Regulatory Compliance Update
By: Hickman Beckner, Senior Vice President
We have reviewed the Compliance News for December 2018. The Federal Reserve, FFIEC and the CFPB have issued new and updated regulations.
Federal Reserve – Issued the final changes to Regulation CC which governs collection of checks. The new rules address how a substitute check is treated when the original paper check is no longer available.
Altered Check – a check that has the payee’s name or amount altered. In this case, the depository bank (the bank where the check was first deposited) would bear the loss. In practice, the altered check would be charged back to the depositor.
Forged Check – a check on which the signature of the drawer was made without authorization. In this case, the paying bank would bear the loss. In practice, the depositor would have to dispute the check and the check would be returned.
FFIEC (Federal Financial Institutions Examination Council) – Has proposed changes in the Call Report to bring the Call Report into line with the revised accounting for credit losses under FASB ASU No. 2016-13. The new rules will be phased in starting with institutions with fiscal years beginning December 15, 2018.
ASU 2016-13 changed the way loan losses are calculated and reported. Under the old accounting rules, the institution would examine accounts that were 90 days or more past due and estimate the credit losses. This method allowed great leeway for management to report loan and lease losses. Under the new rules, an allowance for credit losses would be calculated each reporting period based on the new loans and leases that were made.
The new FFIEC rules do not directly affect our systems. Our system produces 90-day past due reports, but it is the responsibility of management to estimate the losses. The new accounting standards will now require management to estimate the credit losses when loans are made rather than when loans become 90 days past due or other factors impair the institution’s ability to collect.
The following Call Reports are affected with the March 31, 2019 report:
RI-B – Charge-offs and Recoveries
RI-C – Disaggregated Data on Allowance for Loan and Lease Losses
RI-E – Explanations (management’s discussion of the effect of the accounting rule changes)
RC – Balance Sheet
RC-B – Securities
RC-F – Other Assets
RC-G – Other Liabilities
RC-H – Selected Balance Sheet Items for Domestic Offices
RC-K – Quarterly Averages
RC-R – Regulatory Capital
RC-V – Variable Interest Entities
The following Call Reports are affected with the March 31, 2021 report:
RI – Income Statement captions and titles are changed
RI-B – Charge-offs and Recoveries – This report is changed to break out credit card fees that are uncollectable starting with the March 31, 2021 report.
RI-C – Changes in titles and captions of the report
RI-D – Income from Foreign Offices
The following Call Reports are affected with the December 31, 2022 report:
RI – Income Statement sections and breakouts are deleted.
CFPB – Has issued an interim final rule that updates disclosures under Regulation V – Fair Credit Reporting Act. The disclosures cover identity theft and credit reporting for employers and job applicants.
The CFPB also updated the thresholds for consumer leases and loans. The new Regulation M (Lease) threshold is $57,200. The new Regulation Z (Loan) threshold is $57,200.00. Leases and loans less than or equal to these amounts are considered consumer instruments and subject to the Regulations.
December 17, 2018 – Comments due on IRS proposed rule for a “safe harbor” for small error on information returns.
January 1, 2019 – Effective date of IRS final regulations that remove automatic extension of time to file W-2 forms and Forms 1099-MISC that report non-employee compensation.
January 1, 2019 – Effective date for changes in Federal Reserve rules for altered and forged checks discussed above.
January 1, 2019 – Effective date for changes in Federal Reserve rules altering Regulation J to bring the Regulation in conformance with changes in Rule CC discussed above.
April 1, 2019 – Effective date for CFPB rules for Prepaid Accounts which implement changes to Regulation Z and Regulation E.
August 19, 2019 – Published Compliance date for CFPB’s final rule for payday loans.
Financial Technology Protection Act – this act would:
- Establish an independent Financial Technology Task Force with the goal of improving coordination between the private and public sectors to decrease the risk of terrorist attacks and illicit use of new financial services technologies including digital currencies.
- Direct the federal government to prioritize investigation of terrorist and illicit use of new financial services technologies including digital currencies.
- Establish a fund to reward any person who provides information leading to conviction of an individual involved with terrorist use of digital currencies; and a program to provide grants for the development of tools and programs to detect terrorist and illicit use of new financial services technologies.
This act has passed the House.
Protecting Family and Small Business Tax Cuts Act – This act would make permanent the tax cuts passed in 2017. The act has passed the House.
Comprehensive Regulatory Review Act – Would bring the CFPB under the Economic Growth and Regulatory Paperwork Reduction Act of 1996. This would require the CFPB to review regulations every 7 years, require regulations to limit specified burdens and would specify the information and criteria the CFPB must use when conducting its review. This act has passed the house.
The CFPB has a new permanent director:
Kathy Kraninger, a senior official at the Office of Management and Budget, was confirmed by the Senate to serve as director of the Consumer Financial Protection Bureau (CFPB). She is replacing the current director Mick Mulvaney. The director of the CFPB is responsible for overseeing mortgages, credit cards, payday loans, and other financial products.
Kraninger is a graduate of Marquette University, where she studied history and political science and earned her certification to teach high school social studies. After graduation from college, she taught as a Peace Corps volunteer in Ukraine, which redirected her professional career to government services. She has served since then in various US government offices, including Homeland Security.
Kraninger plans on continuing along the path of consumer-friendly oversight of the CFPB. Her confirmation set a new course where the CFPB will be limited and focused in its consumer protections and serving the interest of the public.