Topic: Examinations
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Our FDIC examiners looked at our fee schedule, which includes a charge for overdrafts that are not resolved (“continuous overdrafts”). The examiners told us to add a disclosure to the fee schedule stating that we may assess a fee for a “continuous overdraft” caused by a bank fee. We were thinking about adding a line stating that continuous overdrafts would “include OD as a result from bank charges.” Does the FDIC have any guidance on how to phrase this disclosure?
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We are not aware of any rule or guidance that specifies how to disclose the fact that bank fees may cause continuous overdrafts which will incur separate overdraft fees. If your disclosure is clear and not misleading, we believe it should be sufficient as it relates to the wording of the disclosure. In our view,…
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An examiner recently told us that we should not pay more than a 10% bonus to an employee who holds a NMLS license. Does that apply to our bonuses? We set aside a pool at the beginning of the year for all employee bonuses, and the amount of the bonus pool is not based on the bank’s profits.
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If your bank’s bonus pool is not based in any way on the bank’s profitability, then bonuses paid out of that pool may qualify for an exemption from the 10% limitation on loan originator bonuses. Regulation Z does limit bonuses paid to individuals who qualify as “loan originators” when the bonuses are “based in whole…
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Our FDIC examiners have cited us for having a rider on our Directors and Officers (D&O) insurance policy to cover any civil money penalties (CMPs) that are assessed against a director personally. But our insurance provider thinks that the CMP rider is permissible, as the directors pay for the riders individually. What do you think?
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Since last year, the FDIC has begun citing banks in exams for maintaining D&O policy endorsements that indemnify directors for CMPs, even when the directors pay for this coverage. The American Association of Bank Directors (AABD) wrote to the FDIC earlier this year questioning these citations and the FDIC’s interpretation of the law on which…
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How many years of compliance examination reports do you have to keep or recommend keeping?
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We believe it is a best practice to save compliance examination reports permanently.
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If a bank received notice from the FDIC that it did not comply with Truth in Lending Act disclosure requirements but the finance charge was overstated and annual percentage rate was within tolerances, how should the bank rebut the notice?
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If the finance charge was overstated in the original disclosure, then the disclosure should be considered accurate under the TILA regulations. 12 CFR 1026.18(d)(1)(ii). Your written rebuttal should include the regulation and an explanation of why you believe the FDIC should reconsider its conclusion that the disclosure was inaccurate.
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The FDIC released guidance on overdraft protection programs (FIL 81-2010) stating that “the FDIC expects that any additional efforts to mitigate risk would be in place by July 1, 2011. Will it be a problem if we cannot comply with all of the suggested changes by that date?
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The truthful answer is that you just have to do your best to comply on time. It’s called guidance, but the FDIC expects all state-chartered non-member banks to follow the guidance. You do the best you can, and if you get dinged, you can make the argument that it’s merely guidance, which should not be…
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How can we respond to an FDIC examiner’s request that the bank perform a full financial audit (rather than a director’s audit or balance sheet audit)?
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Your FDIC examination has been completed, but you may be able to request a review through the FDIC Division of Supervision and Consumer Protection. The FDIC will review any decisions that it considers “material supervisory decisions,” defined in its Guidelines for Appeals of Material Supervisory Determinations. Section D lists decisions that are eligible for appeal…