SBA Borrower Assistance

In past SBA articles we have provided details on how ABS can help your institution with packaging, servicing, selling the guaranteed portion and auditing your files to ensure your guaranty is secure.

We can also work with the financial institution’s potential borrowers in putting the application together.  We have clients that put us in touch with their potential SBA borrowers to work with them to gather all the needed information, fill out the correct forms and to review if the potential borrower is a good candidate for an SBA loan.  All the financial institution has to do is send the loan through its own review and approval process.  All this is at the cost of the potential borrower.

Plus, ABS has access to many services that small business owners may need for their back room operations.  These services include bookkeeping, accrual accounting, bill pay, payroll administration, invoicing, sales tax filing, compliance calendar, strategic planning and mentorship.  This is just a partial list.  These services may also benefit your current borrowers/customers as well.

To see how this process works and the costs for our various services, please contact us at 913-599-7471 or info@abs-core.com.   We welcome the opportunity to meet with you.

Security Overlooked

It seems the publicity of hacks and attacks on business networks has been quiet lately. Don’t be fooled into thinking your business is safe because all has been quiet. Security is a continuous and evolving practice that businesses should have a plan in place for and continuously monitor.

Many businesses are moving their hosting of security and business resources to the “cloud” as a solution to offload the responsibility of managing these resources in-house. While this is a sensible solution, keep in mind the business still has a responsibility of oversite of these services. If you are a financial institution, the Regulators still want to ensure you have knowledgeable oversite of these services and that institutions have sound security practices in place. If you are a business, don’t be fooled that someone else is watching over your security and you have nothing to worry about. You should continuously monitor their practices through reports available to you. Many services have Management Portals you can get dashboard reports without having to be technology savvy.

While the task of managing and understanding these security services can seem daunting, take heart that ABS can be a resource for helping you navigate these services and help you understand the reports and dashboards. We offer one time and contracted services to help educate, study and review these services and reports. Need help with choosing an outsourced solution, ABS can help there as well.

ABS is your trusted resource in helping your business thrive and survive. To see how this process works and services ABS offers, please contact us at 913-599-7471 or info@abs-core.com.   We welcome the opportunity to meet with you.

Supervisory Highlights on Consumer Compliance

In June 2019, the FDIC issued Consumer Compliance Supervisory Highlights. This publication includes a high-level overview of consumer compliance issues identified during 2018 through the FDIC’s supervision.

Five of the most frequently cited level 2 (Medium Severity) and level 3 (High Severity) violations included:

  • Truth in Lending Act (Regulation Z) – failure to properly calculate or disclose the finance charge or annual percentage rate for mortgage loans and disclosing fees on the closing disclosure that exceeded permitted tolerances;
  • Trust in Savings Act (Regulation DD) – applicable and accurate information not included on account disclosures;
  • Electronic Funds Transfer (Regulation E) – failure to properly investigate whether an error occurred and present the results of the investigation to the consumer within the appropriate timeframe;
  • Flood Disaster Protection Act (FDPA) – originating or renewing a designated loan with no flood insurance or an insufficient amount of flood insurance coverage; and
  • Equal Credit Opportunity Act/Regulation B – written notice of the applicant’s right to receive a copy of the written appraisal not provided to the applicant within three business days of receiving the application; higher fees for credit reports being charged for unmarried joint applicants than married joint applicants; erroneously obtaining information about the applicant’s race, color, religion, national origin, or sex in connection with a credit transaction for loan products prohibited from collecting this information; and failure to provide specific reason for adverse action to applicants for denied credit.

To read additional information presented in the Consumer Compliance Supervisory Highlights, the link is here.

If you have concerns with compliance or need assistance ensuring all necessary areas are reviewed, ABS is ready to help with any outstanding reviews or guidance you may need.  Please contact us at info@abs-core.com.

Upcoming Changes to Regulation CC

In June 2019, the Federal Reserve Board and the Bureau of Consumer Financial Protection issued a final rule amending Regulation CC – Availability of Funds and Collection of Checks.  The final rule implements a statutory requirement to adjust for inflation the amount of funds depository institutions must make available to their customers as required by The Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as certain amendments made by the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Under the final rule, the adjustments for inflation are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.  The final rule implements the first set of adjustments and provides a timetable for adjustments to be made ever five years thereafter.

The following dollar amounts will be impacted by the adjustments and will be effective July 1, 2020:

  • The $200 Rule (check deposits not subject to next day availability) adjusted to $225;
  • The $400 rule (time period adjustment for withdrawal by cash or similar means) adjusted to $450;
  • The new account threshold adjusted from $5,000 to $5,525;
  • The large deposit threshold adjusted from $5,000 to $5,525; and
  • The threshold for determining a repeat overdraft adjusted from $5,000 to $5,525.

For additional information regarding the changes, please review the published Regulation CC Amendments.  These changes will require updates to the financial institution’s Funds Availability Disclosures, Change Notices, poster updates, training materials and system updates.

As you start the process to implement these changes and would like some guidance or a secondary review to ensure all changes required have been identified, please contact ABS at info@abs-core.com.

Federal Regulators issue Frequently Asked Questions regarding CECL

Recently, the Federal regulatory agencies issued updated Frequently Asked Questions on the new accounting standard for credit losses, Current Expected Credit Losses (CECL).  The new standard will take effect in 2020, 2021 or 2022 depending on the institution’s characteristics.  The Frequently Asked Questions is intended to help institutions understand the regulators expectations under the new standard.

The Federal regulators continue to emphasize that:

  • Community institutions are not expected to need to adopt complex modeling techniques to implement the new accounting standard.
  • No one system is preferred over others. The agencies expect an array of credit loss estimation methods will be used under CECL.
  • The agencies expect institutions to make good faith efforts to apply the new credit losses standard in a sound and reasonable manner.
  • Institutions should continue preparing to implement the standard.

For the complete FAQ, please click here.  If you have questions regarding implementation of CECL, where to start or just need a sounding board, ABS is here to help guide you through the transition.

FDIC Warns of Importance of Vendor Contracts

The FDIC has issued a new Financial Institution Letter (FIL) FIL-19-2019 . This FIL discusses examiner observations about gaps in financial institutions’ contracts with technology service providers that may require financial institutions to take additional steps to mitigate risks and manage their own business continuity and incident response.

In recent FDIC examinations, they noted the institution’s contracts with technology service providers lacked detail regarding the rights and responsibilities for business continuity and incident response.  They noted some contracts did not require the provider to maintain business continuity plans or recovery standards or define the remedies if the provider doesn’t meet the recovery standards. Some did not identify the provider’s responsibility to notify the financial institution, regulators, or law enforcement.

The FDIC and other regulators will want to see that you have performed your due diligence, both before signing and during the contract term, to ensure that the provider has business continuity and incident response plans.  Financial institutions should ensure their contracts give them rights to see the plans, and/or see any testing completed on the plans.  If the service provider will not provide them, or they do not meet your standards, then you must mitigate your risk either through looking at different vendors or putting other controls in place to offset their shortcomings.

The FDIC also reminds depository institutions of their responsibility to notify their federal banking regulator of contracts or relationships with technology service providers that provide certain services.  These providers include check and deposit sorting and posting, computation and posting of interest, preparation and mailing of checks or statements, and other clerical, bookkeeping, accounting, statistical, or similar functions such as data processing, Internet banking, or mobile banking services.  This is required by Section 7 of the Bank Service Company Act (12 USC 1867).  You should check with your regulator for help with how they recommend you comply with the notification requirements.

As always, please contact ABS if we can help you identify potential vendors or provide assistance with your vendor due diligence for your current vendors

Phishing

No, I didn’t spell some people’s favorite pastime wrong (fishing) but with summer coming on I thought it pertinent to discuss some hackers’ favorite past time. Phishing is a scam in which a perpetrator sends an official looking e-mail message that attempts to obtain your personal and financial information. Scammers use email or text messages to trick you into giving them your personal information. They may try to steal your passwords, account numbers, or Social Security numbers. If they get that information, they could gain access to your email, bank, or other accounts. Scammers launch thousands of phishing attacks like these every day—and they’re often successful. The FBI’s Internet Crime Complaint Center reported that people lost $30 million to phishing schemes in one year. But there are several things you can do to protect yourself.

  1. Set up recover phone number/email address.
  2. Use unique passwords for your accounts.
  3. Keep software up to date.
  4. Set up two-factor/multi-factor authentication- Multi-factor authentication makes is harder for scammers to log in to your accounts if they do get your username and password.

Older generations appear to have better cybersecurity knowledge and practices than younger tech users according to a report from Google. The report, in partnership with Harris Poll, found that despite negative stereotypes, older generations are more aware about security concerns and concepts than their younger counterparts.

The report surveyed 3,000 US adults between the ages of 16 and 50+ to determine their beliefs and practices regarding online security. Gen Zers aren’t as well-versed in security practices as they think they are, the report found. While 71% said they are too smart to fall for a phishing scam, only 44% said they actually know what “phishing” means.

Some 65% of respondents ages 25 to 49 said they are confident they won’t fall for phishing attacks, and 53% said they know what phishing means. As for Baby Boomers, only 55% were confident, but 71% said they understand what phishing is, the report found.

Password reuse was the highest among Generation Z, with 78% saying they used the same password for multiple accounts online.

While Gen Z may think they know more about cybersecurity risks and procedures than their older counterparts, the data says differently. Baby Boomers proved to have a better understanding of the importance in software updates than younger generations: 84% said they believed updating security software is absolutely essential, while 61% of Gen Z said the same.  Baby Boomers also demonstrated a greater overall understanding of phishing schemes, according to the report, leaving younger generations vulnerable to attack.

While many people’s hobby may not include fishing, you should avail yourself to what Phishing is and how to protect yourself. Who knows, you may find that fishing is something you like!

ABS is always ready to help you audit your phishing security and help you ensure your organization is protected. Let us know how we can help.

Top Concerns

I had the pleasure of attending OCC training for board members this past week.  Good training and great time to hear what bankers are challenged by.

The top operational risk management concerns cited by exam area in 2018:

  • Commercial Credit
  • Information Technology
  • Enterprise Governance and Operations
  • Consumer Compliance
  • BSA/AML
  • Capital Markets
  • Retail Credit
  • Asset Management
  • Capital
  • Earnings

In visiting with the regulators a few other items came up:

  • Weak strategic plans
  • Board involvement

In visiting with board members and bank executives some common themes came up:

  • Finding and keeping quality staff was a challenge for some institutions but many stated that once they were clear on their focus and strategic plan and shared that with staff and partners (vendors), the staff were reengaged and quality candidates were brought to them.
  • Efficient and effective strategic planning. The financial institutions that didn’t struggle with this utilized a third party to facilitate, guide and follow up.

Hope this information helps in some way and remember ABS is your partner for all of these areas.  Our goal is to make your life easier!  Don’t hesitate to reach out and let’s see how we can help make your life better!

Sandy

Legislation is advancing in the BSA world

There are several bills in congress, and some still in committee, that could impact the Bank Secrecy Act (BSA) world.  Keep an eye open for H.R. 2514, a bill introduced by Representative Emanuel Cleaver (D-Mo.) that would modernize the Bank Secrecy Act/anti-money laundering framework.  There is legislation being worked on that would seek to combat the use of shell corporations and create a secure beneficial ownership registry of legal entities to be overseen by FinCEN.  There is also a bill that would help resolve the conflict between state and federal laws on marijuana.

At this time none of these are laws, but as always, compliance is always changing.  Keep your eyes open and participate in the discussion.  If you need help navigating any of the changes, give us a call.

SBA Lending

Are you afraid of SBA lending? Too much paperwork? Not worth the time? Too much risk?? Don’t feel you need to offer then to help your community??

Let’s look at ten $100,000 SBA loans in a loan portfolio that are 75% guaranteed by the SBA. Now assume the guaranteed portion of these loans have been sold. In today’s market you can get at least a 10% premium on the sale (actually it could be more, but let’s use 10%). Selling the guaranteed portion of the loans at a 10% premium would result in a $7,500 gain on each loan, for a total of $75,000.

Of the $250,000 in SBA loans remaining on the books, after the guaranteed portion has been sold ($100,000 less the $75,000 sale in the secondary market times 10 loans), let us now assume you lose 5% on the remaining loan SBA loan balances – or $12,500. This would leave the institution with a net gain of $62,500 on the original underwritten $1 million-dollar portfolio. If the secondary market for the guaranteed portion is higher than 10%, which it is now, the gain could be even higher. Since these loans typically make your financial institution a hero within your community, generally are accompanied with deposits, are “gold” with the regulators when it comes to your Community Reinvestment Act (CRA) program and result in a potential gain for the financial institution, aren’t these loans worth it? In addition, the regulators give the financial institution CRA credit for the original amount of the $100,000 loan underwritten not just the $25,000 remaining after the guaranteed portion has been sold.

If the financial institution is unsure on how to make these loans or think the staff is not big enough to take advantage of this opportunity, ABS can assist. Some of our experts have spent their careers dealing with SBA loans. We can not only help the financial institution with every facet of the SBA loan and its processes, but we can provide training to your staff in identifying potential borrowers and how to deal with the SBA. With the economy booming, you should not pass up these obvious opportunities. We can take all “the scary” out of it.

To see how this process works and costs for our various services, please contact us at 913-599-7471 or info@abs-core.com. We welcome the opportunity to meet with you