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Compliance Solutions quarterly newsletter — March 2024

Important information about compliance updates, regulatory changes, document enhancements, and more.


FinCEN final Beneficial Ownership Information (BOI) access rule

The Financial Crimes Enforcement Network (FinCEN) issued the final rule (the Access Rule) regarding access by authorized recipients to beneficial ownership information (BOI). The Access Rule indicates who is authorized to receive BOI, the circumstances under which the BOI reported may be disclosed, and how that information must be protected.

FinCEN will allow disclosure of BOI to six categories of recipients, including financial institutions using BOI to comply with customer due diligence (CDD) requirements. As stated in the proposed rule, financial institutions must have the reporting company’s consent to request its BOI. However, a change resulting from industry comments to the proposed rule is that the Access Rule expands the definition of “customer due diligence requirements under applicable law.” The definition now includes “any legal requirement or prohibition designed to counter money laundering or the financing of terrorism, or to safeguard the national security of the United States, to comply with which it is reasonably necessary for a financial institution to obtain or verify beneficial ownership information of a legal entity customer.” An Interagency Statement reiterated that the Access Rule does not create a new regulatory requirement for banks or non-bank financial institutions to access BOI from the FinCEN System or a supervisory expectation that they do so.

Authorized recipients of BOI are subject to security protocols aligned with their access and use. Financial institutions that receive BOI must develop and apply administrative, technical, and physical safeguards to protect the obtained information. As in the proposed rule, security and information handling procedures in compliance with Section 501 of the Gramm-Leach-Bliley Act to protect non-public customer personal information would satisfy requirements if applied to BOI.

The Access Rule is the second of three rulemakings to implement the Corporate Transparency Act (CTA) and was effective on February 20, 2024. Throughout 2024, FinCEN will begin its phased approach to access of the BO IT system (FinCEN’s system where authorized users would obtain BOI). Financial institutions and their regulators will have direct access to the BO IT system, but in a more limited role than domestic government agency users. There is still time to submit your comments about the third rule to the CTA, which would revise the current CDD Rule. The revision should account for financial institutions’ access to BOI reported to FinCEN among other directives.

To view the full details of the final rule concerning access to beneficial ownership information, visit here. FinCEN’s Fact Sheet is found here.


CFPB’s proposed rule related to overdraft loans and associated fees

This past January, as part of its standing initiative to “rein in junk fees,” the Consumer Financial Protection Bureau (CFPB) proposed a new rule effectively closing a long-standing loophole that exempted certain overdraft convenience loans from the Federal Truth-In-Lending Act (TILA) disclosure requirements.

The proposed rule, which affects “very large financial institutions” with $10 billion or more in assets, provides two different options when approaching overdrafts: a courtesy service or as a line of credit. If offering courtesy service, the institution can base its fee either on a “breakeven standard” or on a benchmark.

Courtesy service — breakeven standard

The “breakeven standard” permits institutions to determine the amount of the overdraft service fee necessary – as the name suggests – to breakeven. This fee determination is based on losses the institution incurs when writing off overdrawn accounts and is in addition to direct costs incurred as a traceable result of providing the courtesy service.

Courtesy service — benchmark

Alternatively, institutions can impose a fee based on a benchmark of fees ranging from $3 to $14. The proposed benchmark fees are based on CFPB analysis of charge-off losses and overdraft cost data provided by institutions. Note, however, that whether the benchmark fees are based data associated with average losses, the institution with the highest losses, or whether the fees factor in overdraft fees waived by institutions has not yet been determined.

Covered overdraft credit

Institutions electing to offer overdraft loans — referred to in the proposed rule as “covered overdraft credit” — to its customers must ensure those loans comply with the requirements of the TILA. Under this approach, consumers would receive TILA disclosures intended to facilitate the consumers’ ability to compare the cost of the overdraft credit with other, similar products. Additionally, the proposed rule extends protections similar to those currently applicable to credit cards for overdraft credit accessed via debit card or electronically via the routing/checking account.

Effective date

While the rule has net been finalized, it is proposed to go into effect on 1st of October occurring at least six months following publication of the final rule in the Federal Register, currently project to be October 1, 2025.


CFPB’s latest target on fees: prohibition on non-sufficient funds fees for instantaneously declined transactions

The CFPB continues to target what it considers “junk fees,” and its latest target is non-sufficient funds fees charged when certain transactions are declined. On January 24, 2024, the CFPB issued a proposed rule (new 12 CFR Part 1042) which would prohibit financial institutions from charging nonsufficient funds fees when consumers initiate transactions from their account that are instantaneously (or near-instantaneously) declined. Under the proposed rule, charging such fees would constitute an abusive practice as described below.

General summary

This proposed rule would prohibit financial institutions from charging fees, including nonsufficient funds fees, on all instantaneously declined transactions, including debit card, ATM, or person to person transactions. That means that financial institutions cannot charge fees on these types of transactions even if the fees were disclosed to consumers and regardless of how the fee is labeled (e.g., returned item fee, unpaid item fee).

As proposed, charging these nonsufficient funds fees would constitute an abusive practice under the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices. The CFPB commented that it “is preliminarily determining that charging an NSF fee in connection with a covered transaction would take unreasonable advantage of consumers’ lack of understanding of the material risks, costs, or conditions associated with their deposit accounts, and thus would be abusive.”

Transactions covered by this proposed rule

A “covered transaction” under the rule is any attempt by a consumer to withdraw, debit, pay, or transfer funds that is declined instantaneously or near instantaneously due to insufficient funds. A transaction is declined instantaneously when it is processed in real time with no significant perceptible delay after the consumer initiates the transaction. Such transactions include, for example, debit card purchases, ATM withdrawals, and person-to-person transfers.

Transactions not covered by this proposed rule

Transactions rejected due to insufficient funds hours or days after the attempted transaction are not considered instantaneously or near-instantaneously declined and are not covered by the proposed rule. This exclusion also extends to checks and ACH transactions as long as these payment types do not evolve in such a way that they are able to be instantaneously declined.

Institutions subject to this proposed rule

The proposed rule covers any “financial institution” as defined in Regulation E, including a bank, savings association, credit union, or any other person that that directly or indirectly holds an account belonging to a consumer or that issues an access device and agrees with a consumer to provide electronic fund transfer services (12 CFR 1005.2(i)).

Key takeaways

If this rule is finalized as drafted, then financial institutions should review their policies and practices to eliminate nonsufficient funds fees involving instantaneous transactions because, based on the proposed rule, financial institutions cannot charge these fees even with “well-crafted” disclosures. The CFPB determined that a disclosure remedy might reduce the incidence of abusive conduct but determined that 1) it would not eliminate it and 2) it would likely be too costly or not feasible in many or most situations.

What's next

With this proposed rule, the CFPB is taking preventative measures to target these nonsufficient funds fees on covered transactions. The CFPB acknowledges that it is unclear the extent to which these fees are charged today; however, in light of the other proposed rules it has in flight (e.g., a proposed rule intended to limit fees for courtesy overdraft services), the CFPB anticipates financial institutions may look for other ways to generate fee income, including NSF fee income. And so, the CFPB is sending a strong message to financial institutions: not only is it looking to crack down on the fees that financial institutions are charging today, but it is also looking to ward off fees they may decide to charge in the future.


Question of the quarter

Question: Will we be required to update the dollar amounts that appear in our Funds Availability Policy Disclosure in 2025?

Answer: The Federal Reserve Board (FRB) has yet to determine whether the dollar amounts will change and, if so, what the new dollar amounts will be. Changes in the dollar amounts may impact initial funds availability disclosures as well as deposit hold notices.

The FRB’s first inflation-based adjustments to Regulation CC’s dollar amounts were effective July 1, 2020, and those amounts are subject to change every five years. For the next dollar amount adjustments that are effective on July 1, 2025, the inflation measurement period begins July 2018 and ends July 2023. The adjustment calculations will be based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (“CPI-W”) during that time period. The Fed is expected to announce the results of those calculations by mid-2024, and we will share more details at that time.


CARS Rule — where is it driving to right now?

History of the rule

The Combating Auto Retail Scams Rule (CARS Rule) was proposed by the Federal Trade Commission (FTC) in 2022. The CARS Rule intends to ease the consumer vehicle purchase process and provide more transparency to consumers through increased disclosure by a motor vehicle dealer. On December 12, 2023, the rule was finalized with an initial effective date of July 30, 2024. Two weeks later, the FTC issued a stay on the effective date due to a challenge in court. That court case is still pending.

What types of vehicles and dealers are covered?

The CARS Rule directly applies to a “Covered Motor Vehicle Dealer” or “Dealer” as defined in the CARS Rule:

Means any person, including any individual or entity, or resident in the United States, or any territory of the United States, that:

Is licensed by a State, a territory of the United States, or the District of Columbia to engage in the sale of Covered Motor Vehicles; (2) Takes title to, holds an ownership interest in, or takes physical custody of Covered Motor Vehicles; and (3) Is predominantly engaged in the sale and servicing of Covered Motor Vehicles, the leasing and servicing of Covered Motor Vehicles, or both.

The CARS Rule defines “Covered Motor Vehicle or Vehicle” as:

Any self-propelled vehicle designed for transporting persons or property on a public street, highway or road. The rule does not cover: (1) Recreational boats and marine equipment; (2) Motorcycles, scooters, and electric bicycles; (3) Motor homes, recreational vehicle trailers, and slide-in campers; or (4) Golf carts.

General Areas Covered Under the CARS Rule

Disclosure is a key part of CARS Rule. The rule sets a “Clearly and Conspicuous” standard for all Dealer communications.

Prohibited misrepresentations

The rule calls out 16 specific categories of prohibited misrepresentations in a motor vehicle transaction. The misrepresentations are judged by a “material” standard defined in the rule.

The categories include:

  1. The cost of terms of purchasing, financing or leasing a vehicle;
  2. Whether or when a dealer will pay off some or all of the financing or lease on a consumer’s trade-in vehicle; and
  3. Whether, or under what circumstances, a vehicle may be repossessed.

Dealer advertising and sales disclosures

The rule requires new disclosures for an Offering Price, Add-Ons, Total Payments, and Monthly Payments Comparison.

Add-On products

The rule increases the obligations around “Add-On” products. Add-On products are defined as “any product(s) or service(s) not provided to the consumer or installed on the vehicle by the motor vehicle manufacturer and for which the Motor Vehicle Dealer, directly or indirectly, charges a consumer in connection with a vehicle sale, lease, or financing transaction.” A dealer must only charge a consumer for Add-On products that provide a benefit to the consumer.

Express, informed consent

A consumer will need to have express, informed consent for each item charged in an auto transaction.

Effect on financial services

Financial institutions that do not meet the definition of Covered Motor Vehicle Dealers, have no direct liability under the CARS Rule. However, financial institutions financing transactions with covered motor vehicle dealers may be held liable under state laws or other federal laws. This lender risk stems from existing FTC Holder Rule liability, potential UDAP violations, and existing state laws that allow for private causes of action against lenders outside of this rule.

Due to this potential liability under other laws, it is good practice to review all motor vehicle lending procedures and contracts with Dealers.

Legal challenges

As noted, there are legal challenges to this rule which prompted a stay on the effective date. National Automobile Dealers Association (NADA) and Texas Automobile Dealers Association petitioned to overturn the rule.

It is unclear when this rule will be effective due to the current legal challenges. The FTC states on its website that, “a stay of the effective date should not postpone implementation of the rule by more than a few months, if at all.”

We will continue to monitor this rule and give updates as available.

To view the FTC’s final rule, please visit the link below:
Link: Combating Auto Retail Scams TRR (


Question of the quarter

Question: For a vehicle loan, when should I fill in the Total Sales Price in the Loan and Security Agreement?

Answer: Regulation Z, Section §1026.18(j) requires the Total Sales Price be disclosed whenever your financial institution is both the seller and the creditor. This is most likely to happen when you are selling a repossessed vehicle. In this field, you must disclose both the total sales price and the down payment amount, if any. The figure to be disclosed is the sum of the cash price, other charges added under §1026.18(b)(2), and the finance charge disclosed under §1026.18(d).