Returning to Normal – (One Step at a Time)

As COVID-19 became a pandemic, the economic impact grew with the virus. Unemployment rates were once again at record highs and businesses had to adapt to new health guidelines to maintain business continuity. To help both businesses and consumers during this troubling time, the United States government issued the CARES Act and many other regulatory changes. This included the introduction of Paycheck Protection Program (PPP) loans and removed excessive transaction requirements for savings accounts under Regulation D. Aside from these major changes, there were many slight regulatory changes. As the fully vaccinated population continues to grow in the United States, and we get closer to returning to our “pre-pandemic” lifestyles, the Consumer Financial Protection Bureau (CFPB) is rescinding a handful of regulations that were implemented during the pandemic. This is because the CFPB no longer finds these flexibilities to be necessary to financial institutions at the expense of consumer protections. The rescinded policies are listed at the link here:

Although many of the flexibilities that were issued in response to the pandemic are slowly being removed, there are a few changes that are not. Among the extended or permanent change, first, the Regulation D changes removing excessive transactions have not been rescinded. As a matter of fact, the Federal Reserve has indicated that this change is intended to be a permanent change. 

  • Are the recent amendments to Regulation D temporary or permanent?
    On April 24, 2020, the Board of Governors issued an interim final rule amending its Regulation D to delete the six-per-month limit on convenient transfers from “savings deposits.” The underlying reason enabling the changes in Regulation D is the FOMC’s choice of monetary policy framework of an ample reserve regime. In such a regime, reserve requirements are not needed. As a result, the distinction made by the transfer limit between reservable and non-reservable accounts is also not necessary. The Committee’s choice of a monetary policy framework is not a short-term choice. The Board does not have plans to re-impose transfer limits but may make adjustments to the definition of savings accounts in response to comments received on the Board’s interim final rule and, in the future, if conditions warrant.

This means that the banks can still determine whether it would like to continue monitoring savings accounts for excessive transactions. Charging fees for excessive transactions would also be at the bank’s discretion. 

Additionally, the Regulation O modification that PPP loans to insiders would continue to be exempt from most of the Regulation O provisions for loans made before March 31, 2022. Therefore, aside from §215.5, PPP loans are not considered an “extension of credit” under Regulation O and do not count toward the insiders’ lending limits. 

As the world returns to its “pre-pandemic” state, there may be continuing regulatory transitions and Compliance Alliance will continue to update and provide guidance on the regulatory landscape as it happens. Until then, it is important that the banks readjust their policies and procedures as the recently rescinded policy statements would no longer be applicable.