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Chapter Overview

Volume 1 RISK ASSESSMENT

Compliance Risk-Assessment Matrix

DEPOSITS

Chapter 1: Deposit Account Restrictions (Reserve Requirements; Interest on Demand Deposits; NOW Accounts) Deposit Insurance Signs and Advertisements The Electronic Fund Transfer Act (EFTA) -- Regulation E Truth-in-Savings Act -- Regulation DD Regulation CC: As Amended by Check 21

Chapter 2: Chapter 3: Chapter 4: Chapter 5:

LOANS

Chapter 6: Chapter 7: Chapter 8: Chapter 8A: Regulation B (Equal Credit Opportunity Act) Regulation Z -- Truth-in-Lending Act Credit Practices Rule Fair Debt Collection Practices Act

Volume 2

Chapter 9: Chapter 10: Chapter 11: Chapter 12: Chapter 12A: Chapter 13: Chapter 14: Fair Credit Reporting Act Insider Lending Restrictions -- Regulation O Home Mortgage Disclosure Act Real Estate Settlement Procedures Act (RESPA) Homeownership Counseling and SCRA Notice Flood Disaster Protection Act Regulation U -- Loans To Purchase or Carry Margin Stock vii

Self-Assessment and Regulatory Compliance Review Chapter 15: Homeowners Protection Act of 1998

GENERAL APPLICABILITY

Chapter 16: Chapter 17: Chapter 18: Chapter 19: Chapter 19A: Chapter 20: Chapter 21: Chapter 22: Chapter 23: Chapter 24: Bank Secrecy Act OFAC Restrictions Community Reinvestment Act Privacy Information Security Requirements Electronic Signatures and Disclosures -- The "E-Sign Act" and Related Regulations Right to Financial Privacy Act Consumer Protections for Sales of Insurance Servicemembers Civil Relief Act Regulation W: Affiliate Transaction Restrictions

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Contents

Volume 1

About the Author ...................................................................................................................................... iii How to Use This Manual ........................................................................................................................... v Chapter Overview .................................................................................................................................... vii

Risk Assessment

Compliance Risk-Assessment Matrix

Compliance Risk-Assessment Matrix -- 2010............................................................................. Matrix-5 Deposit Account Restrictions .................................................................................................... Matrix-5 Reserve Requirements of Depository Institutions -- Regulation D ................................... Matrix-5 Prohibition Against the Payment of Interest on Demand Deposits -- Regulation Q ....................................................................................................................... Matrix-5 Deposit Insurance Signs and Advertisements ........................................................................... Matrix-5 Electronic Fund Transfers -- Regulation E .............................................................................. Matrix-6 Truth in Savings -- Regulation DD .......................................................................................... Matrix-7 Availability of Funds and Collection of Checks -- Regulation CC.......................................... Matrix-8 Subpart B -- Availability of Funds and Disclosure of Funds Availability Policies............................................................................................................ Matrix-8 Subpart C -- Collection of Checks..................................................................................... Matrix-9 Subpart D -- Substitute Checks ......................................................................................... Matrix-9 Equal Credit Opportunity Act -- Regulation B ...................................................................... Matrix-10 Truth in Lending -- Regulation Z........................................................................................... Matrix-11 Subpart B -- Open-End Credit ......................................................................................... Matrix-11 Subpart C -- Closed-End Credit....................................................................................... Matrix-12 Subpart D -- Miscellaneous ............................................................................................. Matrix-13 Subpart E -- Special Rules for Certain Home Mortgage Transactions............................ Matrix-13 Subpart G -- Special Rules Applicable to Credit Card Accounts and Open-End Credit Offered to College Students ................................................................. Matrix-14 Credit Practices Rule -- Regulation AA................................................................................. Matrix-15 Fair Credit Reporting Act........................................................................................................ Matrix-15 Insider Lending -- Regulation O ............................................................................................ Matrix-20 Home Mortgage Disclosure Act -- Regulation C................................................................... Matrix-21 Real Estate Settlement Procedures Act -- HUD's Regulation X............................................ Matrix-21 Homeownership Counseling/SCRA Notice ............................................................................ Matrix-22 Flood Disaster Protection Act ................................................................................................. Matrix-22 Loans in Areas Having Special Flood Hazards ................................................................ Matrix-23 Regulation U -- Loans Purchase or Carry Margin Stock ....................................................... Matrix-23 Homeowners Protection Act.................................................................................................... Matrix-24 Bank Secrecy Act .................................................................................................................... Matrix-24 Office of Foreign Asset Control .............................................................................................. Matrix-26

12/10

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Self-Assessment and Regulatory Compliance Review Community Reinvestment Act ................................................................................................ Privacy of Consumer Financial Information ........................................................................... Information Security Requirements ........................................................................................ Electronic Signatures and Disclosures .................................................................................... Right to Financial Privacy Act ................................................................................................ Consumer Protection in Sales of Insurance............................................................................. Servicemembers Civil Relief Act............................................................................................ Affiliate Transaction Restrictions -- Regulation W ............................................................... Matrix-27 Matrix-27 Matrix-29 Matrix-29 Matrix-29 Matrix-30 Matrix-30 Matrix-31

Deposits

Chapter 1 Deposit Account Restrictions (Reserve Requirements; Interest on Demand Deposits; NOW Accounts)

Deposit Account Restrictions Checklist ............................................................................................... 1-iii Regulation D -- Reserve Requirements of Depository Institutions (12 CFR 204) ........................... 1-1 Demand Deposits (204.2(b)) .............................................................................................................. 1-2 NOW Account Eligibility (12 USC 1832).............................................................................................. 1-4 Savings Deposit (204.2(d)(1)) ............................................................................................................ 1-7 Six-Transfer Limitation ............................................................................................................... 1-7 Monitoring Restricted Transactions............................................................................................. 1-8 Time Deposits (204.2(c)(1) ................................................................................................................ 1-9 Prohibition Against the Payment of Interest on Demand Deposits .................................................. 1-10

Chapter 2 Deposit Insurance Signs and Advertisements

Deposit Insurance Signs and Advertisements Checklist..................................................................... 2-iii Banks and Savings Associations ............................................................................................................ 2-1 Official FDIC Sign and Display ............................................................................................................. 2-1 Official FDIC Advertising Statement Requirements........................................................................... 2-3 Advertisements Subject to the Rule ................................................................................................... 2-3 Format of Advertising Statement ....................................................................................................... 2-4 When the Advertising Statement Is Required .................................................................................... 2-4 Advertisements That Do Not Require the Official Advertising Statement ........................................ 2-5 Restrictions on Using the Official Advertising Statement When Advertising Non-Deposit Products ........................................................................................................................ 2-6 Non-Deposit Product Advertisements ......................................................................................... 2-6 Hybrid Product Advertisements................................................................................................... 2-6 Mixed Advertisements ................................................................................................................. 2-6 Notices Required Under the Temporary Liquidity Guarantee Program............................................. 2-7 Sample FDIC Disclosures............................................................................................................ 2-7 Sweep Account Disclosures......................................................................................................... 2-8 Credit Unions .......................................................................................................................................... 2-9

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Contents Official NCUA Signs ......................................................................................................................... 2-9 Mandatory Requirements for Use of the Official Advertising Statement by Credit Unions ......... 2-11 Official Advertising Statement......................................................................................................... 2-11 Required Use of the Official Advertising Statement........................................................................ 2-11 Advertisements That Do Not Require the Official Advertising Statement ...................................... 2-12 Exhibit on CD........................................................................................................................................ 2-13 Exhibit 2.1: Sweep Account Disclosure Requirements FAQs ......................................................... 2-13

Chapter 3 The Electronic Fund Transfer Act (EFTA) -- Regulation E

Electronic Fund Transfer Act Checklist............................................................................................... 3-v Coverage of Regulation E (205.3) .......................................................................................................... 3-2 Electronic Fund Transfer.................................................................................................................... 3-2 Electronic Check Conversions..................................................................................................... 3-3 Collection of Insufficient Funds Fees via Electronic Fund Transfer ........................................... 3-3 Exclusions .......................................................................................................................................... 3-4 General Disclosure Requirements (205.4) ............................................................................................ 3-7 Form of Disclosures ........................................................................................................................... 3-7 Foreign Language Disclosures ........................................................................................................... 3-7 Providing Additional Disclosures and Information with Regulation E Disclosures .......................... 3-7 Disclosures Involving Multiple Accounts and/or Account Holders; Services Offered Jointly .......... 3-7 Issuance of Access Devices (205.5)......................................................................................................... 3-8 General Rule....................................................................................................................................... 3-8 Exceptions .......................................................................................................................................... 3-9 Liability of Consumer for Unauthorized Transfers (205.6) ................................................................ 3-9 Definition............................................................................................................................................ 3-9 Conditions for Liability .................................................................................................................... 3-10 Limitations on Amount of Liability ................................................................................................. 3-11 The Three Tiers of Liability....................................................................................................... 3-11 Notification Within Two Business Days ($50 Limit) ......................................................... 3-12 Notification Longer Than Two Business Days ($500 Limit).............................................. 3-12 Notification Requirement for Unauthorized EFTs on Periodic Statements (Unlimited Liability).............................................................................................................................. 3-12 Extension of Consumer's Time Limits for Notification ............................................................ 3-13 Method of Notice to Financial Institution.................................................................................. 3-13 Lesser Liability Under State Law or Agreement ....................................................................... 3-14 Initial EFT Disclosure (205.7) .............................................................................................................. 3-14 Timing of Disclosure........................................................................................................................ 3-14 Content of Initial Disclosure ............................................................................................................ 3-15 Change in Terms Notice and Periodic Error Resolution Notice (205.8) .......................................... 3-17 Change in Terms Notice................................................................................................................... 3-17 Error Resolution Notice.................................................................................................................... 3-18 Receipts at Electronic Terminals and Periodic Statements (205.9).................................................. 3-19 Receipts at Electronic Terminals...................................................................................................... 3-19 Documentation of Foreign-Initiated Transfers ................................................................................. 3-20 Periodic Statements .......................................................................................................................... 3-20 When Periodic Statements Are Required................................................................................... 3-21 Contents ..................................................................................................................................... 3-21

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Self-Assessment and Regulatory Compliance Review Exceptions to the Periodic Statement Requirement for Certain Accounts ................................ Accounts Limited to Preauthorized Credit Transfers .......................................................... Intra-Institutional Transfers Between Accounts.................................................................. Accounts That Allow Both Preauthorized Credits and Intra-Institutional Transfers .......... Preauthorized Transfers (205.10)........................................................................................................ Preauthorized Transfers into Consumer's Account.......................................................................... Written Authorization for Preauthorized Transfers from Consumer's Account .............................. Notice of Transfers Varying in Amount........................................................................................... Consumer's Right to Stop Payment ................................................................................................. Compulsory Use ............................................................................................................................... EFT Error Resolution Procedures (205.11)........................................................................................ Applicability of EFT Rules vs. Truth-in-Lending Rules (205.12(a))............................................... Inquiries Subject to EFT Error Resolution ....................................................................................... Error Resolution Time Periods......................................................................................................... Requirements for Consumer's Inquiry....................................................................................... Written Confirmation................................................................................................................. General 10-Day (or 20-Day) Error Resolution Period............................................................... Extended Error Resolution Period ............................................................................................. Requirements If No Error or Different Error Occurred ............................................................. Regulatory Concerns ........................................................................................................................ Administrative Enforcement; Record Retention (205.13)................................................................. Electronic Fund Transfer Service Provider Not Holding Consumer's Account (205.14) .............. Compliance by Service Provider ...................................................................................................... Compliance by Account-Holding Institution ................................................................................... Electronic Fund Transfer of Government Benefits (205.15)............................................................. Disclosures at Automated Teller Machines (205.16).......................................................................... Requirements for Overdraft Services (205.17)................................................................................... Definition of Overdraft Service........................................................................................................ Exception ................................................................................................................................... Prior Approval Requirements........................................................................................................... No Opt-In................................................................................................................................... Timing of Opt-In Notice................................................................................................................... Model Form A-9............................................................................................................................... Requirements for Financial Institutions Offering Payroll Card Accounts (205.18)....................... Alternative to Periodic Statements ................................................................................................... Other Modified Requirements.......................................................................................................... Initial Disclosures ...................................................................................................................... Annual Error Resolution Notice ................................................................................................ Limitations on Liability ............................................................................................................. Error Resolution ............................................................................................................................... Requirements for Gift Cards and Gift Certificates (205.20)............................................................. Compliance Dates (205.20(g)) ......................................................................................................... Definitions (205.20(a)) ..................................................................................................................... Gift Certificate ........................................................................................................................... Store Gift Card........................................................................................................................... General-Use Prepaid Card ......................................................................................................... Loyalty, Award or Promotional Gift Card ................................................................................. Dormancy or Inactivity Fee ....................................................................................................... Service Fee................................................................................................................................. Activity ...................................................................................................................................... Exclusions (205.20(a)) ..................................................................................................................... xii 3-23 3-23 3-23 3-24 3-24 3-24 3-25 3-26 3-27 3-27 3-28 3-28 3-29 3-30 3-30 3-31 3-31 3-31 3-32 3-33 3-35 3-35 3-35 3-37 3-37 3-39 3-40 3-40 3-41 3-41 3-42 3-42 3-42 3-44 3-44 3-45 3-45 3-45 3-46 3-46 3-47 3-47 3-47 3-47 3-47 3-48 3-48 3-49 3-49 3-49 3-49

Contents Form of Disclosures (205.20(c)) ...................................................................................................... Clear and Conspicuous .............................................................................................................. Format........................................................................................................................................ Disclosures Prior to Purchase .................................................................................................... Disclosures on the Certificate or Card ....................................................................................... Prohibition on Imposition of Fees or Charges (205.20(d)) .............................................................. Prohibition on Sale of Gift Certificates or Cards with Expiration Dates (205.20(e)) ...................... Additional Disclosure Requirements for Gift Certificates or Cards (205.20(f)) .............................. Fee Disclosures .......................................................................................................................... Telephone Number for Fee Information .................................................................................... 3-49 3-50 3-50 3-50 3-50 3-50 3-51 3-52 3-52 3-52

Chapter 4 Truth-in-Savings Act -- Regulation DD

Truth-in-Savings Checklist ................................................................................................................... 4-iii Scope of Regulation DD.......................................................................................................................... 4-1 General Disclosure Requirements (230.3) ............................................................................................ 4-2 Format for Disclosures ....................................................................................................................... 4-2 Relation to Regulation E .................................................................................................................... 4-2 Multiple Consumers ........................................................................................................................... 4-3 Oral Responses to Inquiries................................................................................................................ 4-3 Rounding and Accuracy Rules for Rates and Yields ......................................................................... 4-3 Required Disclosures (230.4).................................................................................................................. 4-4 Initial Disclosure ................................................................................................................................ 4-4 Account Opening ......................................................................................................................... 4-4 On Request................................................................................................................................... 4-4 Contents of Disclosure (230.4(b)) ...................................................................................................... 4-5 Annual Percentage Yield for Account Disclosures and Advertising Purposes .................................. 4-7 General Rules............................................................................................................................... 4-7 Stepped-Rate Accounts (Different Rates Apply in Succeeding Periods) .................................... 4-9 Variable-Rate Accounts ............................................................................................................... 4-9 Tiered-Rate Accounts (Different Rates Apply to Specified Balance Levels) ..................... 4-10 Tiering Method A................................................................................................................ 4-11 Tiering Method B ................................................................................................................ 4-12 Time Accounts with a Stated Maturity Greater Than One Year That Pay Interest at Least Annually ....................................................................................................................... 4-14 Subsequent Disclosures (230.5)............................................................................................................ 4-14 Change in Terms (230.5(a)) ............................................................................................................. 4-15 Notice of Maturity (230.5(b) and (c))............................................................................................... 4-15 Accounts That Automatically Renew ........................................................................................ 4-15 Maturities of One Month or Less ........................................................................................ 4-16 Maturities of Longer Than One Month ............................................................................... 4-16 Maturities of Longer Than One Year .................................................................................. 4-16 Maturities of Longer Than One Month but One Year or Less ............................................ 4-16 Accounts That Do Not Automatically Renew ........................................................................... 4-17 Deposit Periodic Statements (230.6) ................................................................................................ 4-17 Content Requirements................................................................................................................ 4-18 Determining the Annual Percentage Yield for Periodic Statements .......................................... 4-18 Payment of Interest (230.7) .................................................................................................................. 4-21

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Self-Assessment and Regulatory Compliance Review Permissible Methods ........................................................................................................................ Compounding and Crediting Policies............................................................................................... Date Interest Begins to Accrue......................................................................................................... Advertising (230.8)................................................................................................................................ Cannot Be Misleading or Inaccurate ................................................................................................ Must Use "Annual Percentage Yield" .............................................................................................. Triggering Terms.............................................................................................................................. Bonuses ............................................................................................................................................ Exceptions for Electronic Media ...................................................................................................... Additional Disclosures in Connection with the Payment of Overdrafts........................................... Additional Disclosures for Institutions Advertising the Payment of Overdrafts (230.11): Effective Until January 1, 2010............................................................................................ Advertising of Overdraft Plans......................................................................................................... Periodic Accounts Statements by Institutions That Advertise Overdraft Plans ............................... Additional Disclosure Requirements for Overdraft Services (230.11): Effective January 1, 2010 ..................................................................................................................... Disclosure of Total Fees on Periodic Statements ............................................................................. Advertising of Overdraft Plans......................................................................................................... Disclosure of Account Balances....................................................................................................... 4-21 4-21 4-21 4-21 4-22 4-23 4-24 4-26 4-26 4-26 4-27 4-27 4-29 4-30 4-31 4-31 4-33

Chapter 5 Regulation CC: As Amended by Check 21

Expedited Funds Availability Act Checklist....................................................................................... 5-vii Update Note ............................................................................................................................................. 5-1 Subpart A -- Scope and Coverage of Regulation CC (Definitions) ................................................... 5-1 Definitions (In Section 229.2) ................................................................................................................. 5-1 "Account" (229.2(a)).......................................................................................................................... 5-2 "Automated Clearing House" or ACH (229.2(b)).............................................................................. 5-3 "Automated Teller Machine" or ATM (229.2(c)) .............................................................................. 5-3 "Available for Withdrawal" (229.2(d))........................................................................................ 5-3 "Bank" (229.2(e)) ........................................................................................................................ 5-4 "Banking Day" (229.2(f)) ............................................................................................................ 5-5 "Business Day" (229.2(g))........................................................................................................... 5-5 "Cash" (229.2(h))......................................................................................................................... 5-5 "Cashier's Check" (229.2(i)) ....................................................................................................... 5-5 "Certified Check" (229.2(j)) ........................................................................................................ 5-6 "Check" (229.2(k))............................................................................................................................. 5-6 "Negotiable Demand Draft Drawn On, or Payable Through or At, an Office of a Bank" .................................................................................................................................... 5-7 "Negotiable Demand Draft Drawn On a Federal Reserve Bank or a Federal Home Loan Bank" ....................................................................................................................... 5-7 "Negotiable Demand Draft Drawn On the Treasury of the United States; Demand Draft Drawn On a State Government or Unit of General Local Government That Is Not Payable Through or at a Bank"........................................................... 5-8 "United States Postal Service Money Orders"............................................................................. 5-8 "Nonnegotiable Demand Drafts" ................................................................................................. 5-8 "Substitute Checks" ..................................................................................................................... 5-8

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Contents "Instrument Payable in a Foreign Currency; Credit Card Drafts; ACH Debit Transfer"................................................................................................................... 5-9 "Check Processing Region" (229.2(m)) ............................................................................................. 5-9 "Consumer Account" (229.2(n)) ........................................................................................................ 5-9 "Depositary Bank" (229.2(o)) ............................................................................................................ 5-9 "Electronic Payment" (229.2(p))...................................................................................................... 5-10 "Forward Collection" (229.2(q)) ...................................................................................................... 5-11 "Local Check" (229.2(r)).................................................................................................................. 5-11 "Local Paying Bank" (229.2(s)) ....................................................................................................... 5-11 "Merger Transaction" (229.2(t)) ...................................................................................................... 5-11 "Noncash Item" (229.2(u))............................................................................................................... 5-11 "Nonproprietary ATM" (229.2(x))................................................................................................... 5-12 "Paying Bank" (229.2(z))................................................................................................................. 5-12 "Proprietary ATM" (229.2(aa))........................................................................................................ 5-14 "Qualified Returned Check" (229.2(bb)) ......................................................................................... 5-15 "Returning Bank" (229.2(cc)) .......................................................................................................... 5-16 "Routing Number" (229.2(dd)) ........................................................................................................ 5-16 "Similarly Situated Bank" (229.2(ee)) ............................................................................................. 5-16 "State" (229.2(ff)) ............................................................................................................................ 5-16 "Teller's Check" (229.2(gg))............................................................................................................ 5-16 "Traveler's Check" (229.2(hh))........................................................................................................ 5-16 "Uniform Commercial Code," "Code," or "UCC" (229.2(ii)) ......................................................... 5-17 "United States" (229.2(jj))................................................................................................................ 5-17 "Unit of General Local Government" (229.2(kk)) ........................................................................... 5-17 "Wire Transfer" (229.2(ll)) .............................................................................................................. 5-17 "Fedwire" (229.2(mm)).................................................................................................................... 5-17 "Good Faith" (229.2(nn)) ................................................................................................................. 5-18 "Interest Compensation" (229.2(oo)) ............................................................................................... 5-18 "Contractual Branch" (229.2(pp)) .................................................................................................... 5-18 "Claimant Bank" (229.2(qq)) ........................................................................................................... 5-18 "Collecting Bank" (229.2(rr)) .......................................................................................................... 5-18 "Consumer" (229.2(ss)).................................................................................................................... 5-18 "Customer" (229.2(tt)) ..................................................................................................................... 5-18 "Indemnifying Bank" (229.2(uu)) .................................................................................................... 5-19 "Magnetic Ink Character Recognition Line"/ "MICR Line" (229.2(vv)) ........................................ 5-19 "Original Check" (229.2(ww))......................................................................................................... 5-19 "Paper or Electronic Representation of a Substitute Check" (229.2(xx)) ........................................ 5-20 "Person" (229.2(yy)) ........................................................................................................................ 5-21 "Reconverting Bank" (229.2(zz))..................................................................................................... 5-21 "Substitute Check" (229.2(aaa))....................................................................................................... 5-22 "Sufficient Copy" and "Copy" (229.2(bbb)).................................................................................... 5-26 "Transfer and Consideration" (229.2(ccc)) ...................................................................................... 5-27 "Truncate" (229.2(ddd)) ................................................................................................................... 5-28 "Truncating Bank" (229.2(eee)) ....................................................................................................... 5-29 Subpart B -- Availability of Funds and Disclosure of Funds Availability Policies ........................ 5-30 Minimum Availability (229.10 and 229.12) ........................................................................................ 5-30 Definition of "Checks" ..................................................................................................................... 5-32 Special Deposit Slip ......................................................................................................................... 5-32 Payment of Interest (229.14) ................................................................................................................ 5-33 General Disclosure Requirements for All Disclosures (229.15) ........................................................ 5-34 Initial Disclosure (229.16 and 229.17) ................................................................................................. 5-35 xv

Self-Assessment and Regulatory Compliance Review Placing Holds on Availability............................................................................................................... Types of Holds ................................................................................................................................. Exception Holds (229.13) .......................................................................................................... Case-by-Case Holds (229.16(c))................................................................................................ Notice Requirements When Imposing Holds ................................................................................... Exception Hold Notices ............................................................................................................. General Exception Hold Notice (229.13(g)) ....................................................................... Length of Additional Hold Period....................................................................................... One-Time Exception Notice for Large Deposits or Redeposited Items (229.13(g)(2)) ...... Notice of Repeated Overdrafts Exception (229.13(g)(3)) ................................................... Emergency Conditions Exception Notice (229.13(g)(4)).................................................... Case-by-Case Holds (229.16) .................................................................................................... Additional Disclosure Requirements (229.18) .................................................................................... Deposit Slips..................................................................................................................................... Locations Where Employees Accept Consumer Deposits ............................................................... Automated Teller Machines ............................................................................................................. Disclosures Upon Request................................................................................................................ Changes in Policy............................................................................................................................. Miscellaneous (229.19).......................................................................................................................... When Funds Are Considered Deposited (229.19(a)) ....................................................................... Availability at Start of Business Day ............................................................................................... Effect on Policies of Depositary Bank ............................................................................................. Use of Calculated Availability ......................................................................................................... Holds on Other Funds....................................................................................................................... Employee Training and Compliance ................................................................................................ Effect of Merger Transaction ........................................................................................................... Relation to State Law (229.20) ............................................................................................................. Civil Liability (229.21) .......................................................................................................................... Record Retention.............................................................................................................................. Subpart C -- Collection of Checks...................................................................................................... Paying Bank's Responsibility for Return of Checks (229.30) ........................................................... Method of Return (229.30(a)) .......................................................................................................... Two-Day/Four-Day Test............................................................................................................ Forward Collection Test ............................................................................................................ Choice of Returning Bank ......................................................................................................... Qualified Returned Checks ........................................................................................................ Routing of Returned Checks...................................................................................................... Midnight Deadline ..................................................................................................................... UCC Provisions Affected .................................................................................................... Unidentifiable Depositary Bank (229.30(b)).................................................................................... Extension of Deadline (229.30(c)) ................................................................................................... Identification of Returned Check (229.30(d)) .................................................................................. Depositary Bank Without Accounts (229.30(e)).............................................................................. Notice in Lieu of Return (229.30(f)) ................................................................................................ Reliance on Routing Number (229.30(g))........................................................................................ Returning Bank's Responsibility for Return of Checks (229.31) ..................................................... Return of Checks (229.31(a)) ........................................................................................................... Two-Day/Four-Day Test............................................................................................................ Forward Collection Test ............................................................................................................ Encoding .................................................................................................................................... Cutoff Hours .............................................................................................................................. xvi 5-37 5-37 5-37 5-38 5-39 5-39 5-39 5-40 5-40 5-41 5-41 5-41 5-43 5-43 5-43 5-43 5-44 5-44 5-44 5-44 5-45 5-45 5-46 5-46 5-47 5-47 5-47 5-48 5-49 5-51 5-51 5-51 5-51 5-53 5-56 5-57 5-57 5-57 5-58 5-58 5-59 5-59 5-60 5-60 5-60 5-60 5-60 5-61 5-62 5-63 5-64

Contents Qualified Returned Checks ........................................................................................................ Routing of Returned Check ....................................................................................................... Responsibilities of Returning Bank ........................................................................................... UCC Sections Affected.............................................................................................................. Unidentifiable Depositary Bank (229.31(b)) ............................................................................. Settlement (229.31(c))...................................................................................................................... Charges (229.31(d)).......................................................................................................................... Depositary Bank Without Accounts (229.31(e)).............................................................................. Notice in Lieu of Return (229.31(f)) ................................................................................................ Reliance on Routing Number 229.31(g)) ......................................................................................... Depositary Bank's Responsibility for Returned Checks (229.32)..................................................... Acceptance of Returned Checks....................................................................................................... Payment ............................................................................................................................................ Misrouted Returned Checks; Written Notices of Nonpayment........................................................ Charges............................................................................................................................................. Notice of Nonpayment (229.33)............................................................................................................ General Requirement........................................................................................................................ Content of Notice ............................................................................................................................. Acceptance of Notice ....................................................................................................................... Notification to Customer .................................................................................................................. Depositary Banks Without Accounts ............................................................................................... Warranties (229.34) .............................................................................................................................. General Warranties Given ................................................................................................................ Warranty of Notice of Nonpayment ................................................................................................. Warranties of Settlement Amount; Encoding; and Offset................................................................ Warranty Regarding Remotely Created Checks ............................................................................... Damages ........................................................................................................................................... Tender of Defense ............................................................................................................................ Notice of Claim ................................................................................................................................ Indorsements (229.35)........................................................................................................................... Indorsement Standards ..................................................................................................................... Liability of Bank Handling Check ................................................................................................... Indorsement by a Bank..................................................................................................................... Indorsement for Depositary Bank .................................................................................................... Presentment and Issuance of Checks (229.36).................................................................................... Payable-Through and Payable-At Checks (229.36(a))..................................................................... Receipt at Bank Office or Processing Center (229.36(b))................................................................ Truncation (229.36(c)) ..................................................................................................................... Liability of Banks During Forward Collection (229.36(d)) ............................................................. Issuance of Payable-Through Checks (229.36(e)) ........................................................................... Same-Day Settlement (229.36(f)) .................................................................................................... Location and Time ..................................................................................................................... Reasonable Delivery Requirements ........................................................................................... Sorting of Checks....................................................................................................................... Settlement .................................................................................................................................. Closed Paying Bank................................................................................................................... Good Faith ................................................................................................................................. UCC Sections Affected.............................................................................................................. Variation by Agreement (229.37) ........................................................................................................ Liability (229.38) ................................................................................................................................... Standard of Care; Liability; Measure of Damages ........................................................................... xvii 5-64 5-65 5-65 5-65 5-66 5-67 5-68 5-68 5-68 5-69 5-69 5-69 5-70 5-72 5-73 5-73 5-73 5-74 5-75 5-76 5-76 5-76 5-76 5-77 5-77 5-78 5-80 5-80 5-80 5-80 5-81 5-84 5-84 5-84 5-85 5-85 5-85 5-87 5-88 5-88 5-89 5-90 5-91 5-92 5-92 5-93 5-93 5-94 5-94 5-96 5-96

Self-Assessment and Regulatory Compliance Review Paying Bank's Failure To Make Timely Return .............................................................................. 5-98 Comparative Negligence .................................................................................................................. 5-98 Responsibility for Certain Aspects of Checks.................................................................................. 5-99 Responsibility for Back of Check ............................................................................................ 5-100 Responsibility for Payable-Through Checks ........................................................................... 5-102 Timeliness of Action................................................................................................................ 5-102 Exclusion ................................................................................................................................. 5-102 Jurisdiction............................................................................................................................... 5-102 Reliance on Board Rulings ...................................................................................................... 5-103 Insolvency of Bank (229.39) ............................................................................................................... 5-103 Effect of Merger Transaction (229.40).............................................................................................. 5-104 Relation to State Law (229.41) ........................................................................................................... 5-104 Exclusions (229.42).............................................................................................................................. 5-104 Checks Payable in Guam, American Samoa, and the Northern Mariana Islands (229.43).................................................................................................................................... 5-104 Subpart D -- Substitute Checks ........................................................................................................ 5-105 General Provisions Governing Substitute Checks (229.51)............................................................. 5-106 Legal Equivalence .......................................................................................................................... 5-106 Reconverting Bank Duties.............................................................................................................. 5-108 Applicable Law .............................................................................................................................. 5-109 Substitute Check Warranties (229.52) .............................................................................................. 5-110 Content and Provision of Substitute Check Warranties ................................................................. 5-110 Warranty Recipients ....................................................................................................................... 5-112 Substitute Check Indemnity (229.53) ................................................................................................ 5-113 Scope of Indemnity ........................................................................................................................ 5-113 Indemnity Amount ......................................................................................................................... 5-114 General Rule ............................................................................................................................ 5-115 Negligence Contributing to the Loss ....................................................................................... 5-115 Effect of Producing the Original Check or a Sufficient Copy of the Original Check ......................................................................................................................... 5-115 Examples of How the Amounts Are Determined .................................................................... 5-116 Subrogation of Rights..................................................................................................................... 5-118 Expedited Recredit for Consumers (229.54)..................................................................................... 5-118 Requirements to Make an Expedited Recredit ............................................................................... 5-118 Consumer Procedures for Making Claims ..................................................................................... 5-121 Timing of Claim....................................................................................................................... 5-121 Extension of Time Period.................................................................................................. 5-122 Oral Requests and Written Requirement........................................................................... 5-122 Content of Claim...................................................................................................................... 5-122 Requiring Written Claim.......................................................................................................... 5-124 Incomplete Claims............................................................................................................. 5-124 Financial Institution Action on Claims........................................................................................... 5-124 Investigations Completed Within 10 Business Days ............................................................... 5-125 For a Valid Consumer Claim............................................................................................. 5-125 For an Invalid Consumer Claim ........................................................................................ 5-125 Investigations That Cannot Be Completed Within 10 Business Days..................................... 5-125 For a Valid Consumer Claim............................................................................................. 5-126 For an Invalid Consumer Claim ........................................................................................ 5-126 Availability of Recredit............................................................................................................ 5-126 Notices Relating to Consumer Expedited Recredit Claims ..................................................... 5-127 Notice of Recredit ............................................................................................................. 5-127 xviii

Contents Notice That the Consumer's Claim Is Not Valid .............................................................. Notice of a Reversal of Recredit ....................................................................................... Model Notice Forms.......................................................................................................... Other Claims Not Affected............................................................................................................. Expedited Recredit Procedures for Financial Institutions (229.55)................................................ Circumstances Giving Rise to a Claim........................................................................................... Procedures for Making Claims....................................................................................................... Timing of Claim....................................................................................................................... Content of Claim...................................................................................................................... Handling Copies of Substitute Checks..................................................................................... Requirement for a Written Claim ............................................................................................ Required Action on Interbank Claims ............................................................................................ Recredit Does Not Abrogate Other Liabilities ............................................................................... Indemnifying Bank's Right to a Refund ........................................................................................ Liability (229.56) ................................................................................................................................. Measure of Damages ...................................................................................................................... In General ................................................................................................................................ Offset of Recredits ................................................................................................................... Comparative Negligence.......................................................................................................... Timeliness of Action................................................................................................................ Jurisdiction............................................................................................................................... Notice of Claims ...................................................................................................................... Consumer Awareness (229.57)........................................................................................................... Content of Disclosure ..................................................................................................................... Required Distribution ..................................................................................................................... One-Time Disclosure for New and Existing Accounts............................................................ Consumers Who Receive Substitute Checks on an Occasional Basis ..................................... Notice in the Case of Multiple Accountholders....................................................................... Mode of Delivery of Information Required by This Subpart (229.58)........................................... Relation to Other Law (229.59) ......................................................................................................... Variation by Agreement (229.60) ...................................................................................................... Appendix C to Part 229 -- Model Availability Policy Disclosures, Clauses, and Notices; Model Substitute Check Policy Disclosure and Notices.................................................... Appendix D to Regulation CC -- Indorsement, Reconverting Bank Identification, and Truncating Bank Identification Standards ............................................................................... Depositary Banks ................................................................................................................................ Required Indorsement Items........................................................................................................... Optional Indorsement Items ........................................................................................................... Location of Indorsements ............................................................................................................... Printing of Indorsements ................................................................................................................ Subsequent Collecting or Returning Banks...................................................................................... Reconverting Banks ............................................................................................................................ Black Ink Requirement ...................................................................................................................... 5-128 5-129 5-129 5-129 5-130 5-130 5-132 5-132 5-132 5-133 5-133 5-133 5-134 5-134 5-134 5-134 5-134 5-135 5-135 5-135 5-136 5-136 5-136 5-137 5-137 5-137 5-138 5-139 5-139 5-140 5-140 5-141 5-143 5-143 5-143 5-143 5-144 5-144 5-144 5-145 5-145

xix

Self-Assessment and Regulatory Compliance Review

Loans

Chapter 6 Regulation B (Equal Credit Opportunity Act)

Regulation B Checklist ............................................................................................................................ 6-i Coverage .................................................................................................................................................. 6-1 Exemptions......................................................................................................................................... 6-1 General Rules (202.4).............................................................................................................................. 6-3 Discrimination (202.4(a)) ................................................................................................................... 6-3 Discouragement (202.4(b))................................................................................................................. 6-4 Written Applications (202.4(c)) ......................................................................................................... 6-4 Form of Disclosures (202.4(d)) .......................................................................................................... 6-5 Electronic Disclosures ................................................................................................................. 6-5 Foreign-Language Disclosures (202.4(e)).......................................................................................... 6-6 Rules Concerning Taking of Applications (202.5) ............................................................................... 6-6 General Rules (202.5(a)) .................................................................................................................... 6-6 Limitation on Information About Race, Color, Religion, National Origin, or Sex (202.5(b))........... 6-7 Self-Testing.................................................................................................................................. 6-7 Sex ............................................................................................................................................... 6-8 Information on a Spouse (202.5(c)).................................................................................................... 6-8 Requesting Marital Status (202.5(d)(1))............................................................................................. 6-8 Requesting an Applicant's Income (202.5(d)(2))............................................................................... 6-9 Childbearing, Childrearing (202.5(d)(3)) ........................................................................................... 6-9 Permanent Residency and Immigration Status (202.5(e))................................................................ 6-10 Rules Concerning Evaluation of Applications (202.6) ....................................................................... 6-10 Use of Age in Evaluating Credit (202.6(b)(2))................................................................................. 6-10 Public Assistance Income Considerations (202.6(b)(2)).................................................................. 6-11 Childbearing and Childrearing Considerations (202.6(b)(3)) .......................................................... 6-12 Telephone Considerations (202.6(b)(4)) .......................................................................................... 6-12 Income Considerations (202.6(b)(5)) ............................................................................................... 6-12 Credit History Considerations (202.6(b)(6)) .................................................................................... 6-13 Immigration Status (202.6(b)(7)) ..................................................................................................... 6-13 Marital Status (202.6(b)(8)).............................................................................................................. 6-14 Race, Color, Religion, National Origin, Sex (202.6(b)(9)) .............................................................. 6-14 State Property Laws (202.6(c))......................................................................................................... 6-14 Rules Concerning Extensions of Credit (202.7).................................................................................. 6-14 Individual Account (202.7(a)) .......................................................................................................... 6-14 Designation of Name (202.7(b))....................................................................................................... 6-14 Action Concerning Existing Open-End Accounts (202.7(c))........................................................... 6-15 Signature Requirements (202.7(d)) .................................................................................................. 6-15 General Rule .............................................................................................................................. 6-16 Exceptions.................................................................................................................................. 6-17 Secured Credit (202.7(d)(4)) ............................................................................................... 6-17 Unsecured Credit (202.7(d)(2)) ........................................................................................... 6-18 Unsecured Credit -- Community Property States (202.7(d)(3))......................................... 6-18 Co-Signers and Other Additional Parties (202.7(d)(5)) ...................................................... 6-19 Rights of Additional Parties (202.7(d)(6)) .......................................................................... 6-20 Insurance .......................................................................................................................................... 6-21 xx

Contents Special Purpose Credit Programs (202.8)........................................................................................... Notification of Decision (202.9) ............................................................................................................ In General ......................................................................................................................................... Applications -- Prequalifications vs. Preapprovals ......................................................................... When an Inquiry or Prequalification Request Becomes an Application.................................... Prequalification Requests .................................................................................................... Examples of Inquiries That Are Not Applications .............................................................. Examples of an Application ................................................................................................ General Notification Time Period for Decision ............................................................................... Loan Approval.................................................................................................................................. Adverse Action................................................................................................................................. Contents of Adverse Action Notice ........................................................................................... Statement of Specific Reasons ............................................................................................ Combined ECOA­FCRA Disclosures ................................................................................ Counteroffers.................................................................................................................................... Withdrawn Applications................................................................................................................... Incomplete Applications................................................................................................................... Notifications When a Broker Is Involved......................................................................................... Business Loans ................................................................................................................................. Notification When Multiple Applicants Are Involved ..................................................................... Furnishing of Credit Information (202.10)......................................................................................... Relation to State Law (202.11) ............................................................................................................. Record Retention (202.12).................................................................................................................... Information for Monitoring Purposes (202.13) .................................................................................. Applications Requiring Monitoring Information ............................................................................. Information That Must Be Requested .............................................................................................. Method of Requesting Monitoring Information ............................................................................... Telephone and Mail Applications .............................................................................................. Video and Other Electronic-Application Processes................................................................... Applications Through Loan-Shopping Services ........................................................................ Providing Copies of Appraisals (202.14)............................................................................................. Incentives for Self-Testing and Self-Correction (202.15) .................................................................. Enforcement, Penalties, and Liabilities (202.16) ................................................................................ Exhibit 6.1: Form C-4 -- Sample Notice of Action Taken, Statement of Reasons, and Counteroffer ........................................................................................................................ Exhibit 6.2: Form C-6 -- Sample Notice of Incomplete Application and Request for Additional Information......................................................................................................... Exhibit 6.3: Form C-10 -- Sample Disclosure About Voluntary Data Notation ...................... Exhibit 6.4: Fannie Mae/Freddie Mac Real Estate Loan Application Form.............................. Exhibit 6.5: Section 615(a) of the Fair Credit Reporting Act and Section 202.9(f) of Regulation B, Implementing the Equal Credit Opportunity Act ........................................... 6-21 6-22 6-22 6-23 6-24 6-24 6-24 6-25 6-25 6-26 6-27 6-28 6-29 6-31 6-33 6-33 6-34 6-35 6-36 6-37 6-37 6-37 6-39 6-41 6-41 6-43 6-43 6-44 6-44 6-44 6-45 6-47 6-49 6-50 6-51 6-52 6-53 6-58

Chapter 7 Regulation Z -- Truth-in-Lending Act

Regulation Z Checklist .......................................................................................................................... 7-ix Introduction............................................................................................................................................. 7-1 Coverage .................................................................................................................................................. 7-1 Open-End Versus Closed-End Credit ................................................................................................... 7-3

xxi

Self-Assessment and Regulatory Compliance Review A Warning Regarding the Use of Multi-Featured Open-End Lending (MFOEL) Plans.................... 7-4 Policies and Procedures ............................................................................................................. 7-4a "Advertisement" ................................................................................................................................... 7-4c "Dwelling" and "Principal Dwelling" ................................................................................................... 7-6 "Dwelling".......................................................................................................................................... 7-6 "Principal Dwelling" .......................................................................................................................... 7-7 "Residential Mortgage Transaction" .................................................................................................. 7-7 Finance Charge ....................................................................................................................................... 7-8 Examples of Finance Charges ............................................................................................................ 7-8 Charges That Can Be Excluded from the Finance Charge ................................................................. 7-9 Credit Insurance and Debt Cancellation Coverage .................................................................... 7-10 Credit Insurance .................................................................................................................. 7-10 Hazard Insurance................................................................................................................. 7-11 Certain Security Interest Charges........................................................................................ 7-13 Prohibited Offsets................................................................................................................ 7-14 Special Issues ................................................................................................................................... 7-14 Lump Sum Charges.................................................................................................................... 7-14 Fees Imposed by Third Parties................................................................................................... 7-15 Mortgage Broker Fees................................................................................................................ 7-16 Flood Check Fee: Life-of-Loan Portion and/or a Tax Servicing Fee ........................................ 7-16 Courier Fees/Overnight Mail Fees/Wire Fees ........................................................................... 7-16 Open-End Credit (Subpart B) ............................................................................................................. 7-17 Definition of "Credit Card" and "Charge Card" (226.2(a)(15)) ...................................................... 7-17 General Disclosure Requirements (226.5) .......................................................................................... 7-19 Form of Disclosures (226.5(a)) ........................................................................................................ 7-19 Electronic Disclosures ............................................................................................................... 7-19 Exceptions.................................................................................................................................. 7-19 Time of Disclosures (226.5(b)) ............................................................................................................. 7-20 Initial Disclosures (226.5(b)(1))....................................................................................................... 7-20 Periodic Statements (226.5(b)(2)) .................................................................................................... 7-20 When Periodic Statements Must Be Sent (226.5(b)(2)(ii))........................................................ 7-20 Disclosure of "Finance Charge" and "Annual Percentage Rate" (226.5(a)) .................................... 7-22 Use of the Term "Fixed" Rate (Effective February 22, 2010)................................................... 7-23 Time of Disclosures (226.5(b)) (Effective February 22, 2010)........................................................ 7-23 Account-Opening Disclosures ................................................................................................... 7-23 Periodic Statements.................................................................................................................... 7-23 Timing of Periodic Statements (Effective February 22, 2010) ........................................... 7-23 Basis of Disclosures and Use of Estimates (226.5(c))...................................................................... 7-24 Multiple Creditors; Multiple Consumers (226.5(d)) ........................................................................ 7-24 Effect of Subsequent Events (226.5(e))............................................................................................ 7-25 Early Credit and Charge Card Disclosures (226.5a) ......................................................................... 7-25 Coverage........................................................................................................................................... 7-25 Exceptions.................................................................................................................................. 7-25 Relationship to Initial Disclosures ............................................................................................. 7-26 Form of Disclosures ......................................................................................................................... 7-26 Electronic Disclosures ............................................................................................................... 7-27 Disclosure Methods.......................................................................................................................... 7-28 Disclosure Contents.......................................................................................................................... 7-29 Disclosures Required in Table Format....................................................................................... 7-29 Other Disclosures Required in or Outside of the Table....................................................... 7-31 Direct Mail or Electronic Applications/Solicitations (226.5a(c)) .............................................. 7-32 xxii

Contents Telephone Applications/Solicitations (226.5a(d)) ..................................................................... 7-32 Alternative 1 -- Oral Disclosure......................................................................................... 7-32 Alternative 2 -- Written Follow-Up Disclosure ................................................................. 7-32 General Public Applications/Solicitations (226.5a(e)) .............................................................. 7-33 Alternative 1 -- Full Disclosure.......................................................................................... 7-34 Alternative 2 -- Partial Disclosure...................................................................................... 7-34 Alternative 3 -- No Disclosure of Information................................................................... 7-34 Prompt Response Under All Alternatives ........................................................................... 7-35 Disclosures Under Special Circumstances (226.5a(f)) .............................................................. 7-35 Early Home Equity Plan Disclosure (226.5b)..................................................................................... 7-35 Disclosure Format ............................................................................................................................ 7-36 Electronic Disclosure ................................................................................................................. 7-36 Contents of Disclosure ..................................................................................................................... 7-37 Limitations on Home Equity Plans................................................................................................... 7-41 Restrictions on Fees.......................................................................................................................... 7-43 Initial Open-End Disclosure (226.6) .................................................................................................... 7-43 Time of Disclosures.......................................................................................................................... 7-43 Contents of Initial Disclosure........................................................................................................... 7-44 Home Equity Plans (226.6(a)) ................................................................................................... 7-44 Open-End (Not Home-Secured) Plans (226.6(b))...................................................................... 7-46 Form of Disclosures: Tabular Format for Open-End (Not Home-Secured) Plans (226.6(b)(1)) .............................................................................................................. 7-46 Contents of Disclosures for Account-Opening Table for Open-End (Not Home-Secured) Plans (226.6(b)(2))............................................................................ 7-48 Disclosure of Charges Imposed as Part of Open-End (Not Home-Secured) Plan (226.6(b)(3))................................................................................................................ 7-52 Disclosure of Rates for Open-End (Not Home-Secured) Plans (226.6(b)(4))..................... 7-53 Additional Disclosures for Open-End (Not Home-Secured) Plans (226.6(b)(5)) ........................................................................................................................ 7-55 Periodic Statement Requirements (226.5(b), 226.7 and 226.8) ......................................................... 7-55 Contents of the Periodic Statement (226.7)...................................................................................... 7-55 Periodic Statements: Home-Equity Plans (226.7(a)) ................................................................. 7-55 Periodic Statements: Open-End (Not Home-Secured) Plans (226.7(b)).................................... 7-57 Identifying Transactions on Periodic Statements (226.8) ................................................................ 7-63 Subsequent Disclosure Requirements (226.9) .................................................................................... 7-65 Statement of Billing Rights (226.9(a)) ............................................................................................. 7-65 Disclosures for Supplemental Credit Devices and Additional Features (226.9(b)) ......................... 7-65 Special Rules for Checks That Access a Credit Card Account (226.9(b)(3))............................ 7-66 Disclosures (226.9(b)(3)(i))................................................................................................. 7-66 Accuracy (226.9(b)(3)(ii))................................................................................................... 7-67 Change in Terms (226.9(c)) ............................................................................................................. 7-67 Rules Affecting Home-Equity Plans (226.9(c)(1)) .................................................................... 7-67 Rules Affecting Open-End (Not Home-Secured) Plans (226.9(c)(2))....................................... 7-68 Changes Where Written Advance Notice Is Required (226.9(c)(2)(i))............................... 7-68 Definition of "Significant Change in Account Terms" (226.9(c)(2)(ii))............................. 7-69 Changes in Charges Not Covered by 226.9(1) and (2) (226.9(c)(2)(iii))............................ 7-69 Disclosure Requirements for a Significant Change in Account Term (226.9(c)(2)(iv)(A)) 7-69 Right to Reject for Credit Card Accounts (226.9(c)(2)(iv)(B))........................................... 7-70 Credit Card Account Changes Resulting from Failure to Make Minimum Periodic Payment Within 60 Days (226.9(c)(2)(iv)(C))................................................................................... 7-71 Format Requirements for Change in Terms Notice (226.9(c)(2)(iv)((D)) .......................... 7-71 xxiii

Self-Assessment and Regulatory Compliance Review Notice Not Required (226.9(c)(2)(v)) ................................................................................. Reduction of the Credit Limit (226.9(c)(vi))....................................................................... Finance Charge Imposed at Time of Transaction (226.9(d)) ........................................................... Credit Card Renewals (226.9(e))...................................................................................................... Notice Before Renewal .............................................................................................................. Delayed Notice .......................................................................................................................... Change in Credit Card Insurance Provider (226.9(f)) ...................................................................... Notice Prior to Change (226.9(f)(1)) ......................................................................................... Notice When Change in Provider Occurs (226.9(f)(2)) ...................................................... Increase in Rates Due to Delinquency or Default or as a Penalty (226.9(g))................................... Timing of Written Notice (226.9(g)(2))..................................................................................... Contents of Written Notice (226.9(g)(3)) .................................................................................. In General (226.9(g)(3)(i)(A))............................................................................................. Additional Requirements for Rate Increases Resulting from Failure to Make Minimum Periodic Payment within 60 days from Due Date (226.9(g)(3)(i)(B))............................................................................................................... Format Requirements for Notice (226.9(g)(3)(ii)) .............................................................. Exception to the Notice Requirements for a Decrease in Credit Limit (226.9(g)(4)) ......... Consumer Rejection of Significant Change in Terms or Increase in Annual Percentage Rate (226.9(h))............................................................................................................... Right to Reject (226.9(h)(1)) ..................................................................................................... Effect of Rejection (226.9(h)(2)) ............................................................................................... Application to Promotional Rates and Deferred Interest and Similar Programs................. Prohibition on Penalties....................................................................................................... Repayment of Outstanding Balance .................................................................................... Five-Year Amortization Period ........................................................................................... Doubling Repayment Rate .................................................................................................. Exceptions 226.9(h)(3) .............................................................................................................. Delinquencies of More Than 60 Days................................................................................. Transactions That Occur More Than 14 Days After Provision of Notice........................... Disclosures Upon Renewal of a Credit or Charge Card (226.9(e)) ........................................... Notice Prior to Renewal ...................................................................................................... Notification on Periodic Statements.................................................................................... Consumer Rejection of Certain Significant Changes in Terms (226.9(h)) ................................ Right to Reject..................................................................................................................... Effect of Rejection............................................................................................................... Prompt Crediting of Payments (226.10) ............................................................................................. New Rules Effective February 22, 2010 .......................................................................................... Specific Requirements for Payments 226.10(b) (Effective February 22, 2010)........................ Reasonable Requirements for Payments (226.10(b)(2)(ii)) ................................................ In-Person Payments on Credit Card Accounts (226.10(b)(3)) ............................................ Crediting of Payments When Creditor Does Not Receive or Accept Payments on Due Date (226.10(d)) ............................................................................................................ Payments Accepted or Received Other Than by Mail ........................................................ Limitations on Fees Related to Method of Payment (226.10(e))............................................... Changes by Card Issuer (226.10(f))........................................................................................... Treatment of Credit Balances (226.11) ............................................................................................... Timely Settlement of Estate Debts (Effective February 2, 2010) .................................................... Special Credit Card Provisions............................................................................................................ Issuance of Credit Cards (226.12(a))................................................................................................ Liability of Cardholder for Unauthorized Use (226.12(b)) .............................................................. xxiv 7-72 7-74 7-74 7-75 7-75 7-75 7-76 7-76 7-77 7-77 7-77 7-78 7-78 7-78 7-79 7-79 7-80 7-80 7-81 7-82 7-84 7-84 7-85 7-85 7-86 7-86 7-87 7-90 7-90 7-90 7-92 7-93 7-93 7-93 7-93 7-94 7-94 7-94 7-94 7-95 7-95 7-95 7-95 7-96 7-96 7-96 7-97

Contents Right of Cardholder to Assert Claims or Defenses Against Card Issuer (226.12(c))....................... 7-98 Offsets by Card Issuer Prohibited (226.12(d)) ............................................................................... 7-100 Prompt Notification of Returns and Crediting of Refunds (226.12(e)).......................................... 7-101 Discounts -- Tie-In Arrangements (226.12(f)).............................................................................. 7-101 Billing Error Resolution (226.13) ...................................................................................................... 7-102 Applicability of EFT Rules versus Truth-in-Lending Rules .......................................................... 7-102 Inquiries Subject to the Error Resolution Procedures (226.13(a)) ................................................. 7-103 Notification Requirements (226.13(b)) .......................................................................................... 7-103 Time Limit for Resolving the Claim (226.13(c)) ........................................................................... 7-104 Requirements While Resolution Is Pending (226.13(d))................................................................ 7-105 Resolution of the Error ................................................................................................................... 7-105 If the Claimed Error Did Occur (226.13(e)) ............................................................................ 7-105 If the Claimed Error Did Not Occur or a Different Error Occurred (226.13(f))...................... 7-106 Determination of Annual Percentage Rate (226.14) ........................................................................ 7-107 Accuracy Tolerance (226.14(a))..................................................................................................... 7-107 Annual Percentage Rate for Sections 226.5a (Early Credit Card Disclosures); 226.5b (Early Home Equity Line of Credit Disclosures); 226.6 (Initial Disclosures); and 226.16 (Advertising) (226.14(b)) ............................................................................................ 7-107 Annual Percentage Rate for Periodic Statements (226.14(c)) ........................................................ 7-108 Right of Rescission (226.15)................................................................................................................ 7-112 Notice of Right to Rescind (226.15(b)).......................................................................................... 7-113 Delay of Creditor's Performance During Rescission Period (226.15(c))....................................... 7-114 Effects of Rescission (226.15(d)) ................................................................................................... 7-114 Waiver of Right to Rescind (226.15(e)) ......................................................................................... 7-115 Exempt Transactions (226.15(f)).................................................................................................... 7-115 Open-End Loan Advertisements (226.16)......................................................................................... 7-116 Sections Applicable to All Open-End Plans................................................................................... 7-116 Sections Applicable to Home Equity Plans.................................................................................... 7-118 Discounted and Premium Rates ............................................................................................... 7-118 Prior to October 1, 2009 .................................................................................................... 7-118 On or After October 1, 2009 ............................................................................................. 7-119 Balloon Payment...................................................................................................................... 7-119 Prior to October 1, 2009 .................................................................................................... 7-119 On or After October 1, 2009 ............................................................................................. 7-119 Tax Implications ...................................................................................................................... 7-119 Prior to October 1, 2009 .................................................................................................... 7-119 On or After October 1, 2009 ............................................................................................. 7-120 Misleading Terms .................................................................................................................... 7-120 Promotional Rates and Payments (Effective October 1, 2009)................................................ 7-120 Alternative Disclosures -- Television or Radio Ads (Effective October 1, 2009).................. 7-121 Misleading Terms -- Use of the Term "Fixed" (226.16(f)) (Effective February 22, 2010) ......................................................................................................................... 7-121 Closed-End Credit .............................................................................................................................. 7-121 General Disclosure Requirements (226.17) ...................................................................................... 7-121 Form of Disclosures (226.17(a)) .................................................................................................... 7-121 Time of Disclosures (226.17(b)) .................................................................................................... 7-122 Basis of Disclosures and Use of Estimates (226.17(c)).................................................................. 7-123 Discounted and Premium Variable-Rate Transactions (Comment 17(c)(1)-10) ..................... 7-124 Examples of Discounted Variable-Rate Transactions ....................................................... 7-125 Multiple Creditors and/or Multiple Consumers (226.17(d)) .......................................................... 7-126 Effect of Subsequent Events (226.17(e))........................................................................................ 7-126 xxv

Self-Assessment and Regulatory Compliance Review Early Disclosures (226.17(f)) ......................................................................................................... 7-126 Mail or Telephone Orders -- Delay in Disclosures (226.17(g)) .................................................... 7-127 Series of Sales -- Delay in Disclosures (226.17(h)) ...................................................................... 7-127 Student Loans (226.17(i))............................................................................................................... 7-128 Closed-End Credit Disclosure (226.18) ............................................................................................. 7-128 Preparation of Truth-in-Lending Disclosures for Loans with Borrower-Paid PMI ..................... 7-134e Early Truth-in-Lending Disclosure (TIL) (226.19(a)) -- Prior to July 30, 2009 ........................ 7-134e Early Truth-in-Lending Disclosure (TIL) (226.19(a)) -- On or After July 30, 2009.................... 7-135 Special Rules for Loans Secured by Timeshare Plans ................................................................... 7-137 Early Adjustable Rate Mortgage Disclosure (226.19(b))................................................................. 7-137 Electronic Disclosure ..................................................................................................................... 7-138 Content Requirements .................................................................................................................... 7-139 Consumer ARM Booklet ......................................................................................................... 7-139 ARM Program Disclosure........................................................................................................ 7-139 Teaser and Premium Interest Rates ................................................................................................ 7-140 Disclosures Required for Each ARM Program .............................................................................. 7-141 Lifetime Interest Rate Caps for ARM Loans (226.30)..................................................................... 7-142 Subsequent Disclosure Requirements (226.20) ................................................................................ 7-143 Refinancings (226.20(a))................................................................................................................ 7-143 Assumptions (226.20(b))................................................................................................................ 7-143 Variable-Rate Adjustments (226.20(c)) ......................................................................................... 7-144 Treatment of Credit Balances (226.21) ............................................................................................. 7-145 Determination of Annual Percentage Rate (226.22) ........................................................................ 7-145 Accuracy of Annual Percentage Rate and Finance Charge (226.18(d) and 226.22) ...................... 7-145 Finance Charge Tolerance ....................................................................................................... 7-146 Annual Percentage Rate Tolerance .......................................................................................... 7-146 Computation Tools (226.22(b))...................................................................................................... 7-147 Single Add-On Rate Transactions (226.22(c)) ............................................................................... 7-147 Certain Transactions Involving Ranges of Balances (226.22(d))................................................... 7-148 Right of Rescission (226.23)................................................................................................................ 7-148 Notice of Right to Rescind (226.23(b)).......................................................................................... 7-149 Delay of Creditor's Performance During Rescission Period (226.23(c))....................................... 7-150 Effects of Rescission (226.23(d)) ................................................................................................... 7-150 Waiver of Right to Rescind (226.23(e)) ......................................................................................... 7-151 Exempt Transactions (226.23(f)).................................................................................................... 7-151 Tolerances for Accuracy (226.23(g) and (h))................................................................................. 7-152 Situations Not Involving Foreclosure (226.23(g))................................................................... 7-152 One-Half of One Percent Tolerance .................................................................................. 7-152 One Percent Tolerance ...................................................................................................... 7-152 Situations Involving Foreclosure (226.23(h)).......................................................................... 7-153 Advertising of Closed-End Loans (226.24) ....................................................................................... 7-153 Prior to October 1, 2009 ................................................................................................................. 7-153 Actually Available Terms (226.24(a)) ..................................................................................... 7-153 Advertisements of Rates (226.24(b)) ....................................................................................... 7-153 Advertisements Using "Triggering" Terms That Require Additional Disclosures (226.24(c)) 7-154 Effect of Triggering Terms................................................................................................ 7-155 Catalog and Multi-Page Advertisements (226.24(d)) .............................................................. 7-156 On or After October 1, 2009........................................................................................................... 7-157 Actually Available Terms (226.24(a)) ..................................................................................... 7-157 Clear and Conspicuous Standard (226.24(b) ........................................................................... 7-157 Rates and Payments in Advertisements for Credit Secured by a Dwelling....................... 7-157 xxvi

Contents Internet Advertisements for Credit Secured by a Dwelling .............................................. 7-158 Televised Advertisements for Credit Secured by a Dwelling ........................................... 7-158 Oral Advertisements for Credit Secured by a Dwelling.................................................... 7-158 Advertisements of Rates (226.24(c)) ....................................................................................... 7-159 Buydowns.......................................................................................................................... 7-159 Discounted Variable-Rate Transactions ............................................................................ 7-160 Advertisements Using "Triggering" Terms That Require Additional Disclosures (226.24(d)) 7-161 Terms That Trigger Additional Disclosures (226.24(d)(1)).............................................. 7-161 Effect of Triggering Terms (226.24(d)(2))........................................................................ 7-162 Catalog and Multi-Page Advertisements; Electronic Advertisements (226.24(e)).................. 7-163 Disclosure of Rates and Payments in Advertisements for Credit Secured by a Dwelling (226.24(f))................................................................................................................................ 7-164 Disclosure of Rates............................................................................................................ 7-164 Disclosure of Payments ..................................................................................................... 7-165 Envelopes Excluded .......................................................................................................... 7-165 Alternative Disclosures -- Television or Radio Advertisements (226.24(g)) ......................... 7-165 Tax Implications (226.24(h)) ................................................................................................... 7-166 Prohibited Acts or Practices in Advertisements for Credit Secured by a Dwelling (226.24(i)) 7-166 Misleading Advertising of "Fixed" Rates and Payments .................................................. 7-166 Misleading Comparisons in Advertisements..................................................................... 7-167 Misrepresentations About Government Endorsement....................................................... 7-168 Misleading Use of the Current Lender's Name................................................................. 7-168 Misleading Claims of Debt Elimination............................................................................ 7-168 Misleading Use of the Term "Counselor" ......................................................................... 7-168 Misleading Foreign-Language Advertisements ................................................................ 7-168 Miscellaneous....................................................................................................................................... 7-169 Record Retention (226.25).................................................................................................................. 7-169 Use of Annual Percentage Rate in Oral Disclosures (226.26) ......................................................... 7-169 Open-End Credit (226.26(a)).......................................................................................................... 7-169 Closed-End Credit (226.26(b))....................................................................................................... 7-169 Language of Disclosures (226.27) ...................................................................................................... 7-169 Effect on State Laws (226.28)............................................................................................................. 7-170 State Exemptions (226.29) .................................................................................................................. 7-171 Limitation on Rates (226.30) .............................................................................................................. 7-171 Subpart E -- Special Rules for Certain Home Mortgage Transactions ........................................ 7-171 General Rules (226.31)........................................................................................................................ 7-172 Timing of Disclosure (226.31(c))................................................................................................... 7-172 Disclosures for HOEPA (Section 32) Mortgages (226.31(c)(1))............................................. 7-172 Disclosures for Reverse Mortgages (226.31(c)(2)).................................................................. 7-173 Basis of Disclosures and Use of Estimates (226.31(d)) ................................................................. 7-173 Multiple Creditors; Multiple Consumers (226.31(e))..................................................................... 7-173 Effect of Subsequent Events (226.31(f)) ........................................................................................ 7-173 Accuracy of Annual Percentage Rate (226.31(g)).......................................................................... 7-174 Requirements for Certain Closed-End Home Mortgages ("HOEPA Loans") (226.32)................................................................................................................................................. 7-174 APR Test ........................................................................................................................................ 7-175 "Points and Fees" Test ................................................................................................................... 7-176 Disclosure Requirements (226.32(c))............................................................................................. 7-179 Restrictions and Limitations (226.32(d)) ....................................................................................... 7-179 The Following Section Is Effective Until October 1, 2009 ...................................................... 7-179 The Following Section Is Effective on or After October 1, 2009 ............................................. 7-181 xxvii

Self-Assessment and Regulatory Compliance Review Balloon Payment (226.32(d)(1)).............................................................................................. Negative Amortization (226.32(d)(2))..................................................................................... Advance Payment (226.32(d)(3)) ............................................................................................ Increased Interest Rate (226.32(d)(4)) ..................................................................................... Rebates (226.32(d)(5))............................................................................................................. Prepayment Penalties (226.32(d)(6)) ....................................................................................... Prepayment Penalty Exception (226.32(d)(7)) ........................................................................ Due-on-Demand Clause (226.32(d)(8))................................................................................... Prohibited Acts and Practices for Loans Subject to 226.32 (226.34).............................................. Home Improvement Contracts (226.34(a)(1))................................................................................ Notice to Assignee (226.34(a)(2)).................................................................................................. Refinancings Within One-Year Period (226.34(a)(3)) ................................................................... Repayment Ability (226.34(a)(4)).................................................................................................. Prohibited Acts or Practices in Connection with Higher-Priced Mortgage Loans (226.35) ........ Definition of "Higher-Priced Mortgage Loans"............................................................................. Rules for Higher-Priced Mortgage Loans ...................................................................................... Prohibited Acts or Practices in Connection with Credit Secured by a Consumer's Principal Dwelling (226.36)................................................................................................................................. Misrepresentation of Value of Consumer's Dwelling (226.36(b))................................................. Servicing Practices (226.36(c)) ...................................................................................................... Requirements for Reverse Mortgages (226.33) ................................................................................ Content of Disclosures (226.33(b)) ................................................................................................ Projected Total Cost of Credit (226.33(c))..................................................................................... Transfer of Mortgage Servicing Notice (226.39) .............................................................................. Mortgage Transfer Notice (226.39) ................................................................................................... Definitions ...................................................................................................................................... Notice Required.............................................................................................................................. Form of Notice......................................................................................................................... Determining the Date of Transfer ............................................................................................ Multiple Consumers................................................................................................................. Multiple Transfers.................................................................................................................... Multiple Covered Persons........................................................................................................ Exceptions to the Notice Requirement ........................................................................................... Required Contents of Transfer Notice............................................................................................ Optional Disclosures ...................................................................................................................... Subpart G -- Special Rules Applicable to Credit Card Accounts and Open-End Credit Offered to College Students ................................................................................................... Evaluating the Consumer's Ability to Repay (226.51) .................................................................. Limitations on Fees (226.52).......................................................................................................... During the First Year an Account Is Opened (226.52(a))........................................................ Limitations on Penalty Fees (226.52(b)).................................................................................. General Rule (226.52(b)(1)).............................................................................................. Prohibited Fees (226.52(b)(2)) .......................................................................................... Allocation of Payments (226.53).................................................................................................... Prohibition Against Double Billing Cycle (226.54)....................................................................... Limitations on Increasing Annual Percentage Rates, Fees, and Charges (226.55) ........................ Requirements for Over-the-Limit Transactions (226.56)............................................................... Marketing Rules for College Students (226.57)............................................................................. Posting Credit Card Agreements on Web Site and on Fed's Web Site (226.58) ........................... Re-Evaluation of Rate Increases (226.59)...................................................................................... General Rule (226.59(a)) ......................................................................................................... xxviii 7-181 7-181 7-181 7-181 7-182 7-182 7-182 7-182 7-183 7-183 7-183 7-183 7-184 7-185 7-185 7-186 7-188 7-188 7-190 7-191 7-191 7-192 7-193 7-194 7-194 7-195 7-195 7-195 7-195 7-195 7-196 7-196 7-196 7-197 7-197 7-197 7-198 7-199 7-199 7-199 7-200 7-201 7-201 7-202 7-204 7-205 7-206 7-206 7-206

Contents Policies and Procedures (226.59(b)) ........................................................................................ Timing of Review (226.59(c)) ................................................................................................. Factors to Be Used When Conducting the Review (226.59(c))............................................... Rules Applicable to Rate Increases Subject to 226.55(b)(4) (226.59(e)) ................................ Termination of Obligation to Review Factors (226.59(f))....................................................... Acquired Accounts (226.59(g)) ............................................................................................... Exceptions (226.59(h)) ............................................................................................................ Exhibits on CD .................................................................................................................................... Exhibit 7.1: Regulation Z: Appendix G -- Open-End Model Forms and Clauses ........................ Exhibit 7.2: 2010 Amount Financed/HOEPA Worksheet.............................................................. Exhibit 7.3: 2009 Amount Financed/HOEPA Worksheet.............................................................. Exhibit 7.4: Regulation Z -- Model Forms and Clauses ............................................................... 7-207 7-207 7-207 7-208 7-208 7-208 7-209 7-209 7-209 7-209 7-209 7-209

Chapter 8 Credit Practices Rule

Credit Practices Rule Checklist .............................................................................................................. 8-i Introduction............................................................................................................................................. 8-1 Scope ........................................................................................................................................................ 8-1 Prohibited Contract Provisions ............................................................................................................. 8-2 Confession of Judgment ..................................................................................................................... 8-2 Waiver of Exemption ......................................................................................................................... 8-2 Assignment of Wages......................................................................................................................... 8-2 Household Goods Security Interests .................................................................................................. 8-3 Prohibited Practices................................................................................................................................ 8-4 Pyramiding of Late Charges............................................................................................................... 8-4 Cosigners ............................................................................................................................................ 8-4 Cosigner Disclosure ..................................................................................................................... 8-4

Chapter 8A Fair Debt Collection Practices Act

Fair Debt Collection Practices Act Checklist ..................................................................................... 8A-i "Debt Collectors" Subject to the Act.................................................................................................. 8A-1 Obtaining Location Information ("Skip Tracing") .......................................................................... 8A-2 Communication in Connection with Debt Collection ....................................................................... 8A-3 Communications with the Debtor.................................................................................................... 8A-3 Communication with Third Parties ................................................................................................. 8A-4 Ceasing Communication ................................................................................................................. 8A-4 Harrassment or Abuse......................................................................................................................... 8A-4 False or Misleading Representations.................................................................................................. 8A-5 Unfair Practices.................................................................................................................................... 8A-7 Validation of Debts .............................................................................................................................. 8A-8 Multiple Debts ...................................................................................................................................... 8A-9 Legal Actions by Debt Collectors ....................................................................................................... 8A-9 Furnishing Certain Deceptive Forms................................................................................................. 8A-9 Civil Liability...................................................................................................................................... 8A-10 Administrative Enforcement............................................................................................................. 8A-10

xxix

Self-Assessment and Regulatory Compliance Review Relation to State Laws ....................................................................................................................... 8A-10

Volume 2

Chapter 9 Fair Credit Reporting Act

Fair Credit Reporting Act Checklist..................................................................................................... 9-v Persons Subject to the FCRA................................................................................................................. 9-1 Consumer Reporting Agencies........................................................................................................... 9-1 Joint Users of Consumer Reports ....................................................................................................... 9-2 Information Subject to the FCRA ......................................................................................................... 9-3 Information That Is Considered To Be a Consumer Report............................................................... 9-3 Information That Is Not Considered To Be a Consumer Report........................................................ 9-4 Transaction or Experience Information ....................................................................................... 9-4 Communications with Affiliates .................................................................................................. 9-5 Authorization or Approval of Credit Extensions ......................................................................... 9-6 Notification of Credit Decisions to an Intermediary.................................................................... 9-6 Background Checks for Employment Purposes........................................................................... 9-6 Joint Users of Consumer Reports ................................................................................................ 9-6 Permissible Uses of Consumer Reports ................................................................................................ 9-7 Use of Consumer Reports for Business Loans ................................................................................... 9-8 Certification by Users of Consumer Reports...................................................................................... 9-8 Notices to Users and Furnishers ............................................................................................................ 9-9 Adverse Action Notice Requirements ................................................................................................... 9-9 Adverse Actions Based on Information Obtained from a Consumer Reporting Agency................... 9-9 Adverse Actions Based on Information Obtained from Third Parties That Are Not Consumer Reporting Agencies or Affiliates...................................................................................................... 9-10 Notifying Multiple Applicants in Cases of Adverse Action............................................................. 9-11 Obligations of Users of Prescreened Lists Users ................................................................................ 9-12 Prescreen Opt-Out Notice .................................................................................................................... 9-13 Short Notice...................................................................................................................................... 9-13 Long Notice...................................................................................................................................... 9-14 "Simple and Easy To Understand"................................................................................................... 9-14 Model Forms .................................................................................................................................... 9-15 Error Resolution and Information Reporting.................................................................................... 9-15 Duties After Notice of Dispute from a Consumer............................................................................ 9-15 Duties After Notice of Dispute from a Consumer Reporting Agency.............................................. 9-16 Duty To Provide Notice of Closed Accounts ................................................................................... 9-16 Duty To Provide Notice of Delinquency of Accounts ..................................................................... 9-16 FACT Act-Related Amendments to FCRA ........................................................................................ 9-17 Important FACT Act Definitions ........................................................................................................ 9-17 Definition of "Identity Theft" (16 CFR 603.2)................................................................................. 9-17 Definition of "Identity Theft Report" (16 CFR 603.3)..................................................................... 9-17 Appropriate Proof of Identity (16 CFR 614.1) ................................................................................. 9-19 Fraud Alerts and Active Duty Alerts .................................................................................................. 9-20 Disclosure of Credit Score in Real Estate Secured Loans ................................................................. 9-21 Specific Information Related to the Consumer's Credit Score ........................................................ 9-22

xxx

Contents General Disclosure Regarding Credit Scores and Related Information ........................................... 9-24 Requirement To Disclose Negative Information Provided to a Consumer Reporting Agency...... 9-24 Providing Identity Theft-Related Records to Victims ....................................................................... 9-28 Content of Victim's Request ............................................................................................................ 9-29 Responding to the Customer's Request............................................................................................ 9-29 Limitations on Liability.................................................................................................................... 9-31 Recordkeeping.................................................................................................................................. 9-31 Affirmative Defense in Civil Actions............................................................................................... 9-31 Blocking Information Resulting from Identity Theft ........................................................................ 9-31 Prevention of Repollution of Consumer Reports ............................................................................... 9-32 Prohibition of Sale or Transfer of Debt Caused by Identity Theft................................................... 9-32 Disposal of Consumer Report Information ........................................................................................ 9-33 Improved Disclosure of Disputed Information Investigation Results .............................................. 9-34 Truncation of Credit Card and Debit Card Account Numbers ....................................................... 9-34 Summary of Rights of Identity Theft Victims .................................................................................... 9-35 Identity Theft Red Flags....................................................................................................................... 9-35 Relationship Between the Red Flag Rules and Information Security Requirements ....................... 9-36 Accounts Subject to the Identity Theft "Red Flag" Rules................................................................ 9-37 Account ............................................................................................................................................ 9-37 Covered Account.............................................................................................................................. 9-37 Business Accounts ..................................................................................................................... 9-39 Pre-Paid Cards ........................................................................................................................... 9-39 Certificates of Deposit ............................................................................................................... 9-39 Individual Retirement Accounts (IRA)...................................................................................... 9-40 Trust Accounts ........................................................................................................................... 9-40 Accounts Established in the U.S. by Non-U.S. Residents ......................................................... 9-41 Indirect Lending......................................................................................................................... 9-41 Establishment of an Identity Theft Prevention Program .................................................................. 9-42 Definition of "Identity Theft" .................................................................................................... 9-42 Record Retention ....................................................................................................................... 9-43 Elements of the Identity Theft Program..................................................................................... 9-43 Identifying Red Flags................................................................................................................. 9-44 Detection of Red Flags............................................................................................................... 9-46 Responding to Detected Red Flags ............................................................................................ 9-47 Updating the Program ................................................................................................................ 9-49 Administration of the Program......................................................................................................... 9-50 Approval of the Board of Directors ........................................................................................... 9-50 Ongoing Involvement of the Board and Senior Management ................................................... 9-51 Staff Training ................................................................................................................................... 9-53 Oversight of Service Provider Arrangements................................................................................... 9-54 Appendix J -- Interagency Guidelines on Identity Theft Detection, Prevention, and Mitigation .................................................................................................................................. 9-54 Supplement A to Appendix J: Examples of Red Flags .............................................................. 9-55 Inactive Accounts ................................................................................................................ 9-55 Duties of Card Issuers Regarding Changes of Address..................................................................... 9-56 "Cardholders" Protected by the Rule ............................................................................................... 9-56 Corporate Credit or Debit Cards .............................................................................................. 9-56a Address Validation Requirements .................................................................................................. 9-56b Alternative Timing of Address Validation............................................................................... 9-56c Form of Notice......................................................................................................................... 9-56c Guidelines ................................................................................................................................ 9-56d xxxi

Self-Assessment and Regulatory Compliance Review Duties of Users of Consumer Reports Regarding Address Discrepancies and Records Disposal ................................................................................................................................. 9-56d Applicability of the Rules................................................................................................................ 9-56f Notice of Address Discrepancy ....................................................................................................... 9-56f Response to Notice of Address Discrepancy.................................................................................. 9-56g Requirement To Furnish Consumer's Address to a Consumer Reporting Agency........................ 9-56h Timing of Furnishing Consumer's Address to CRA ................................................................ 9-56i Affiliate Marketing Opt-Out............................................................................................................... 9-56j Affiliate Marketing Opt-Out and Exceptions ................................................................................... 9-58 "Eligibility Information"............................................................................................................ 9-58 Solicitations Subject to the Rule ................................................................................................ 9-59 Definition of "Solicitation" ................................................................................................. 9-60 Receiving Eligibility Information from an Affiliate, Including Through a Common Database............................................................................................................ 9-60 Receipt or Use of Eligibility Information by Your Service Provider.................................. 9-61 Use by an Affiliate of Its Own Eligibility Information ....................................................... 9-62 Examples of the Application of the Rule ................................................................................... 9-62 Exceptions.................................................................................................................................. 9-66 Definition of "Pre-Existing Business Relationship" ........................................................... 9-66 Examples of Exceptions ...................................................................................................... 9-70 Affiliates Who May Provide the Notice ........................................................................................... 9-73 Scope and Duration of Opt-Out........................................................................................................ 9-73 Providing Menu of Alternatives for Opt-Out............................................................................. 9-75 Special Rule for a Notice Following Termination of All Continuing Relationships ................. 9-75 Duration of Opt-Out................................................................................................................... 9-76 Time of Opt-Out ........................................................................................................................ 9-76 Contents of Opt-Out Notice, Consolidated and Equivalent Notices ................................................ 9-76 Contents of Opt-Out Notice ....................................................................................................... 9-76 Opt-Outs Involving Joint Relationships..................................................................................... 9-77 Alternative Contents in Cases of Broader Opt-Out Rights ........................................................ 9-78 Model Notices............................................................................................................................ 9-78 Coordinated and Consolidated Notices...................................................................................... 9-78 Equivalent Notices ..................................................................................................................... 9-78 Methods of Providing the Opt-Out Notice ....................................................................................... 9-78 Methods of Opting Out..................................................................................................................... 9-80 Delivery of Opt-Out Notices ............................................................................................................ 9-81 Expiration and Renewal of Opt-Out................................................................................................. 9-81 Contents of Renewal Notice ...................................................................................................... 9-82 Timing of the Renewal Notice ................................................................................................... 9-83 Obtaining or Using Medical Information To Determine Eligibility for Credit............................... 9-83 Medical Information Subject to the Rule ......................................................................................... 9-84 Obtaining or Using Medical Information in Connection with a Determination of Eligibility for Credit .......................................................................................................................................... 9-85 General Exceptions for Obtaining and Using Medical Information................................................. 9-86 Specific Exceptions for Obtaining and Using Medical Information ................................................ 9-89 Limits on Redisclosure of Information............................................................................................. 9-94 Sharing Medical Information with Affiliates ................................................................................... 9-94 Coordination of Identity Theft Complaint Investigations (Section 153; FCRA Section 621(f)) ..... 9-96 Risk-Based Pricing Notice (Section 311; FCRA Section 615(h)).................................................... 9-96 Loans Subject to the Risk-Based Pricing Notice.............................................................................. 9-97 Key Definitions.......................................................................................................................... 9-97 xxxii

Contents Determining Which Consumers Must Receive a Notice ........................................................... 9-98 Alternative 1 -- Credit Score Proxy Method (222.72(b)(1)/640.3(b)(1))........................... 9-98 Alternative 2 -- Tiered Pricing Notice (222.72(b)(2)/640.3(b)(2)) .................................... 9-99 Special Rule Available for Credit Cards ........................................................................... 9-100 Exceptions to the Notice Requirement..................................................................................... 9-100 When a Consumer Applies for Specific Material Terms and Is Granted Those Terms ...................................................................................................................... 9-101 When a Consumer Has Been or Will Be Provided a Notice of Adverse Action ............................................................................................................. 9-101 When a Creditor Makes a Firm Offer of Credit Based on a Prescreened List Under Section 604(c)(2) of the Fair Credit Reporting Act................................................ 9-102 Where Credit Score Disclosures Are Provided for Loans Secured by Residential Real Estate ................................................................................................. 9-102 Credit Score Disclosure for Non-Real Estate Extensions of Credit .................................. 9-105 Credit Score Not Available ............................................................................................... 9-108 Contents of Notice ................................................................................................................... 9-110 Form of Notice......................................................................................................................... 9-111 Timing of Risk-Based Pricing Notice...................................................................................... 9-111 Model Forms for Notices ......................................................................................................... 9-113 Other Issues.............................................................................................................................. 9-113 One Notice per Credit Extension....................................................................................... 9-114 Multi-Party Transactions ................................................................................................... 9-114 Providing Notice to Multiple Consumers.......................................................................... 9-115 Procedures to Enhance the Accuracy and Integrity of Information Furnished (Section 312; FCRA Section 623(e)) .................................................................................................. 9-116 Reasonable Policies and Procedures Concerning the Accuracy and Integrity of Furnished Information .................................................................................................................... 9-117 Appendix -- Interagency Guidelines Concerning the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies................................................... 9-117 Nature, Scope and Objectives of Policies and Procedures ................................................ 9-117 Establishing and Implementing Policies and Procedures .................................................. 9-118 Specific Components of Policies and Procedures ............................................................. 9-119 Direct Disputes of Consumer Report Information .......................................................................... 9-121 Procedures to Enhance the Accuracy and Integrity of Information Furnished (Section 312; FCRA Section 623(e)) ............................................................................................. 9-124 Exhibits on CD .................................................................................................................................... 9-125 Exhibit 9.1: Federal Trade Commission Letter........................................................................ 9-125 Exhibit 9.2: Notice to Furnishers of Information..................................................................... 9-125 Exhibit 9.3: Notice of User Responsibility .............................................................................. 9-125 Exhibit 9.4: Summary of Consumer Identity Theft Rights ...................................................... 9-125 Exhibit 9.5: General Summary of Consumer Rights ............................................................... 9-125 Exhibit 9.6: Section 615(a) of the FCRA and Section 202.9(f) of Regulation B, Implementing the Equal Credit Opportunity Act..................................................................... 9-125 Exhibit 9.7: Appendix C Model Notices.................................................................................. 9-125 Exhibit 9.8: Appendix J to Part 334 -- Interagency Guidelines on Identity Theft Detection, Prevention, and Mitigation ..................................................................................... 9-125 Exhibit 9.9: FAQs: ID Theft Red Flags and Address Discrepancies ....................................... 9-125 Exhibit 9.10: Model Forms for Notices ................................................................................... 9-125

xxxiii

Self-Assessment and Regulatory Compliance Review

Chapter 10 Insider Lending Restrictions -- Regulation O

Insider Lending Restrictions Checklist................................................................................................ 10-i Loans by Member Banks to Their Executive Officers, Directors, and Principal Shareholders.... 10-1 Definition of Insiders ............................................................................................................................ 10-1 Executive Officer ............................................................................................................................. 10-1 Special Rule for Executive Officers of Affiliates ...................................................................... 10-2 Board of Directors Resolution Excluding Executive Officers................................................... 10-3 Director............................................................................................................................................. 10-3 Special Rule for Directors of Affiliates ..................................................................................... 10-3 Board of Directors Resolution Excluding Directors of Affiliates.............................................. 10-4 Principal Shareholder ....................................................................................................................... 10-4 Related Interest................................................................................................................................. 10-5 Extension of Credit (215.3)................................................................................................................... 10-6 Definition.......................................................................................................................................... 10-6 Tangible Economic Benefit Rule ..................................................................................................... 10-7 Exclusions ........................................................................................................................................ 10-7 General Prohibitions and Requirements (215.4)................................................................................ 10-9 Special Rule for Executive Officers and Directors of Affiliates ...................................................... 10-9 Terms and Creditworthiness............................................................................................................. 10-9 Exceptions.................................................................................................................................. 10-9 Prior Approval................................................................................................................................ 10-10 Special Rule for Lines of Credit .............................................................................................. 10-11 Individual Insider Lending Limit ................................................................................................... 10-11 Aggregate Lending Limit ............................................................................................................... 10-12 General Limit ........................................................................................................................... 10-12 Exceptions to the General Lending Limit ......................................................................... 10-13 Special Rule for Banks with Deposits of Less Than $100 Million.......................................... 10-14 Overdrafts of Insiders ..................................................................................................................... 10-14 Additional Restrictions on Loans to Executive Officers of Banks (215.5) ..................................... 10-16 Executive Officer Lending Limit ................................................................................................... 10-16 Procedural Requirements for Extensions of Credit to Executive Officers ..................................... 10-17 Prohibition on Knowingly Receiving Unauthorized Extension of Credit (215.6) ......................... 10-18 Extensions of Credit Outstanding on March 10, 1979 (215.7) ........................................................ 10-19 Records of Banks (215.8).................................................................................................................... 10-19 In General ....................................................................................................................................... 10-19 Recordkeeping for Insiders of the Bank ......................................................................................... 10-19 Recordkeeping for Insiders of the Bank's Affiliates ...................................................................... 10-19 Survey Method......................................................................................................................... 10-20 Borrower Inquiry Method ........................................................................................................ 10-20 Alternative Recordkeeping Methods for Insiders of Affiliates................................................ 10-20 Special Rule for Non-Commercial Lenders............................................................................. 10-20 Disclosure of Credit from Banks to Executive Officers and Principal Shareholders (215.9) ...... 10-21 Definitions ...................................................................................................................................... 10-21 Principal Shareholder of a Bank .............................................................................................. 10-21 Related Interest ........................................................................................................................ 10-21 Public Disclosure............................................................................................................................ 10-21 Reporting Requirement for Credit Secured by Certain Bank Stock (215.10) .............................. 10-22 Civil Penalties ...................................................................................................................................... 10-22 xxxiv

Contents

Chapter 11 Home Mortgage Disclosure Act

HMDA Checklist.................................................................................................................................. 11-iii HMDA's Purpose .................................................................................................................................. 11-1 Lender Coverage and Exemptions (203.2(e) and (203.3)) ................................................................. 11-2 Banks, Savings Associations, and Credit Unions............................................................................. 11-2 Other For-Profit Mortgage Lenders.................................................................................................. 11-3 General Reporting Requirements........................................................................................................ 11-3 Loan Application Register Requirements (203.4) .............................................................................. 11-4 Applications Pending at the End of the Year ................................................................................... 11-4 Reinstated Applications.................................................................................................................... 11-4 Purchased Loans............................................................................................................................... 11-5 Date of Submission .......................................................................................................................... 11-5 Transactions Reported ...................................................................................................................... 11-5 Applications...................................................................................................................................... 11-5 Prequalifications ........................................................................................................................ 11-6 Preapprovals............................................................................................................................... 11-6 Loans Subject to HMDA .................................................................................................................. 11-8 Dwelling..................................................................................................................................... 11-8 Home Purchase Loan ................................................................................................................. 11-9 Home Improvement Loans ........................................................................................................ 11-9 Refinancing Loan..................................................................................................................... 11-11 Determining Whether an Institution Is Subject to HMDA................................................ 11-11 Determining Loans Reported on the HMDA/LAR ........................................................... 11-11 Home Equity Credit Lines of Credit ........................................................................................ 11-12 Loans and Applications That Are Excluded ............................................................................ 11-12 Temporary Financing ........................................................................................................ 11-13 Reporting Brokered Loans on the HMDA/LAR...................................................................... 11-14 Information Required on the HMDA/LAR.............................................................................. 11-15 Identification Number.............................................................................................................. 11-16 Date Application Received ...................................................................................................... 11-17 Type of Loan............................................................................................................................ 11-17 Type of Property ...................................................................................................................... 11-18 Purpose of Loan ....................................................................................................................... 11-18 Owner-Occupancy ................................................................................................................... 11-18 Loan Amount ........................................................................................................................... 11-19 Preapprovals............................................................................................................................. 11-20 Request for Preapproval........................................................................................................... 11-20 Type of Action ......................................................................................................................... 11-20 Counteroffers..................................................................................................................... 11-21 Rescinded Transactions..................................................................................................... 11-21 Conditional Approvals ...................................................................................................... 11-21 Preapprovals............................................................................................................................. 11-23 Date of Action Taken ..................................................................................................................... 11-23 Applications Approved but Not Accepted ............................................................................... 11-23 Loan Originations .................................................................................................................... 11-24 Property Location ........................................................................................................................... 11-24 Metropolitan Statistical Area............................................................................................. 11-25 State and County ............................................................................................................... 11-26 xxxv

Self-Assessment and Regulatory Compliance Review Census Tract Number........................................................................................................ Multiple Properties (Home Improvement/Refinance of Home Improvement) ................. Multiple Properties (Home Purchase/Refinance of Home Purchase)................................ Mobile or Manufactured Home ......................................................................................... Data Reporting Required Under the CRA Regulations on Small Business, Small Farm, and Community Development Lending........................................................ Applicant Ethnicity, Race, and Sex Monitoring Information .................................................. Applications Through Loan-Shopping Services ............................................................... Sex of Borrower or Applicant ........................................................................................... Race Monitoring Information............................................................................................ Hispanic Ethnicity.................................................................................................................... Applicant Income..................................................................................................................... Type of Purchaser .................................................................................................................... Reasons for Denial................................................................................................................... Pricing-Related Data ("Other Data") ....................................................................................... Rate Spread ....................................................................................................................... Loan Applications Taken Prior to October 1, 2009 and Closed Prior to January 1, 2010.................................................................................................................. HOEPA Status................................................................................................................... Reporting Format (Appendix A of Part 203) ........................................................................... HMDA Disclosure Statement (203.5(a) and (d)) ........................................................................... HMDA Public Notice (203.5(e)).................................................................................................... Public Availability of HMDA/LAR (203.5(c) and (d)).................................................................. Exhibits on CD .................................................................................................................................... Exhibit 11.1: A Guide to HMDA Reporting: Getting It Right! 2009 Edition................................ Exhibit 11.2: Frequently Asked Questions About the New HMDA Data...................................... Exhibit 11.3: Appendix A -- Standards for Maintaining, Collecting, and Presenting Federal Data on Race and Ethnicity ............................................................................. 11-26 11-27 11-27 11-27 11-27 11-27 11-29 11-29 11-29 11-31 11-32 11-32 11-34 11-35 11-35 11-35 11-36 11-36 11-37 11-37 11-38 11-38 11-38 11-38 11-38

Chapter 12 Real Estate Settlement Procedures Act (RESPA)

Real Estate Settlement Procedures Act Checklist ............................................................................... 12-iii Coverage (3500.5).................................................................................................................................. 12-1 Exemptions (3500.5(b)).................................................................................................................... 12-3 General Requirements.......................................................................................................................... 12-4 Special Information Booklet on Settlement Costs (3500.6) ............................................................... 12-5 Good Faith Estimate of Closing Costs (GFE) (3500.7) ...................................................................... 12-5 General Requirements ...................................................................................................................... 12-5 Definition of "Application" ....................................................................................................... 12-6 Delivery of GFE......................................................................................................................... 12-7 Restriction on Imposing Fees ........................................................................................................... 12-7 Mortgage Broker Providing GFE ..................................................................................................... 12-7 Availability of Fees Listed on GFE.................................................................................................. 12-9 Binding GFE and Tolerances..................................................................................................... 12-9 Changed Circumstances Affecting Settlement Costs............................................................... 12-10 Changed Circumstances Affecting the Loan ........................................................................... 12-10 Borrower-Requested Changes ................................................................................................. 12-10 Expiration of Original GFE ..................................................................................................... 12-10

xxxvi

Contents Charges Dependent on Interest Rate........................................................................................ New Home Purchases .............................................................................................................. Curing Violations and Penalties for Violations of the GFE Rules ................................................. Uniform Settlement Statement (HUD-1 or HUD-1A) (3500.8)..................................................... Use of Average Charge .................................................................................................................. Violations of Section 4 of RESPA ................................................................................................. General Disclosure Requirements............................................................................................ Completing the HUD-1/HUD-1A Form .................................................................................. Curing Tolerance Violations.................................................................................................... Reproduction of Settlement Statements (3500.9) ............................................................................. One-Day Advance Inspection of HUD-1 or HUD-1A Settlement Statement, Delivery; Recordkeeping (3500.10) ................................................................................................... One-Day Advance Inspection......................................................................................................... Delivery of HUD-1/1A................................................................................................................... Record Retention............................................................................................................................ Mailing of RESPA-Required Documents (3500.11)......................................................................... No Fee Allowed for Preparation (3500.12) ....................................................................................... Relation to State Laws (3500.13)............................................................................................. Anti-Kickback Restrictions (RESPA Section 8, 24 CFR 3500.14)................................................ No Referral Fees ...................................................................................................................... No Split Of Charges Except For Actual Services Performed .................................................. "Thing of Value"...................................................................................................................... "Agreement Or Understanding" .............................................................................................. "Referral"................................................................................................................................. Fees, Salaries, Compensation, or Other Payments................................................................... General Requirements for Payments Including Yield-Spread Premiums, etc.-HUD's 1999 Policy Statement ............................................................................................................. HUD'S 2001 Clarification of the 1999 Policy Statement .............................................................. The Culpepper Case and Yield Spread Premiums................................................................... The First Part of the HUD Test ......................................................................................... The Second Part of HUD's Test-Reasonableness of Broker Fees..................................... The Echevarria Case-Unearned Fees................................................................................. Providing Meaningful Disclosures Information to Borrowers .......................................... Payments That Are Not Considered To Be Illegal Kickbacks ....................................................... Affiliated Business Arrangements (3500.15) .................................................................................... Sham Business Arrangements ........................................................................................................ Escrow Accounting for the HUD-1 and HUD-1A and Initial Escrow Disclosure 3500.17............................................................................................................................... General Rules ................................................................................................................................. Single-Item versus Aggregate Analysis ......................................................................................... Single-Item Analysis................................................................................................................ Aggregate Analysis.................................................................................................................. Initial Escrow Account Disclosure (3500.17(g))............................................................................ Annual Escrow Account Statements (3500.17(i)).......................................................................... Interest on Escrow Accounts ................................................................................................... Annual Account Analysis ........................................................................................................ Frequency of Analysis ............................................................................................................. Timing...................................................................................................................................... Short Year Statements ....................................................................................................... Contents ................................................................................................................................... Mortgage Servicing Transfers and Disclosures (3500.21) ............................................................... xxxvii 12-11 12-11 12-11 12-12 12-13 12-15 12-15 12-17 12-19 12-19 12-21 12-21 12-21 12-22 12-22 12-22 12-23 12-23 12-24 12-24 12-25 12-26 12-26 12-26 12-28 12-31 12-32 12-33 12-34 12-36 12-43 12-46 12-48 12-50 12-56 12-56 12-58 12-59 12-61 12-62 12-63 12-63 12-63 12-66 12-66 12-67 12-67 12-70

Self-Assessment and Regulatory Compliance Review Mortgage Servicing Disclosure Statement (3500.21(b))................................................................ 12-70 Transfer of Mortgage Servicing (3500.21(d)) ................................................................................ 12-72 Error Resolution (3500.21(e)) ........................................................................................................ 12-73 Exhibit 12.1: Good Faith Estimate and Instructions....................................................................... 12-75 Exhibit 12.1A: Form and Instructions for Completing HUD-1 and HUD-1A Settlement Statements .................................................................................................................... 12-81 Exhibit 12.1B: New RESPA Rule FAQs ....................................................................................... 12-91 Exhibits on CD .................................................................................................................................. 12-139 Exhibit 12.2: HUD's Response to Questions from the Massachusetts Bankers Association ................................................................................................................................... 12-139 Exhibit 12.3: Examples of RESPA Coverage .............................................................................. 12-139 Exhibit 12.4: RESPA Policy on Lender Payments to Mortgage Brokers..................................... 12-139 Exhibit 12.5: Single-Item Analysis Example ............................................................................... 12-139 Exhibit 12.6: Aggregate-Item Analysis Example......................................................................... 12-139 Exhibit 12.7: Format for Escrow Disclosure Statement ............................................................... 12-139 Exhibit 12.8: Example of Escrow Disclosure Statement.............................................................. 12-139 Exhibit 12.9: Account History Disclosure Form .......................................................................... 12-139 Exhibit 12.10: Projections for Coming Year ................................................................................ 12-139 Exhibit 12.11: Account History Example .................................................................................... 12-139 Exhibit 12.12: Escrow Account Projection .................................................................................. 12-139 Exhibit 12.13: Projections for Coming Year Example................................................................. 12-139

Chapter 12A Homeownership Counseling and SCRA Notice

Homeownership Counseling and SCRA Checklist ........................................................................ 12A-iii HUD Act of 1968 ................................................................................................................................ 12A-1 Borrowers Entitled to the Homeownership Counseling and SCRA Notices................................. 12A-1 Providing the Notice...................................................................................................................... 12A-2 Servicemembers Civil Relief Act Notice .......................................................................................... 12A-2 United States Department of Housing and Urban Development Servicemembers Civil Relief Act Notice ....................................................................................................................... 12A-3 Legal Rights and Protections Under the SCRA............................................................................. 12A-3 Who May Be Entitled to Legal Protections Under the SCRA?..................................................... 12A-3 What Legal Protections Are Servicemembers Entitled to Under the SCRA? ............................... 12A-3 How Does a Servicemember or Dependent Request Relief Under the SCRA? ............................ 12A-4 How Does a Servicemember or Dependent Obtain Information About the SCRA?..................... 12A-4 Exhibit on CD..................................................................................................................................... 12A-4 Exhibit 12A.1: HUD Mortgage Letter 2006-28 ............................................................................ 12A-4

Chapter 13 Flood Disaster Protection Act

Flood Disaster Protection Act Checklist ............................................................................................ 13-iii Coverage ................................................................................................................................................ 13-2 Exemptions (339.4) .......................................................................................................................... 13-3 Requirement to Purchase Flood Insurance Where Available (339.3) .............................................. 13-3 Calculating Insurance Required on a Nonresidential Building ........................................................ 13-4

xxxviii

Contents Escrow Requirement (339.5)................................................................................................................ 13-8 Required Use of Standard Flood Hazard Determination Form (339.6)........................................... 13-8 Forced Placement of Flood Insurance (339.7) .................................................................................... 13-9 Determination Fees (339.8) .................................................................................................................. 13-9 Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance (339.9) ................................................................................................................................ 13-10 Notice of Servicer's Identity (339.10) ................................................................................................ 13-11 Exhibit on CD...................................................................................................................................... 13-12 Exhibit 13.1: FAQs on the Flood Insurance Requirements............................................................ 13-12

Chapter 14 Regulation U -- Loans To Purchase or Carry Margin Stock

Regulation U Checklist .......................................................................................................................... 14-i Definition of "Margin Stock"............................................................................................................... 14-1 Institutions Subject to Regulation U ................................................................................................... 14-2 Commercial Banks ........................................................................................................................... 14-2 Nonbank Lenders ............................................................................................................................. 14-2 Registration ................................................................................................................................ 14-3 Deregistration............................................................................................................................. 14-3 Lending Restrictions............................................................................................................................. 14-3 Purpose Credit .................................................................................................................................. 14-3 Maximum Loan Value...................................................................................................................... 14-3 Single Credit Rule...................................................................................................................... 14-4 Withdrawals and Substitutions .................................................................................................. 14-4 Plan Lenders .............................................................................................................................. 14-5 Special Purpose Loans to Broker-Dealers ................................................................................. 14-5 Exempted Borrowers ................................................................................................................. 14-5 Reporting and Regulatory Requirements........................................................................................... 14-6 Registered Nonbank Lenders -- Annual Report.............................................................................. 14-6 Purpose Statement ............................................................................................................................ 14-6 Banks ......................................................................................................................................... 14-6 Registered Nonbank Lenders ..................................................................................................... 14-6 Use of Purpose Statement .......................................................................................................... 14-7 Purpose Statement for Revolving-Credit or Multiple-Draw Agreements.................................. 14-7

Chapter 15 Homeowners Protection Act of 1998

Homeowners Protection Act of 1998 Checklist ................................................................................... 15-i Effect on State Laws Governing PMI ................................................................................................. 15-2 Loans Made on or After July 29, 1999 ................................................................................................ 15-2 Exception for High-Risk Loans........................................................................................................ 15-3 Disclosures Required at Closing ...................................................................................................... 15-4 Fixed Rate Mortgage.................................................................................................................. 15-4 Adjustable Rate Mortgages........................................................................................................ 15-5 Disclosures for High-Risk Loans............................................................................................... 15-5 Borrower Requested Cancellation of PMI ....................................................................................... 15-5

xxxix

Self-Assessment and Regulatory Compliance Review Automatic Termination of PMI ........................................................................................................ 15-7 PMI Final Termination ..................................................................................................................... 15-8 Annual Disclosure Requirements ..................................................................................................... 15-8 Disclosure Requirement for Lender-Paid PMI................................................................................. 15-8 Loans Entered into Before July 29, 1999 ............................................................................................ 15-9 Internet and Other Electronic Delivery ............................................................................................ 15-9 Fannie Mae's PMI Termination and Cancellation Requirements ................................................... 15-9 Loans Closed on or After July 29, 1999......................................................................................... 15-10 Cancellation Based on Original Value..................................................................................... 15-10 Cancellation Based on Current Value...................................................................................... 15-10 Automatic Termination of PMI ............................................................................................... 15-11 Loans Closed Prior to July 29, 1999 .............................................................................................. 15-11 Cancellation Based on Original Value..................................................................................... 15-11 Cancellation Based on Current Value...................................................................................... 15-12 Automatic Termination of PMI ............................................................................................... 15-12

General Applicability

Chapter 16 Bank Secrecy Act

BSA Compliance Checklist ................................................................................................................ 16-vii Compliance Programs and Requirements .......................................................................................... 16-1 Introduction ...................................................................................................................................... 16-1 Anti-Money Laundering Record Considered in Applications.......................................................... 16-1 BSA Compliance Program Requirements.................................................................................. 16-1 Internal Controls............................................................................................................................... 16-2 Independent Testing of Compliance................................................................................................. 16-3 Compliance Officer .......................................................................................................................... 16-3 Training ............................................................................................................................................ 16-4 Common Problems in BSA Programs .............................................................................................. 16-4 Anti-Money Laundering Program Requirements ............................................................................. 16-5 Risk Assessment .................................................................................................................................... 16-6 Products and Services....................................................................................................................... 16-7 Customers and Entities ..................................................................................................................... 16-7 Geographic Locations....................................................................................................................... 16-8 MSBs as Customers of Financial Institutions ................................................................................ 16-11 New Accounts vs. Existing Accounts for Known Money Services Businesses ...................... 16-11 Minimum Bank Secrecy Act Due Diligence Expectations ............................................................ 16-12 FinCEN Registration Requirements ........................................................................................ 16-13 Common Registration Issues............................................................................................. 16-15 Other Due Diligence ................................................................................................................ 16-17 Basic Bank Secrecy Act/Anti-Money Laundering Risk Assessment ...................................... 16-17 Risk Indicators ......................................................................................................................... 16-18 Due Diligence for Higher Risk Customers .............................................................................. 16-20 Identification and Reporting of Suspicious Activity................................................................ 16-21 Termination of MSB Accounts/Refusal To Open an MSB Account ....................................... 16-23 xl

Contents 314(b) Voluntary Information Sharing .................................................................................... Additional Information for MSBs............................................................................................ Customer Identification Program Requirements ............................................................................ Institutions Subject to the CIP Rule ............................................................................................... Holding Companies and Subsidiaries............................................................................................. Bank Subsidiaries .................................................................................................................... CIP Requirements........................................................................................................................... Accounts Subject to CIP Requirements ......................................................................................... Exemptions..................................................................................................................................... Indirect Lending and Loan Participations................................................................................ Data Processing, Data Warehousing, and Data Transmission ................................................. Customers Subject to CIP Requirements ....................................................................................... Additional or Substitute Accountholders................................................................................. Accounts with Power-of-Attorney ........................................................................................... Signatories ............................................................................................................................... Accounts Held by Minors ........................................................................................................ Trust Accounts and Escrow Accounts ..................................................................................... Pension Plan Administrators.................................................................................................... Agent Banks for Credit Card Issuers ....................................................................................... Administrators of Non-ERISA Accounts ................................................................................ Banks Acting as Transfer Agent .............................................................................................. Exemptions..................................................................................................................................... Banks ....................................................................................................................................... Persons Eligible for Automatic CTR Exemption..................................................................... Existing Customers .................................................................................................................. Required Contents for Customer Identification Program............................................................... Reliance on Third Parties......................................................................................................... Identity Information Collection and Verification .................................................................... Required Customer Information To Be Collected ................................................................... Exception for Persons Applying for a Taxpayer Identification Number ................................. Trusts and Taxpayer Identification Number ............................................................................ Members of Religious Groups That Have No SSN ................................................................. Special Rule for Credit Card Accounts.................................................................................... Customer Verification.............................................................................................................. Verification Through Documents ............................................................................................ Consular ID Cards ................................................................................................................... Verification Through Non-Documentary Methods.................................................................. Additional Procedures for Certain Signatories ........................................................................ Lack of Verification................................................................................................................. Recordkeeping................................................................................................................................ Sales of Loans While Retaining the Servicing Rights ............................................................. Comparison with Government Lists............................................................................................... Customer Notice............................................................................................................................. Additional Exemptions................................................................................................................... Incorporating High-Risk Areas into BSA/Anti-Money Laundering Programs .............................. Suspicious Activity Reporting Requirements................................................................................... When a SAR Is Required ............................................................................................................... Exceptions ...................................................................................................................................... SAR Filings and BSA Enforcement ............................................................................................... Monitoring for Suspicious Activities ............................................................................................. Time for Reporting......................................................................................................................... xli 16-23 16-23 16-24 16-25 16-26 16-26 16-27 16-29 16-29 16-30 16-30 16-30 16-31 16-31 16-32 16-33 16-33 16-34 16-35 16-35 16-36 16-36 16-37 16-37 16-37 16-38 16-38 16-40 16-40 16-41 16-42 16-42 16-42 16-43 16-43 16-44 16-45 16-46 16-46 16-47 16-48 16-49 16-49 16-50 16-51 16-52 16-53 16-54 16-54 16-56 16-57

Self-Assessment and Regulatory Compliance Review When the Reporting Clock Begins to Run............................................................................... 16-58 Format and Where To File ............................................................................................................. 16-60 Securing Filing Network ................................................................................................................ 16-62 Retention of Records ...................................................................................................................... 16-62 Notification to Board of Directors.................................................................................................. 16-62 Prohibition on the Disclosure of SAR Filing ................................................................................. 16-62 Sharing SARs With Controlling Companies or Affiliates.............................................................. 16-64 SAR Records Sought by Subpoena or Court Order ....................................................................... 16-66 Disclosure of SAR Information to the Federal Government .......................................................... 16-68 Safe Harbor Amendments .............................................................................................................. 16-68 Filing a SAR When an OFAC Match Is Found.............................................................................. 16-72 National Security Letters and Suspicious Activity Reporting........................................................ 16-73 Completing the SAR Form............................................................................................................. 16-75 General SAR Completion Issues .................................................................................................... 16-76 General Tips for Using These Types of Responses in SARs................................................... 16-78 Part II -- Suspect Information -- Multiple Suspects..................................................................... 16-79 Identifying Victims of Suspicious Activity in a SAR .................................................................... 16-79 Suspect Information Unavailable ................................................................................................... 16-80 Part III -- Suspicious Activity Information ................................................................................... 16-80 Part V -- The Importance of the Narrative .................................................................................... 16-81 Organizing Information in the SAR Narrative......................................................................... 16-83 Introduction.............................................................................................................................. 16-83 Body......................................................................................................................................... 16-84 Conclusion ............................................................................................................................... 16-85 Examples of Sufficient and Insufficient SAR Narratives............................................................... 16-85 Sufficient and Complete Depository Institution SAR Narratives ............................................ 16-86 Insufficient or Incomplete Depository Institution SAR Narratives ......................................... 16-92 Closing of an Account .................................................................................................................... 16-93 Filing Subsequent SARs Regarding the Same Activity ................................................................. 16-93 Correcting Report ........................................................................................................................... 16-94 Updating Report ............................................................................................................................. 16-94 Special SAR Form Completion Guidance for Particular Types of Suspicious Activity ................ 16-95 Identity Theft and Pretext Calling............................................................................................ 16-95 Computer Intrusion .................................................................................................................. 16-96 Suspected Terrorist Activity........................................................................................................... 16-98 Informal Value Transfer System (IVTS) Activity.......................................................................... 16-99 Suspicious Activity Involving Shell Banks .................................................................................. 16-100 Tax Refund Anticipation Loan Fraud........................................................................................... 16-100 Suspicious Activity Involving ATMs........................................................................................... 16-100 Advance Fee Schemes.................................................................................................................. 16-100 Sharing of Information To Deter Money Laundering................................................................... 16-101 Information Sharing Among Financial Institutions (Section 314(b)) .......................................... 16-102 Information Sharing with Law Enforcement (314(a)).................................................................. 16-104 Agency Requirements............................................................................................................ 16-105 Financial Institution Point of Contact .................................................................................... 16-106 Board of Governors of the Federal Reserve System ....................................................... 16-107 Federal Deposit Insurance Corporation........................................................................... 16-107 Office of the Comptroller of the Currency ...................................................................... 16-107 Office of Thrift Supervision ............................................................................................ 16-107 National Credit Union Administration ............................................................................ 16-107 Search Requirements ............................................................................................................. 16-107 xlii

Contents Restrictions on Use of Information........................................................................................ Closing Accounts ................................................................................................................... Filing a SAR When a Match Is Found................................................................................... Currency Transaction Reporting Requirements ........................................................................... Definitions .................................................................................................................................... Financial Institution ............................................................................................................... Bank ....................................................................................................................................... Currency Transaction Reports in General .................................................................................... Completing the CTR Form........................................................................................................... Specific Guidance on Completing Part II of the CTR Form.................................................. What Should Be Entered in Items 26 and 27?................................................................. What Should Be Entered in Items 26a and 27a? ............................................................. What Should Be Entered in Item 29? .............................................................................. Where Can the Country Code List Be Found? ................................................................ What Country Code Should Be Entered in Items 29 and 36 for Transactions in Euros?.......................................................................................................................... When Is Box 33 Checked? .............................................................................................. When Is Box 36 Checked? .............................................................................................. Customer Exemptions .................................................................................................................. Automatic (Phase I) Exemptions ........................................................................................... Governmental Departments and Agencies ...................................................................... Exchange Listings ........................................................................................................... Listed Company Subsidiaries .......................................................................................... Filing for the Phase I Exemption..................................................................................... Discretionary (Phase II) Exemptions ..................................................................................... Required Frequency of Transactions To Qualify for Exemption .................................... Extent of Exemption........................................................................................................ Exemptions for Payroll Customers.................................................................................. Exemptible Accounts of a Non-Listed Business or Payroll Customer............................ Aggregated Accounts ...................................................................................................... Ineligible Businesses ....................................................................................................... Making the Exemption .................................................................................................... Monitoring....................................................................................................................... Limitation on Exemptions...................................................................................................... Affiliated Banks .............................................................................................................. Annual Review ................................................................................................................ Obligations To File Suspicious Activity Reports and Maintain System for Monitoring Transactions in Currency ............................................................................. Limitation on Liability .................................................................................................... Reports of International Shipments of Currency and Foreign Bank and Financial Accounts............................................................................................................................ Introduction .................................................................................................................................. Definition of "Monetary Instruments"................................................................................... Exclusions.............................................................................................................................. Foreign Bank and Financial Accounts ......................................................................................... Special Measures for Jurisdictions, Financial Institutions, or International Transactions of Primary Money-Laundering Concern................................................................. Purchase/Sale of Monetary Instruments and Wire Transfers ...................................................... Definitions of "Financial Institution" and "Bank" ....................................................................... "Financial Institution"............................................................................................................ "Bank" ................................................................................................................................... xliii 16-110 16-110 16-110 16-111 16-111 16-111 16-111 16-112 16-114 16-115 16-115 16-116 16-116 16-116 16-116 16-116 16-117 16-117 16-118 16-119 16-121 16-121 16-121 16-122 16-123 16-123 16-124 16-124 16-125 16-125 16-126 16-126 16-126 16-126 16-127 16-127 16-128 16-128 16-128 16-129 16-129 16-131 16-131 16-132 16-132 16-132 16-132

Self-Assessment and Regulatory Compliance Review Purchases of Bank Checks and Drafts, Cashier's Checks, Money Orders, and Traveler's Checks......................................................................................................................... Purchases Subject to Recordkeeping Requirements .............................................................. Purchasers Who Have a Deposit Account ............................................................................. Purchasers Who Do Not Have a Deposit Account ................................................................ Wire Transfer Recordkeeping ......................................................................................................... Transactions Subject to Recordkeeping ....................................................................................... Institutions Subject to Recordkeeping.......................................................................................... Definitions .................................................................................................................................... Examples ......................................................................................................................... Bank Wire Transfer Recordkeeping Requirements ............................................................... As Originator's Bank....................................................................................................... As Intermediary Bank ..................................................................................................... As Beneficiary's Bank..................................................................................................... Retrievability ................................................................................................................... Verification of Identification........................................................................................... Nonbank Financial Institutions' Recordkeeping Requirements ............................................ As a Transmittor's Financial Institution.......................................................................... As an Intermediary Financial Institution......................................................................... As a Recipient's Financial Institution ............................................................................. Retrievability ................................................................................................................... Verification...................................................................................................................... "Travel Rule" ......................................................................................................................... Transmittor's Financial Institution .................................................................................. Receiving Financial Institution That Acts as an Intermediary Financial Institution......................................................................................................... Safe Harbor for Transmittals of Funds Prior to Conversion to the Expanded Fedwire Message Format .............................................................................................................. Other Records To Be Made and Retained by Financial Institutions ........................................... Other Records Under BSA Requirements .................................................................................... Records Under 31 CFR 103.33.............................................................................................. Records Relating to Certificates of Deposits................................................................................ Records Required by 31 CFR 103.34(b)................................................................................ Length of Recordkeeping Period ........................................................................................... Responding to Requests for BSA-Related Information................................................................. Records Relating to Foreign Correspondent Banks ...................................................................... Institutions Subject to the Restrictions ......................................................................................... Definition of "Foreign Bank"....................................................................................................... Definition of "Correspondent Account"....................................................................................... Record of Foreign Correspondent Bank Ownership.............................................................. Prohibition on United States Correspondent Accounts with Foreign Shell Banks ................ Certification "Safe Harbor" for Foreign Ownership and "Shell Bank" Prohibition .............. Closure of Correspondent Accounts ...................................................................................... Accounts Existing on October 28, 2002.......................................................................... Accounts Established After October 28, 2002 ................................................................ Verification of Previously Provided Information............................................................ Re-Establishment of Closed Accounts and Establishment of New Accounts................. Limitation on Liability .................................................................................................... Recordkeeping ....................................................................................................................... Special Rules for Certifications Obtained Under the Interim Guidance................................

16-133 16-133 16-135 16-136 16-137 16-137 16-137 16-138 16-142 16-142 16-143 16-145 16-145 16-146 16-147 16-147 16-148 16-151 16-151 16-151 16-151 16-152 16-152 16-153 16-154 16-155 16-155 16-155 16-156 16-157 16-160 16-160 16-160 16-160 16-161 16-161 16-162 16-163 16-165 16-166 16-166 16-167 16-167 16-167 16-168 16-168 16-168

xliv

Contents Summons or Subpoena of Foreign Bank Records; Termination of Correspondent Relationship................................................................................................... Special Due Diligence for Correspondent Accounts and Private Banking Accounts............ Exhibits on CD .................................................................................................................................. Exhibit 16.1: Suspicious Activity Report Form ........................................................................... Exhibit 16.2: Suspicious Activity Report Instructions ................................................................. Exhibit 16.2A: SAR-DI -- FinCEN Form 111 ............................................................................ Exhibit 16.3: Notice of Information Sharing Among Financial Institutions ................................ Exhibit 16.4: Currency Transaction Report.................................................................................. Exhibit 16.5: Designation of Exempt Person ............................................................................... Exhibit 16.6: Report of International Transportation of Currency or Monetary Instruments ...... Exhibit 16.7: Report of Foreign Bank and Financial Accounts.................................................... Exhibit 16.8: Certification Regarding Correspondent Accounts for Foreign Banks.................... Exhibit 16.9: Recertification Regarding Correspondent Accounts for Foreign Banks ................ Exhibit 16.10: Notice of Conditional Exception for Transmittal of Funds .................................. Exhibit 16.11: Risk Assessment Link to the BSA/AML Compliance Program...........................

16-168 16-169 16-173 16-173 16-173 16-173 16-173 16-173 16-173 16-173 16-173 16-173 16-173 16-173 16-173

Chapter 17 OFAC Restrictions

OFAC Restrictions Checklist................................................................................................................ 17-i Introduction........................................................................................................................................... 17-1 Terminology ..................................................................................................................................... 17-2 Laws Enforced by OFAC ..................................................................................................................... 17-4 Trading with the Enemy Act (TWEA), 50 USC App. Sections 1-44............................................... 17-5 Criminal Penalties...................................................................................................................... 17-5 International Emergency Economic Powers Act (IEEPA), 50 USC Sections 1701-06 .................... 17-5 Criminal Penalties...................................................................................................................... 17-5 Iraqi Sanctions Act (ISA), Pub.L. 101­513, 104 Stat. 2047-55 ....................................................... 17-5 Criminal Penalties...................................................................................................................... 17-5 United Nations Participation Act (UNPA), 22 USC Section 287c................................................... 17-6 Criminal Penalties...................................................................................................................... 17-6 International Security and Development Cooperation Act (ISDCA) Codified at 22 USC 2349aa-9 ............................................................................................................................. 17-6 Criminal Penalties...................................................................................................................... 17-6 The Cuban Democracy Act (CDA), 22 USC Section 6001-10 ........................................................ 17-6 Criminal Penalties...................................................................................................................... 17-6 The Cuban Liberty and Democratic Solidarity (Libertad) Act, 22 USC 6021-91............................ 17-6 Criminal Penalties...................................................................................................................... 17-6 The Antiterrorism and Effective Death Penalty Act (Enacting 18 USC 2332d and 18 USC 2339b)................................................................................................................................. 17-7 Criminal Penalties...................................................................................................................... 17-7 The Foreign Narcotics Kingpin Designation Act, Pub L. No. 106­120, Tit. VIII, 113 Stat 1606, 1626-1636 (1999) (To Be Codified at 21 USC Sections 1901-1908) ...................... 17-7 Criminal Penalties...................................................................................................................... 17-7 Other Criminal Penalties .................................................................................................................. 17-7 Civil Money Penalties ...................................................................................................................... 17-7 Procedure Used To Impose Civil Money Penalties.......................................................................... 17-8 Complying with OFAC Restrictions ................................................................................................... 17-9 Blockings........................................................................................................................................ 17-10

xlv

Self-Assessment and Regulatory Compliance Review Reject Items.................................................................................................................................... Annual Reports on Blocked Property............................................................................................. Reports on Litigation, Arbitration, and Dispute Resolution Proceedings ...................................... Licensing Requests......................................................................................................................... Filing a SAR When an OFAC "Match" Is Found............................................................................ Recordkeeping..................................................................................................................................... Compliance Programs and Audit Procedures.................................................................................. 17-11 17-11 17-11 17-12 17-12 17-13 17-14

Chapter 18 Community Reinvestment Act

Community Reinvestment Act Checklist............................................................................................. 18-i Subpart A -- General........................................................................................................................... 18-2 Subpart B -- Standards for Assessing Performance ......................................................................... 18-2 Lending Test (__.22) ............................................................................................................................. 18-2 Investment Test (__.23) ........................................................................................................................ 18-3 Service Test Section (__.24).................................................................................................................. 18-3 Community Development Test for Wholesale or Limited-Purpose Banks (__.25) ......................... 18-3 Small-Bank Performance Standards (__.26) ...................................................................................... 18-4 Intermediate Small Bank Performance Standards (__.26(b)) .......................................................... 18-4 Strategic Plan (__.27)............................................................................................................................ 18-5 Assigned Ratings (__.28) ...................................................................................................................... 18-5 Effect of CRA Performance on Applications (__.29)........................................................................ 18-6 Subpart C -- Records, Reporting, and Disclosure Requirements ................................................... 18-6 In General .............................................................................................................................................. 18-6 "Small Bank," "Intermediate Small Bank," and "Large Bank" ....................................................... 18-6 Geography ........................................................................................................................................ 18-6 Assessment Area (__.41)....................................................................................................................... 18-7 General Requirements ...................................................................................................................... 18-7 Wholesale or Limited Purpose Banks........................................................................................ 18-7 All Other Institutions ................................................................................................................. 18-7 Additional Requirements.................................................................................................................. 18-8 Data Collection, Reporting, and Disclosure (__.42) ........................................................................... 18-8 Small Business and Small Farm Loans ............................................................................................ 18-8 Aggregate Loan Data........................................................................................................................ 18-9 Consumer Loan Data...................................................................................................................... 18-10 Other Information........................................................................................................................... 18-10 Data on Affiliate Lending............................................................................................................... 18-10 Data on Lending by a Consortium or a Third Party ....................................................................... 18-11 Small Banks Electing Evaluation Under the Lending, Investment, and Service Tests .................. 18-11 Assessment Area Data.................................................................................................................... 18-11 CRA Disclosure Statement; Aggregate Disclosure Statement ....................................................... 18-11 Central Data Depositories............................................................................................................... 18-11 Public File (__.43)................................................................................................................................ 18-12 In General ....................................................................................................................................... 18-12 Additional Information Available to the Public ............................................................................. 18-13 Banks Other Than Small Banks ............................................................................................... 18-13 Institutions Subject to the Home Mortgage Disclosure Act..................................................... 18-13 Small Banks ............................................................................................................................. 18-13 Banks with Strategic Plans....................................................................................................... 18-14

xlvi

Contents Banks with Less Than Satisfactory Ratings............................................................................. Location of Public Information ...................................................................................................... Copies............................................................................................................................................. Updating ......................................................................................................................................... Public CRA Notice .............................................................................................................................. 18-14 18-14 18-14 18-15 18-15

Chapter 19 Privacy

Privacy Checklist ................................................................................................................................. 19-iii Who And What Is Subject to the Privacy Rule.................................................................................. 19-1 Agency Enforcement............................................................................................................................. 19-2 Related Federal and State Privacy Laws ............................................................................................ 19-4 Relationship to the Fair Credit Reporting Act................................................................................... 19-5 Relationship to State Laws ................................................................................................................... 19-5 Consumer Opt-Outs and the Privacy Disclosure ............................................................................... 19-5 General Requirements of the Rules..................................................................................................... 19-6 Coverage of the Privacy Regulations .................................................................................................. 19-7 Definition of "Financial Institutions"............................................................................................... 19-7 Activities That Are Considered "Financial in Nature"..................................................................... 19-7 Institutions Not Subject to the Requirements ................................................................................... 19-8 Definition of "Financial Product or Service" ................................................................................... 19-9 Definition of "Consumers"............................................................................................................... 19-9 Types of Third Parties That Receive Customer Information -- "Affiliate" and "Nonaffiliated Third Parties" ............................................................................................................ 19-11 "Affiliate"....................................................................................................................................... 19-11 "Nonaffiliated Third Party"............................................................................................................ 19-12 Information Subject to the Privacy Law........................................................................................... 19-12 "Nonpublic Personal Information"................................................................................................. 19-13 "Personally Identifiable Financial Information" ............................................................................ 19-13 Lists as Nonpublic Personal Information ....................................................................................... 19-14 "Publicly Available Information"................................................................................................... 19-15 Disclosure Requirements.................................................................................................................... 19-17 Coverage .............................................................................................................................................. 19-17 Definition of "Customer," "Customer Relationship," "Member," and "Member Relationship" ..................................................................................................................... 19-18 Initial Disclosures................................................................................................................................ 19-20 Providing the Disclosure to an Existing Customer When a New Product or Service Is Added ......................................................................................................................................... 19-23 Joint Accounts ................................................................................................................................ 19-23 Mergers........................................................................................................................................... 19-23 Method of Providing Disclosure .................................................................................................... 19-23 Annual Disclosure ............................................................................................................................... 19-24 Method of Providing Disclosure .................................................................................................... 19-25 Revised Disclosure When Changing the Terms of the Privacy Policy ........................................... 19-25 Method of Providing Disclosure .................................................................................................... 19-26 Contents of Privacy Policy Disclosure............................................................................................... 19-26 The Categories of Nonpublic Personal Information That the Institution Collects ......................... 19-27 Categories of Nonpublic Personal Information the Institution Discloses ...................................... 19-27 Categories of Affiliates and Nonaffiliated Third Parties to Whom the Institution Discloses ........ 19-28 xlvii

Self-Assessment and Regulatory Compliance Review Disclosures Under the Exception for Service Providers and Joint Marketers................................ Explanation of Opt-Out Right ........................................................................................................ Confidentiality and Security........................................................................................................... Short-Form Disclosure for Consumers That Are Not Customers .................................................. General Format Guidelines............................................................................................................. Model Form ............................................................................................................................. Disclosures on Web Sites ............................................................................................................... Combining Several "Clear and Conspicuous" Notices .................................................................. Method of Disclosure .......................................................................................................................... General Requirements for Providing Disclosures .......................................................................... Form the Customer Can Keep ........................................................................................................ Posting Disclosures on Web Sites .................................................................................................. Initial Disclosures .................................................................................................................... Annual Notices ........................................................................................................................ Posting Previous Privacy Disclosures...................................................................................... Joint Privacy Disclosures with Affiliates ....................................................................................... Restrictions on Providing Consumer Information to Others ......................................................... Providing Nonpublic Personal Information to Third Parties.......................................................... "Affiliates" vs. "Nonaffiliated Third Parties" ................................................................................ Providing Information to Affiliates ................................................................................................ Providing Information to Nonaffiliated Third Parties .................................................................... General Requirements.............................................................................................................. Method of Opt Out................................................................................................................... Form and Content of Opt-Out Notice to Consumers ............................................................... Joint Accounts.......................................................................................................................... Partial Opt Out ......................................................................................................................... When the Opt Out Must Be Implemented ............................................................................... Continuing Right To Opt Out .................................................................................................. Duration of Consumer's Opt-Out Election .............................................................................. Exceptions............................................................................................................................................ Exception for Service Providers and Joint Marketing.................................................................... Exceptions for Processing and Servicing Transactions .................................................................. "Other" Exceptions to Notice and Opt-Out Requirements............................................................. Examples of Exceptions ................................................................................................................. Limits on Redisclosure and Reuse of Information........................................................................... Information the Institution Receives Under an Exception ............................................................. Information an Institution Receives Outside of an Exception........................................................ Information an Institution Discloses Under an Exception.............................................................. Information an Institution Discloses Outside of an Exception....................................................... Limits on Sharing of Account Number Information for Marketing Purposes ............................. Exhibits on CD .................................................................................................................................... Exhibit 19.1: Interagency Guidance on Financial Privacy ............................................................. Exhibit 19.2: Sample Privacy Disclosures ..................................................................................... Exhibit 19.3: NCUA Interpretive Letter 910: Limits on Disclosing Account Numbers ................ Exhibit 19.4: Model Privacy Forms and Instructions..................................................................... 19-29 19-30 19-30 19-31 19-31 19-32 19-32 19-33 19-34 19-34 19-35 19-35 19-35 19-36 19-36 19-36 19-37 19-37 19-37 19-37 19-38 19-38 19-39 19-40 19-40 19-41 19-42 19-42 19-42 19-42 19-43 19-44 19-46 19-48 19-48 19-49 19-49 19-50 19-50 19-51 19-52 19-52 19-52 19-52 19-52

Chapter 19A Information Security Requirements

Information Security Requirements Checklist............................................................................... 19A-iii

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Contents Definitions........................................................................................................................................... 19A-2 Standards for Safeguarding Customer Information ...................................................................... 19A-2 Information Security Program....................................................................................................... 19A-2 Objectives ............................................................................................................................... 19A-2 Development and Implementation of Information Security Program ........................................... 19A-3 Involve the Board of Directors ............................................................................................... 19A-3 Assess Risk ............................................................................................................................. 19A-3 Manage and Control Risk ....................................................................................................... 19A-3 Oversee Service Provider Arrangements ................................................................................ 19A-5 Adjust the Program ................................................................................................................. 19A-5 Report to the Board................................................................................................................. 19A-5 Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice............................................................................................................................ 19A-5 Components of a Response Program ...................................................................................... 19A-6 Sensitive Customer Information ............................................................................................. 19A-7 When Customer Notice Should Be Provided.......................................................................... 19A-7 Customer Notice ..................................................................................................................... 19A-7 Delivery of Customer Notice .................................................................................................. 19A-7 Disposal of Consumer Report Information ................................................................................... 19A-8 Implementing Security Programs .................................................................................................. 19A-8 Securing Information .............................................................................................................. 19A-8 Employee Management and Training .............................................................................. 19A-9 Information Systems....................................................................................................... 19A-10 Managing System Failures ............................................................................................. 19A-11 Exhibits on CD ................................................................................................................................. 19A-12 Exhibit 19A.1: OCC News Release............................................................................................. 19A-12 Exhibit 19A.2: Small-Entity Compliance Guide......................................................................... 19A-12

Chapter 20 Electronic Signatures and Disclosures -- The "E-Sign Act" and Related Regulations

Electronic Signatures and Disclosures Checklist ................................................................................ 20-i Overview ................................................................................................................................................ 20-1 Electronic Signatures............................................................................................................................ 20-1 Validity of Electronic Signatures ..................................................................................................... 20-1 Consumer Disclosures .......................................................................................................................... 20-2 E-Sign Act Requirements ................................................................................................................. 20-2 Regulatory Requirements Implementing the E-Sign Act ................................................................. 20-3 General Requirements for Regulations B, E, Z, and DD ................................................................. 20-3 Regulation B Application Disclosure.................................................................................. 20-4 Regulation Z Disclosures........................................................................................................... 20-5 Open-End Credit.................................................................................................................. 20-5 Closed-End Credit ............................................................................................................... 20-5 Regulation DD Disclosures........................................................................................................ 20-6 Retention of Contracts and Records ................................................................................................... 20-7 Exceptions to Preemption..................................................................................................................... 20-7 Extent of Disclosure Preemption ......................................................................................................... 20-8

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Self-Assessment and Regulatory Compliance Review

Chapter 21 Right to Financial Privacy Act

Right to Financial Privacy Act Checklist............................................................................................. 21-i Overview ................................................................................................................................................ 21-1 Who Is Subject to the Act (12 USC 3401) ........................................................................................... 21-2 Who Is Protected (12 USC 3401(5))..................................................................................................... 21-3 What Is Protected (12 USC 3401(2)) ................................................................................................... 21-3 Conditions for Access ........................................................................................................................... 21-3 Methods Allowing Access to Customer Financial Records ............................................................. 21-3 Customer Authorizations (12 USC 3404) ........................................................................................ 21-4 Administrative Subpoena and Summons (12 USC 3405).......................................................... 21-5 Search Warrants (12 USC 3406)................................................................................................ 21-6 Judicial Subpoena (12 USC 3407)............................................................................................. 21-7 Formal Written Request (12 USC 3408).................................................................................... 21-8 Certification by Government Authority ........................................................................................... 21-9 Record Retention ................................................................................................................................ 21-10 Cost Reimbursements ......................................................................................................................... 21-10 Customer Challenges (12 CFR 3410) ................................................................................................ 21-11 Exceptions............................................................................................................................................ 21-12 Exceptions to Notice and Certification Requirements ................................................................... 21-13 Exceptions to Notice Requirements When Certification Is Required ............................................ 21-14 Delayed Notice Requirements........................................................................................................ 21-15 Exception in the Bank Secrecy Act ................................................................................................ 21-16 Civil Liability....................................................................................................................................... 21-16

Chapter 22 Consumer Protections for Sales of Insurance

Insurance Sales Checklist...................................................................................................................... 22-i Who Is Subject to the Rules (___.20)................................................................................................... 22-2 Activities Not Covered ..................................................................................................................... 22-3 Products Not Covered ...................................................................................................................... 22-3 Renewals of Existing Insurance ....................................................................................................... 22-4 Prohibited Practices (___.30) ............................................................................................................... 22-4 Required Disclosures (___.40).............................................................................................................. 22-6 Types of Disclosures Required......................................................................................................... 22-6 General Disclosure Requirement (___.40(a)) ............................................................................ 22-6 Additional Disclosure for Sales in Connection with Credit (___.40(b)) ................................... 22-7 Timing and Method of Disclosures (___.40(c)) ............................................................................... 22-7 Exception for Transactions by Mail........................................................................................... 22-8 Exception for Transactions by Telephone ................................................................................. 22-8 Transactions Involving Both Mail and Telephone..................................................................... 22-8 Electronic Disclosures ............................................................................................................... 22-8 Form and Content of Disclosures (___.40(c)(5) and (6))................................................................. 22-9 Consumer Acknowledgment of Disclosures (___.40(c)(7))........................................................... 22-10 Advertisements and Other Promotional Material for Insurance Products or Annuities (___.40(d)) ..................................................................................................................... 22-12 Where Insurance Activities May Take Place (___.50)..................................................................... 22-12

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Contents General Rule................................................................................................................................... Fees for Insurance Referrals........................................................................................................... Qualification and Licensing Requirements for Insurance Sales Personnel (___.60) .................... Consumer Grievance Process (___.70).............................................................................................. National Banks -- Impact of Rules on OCC Advisory 96-8 ........................................................... 22-12 22-12 22-13 22-13 22-14

Chapter 23 Servicemembers Civil Relief Act

Servicemember Civil Relief Act Checklist......................................................................................... 23-iii Overview ................................................................................................................................................ 23-1 Organization of the SCRA................................................................................................................ 23-1 Material Covered in This Chapter .................................................................................................... 23-3 Title I -- General Provisions ............................................................................................................... 23-4 "Servicemembers" Entitled to SCRA Protection ............................................................................. 23-4 Those in Active Military Status ................................................................................................. 23-4 Extension of Protections to Citizens Serving with Allied Forces .............................................. 23-5 Extension of SCRA Provisions to Reserves Ordered To Report for Military Service and to Persons Ordered To Report for Induction .......................................................... 23-5 Dependents................................................................................................................................. 23-6 Effect on Co-Borrowers and Guarantors ................................................................................... 23-6 Notification of Benefits .................................................................................................................... 23-6 Waiver of Rights Under a Written Agreement .......................................................................... 23-6 Waiver of Rights Pursuant to Written Agreement ..................................................................... 23-7 Exercising Rights Not To Affect Certain Future Transactions.................................................. 23-8 Legal Representatives....................................................................................................................... 23-9 Title II -- General Relief...................................................................................................................... 23-9 Default Judgment Protection ............................................................................................................ 23-9 Delay of Court and Administrative Proceedings.............................................................................. 23-9 Fines and Penalties on Contracts.................................................................................................... 23-10 Stay or Vacation of Execution of Judgments, Attachments, and Garnishments ............................ 23-10 Duration and Term of Stays; Co-Defendants Not in Service ......................................................... 23-11 Statute of Limitations; Redemption Periods................................................................................... 23-11 Maximum Rate of Interest on Loans (The "Six Percent Rule")..................................................... 23-11 Title III -- Rent, Installment Contracts, Mortgages, Liens, Assignment, Leases......................... 23-14 Eviction for Nonpayment of Rent .................................................................................................. 23-14 Protection Under Installment Contracts for Purchase or Lease...................................................... 23-15 Protection After Entering Military Service.............................................................................. 23-15 Penalties ................................................................................................................................... 23-15 Mortgages and Trust Deeds............................................................................................................ 23-16 Stay of Proceedings and Adjustment of Obligation................................................................. 23-16 Sale or Foreclosure .................................................................................................................. 23-16 Settlement of Stayed Cases Relating to Personal Property ............................................................ 23-17 Termination of Residential or Motor Vehicle Leases .................................................................... 23-17 Method of Termination ............................................................................................................ 23-18 Effective Date of Lease Termination ....................................................................................... 23-18 Arrearages and Other Obligations and Liabilities .......................................................................... 23-19 Rent Paid in Advance............................................................................................................... 23-19 Relief for Lessors..................................................................................................................... 23-19

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Self-Assessment and Regulatory Compliance Review Penalties ................................................................................................................................... Preservation of Other Remedies .............................................................................................. Protection of Life Insurance Policies ............................................................................................. Enforcement of Storage Liens ........................................................................................................ Extension of Protections to Dependents......................................................................................... Title IV -- Life Insurance .................................................................................................................. Title V -- Taxes and Public Lands.................................................................................................... Title VI -- Administrative Remedies ................................................................................................ Title VII -- Further Relief ................................................................................................................. Anticipatory Relief from Obligations............................................................................................. Stay of Enforcement of Real Estate Contracts......................................................................... Stay of Enforcement of Other Contracts.................................................................................. Effect of Stay on Fine or Penalty ................................................................................................... Power of Attorney if Missing in Action (MIA).............................................................................. Professional Liability Protection .................................................................................................... Health Insurance Reinstatement ..................................................................................................... Guarantee of Residency for Military Personnel ............................................................................. Business or Trade Obligations........................................................................................................ Consumer Credit Extended to Servicemembers and Dependents.................................................. "Covered Borrowers" Subject to Protection................................................................................... Identification of Covered Borrowers.............................................................................................. Covered Borrower Identification Statement ............................................................................ Format of Covered Borrower Identification Statement ........................................................... Verification of Covered Borrower Status....................................................................................... Conflict Between Covered Borrower Identification Statement and Verification........................... "Consumer Loans" Subject to Limitations..................................................................................... Payday Loans ........................................................................................................................... Vehicle Title Loans.................................................................................................................. Tax Refund Anticipation Loans............................................................................................... Exclusions................................................................................................................................ Military Annual Percentage Rate (MAPR) limitations .................................................................. MAPR Calculation................................................................................................................... General MAPR Requirements ................................................................................................. Maximum MAPR .................................................................................................................... Mandatory Loan Disclosures.......................................................................................................... Content of Disclosures............................................................................................................. Method of Disclosure -- Oral and Written.............................................................................. Written Disclosures ........................................................................................................... Oral Disclosures ................................................................................................................ Preemption of State Laws and Other Federal Laws ....................................................................... Additional Limitations on Loans to Covered Borrowers ............................................................... Penalties and Remedies .................................................................................................................. Servicemembers Civil Relief Act Protections Unaffected ............................................................. 23-19 23-19 23-20 23-20 23-21 23-21 23-22 23-22 23-23 23-23 23-23 23-24 23-25 23-25 23-25 23-25 23-26 23-26 23-26 23-27 23-27 23-28 23-28 23-29 23-29 23-30 23-31 23-31 23-31 23-32 23-32 23-32 23-33 23-34 23-34 23-34 23-35 23-35 23-35 23-36 23-36 23-38 23-38

Chapter 24 Regulation W: Affiliate Transaction Restrictions

Who Is an "Affiliate" ............................................................................................................................ 24-3 Exceptions.............................................................................................................................................. 24-6

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Contents SUBPART B -- General Provisions of Section 23A .......................................................................... 24-8 Restrictions on the Amount of "Covered Transactions" with an Affiliate ...................................... 24-8 The Maximum Amount of Covered Transactions any Single Affiliate ........................................... 24-9 Maximum Amount of Covered Transactions with All Affiliates................................................... 24-10 Safety and Soundness Requirement ............................................................................................... 24-10 Collateral Requirements for Certain Transactions with an Affiliate............................................. 24-10 Exception........................................................................................................................................ 24-12 Restrictions on the Purchase of Low-Quality Assets from an Affiliate.......................................... 24-13 Attribution Rule -- Other Transactions That Are Treated as Transactions an Affiliate (223.16)............................................................................................................................. 24-14 SUBPART C -- Valuation and Timing Principles Under Section 23A ......................................... 24-18 For Credit Transactions (223.21) ...................................................................................................... 24-18 Valuation ........................................................................................................................................ 24-18 Timing ............................................................................................................................................ 24-19 For Asset Purchases (223.22) ............................................................................................................. 24-20 Valuation ........................................................................................................................................ 24-20 Timing ............................................................................................................................................ 24-21 Purchases of and Investments in Securities Issued by an Affiliate (223.23) .................................. 24-22 Valuation ........................................................................................................................................ 24-22 Timing ............................................................................................................................................ 24-23 Extensions of Credit Secured by Affiliate Securities (223.24)......................................................... 24-23 Valuation ........................................................................................................................................ 24-23 SUBPART D -- Other Requirements Under Section 23A.............................................................. 24-25 Acquisition of an Affiliate That Becomes an Operating Subsidiary of the Bank After the Acquisition........................................................................................................................... 24-25 Valuation ........................................................................................................................................ 24-25 Exemption for Step Transactions ................................................................................................... 24-26 Rules Applicable to Financial Subsidiaries of a Bank (223.32) ...................................................... 24-27 Exemption from the 10 Percent Limit for Covered Transactions Between a Member Bank and a Single Financial Subsidiary (223.32(a)) ....................................................... 24-27 Valuation of Purchases of or Investments in the Securities of a Financial Subsidiary (223.32(b)).................................................................................................................... 24-27 Treatment of an Affiliate's Investments in, and Extensions of Credit to, a Financial Subsidiary of a Bank (226.32(c)).................................................................................... 24-29 Investments .............................................................................................................................. 24-29 Extensions of Credit That Are Treated as Regulatory Capital of the Financial Subsidiary................................................................................................................. 24-29 Other Extensions of Credit....................................................................................................... 24-29 Derivative Transactions (223.33) ....................................................................................................... 24-29 SUBPART E -- Exemptions from the Provisions of Section 23A .................................................. 24-30 Covered Transactions That Are Exempt from the Quantitative Limits and Collateral Requirements (223.41)...................................................................................................... 24-30 Covered Transactions That Are Exempt from the Quantitative Limits, Collateral Requirements, and Low-Quality Asset Prohibition (223.42) ........................................ 24-32 Additional Exemptions from the Requirements of Section 23A (223.43) ...................................... 24-37 SUBPART F -- General Provisions of Section 23B......................................................................... 24-38 Market Terms Requirement of Section 23B (223.51) ...................................................................... 24-38 Transactions Subject to Section 23b's Market Terms Requirement (223.52)............................... 24-38 Asset Purchases Prohibited by Section 23B (223.53) ....................................................................... 24-39 Fiduciary Purchases of Assets from an Affiliate ............................................................................ 24-39 Purchase of a Security Underwritten by an Affiliate...................................................................... 24-39 liii

Self-Assessment and Regulatory Compliance Review Advertisements and Statements Prohibited by Section 23B (223.54)............................................. Guarantees, Acceptances, Letters of Credit, and Cross-Affiliate Netting Arrangements Subject to Section 23A ........................................................................................... Other Exemptions from the Requirements of Section 23B (223.55)............................................... SUBPART G -- Application of Sections 23A and 23A to U.S. Branches and Agencies of Foreign Banks ................................................................................................................. Application of Sections 23A and 23B to U.S. Branches and Agencies of Foreign Banks (223.61)....................................................................................................................... SUBPART H -- Miscellaneous Interpretations ............................................................................... Application of Sections 23A and 23B to Transactions in Which a Bank Purchases from One Affiliate an Asset Relating to Another Affiliate (223.71) ............................................... 24-40 24-40 24-41 24-42 24-42 24-44 24-44

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