Last Month's Q&A Answered

The following question appeared in the Q&A section of Banking Spectrum's Report Bulletin last month. Compare your answer to the correct answer below:

Q: We acquired a branch in an area that is largely Hispanic.  All our documents are in English and customers who are not fluent in English are directed to branch staff who are bilingual.  None of our disclosures are in English nor are any of our agreements, contracts and statements.  We use different systems for different products.  Do we need to provide Spanish speaking documents at the branch? 

A: A goods idea and one almost born out of necessity because of the large per centage of Spanish and perhaps non-English speaking applicants.  A failure to do so could result in CRA and fair lending issues in later compliance exams.  The bank will be faced with legal problems when they are faced with delinquent and other bad customer behavior that is defended on the basis that the customer did not understand what he was signing.  Having an interpreter for the customer won’t do on a long term basis.  Consider having English and Spanish versions for mortgage loan documents but have the customer sign the English version with the Spanish version attached or referenced or with a separately signed acknowledgment that he understood what he signed and all questions were answered.

NY Court of Appeals Decision

On May 8, 2014, the New York State Court of Appeals issued a decision in Clemente Brothers v. Aprile Hafner-Milazzo and Capital One. The case presented the issue of whether a bank and its customer may shorten the statutory time period provided for in UCC 4-406 within which a customer must notify its bank of an improperly paid item in order to recover the payment.

The court found for defendants on the facts of this case, calling it “not manifestly unreasonable” for the bank to shorten the time period from one year to 14 days because Clemente Brothers was a sophisticated customer with numerous employees who had the resources to make informed decisions about opening accounts. The Court specifically pointed to the fact that Clemente Brothers passed a corporate resolution acknowledging its obligation to notify Capital One of any irregularities in account statements within 14 days. It is important to note that the Court limited its holding to a case involving a sophisticated corporate entity but thought it could be unreasonable to impose a 14 day limit on unsophisticated customers, such as the elderly, disabled or small family businesses.

What's New? IRA Rollover Rules

IRS Announcement 2014-15 addresses a recent Tax Court opinion that limits the number of IRA-to-IRA rollovers an individual can make in a 12-month period. The interpretation indicates that the limitation applies on an aggregate basis, meaning that an individual could not make an IRA-to-IRA rollover if he or she had made such a rollover involving any of the individual’s IRAs in the preceding 1-year period. This rule is effective beginning January 1, 2015 and IRS Publication 590 will be updated accordingly.

Read more in The Gold Book under IRA Rollovers; General Rules and IRA Rollovers; Types; From One IRA to Another IRA.

Deposit Insurance Coverage: Free Seminars

The FDIC will conduct the following 12 free seminars on deposit insurance coverage for bank officers and employees between May 6, 2014, and December 4, 2014:

• Four sessions on "Fundamentals of Deposit Insurance Coverage" (Fundamentals Seminar), which will provide an overview of the rules for determining deposit insurance coverage for the nine most common account ownership categories.
• Four sessions on "Deposit Insurance Coverage for Revocable Trust Accounts" (Revocable Trust Seminar), which will focus on the rules for informal and formal revocable trust accounts.
• Four sessions on "Advanced Topics in Deposit Insurance Coverage" (Advanced Topics Seminar), which will focus on government accounts, mortgage servicing accounts, bank mergers, pass-through deposit insurance coverage, and other deposit insurance topics. 

For instructions and presentation links, click here.

What's New? Adult Guardianship in Other States

New York and New Jersey recently joined over thirty other states in their adoption of a Uniform Adult Guardianship Protective Proceedings Jurisdiction Act. Passing of these acts is to create uniform procedures for guardianships and protective proceedings and to prevent or minimize interstate jurisdictional disputes in adult guardianship cases. Read more about New York's Act and New Jersey's Act in The Gold Book. 

Last Month's Q&A Answered

The following question appeared in the Q&A section of Banking Spectrum's January 2014 Report Bulletin.

Compare your answer to the correct answer provided below.

Q: We want to make a loan to a customer for $300,000 to buy property; but we do not want to take a mortgage on the real estate.  Rather, we wish to secure our loan with the borrower’s brokerage account, which contains securities.  The loan to value ratio for this loan is 70% but we are concerned about Regulation U, the Federal Reserve Board’s margin stock Regulation.  Under Regulation U, a lender may not loan more than 50% against the value of the securities.  If Regulation U applies to this transaction, we would need additional collateral to secure our loan.  Since the borrower is not using the loan to buy securities, does the Regulation U limits apply to us here?

A: Yes.  The regulation applies to lenders who extend credit for the purpose of buying or carrying margin stock.  Here the borrower would be carrying margin stock for the purpose of securing the loan.  There are some Federal Reserve Board Interpretations (Regulation U, Section 221.101.101) that support this view.

What's New? New York City Human Rights Amendment

An amendment to the New York City Human Rights Law goes into effect on January 30th requiring employers with four (4) or more employees to provide “reasonable accommodations” for employees who are pregnant or have pregnancy or childbirth-related medical conditions. See The Gold Book for detailed information. 

What's New? Know Before You Owe

Consumer Financial Protection Bureau (CFPB) has issued rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act and the Real Estate Settlement Procedures Act. 

The new forms use clear language and design to make it easier for consumers to locate key information, such as interest rate, monthly payments, and costs to close the loan. The forms also provide more information to help consumers decide whether they can afford the loan and to compare the cost of different loan offers, including the cost of the loans over time.

The rule is effective August 1, 2015. See Know Before You Owe in The Gold Book for more information. 

What's New? Paying Agent Notification Requirements

On January 23, 2013, the Securities and Exchange Commission (SEC) amended Exchange Act Rule 17Ad-17 to implement the requirements of Section 929W of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The amendments add a requirement that "paying agents" send a one-time notification to "unresponsive payees" stating that the agent has sent a securityholder a check that has not yet been negotiated.

The effective date for the amendments is January 23, 2014. Therefore, the first potential notice to unresponsive payees would be due no later than August 23, 2014. 

See the The Gold Book for more information. 

Last Month's Q&A Answered

The following question appeared in the Q&A section of Banking Spectrum's November 2013 Report Bulletin.

Compare your answer to the correct answer provided below.

Q: We received a POA with a gifts rider.  There is one agent, X, appointed and a successor agent, Y.  Both agents signed on line O, thereby giving the impression that they are co-agents.  Y did not sign on line P where the successor agent is supposed to sign.  May we accept this POA?

A: The bank has two choices.  Note on the POA that only X is to act as a POA.  If and when X no longer can serve, then Y can later sign on line P as successor agent on the original POA and then bring a new copy to the bank.  Or, have Y sign now on the original POA as successor agent on the correct line P and resubmit a corrected copy to the bank for its file.

What's New? IRS Reporting Requirements Updated

Information and instructions on the following IRS reporting forms have been updated in The Gold Book:

Form 1098

Form 1099-K

Form 1099-R

Form 5498

OCC Final Regs on Direct Deposit Advances

The Office of the Comptroller of the Currency (OCC) on November 26, 2013, issued final “Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products”. This guidance addresses safe and sound banking practices and consumer protection in connection with deposit advance products.

The guidance outlines appropriate underwriting policies and practices, including establishing customers’ eligibility and assessing their ability to repay while allowing borrowers to continue to meet typical recurring and other necessary expenses.

This final supervisory guidance is applicable to all OCC-supervised institutions.

Complete guidance may be found in the Federal Register.

What's New? 2014 Cost of Living Adjustments

The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2014.

Updates are found primarily in the Cost of Living Adjustments for Pension Plans section and throughout the Pension Plans chapter.

What's New? NYS MLO Requirements

The Department of Financial Services published a notice of Emergency Rulemaking to implement license, financial responsibility, education and test requirements for mortgage loan originators (MLOs) to comply with Article 12-E of the Banking Law, amended in order to conform the regulation of MLOs in New York to federal legislation.

The rule requires that individuals engaging in mortgage loan origination must be licensed by the Superintendent of Financial Services and that MLOs, including those already engaged in the business of originating mortgage loans, must complete new education, testing and bonding requirements for licensure.

The new regulation is substantially similar to the prior rule on the same matter. This rule will expire on February 12, 2014.

See also the SAFE Act information in The Gold Book. 

What's New? Reg Z & M Threshold Exemptions for Consumer Credit and Lease Transactions

The Federal Reserve Board and the Consumer Financial Protection Bureau (CFPB) announced increases tothe dollar thresholds in Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) for exempt consumer credit and lease transactions. Transactions at or below the thresholds are subject to the protections of the regulations.

The adjustments to the thresholds reflect the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1, 2013 and will take effect on January 1, 2014. These increases are consistent with amendments to the Truth in Lending and Consumer Leasing laws made by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

See The Gold Book for more information.

What's New? Military Powers of Attorney

The Gold Book has been updated to include information regarding the requirement of financial institutions to accept military powers of attorney. See Power of Attorney and Military Powers of Attorney in The Gold Book. 

2014 Standard Mileage Rates

The Internal Revenue Service has issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56 cents per mile for business miles driven
• 23.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51 and  Notice 2013-80.

What's New? New Law - NYS Unsolicited Loan Checks

On November 13, 2013, Governor Cuomo signed A.3601/S43012, which became Chapter 467 of the Laws of 2013.  The law adds a new section 520-d to the General Business Law to aid in consumer protection.  The new law is effective as of the signing date.

The new law removes liability on the part of the payee unless the payee has accepted the check or the account against which the check is issued. 

See Unsolicited Mail Loan Checks in The Gold Book for additional information.

What's New? New ATR/QM Rules for Mortgage Lenders

The CFPB recently issued new Ability-to-Repay (ATR) and Qualified Mortgage (QM) rules for financial institutions that originate closed-end residential mortgage loans.

See the new section in The Gold Book, Ability-to-Repay and Qualified Mortgage Rule in the Truth in Lending (Regulation Z) section for details. 

For a guide to help financial institutions determine compliance oblications for mortgage loans, click here.

Last Month's Q&A: Answered!

The following question appeared in the Q&A section of Banking Spectrum's September 2013 Report Bulletin.

Compare your answer to the correct answer provided below.

Q: What is the rule for the exercise of powers by trustees and other fiduciaries in wills, trusts or other similar documents?  And where can I find the authority for such conduct?

A: The bank should adhere to the language in the trust or will that may recite who and how many shall act.  If the document is silent as to the exercise of fiduciary powers, the general rule is that if there are two fiduciaries, they must act together.  If three or more, then a majority of the fiduciaries are empowered to act.  For example, if there are three trustees, a majority must act and if one dies and two are left, then the two surviving trustees must act together, unless the instrument states otherwise.  Look at the NYS Estates Powers and Trusts Law (“EPTL”) section 10-10.7.