EFTA. Q: We issued a provisional credit to a customer for an online card-not-present transaction while we investigated the error they alleged. The dispute for the transaction was filed through our EFT system provider. The merchant denied the dispute based on the methods used to verify the customer at the time of initiating the transaction. The merchant provided us with a copy of the bank customer’s driver’s license as well as a “selfie” photo which the merchant requires when initiating a transaction. We recognize the selfie as being a picture of our customer.

In your opinion, is the evidence of a driver’s license and selfie photo sufficient evidence to revoke the provisional credit?

A: We cannot make the final decision regarding the legitimacy or not of the “error” for the bank. It does sound like the merchant’s evidence is compelling, but only the bank can determine if it is “enough” since that can depend on the bank’s risk appetite.

One step you could take (if not done already) is to contact the customer with this information and see what they say. It may very well be that this will jog their memory, and they may ask to end the dispute process. If this happens (or if the bank otherwise determines that the evidence proves the correctness of the EFT transaction), debiting the provisional credit from their account would seem appropriate while complying with Regulation E requirements for notifying the customer and honoring items and preauthorized transactions initiated based on the provisional credit for five business days after notifying the customer.

TILA. Q: Currently, we disclose the fee for the automobile title on an auto loan, even if we do not do the titling ourselves. Do we have to disclose the fee, or can we stop doing that?

A: Regulation Z generally requires disclosing only amounts that are paid from/with a loan transaction. One exception to that is “security interest charges” (translation: filing fees). Generally, anything paid by the customer to perfect the lender’s security interest is a finance charge unless particular steps are taken. This applies whether the lender collects the fee(s) and pays them to the relevant government agency itself, a dealer collects the fee and pays it to the relevant government agency, or the customer goes directly to the government agency and pays them to file the lender’s lien.

If there are security interest charges (filing fees) involved in a transaction that are required to perfect the bank’s security interest, they are a finance charge unless the fee(s) is (are) “itemized and disclosed” by the lender on/with the disclosure statement given to the borrower. The covered security interest charges are pretty broad, including any fees or taxes specified by relevant law to be paid to a government agency or premiums for insurance obtained in lieu of filing a lien (generally only in states where such insurance costs less than the governmental security interest changes).

Whether the fee for the title itself is included would depend on your state’s process for issuing titles and notating liens. If a new title must be obtained to file the bank’s lien (with a fee for the title issuance), then the title fee would need to be included in the filing fees disclosure — unless the fee would be paid in a comparable cash transaction. This last criterion generally means that a title fee paid as part of an auto purchase transaction will not be included in the disclosed filing fee, while the same fee for a non-purchase transaction would have to be included in the “filing fee” disclosure.

As you can see, how this process is handled in your state impacts what needs to be disclosed as “filing fees.”

Flood Insurance. Q: Can the bank use a previous flood determination if it is not more than seven years old when we do an extension with no new money added to the loan? I read that you can rely on previous determination if the Federal Emergency Management Administration (FEMA) has made no map revisions or updates. Is there a way for the bank to check if revisions or updates have been done since the flood determination was performed if it is within the seven years? Should the bank put this step into the processes when extending the loan?

A: A lender may rely on a previous flood hazard determination when increasing, extending or renewing a loan on the same property. The previous determination must be no more than seven years old and meet the three following conditions: original determination was made on FEMA’s standard flood hazard determination form (SFHDF); the basis for the determination is set forth on the SFHDF; and there have been no map revisions affecting the property since the original determination.

A new determination is required when either a different lender refinances or assumes the loan or when the original lender is making a new loan.

So, for the extension of an existing loan you describe, you may rely on the previous flood determination (as long as it meets the previous criteria).

As for determining if there have been any flood map changes, there are a couple of ways to do this. If you paid the nominal fee for life-of-loan monitoring from your flood determination vendor, they would have notified you of any changes. Of course, you can always contact them to verify that no changes have occurred. Another way to find any map changes is you can go to fema.gov to their flood map utility, input the address and see for yourself.

RESPA. Q: We recently sent out annual escrow account statements, and we have a customer who paid his shortage in a lump sum. He was only $220 short, but dropped off $250 to have put into his escrow account.

Based on what I’m reading in the regulation, I believe we are allowed to accept the additional funds and credit them to the escrow account. We would not be required to run a new analysis based on the overpayment, and in the event that it creates a surplus in his account, we would just have to credit him if the surplus exceeded $50 during the next annual analysis in 2026. 

Am I understanding this correctly? 

A: You are correct. There is no prohibition against the bank accepting the (slight) overpayment and that there is no requirement to perform a new escrow account analysis in this situation. You can just let it ride, so to speak, until the next annual escrow account analysis and statement.

BSA. Q: I want to clarify something regarding the procedure related to a Suspicious Activity Report (SAR) filing and later receiving a subpoena. Several months ago, we filed a SAR. We just received a phone call from the U.S. Secret Service informing us that they were notified of the SAR filing through the Financial Crimes Enforcement Network (FinCEN) and are going to need copies of the documents referenced in the narrative of the SAR. The agent stated he would be sending us a subpoena for the documents but was giving us a verbal heads-up that it would be coming. 

Since the subpoena is coming from a law enforcement agency, do we still have to notify FinCEN? I think not but want to make sure I am not overlooking a step.

A: You are correct that the bank does not need to notify FinCEN in this case — providing supporting documentation for a SAR to a law enforcement agency under a subpoena. FinCEN issued guidance on SAR filings in its release FIN-2007-G003.

Of course, there is also no prohibition against the bank reaching out to FinCEN for guidance, even when notification is not required.

Compliance Policies. Q: The bank does not have a separate Fair Lending Policy. We have always felt we had this covered in our Loan Policy; Unfair, Deceptive, and Abusive Acts of Practices (UDAAP); and Equal Credit Opportunity Act (ECOA) policies. Is it necessary to have a separate policy?

A: There is not a specific mandate for financial institutions to have a separate fair lending policy. However, at least some examiners or agencies seem to prefer individual policies for each law/regulation.