Compliance Center: CFPB Proposed Temporarily Suspending Credit Card Agreement Submissions

The Consumer Financial Protection Bureau (CFPB) has issued a proposed rule that would temporarily suspend the requirement for credit card issues with more than 10,000 credit card accounts send their agreements to the Bureau each quarter.

Credit card issuers’ submissions that would otherwise be due to the bureau by April 30, July 31 and Oct. 31 of 2015, and Jan. 31, 2016, would be suspended. Issuers would resume submitting credit card agreements on a quarterly basis starting April 30, 2016.

During the time period of the suspension the CFPB intends to develop an automated electronic submission system, meant to be easier than the current manual submission system.

The Credit Cards Act required credit card issuers to post consumer agreements on their websites, as well as submit them to the CFPB. The bureau maintains a public database on its website.

The CFPB is accepting comments on whether the one-year period should start as soon as a final rule is published in the Federal Register, or whether a later effective date is more appropriate. Comments are due by March 13.

Compliance Question of the Week

Is there a requirement that the credit union match the names on a tax refund received through direct deposit to the name(s) on the account?

NACHA does not require financial institutions to match names on incoming ACHs. It is important that credit unions do not try to change the intended destination if they do discover the names don’t match, because this could put them on the hook for any losses associated with the transaction. However, if the credit union becomes aware of a situation where a tax return has gone to the wrong account, they should try to return the funds to the IRS if they are still available.

FinCEN has released some guidance that can help financial institutions detect tax return fraud. FinCEN recognizes that there is a growing issue of tax refund scams that often are a result of identity theft. FinCEN put together a list of red flags that credit unions should carefully review to determine if any of their account holders might actually be attempting to commit fraud.

Red Flags:

  • Multiple direct deposit tax refund payments, directed to different individuals, from the United States Department of the Treasury (Treasury) or state or local revenue offices are made to a demand deposit or prepaid access account held in the name of a single accountholder.
  • Suspicious or authorized account opening at a depository institution, on behalf of individuals who are not present, with the absent individuals being accorded signatory authority over the account. The subsequent deposits are comprised solely of tax refund payments. This activity often occurs with fraudulent returns for the elderly, minors, prisoners, the disabled, or recently deceased.
  • A single individual opening multiple prepaid card accounts in different names, using valid TINs for each of the supplied names and having the cards mailed to the same address. Shortly after card activation, Automated Clearing House (ACH) credit(s) from Treasury, state or local revenue offices, representing tax refunds, occur. This is followed quickly by ATM cash withdrawals and/or point-of-sale purchases.
  • Business accountholders processing third-party tax refund checks in a manner inconsistent with their stated business model or at a volume inconsistent with expected activity. Similarly, individuals processing third-party tax refund checks through a personal account with no business or apparent lawful purpose.
  • Business accountholders processing third-party tax refund checks and conducting transactions inconsistent with normal business practices, which may include:
    • A large volume of Treasury refund checks or bank checks being deposited, in contrast to other checks, such as payroll checks;
    • A large volume of refund checks bearing addresses of customers who reside in another state;
    • Multiple refund checks for the same or almost the same dollar amount;
    • Treasury refund checks or bank checks representing electronic refunds with sequential or close to sequential numbers;
    • The dollar amount of checks being deposited is not commensurate with the amount of currency being withdrawn to cover the cashing of these refund checks.
  • Multiple prepaid cards that are associated with 1) the same physical address [individuals involved in criminal activity may also contact the customer service department requesting to change their address for their permanent prepaid card shortly after opening their temporary prepaid card account on-line]; 2) the same telephone number; 3) the same e-mail address; or 4) the same Internet Protocol (IP) address, which receive tax refunds as the primary or sole source of funds.
  • The opening of a business account for a check cashing business at a financial institution, which subsequently processed a high volume of tax refund checks issued to individuals from other states.
  • A sudden increase in volume involving the cashing of tax refund checks issued to individuals from across the United States, moving through the account of an existing check cashing service.
  • Individuals using bank accounts where the majority of the transactions are ACH federal tax refunds or refund anticipation loans.
  • Individuals attempting to negotiate double endorsed Treasury tax refund checks with questionable identification.
  • Individuals accompanying multiple parties to the bank to negotiate Treasury tax refund checks. Such items may or may not be double endorsed checks.
  • The freezing or closure of a personal or business account due to suspicious activity involving either Treasury tax refund checks or ACH Treasury deposits.
  • The signature/endorsement on the back of the check(s) does not match the identification of the individual conducting the transaction.
  • The same signature/endorsement is used on multiple checks, with multiple names.
  • Employees of financial institutions may also facilitate tax refund fraud by conducting transactions inconsistent with normal activity through the following practices:
  • Tellers who regularly process large quantities of Treasury tax refund checks. This may include one or more tellers during a specific time frame.
  • Bank employees who open multiple bank accounts that received a large quantity of Treasury tax refund checks.
  • Bank employees who did not follow proper identification procedures or accepted apparent fraudulent identification when opening an account.

Additionally, if a credit union does suspect tax return fraud, they should look to FinCEN’s guidance on how to prepare a SAR (link below).

Resources

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA, along with the other financial regulators, issued guidance to encourage financial institutions to offer youth savings programs.

The NCUA announced that credit union loan growth in 2014 was at a nine-year high by year end, as indicated by Call Report data for the fourth quarter of 2014.

The NCUA announced that registration via Livestream for the Open Board Meeting on March 19th is now available.

The NCUA announced that it will hold a free webinar on Wednesday, March 25th on field of membership expansion. Credit unions can register for the webinar here.

NCUA Chairman Debbie Matz delivered a speech at CUNA’s GAC and stated that she is committed to making 2015 the “year of regulatory relief.”

Consumer Financial Protection Bureau (CFPB)

CFPB Director Cordray delivered written testimony to the House Committee on Financial Services on the Bureau’s sixth Semi-Annual Report to the Congress.

CFPB Director Cordray delivered prepared remarks at the President’s Advisory Council regarding financial aid and managing college costs. 

Federal Housing Finance Agency (FHFA)

The FHFA announced new enhanced requirements for Freddie Mac and Fannie Mae sales of non-performing loans.

Federal Reserve Bank (FRB)

The FRB has posted the G.5 Monthly Foreign Exchange Rates.

The March edition of the FRB’s Beige Book is now available.

The FRB released the 2014 Annual Report by the Federal Open Market Committee. 

The FRB announced that support for Internet Explorer 8 will be discontinued after April 15, 2015, for users of FedLine Web and FedLine Advantage. 

The March issue of Fedfocus is now available.

The FRB released a statement on the results of the 2015 Dodd-Frank Stress Test.

The FRB has posted the G.19 Consumer Credit Report.

U.S. Department of the Treasury (Treasury)

Treasury Secretary Lew delivered testimony to the Senate Appropriations Subcommittee on Financial Services and General Government. The testimony was in regards to the Treasury’s Fiscal Year 2016 Budget.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of March 9, 2015. The last update prior to this was February 26, 2015.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance.