A year removed from President Trump’s inauguration, everyone is looking toward 2018 and trying to getter better idea of where the industry is headed.
Here are a few changes that are in the works in Washington:
One of the biggest regulatory changes facing financial institutions this year is HMDA. In December, the CFPB announced that it will not require data re-submission unless the errors are material or assess penalties for errors collected in 2018 and reported in 2019. Also, there will be a new rule-making process to reconsider several aspects of the HMDA rule, including the institutional and transaction coverage test and the discretionary data point. In addition to this, the House of Representatives introduced several bills to relieve some of the pressure associated with compliance with HMDA requirements, including increasing the exemption threshold to 500 for both closed end mortgage and open end lines of credit.
Several other long-awaited regulations are undergoing reconsideration or delays in effective date, including Payday, Vehicle Title and Certain High-cost Installment Loans (“Payday Rule”) Prepaid Accounts regulation (extended one year to April 1, 2019)
The Anti-Money laundering/Bank Secrecy Act area will also see changes as the mandatory compliance date of May 11, 2018 quickly approaches for the beneficial ownership rule. This fifth pillar requires financial institutions to verify a legal entity’s beneficial owner(s) at the time a new account is opened. Institutions should start reviewing policies, procedures, and training programs to ensure all applicable information on this new requirement is a part of these controls. If the institution uses any technology to assist with BSA compliance, be sure that the software is upgraded to capture this information.
Regulatory Relief on the Horizon
In regards to regulation with the CFPB, expect a more formal rule-making process and less regulation by enforcement. Given the Administration’s push for de-regulation, it is likely whoever President Trump appoints to take over as permanent director will continue this new approach.
Congress has taken up the cause as well. One of the biggest rollbacks of a regulatory requirement (although not yet effective) was the vote to repeal the rule banning mandatory arbitration clauses in financial contracts. This prevented lenders from requiring customers to use arbitration to resolve disputes, and disallowed them from filing class-action lawsuits.
At the Committee level, the House Financial Services and the Senate Banking Committees passed bills aimed at regulatory relief through focusing on risk level of the financial institution’s activity or adjusting threshold limits. Although there seems to be agreement that regulatory relief is necessary, there is still division regarding how. With 2018 being an election year, it’s uncertain how much progress will be made.
What Should You Do?
With the easing of regulatory requirements, it is critical to continue considering the needs of your customer. Proper disclosures, offering products appropriate to the customer’s needs, and quickly addressing complaints go a long away in creating happy customers who support your institution. It is also important to assess the risk appetite of your institution and what controls are in place. Without the proper implementation of controls, deregulation can increase risks on your institution.