RegWatch - CUNA OpSS Council

CUNA Regulatory Affairs (edited by the OpSS Council Regulatory Committee)
May 15, 2008 | COMMENTS

Regulatory Issues of Interest to CUNA OpSS Council Members

In This Issue:

• Proposed FCRA Act Amendment Would Require Creditors to Provide Certain Consumers with Risk-Based Pricing Notices
• New International ACH Payment
• FinCEN Proposes Amendments to CTR Exemptions

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PROPOSED FCRA ACT AMENDMENT WOULD REQUIRE CREDITORS TO PROVIDE CERTAIN CONSUMERS WITH RISK-BASED PRICING NOTICES

The Federal Reserve Board (Fed) and the Federal Trade Commission (FTC) have issued a proposal that would require creditors to provide certain consumers with a risk-based pricing notice. Such notice would be required when, based on the consumer's credit report, the creditor offers credit to the consumer on terms less favorable than those offered to other consumers by that creditor.

The proposed rules provide a menu of approaches that creditors may use to comply with the statute's legal requirement. The proposal also contain certain exceptions. A major exception would allow creditors to provide all of their consumers with their credit scores and explanatory information instead of providing risk-based pricing notices for those offered less favorable terms.

There will be a 90-day comment period following publication in the Federal Register.

Click here for a copy of the proposed rulemaking.

-  Luke Martone, Regulatory Research Counsel

 

NEW INTERNATIONAL ACH PAYMENTS

NACHA is amending its Operating Rules regarding International ACH Transactions, which would impact all financial institutions, including credit unions. Effective March 20, 2009, the new NACHA rule and format for International ACH Transactions will enable financial institutions to send and receive cross-border ACH payments that can be readily identified and that carry remittance information identifying all the parties to the payment.

The rules were amended in response to a request from the Office of Foreign Assets Control (OFAC) and the Financial Action Task Force Special Recommendation VII to align the NACHA Operating Rules with OFAC compliance obligations. The rule:

• Requires Gateway Operators to classify payments that are transmitted to or received from outside the U.S. as International ACH Transactions (IATs); and
• Includes the Bank Secrecy Act's (BSA) “Travel Rule” information within the international payment format.

These changes will make it easier for Receiving Depository Financial Institutions (RDFIs) to comply with OFAC requirements by carrying the additional information required under the BSA's Travel Rule and will contain screening indicators that will help financial institutions conduct an efficient review of the transactions, as required by law. The current cross-border payment formats, CBR and PBR, do not readily identify all parties to an IAT.

Every financial institution will be impacted by the new NACHA rule. Credit unions that outsource their ACH processing will need to comply with vendor due diligence to ensure that their processors made the proper changes to their system. All RDFIs will need to establish a written OFAC compliance policy for handling IATs and meeting OFAC compliance obligations. Originating Depository Financial Institutions (ODFIs) and their Originators will need to change their procedures to incorporate the IAT changes when originating a cross-border ACH transaction.

Click here for a copy of CUNA's Final Rule Analysis for more information.

- Lilly Thomas, Assistant General Counsel

 

FinCEN PROPOSES AMENDMENTS TO CTR EXEMPTIONS

The Financial Crimes Enforcement Network (FinCEN) is proposing to amend requirements under the Bank Secrecy Act (BSA) by simplifying certain aspects of the CTR exemption process.

The BSA regulations require that each financial institution, including every credit union, file a Currency Transaction Report (CTR) for each transaction involving currency (cash) of more than $10,000. Two categories of “exempt” status were created, Phase I and Phase II, so that transactions of certain individuals that are not likely to aid officials in potential criminal activity do not have to be reported. As a result, if an “exempt person” initiates a currency transaction in excess of $10,000 the credit union is not required to file a CTR.

Phase I eligible entities include:

• Credit unions/banks;
• Governmental departments or agencies;
• Certain entities that exercise governmental authority; and
• Entities and their subsidiaries that are listed on one of the major national stock exchanges.

Phase II designees are certain eligible businesses and payroll customers/members that meet specific requirements, including having a transaction account with the institution for at least 12 months.

In an effort to simplify the exemption process, FinCEN is proposing to no longer require a Form 110 (designation of exempt person) to be completed for certain Phase I eligible customers/members that are depository institutions; federal, state, or local governments; or entities exercising governmental authority. An annual review of information supporting the listed eligible customers/members would also no longer be required.

FinCEN is also proposing to permit depository institutions to exempt otherwise eligible Phase II customers/members within a period of time shorter than 12 months by either enabling the institution to make a risk-based determination or by reducing the required length of time from 12 months to two months.

Depository institutions would no longer be required to file biennially Form 110 for Phase II customers/members. However, they would be required to notify FinCEN of any change in control such as a Phase II customer that it knows of, or should know of on the basis of its records. They would also be required to conduct a risk-based assessment of the customer's/member's transactional activity when a Phase II eligible customer is designated.

For more information on FinCEN's proposal, click here. Please submit your comments to CUNA by June 6, 2008. Comments are due to the FinCEN by June 23, 2008.

- Lilly Thomas, Assistant General Counsel