Pub. 7 2019 Issue 1

14 The Community Banker www.mibonline.org COMPLIANCE Q&A – SPRING 2019 By Bill Showalter, Senior Consultant, Young & Associates, Inc. Compliance Q&A 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. FCRA. Q: A gentleman came into the bank to open a checking account. The teller began the process and pulled his credit. He had a personal check for over $4,000 to deposit. The teller told him there would be a hold placed on the account upon opening, and he chose not to open the account and left. Since we did not deny him from opening the account, is an FCRA adverse action notice necessary? And if not, what would the typical procedure be to remain compliant. A: No, an FCRA adverse action notice is not required since, as you note, the bank did not turn down this person’s application for a deposit account – he withdrew it, in effect. What should be done is to retain information that the bank had collected (including the credit report), make some notation (memo, etc.) of what happened, and file it wherever the bank normally files its adverse action notices for deposit accounts. TILA. Q: If we find a mistake on a Closing Disclosure more than 30 days past the closing date, is there any action we should take to cor- rect and redisclose to the borrower? For example, if the margin listed in the Adjustable Interest Rate Table was incorrect or does not match the signed note. Would the corrective steps be any different if six months have passed since closing or more than one year? A: Yes, when the bank discovers such a clerical error on a Closing Dis- closure, it should correct it and send the customer(s) a corrected CD. Ide- ally, any errors will be discovered sooner rather than later – though rare instances of later discovery should not be too big an issue, as long as the exception does not become the rule. The CFPB’s Small Entity Compliance Guide for the TRID rule has guidance on how to handle CD corrections. The 60-day window after closing is when the bank can “cure” the violation, make it as though it never happened. However, correction after that window may have some effect on bank liability (as it usually did in the pre-TRID era), but that is untested to date. BSA. Q: If we have a customer who opened an account with us a couple of years ago and at account opening provided us with a cur- rent state driver’s license, are we responsible for obtaining a current valid picture ID if his driver’s license has now expired? We always get a current valid picture ID when a new account is opened regardless of how long that person has been a customer. A: No, there is no requirement that you track ID expirations during the life of an account and obtain updates when renewal of IDs occur. The bank’s practice of obtaining/verifying ID when any new account is opened is prudent and is sufficient for remaining updated. EFAA. Q: If a new customer wants to open a new account with an SSI check over $14,000, are we able to make the first $5,000 available the next day and hold the rest because this is a new account? Or, do we have to make all the funds available the next day since it’s a government check? Regulation CC says next-day availability for government-issued checks, but with special circumstances for “new accounts” (within 30 days from opening)? A: Regulation CC provides that the next-day availability require- ment for deposit of U.S. Treasury checks into a “new account” applies only to the first $5,000 of that deposit. The remaining balance must be made available no later than the ninth business day after the bank- ing day of deposit (unless the bank’s funds availability policy provides for quicker availability). RESPA. Q: We recently attended a webinar dealing with escrows. The question was brought up about using the remaining balance in the escrow account as part of the payoff. The “expert” doing the webinar stated that we should always refund the funds back to the borrower. When we do a refi of a bank loan, we normally use the remaining escrow funds to reduce the payoff amount. Is there some- thing in the regs that prohibits us from doing this? A: Regulation X (RESPA) allows lenders/servicers to net remaining escrow balances against outstanding loan balances at payoff or to credit those funds to an escrow account for a new loan. If you are going to credit those funds to a new escrow account (for a new loan), you have to get the customer’s agreement – no customer agreement is required for netting them against a payoff. TILA. Q: We have a customer that is purchasing a new primary residence. He currently lives in a house he owns that we are also taking as collateral on this loan. Since he is moving into the house he is purchasing, do we need a right to cancel on this loan? A: Yes, any time a lender takes the borrower’s current home as collat- eral/additional collateral on a loan to buy or build a new home, the loan is subject to the right of rescission. So, rescission notices and “material disclosures” must be given, disbursement must be delayed, and so forth. EFTA. Q: How long does a customer have to tell us about an unauthorized ACH item? Is it 60 days from the statement date? Is that calendar or business days? A: The customer must notify the bank within 60 days – calendar days – after the bank transmits the periodic statement to the custom- er to limit their liability under Regulation E. For an ACH transaction, if the customer notifies the bank within 60 days after transmission of the first statement showing the unauthorized ACH, then the customer will have no liability for any subsequent unauthorized ACHs from/to the same person that may occur before they finally do give notice to the bank (which will cut off their liability for future such unauthorized EFTs) – plus, the customer has no liability under Regulation E for that first unauthorized ACH. BSA. Q: We have a question about requiring beneficial owner infor- mation on a commercial loan taken out by individuals but guaranteed by a business. We are closing an unsecured loan for two individuals. They are purchasing a property to use as storage for their business, a business purpose loan. The business is a guarantor on the loan. Do we need to get beneficial owner certification on the business (legal entity)? I believe we do not. The business is not the borrower and therefore not our customer in this transaction. A: Your understanding appears to be correct. The rule addresses a legal entity customer that opens an account/loan, not a legal entity that acts as a guarantor.