The Compliance 911 Show
Welcome to Compliance 911, a no-nonsense, cut to the point, style show for today’s busy bank and credit union compliance professionals. With this series of bi-weekly shows our goal is to boil down some of today’s hottest regulatory compliance topics in quick and easy to digest 5-10 minute episodes so you can get the information you want and get on with your day. We’ll be discussing topics like CRA, HMDA, Fair Lending, Anti Money Laundering, and so much more. Don’t forget to subscribe and tell a friend about us! Follow M&M Consulting and GeoDataVision us on LinkedIn to get the latest updates.
Episodes
Tuesday Mar 26, 2024
How to estimate how your performance will look under the new CRA
Tuesday Mar 26, 2024
Tuesday Mar 26, 2024
Podcast #71 discusses how banks can estimate their performance under the new Community Reinvestment Act (CRA) rules. Len highlights bankers' concerns about the increased difficulty in passing the CRA exam with the new rules, which predict a significant rise in failure rates. He emphasizes the importance of the Retail Lending Test, explaining that failing this test results in an overall unsatisfactory CRA rating.To estimate their performance, banks should first focus on the Retail Lending Test and identify their Retail Lending Assessment Areas. The next steps involve determining benchmarks based on geographic and borrower distribution tests and applying multipliers to create calibrated benchmarks for a low satisfactory rating. Banks then need to compute their penetration rates in different income tracts and compare them to these benchmarks.Dean asks about data sources for these calculations, and Len suggests using HMDA and CRA data, along with FFIEC demographic files. He also notes that GeoDataVision will publish relevant benchmarks on their website for further guidance. The podcast ends with an invitation for future topic suggestions from listeners.
Brought to you by GeoDataVision and M&M Consulting
Saturday Mar 16, 2024
2024 Regulatory Hot Topics
Saturday Mar 16, 2024
Saturday Mar 16, 2024
Episode 70 of "Compliance 911, show" titled "2024 Regulatory Hot Topics," discusses the major regulatory challenges facing financial institutions in 2024. Hosts Len and Dean mark their 70th episode, reflecting on various topics covered over the series. They delve into significant regulatory changes including the Community Reinvestment Act (CRA) reforms and Dodd-Frank 1071 rules, highlighting their impact on banks and the ongoing lawsuits challenging these regulations. Additionally, they touch on proposed changes to the Fair Credit Reporting Act (FCRA), slow progress in Anti-Money Laundering rulemaking, and new standards for Automated Valuation Models (AVMs). The episode also covers updates in Fair Lending, digital adaptations for FDIC signs, and mortgage-related regulations, emphasizing their significance for financial institutions in 2024.
Brought to you by GeoDataVision and M&M Consulting
Wednesday Feb 28, 2024
Electronic Funds Transfers-The Investigation Process
Wednesday Feb 28, 2024
Wednesday Feb 28, 2024
Episode 68 of the podcast discusses the investigation process for Electronic Funds Transfers (EFT) under the Electronic Fund Transfer Act. The hosts, Dean and Len, emphasize the importance of consumer protection in EFT and remittance transfers, outlining the process for consumers to dispute unauthorized or incorrect transactions. They stress that financial institutions must promptly begin investigating disputes upon receiving notice, either oral or written, from the consumer. The regulation mandates strict timelines for these investigations, with institutions having 10 business days to investigate, extendable to 45 or 90 days for certain cases if provisional credit is provided. The episode highlights the need for financial institutions to be aware of and comply with these regulations, including the application of Regulation E to Person to Person (P2P) payments. The hosts conclude by encouraging listeners to stay informed about their institution’s error resolution processes and suggesting future podcast topics.
Brought to you by GeoDataVision and M&M Consulting
Tuesday Feb 20, 2024
The Coming Perfect Storm
Tuesday Feb 20, 2024
Tuesday Feb 20, 2024
Podcast #69, "The Coming Perfect Storm," features a discussion between Dean and Len Suzio about new regulatory challenges for the banking sector. Len highlights the implications of two key regulations: Section 1071 of the Dodd-Frank Act and the new Community Reinvestment Act (CRA) rule. Section 1071 requires detailed reporting of small business lending data, including race and ethnicity of borrowers, to the Consumer Financial Protection Bureau. The revised CRA rule emphasizes the impact of fair lending issues on a bank's CRA rating and introduces more stringent criteria for evaluating discriminatory or illegal credit practices.
Len expresses concerns about the potential misuse of small business lending data and the new CRA rule's assessment areas, which could unfairly impact banks' operations and regulatory compliance. He notes that these changes could lead to more aggressive regulatory approaches, especially in light of the Department of Justice's "Anti-redlining Initiative." The podcast concludes with an acknowledgment of the seriousness of these regulatory changes and their potential impact on the banking industry.
Brought to you by GeoDataVision and M&M Consulting
Wednesday Jan 31, 2024
The New CRA II - Retail Lending Test
Wednesday Jan 31, 2024
Wednesday Jan 31, 2024
"The New CRA" features a discussion between Dean Stockford and Len Suzio about the recent changes in the Community Reinvestment Act (CRA) regulations. Len has dedicated significant time to understanding the new CRA rule, which is a lengthy 1,494 pages, and has even published articles on the topic.
He describes the new rule as an "unmitigated disaster for the banking industry," a conclusion drawn not from his personal opinion but from the regulators' own data. The new CRA rule significantly increases the failure rate of CRA exams for banks, estimated to be 10-12%, up from the long-term average of 1.2%. This increase is attributed to the new Retail Lending Test included in the rule.
The new rule introduces additional assessment areas for banks, leading to evaluations in markets far removed from their physical branches. This creates competitive disadvantages for banks in these remote areas, as they are evaluated against the same benchmarks as local lenders. The failure rates in these new assessment areas are alarmingly high, with estimates of 22.4% for Retail Lending Assessment Areas and 28.8% for Outside Retail Lending Areas.
Len highlights that the complexity and size of the new rule, along with the extensive data manipulations required for compliance, may be overwhelming for many. He cites quotes from regulators that explicitly state that the increased failure rate was a deliberate intent of the regulators to "raise the bar" for CRA performance evaluations.
Dean concludes the podcast by expressing that listeners will likely be apprehensive yet eager to learn more about the changes in the new CRA. Both hosts encourage listeners to send in suggestions for future podcast topics.
Brought to you by GeoDataVision and M&M Consulting
Wednesday Jan 17, 2024
ECOA Credit Denial and the use of AI
Wednesday Jan 17, 2024
Wednesday Jan 17, 2024
In this podcast, Dean and Len discuss the September guidance from the CFPB concerning the Equal Credit Opportunity Act (ECOA), credit denials, and Artificial Intelligence (AI). The guidance emphasizes that lenders using AI for credit decisions must provide specific and accurate reasons for adverse actions. This includes updates to sample adverse action forms and checklists to reflect actual reasons for credit denials or changes in conditions. The discussion also touches on potential updates to Home Mortgage Disclosure Act (HMDA) data collection to align with these expanded reasons for adverse action. Dean advises lenders to update ECOA assessments, review policies, procedures, forms, and ensure compliance and substantiation in credit decisions, especially in the context of AI and complex algorithms.
Brought to you by GeoDataVision and M&M Consulting
Wednesday Jan 03, 2024
The New CRA - I
Wednesday Jan 03, 2024
Wednesday Jan 03, 2024
In Podcast #65 titled "The New CRA", Dean and Len discuss the recent changes introduced in the new Community Reinvestment Act (CRA) published just over a week ago. Len highlights three significant changes: the reclassification of bank categories based on their assets; the transformation in assessment areas which now include "facility-based assessment areas", "retail lending" assessment areas, and "outside retail lending areas"; and the modification in performance tests and standards. Particularly, the changes in bank categories mean that small banks are those with assets less than $600 million, intermediate banks have assets ranging from $600 million to less than $2 billion, and large banks have assets of $2 billion or more. The new assessment areas represent a departure from the traditional model, where every assessment area had to contain at least one branch. The performance tests and standards, especially for small banks, may see unannounced changes in benchmarks.
Len delves deeper into the impact of these changes, emphasizing the controversial nature of the new retail lending and outside retail lending areas. He details the criteria that define these areas, stressing that they might face legal challenges. Regarding performance tests, while small banks will ostensibly continue to be evaluated based on current tests, Len anticipates that they might be unofficially held to the new standards. He explains the "Retail Lending test" applied to intermediate and large banks, including a lending volume screen and distribution tests. The podcast concludes with Len's assertion that small banks, despite seemingly escaping significant changes, might still be substantially affected by these calibrated benchmarks in the new CRA.
Brought to you by GeoDataVision and M&M Consulting
Wednesday Dec 20, 2023
Wednesday Dec 20, 2023
In episode 64 of the Compliance 911 podcast, hosts Len Suzio and Dean Stockford discuss the intricacies of Reg. CC, a regulation that deals with funds availability. Dean emphasizes the importance of understanding the definitions within regulations as the same word or phrase might carry different meanings in different contexts. He goes on to explain that Reg. CC was implemented to enforce the provisions of the Expedited Funds Availability Act of 1987, which set the rules for when a bank had to make deposited funds available to depositors. The regulation is highly technical and mandates strict timing provisions based on factors such as the nature of the item deposited, where and to whom the deposit was made, and the bank's funds availability policy.
Dean delves deeper into the timing specifics, noting that funds availability begins at the start of a “business day.” He lists types of deposits that must be made available on the next business day, such as cash, electronic payments, U.S. Treasury checks, and certain other checks. Len, intrigued by the strictness of the rules, inquires about any potential exceptions. Dean highlights that banks can place Exception Holds, also known as Safeguard Holds, to mitigate risks. These holds allow financial institutions to manage fraud, but they must adhere to specific protocols, including providing customers with written notices detailing reasons for the extended hold. The episode concludes with Dean urging listeners to thoroughly understand Reg. CC.
Brought to you by GeoDataVision and M&M Consulting
Wednesday Dec 06, 2023
The Importance of Assessment Areas
Wednesday Dec 06, 2023
Wednesday Dec 06, 2023
In the podcast, Len Suzio from GeoDataVision LLC and Dean Stockford of M&M Consulting delve into the topic of CRA (Community Reinvestment Act) Assessment Area delineation. Len emphasizes the critical importance of banks updating their CRA assessment area maps, particularly in light of changes to census tracts that were officially adopted by the FFIEC on January 1, 2022. He is alarmed to find that many banks haven't updated their maps, which is a mandatory requirement. Len further elaborates on the "performance context" in the CRA regulation, which is pivotal in determining banks' performance expectations. This context includes the unique characteristics of the bank, the demographics of the communities within the CRA assessment area, and the credit markets in local communities.
Len explains the various CRA lending tests, such as the Assessment Area ratio, the conspicuous gaps in contiguous tracts test, the LMI tracts penetration test, and the “borrower characteristics” test. He emphasizes that the configuration of the assessment area can significantly impact performance standards, as examiners will evaluate demographic and credit market variables. Len also touches upon the regulatory flexibility banks have in defining their assessment areas and urges banks to review and evaluate their current areas to avoid inflating their CRA performance standards. The conversation concludes with Len and Dean encouraging listeners to take the topic seriously and consider the implications of their assessment area delineations.
Brought to you by GeoDataVision and M&M Consulting
Wednesday Nov 22, 2023
Electronic Funds Transfers-The Basics
Wednesday Nov 22, 2023
Wednesday Nov 22, 2023
Episode 62 of the podcast delves into the intricacies of Electronic Funds Transfers, primarily focusing on the basics of Regulation E (Reg. E) Error Resolution provisions and their stringent timelines for addressing claims. Dean Stockford and Len Suzio begin by discussing the impact of their previous podcasts, with Dean emphasizing the importance of understanding the Electronic Fund Transfer Act, which establishes the basic rights, responsibilities, and liabilities of consumers and financial institutions engaging in electronic fund transfers. Dean outlines the specific definitions of "Electronic Fund Transfer," explaining that it includes activities such as Point-of-sale transfers, ATM transfers, direct deposits or withdrawals, telephone-initiated transfers, and debit card transactions. He further elaborates on the definition of "error" in the context of electronic fund transfers and stresses the immediacy required in investigating these errors. Dean highlights common misconceptions about error notifications, clarifying that financial institutions must start investigations immediately upon receiving an oral notification and not necessarily wait for written confirmation. The episode wraps up with a detailed walkthrough of the steps and timelines involved in resolving errors, emphasizing the importance of provisional credit, extensions for investigations, and the final resolutions based on the findings.
The podcast episode serves as an informative session aimed at demystifying the complex world of electronic fund transfers, ensuring that consumers are well-informed about their rights and the responsibilities of financial institutions. Dean and Len's conversation underscores the significance of timely error resolution and the stringent provisions in place to safeguard consumers. Their discussion provides valuable insights into the potential pitfalls and best practices for financial institutions when dealing with electronic fund transfer errors, ensuring transparency and accountability. Towards the end, they express gratitude to their audience and encourage feedback for future topics, underscoring their commitment to addressing relevant and impactful subjects in the realm of regulatory compliance.