Pub. 9 2019-2020 Issue 4

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S January • February 2020 17 Victoria E. Stephen Deputy General Counsel Victoria E. Stephen, CRCM, serves as associate general counsel for Compliance Alliance and was recently appointed as the supervising attorney of Hotline. While receiving her Bachelor of Business Administration in Banking Finance from The University of Texas McCombs School of Business, Victoria worked in both deposit and lending services. She continued her interest in financial services at the University of Texas School of Law by focusing on secured transactions, taxation, contracts, and corporate governance. Victoria has since worked in corporate tax law, mergers and acquisitions, and per- formed legal research on a range of regulatory issues. Since joining the Compliance Alliance team in 2015, Victoria has writtenmany articles for a variety of publications, and spoken at a number of compliance schools and conferences. Victoria heads our team of hotline attorneys who assist members with the spectrum of regulatory compliance questions on a daily basis, and serves as editor of Compliance Alliance’s monthly Access Magazine. Credit Card Account Management The first issue in this area was with so-called “triggering terms” found in Reg. Z, 12 CFR 1026.16(b). In some exams, institutions included triggering terms in their advertisements and simply failed to provide some or all of the required additional disclosures. In others, there were issues with the “one click away” rule. Not only were some disclosures multiple clicks away, but some were not properly labeled at all or were not conspicuous. I’ll note that these issues often come up in Compliance Alliance’s document reviews, so it would be worthwhile to do a double-check of your credit card ads before they’re published. This wasn’t the end of the credit card issues, either. In general, 12 CFR 1026.12(d) prohibits credit card issuers from offsetting credit card debt with a consumer’s deposit account. However, there’s an exception for a security interest in a deposit account if the consumer affirmatively agrees in the account-opening disclosures. The hang-up is that the security interest cannot be effectively the same as the right of offset, so an institution that just routinely includes a security interest provision in the cardholder agreement would generally not qualify for the exemption. The Bureau highlighted that the consumer must be aware that granting a security interest is a condition for the credit card (or for more favorable terms on the account) and must specifically intend to grant a security interest in the account. Some indicators of the consumer awareness and intent mentioned were: (1) separate signature or initial lines on the agreement indicating that a security interest is being given; (2) placement of the security agreement on a separate page from any other disclosures; and (3) referencing a specific amount of deposited funds or a specific deposit account number. Debt Collection Practices The Fair Debt Collection Practices Act (FDCPA), of course, prohibits using any false, deceptive, or misleading representation or means in the process of collecting any debt. Specifically, Section 807(2)(A) of the FDCPA prohibits falsely representing the character, amount, or legal status of any debt. Examiners found that certain debt collectors claimed that interest was owned on debts when, in fact, it was not authorized by the underlying contracts between the debt collectors and the creditors. In doing so, the debt collectors falsely represented to consumers the amount due and ultimately had to provide remediation. As a side note, a “debt collector” for FDCPA purposes generally does not include a bank that collects its own debts in its own name, but we’ve talked to many Compliance Alliance members who follow the FDCPA rules as guidelines, even though they technically do not apply as a matter of law. FCRA Information Furnishing The Fair Credit Reporting Act (FCRA) requires that when a bank that is acting as an information “furnisher” receives a notice of a dispute from a consumer reporting agency (CRA) that it complete its own investigation, generally within 30 days. Not only did some institutions miss this deadline, but others failed to conduct an investigation or respond at all. In addition, if a furnisher determines that previously furnished information is not complete or accurate, the furnisher must promptly let the CRA know and provide any corrections or additional information to make the reporting complete and accurate. Some failed to provide these corrections or updates, while others did so, but subsequently continued reporting inaccurate information after the correction. Another issue cropped up with accounts that were paid- in-full or settled-in-full. Certain institutions had a practice of deleting the identification number when an account was paid in full, and this practice changed the search key that the furnishers used for matching when making account updates. As a result, the CFPB found that almost 2,000 accounts were not updated to reflect the correct paid-in-full or settled-in-full status. Finally, the Bureau found that when some institutions received consumer disputes, they continued furnishing information about the disputed accounts for several months without providing the CRA with notice that the information was disputed, in clear violation of the FCRA. In response to these findings, the CFPB required them to set up enhanced monitoring activities, as well as policies and procedures on compliance with furnisher-specific requirements of the FCRA, in addition to providing evidence of corrective actions. Mortgage Loan Origination The focus of this section was on the inaccurate disclosure of annual percentage rates and total annual loan costs in reverse mortgage transactions. While most of our members do not originate reverse mortgages, this is still a sobering reminder of how pervasive a failure to properly calculate the APR can be, and the very high cost of consumer restitution. So this covers the key takeaways that are most likely to affect our community bankmembers, but if you’re interested in reviewing the review in its entirety, you can access it at: https:// highlights_issue-19_092019.pdf