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Regulators release HELOC end-of-draw guidance

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WASHINGTON (7/2/14)--The National Credit Union Administration, along with other federal financial regulatory agencies and the Conference of State Bank Supervisors, issued guidance Tuesday regarding home equity lines of credit (HELOCs).

The guidance concerns HELOCs nearing the "end-of-draw" period, which is when the principal amount of the line of credit must begin to be repaid. The guidance encourages financial institutions to communicate with borrowers about the pending reset and provides principles for managing risk as HELOCs reach their end-of-draw periods.

These risk-management principles are:
  • Prudent underwriting for renewals, extensions, and rewrites;

  • Compliance with pertinent existing guidance, including but not limited to the Credit Risk Management Guidance for Home Equity Lending and the Interagency Guidelines for Real Estate Lending Policies;

  • Use of well-structured and sustainable modification terms;

  • Appropriate accounting, reporting, and disclosure of troubled debt restructurings; and

  • Appropriate segmentation and analysis of end-of-draw exposure in allowance for loan lease losses estimation processes.
As borrowers near their end-of-draw periods, many will continue to meet their obligation when their loan resets to an amortizing payment or reaches a balloon maturity; however some may find it difficult to make higher payments or to refinance their existing loans due to changes in their financial circumstances or declines in property values.

The guidance offers how financial institutions can understand and effectively manage potential exposures under these circumstances and descibes responses to HELOC borrowers unable to meet their contractual obligations. The appropriate accounting and reporting procedures for HELOCs nearing their end-of-draw periods are also discussed.

Use the resource link below for more information.

CUs among FIs with increased cybersecurity assessments

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ALEXANDRIA, Va. (7/2/14)--While data breaches at retailers have made headlines recently, financial institutions of all sizes are vulnerable to cyberattacks. With that in mind, the Federal Financial Institutions Examinations Council (FFIEC) has launched a pilot program to assess 500 financial institutions' supervisory policies and processes when it comes to cybersecurity.

The assessments will be used to develop a preliminary assessment of how community financial institutions manage cybersecurity, said National Credit Union Administration spokesman John Fairbanks. Credit unions represent about half of the institutions being examined. These credit unions range from small to very large asset sizes.

"This pilot is one of several FFIEC assessments that will ultimately benefit community financial institutions by assisting regulators in strengthening and standardizing our supervisory programs and being responsive to industry requests for supervisory guidance," Fairbanks said. "The assessments under the FFIEC pilot program are being done during the normal exam cycle using existing rules and regulations."

Should the assessments lead the NCUA to identify policies and procedures that do not meet legal requirements or supervisory expectation, the institution will be notified and concerns will be handled as they would normally be during a standard exam.

In announcing the pilot program in May, the FFIEC said its members want to provide additional support to community banks, which may not have access to the resources available to larger institutions.

NCUA Chair Debbie Matz recalled one incident in her February address at the Credit Union National Association's Governmental Affairs Conference in which hackers broke into a medium-sized credit union and used that credit union's passwords to access a large credit bureau, allowing them to steal credit reports from hundreds of consumers.

"These attacks are like poison-tipped darts. Where they hit doesn't matter. Once that poison hits your bloodstream, it moves quickly through the system," she said.

The FFIEC, which in addition to the NCUA counts as its members the Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Federal Deposit Insurance Corp., Federal Reserve Board and a liaison committee of state regulators, has said that the pilot program will not result in any new examination rating.

Treasury reaches largest ever sanctions-related settlement

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WASHINGTON (7/2/14)--The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has announced its largest settlement to date--a $963 million agreement with BNP Paribas SA (BNPP) to settle its potential liability for apparent violations of U.S. sanctions regulations.

In an announcement of this week's settlement, Treasury said the agreement resolves an investigation into BNPP's "systemic practice of concealing, removing, omitting, or obscuring references to information about U.S.-sanctioned parties in 3,897 financial and trade transactions routed to or through banks in the United States between 2005 and 2012" in apparent violation of a series of regulations.

"Today's settlement is OFAC's largest-ever and reaffirms OFAC's determination to aggressively enforce U.S. sanctions rules and regulations," said OFAC Director Adam J. Szubin in a release.  "The settlement is the result of an interagency effort to investigate institutions that abuse the U.S. financial system and undermine U.S. sanctions programs. OFAC will continue to coordinate these efforts with other federal and state agencies in order to protect the U.S. financial infrastructure from the risks inherent in this type of illicit activity."

Under the settlement agreement, BNPP is required to put in place and maintain policies and procedures to minimize the risk of the recurrence of such conduct in the future.

Use the resource link to read the Treasury's announcement.

Court halts collection of allegedly fake payday debts

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WASHINGTON (7/2/14)--A U.S. District Court ruling has halted a Georgia-based operation from attempting to collect $3.5 million in phantom payday debts. The ruling was handed down at the request of the Federal Trade Commission (FTC), who charged that John Williams and two companies he controls used deception and threats to collect payday loan debts that consumers did not owe.

The FTC claims that Williams, a resident of Norcross, Ga.; Williams, Scott & Associates LLC; and WSA LLC falsely claimed to be affiliated with federal and state agents, investigators and members of a government fraud task force, as well as pretended to be a law firm. The defendants allegedly told consumers their drivers' licenses were going to be revoked, and that they were criminals facing imminent arrest and imprisonment.

In addition, the FTC alleges many consumers contacted by the defendants had previously submitted contact information while inquiring about a payday loan online, information that was later used by the defendants.

"Many consumers in this case were victimized twice," said Jessica Rich, director of the FTC's Bureau of Consumer Protection. "First when they inquired about payday loans online and their personal information was not properly safeguarded, and later, when they were harassed and intimidated by these defendants, to whom they didn't owe any money."

The FTC alleged that the defendants violated the Federal Trade Commission Act and the Fair Debt Collection Practices Act by telling consumers' family members, employers and co-workers about the debt; failing to identify themselves as debt collectors; using profanity; making repeated inconvenient or prohibited calls; failing to provide information in writing about the debt; and making unauthorized withdrawals from consumers' bank accounts.

The court had previously ordered the defendants' assets frozen to preserve the possibility that they could be used to provide redress to consumers, and appointed a receiver.