January 2021 Newsletters

Round 2: Economic Impact Payments

On December 29, 2020, the Internal Revenue Service and the Treasury Department began delivering the second round of Economic Impact Payments (EIP 2) as part of the newly enacted Coronavirus Response and Relief Supplemental Appropriations Act of 2021.  This second round of payments is generally $600 for singles and $1,200 for married couples filing a joint return.  Those with qualifying children will already receive $600 for each qualifying child.  Just like the prior round, payments are automatic for eligible taxpayers who filed a 2019 tax return, those who receive Social Security retirement, survivor, or disability benefits (SSDI), Railroad Retirement benefits, as well as Supplemental Security Income (SSI) and Veterans Affairs beneficiaries who did not file tax returns.  Additionally, joint returns of couples where only one member of the couple has a Social Security number can now be eligible for a payment (work-eligible SSNs).  Incarcerated individuals are also likely eligible for the EIP 2. 

The IRS has made it clear that no action is required by eligible individuals to receive the EIP 2.  People can check the status of both their first and second payments by using the Get My Payment tool on IRS.gov. Again, like the prior round, most recipients will receive these payments via direct deposit ACH deposits, paper checks as well as debit cards.  The EIP 2 payment card is sponsored by the Treasury Department’s Bureau of the Fiscal Service and issued by its financial agent, MetaBank, N.A.  The Treasury Check Verification Application (TCVA) is available to financial institutions as well to assist in the prevention of fraud. That can be found here: TCVA and U.S. Treasury Check Security Features

C/A has put together the Top 5 questions regarding EIP 2:

  1. Offset/Right of Set-Off—The EIP 2 are not subject to offset through the Treasury Offset Program. If financial institutions are considering this, it is best to consult with counsel prior to exercising a right of set-off. Reference: EIP Operational FAQs for Financial Institutions 4.1
  2. Garnishment—The EIP 2 are exempt from garnishment and do not support bank garnishment or levy by private creditors or debt collectors. EIP 2s are treated in the same manner as Federal benefit payments that are also exempt from garnishment. Reference: EIP Operational FAQs for Financial Institutions 4.2
  3. Closed or Inactive Accounts—If an account is closed or no longer active, by law, the financial institution must return the payment to the Treasury using the normal processes for returning payments sent to closed accounts. Reference: EIP Operational FAQs for Financial Institutions 2.2
  4. Overdraft Fees—At this time, it remains unclear whether financial institutions are allowed to take out overdraft or other fees with the EIP 2. Some of the larger institutions (JPMorgan, Bank of America, Wells Fargo) are granting overdraft relief as EIP 2 comes in, pausing collection on negative balances or offering temporary credits to customers who have overdrawn accounts. Other institutions are not considering zeroing out accounts or are looking at it from a case-by-case basis. 
  5. Deceased Recipient—Unless the account is closed, the bank should generally post the funds in accordance with the payment instructions. EIP recipients are responsible for returning to the IRS a payment made to someone who may not be eligible. Reference: EIP Operational FAQs for Financial Institutions 2.6

This continues to raise a lot of questions for financial institutions, both from a processing and collections standpoint, as well as trying to assist your customers during these difficult times. The Fed has released their AskTheFed Webinar addressing these concerns, and as always C/A’s Hotline is standing by to assist. 

Inoculate Your SAR Filings From COVID-19 Vaccine Scams

Scams come in all shapes and sizes.  Sometimes scams give themselves away because they are poorly worded and badly formatted, which allows many to easily spot them as scams. Other times, however, scams can be very sophisticated and can fool even those who work in the tech industry or are looking for scams. In short, anyone can fall for a scam of one type or another.  

Sadly, nearly any time something newsworthy happens, you can just about bet there will be a scam soon to follow. For example, COVID-19 has dominated the news headlines for almost an entire year with multiple scams popping up; the latest being e-mail and text message scams related to the vaccine. These are not the first vaccine scams we’ve seen, as vaccine scams have sort of been making their way around for a while, but we’re really starting to see the first wave of scams after the vaccine has been made publicly available. These scams commonly include information about being getting on a waiting list for early access to the vaccine, requests for payment for the vaccine to be shipped directly to the victim, and various advertisements attempting to have the victim input their information in order to be updated with the latest vaccine availability. Scams largely work by trying to create urgency and there’s nothing so urgent as health and safety.

Because of the increase in vaccine-related scams, FinCEN has published guidance about specific ways to file SARs related to these vaccine scams. As a general guideline, in order to effectively respond to and combat fraud schemes, law enforcement and FinCEN require as quickly as possible the full details related to SAR filings, including supporting documentation. Due to the extent of COVID-19 related scams, FinCEN and law enforcement are working even more quickly than normal to combat COVID-19 related scams. 

In addition to the general guidance, FinCEN specifically requests that banks reference “FIN-2020-NTC4” in Item 2, when filing vaccine-related SARs. Item 2 is a 50-character field provided for banks to alert FinCEN that the SAR is being filed in response to a specific notice or advisory. FinCEN also requests that “FIN-2020-NTC4” be included in the narrative portion of the SAR to indicate a connection between the suspicious activity being reported and the activities highlighted in notice FIN-2020-NTC4. 

Additionally, FinCEN also specifically requests that banks select Item 34 option “z. Other (specify type of suspicious activity in the space provided),” to indicate a connection between the suspicious activity being reported and COVID-19. Banks should include the name of the scam (e.g., vaccine scam) in Item 34(z). 

FinCEN further requests that banks detail the reported activity in the SAR narrative. If the activity is suspected of being a scam, banks should provide details (if known) about how the scammers contacted the victim, how the victim provided or attempted to provide payment related to the scammer, and any other pertinent details such as ip-addresses and phone numbers involved in the scam. Likewise, the Justice Department also urges the public to report suspected COVID-19 related scams to the National Center for Disaster Fraud at 1-866-720-5721.  

New Year, New Thresholds

Living in a volatile regulatory climate, we cannot not forget the best way to surf the wave of change is to stay on the board. A new calendar gives us the chance to reset our footing. It also brings us updated thresholds for various regulatory requirements. As you finalize your new year business plans, please make sure that your policies and procedures have been updated to take the new thresholds into account.

Reg. Z exemption threshold
For those loans not secured by real property or personal property used as a principal dwelling, or private education loans, Section 1026.3(1) establishes a threshold limit for covered loans. While this threshold is evaluated annually, it remains at $58,300 for 2021.

Small Creditor
One of the exception categories that comes up often is that of the Small Creditor. The asset size threshold for 2021 increased to $2.23 billion, up from $2.202 billion in 2020.

High Price Mortgage Loans
The Truth in Lending Act establishes special appraisal requirements for “higher-priced mortgage loans” or “HPMLs.” The exemption threshold increased from $26,700 to $27,200, effective January 1, 2020. Of course, the Small Creditor exception discussed above also impacts whether the bank must escrow for an HPML as well.

HOEPA Thresholds
To determine whether a transaction is a high-cost mortgage, a creditor must exam the points and fees it is charging. Based on the loan balance, the regulation sets a limit to the points and fees. Reflecting an increase in the Consumer Price Index, the new formula is:

  • 5 percent of the total loan amount for a transaction with a loan amount of $22,052or more; or
  • The lesser of 8 percent of the total loan amount or $1,103 for a transaction with a loan amount of less than $22,052.

QM Points and Fees Limits
Points and fees also come up in the context of the Qualified Mortgage. For qualified mortgages, which provide creditors with certain protections from liability under the Ability-to-Repay Rule, the maximum thresholds for total points and fees in 2021 will be:

  • 3% of the total loan amount for loans greater than or equal to $110,260;
  • $3,308 for loans greater than or equal to $66,156 but less than $110,260;
  • 5% of the total loan amount for loans greater than or equal to $22,052 but less than $66,156;
  • $1,103 for loans greater than or equal to $13,783 but less than $22,052; and
  • 8% of the total loan amount for loans less than $13,783

Compliance Alliance helps you adapt to the ever-changing regulatory landscape with the best and most practical tools on the market. We’ve updated our tools to reflect the thresholds discussed above. 2020 threw a lot our way very rapidly, as will 2021. While PPP is top-of-mind right now, and you can find many helpful tools on our site, be sure to also check out our Safety and Soundness Incoming Information Assessment, which will help you are surf the wave of change in 2021 and not being buried under it.

Updates to the HPML Escrow Exemption

Along with the flood regulations, High Priced Mortgage Loans are the only time that the regulations require a bank to escrow for a loan. Minus the list of exemptions, the flood regulations require escrow for flood insurance premiums but the HPML escrow requirement is the one time that the regulation requires the bank to escrow taxes and hazard insurance. Of course, there are exemptions to the escrow requirements for HPMLs as well. These exemptions have been updated with the issuance of this final rule.

The final rule regarding HPML Escrow exemption modifies the current requirements to the HPML escrow rules. §1026.35(b)(2)(vi) is changing so that escrow would not be required if: (1) the institution has assets of $10 billion or less; (2) the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year, and (3) certain of the existing HPML escrow exemption criteria are met. 

The Regulation Z exemption criteria that the statute includes in the new exemption are: (1) the requirement that the creditor extend credit in a rural or underserved area (§1026.35(b)(2)(iii)(A)); (2) the exclusion from exemption eligibility of transactions involving forward purchase commitments (§ 1026.35(b)(2)(v)); and (3) the prerequisite that the institution and its affiliates not maintain an escrow account other than either (a) those established for HPMLs at a time when the creditor may have been required by the HPML escrow rule to do so, or (b) those established after consummation as an accommodation to distressed consumers (§ 1026.35(b)(2)(iii)(D)). This part of the rule has been adjusted in the final rule to be 120 days from the effective date to qualify for the exception instead of the 90 days that was suggested in the proposed rule. This would allow small institutions that often lack the resources to adjust to new compliance requirements quickly extra time to comply with the final rule. 

Ultimately, the changes to the HPML escrow exemptions are becoming a bit broader and easier to qualify for than the exemption that exists currently under § 1026.35(b)(2)(iii). The total asset threshold to qualify for the exemption is increasing from $2 billion to $10 billion. Additionally, with the change in dates for when the bank made a HPML loan with escrow is also changing from May 1, 2016 to 120 days from the rule’s effective date which would help many more banks qualify for the exemption. Even if your bank does not qualify under these revised exemptions, we are here to help you continue escrowing for these high-priced mortgage loans. We also have some tools that would help you in this process – you can find the C/A Escrow Account Procedures here and the C/A Escrow Account Cheat Sheet here .