What's New? New COVID-19 Safety and Soundness Standards for Financial Institutions

On June 23, 2020, the financial institution regulatory agencies jointly issued interagency examiner guidance for assessing safety and soundness considering the effect of the COVID-19.

Read more on the interagency guidance in The Gold Book.

 

New CIP Rule Exemption

The FDIC, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the National Credit Union Administration, collectively the federal banking agencies (FBAs), with the concurrence of the Financial Crimes Enforcement Network (FinCEN), grant an exemption from the requirements of the customer identification program (CIP) rules for loans extended by banks and their subsidiaries to all customers to facilitate purchases of property and casualty insurance policies.

See Customer Identification Program in The Gold Book to learn more.

What's New? Plan Loans Under the CARES Act

The Internal Revenue Service today released Notice 2020-50 (PDF) to help retirement plan participants affected by the COVID-19 coronavirus take advantage of the CARES Act provisions providing enhanced access to plan distributions and plan loans. This includes expanding the categories of individuals eligible for these types of distributions and loans (referred to as "qualified individuals") and providing helpful guidance and examples on how qualified individuals will reflect the tax treatment of these distributions and loans on their federal income tax filings.

Read more about Plan Loans in The Gold Book.

What's New? RMD Rollover Relief Under CARES Act

The Internal Revenue Service announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described this change in Notice 2020-51 (PDF), released today. The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.

What's New? FCRA COVID-19 Relief

The Consumer Financial Protection Bureau issued guidance on consumer reporting during the COVID-19 pandemic. The frequently asked questions (FAQs) address responsibilities under the CARES Act and FCRA when information is furnished to consumer reporting agencies. Lenders they must comply with the credit reporting requirements of the CARES Act. Read more in The Gold Book.

COVID-19 Relief Programs: Preemption

Federal, state, and local governments have taken many actions to respond to the economic disruption caused by the spread of COVID-19. While the Office of the Comptroller of the Currency (OCC) recognizes that a wide range of stakeholders, including state and local governments, have an important role to play in the country’s COVID-19 response, the agency reminds stakeholders that banks are governed primarily by uniform federal standards. This bulletin applies to community banks.

Click here to read the OCC bulletin: COVID-19 Relief Programs: Preemption.

What's New? Final Remittance Rule

On May 11, 2020, the Consumer Financial Protection Bureau issued a final rule (2020 Final Rule) amending the Remittance Transfer Rule. The rule is effective beginning July 21, 2020.  Click here to read more.

What's New? Additional CRA Guidance

The Gold Book has been updated with additional OCC guidance and FAQs for financial institutions. Click here.

Considerations for Economic Impact Payments

Signed in March 2020, the CARES Act provides Economic Impact Payments (EIPs) to qualified consumers. The government is disbursing EIPs to people based on information contained within their 2018 or 2019 federal tax returns. Both electronic and physical EIPs are distributed in weekly cycles. As these stimulus funds begin to be distributed to individuals, certain questions and risks have arisen that financial institutions need to consider.

EIP Automated Clearing House (ACH) direct deposits returned by an institution will be redistributed as a physical check payment. Use caution when an EIP is received for deceased accountholders. EIPs are not subject to reclamation of funds by the Treasury Department and should be handled in accordance with the institution’s existing controls.

There are cases where an electronic EIP is received for a closed account. An institution may risk reputational harm returning the EIP if the closed account relates to an existing customer that’s readily identifiable. However, an institution may expose itself to liability if it distributes the funds to an incorrect party. Careful analysis should be performed with proper documentation if an institution chooses not to automatically return the EIP.

As a Receiving Depository Financial Institution (RDFI), the institution is protected by safe harbor if it exactly processes and posts the EIP in accordance with the instructions accompanying the transaction entry. Any change in depositing the funds into an account other than that received in the transaction entry, or subsequently transferring the funds to another account, will create potential liability. 

EIPs are not protected from offset by the financial institution for outstanding debts or overdrafts. New York has passed restrictions prohibiting institutions from claiming EIPs for such purposes. Institutions should review their core system settings to ensure that EIPs are not automatically applied to such pre-existing negative account balances. Different systems may require different process solutions.

As EIPs have Social Security Numbers (SSN) included in the payment transaction information, institutions must review IT controls to determine whether the SSN information will carry into the recording and reporting of the EIP through its online statements, physical paper statements, and mobile banking services. Fraud may exist in the creation of fraudulent EIP checks or the fraudulent transacting of valid EIP checks. Multiple deposits of EIP checks through remote deposit capture or mobile banking channels are other concerns that should be considered. Communication and training on potential fraud and identity theft red flags will be essential in combatting these risks.

IRS Postponement of Deadlines

IRS Forms 5498 reporting deadlines are postponed to August 31, 2020. 

The deadlines applicable to any of the following acts that would have fallen on or after April 1, 2020 and before July 15, 2020 have been postponed until July 15, 2020:

• Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) plan contributions
• Indirect rollovers from employer sponsored retirement plans to IRAs
• 2019 traditional IRA, Roth IRA, and HSA regular contributions -(from previous guidance)
• 2019 CESA regular contributions
• Rollovers between IRAs, between HSAs, and between CESAs
• 120-day rollover period for first-time home buyers
• Repayment of a Qualified Reservist Distribution
• Deadline to remove excess or unwanted IRA contributions

Extention of 5498 Filing Deadline

On May 28, 2020, the IRS issued Notice 2020-35, which further postpones, to August 31, 2020, the due date for filing with the IRS and furnishing to account holders Form 5498, IRA Contribution Information, Form 5498-ESA, Coverdell ESA Contribution Information, and Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information. Previously, on April 10, 2020, the IRS issued Notice 2020-23, which provided guidance that extended from June 1 to July 15 the deadline for filing and furnishing IRS Forms 5498 and 5498-SA.

FAQs on the CRA Related to COVID-19

Click here to read the Q & A.

OCC COVID-19 Information

The OCC is working cooperatively with all state and federal banking agencies and other organizations to assist regulated institutions and their customers in managing the impact of the outbreak. Accordingly, the OCC has provided links to information concerning the operation of financial institutions during the COVID-19 pandemic.

Click here to read more on the OCC website.

IRS: Withholding on certain periodic retirement and annuity payments

In Notice 2020-3, the IRS provided that, for 2020 the default rate of withholding on periodic payments will continue to be based on treating the taxpayer as a married individual claiming three withholding allowances when no withholding certificate is in effect.

Director, Shareholder, and Member Meetings: Interim Final Rule

The Office of the Comptroller of the Currency (OCC) is issuing an interim final rule that amends 12 CFR 5 and 7 to clarify that national banks and federal savings associations (FSAs) (collectively, banks) may permit telephonic and electronic participation at all board of directors, shareholder, and, as applicable, member meetings.

This interim final rule is effective on May 28, 2020. Comments on the interim final rule must be received no later than July 13, 2020.

Read more here on the OCC website.

NYS Provisions of Commercial Leases

A Local Law to amend the administrative code of the city of New York, in relation to personal liability provisions of leases for commercial tenants impacted by COVID-19 has been passed. This bill would temporarily prohibit the enforcement of personal liability provisions in commercial leases or rental agreements involving a COVID-19 impacted tenant. This would apply to businesses that were impacted by mandated closures and service limitations in the Governor's Executive Orders. Specifically, it covers (1) businesses that were required to stop serving food or beverages on-premises (restaurants and bars); (2) businesses that were required to cease operations altogether (gyms, fitness centers, movie theaters); (3) retail businesses that were required to close and/or subject to in-person restrictions; and (4) businesses that were required to close to the public (barbershops, hair salons, tattoo or piercing parlors and related personal care services). Threatening to or attempting to enforce such a provision would also be considered a form of harassment.

EIP RIsk Management

Signed in March 2020, the CARES Act provides Economic Impact Payments (EIPs) to qualified consumers. The government is disbursing EIPs to people based on information contained within their 2018 or 2019 federal tax returns. Both electronic and physical EIPs will be distributed in weekly cycles. As these stimulus funds begin to be distributed to individuals, certain questions and risks have arisen that financial institutions need to consider.

Operational Risks – Your institution has standard policies and procedures on processing ACH payments and specifically, tax refunds. These payments should follow these standard procedures with particular attention paid to unique situations with the goal of providing EIPs to consumers.

Closed Accounts – Some entries may reject if the account is closed. Your institution should consider if you have the ability to identify if the closed account is for an accountholder who opened a different account, or has left the institution. It may be difficult to explain to a current accountholder that the payment was received and returned. Accounts for existing customers may have changed for any number of reasons, including internal changes made to the core since the person filed either his or her 2018 or 2019 tax returns. Changes related to your core system that caused them not to get paid would be even more difficult to explain.   As mentioned above, any returned EIP will be redistributed via check.

Deceased Account holders – These payments should be handled in your institution’s usual manner. EIPs are NOT subject to reclamation, so the institution would not be liable to Treasury for the reclamation of these payments.

Handling Economic Impact Payment Challenges
Signed in March 2020, the CARES Act provides Economic Impact Payments (EIPs) to qualified consumers. The government is disbursing EIPs to people based on information contained within their 2018 or 2019 federal tax returns. Both electronic and physical EIPs will be distributed in weekly cycles. As these stimulus funds begin to be distributed to individuals, certain questions and risks have arisen that financial institutions need to consider.
Operational Risks – Your institution has standard policies and procedures on processing ACH payments and specifically, tax refunds. These payments should follow these standard procedures with particular attention paid to unique situations with the goal of providing EIPs to consumers.
Closed Accounts – Some entries may reject if the account is closed. Your institution should consider if you have the ability to identify if the closed account is for an accountholder who opened a different account, or has left the institution. It may be difficult to explain to a current accountholder that the payment was received and returned. Accounts for existing customers may have changed for any number of reasons, including internal changes made to the core since the person filed either his or her 2018 or 2019 tax returns. Changes related to your core system that caused them not to get paid would be even more difficult to explain.   As mentioned above, any returned EIP will be redistributed via check.
Deceased Account holders – These payments should be handled in your institution’s usual manner. EIPs are NOT subject to reclamation, so the institution would not be liable to Treasury for the reclamation of these payments.

Corporate Governance: Annual Meetings and the COVID-19 Emergency

The Office of the Comptroller of the Currency (OCC) recognizes the recent disruptions and significant challenges faced by banks1 as a result of the coronavirus disease (COVID-19) emergency. The OCC is issuing this bulletin in response to inquiries from banks that are considering changes to the date, time, or location of their annual meetings as a result of stay-at-home and similar orders and potential health concerns. The bulletin also addresses the specific regulatory requirements applicable to federal savings associations (FSA) that may seek to delay their annual meetings.

https://www.occ.gov/news-issuances/bulletins/2020/bulletin-2020-51.html

Payments and Deposit Rules Impacted by COVID-19

The CFPB issued FAQs related to pandemic relief measures for accountholders. The answers clarify that terms of checking, savings, or prepaid accounts can be changed immediately due to the pandemic, if changes are favorable to the consumer. Institutions are reminded of their advance notice obligations if changes are not favorable to the consumer. The Aid describes other types of immediate relief such as fee waivers and proactive outreach, adding a reminder that stop payment orders must be honored. This Compliance Aid does not impose any new or changed regulatory requirements.

The CFPB FAQs may be found here.

More information may be found in The Gold Book sections covering Checking Accounts, Regulation E and Regulation D.

FDIC Proposed Rulemaking

The Federal Deposit Insurance Corporation (FDIC) approved a notice of proposed rulemaking that would mitigate the deposit insurance assessment effects of participating in the Paycheck Protection Program (PPP) established by the U.S. Small Business Administration (SBA) and the Paycheck Protection Program Lending Facility (PPPLF) and Money Market Mutual Fund Liquidity Facility (MMLF) established by the Board of Governors of the Federal Reserve System. 

The PPP, PPPLF and MMLF were put in place to provide financing to small businesses and liquidity to small business lenders and the broader credit markets, and to help stabilize the financial system in a time of significant economic strain.  At the same time, PPP loans are fully guaranteed by the SBA, and transactions made with the PPPLF and MMLF are conducted with the Federal Reserve on a non-recourse basis.  The FDIC’s action today will ensure that banks will not be subject to significantly higher deposit insurance assessments for participating in these programs. 

The FDIC is proposing an effective date by June 30, 2020, and an application date of April 1, 2020, which would ensure that the changes are applied to assessments starting in the second quarter of 2020 and provide certainty to the IDIs regarding the assessment effects of these programs.  Comments on the proposed rule will be accepted for seven days after publication in the Federal Register.