1. What The Board Needs to Know
COMPLIANCE HOT TOPICS
What The Board Needs to Know

2. STILL A LOT TO DO

3. LATELY, COMPLIANCE FEELS LIKE THIS . . . .

4. IMPLEMENTED DURING 2010 New RESPA Disclosures
New Credit Card Disclosures, Processing Rules and Fee Restrictions
Shorter Allowable Hold Periods on Deposits
New Overdraft Opt-in, Disclosures and Restrictions
Overhaul of Open-end Credit Reg Z Disclosures
New Uniform Privacy Disclosures

5. IMPLEMENTED DURING 2011 New Risk-Based Pricing Notices
New Closed-End Mortgage Reg Z Disclosures
New Mortgage Loan Officer Compensation Rules
SAFE Act Registration
Financial Literacy Requirements (Federal Credit Unions)

6. COMING UP SOON Changes to Online Banking Authentication Systems
Consumer Financial Protection Bureau

7. BOARD RESPONSIBILITY FOR COMPLIANCE

8. BOARD RESPONSIBILITIES
Board Support
Resources
Approve Policy and Programs
Review Status Reports

9. KEY CURRENT ISSUES CARD Act Overdraft Protection Opt-in
Reg Z Open-End Disclosures
Mortgage Disclosures
Loan Officer Compensation
SAFE Act Registration
Financial Literacy Training
Vendor Due Diligence
Flood Insurance
Bank Secrecy Act
Online Banking Authentication Systems
Consumer Financial Protection Bureau

10. CARD ACT
Rule of Thumb: Anytime a regulation makes it into mainstream news media, it’s a big deal.

11. CARD ACT
Prohibitions on raising interest rates on existing balances (except for variable rate cards and some penalty rates)
Elimination of a floor on variable rate cards
New periodic statement disclosures
Payment due dates on the same day every month
Opt-in for over-the-limit fees
New rules for card issuance to members under 21
Card agreements posted on the credit union’s website
Six month rate increase reviews
Fee restrictions

12. OVERDRAFT OPT-IN
Fee Income: An endangered species

13. OVERDRAFT OPT-IN
Applies to one-time debit card and ATM transactions only
Member must opt-in for service
Regulatory mandated disclosure
Credit Union confirmation required
No discrimination against members who do not opt-in

14. REG Z OPEN-END LOAN DISCLOSURES
A major overhaul

15. REG Z OPEN-END LOAN DISCLOSURES
New disclosures for applications and solicitations (applies to credit cards only)
New account opening disclosures
New periodic statement disclosures
New change-in-terms notifications
New underwriting and procedural changes for credit unions that offer Multi-feature Open-ended Lending (MFOEL)

16. MORTGAGE DISCLOSURES
More important than ever

17. MORTGAGE DISCLOSURES RESPA: Regulation Z TIL Statement Changes:
New standardized Good Faith Estimate
Changes to HUD-1 Settlement Statement
Comparison of fees disclosed on both documents
Limitation on the amount fees can change from application to closing
Regulation Z TIL Statement Changes:
New payment disclosures
Statement that the borrower may not be able to refinance

18. LOAN OFFICER COMP-ENSATION
The end of yield-spread premiums.

19. LOAN OFFICER COMPENSATION
Applies to compensation related to the origination of mortgage loans.
Prohibits any loan originator or mortgage broker compensation based on the terms or conditions of the transaction other than the amount of credit extended.
Prohibits payment of compensation by any other party if the consumer is directly compensating the loan originator.
Prohibits loan originators from steering applicants to loan products based on the fact that the loan officer will receive greater compensation for the loan.

20. SAFE ACT REGISTRATION
You can’t make mortgage loans without it . . .

21. SAFE ACT REGISTRATION
All Mortgage Loan Originators (MLOs) should have been registered by July 29, 2011.
After the registration deadline MLOs cannot originate mortgage loans without their identification number.
The Board must approve a written SAFE Act Policy.
All newly hired MLOs must be registered before acting as an MLO.

22. FINANCIAL LITERACY TRAINING
Requirement for Federal Credit Unions Only.

23. FINANCIAL LITERACY TRAINING
Directors must have the following financial skills:
Working familiarity with basic finance and accounting practices
Ability to read and understand the credit union’s balance sheet and income statement
Ability to ask substantive questions of management and auditors
Level of financial knowledge should be consistent with the size and complexity of the credit union.
Directors appointed prior to January 27, 2011 should have acquire necessary skills by July 27, 2011.
Directors appointed after January 27, 2011 will need to acquired necessary skills within six months of their appointment.

24. VENDOR DUE DILIGENCE
Do you really know your vendors?

25. VENDOR DUE DILIGENCE
Third party arrangements should be evaluated for possible risks and managed in a manner commensurate with the credit union’s size, complexity and risk profile.
Credit Union management should complete the following tasks:
Risk Assessment and Planning
Due Diligence
Risk Measurement, Monitoring and Controls
A plan should be in place to evaluate all new vendors, monitor existing relationships and manage risk.

26. FLOOD INSURANCE
You never think about it until it’s too late.

27. FLOOD INSURANCE Large fines are possible
Credit Unions must do the following:
Determine the flood zone of all real property securing a loan each time the credit union makes, increases, extends or renews a loan
Notify property owners in flood zones of insurance requirements within a reasonable time (10 days) prior to consummation
Ensure adequate flood insurance is in place prior to consummation
Track insurance coverage through the life of the loan
Force place insurance when necessary

28. BANK SECRECY ACT
An oldie, but a goodie

29. BSA PROGRAM REQUIREMENTS
Independent testing of BSA compliance.
A specifically designated person or persons responsible for managing BSA compliance (BSA compliance officer).
Training for appropriate personnel.
A system of internal controls to ensure ongoing compliance.

30. BSA BOARD RESPONSIBILITIES
Approve the BSA Program annually
Appoint a BSA Officer
Review the BSA Risk Assessment as applicable
Review periodic BSA program updates
Ensure BSA officer has adequate staffing and resources
Review reports of filed Suspicious Activity Reports
Champion policy and procedure

31. ONLINE BANKING AUTHENTI-CATION
Changing requirements for a changing world.

32. UPDATED ONLINE BANKING AUTHENTICATION SYSTEMS
Changes should be completed by January 1, 2012.
Required by the supplement to the FFIEC’s “Authentication in an Internet Banking Environment.”
Examiner expectations include:
Risk Assessments (updated at least every 12 months or as membership, products, services, or on-line threats change)
Increased authentication for higher risk transactions (member initiated ACH withdrawals, business accounts)
Implementation of layered security for online banking
Re-evaluation of authentication techniques (username/password/cookie and simple challenge questions will no longer be considered adequate)
Member Awareness and Education Program
Assistance and cooperation from your online banking provider is critical. Status updates should be provided to the board.

33. CFPB
Still a lot of unknowns . . .

34. CONSUMER FINANCIAL PROTECTION BUREAU
Direct examination authority only for financial institutions with $10 billion or more in assets.
The Bureau has rulemaking authority for many consumer protection regulations.
The Bureau can go on joint examinations with the NCUA if there is practice the NCUA is concerned about.
Even beneficial changes mean more work for credit unions:
New forms
New procedures
New training

35. Heather Line Compliance Specialist Utah Credit Union Association
THANK YOU