Regulators Stress Account Reconciliation
This one goes into the “don’t shoot the messenger” category, particularly when the messenger is in a good mood because it sounds as if some warm weather is coming.
Yesterday evening, the NCUA joined with the other merry band of financial regulators to issue a joint edict, I mean “guidance” detailing the responsibility of financial institutions to properly reconcile account discrepancies. They pointed out that the failure to do so could constitute a violation of federal regulations as well as a deceptive practice.
What are they talking about? Take me for instance. I am a bank teller’s worst nightmare. The Rosetta Stone is easier to read than my handwriting. In the Middle Ages, before direct deposit took off, I used to deposit my meager starting salary at a branch down the block from my apartment in Washington. I used to dutifully fill out the deposit slip, place it in an envelope with the check, and either deposit it with a teller or at the ATM. If I deposited more than one check, it wasn’t uncommon for me to round off the deposit. I didn’t think fifty cents was such a big deal As time went by, however, I got so many notices from the branch that this sweet teller I used to deal with occasionally became increasingly frustrated and unfriendly. She eventually explained to me, albeit in much nicer terms, that, my shoddy deposit slips never added up and those were messing up the computer system. I was a little surprised, and in all honesty a little flattered, to find out that my salary could inconvenience such a big bank, although I didn’t tell her that as I could tell she wasn’t amused. After all, it wasn’t a big deal to expect customers to accurately record deposits. Can’t members be held accountable for accurately recording their own deposits?
If only this guidance was around when I was depositing my checks, I could have explained to the exasperated teller that “in some instances, financial institutions do not research or correct all variances between the dollar value of items deposited to the customer’s account and the dollar amount that is credited to that account, resulting in the customer not receiving the full amount of the actual deposit.” Regulators expect them “to have deposit reconciliation policies and practices that are designed to avoid or reconcile discrepancies, or designed to resolve discrepancies such that customers are not disadvantaged.”
Why are regulators coming out with this edict now as opposed to several decades ago when I could have indignantly responded to my exasperated teller? Pure speculation on my part, but I bet some class action lawyers or AGs are considering lawsuits claiming that banks are saving money by not trying hard enough to reconcile deposits.
Payday Lending Reg Coming in June
On June 2, the CFPB is expected to formally issue a proposal to regulate payday loans. The Bureau That Never Sleeps has scheduled a field hearing in the “Show Me” state on small dollar loans. As The American Banker points out, the CFPB typically uses these events to unveil new regulations. (Of course, the fact that the Bureau has already decided what it is going to do before it holds these hearings makes them more like Chinese show trials than hearings, but I digress).
The big question is how the regulation will impact the ability of credit unions to offer payday loan alternatives that are currently sanctioned and encouraged by the NCUA. Inquiring minds also want to know how the CFPB is going to balance enhanced regulation against the demonstrable demand for these loans. Too tough an approach will cripple the payday lending industry; too light an approach will send the usual suspects in the Consumer Advocate class howling that the Bureau has gone soft.