The Compliance 911 Show

In this podcast episode, Dean and Len discuss the implications of the new Section 1071 rule, which extends beyond the banking community. Len highlights that the number of reporters under Section 1071 is estimated to be four times greater than under the Community Reinvestment Act (CRA). They focus on the impact of Section 1071 on CRA reporting. Len mentions that the Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB), and Federal Deposit Insurance Corporation (FDIC) announced their intention to replace the reporting of small business and small farm loans under CRA with Section 1071 reporting. Additionally, the definition of a small business loan will change, and the Section 1071 definition will replace the CRA definition.
Len emphasizes that this change allows for unlimited loan sizes based on the size of the business, not the loan. This has significant implications for CRA. Furthermore, Len discusses how Section 1071 may affect community development lending under CRA and raises questions about how the regulators will treat loans reported under both Section 1071 and CRA. Len also mentions some aspects of Section 1071, such as protected demographic information and reporting the course of action for small business loans, that will not impact CRA.
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In a podcast, hosts Len and Dean discussed the heightened focus on Enterprise Risk Management (ERM) within financial institutions. They highlighted the regulatory pressure spurred by issues like compliance, bank failures, Climate Risk, ESG factors, and political influences. Dean pointed out common gaps in ERM policies, such as lack of coverage for technology systems, strategic plans, and talent management. 
He advised that ERM policies should emphasize data and technology structures for reporting, mention strategic plans, and reference "Talent Management" for skill enhancement. The conversation concluded with a recommendation for risk managers and senior executives to review and enhance their ERM policies based on these insights to withstand future regulatory scrutiny.
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In this podcast episode, Dean and Len discuss the Section 1071 Rule, which is the hottest regulatory topic in the financial industry. Len provides an overview of the rule and its implications for lenders. Covered lenders, which include any financial institution that originates 100 or more covered loans for two consecutive years, will need to maintain a data collection system to report on their commercial lending activity. Len also emphasizes the importance of distinguishing between covered and non-covered transactions and being careful about protected demographic information, such as the race, ethnicity, and sex of the principals of the business. The podcast also touches on other important requirements under Section 1071, such as capturing the NAICs code for borrowers and the number of employees and reporting on all applications, not just originated, refinanced, or renewed loans. The episode concludes by encouraging listeners to tune into a more comprehensive 90-minute broadcast on Section 1071.
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This podcast episode discusses Fair Lending and focuses on examiner comments and specific examples of issues from regulators. The hosts, Len and Dean, discuss a scenario where a Compliance Officer or Fair Lending Officer in a community bank reviews loans for evidence of disparate treatment (Redlining). They find a series of portfolio loans where the borrowers received more favorable terms in the form of a better rate, and in each case, all were white men applying alone. Upon further review, they find that these exceptions were never submitted to the loan committee for approval, which is required by policy.
The episode then lists several examiner comments on Fair Lending, including appropriate documentation of exceptions within files, tracking mechanisms for exceptions, and reviewing exception log reports periodically. They caution against the quality of fair lending risk assessments, which must include sufficient qualitative and quantitative detail as to the overall risk profile of the institution.
 
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In this episode of Podcast 51, hosts Dean and Len discuss the complexities of community development under the Community Reinvestment Act (CRA). They outline the four different definitions that qualify for community development credit: affordable housing, community services, economic development, and revitalization/stabilization. Len provides an in-depth explanation of each definition and shares tips for maximizing community development credit.
They also discuss common misconceptions about claiming credit for community development activities outside assessment areas. Len emphasizes the importance of claiming credit for all qualified community development activities, as it can contribute to a higher performance rating under CRA regulations. This episode is a valuable refresher for anyone seeking clarity on the intricacies of community development under the CRA.
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In Episode 50 Len and Dean explore the issue of Fair Lending as it relates to appraisal bias. This emerging issue can lead to illegal discrimination within the appraisal process, impacting generational wealth building for minority consumers. Len and Dean discuss appraiser independence, the 2008 financial crisis, and how lenders can protect themselves against appraisal bias and potential liability under ECOA and FHA. Suggestions include thorough vendor due diligence, incorporating appraisal bias risks into fair lending risk assessments, training personnel on fair lending and appraisal bias red flags, and establishing clear processes for reconsiderations and appraisal complaints. Tune in to this insightful conversation as Len and Dean delve into the complexities of appraisal bias and its significant impact on consumers and the lending industry.
 
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In Podcast 49, Dean Stockford and Len Suzio discuss the impending changes to the Community Reinvestment Act (CRA) and the imminent publication of the Dodd-Frank Section 1071 Rule. The CRA Rule's publication date remains uncertain, while the Consumer Financial Protection Bureau (CFPB) is under court order to publish the Section 1071 Rule by March 31. Len notes that the 1071 Rule, which will have profound implications for the financial services industry, has been 15 months in the making and is expected to be quite controversial. Unlike CRA, Section 1071 is a reporting mandate, much like the Home Mortgage Disclosure Act (HMDA) regulations, and will be used for both fair lending and CRA purposes. Data collection and reporting requirements under Section 1071 will be more onerous than those under CRA, and it will cover a larger number of institutions.
 
Len expects the final 1071 Rule to be almost identical to the proposed rule, which will be challenging for banks and other financial institutions. As for the CRA rule, its finalization could be delayed for several reasons, including the many comments and criticisms received and potential legal action by the banking community. Furthermore, the prudential regulators may be waiting to see what Section 1071 looks like, as it will have a significant impact on CRA regulations. Len believes the final CRA rule won't be published until sometime late in the spring, but nothing would surprise him. Both Dean and Len plan to collaborate on an education series to help financial institutions understand the implications and requirements of Section 1071 and the new CRA Rule after their publication.
 
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In this podcast episode, Len Suzio and Dean Stockford discuss the basics of the Bank Secrecy Act (BSA) and the importance of having a sound BSA program. They break down the extensive provisions of the BSA into two parts - the Basic Stuff (BS) and the Additional (A), which is pre and post 9/11. They also highlight the areas of high risk for non-compliance, including suspicious activity monitoring, SAR referral programs, and customer due diligence. This podcast is informative for those who want to understand the basics of BSA and its importance in maintaining safety and soundness in financial institutions.
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In this podcast, Len Suzio discusses his concerns about the threat posed to banks by the misuse of the concept of Reasonably Expected Market Areas (REMA) by regulators in their fight against redlining. The DOJ's "Combatting redlining initiative" launched in October 2021 is one such example. Len highlights that the concept of REMA has no origin in law or regulation, making it vague and open to interpretation, which can lead to potential abuse.
Regulators often determine a bank's REMA based on factors like marketing campaigns, market plans, media usage, and self-produced promotional materials. If a bank's REMA is found to be larger than its Community Reinvestment Act (CRA) assessment area, the bank's lending outside its CRA-defined community could be subject to scrutiny for redlining.
Len shared his concern when federal examiners revealed that they use entire MSAs (Metropolitan Statistical Areas) or MDs (Metropolitan Divisions) as the basis for every bank's REMA, no matter the size of the bank. This approach makes almost every bank with an urban area nearby vulnerable to redlining accusations if they are not lending in the urban area.
The podcast concludes that this issue is alarming for banks, and they should be aware of the potential consequences of how their REMA is determined.
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In Episode 46 of the podcast series, Len and Dean discuss the 2023 regulatory hot topics facing financial institutions. They touch on multiple re-presentment fees, Dodd-Frank 1071 and its implications for small business data collection, and the forthcoming Cyber Security reporting requirements under the Critical Infrastructure Act of 2022. Climate risk is also identified as a significant area of focus for financial institutions, even for those below the $100 billion asset threshold. Lastly, they highlight fair lending, fraud, and potential changes to Reg. E as additional areas of interest for 2023. Throughout the episode, the hosts emphasize the importance of being proactive and staying informed about evolving regulations and guidance.Brought to you by GeoDataVision and M&M Consulting