Revised Interagency Q&As on Flood Insurance

Five federal agencies — the Federal Reserve Board, Farm Credit Administration, FDIC, NCUA, and OCC recently announced jointly issued questions and answers regarding flood insurance on federal flood insurance law and the agencies’ implementing regulations. These Q&As replace those originally published by the agencies in 2009 and 2011 and consolidate Q&As proposed by the agencies in 2020 and 2021. The revised Q&As reflect significant changes to the flood insurance requirements made by federal law in recent years.

The Q&As cover a broad range of technical flood insurance topics, including the escrow of flood insurance premiums, the detached structure exemption to the flood insurance purchase requirement, force placement procedures, and private flood insurance. In addition, the agencies reorganized the Q&As by topic to make it easier for users to find and review information related to flood insurance.

Question of the Week

Q: Can a credit union use directly deposited Social Security and SSI benefits to offset overdrafts and overdraft fees? 

A: Yes and no.

Under 42 U.S. C. § 407, a recipient of Social Security is protected against the attachment of those funds. There have been several lawsuits on this topic with varying outcomes. However, the underlying message in the court decisions is that a financial institution may not exercise its right to offset a delinquent loan or account if the funds are from Social Security or are SSI. The one caveat is that if the funds are directly deposited to an account that is overdrawn at the time of the direct deposit, and the member had a reasonable ability to direct the funds elsewhere if they chose to do so — this isn’t considered a prohibited offset. Notably, in Lopez v. Washington Mutual, the court upheld the financial institution’s right to use Social Security funds to bring a negative account positive. However, it is important to note that the reasons for ruling in Washington Mutual’s favor, in this case, had to do with proper disclosures regarding the institution’s overdraft practices and the fact that the Social Security funds were directly deposited to the overdrawn account in question.

Related Links

42 USC 407
Lopez v. Washington Mutual 

Compliance Alerts 

Consumer Financial Protection Bureau

Action to Protect Depositors from False Claims About FDIC Insurance: The Bureau released an enforcement memorandum that addresses prohibited practices on claims about Federal Deposit Insurance Corporation (FDIC) insurance. Specifically, firms cannot misuse the name or logo of the FDIC or make deceptive representations about deposit insurance. The issue has taken on renewed importance with the emergence of financial technologies — such as crypto assets, including stablecoins — and the risks posed to consumers if they are lured to these or other financial products or services through misrepresentations or false advertising.

Interpretive Rule Seeks to Bolster Enforcement Efforts by States: The Bureau issued an interpretive rule that describes states’ authorities to pursue lawbreaking companies and individuals that violate the provisions of federal consumer financial protection law. Because of the crucial role states play in protecting consumers, the Consumer Financial Protection Act grants their consumer protection enforcers the authority to protect their citizens and otherwise pursue lawbreakers.

Office of Foreign Assets Control

Notice of OFAC Sanctions Actions: The U.S. Department of the Treasury’s Office of Foreign Assets Control is publishing the names of one entity that has been placed on OFAC’s Specially Designated Nationals and Blocked Persons List based on OFAC’s determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of this entity are blocked, and U.S. persons are generally prohibited from engaging in transactions with it. Additionally, OFAC is publishing updates to the identifying information of one entity currently included on the SDN List. All property and interests in property subject to U.S. jurisdiction of this entity remain blocked, and U.S. persons are generally prohibited from engaging in transactions with it.

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

Posted in Compliance News, Compliance News, Compliance Question.