Regulatory Bulletin: January 2017


Not interested anymore? Unsubscribe. Having trouble viewing this email? View it in your browser.


New York is taking the lead in Cyber Security PART 500 AND PART 504

HeaderIn our world of finance where the demand for cyber security is greater every day, FRC is pleased to announce that we have developed programs to assist our clients with yet another area of compliance. While these programs are compulsory in New York State, they do set a standard that all institutions should aspire to in protecting themselves, their depositors, borrowers, customers and investors. Let us show you how. The New York Department of Financial Services (NYDFS) has issued two new requirements: NYSDFS PART 500 and NYSDFS PART 504 Both will be requirements for any institution licensed, etc. in New York State. Part 500 The New York State Department of Financial Services (NYSDFS) has issued a new regulation, Part 500, which will require covered entities, including banks, to have a Cybersecurity program designed to promote the protection of customer information and information systems. Covered entities will be required to certify that the Cybersecurity program so developed is in compliance with Part 500. The certification must be made by the Board of Directors (or equivalent), or Senior Officer, and all documents and records which support the certification must be maintained for 5 years, and be made available to examiners upon request. Financial Regulatory Consulting Inc. (FRC) establishes customized Cybersecurity Programs for banks and other covered entities. This work includes development of policies and procedures as necessary and documentation to show compliance with Part 500. Part 500 Compliance Part 500 applies to covered entities, which are defined as entities which operate or are required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the banking law, the insurance law or the financial services law. Such entities include banks, money service businesses, and insurance companies. NYSDFS PART 504 COMPLIANCE SERVICES The New York State Department of Financial Services (NYSDFS) has issued a new regulation, known as Part 504, which will require covered entities, including banks, to develop an overall BSA/AML Transaction Monitoring and OFAC Filtering Program (“Program”) and to certify the adequacy of that Program. Such certification requires the Board or equivalent, or Senior Officer, to certify the adequacy of the specific program, and for the bank to maintain documents and records in support of such certification for 5 years, and to make such documents and records available to examiners upon request. Financial Regulatory Consulting Inc. (FRC) establishes Transaction Monitoring and Filtering Programs and supporting documentation for banks and other covered entities. This work includes development of policies and procedures as necessary and documentation to show compliance with Part 504, respectively, and enables informed and documented certification of such Programs by a bank’s Board (or equivalent), or appropriate Senior Officer. For further information on PART 500 and PART 504 or to set up an appointment, contact Kevin Kane at FRC, 212-849-6828.



HeaderWe do not wish to complain when useful information is released, even if we wished it were earlier. “Don’t condemn a man until you’ve walked a mile in his shoes” The LAR Formatting Tool, a Microsoft Workbook intended to assist small volume financial institutions has been released. It can be use to create an electronic file for submission to the HMDA Platform. The HMDA Platform will be used to upload 2017 HMDA data to the CFPB by March 1, 2018; we are still awaiting access to the platform. Users of this tool will typically be those that report small volumes, previously may have entered data manually or do not use a vendor or software to prepare their HMDA data for submission. The LAR Formatting Tool and instructions can be downloaded from the CFPB’s website: If you are entering your 2017 data into the FFIEC’s DES you will need to stop utilizing it now and begin to utilize this LAR Formatting Tool. As to Technology, there are some clarifications and reminders about mandatory filing dates. Read with your calendar in hand! There is still more to be released, including important matters, like the HMDA platform. Technology wonks will wait expectantly, like kids on Christmas Eve. Most will look to their gurus for guidance as the new material comes out in bit and pieces. will wait While this was a significant release of new information and tools for financial institutions that are already collecting in 2017, we still await additional resources, such as the HMDA Platform. While we sit on the edge of our chair and wait with bated breath for the next tattoo…uh, tool to be released from the agencies involved in HMDA filing, we will keep you up-to-date on additional releases! For assistance with new plans or a review of what your institution’s preparedness, contact Kevin Kane at FRC, 212-849-6828, for guidance.

CFPB Complaint Data for December, 2016

HeaderAccording to CRB Director Richard Cordray the “report shows that consumers continue to report being harassed about debts they already repaid or debts they do not owe”. He stressed that “The Bureau will continue to work to ensure that consumers are not being wrongly pursued by debt collectors.” A WORD TO THE WISE IS SUFFICIENT As of Dec. 1, 2016, the Bureau’s statistics indicate that 39% of debt complains are for debts no longer owed. In addition, consumers complained about accounts forwarded to third-party collectors without appropriate notice. This was accompanied by reference to accounts transferred that were not in delinquent status. There was emphasis given to collection calls made at work even after collectors were notified that such calls were prohibited by employers. The three companies earning the most average monthly complaints were Portfolio Recovery Associates, Inc., Encore Capital Group, and ERC. If you are engaging these collectors or selling accounts to them, be prepared to demonstrate that you are not engaged in prohibited practices. In the most recent three months, the second most-complained-about consumer product was credit reporting, followed by mortgages. The area showing the greatest improvement in year to year comparison is prepaid product complaints showed the greatest decrease of any product or service in year to year comparison, decreasing almost 60%. The States Iowa, Georgia, and Alaska showed the largest year-to-year complaint volume increases. Not surprisingly, the three companies that received the most complaints from July through September 2016 were credit reporting companies Equifax, Experian, and TransUnion. The Monthly Complaint Report can be found at: If your data looks better than what the CFB is reporting, congratulations. If not, and you need help to be sure that you are not setting your institution up for a CFPB issue, contact Kevin Kane at FRC, 212-849-6828, for guidance.

Consumer Financial Protection Bureau Takes Second Action Against Military Credit Services for Improper Contract Disclosures

HeaderBureau Orders Lender to Pay $200,000 Civil Penalty In December, 2016 the CFPB filed suit against Military Credit Services, LLC (MCS) for making loans without proper disclosures. “Today’s action sends a clear message that lenders cannot ignore their responsibilities under the law,” said CFPB Director Richard Cordray. “This is the Consumer Bureau’s second action against Military Credit Services for improper disclosures. We are imposing further penalties, and we will continue to closely monitor their compliance in the future.” The CFPB had previously sued in 2014 and ordered the company to make changes in 2015. The most recent action orders the company to ensure it’s contracts are in compliance with the law, to engage an independent consultant to review practices and pay a $200,000.00 civil penalty. The present action is authorized under the provisions of the Dodd-Frank Act in response to UDAP, unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. It is clear that the CFPB will continue to pursue what it believes are UDAP violations and particularly those which might be affecting members of the military, although that was not specifically alleged in this instance. It should also be noted that under the Know Your Customer regulations, if you have a customer that is making consumer-type loans, you should take care to know they are in compliance, to avoid reputational issues. In the event that you have a compliance issue at hand and want to make sure your institution is performing as required, contact Kevin Kane at FRC, 212-849-6828, for guidance. The full text of the CFPB’s consent order is available at:

CFPB Takes Action Against Pawn Companies for Deceiving Consumers About Loan Costs

HeaderIn December the CFPB Alleged Four Virginia Pawnbrokers Disclosed Misleading Annual Percentage Rates NOT ALL CONSUMER LENDERS ARE BANKS, BUT ALL CONSUMER LENDERS COME UNDER THE PURVIEW OF THE CFPB The CFPB’s seeks to end the pawnbrokers’ illegal practices, get restitution for the consumers they harmed, and impose penalties. “When consumers take out a loan, they are entitled to know the actual annual cost,” said CFPB Director Richard Cordray. “We are taking action today against pawnbrokers that deceived consumers about these costs, and we will work to make sure they stop violating the law and provide relief for consumers who were wronged.” The violators, Spotsylvania Gold & Pawn, Inc.; Fredericksburg Pawn, Inc.; Pawn U.S.A., Inc.; and A to Z Pawn, Inc. charge consumers a finance charge on their loans. The charge is made up of several fees, called, for instance, “appraisal,” “interest,” “storage” or “setup” charges. The CFPB alleges that the consumers were mislead about the costs of their loans by deceptively low annual percentage rates (APRs) that did not reflect all of the fees and charges tacked onto the loans. While the complaints are not proof of a violation of the law, the complaints allege that the companies’ actions violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws under the Dodd-Frank Act. The complaints filed today seek monetary relief, injunctive relief, and penalties. It is clear that the CFPB takes it’s mandate seriously and will continue to pursue suspected violators whether they are banks, credit unions or consumer lending companies. The full text of the complaint filed against Spotsylvania Gold & Pawn, Inc. is available here: The full text of the complaint filed against Fredericksburg Pawn, Inc. is available here: The full text of the complaint filed against Pawn U.S.A., Inc. is available here: The full text of the complaint filed against A to Z Pawn, Inc. is available here: The CFPB recently sued an additional Virginia pawnbroker, B&B Pawnbrokers. More information about that lawsuit is available here: In the event that you have a compliance issue at hand and want to make sure your institution is performing as required, contact Kevin Kane at FRC, 212-849-6828, for guidance.

FOREWARNED IS FOREARMED CFPB announces Fair lending priorities in the new year

HeaderIn December, 2016 the CFPB published it’s priorities for 2017, stating that the fair lending team will focus in 2017 on Redlining, Servicing of Mortgages & Student Loans and Small Business Lending. In a publication aimed at consumers the Bureau clarified that they will increase focus on whether lenders have intentionally avoided lending in minority neighborhoods. This will be coupled with efforts to determine whether borrowers who are delinquent on mortgage or student loan payments may experience more difficulty achieving workable new solutions with their loan servicers because of their race or ethnicity. And a third priority will be increased attention given to Small Business Lending, in response to expressed Congressional concern that women-owned and minority-owned businesses may be experiencing discrimination when they apply for credit. The CFPB will take those steps necessary to ensure their fair and equal access to credit for all. All lenders would be well served to review their current policies and practices to ensure that not only do they avoid overtly discriminatory practices, but also that they are not caught in the trap of de facto discrimination. Don’t wait for a complaint or examination to make your institution the subject of an investigation. Be sure that your lending plans are pro-active. If you have any uncertainty, now is the time to review your policies and practices. Contact Kevin Kane at FRC, 212-849-6828, for professional guidance. To see CFPB’s vision visit:

CFPB Takes Action Against Moneytree for Deceptive Advertising and Collection Practices

HeaderIn December 2016 the CFPB Ordered Financial Services Company to Pay $255,000 to Consumers “Consumers deserve honesty and transparency from the financial institutions they rely on,” said CFPB Director Richard Cordray. “Moneytree’s practices meant consumers were making decisions based on false and deceptive information, and today’s action will give the company’s customers the redress they are owed.” The action was taken against the financial services company that offers payday loans and check-cashing services, for misleading consumers with deceptive online advertisements and collections letters. The Bureau found that the company used deceptive online ads, specifically offering to cash checks for “1.99”, leading consumers to believe that meant $1.99 instead of 1.99%, the actual fee. Further they deceptively told consumers their vehicles could be repossessed if they did n’t make past due loan payments, when in fact loans referenced were not secured by the consumers’ vehicles and Moneytree had neither the right or ability to repossess. In addition, the company withdrew funds from consumers’ bank accounts without preauthorization, in violation of federal law. Under the terms of the CFPB order, Moneytree is required to pay $255,000.00 to the consumers who were affected, cease its illegal/deceptive practices and obtain authorizations for electronic fund transfers as well as pay $250,000.00 to the CFPB’s Civil Penalty Fund. This action against a relatively small company demonstrates the Bureau’s willingness to pursue even small violations to carry out what it sees as it’s consumerist mandate. A lesson to be learned is that no opportunity to correct a potential violation can be overlooked. The full text of today’s order is available at: If you have concerns about how to deal with potential violations before they become “issues” contact Contact Kevin Kane at FRC, 212-849-6828.

CFPB Finds Bank Marketing Deals With Colleges Can Mean Costly Fees and Risks for Students

HeaderIn a move that we see as a warning to colleges and lenders, Bureau Urges Schools and Banks to Put Students’ Best Financial Interests First In December 2016 the CFPB released a report raising concerns about fees and high risk features that may accompany certain college-sponsored accounts. The Bureau analyzed about 500 marketing deals between schools and banks find that many allow for features that can lead to excessive fees over a one year period.. The report further reviews trends in the school-sponsored credit card market. This report lead the CFPB to send notices to educators reminding them of their obligation to disclose marketing agreements with credit card companies. “Deals between big banks and schools can drive students into accounts that contain high fees,” said Director Richard Cordray. “Today’s report shows that many schools are more focused on their bottom line than their students’ well-being when they agree to sponsor financial accounts. Many young people struggle to manage money while at school and we urge schools to put students’ financial interest first.” “Colleges across the country continue to make deals with banks to promote products that have high fees, despite the availability of safer and more affordable products,” said CFPB Student Loan Ombudsman Seth Frotman. “Students shouldn’t get stuck with the bill when their school inks a deal for an account that’s not in their best interest. ” Lenders should be wary, as the colleges are getting the notices, but historically it’s the lenders who pay the fines and penalties. The campus banking report is available at: Based on its analysis the CFPB believes that large bank products are being marketed to students that fail to meet established limits and are not in the students’ best interests. Dozens of bank deals with colleges fail to limit costly fees: The Bureau found that dozens of deals with banks for school-sponsored accounts, including deals at some of the nation’s largest colleges and universities, do not place limits on account fees, such as overdraft fees, out-of-network ATM fees, or other common charges. These costly fees remain a concern at dozens of campuses, even as safer and more affordable alternatives are widely available at many other schools across the county. Issues highlighted include: Some students paying hundreds of dollars per year in overdraft fees while even small financial shocks can cause significant hardship and can be a deterrent to college completion. Marketing agreements are beneficial to the financial institutions and schools, but offer little financial benefit to students Most colleges were required by the DOE to publicly disclose marketing agreement details earlier in 2016 but as of December 2016 not all requirements appear to have been met. If your institution is involved in college sponsored accounts, it would be wise to review your agreements and confirm that your educational partner is holding up it’s end. Under the provisions of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, issuers are required to disclose to the CFPB the terms and conditions of any college, university or alumni credit card agreement, the number of new credit card accounts, and the compensation paid by issuers to institutions of higher education in the previous year. Recent history tells us that the CFPB will find at least one sponsoring agreement to go after and for the institution and the financial entity, the followup won’t be pretty. Should your institution need assistance in evaluating your risk or planning next steps, contact Kevin Kane at FRC, 212-849-6828.

CFPB Takes Action Against Reverse Mortgage Companies for Deceptive Advertising

HeaderThree Companies Cited For Falsely Claiming Consumers Could Not Lose Their Homes In December, 2016 the CFPB took action against three reverse mortgage companies, American Advisors Group, Reverse Mortgage Solutions, and Aegean Financial for deceptive advertisements, including claiming that consumers could not lose their homes. The CFPB is ordering to cease deceptive advertising practices, implement systems to ensure they are complying with all laws, and pay penalties. “These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” said CFPB Director Richard Cordray. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.” American Advisors Group, headquartered in Orange, Calif., is licensed in 49 states and the District of Columbia. It is the largest reverse mortgage lender in the United States. The company ran television advertisements almost daily and disseminated its information kit to approximately 1 million consumers. The information kit included a DVD and several brochures with information about reverse mortgage products. Reverse Mortgage Solutions, headquartered in Houston, Texas, is licensed to conduct business in 48 states. The company marketed its product through various media, including television, radio, print, direct mail, and the Internet. Aegean Financial, headquartered in El Segundo, Calif., is licensed to conduct business in California, Louisiana, Oregon, Texas, and Washington. The company also operates under multiple names in the jurisdictions in which it is licensed. Under the name Jubilados Financial, the company advertises reverse mortgages to Spanish-speaking consumers in California. Under the name Reverse Mortgage Professionals, the company advertises reverse mortgages in California, Oregon, Washington, and Texas. Aegean Financial markets its product across various media, including print, direct mail, radio, and the Internet. Under the terms of the consent orders, among other things, the companies must make clear and prominent disclosures in their reverse mortgage advertisements, implement systems to ensure they are following all laws and maintain complete and accurate records. Combined they will also pay a civil penalties in excess of $800,000. Under the terms of today’s consent order, the company must make clear and prominent disclosures in its reverse mortgage advertisements and implement a system to ensure it is following all laws. It will also pay a civil penalty of $325,000. If your institution sells, purchases or originates Reverse Mortgages be sure that you are doing complete and accurate disclosures. If you have any questions about this complex product, contact Kevin Kane at FRC, 212-849-6828.

CFPB Fall 2016 rulemaking agenda

HeaderIn December, 2016 the CFPB issued its current list of works in progress. Look for updates in the coming months. Know Before You Owe mortgage disclosure rule Larger participants and non-depository lender registration Arbitration Payday, auto title, and similar lending products Debt collection Details can be found at:

CFPB Warning letters

HeaderIn December, 2016 the CFPB issued a reminder on warning letters. “Sometimes the CFPB will send a warning letter to advise recipients that certain actions may violate federal consumer financial law. These are not accusations of wrongdoing. Instead, they are meant to help recipients review certain practices and ensure that they comply with federal law. If the CFPB determines that other entities might also benefit from a reminder to review certain practices or thinks the public should be aware of particular activities, it may make aspects of these letters public, but will not identify the recipients.” Two such letters were issued in 2016. On 3/30/16 a letter was issued on Student Loan Debt Relief: CFPB Halts Student Loan Debt Relief Scam On 10/27/16 a letter was issued on Mortgage loan data reporting: CFPB Warns Financial Institutions About Potential Mortgage Lending Reporting Failures Remember, if you receive one, it is advisory, not accusatory, but not to be ignored.


HeaderThe Consumer Financial Protection Bureau (CFPB) recently took action against Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers. The companies were found to have lured consumers into costly recurring payments for credit-related products with promises about usefulness of credit scores that proved to be false and misleading. In the end, the CFPB ordered the companies to correct their misleading material, pay restitution to consumers of more than $17.6 million as well as fines of more than $5.5 million. In the past financial institutions have been chastised for partnering with credit reporting companies in plans to sell similar faulty or useless services. The CFPB’s Director Richard Cordray has continued on his campaign stating that “TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises.” As “credit scores are central to a consumer’s financial life … people deserve honest and accurate information about them” he continued. The violations included violating the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by deceiving consumers about the value of the scoring they were selling as well as claiming the services were free or had minimal cost when in fact they were being enrolling in subscription programs with recurring monthly fees. In addition, CFPB determined there was a violation of the Fair Credit Reporting Act due to prohibited advertising being inserted into the process for acquiring the mandated “free” credit report to be available every 12 months. Based upon these activities which are deemed UDAP, the CFPB took action against unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws. In addition to the legal expenses, the cost of the investigation and loss of reputation, the companies must notify and pay the restitutions to consumers, pay the fines, revise their literature and promotional material to clearly inform consumers, establish a method to document express consent for products with a negative option feature, establish as easy way for consumers to cancel future purchases and agree to stop billing and collecting for charges based on a cancelled service. The full text of the CFPB’s Consent Order against Equifax is here: The full text of the CFPB’s Consent Order against TransUnion is here: In the event that you have previously engaged in this activity, contact Kevin Kane at FRC, 212-849-6828, for guidance.

OCC Final Rule Prohibits Bank and Thrift Dealing and Investing in Industrial or Commercial Metals

HeaderIn December, 2016 the OCC submitted a final rule prohibiting National Banks and federal savings associations from dealing in or investing in industrial or commercial metals. There are exclusions for the acquisition of industrial or commercial metal through foreclosures on loans and the resale to mitigate loan losses. The effective date of the final rule is April 1, 2017. Banks with existing holdings of industrial and commercial metal acquired through dealing or investing activities must divest of such metal as soon as reasonably practical, but no later than five years. Final Rule as submitted to the Federal Register in PDF format Inquires can be directed to Kevin Kane at FRC, 212-849-6828.

Former MN banker barred and to pay CMP and restitution

HeaderYes, it still happens! In December, 2016 The OCC issued a Consent Order to T. Ryan Johnson, former senior vice president and chief financial officer and former director of Landmark Community Bank, N.A., Isanti, Minnesota. Failure to follow the rules can have terrible consequences. Mr. Johnson is ordered to pay over $9,000. restitution to the bank as well as a civil money penalty of $10,000. He is further prohibited from participation in the affairs of or voting the shares of any financial institution. The OCC found that, Johnson and other bank directors knowingly participated in diverting about $269,600 of the bank’s capital to pay loans held by the directors and the bank’s holding company, made false statements regarding those transactions, and otherwise violated OCC regulations. Johnson’s is the fifth individual enforcement action involving former directors of Landmark Community Bank announced in recent months. For details see: Minnesota bank director fined and banned

In this issue


Know someone who might be interested in this email? Forward it.


Not interested in this email? Unsubscribe.

Contact us

Financial Regulatory Consulting, Inc.
100 Park Avenue, Suite 1600
New York, NY 10017
Phone: 212.849.6828
Fax: 212.880.6499

For more information visit
© Copyright Financial Regulatory Consulting, Inc. 2006 – 2010.

Boston, MA | Chicago, IL | Louisville, KY | Manhattan, NY | Philadelphia, PA | Scottsdale, AZ


This entry was posted on Sunday, January 8th, 2017 at 7:49 pm and is filed under Regulatory Bulletins, Regulatory Insights. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Comments are closed.

  • « Older Entries
  • Newer Entries »