■ ■ ■ Guidance on how the banking industry can handle (or whether
if it can handle) the legal marijuana industry. Given the fact that
33 states (and counting) have legalized marijuana use in one
form or another, clarity on this issue is long overdue. However,
it will likely take some sort of Congressional action to provide
any safeguards above and beyond what the regulatory agencies are willing to provide. This is a political conundrum at its
heart, but hope springs eternal. For more information, see the
article entitled Compliance and The Cannabis Conundrum by
Robert Rowe on page 4 of the September–October 2018 issue
of ABA Bank Compliance magazine.
The Enforcement Environment
There are more than a few Boards of Directors who hold the
opinion that enforcement of compliance laws and regulations
has decreased significantly, and that means compliance need
not be a priority going forward. While the days of front-page
monster dollar civil money penalties are gone for the most
part (at least for now), there is still significant enforcement
going on out there. A quick search of your regulator’s website
will confirm this. In fact, UDAAP consent orders represented
$1.35 Billion last year which is 10 times the 2017 total. Don’t
fool yourself, and don’t let your management and Boards be
fooled; compliance is still a critically important issue in the
mind of the agencies.
Also realize that while enforcement actions may not be
front-page news, supervision of banks has not slowed at all.
Matters Requiring Attention (MRAs) and similar types of non-monetary enforcement has not disappeared; in fact, anecdotal
information suggests there are more MRAs out there than ever
before. Regulatory relief has unfortunately been interpreted
by some as a rationale to decrease compliance staffing, investment, and priorities. This can come back to bite the bank that
makes too many incorrect assumptions about the importance
(or lack thereof) of compliance. Make sure your bank is not
one of them.
As far as changes within the regulatory agencies, expect no
significant changes. It appears the leadership of the various agencies has finally been set after several years of uncertainty. As well,
constitutional challenges to the CFPB’s structure have been beat
back or are not being pursued. There should be no course-altering
news on this front in 2019.
With all this as backdrop, what should your compliance priorities
be in 2019? Here are a few suggestions:
HMDA compliance and its impact. March 1st, 2019, is likely
a date you have circled on your calendars; it is the submission date
for the new 2018 data. Even if you are not a bank required to submit
a slew of new data under the revised rules, HMDA compliance is
especially important this year due to the public attention and scrutiny that will be given to the data. Many banks are struggling with
gathering and validating all the new data, and this is especially true
for lines of credit, newly reported for 2018. While it is true that the
agencies have announced they will take into account a bank’s “good
faith efforts to comply,” this is not a license to report bad data. Further,
do you want your bank’s public face of its fair lending efforts in the
mortgage market to be based on erroneous information? Nothing is
worse than having to defend allegations of disparate treatment and
impact when they’re based on information that isn’t even accurate.
Expect much attention to be given to the industry’s performance
once the 2018 data becomes publicly available.
Also consider that you might not even know who is accessing
and analyzing your data. Since the information is freely available on the CFPB’s website, anyone can access it without your
knowledge. In prior years, you’d know since the request would
come to your bank for its data. Plus, it is available in a standardized format now, so it’s much easier for the press, community
groups, and your competitors to slice and dice your bank’s data
to their heart’s content.
Keep your nose to the grindstone when it comes to HMDA
compliance. Make sure you continue to improve your processes,
understand and implement all the new interpretations and changes
to the data elements brought about by the new rules, and continue
to monitor the CFPB for any new rules or guidance they issue.
Consider 2019 the starting point for HMDA, not the finish line.
For more information, see my article entitled Hidden Tripwires
in the New 2018 HMDA Rules in the January–February 2019
issue of ABA Bank Compliance on page 14.
Fair Lending. This is one area where the regulators have certainly
not lightened up. Fair lending supervision and enforcement is alive
and well, and hopefully your bank’s fair lending program has kept
up with all that is new and expected. In December of 2016, the
CFPB issued a blog post stating its fair lending priorities. They
have done exactly what they said they would, as ( 1) redlining;
( 2) mortgage and student loan servicing: and ( 3) small business
lending continue to be critically important. Expect no reduction
in attention to fair lending issues in these areas.
Also important for fair lending attention in 2019:
■ ■ ■ Debt collection. While certainly part of the servicing realm,
particular attention is being placed on fairness in collection
practices. This is not FDCPA-related but rather a close look
at whether collection practices adversely impact members of
protected classes. Processes as well as outcomes are being examined, and not just in mortgage and education lending; particular
attention is being placed on credit cards and auto lending.
■ ■ ■ Credit scoring models. Credit reporting in general is being
We’re going through yet another cycle
of expiration and renewal of the
National Flood Insurance Program (NFIP),
and discussion of a permanent renewal
of the program along with changes
in the rules have been percolating
for some time.