Ho Ho Ho and Happy Holidays! The Temenos Compliance Advisory team wants to give you the gift of additional Q&As to help you wind down the year. Whether you are sitting by the fireplace trying to keep warm or sitting by the pool enjoying the warm weather, come along with the Temenos Compliance Advisory team as we share more questions and answers from the year 2019.
Customer Identification Program (CIP)
Question: How do I satisfy CIP requirements when a parent is opening an account for a minor?
Answer: In general, CIP is conducted based on the institution’s CIP Policy and Risk Assessment. When it comes to accounts for minors, if the parent is opening the account on behalf of the minor, then the “customer” is the individual who opens the account, as a minor is considered an individual who lacks legal capacity. This is addressed in the CIP FAQ Q&A #1 found here.
Since verification procedures are risk-based as established by your institution, the institution may use any reasonable documentary or non-documentary method to verify identity. I recommend following your institution’s CIP Policy and Risk Assessment.
Question: Can we use Matricula Consular cards and Mexican Passports as identification for CTRs? If so, does that mean we have to update our CIP/BSA Policy?
Answer: Yes, those are acceptable forms of identification for CTR reporting purposes. You wouldn’t necessarily need to update your institutions CIP/BSA Policy to reflect that you will accept those types of identification documents for CTR purposes. However, if you want to accept those types of identification for CIP purposes for new customers that open a new account with your institution, then you want to address that within your institution’s CIP/BSA Policy.
Requiring a Checking Account
Question: Can an institution require a loan applicant to open a checking account in order to obtain the loan?
Answer: Yes. You can require a deposit account and you can even require that they maintain a certain balance. However, you cannot require that they make automatic payments from that account unless it’s for an overdraft line of credit.
Regulation P – Privacy Notice
Question: Is a Privacy notice required to be provided at the time of loan closing for a commercial loan?
Answer: If it is a commercial customer, you would not need to provide the privacy notice. Section 1016.4(a) states that you need to provide a customer the initial privacy notice not later than when you establish a customer relationship and to a consumer before you disclose any consumer NPI. Sections 1016.3(e)(1) and (i) define consumer and customer as:
(e)(1) Consumer means an individual who obtains or has obtained a financial product or service from you that is to be used primarily for personal, family, or household purposes, or that individual’s legal representative.
(i) Customer means a consumer who has a customer relationship with you.
Question: Is a Privacy notice required for loans that we purchase?
Answer: If you only purchase the loans, you do not need to provide the Privacy notice. However, if you also purchase the servicing rights, you will need to provide the Privacy notice. Section 1016.4(c)(2)states:
(2) Special rule for loans. You establish a customer relationship with a consumer when you originate or acquire the servicing rights to a loan to the consumer for personal, family, or household purposes. If you subsequently transfer the servicing rights to that loan to another financial institution, the customer relationship transfers with the servicing rights.
Regulation E – Error Claim on Closed Account
Question: We have received an error claim of unauthorized transactions; however, the account was closed after those transactions occurred. If we cannot resolve within 10 days of receipt of the claim, do we have to provide provisional credit?
Answer: If the consumer’s claims are timely, Regulation E requires that the consumer be granted full access to provisional credit during an investigation. Unfortunately, it is a consumer friendly regulation and offers few protections to the institution. My suggestion would be to re-open the account during the investigation process to maintain a clear audit trail as evidence of compliance.
Nothing can really be done to “protect” an asset related to the credit (like a hold). Now if it is later determined that no error had occurred, and they have used the credit and the account becomes overdrawn, all you can do at that point is send the consumer written notification of the debiting of the provisional credit and include a demand for repayment.
If the consumer fails to repay the institution, you may take your normal collection actions against them to recover the funds.
Thank you for coming along beside us in 2019. We wish you a very happy holiday season and a prosperous New Year.