February 15, 2018
In This Issue
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InfoSight Highlight: Customer Due Diligence and Beneficial Ownership

Although compliance with the final rule isn't required until May 11, 2018, credit unions have had since May 11, 2016 to begin their compliance with the amendments to the Bank Secrecy Act that relate to these four core elements:
  1. Identification and verification of customers;
  2. Identification and verification of beneficial owners of legal entity customers, subject to certain exceptions;
  3. Development of a customer risk profile through an understanding of the nature and purpose of the customer relationship, and
  4. Ongoing monitoring for reporting suspicious activity, and on a risk basis, maintaining and updating customer information.
Several of these elements are part of the existing customer identification program (CIP) rules, with others implied through suspicious activity reporting (SAR) requirements.  The beneficial ownership identification requirement is new and not part of any existing rule.

Bureau adds HMDA LAR tool and updates resources  

The CFPB has updated its  Resources for HMDA filers  page, adding a  2018 LAR Formatting Tool , and making minor updates to the  2018 Filing Instructions . The 2018 LAR Formatting Tool is designed to assist financial institutions create an electronic file that can be submitted to the HMDA platform. It can be used for data collected in 2018 and reported next year.

The Bureau also updated its  Reportable HMDA Data: A regulatory and reporting overview reference chart . If you previously downloaded the 2018 Filing Instructions and/or the reference chart, we recommend you replace them with the newer versions.

Source:  CFPB
Indirect Lending under the Military Lending Act  
The Department of Defense's December guidance on the Military Lending Act (MLA) has impacted several credit union services, and a recent CUNA CompBlog post examines  its effect on indirect dealer lending programs. The post discusses what loans must be in compliance with the MLA rule, and steps credit unions involved in indirect lending should take.
Depending on what is financed, a creditor may find a portion of its loans are exempt from the MLA, while the remainder will require compliance.
Loans that don't finance GAP or credit insurance and that don't provide additional cash-out financing that is unrelated to the vehicle's purchase, are still exempt from the MLA rule.
However, a loan that finances GAP or credit insurance, or provides additional cash out financing that is unrelated to the vehicle's purchase, will lose its exemption and the creditor must comply with the MLA rule requirements.
Credit unions involved in indirect dealer programs should:
  • Make sure the automobile dealer can check the active duty status of the servicemember through either of the two safe harbor methods-checking the DoD's database directly through the Defense Manpower Data Center or through a nationwide credit reporting agency;
  • Make sure the dealer has MLA compliant loan documents, policies, and procedures;
  • Make sure the dealer can calculate the military APR for the loan prior to consummation;
  • Once a specific dealer is fully able to comply, audit that auto dealer's compliance efforts on a routine basis to insure continued compliance;
  • If the automobile dealer is currently unable to fully comply with the MLA Rule's requirements, a credit union should consider closing covered loans in-house, that sell GAP or credit insurance, until the dealer is capable of fully complying with the MLA rule; and
  • Consider asking your legal counsel to review your indirect lending agreement and revising it in light of these new issues.
The blog post also addresses confusion stemming from one question in the DOD's guidance, a question CUNA has requested the DOD remove due to confusion it is causing for credit unions and other lenders.
Source:  CUNA News
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