Compliance Update with Amy K

​Join us for an introduction to HSAs Webinar next Wednesday! NCUA issues consumer tip to protect your money with a trusted contact, and more! 

Health Savings Account Webinar Next Week!
Please note, there’s still time to join us on Wednesday, June 7 at 10:00 a.m. (CT) for an introduction to Health Savings Accounts (HSAs). As the nationwide growth of HSAs continue to rise, financial organizations are beginning to see more complex transactions due to increased customer activity.  This activity requires personnel to review their existing HSA procedures to ensure transactions are handled properly.  We’ll explore the areas of employee eligibility, handling excess and mistaken distributions, investment diversification and product expansion, including how HSAs are being touted as a retirement savings vehicle in addition to a health care coverage option. 

Highlights for this upcoming webinar include:

• Eligibility requirements,
• Required documents to establish an HSA
• Contribution limits
• Portability rules
• Handling excess contribution and Mistaken Distributions
• Distribution options for qualified medical expenses
• IRS reporting requirements

Our speaker is Matthew Dickinson, who uses real-world exercises to help participants apply information to job-related situations. Mr. Dickinson has over 18 years in banking and retirement and has held many titles within his career. He has worked for companies such as Ascensus, Merril Lynch, Wells Fargo, and Frandsen. On a day-to-day basis, Matt helps financial institutions gain and maintain their knowledge base to manage their IRA portfolio.

Special pricing has been secured for our affiliated credit unions of only $79 for this 90 minute training event, but don’t wait much longer! Register today. The event will be recorded and the link provided to registrants following the live session. The link will be available for 90 days.
 
NCUA Consumer Tip - Trusted Contact
The National Credit Union Administration (NCUA) has provided useful information in a recent consumer tip – protect your money with a trusted contact. A short video, aimed at educating members, can be found here.

As discussed in the consumer tip, choosing a trusted contact can help the member prevent fraud and scams without giving up control of their finances.

In addition to the Trusted Contact tip, the NCUA has a number of other resources available to help protect older adults, which can be found here. NCUA has also provided guidance for credit unions on how they can help fight elder financial exploitation, considering sharing the poster found at the previous link with all staff.
 
CFPB - Small business lending guide
As you will recall, at the end of March the Consumer Financial Protection Bureau (CFPB) issued their final rule concerning small business lending reporting requirements under section 1071 of the Dodd-Frank Act. The rule amends Regulation B to implement the Section 1071 mandates. The mandatory compliance dates are staggered depending on loan volume, with the largest lenders being required to implement first.

• A financial institution must begin collecting data and otherwise complying with the final rule on October 1, 2024 if it originated at least 2,500 covered originations in both 2022 and 2023.
• A financial institution must begin collecting data and otherwise complying with the final rule on April 1, 2025 if it: Originated at least 500 covered originations in both 2022 and 2023; Did not originate 2,500 or more covered originations in both 2022 and 2023; and Originated at least 100 covered originations in 2024.
• A financial institution must begin collecting data and otherwise complying with the final rule on January 1, 2026 if it originated at least 100 covered originations in both 2024 and 2025.

To assist with implementation of this final rule the CFPB has issued several resources, including most recently, a Small Entity Compliance Guide which can be found here.

Briefly to recap, “Covered financial institution” means a financial institution that originated at least 100 covered credit transactions for small businesses in each of the two preceding calendar years. A business is a “small business” if its gross annual revenue for its preceding fiscal year is $5 million or less. Every five years after January 1, 2025, the gross annual revenue threshold will be adjusted based on changes to the Consumer Price Index for All Urban Consumers.

“Covered credit transaction” means an extension of “business credit,” however, there are a number of exclusions, which are discussed in a moment, but first “business credit” has the same meaning as under current Regulation B definitions. Generally, “business credit” refers to extensions of credit primarily for business or commercial (including agricultural) purposes, but excluding certain types of extensions of credit. Thus, covered credit transactions can include loans, lines of credit, credit cards, merchant cash advances, and credit products used for agricultural purposes. The exclusions for “covered credit transaction” for purposes of this final rule include – trade credit, HDMA reportable transactions, insurance premium financing, public utilities credit, securities credit and incidental credit.

Credit unions that are “covered financial institutions” must compile and maintain data regarding covered applications from small businesses. The final rule directs how the data is required to be compiled and what data points are required. But first, another vocab term “Covered application” means an oral or written request for a covered credit transaction that is made in accordance with procedures used by a financial institution for the type of credit requested. Exceptions - a covered application does not include: (1) Reevaluation, extension, or renewal requests on an existing business credit account, unless the request seeks additional credit amounts; or (2) Inquiries and prequalification requests.

The CFPB’s final rule also implements a requirement in section 1071 that certain data collected from applicants be shielded from underwriters and certain other persons (or, a shield is not feasible, a notice is given instead); the CFPB refers to this as the “firewall.” Other implementation resources includes a compliance dates info sheet and data points chart can be found here.
 
CFPB Overdraft Report
The CFPB recently issued a report on Consumer Experiences with Overdraft Programs providing a summary of focus groups and interviews with 36 low and moderate income individuals. CFPB acknowledges that “due to the limited nature of this engagement, findings should not be considered representative of all consumers, or used for statistical analysis.”

The report did highlight some general themes that the participants discussed, such as confusion about overdraft, concerns about fees, and approaches to avoid overdraft fees to name a few. However, the report also provided that, “While most participants expressed frustration with overdraft fees and the circumstances that caused those fees, some participants expressed that they found value in overdraft programs to provide them with greater flexibility. In particular, some of these consumers had accounts with lowered fees or where their financial institution had instituted buffers or grace periods.” [Emphasis added]

As always, DakCU members may contact Amy Kleinschmit with any compliance related questions.