Tuesday, December 1, 2020

Week of March 13

From the chairman

By Curtis Davidson
OBA Chairman

Last Thursday’s meeting between President Trump and community bankers has been widely reported and discussed, and is covered in more detail below. I would also like to reflect on a few points and the significance of this meeting.

Can you remember when a sitting president has met with bankers who represent the nation’s smallest traditional banks? Eight of the nine bankers were from banks under $1 billion in assets, the smallest being the $116 million-asset Bank of Bennington, Neb.

The other banker, Dorothy Savarese (ABA Chairman), runs the $3 billion-asset Cape Cod Five Cents Savings Bank, bigger than the rest, but not exactly a TBTF bank. This was an incredible opportunity for President Trump, the person who can effect change, to hear from bankers that have the same values as you and me.

And this was not a photo-op. According to Rebeca Rainey, chairman and CEO of Centinel Bank of Taos and ICBA Chair, the president was “very curious, wanting to know specifics about what he and his administration could do.”

I believe President Trump understands the role community banks play in creating jobs, which is his number one goal. “You’ll be able to loan,” Trump told the group. “You’ll be able to be safe. You’ll be able to provide the jobs that we want and also create great businesses.” He also said “community banks are the backbone of small business in America.”

That’s the mission statement of most community banks in this country. How many small businesses you have helped to make great? It’s what you have done your entire banking career. Now we have a president who understands the value of community banking.

One other observation that I believe bode well for our industry. The ABA and ICBA joined together for this White House meeting. These organizations must provide a unified front. The nine community bankers present, five women and four men, are the elected leaders of our national trade organizations. They understand that cooperation is essential for the good of the industry.

The political and regulatory climate for community banks is changing and I think for the better. I urge you to be engaged and learn how these changes could affect you. Write letters, such as the one I requested last week for Sub S Banks. Attend events such as Bankers’ Night Out or the ABA Government Relations Conference next week.

Most of all, support your trade organizations. The OBA works for you but we also need your help, input and representation.

Have a great week!

Curtis Davidson
OBA Chairman

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Community bank leaders meet with President Trump at White House

Six ABA community bank leaders were joined by three officers from the Independent Community Bankers of America to meet with President Trump at the White House on March 9. The purpose for the meeting was to hold a “listening session” on the challenges that community banks face and how the regulatory environment can be reformed to promote job creation and economic growth.

“This is great news, in part because it shows the two national trade groups – the American Bankers Association and the ICBA – were working together on behalf of community banks,” OBA President Roger Beverage said.

The bankers raised topics like tailored regulation (OBA’s Top Priority!!!), regulation of small business and mortgage loans (OBA’s Second Highest Priority!!!), accountability for the Consumer Financial Protection Bureau,  and the need to align regulatory capital requirements with risk (OBA’s Third  Highest Priority!!!).

“Community banks play a vital role in helping create jobs by providing approximately half of all loans to small businesses,” President Trump said. “We must ensure access to capital for small business to grow. Community banks [are] the backbone of small business in America. We are going to preserve our community banks.”

Representing ABA members were ABA Chairman Dorothy Savarese, chairman, president and CEO of Cape Cod Five Cents Savings Bank, Orleans, Mass.; Chairman-Elect Ken Burgess, chairman of FirstCapital Bank of Texas, Midland, Texas; Vice Chairman Jeff Szyperski, chairman, president and CEO of Chesapeake Bank, Kilmarnock, Va.; Leslie Andersen, president and CEO of Bank of Bennington, Bennington, Neb.; Luanne Cundiff, president and CEO of First State Bank, St. Charles, Mo.; and Laurie Stewart, president and CEO of Sound Community Bank, Seattle.

Also participating were Treasury Secretary Steven Mnuchin; National Economic Council Director Gary Cohn; ABA President and CEO Rob Nichols; ICBA Chairman Rebeca Romero Rainey, chairman and CEO of Centinel Bank, Taos, N.M.; ICBA Chairman-Elect Scott Heitkamp, president and CEO of ValueBank Texas, Corpus Christi, Texas; ICBA Vice Chairman Tim Zimmerman, president and CEO of Standard Bank, Monroeville, Pa.; and ICBA President and CEO Cam Fine.

“These are all great bankers and banker advocates,” Beverage said. “I know most of them and, in fact, have known Leslie Anderson since she was in high school. She and her family are the quintessential community bankers. I salute Cam Fine and Rob Nichols for their participation and for standing up for (Oklahoma’s) traditional community banks.”

Following the meeting, ABA’s Rob Nichols went on camera with one of the major news outlets to highlight the meeting.

“Today’s meeting is an important step toward policy changes that will allow banks to go even further in helping communities and our economy thrive,” Nichols said. “The diversity and strength of our banking industry is the envy of the world. However, in the current regulatory environment, highly prescriptive rules mean that mortgages don’t get made, small businesses don’t get created and banks find it more difficult to make the loans that drive job creation. This is particularly true for community banks.”

ICBA’s Cam Fine was on Fox Business’ Stuart Varney show early Friday morning.

“I was driving to work listening to Varney & Co. on Fox Business News when I heard (ICBA President) Cam Fine interviewed about his take on the meeting,” OBA President Roger Beverage said. “I can’t find a video of that interview, but Cam did a great job advocating for traditional community banks and the need for regulatory reform.

“I did find a video of my friend, Ken Burgess (ABA Vice Chairman) and he also did a fantastic job of explaining why traditional community banks are asking Congress for at least some kind of regulatory relief,” Beverage said. “You can watch Ken’s interview here:

http://video.foxbusiness.com/v/5354984796001/?utm_campaign=ABA-Newsbytes-031317-HTML&utm_medium=email&utm_source=Eloqua&playlist_id=933116618001&elqTrackId=7feddd27fdc046a8bc5ac4e6c6422d88&elq=cb71943a619e445f914749722277c775&elqaid=15348&elqat=1&elqCampaignId=3382#sp=show-clips

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CFPB oversteps boundaries. Again.

The OBA is in the process of filing an Amicus Curiae brief in a case that challenges a proposed finding by the CFPB. The unintended consequences of this finding are too numerous to list here, but suffice it to say it would turn much of your world upside down insofar as notifying your customers about various options they may have.

The underlying case involves a Minnesota bank in excess of $10 billion and the Regulation E Opt-in rules. You’ll recall that the original Opt-in rule was issued in November 2009, and it became effective in July 2010.  

The Opt-in rule stated that a bank could not impose an overdraft fee on a customer for an overdraft that was caused by a debit card point of sale transaction or ATM transaction, unless the customer had affirmatively requested that the bank pay these kinds of overdrafts. In other words, the customer had to “opt in” to the bank’s overdraft system.

Regulation E requires all banks to provide a detailed disclosure in writing of all its overdraft practices, including all its fees. It then requires banks to give every customer the right to Opt-in.  

Banks have had different options for documenting each customer’s choice, the details of which were spelled out in Regulation E in extreme detail. If a customer chose to Opt-in, the bank had to give the customer a confirmation notice saying the customer chose to opt-in, but the customer could also revoke that decision at any time.  

The bank in questions is a consumer-based bank that serves a lot of regular, everyday people. It was one of the first banks to offer “free checking,” and their “free checking” program worked well. But – because the bank collected a lot of overdraft fees – it has been in the cross-hairs of the CFPB for some time because the Bureau hates overdrafts.

CFPB Complaint

TCF has been working with the CFPB on various overdraft matters for some time.  The bank cooperated with the CFPB, and actually thought the CFPB’s investigation of their overdraft program was going to end favorably for the bank. Then, on the Wednesday before President Obama left office, without any real advance warning, the CFPB suddenly filed suit against the bank.

The CFPB complaint centers around the opt-in rules. Importantly, the CFPB does NOT accuse TCF of failing to provide all the Regulation E Opt-in disclosures. The CFPB agrees that TCF properly gave all the required written disclosures. TCF also has signed Opt-in forms for all its customers who made that choice. That is not the problem.

Because the bank did everything right under Regulation E, the CFPB needed to get “creative” if it was going to have a basis to attack the bank’s overdraft practices. Here’s what happened.

The Bureau is alleging that TCF violated the UDAAP rules as to the way the bank presented the Opt-in information to its customers. To get around the fact that TCF correctly provided all the required written Regulation E disclosures, the CFPB made a huge “leap” to find a different path to attack the bank’s practices.  

The Bureau said that because “consumers rarely read” written disclosures, the CFPB therefore had the right to review and examine the verbal explanations that bank employees gave to bank customers.  

The CFPB found two former employees who said that they gave only “cursory,” “uninformative” descriptions of the written disclosures they had given to the customers they had served. This lack of verbal explanation, the Bureau says, shows the bank was acting in a deceptive and abusive way.  

The bank, of course, denies that it violated the law. It relies heavily on the fact that it followed the rules, exactly as they were written in Regulation E. It noted that only a portion of the bank’s customers received any sort of verbal description of the written disclosures.  

The CFPB has offered no proof as to how many customers received the allegedly “abusive” and “deceptive” verbal descriptions of what the written materials said. Moreover, many customers did the Opt-in designation online, after seeing all the required written disclosures, and without even talking to a bank employee. The Opt-in rates for in person and online customers were essentially the same.

The bank also argues that a lot of the CFPB’s claims are barred by the Regulation E one-year statute of limitations. Many of the CFPB’s claims center around the bank’s actions back in July 2010, right when the Opt-in rules became effective.  

“How can they bring claims for actions in 2010 when Regulation E has a one-year statute of limitations?” you may ask. That’s a great question and one that will be challenged in the lawsuit.

Finally, the CFPB’s  “abusive” claims are also suspect. The “abusive” standard was added to the original UDAP statutes as part of Dodd-Frank. This entirely subjective standard wasn’t defined at the outset, and after it was defined it became effective in 2011.  

The bank’s second argument is that the CFPB cannot retroactively apply the “abusive” standard to actions the bank took in 2010, before the law creating the “abusive” standard was effective.

The main focus of the Amicus Curiae brief that the state banker’s associations are filing in this case focuses primarily on the CFPB’s statement that “customers rarely readwritten disclosures.  What a shocking revelation!  

Regardless of whether that statement is actually true, the CFPB’s job is to enforce the regulations as they are written. It does not have the authority to add a new requirement that banks must give fully informative verbal descriptions of every written disclosure.  

If that position is upheld, it would constitute a huge new regulatory requirement. No bank gives verbal descriptions today for all the Regulation E disclosures, and no bank does it for any of the other consumer compliance regulations.  

Think of all the mortgage disclosures required by Regulation Z and RESPA. If the CFPB could sue every bank that did not give fully informative verbal descriptions of all those disclosures, every bank would lose and no one would be able to get a mortgage loan.

The OBA is joining in the Amicus brief and we’ll post it on the website after it’s been filed. Stay tuned. This case is an example of the outrageous behavior in which we frequently find the Bureau engaged. 

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ABA to FCC: Preserve banks’ ability to contact customers

In a comment letter to the Federal Communications Commission last Friday, ABA emphasized the need for the FCC to preserve banks’ ability to advise their customers of data breaches, suspicious account activity, low account balances and other important information in a timely and efficient manner. The letter came in response to a recent petition that seeks to upend the FCC’s existing interpretation of the “prior express consent” requirement of the Telephone Consumer Protection Act (TCPA).

Under the TCPA, banks must obtain prior express consent from consumers before calling or texting them with informational, non-telemarketing messages using an automated system. Under the FCC’s current interpretation, banks must receive oral consent from the customer in order to make these calls, and this requirement can be satisfied when a customer voluntarily provides the bank with a telephone number. The petition, however, urges the FCC to require written consent from the customer prior to contacting them.

ABA noted that if the FCC were to change its interpretation, it would prevent banks from making potentially millions of calls each month, “mak[ing] it more difficult for consumers to consent to receive important information from their financial institutions, and potentially leav[ing] customers confused and frustrated.” The association added that changes to the current interpretation would violate Congress’ intent to give the FCC flexibility to design rules appropriate for different types of calls, and to provide consumers with choice of contact, rather than isolation from contact. The proposal would also increase regulatory requirements resulting in more costs that will have to be absorbed by consumers.

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Don’t “double dip” on garnishment fees!

It’s been brought to the attention by the OBA’s Compliance Team that we may have an issue with how to proceed under the new garnishment statute that went into effect on Nov. 1, 2016. Apparently some member banks are receiving the $25 check for the garnishment fee up front, as required by the new law, but some are also retaining $10 from funds of the debtor that are being remitted to the creditor.  

This practice violates the provisions of Sec. 1190 of Title 12 O.S., as described below. If your bank has been receiving the $25 up-front fee that’s required AND also keeping $10 from the funds that are the subject of the garnishment, you should immediately remit those improperly retained $10 amounts to the creditor.
 
Effective Nov. 1, 2016, Section 1190 of Title 12 O.S. was amended regarding garnishment fees. The amendment changed both the fee amount (raising it from $10 to $25) and how the fee is paid (requiring it to now be tendered with the garnishment summons). 
 
Before this amendment was adopted, member banks could retain $10 from the funds that were subject to the garnishment summons and remit the remainder. For garnishments filed on or after Nov. 1, 2016, the bank no longer has to wait to collect its fee on the back end. 

What the change did is that when your bank receives a garnishment summons a check for the fee (now $25) must accompany the garnishment summons. The old method of retaining $10 from funds of the debtor cannot also be used. The bank is entitled only to the up-front fee. (FYI:  If the check does not accompany the summons, please read the November OBA Legal Briefs for suggested procedures.)

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Information from Washington

Department of Labor moves to postpone fiduciary rule

The Department of Labor (DOL) has proposed to extend the applicability deadline of the fiduciary rule for 60 days, until June 9, according to a notice published in the Federal Register. The rule was originally scheduled to take effect on April 10. Comments on the extension proposal are due by March 17.

The rule, which expanded the definition of “fiduciary” under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, was the target of a recent executive action by President Trump. The President directed the Secretary of Labor to thoroughly review the rule’s effect on Americans’ ability to access financial services.

The proposed delay will provide DOL additional time to determine the rule’s full impact on consumers, and, if necessary, issue a new proposal for revising or rescinding the rule. The longer implementation period also will allow banks of all sizes more time to comply.

Read the proposal at http://bit.ly/2lYPrMJ.

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FDIC’s Supervisory Insights highlights credit risk trends

Total loan balances at FDIC-insured banks grew 6.8 percent between September 2015 and September 2016, with considerable growth occurring in commercial real estate and agricultural lending portfolios. The FDIC’s March 7 issue Supervisory Insights also highlighted credit risk trends in CRE, ag, and oil and gas lending, and reiterated the importance of maintaining strong risk management processes.

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Would you like to serve on an ABA committee?

The American Bankers Association (ABA) is preparing to review the slate of banker nominees for ABA committees for the 2017-2018 association year, which begins in October. Given the growing volume and complexity of issues confronting the banking industry, your input and participation are needed now more than ever. In Oklahoma, the ABA is seeking to fill three positions: one on the Government Relations Council (GRC) Administrative Committee and two on the Community Bankers Council.

The GRC Administrative Committee represents a broad cross-section of the banking industry by size, geography, and charter type, and develops recommendations on positions and priorities regarding legislative and regulatory issues, which are then presented to the ABA Board of Directors. Members attend approximately three meetings a year in Washington, D.C., and are asked to be active advocates for the policy positions of the ABA to members of the legislative and executive branches and related agencies, local media and fellow bankers.

The Community Bankers Council represents community banking in ABA’s government policy-making process, tracks community bank competitiveness issues, and responds to them through a broad range of high-quality association products and services. The council is made up of approximately 100 community bankers from every state, primarily CEOs, with assets of generally less than $1 billion.

If you have an interest in serving on the GRC Administrative Committee or the Community Bankers Council, please call Roger Beverage or send him an email at roger@oba.com.

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OBA education corner …

While the weather continues to be all over the place, one thing you can always count on is quality education programs from the OBA! Check out the following:

  • Residential Construction Lending, March 15, webinar — This program provides an overview of the major issues involved in consumer or residential construction lending, primarily to individuals having a home built or remodeled.
  • What to do when a Customer Dies, March 16, webinar — We’ll walk you through the complicated process of dealing with a customer’s death – both on the deposit side and the loan side, as well as unique issues when doing business with the decedent’s estate.
  • Cybercrime and the Dark Web, March 17, webinar — Understanding how the internet is leveraged for crime gives us a better understanding how to protect our institutions.
  • Analyzing Appraisals for Mortgage Decisions, March 21, webinar — Proper valuation of collateral is critical. Yet most people reviewing appraisals have never been properly trained in how to review this critical information.
  • Call Report: Lending Schedules for Banks, March 22, webinar — This webinar will help you learn the classification priority for reporting loan information correctly and will provide detailed information on unused commitments and interest rate lock commitments.
  • Loan Documentation: Top 10 Mistakes and How to Avoid Them, March 22, webinar — New lenders will learn to avoid the most frequent exceptions and loss-causing mistakes.
  • Call Report Seminar, March 23, Oklahoma City — This seminar will help preparers and reviewers understand the preparation process and eliminate errors.
  • Addressing Threats of Violence, March 24, webinar — We’ll review legal and practical issues related to workplace violence, including the ADA Direct Threat standards, and we’ll address policies and best practices so that your organization can act when there is a threat to the workplace.
  • TRID Checkup: Areas of Concern and Uncertainty, March 28, webinar — This webinar is intended to review and discuss many of the major issues lenders are facing with TRID (TILA-RESPA Integrated Disclosure), including as-yet unresolved questions and how to deal with them.
  • Ability-to-Repay/Qualified Mortgage Review and Update, March 29, webinar — We will review all six ATR options, including the four QM options, and the option that expired during 2016.
  • Security Seminar, March 30, Oklahoma City — This session will analyze how the criminal element is incorporating the ever expanding stable of technology tools to exploit the weaknesses in bank operational processes.

Also, several scholarships are now available to bankers from OBA-member banks for various graduate schools of banking. Applications should be submitted to the OBA’s Janis Reeser by email (janis@oba.com), regular mail (643 N.E. 41st St., OKC, 73105) or fax (405-424-4518). The scholarship recipients will be selected and announced no later than April 21.

Click on each link for more specific information about each scholarship:

Also, the OBA is proud to promote the recognition of bankers who have devoted 50 or more years of service to the banking industry. All eligible nominees will be honored at the 2017 OBA Convention on May 24 at the Embassy Suites in Norman.

Click here to download a nomination form. If you have any questions, please contact Janis Reeser at 405-424-5252 or janis@oba.com.