FED Top Violations - Part 1
By David Dickinson
Recently, our local compliance peer group met with a Kansas City FRB Examiner. She informed us of the Kansas City Regions' top violations. This information was gathered from 55 bank reviews from January 2008 until May 2009. Here are my notes from this meeting:
#1. - GMI collection: Over and under collection is always in the top 10. Often Loan Officers collect Ethnicity and sex, but not race or race and sex, but not ethnicity. You must get all 3.
#2. - Reg B - Joint Intent: Especially business loans where one spouse is not an officer. Missing it particularly on renewals and extension. Examiners are interviewing Loan Officers. The examiners are OK with Loan Officers simply documenting in the file (it doesn't have to be completed by applicant - check boxes).
#3. - Reg B - Adverse Action Notice errors. Mostly due to the regulator's address because of the recent change. This is nit picky. Make sure you have the right reasons and they are accurate. This can lead to a file search of 6 months.
#4. - HMDA Errors: loan purpose, loan amount, GMI, income and rate spread. Best practices - use data input sheets, 2nd reviews & training, training, training!
#5. - FACTA Credit Score Disclosure. Failure to provide disclosure. If you're not using the score, turn it off. Have the disclosure automatically generated by the credit bureau, if possible.
The most common violations aren't necessarily the most serious. Watch for the more substantive violations (computational errors, fair lending, Civil Money Penalty risks, reputational risks, etc.)
Don't forget to look at previously noted violations. What did you do to identify the root cause and what corrective actions did you take?
I'll post #6-10 in a future blog.