ABA Banking Journal - July 2011 - (Page 38)
ABA COMPLIANCE CENTER | InbOx
What are the proper rules on stop payments?
Q. Our auditor is telling us that our stop-payment forms for our Reg E and ACH stop payments are invalid because they don’t have an expiration date for the stop order. Our forms vendor states that this is not required for ACH or Reg E stop payments. Who is correct? A.Your vendor is correct. An ACH (or Reg E) stop payment has no expiration date. In fact, if someone stops payment on an ACH transaction, the bank is restricted from allowing that item to post to the account and that prohibition lasts forever—or until the consumer allows it again. Here is a link to a FAQ from NACHA: http://tinyurl.com/4gumb4l This section in particular relates: “Duration of Stop Orders 14. If our Stop Payment forms state that the stop payment order will be in effect for 6 months, are we in compliance with the new ACH rule and Regulation E? Answer: No, you will not be in compliance with either Regulation E or the NACHA Operating Rules if you remove the stop after 6 months. The stop order must remain in place long enough that every entry specified by the consumer is stopped by the RDFI. This could involve an indefinite period of time if the stop order applies to all future transactions. To facilitate and expedite the termination of the origination of all future entries, they must be stopped at their source, i.e., revocation must take place directly with the Originator. The RDFI may request its customer to provide written confirmation that he has revoked authorization directly with the Originator, and, if such confirmation is not provided, may permit future transactions to post to the account.” (Response provided 3/11/2011) If premium’s paid, must we escrow? Q. Under the rules on higherpriced mortgage loans (section 35 of Regulation Z), if we have a loan where the homeowner’s insurance is pre-paid for one year, would we need to establish an escrow account? A. The fact that a consumer may have prepaid insurance premiums for a year does not absolve you of the requirement under these rules to establish an escrow account at settlement. Because the insurance has been prepaid, you will instead collect a monthly amount to be used to pay the next premium due. (In addition, at your discretion you may collect any allowable cushion.) In addition, escrow for taxes or flood insurance (if applicable) would still be required. Then, if the lender so chooses (by stating in the loan agreement) you may allow the borrower to cancel the escrow account a year after the loan was consummated. (Response provided 4/8/11) Keep non-deposit product promotions in their place Q. Can the marketing materials provided by our partners and third-party vendors advertising non-deposit investment products be displayed anywhere we choose in the branch? Or does there need to be an area solely dedicated for these advertisements? For example, can posters/take-ones be displayed at the teller line? A. Third-party vendors, mutual funds, and other non-deposit investment product (NDIP) providers will often supply banks with promotional materials, such as placards, brochures, and signs. However, all such advertising and promotional material displayed on bank premises or provided to customers through bank channels, regardless of the source, may not be displayed anywhere at or near the teller line, where deposits are taken, or where deposit products are advertised. In addition, all retail NDIP advertising and promotions should include the minimum disclosures, and must not misrepresent a product’s risks or lack of FDIC insurance. Further, the official FDIC membership statement described in Part 328 of the FDIC’s Rules and Regulations should not be used in any NDIP advertising or promotional material. See the Interagency Consumer Protections in Sales of Insurance, Section 343.50 for additional information. (Response provided 4/8/11) Quick check on HMDA and jumbo home loans Q. My understanding is that the new 2.5 spread requirement for first-lien jumbo mortgages is only applicable to escrow requirements. Therefore, for HMDA reporting purposes, the rate spread requirement for a first lien jumbo loan is still 1.5, correct? A. Correct. HMDA was not modified by the change in Regulation Z, which requires escrow accounts for “jumbo” loans. (Response provided June 2011)
Leslie Callaway, CRCM, ABA Compliance Project Manager, and Mark Kruhm, CRCM, ABA Senior Compliance Analyst, and other ABA experts, answer ABA member questions here and in the online edition of Inbox at ababj.com. Member banks may submit questions to: compliance@aba. com. Disclaimer: Our answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of date shown at the end of each item.
38 | ABA BANKING JOURNAL | july 2011
Table of Contents for the Digital Edition of ABA Banking Journal - July 2011
ABA Banking Journal - July 2011
Inside family banks
Pass the Aspirin
New gold standard?
Still on their guard
First Person: Special Edition
ABA Banking Journal - July 2011