Signs of the Times

A compliance checkup for required signage and public notice requirements

By Mary Thorson

It’s a “sign” of compliance. Financial institutions are buried under disclosure requirements, but no disclosures are more conspicuous than those required to be posted for public scrutiny. Public signage and notice requirements run the gamut from those making loan and deposit stipulations to those involving privacy statements and the USA PATRIOT Act disclosures.

As a quick compliance checkup, here’s a list of federal regulations and laws requiring public notice or disclosures.

Fair housing posters. A financial institution engaged in making loans for the purpose of purchasing, constructing, improving, repairing or maintaining a dwelling or any loan secured by a dwelling must conspicuously display either:

-the Equal Housing Lender poster required by the Fair Housing Act, or

-the Equal Housing Opportunity poster prescribed by the U.S. Department of Housing and Urban Development’s regulations.

The poster must be at least 11 inches by 14 inches and prominently displayed in a central location where deposits are received or where covered loans are made.

Regulation C—Home Mortgage Disclosure Act notices and disclosures. For a financial institution covered by the Home Mortgage Disclosure Act, a general notice about the availability of its HMDA data must be posted in the lobby of its home office and each branch office in a metropolitan statistical area and Metropolitan Division. A covered institution must also make its modified loan/application register available to the public for a period of three years. The loan/application register made available to the public should be modified to remove the following information regarding each entry: the application or loan number, the date that the application was received and the date action was taken.

The HMDA disclosure statement prepared by the Federal Financial Institution Examinations Council must be made available to the public within 10 business days of receiving it, at the main office and in at least one branch office in each other metropolitan statistical area and each other Metropolitan Division where the institution has offices. The disclosure statement must be available for five years, and the disclosures for the prior two calendar years must be maintained in the bank’s Community Reinvestment Act public file. An institution must make the statement publicly available for inspection and copying during its normal business hours but may impose a reasonable fee for any cost incurred in providing or reproducing it.

Regulation BB—Community Reinvestment Act public file and notices. A financial institution is required to post in the lobby of its main office and each of its branches a public notice about the availability of its CRA public file. Appendix B to Regulation BB provides example formats for each type of required notice.

The CRA also requires each financial institution to maintain public files of specified information. The contents of the CRA public file that must be maintained at the main office are more extensive, and each branch must also maintain a file with more abbreviated contents.

Regulation CC—Expedited Funds Availability Act notices. Regulation CC requires that financial institutions provide customers who have a transaction account with a posted disclosure of the funds availability policy. One common error is a policy disclosure that does not reflect the actual practices followed by the institution in most cases.

Regulation CC requires that notices of availability policies for consumer accounts be posted where employees accept consumer deposits. The notices must state the availability periods for the various types of deposits that may be made to consumer accounts. A notice need not be posted at each teller window, but it must be posted where consumers making deposits are likely to see it. The notice is not required at drive-through teller windows or at night depository locations, but it is required at all ATMs.

USA PATRIOT Act Customer Identification Program (Bank Secrecy Act).  Section 326 of the USA PATRIOT Act requires adequate customer notice of the financial institution’s Customer Identification Program (CIP). The CIP must include procedures for providing customers with adequate notice that the bank is requesting information to verify their identities.

The notice must generally describe the bank’s identification requirements and be provided in a manner that is reasonably designed to allow a customer to view it or otherwise receive it before the account is opened. Examples that meet the requirement include posting the notice in the lobby, on a website or within loan application documents. The notice can be given verbally, or posted or printed on documents.

FDIC insurance disclosures and advertisements of membership. Part 328 of the FDIC Rules requires the display of the official FDIC sign. Each insured depository institution must continuously display the official sign at each station or window where insured deposits are usually and normally received in the depository institution’s principal place of business and in all its branches. The official sign must be 7 inches by 3 inches, with black lettering and gold background. The official sign includes the dollar limit prescribed for FDIC insurance coverage for each depositor.

Nondeposit investment products. Many insured depository institutions have expanded their activities in recommending or selling retail nondeposit investment products, such as mutual funds and annuities. Because the products are not FDIC-insured, where nondeposit investment products are recommended or sold to retail customers, depository institutions should ensure that customers are fully informed that the products:

-are not insured by the FDIC;

-are not deposits or other obligations of the institution and are not guaranteed by the institution; and

-are subject to investment risks, including possible loss of the principal invested.

To minimize customer confusion with deposit products, sales or recommendations of nondeposit investment products on the premises of a depository institution should be conducted in a physical location distinct from the area where retail deposits are taken. Signs or other means should be used to distinguish the investment sales area from the retail deposit-taking area of the institution.

Financial disclosure notices. Financial institutions must at all times display a notice that the annual financial disclosure statement may be obtained from the bank. The notice is required to be displayed in the lobby of the main office and each branch. It must include, at a minimum, an address and telephone number to which requests should be directed. The first copy of the annual financial disclosure statement must be provided to a requester free of charge. endmark

Mary Thorson is vice president of Chartwell Compliance, an ICBA Compliance & Risk Management service provider.