Pub. 4 2016 Issue 1

22 The Community Banker www.mibonline.org COMPLIANCE Q&A – SPRING 2016 By Bill Showalter, Senior Consultant, Young & Associates, Inc. Compliance Q&A TILA. Q: Is a written rate lock agreement required? If the bank does not use one, should we start? On loans that we do not have a signed agreement, are we bound by the rate on the loan estimate? Upon the Loan Estimate's (LE) expiration, could the rate change and a new LE be issued? A: No, a written rate lock agreement is not required by Regulation Z (TILA) or Regulation X (RESPA). Whether your institution starts using one is a decision for your bank man- agement to make. After the LE’s “expiration” (after 10 days), the rate may change if it has not been locked or, if it has been locked, if the date disclosed for the end-date of the lock has passed. And, a new LE may be issued at that time reflect - ing any changes to settlement costs. TILA. Q: In regard to employment ver- ification under the ability to repay (ATR) rules, how exactly should we be verifying current employment? I am under the as- sumption that we need to actually contact the applicant’s employer and document howwe verified and who we spoke to. Speaking with the applicant at his place of employment would not qualify. Can you please advise? A: You are correct that just calling the applicant at his place of employment is not sufficient. You will need to be verifying employment by some “reasonably reliable third-party records.” For employment status itself, a written Verification of Employment form and/or a documented call to the em- ployer (human resources or similar area) is needed. TISA. Q: Are we required to remove the Courtesy Overdraft Service Limit from our Online Banking? Currently our “Available Balance” includes the overdraft limits. For example, the customer has $200 in her account, with a $700 overdraft limit. The Available Balance would state $900. Above the “Available Balance,” we also include the disclaimer: “Your ‘Available Funds’ may include your Courtesy Over- draft Service limit.” Are we in violation of Regulation DD? A: Yes, the total balance (including the overdraft limit) may not be the only balance disclosed to the customer. This provision was added to Regulation DD (Truth in Savings) in 2009, effective January 1, 2010. You must at least disclose the available balance (without the overdraft limit) actually in the customer’s account, but may disclose some combined balance as an additional amount (all clearly labelled). EFAA. Q: I am confused in regards to Regulation CC and “new” accounts. What is the longest funds can be withheld. My confusion is with the following paragraph that is posted on the Federal Reserve guide to Regulation CC: • Deposits into accounts of new custom- ers (open for less than 30 days)--Next- day availability applies only to cash, electronic payments, and the first $5,000 of any other next-day items; the remaining amount from next-day items must be available by the ninth business day. You may choose any availability schedule for deposits of other checks into the accounts of these new customers. What does this last paragraph mean? Can holds be longer than nine days for the “other checks”? A: You are correct. That paragraph means just what it says. Deposits beyond what is listed (cash, etc., first $5,000 of next-day items – next day; other next-day items – ninth business day) do not have any specific required availability time frame. The bank sets that on its own. A common time period I have seen for these “remainder” items is the eleventh business day after the banking day of deposit. One thing to remember is that this provi- sion applies only to “new accounts,” which are defined as those for which at least one customer on the “new” account has not had an “account” (transaction account – savings or time accounts do not count) with the bank in the 30 days before opening this latest ac- count. If that is true, then the latest account qualifies as a “new account.” For the bank to be able to impose the “new accounts” hold on deposits to new transaction accounts, it must disclose this fact in its initial funds availability policy disclosure given to the customer when he opens a new transaction account. No notice is required at the time of a deposit into a “new account,” unlike for other exception holds – presumably because of the short time during which this exception may be invoked and the fact that it is disclosed (or should be) on the initial funds availability disclosure. Privacy. Q: We are looking at entering into a referral agreement with a company to provide investment and trust services. There will be no "joint marketing" with the exception of seminars that the bank would host. However, it is being discussed whether we would share customer lists for the investment company to solicit business from our customers on its own behalf. I am trying to decide if we will need to change our privacy policy. We currently disclose that we share for joint marketing with other financial companies but that we do not share with non-affiliates to market to our customers. Since this agreement is with a financial company, are we okay? A: Your statement about this investment firm being given customer lists for them “to solicit business…on its own behalf” is the very definition of sharing with a nonaffiliated entity so that it may market to your custom- ers. Yes, you need to amend your privacy notice before you begin this sharing. This is different from joint marketing with other financial companies – it sounds as if there will not be joint marketing of financial services here (other than the seminars), but market- ing by the investment firm alone to your customers. Young & Associates provides banks and thrifts with support for their compliance programs, independent reviews, and in-bank training, as well as a full menu of management consulting, loan review, IT consulting, and policy systems.