quantified the cost of increased regulation on community banks. They did so by modeling the impact of new regulatory costs as the hiring of additional staff, resulting in higher total compensation and lower profitability. They then analyze the changes in the distribution of community bank profitability.

Comment: The report found that the median reduction in profitability for banks with less than $50 million in assets is 14 basis points if they have to increase staff by one half of a person; the reduction is 45 basis points if they increase staffing by two employees. The former increase in staff leads an additional 6 percent of banks this size to become unprofitable, while the latter increase leads an additional 33 percent to become unprofitable.

OCC Mortgage Metrics Report

This OCC Mortgage Metrics Report[xxiii] for the first quarter of 2013 provides performance data on first-lien residential mortgages serviced by selected national banks and one federal savings association. The mortgages in this portfolio comprise 55 percent of all mortgages outstanding in the United States—27.9 million loans totaling $4.7 trillion in principal balances. This report provides information on their performance through March 31, 2013.

FHFA: Foreclosure Prevention Report

The FHFA released the Foreclosure Prevention Report, First Quarter 2013[xxiv], which contains data on foreclosure prevention activity of Fannie Mae and Freddie Mac through March 2013.

Fed issues: Consumer Compliance Outlook

Consumer Compliance Outlook[xxv] is a Federal Reserve System publication dedicated to consumer compliance issues. The current issue, second quarter 2013, contains: Perspectives on Consumer Protection: A Conversation with Governor Duke; Fair Lending Webinar: Questions and Answers; Adverse Action Notice Requirements under the ECOA and FCRA; News from Washington: Regulatory Updates; On the Docket: Recent Federal Court Opinions; and Calendar of Events.

Fed’s July FedFocus

July’s FedFocus[xxvi] includes the following articles: The Time is Now (An article on the long-term benefits of same-day ACH); Are You the Weakest Link? (an article on security), and Vantage Credit Union sets SMART goal to fully experience the benefits of a FEDucation (regarding staff training on the Fed’s check adjustments webinar series).

Fed’s July FedFlash

July’s FedFlash[xxvii] includes articles on these topics: Additional changes for Paid Item adjustments; New FedReceipt RTNs; Revisions to Operating Circular 10, effective July 16; Self-service tools; Revisions to Operating Circular and retirement of Operating Circular 8, effective July 25, 2013.

FHFA Refinance Report, April 2013

FHFA released its Refinance Report[xxviii] with data on the refinance program activity of Fannie Mae and Freddie Mac through April 2013.
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Agency rulemaking:

Selected final rules since last Capitol Comments:

CFPB finalizes corrections, clarifications, and amendments to mortgage rules[xxix]Among other things, this final rule:

• Clarifies how to determine a consumer’s debt-to-income (DTI) ratio: Under the Ability-to-Repay rule, a lender may make a Qualified Mortgage (QM), a loan for which certain features are prohibited and fees that can be charged are limited. The main type of Qualified Mortgage requires that a consumer’s monthly debt payments, including the mortgage, will not be more than 43 percent of the consumer’s monthly income. This rule clarifies and amends how several factors can be used to calculate a consumer’s DTI ratio. Such factors include a consumer’s employment record and income, business credit reports and other documents relating to self-employed consumers, Social Security income, and non-employment related income such as from a trust or rental property.

• Explains that CFPB’s RESPA rule does not preempt the field of servicing regulation by states: The preamble to the Bureau’s final mortgage servicing rules made clear that CFPB authority on servicing, from the Real Estate Settlement Procedures Act (RESPA), does not preempt the field of possible mortgage servicing regulation by states. In today’s final rule, the Bureau is adding a comment to expressly state this point and explain how RESPA preemption works.

• Establishes which mortgage loans to consider in determining small servicer status: The servicing rules issued in January included an exemption from some requirements for small servicers. Today’s changes clarify which mortgage loans will be considered in determining whether a servicer qualifies as small. For example, loans serviced on a charitable basis will not be considered in making that determination.

• Clarifies the eligibility standard of the temporary QM provision: Under the Ability-to-Repay rule, a loan can be a Qualified Mortgage if it is eligible for purchase, guarantee, or insurance by government sponsored enterprises (GSEs) or by certain federal agencies, provided the loan does not contain certain risky loan features and meets certain limitations on points and fees. Today’s rule clarifies the standards that a loan must meet if the creditor is underwriting it based on GSE or agency guidelines. For example, where a loan is eligible for GSE or agency purchase, guarantee, or insurance, creditors do not need to satisfy the types of procedural and technical requirements that are completely unrelated to the consumer’s ability to repay.

The rule is effective January 10, 2014.