Print Friendly and PDF

Amy K's Compliance Calendar
Story ID:8364  
Date Posted:  June 1, 2017

by Amy Kleinschmit, VP Compliance

All of these effective dates are happening within the next twelve months! Don’t wait until the last minute to implement these regulatory changes.

June 9, 2017 - Department of Labor Fiduciary Rule

Impact - This will affect IRAs, ERISA covered plans, and other plans covered by section 4975(e)(1) of the Internal Revenue Code. Credit unions and their relationship with CUSOs may be impacted depending on products offered.

Effective date – originally April 10, 2017, delayed to June 9, 2017, with certain provisions in the exemptions further delayed to January 1, 2018. Additional information, including FAQs can be found here.

The final rule defines who is considered a fiduciary investment adviser, describes the kinds of communications that would constitute investment advice, and adopts new exemptions to permit investment advice fiduciaries to continue to receive compensation under certain circumstances.

Covered investment advice is defined as a recommendation to a plan, plan fiduciary, plan participant and beneficiary, IRA, or IRA owner for a fee or other compensation, direct or indirect.  A “recommendation” is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular investment-related course of action. In general, a recommendation is a “call to action” -- a communication that a reasonable person would view as recommending that he or she actually buy, hold, or sell a particular investment, or as a recommendation on managing investments or investment accounts. The more individually tailored the communication is to a specific advice recipient or recipients, the more likely the communication will be viewed as a recommendation.
Not all communications with financial advisers will be covered fiduciary investment advice. The Rule draws an important distinction between non-fiduciary investment education and fiduciary recommendations. The Rule defines non-fiduciary education as covering four categories of information and materials:
  • Plan and investment information (information and materials that describe investments or plan alternatives without specifically recommending particular investments or strategies);
  • General financial, investment, and retirement information;
  • Asset allocation models; and
  • Interactive investment materials.
August 2017 – FinCEN updates to CTR
The Financial Crimes Enforcement Network (FinCEN) has recently announced that certain fields on the Currency Transaction Report (CTR) will be updated starting in August 2017. (See today’s other Memo compliance article for additional details.)
September 15, 2017 – NACHA Same-day ACH Phase 2

As discussed in the May 18 Memo article, starting on September 15, 2017, Same Day ACH will be available for debit entries. Offering Same Day ACH products and services is optional for ODFIs. However, receipt of Same Day Entries is not optional for RDFIs, with the narrow exception for international ACH transactions and single transactions over $25,000. NACHA has developed a Same Day ACH Resource Center where credit unions can access a number of resources to assist with preparing for Phase 2, and eventually Phase 3, of Same Day ACH.

October 3, 2017 – Department of Defense Military Lending Act for Credit Cards
As discussed in more detail in the March 23 Memo article, the Department of Defense (DoD) issued a final rule that significantly expanded the coverage of the Military Lending Act (MLA). The rule went into effect October 3, 2016, for most closed-end and open-end lending products. However, credit cards were not included in the initial effective date as the DoD excluded them until October 3, 2017. (It is possible that the DoD may extend this exemption for one more year – however, as of the date of writing this article the DoD has not announced any extension).
MLA prohibits certain contract provisions from applying to covered borrowers. Any credit agreement, promissory note, or other contract with a covered borrower that fails to comply with the regulatory restrictions/prohibitions which contains one or more provisions prohibited is void from the inception of the contract.
The regulation requires that certain loan disclosures be provided to the covered borrower. Per the regulation a creditor must provide to the covered borrower the following information before or at the time the borrower becomes obligated on the transaction or establishes an account for the consumer credit: (1) A statement of the MAPR applicable to the extension of consumer credit; (2) Any disclosure required by Regulation Z, which shall be provided only in accordance with the requirements of Regulation Z that apply to that disclosure; and (3) A clear description of the payment obligation of the covered borrower, as applicable. A payment schedule (in the case of closed-end credit) or account opening disclosure (in the case of open-end credit) provided pursuant to satisfy this requirement.
Remember – written AND ORAL disclosures are required for the MAPR statement and the payment obligation.
In addition to the contract provision restrictions and the oral disclosures there is also the cap on the Military Annual Percentage Rate (MAPR). A creditor may not impose an MAPR greater than 36 percent in connection with an extension of consumer credit that is closed-end credit or in any billing cycle for open-end credit.
October 19, 2017 – CFPB Amendments to the 2013 Mortgage Rules Regulation X and Z

The Consumer Financial Protection Bureau (CFPB) issued final rules amending their 2013 mortgage servicing rules (which were effective January 2014) and can be found here. This final rule affects provisions relating to force-placed insurance notices, policies and procedures, early intervention and loss mitigation requirements under Regulation X. There are also revisions to Regulation Z, including periodic statements. The final rule also discusses servicing requirements when a person is a potential or confirmed successor in interest, in bankruptcy or requests a cease of communication under the Fair Debt Collection Practices Act. The CFPB also issued an interpretive rule under the Fair Debt Collection Practices Act that relates to servicers’ compliance with mortgage servicing rules.

January 1, 2018 – CFPB Home Mortgage Disclosure Act

A financial institution (as defined by the regulation – i.e. five part test) is required to collect data regarding applications for covered loans (closed-end mortgage loan or an open-end line of credit that is not an excluded transaction) that it receives, covered loans that it originates, and covered loans that it purchases for each calendar year. A financial institution shall collect data regarding requests under a preapproval program only if the preapproval request is denied, is approved by the financial institution but not accepted by the applicant, or results in the origination of a home purchase loan. The current fourteen data fields is expanded to thirty-eight! The CFPB has developed a resource page that has a number of helpful items to assist credit unions in implementing these changes, including small entity guide, timeline, coverage charts, etc. Find these resources here.

March 16, 2018 – NACHA Same-day ACH Phase 3

As mentioned above, the final phase of Same-day ACH goes into effect spring 2018. Beginning March 16, 2018, RDFIs will be mandated to make funds available from same day ACH credits (such as payroll direct deposits) to their depositors by 5:00 PM at the RDFI’s local time. 

The rule enables the option for same-day ACH payments through additional ACH network functionality, without affecting previously available ACH schedules and capabilities.
Originating financial institutions (ODFIs) are able to submit files of same-day ACH payments through two additional clearing windows provided by the ACH Operators (Note: The actual ACH Operator schedules are not determined by the NACHA Operating Rules.):
  • A morning submission deadline at 10:30 AM ET, with settlement occurring at 1:00 PM.
  • An afternoon submission deadline at 2:45 PM ET, with settlement occurring at 5:00 PM.
Virtually all types of ACH payments, including both credits and debits, are eligible for same-day processing. Only international transactions (IATs) and high-value transactions above $25,000 are not eligible. All RDFIs are required to receive same-day ACH payments, thereby giving ODFIs and Originators the certainty of being able to send same-day ACH payments to accounts at all RDFIs.

April 1, 2018 – CFPB Prepaid Accounts under Regulation E and Z (Date Extended)

The CFPB issued their final rule to delay the effective date of their Prepaid Accounts Rule under Regulation E and Regulation Z. The Prepaid Rule was originally scheduled to become effective this October 1, 2017, but delayed until April 1, 2018.

As you will recall this rule, when it goes into effect, will implement “comprehensive consumer protections” for prepaid accounts under Regulation E and Regulation Z.

The CFPB also issued a number of implementation resources at the same time as the final rule. Those additional resources can be found here, which includes a coverage chart that can be found here. (What rule isn’t complete without a flow chart…a six page flow chart…)

Under this 1,689 page final rule, the CFPB amends the definition of “account” under Regulation E to include “prepaid account.” Prepaid account includes “payroll card account” and “government benefit account” which were already included under Regulation E - however, provisions relating to government benefit account have also been amended under this final rule which will be discussed in more detail below.

The CFPB finalized a definition of prepaid account that covers a range of products including general purpose reloadable (GPR) cards, as well as other products that may not be used as transaction account substitutes, such as certain non-reloadable accounts and digital wallets.

Once this rule becomes effective, “pre-paid account” will be included in the definition of “account” under Regulation E. This means when the term “account” is used in Regulation E those regulatory protections and requirements will apply to “pre-paid accounts” for example, initial disclosures, change in terms notices, periodic statements, liability of consumer for unauthorized transfers and procedures for resolving errors, to name a few.

May 11, 2018 – FinCEN Customer Due Diligence 

Credit unions will also be required to adopt “appropriate risk-based procedures for conducting ongoing customer due diligence, to include, but not be limited to: understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; and conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

New Section 31 CFR 1010.230 has been added to FinCEN’s regulations addressing “beneficial ownership requirements for legal entity customers.” This section will require “covered financial institutions” which includes federally insured credit unions to establish and maintain written procedures that are reasonably designed to identify and verify “beneficial owners” of “legal entity customers.”

For the purposes of this requirement “legal entity customers” means a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction that opens an account. Legal entity does not include sole proprietorships, unincorporated associations, or natural persons opening accounts on their own behalf.

For purposes of this final rule, a “beneficial owner” includes each individual, if any, who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25 percent or more of the equity interests of a legal entity customer (up to four individuals identified); AND a single individual with significant responsibility to control, manage, or direct a legal entity customer (1 person identified). Someone with “significant responsibility to control, manage, direct” includes an executive officer or senior manager (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer); or any other individual who regularly performs similar functions.

There is a model form in the regulation for this. As always, feel free to contact me with any questions/concerns at