Pub. 12 2017-2018 Issue 5

WWW.NEBANKERS.ORG 28 Kimberly R. Graves serves as associate general counsel for Compliance Alliance. She graduated magna cum laude from St. Mary’s University School of Law and holds a Bachelor of Arts in political science from the University of Texas at San Antonio, also graduating magna cum laude. Graves brings value to NBA-member banks through her experience during law school and her work at both a regional and national financial institution, as well as through her decade-plus of business management experience attained prior to law school. She developed a passion for banking regulation while performing extensive legal research on topics including financial institution law, commercial paper, and corporations. In her spare time, she and her husband wrangle four little boys aged 8 and under, including a set of fraternal twins. loans, and overdraft protection remain excluded. The final piece of the amendments became effective in October. Creditors are required to determine if a borrower is covered by the act, but safe harbor is available if verification is obtained through the MLA online database or consumer credit report containing military status. Violations can result in enforcement actions, civil penalties, private suits, and criminal liability. UDAAP Definitions for unfair, deceptive, and abusive are found in the regulation itself, and the CFPB has provided additional guidance and examples in its online manual. Actual instances of actions the CFPB claimed were violations include threatening to call a commanding officer, misrepresenting the creditor’s intended actions with respect to legal remedies, charging hidden fees, and deceptive advertising. State Laws Some states have enacted stronger protections than the fed- eral regulations. These are not preempted by federal regulations as long as they providemore protection, not less. For example, in California, reserve members called into active duty are entitled to defer payments on a whole host of loan types. Other states have statutes making a violation of the MLA a violation of state law, posing the possibility of additional liability for violations. Evaluate Evaluation of the bank’s existing level of compliance is criti- cal. Military lending is a pervasive compliance risk, reaching from the board of directors to the teller. Key areas to consider include eligibility management, loan servicing, vendor over- sight, SCRA/MLA benefit allowances and denials, and product development. Implement Though designing compliance structure is always bank- specific, some general considerations are useful in the military lending arena. Bank softwaremay not be adaptable to the distinct nature of military lending requirements, so it might be necessary to implement a manual system to tackle factors like eligibility, rate compliance and review, and enforcement action compliance. The status of an individual customer can change quickly, either into or out of coverage under the regulations. Therefore, it is incumbent on the bank to incorporate an effective monitoring system. The grave impact of personnel training and education cannot be overstated, with myriad enforcement actions citing deficiencies therein. Interdepartmental communication, such as between compliance and product development, is another essential consideration in the implementation effort. Finally, managing third-party vendor compliance can make or break the enterprise-wide military lendingmanagement effort, a point emphasized in the same speech by the OCC official mentioned earlier. Conclusion It is clear the risks banks face for noncompliance with mili- tary lending law and regulation are far-reaching, including repu- tation, compliance, legal, and safety and soundness. Conversely, compliance can and often does lead to enhanced relationships with the military community forging partnerships that last a lifetime. It would be a tough pill to swallow to believe that most banks fail to comply with military lending law and regulation intentionally, but, as we all know, the road to hell is paved with good intentions—and minefields. Let your compliance manage- ment system be your goldmine.  Military Lending — continued from page 27 It is clear the risks banks face for noncompliance with military lending law and regulation are far-reaching, including reputation, compliance, legal, and safety and soundness.