As the banking industry continues to evolve, so do the regulatory requirements that financial institutions must navigate. In the coming months, several key compliance areas will demand close attention from banks to ensure they are aligned with updated standards and to mitigate risks. Below are five critical areas to watch:
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ACH Rule Changes – Enhancing Fraud Prevention
Beginning in October 2024, NACHA has introduced updated rules aimed at improving fraud prevention across financial institutions. These changes include:
- Return Reason Code R17: RDFIs (Receiving Depository Financial Institutions) are now required to use this code to return suspected fraudulent entries. Such transactions should be labeled “questionable” in the addenda when using R17.
- Expanded Code R06: This code now allows ODFIs (Originating Depository Financial Institutions) to request a return from RDFIs for any reason. RDFIs must respond to return requests within 10 banking days. This requirement will become mandatory on April 1, 2025.
- New Term “False Pretenses”: Added to the Funds Availability Exceptions category.
- Adjusted WSUD Timing: The Written Statement of Unauthorized Debits (WSUD) can now be signed and dated by the receiver on the date (or later) when the entry has been presented, even if the transaction hasn’t yet posted. This change reflects new technology that lets receivers see pending transactions.
What should you be doing?
- Update your policies and procedures to reflect these new rules.
- Train staff to ensure they are aware of and prepared for the changes.
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Funds Availability (Reg CC) Adjustments
As part of regular inflation adjustments, several key thresholds for funds availability will change effective July 1, 2025. The upcoming changes include:
- Minimum funds for next-day withdrawal increasing to $275.
- Cash withdrawal limits increasing to $550.
- Large deposit, new account, and repeatedly overdrawn account thresholds increasing to $6,725.
- Civil penalties for non-compliance will also rise.
What should you be doing?
- Update consumer disclosures and notices to reflect these new limits.
- Verify that your core transaction systems are set up to handle the changes.
- Train branch staff to ensure they are prepared.
- Strengthen internal monitoring to track compliance with the new rules.
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UDAAP & Junk Fee Scrutiny Continues
The pressure on financial institutions to reassess their fees remains strong, particularly concerning fees that could be deemed unfair, deceptive, or abusive (UDAAP). Current fees under scrutiny include:
- Overdraft and Non-Sufficient Funds (NSF) fees.
- Mortgage servicing fees, such as excessive late fees and unnecessary services.
- Auto loan repossession and excessive late fees.
What should you be doing?
- Conduct a thorough review of all fees charged to ensure transparency and fairness.
- Proactively refund any fees that could be considered misleading or unfair.
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Small Business Lending Rule (Section 1071 of the Dodd-Frank Act)
Due to delays with the Supreme Court, the new compliance deadline for Section 1071 has been extended to July 2025, with smaller lenders expected to comply by 2026. This rule is still subject to potential changes following the CFPB’s interim rule in June 2024.
What should you be doing?
- Train relevant staff on the new requirements and hire additional resources if needed.
- Develop data collection and reporting policies and procedures.
- Consider adopting compliance software to streamline your reporting.
- Establish an internal review process to verify the accuracy of your data.
- Plan for an annual audit by a third party to ensure compliance.
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Community Reinvestment Act (CRA) Changes
In March 2024, federal regulators issued a joint interim final rule that further extended the compliance deadline for CRA-related adjustments to January 1, 2026. Banks will need to align these adjustments with the final rule’s other provisions.
What should you be doing?
- Provide comprehensive training on CRA changes to relevant staff.
- Identify your institution’s asset size category—whether Large, Intermediate, Small, or Limited Purpose—and ensure appropriate compliance measures are in place.
- Clarify your institution’s community development activities and update delineation requirements for assessment areas.
- Develop or update policies and procedures to comply with the new performance standards based on your bank’s size.
- Schedule an annual audit, ideally conducted by a third party, to ensure full compliance.
By staying ahead of these regulatory changes, banks can avoid potential pitfalls and maintain a strong compliance posture, while also enhancing consumer trust and operational efficiency.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
