RegWatch - CUNA Technology Council

CUNA Regulatory Affairs (edited by the CUNA Technology Council Industry Involvement Committee)
December 18, 2008 | COMMENTS

Regulatory Issues of Interest to CUNA Technology Council Members

In This Issue:

• FED Issues Proposal to Revise Mortgage Loan Disclosures
• Agencies Issue Rules on Unlawful Internet Gambling
• FinCEN Simplifies CTR Exemption Process

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FED ISSUES PROPOSAL TO REVISE MORTGAGE LOAN DISCLOSURES

The Federal Reserve Board (Fed) late last week issued a proposal that will revise the Regulation Z disclosure requirements for mortgage loans. These are specific changes to implement provisions of the Mortgage Disclosure Improvement Act (MDIA), which was enacted this past July and amends certain provisions of the Truth in Lending Act. As previously planned, the Fed is in the process of reviewing Regulation Z in its entirety and will issue more changes to the mortgage disclosure provisions sometime next year.

The MDIA requires creditors to give good faith estimates of mortgage loan costs within three days after receiving the application for the mortgage loan and before any fees are collected, other than a reasonable fee for obtaining a credit report. This is consistent with the Fed's recent final rule that amends the Home Ownership Equity Protection Act, which imposes this requirement for the consumer's primary home, but the MDIA now broadens this requirement to include all dwellings, such as second homes. The proposed rule incorporates this extended coverage and also implements these additional requirements that were included in the MDIA:

• Creditors must wait seven business days after they provide the early disclosures before closing the loan.
• Creditors must provide new disclosures with a revised annual percentage rate (APR) if there are any changes that result in the APR being inaccurate beyond certain tolerances. These disclosures must be provided at least three days before the loan closing.

With regard to the above requirements, the proposed rule will allow a consumer to expedite the loan closing if due to a personal financial emergency, such as a foreclosure. As required under the MDIA, the requirements under the proposed rule will become effective as of July 30, 2009. Comments in response to the proposal are due by January 23, 2009. CUNA's Regulatory Comment Call, which will provide additional information, will be posted on CUNA's website shortly.

- Jeff Bloch, Senior Assistant General Counsel

 

AGENCIES ISSUE RULES ON UNLAWFUL INTERNET GAMBLING

Despite serious concerns raised by House Financial Services Committee Chairman Barney Frank, along with CUNA and others, the Department of Treasury and the Federal Reserve Board (the Agencies) have issued a final rule implementing the Unlawful Internet Gambling Enforcement Act.

As in the proposal and as required by the Act, the following five payment systems are addressed in the final rule: automated clearing house systems (ACH), card systems, check collection systems, money transmitting businesses, and wire transfer systems. Most participants in the ACH, check collection, and wire transfer systems will be exempt. However, participants having a customer relationship with a business and those that send or receive certain cross-border transactions, including credit unions that engage in these activities, are not exempt.

The rules include several improvements from the proposal, such as a due diligence process that requires State gambling commissions and other gambling licensing authorities to determine whether gambling activities are unlawful. However, despite these improvements CUNA still has a number of concerns with the Act and implementing regulation and will continue to work with regulators and Congressional offices to address these issues.

Click here for CUNA's Final Rule Analysis.

- Lilly Thomas, Assistant General Counsel

 

FINCEN SIMPLIFIES CTR EXEMPTION PROCESS

The Financial Crimes Enforcement Network (FinCEN) issued a final rule simplifying the requirements for depository institutions to exempt certain customers from filing Currency Transaction Reports (CTRs). The Bank Secrecy Act (BSA) regulations require that all financial institutions, including credit unions, file a CTR for each transaction involving currency (cash) of more than $10,000.

The BSA regulations created two categories of “exempt” status, Phase I and Phase II, so that transactions of certain individuals do not need to be reported if such information is unlikely to aid officials in addressing potential criminal activity. Therefore, if an “exempt person” initiates a currency transaction in excess of $10,000 the credit union is not required to file a CTR.

Most credit unions, as well as other depository institutions, have not made full use of the exemption option because of the burdens and uncertainty associated with it. In an effort to encourage greater use of CTR exemptions, FinCEN is making the following changes to the current system:

• Depository institutions will no longer be required to review annually or make a designation of exempt person filing for members/customers that are other depository institutions, U.S. or State governments, or entities acting with governmental authority.
• Depository institutions will be able to designate an otherwise eligible non-listed company or a payroll customer after either two months (previously twelve) or after conducting a risk-based analysis of the legitimacy of that customer's transactions.
• FinCEN's definition of “frequent” transactions will be lowered from eight to five transactions per year.
• Depository institutions will no longer be required to biennially renew a designation of exempt person filing for otherwise eligible Phase II customers. However, an annual review of these customers must still be conducted.
• Depository institutions will no longer be required to record and report a change of control in a designated non-listed or payroll customer.

CUNA's Final Rule Analysis will be posted shortly on CUNA's website here.

- Lilly Thomas, Assistant General Counsel