AML AND COMPLIANCE NEWS  |  July 15, 2021

Per the Consumer Compliance Supervisory Highlights publication issued by the Federal Deposit Insurance Corporation (FDIC) for March 2021, there are approximately 3,200 state-chartered banks and thrifts supervised by the FDIC, and of those, about 1,000 were examined for consumer compliance. Per the publication, the FDIC stated overall, supervised institutions were demonstrating effective management of consumer compliance responsibilities. As of Dec. 31, 2020, 99% of all FDIC-supervised institutions were rated satisfactory or better for consumer compliance (meaning a rating of either 1 or 2) and Community Reinvestment Act (CRA) compliance.

The FDIC also outlined the five most frequently cited Level 2 or Level 3 violations noted in 2020 examinations. Seventy-four percent of total violations involved the Truth-in-Lending Act (TILA), Truth in Savings Act (TISA), Flood Disaster Protection Act (FDPA), Electronic Funds Transfer Act (EFTA), and the Real Estate Settlement Procedures Act (RESPA). It was noted that the FDIC uses a risk-focused approach to examinations, and therefore, the most frequently cited violations relate to those regulations that represent the greatest risk of consumer harm. Due to the potential for harm, the FDIC stated these areas generally represent the center of focus for consumer compliance examiners.

In 2020, there were eight formal enforcement actions issued and 16 informal enforcement actions to address areas of consumer compliance examination findings. There were civil money penalties (CMPs) of $63,466 related to violations of the FDPA, and voluntary payments of about $7.4 million to more than 67,000 consumers.

The most prevalent violations noted by the FDIC were:

• RESPA violations involving payment of illegal kickbacks, disguised as legitimate payments for lead generation, marketing services, and office space or desk rentals.
• TILA-RESPA Integrated Disclosure (TRID) violations noted concerns with Veteran Affairs (VA) loans where institutions did not comply with the “best information reasonably available” and due diligence standards under TRID by issuing loan estimates based on unavailable terms or rates. In addition, there were instances in which certain terms presented were not generally available.
• One fair lending violation was referred to the Department of Justice (DOJ) for an institution issuing unsecured loans through a third party. The underwriting criteria were found to include prohibited bases of age and receipt of public income. In other cases, the FDIC found fair lending issues arose from the use of third-party credit-scoring models. Another case was sent to the DOJ, due to the institution's policy that provided different pricing for married joint applicants than for unmarried joint applicants, stemming from the way the credit scores were accounted for, for married versus unmarried joint applicants.

The full publication issued by the FDIC can be found here.