Messick Lauer & Smith P.C.

Wishing everyone a very Merry Christmas and Happy Hanukkah!

**Updates to Beneficial Ownership Information Reporting Deadlines – Beneficial Ownership Information Reporting Requirements Now in Effect, with Deadline Extensions** In light of a December 23, 2024, federal Court of Appeals decision, reporting companies, except as indicated below, are once again required to file beneficial ownership information with FinCEN. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, FinCEN had extended the reporting deadline. You can find the new reporting deadlines at the link below.

Last week, the #CFPB issued a final rule directed at banks and credit unions with more than $10 billion in assets, capping overdraft fees at $5, or at an amount that covers no more than their costs or losses. CFPB says this final rule with will up to $5 billion in annual overdraft fee savings to consumers. For financial institutions that wish to keep their current overdraft programs, they may do so by complying with the standard requirements governing other loans, like credit cards. This would include giving consumers a choice on whether to open the line of overdraft credit, providing account-opening disclosures that would allow comparison shopping, sending periodic statements, and giving consumers a choice of whether to pay automatically or manually. Whether or not this rule becomes effective is uncertain. Almost immediately after the publication of the final rule, multiple banking associations rushed to the courts to file a request for a preliminary injunction to block the CFPB from implementing the rule. This injunction will likely be granted and it is also possible that the incoming administration's new CFPB director could choose not to enforce the new rules. Read the final rule here: https://lnkd.in/g2imYnD8

Since our recent "In the CU" episode dropped, #NCUA Chairman Harper released a letter to all federally insured credit unions on "Consumer Harm Stemming from Certain Overdraft and Non-Sufficient Funds Fee Practices." This letter highlights the risks associated with certain overdraft and NSF fee practices, including running afoul of #UDAAP prohibitions, and details risk management principles and the NCUA's supervisory approach going forward. Harper states that if your credit union assesses overdraft or NSF fees that your members cannot reasonably anticipate or avoid, the credit union may be exposed to heightened reputational, consumer compliance, third-party, and litigation risk. The letter focused on "authorize positive, settle negative" transactions; multiple NSF representment fees; and returned deposited item fees and details that these overdraft programs likely would be deemed "unfair" under UDAAP. The NCUA does not expect credit unions to stop offering overdraft programs but will continue to review programs to ensure they are effectively managing the heightened risk these fee practices can entail. You can read the full letter below and contact our office if you have any questions. #creditunions #compliance

In this episode of "In the CU," we have a full house. Everyone here at Messick Lauer & Smith joins in to discuss the impact of the 2024 elections on the credit union and CUSO industry. This full roundtable discussion covers the transition at the NCUA and CFPB and also includes a host of other relevant industry topics that we are all keeping an eye on as we move from the Biden administration to a second Trump administration. After this podcast was recorded, the NCUA issued guidance on its regulatory approach for overdraft and NSF fee programs, and the CFPB issued its final rule on overdrafts (were they listening to us?). Stay tuned here as we will delve deeper into those items next week. #creditunions #cusos #NCUA #CFPB

FinCEN has issued a statement following the preliminary injunction we highlighted last week. In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports. --- The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage. On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024. Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Corporate Transparency Act Update On Tuesday, December 3, 2024, the Eastern District of Texas granted a preliminary injunction to enjoin the enforcement of the Corporate Transparency Act (“CTA”) by the Government. See Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.). Unlike other cases where courts ruled only with respect to the plaintiffs bringing the lawsuit, the Texas Court issued this injunction nationwide. This means that while the temporary injunction is in place, non-exempt reporting companies under the CTA do not need to comply with the reporting requirements. Non-exempt Reporting Companies should still gather the necessary information during this period. It is possible the Government will move to lift the injunction, attempt to limit the application of the injunction to only the plaintiffs in the case or take the case to an appellate court. We will continue to monitor developments with the CTA. Do not hesitate to reach out if you have any questions regarding the CTA and need assistance determining whether your business is subject to the filing requirements in the event the injunction is lifted. As always, if you have any questions or topics you’d like to see covered in a podcast or article, please email our office at Mailbag@cusolaw.com. 

FinCEN recently issued an alert to help financial institutions identify fraud schemes associated with the use of deepfake media created with generative artificial intelligence (GenAI) tools. FinCEN has stated that this trend of sophisticated scams poses a significant risk to anti-money laundering efforts as well as national security. FinCen found after analyzing BSA data, that after opening accounts using GenAI fake identities, criminals use those accounts to launder funds from other fraud schemes that involve checks, credit cards, authorized push payments, loans and unemployment benefits. FinCEN provides a list of indicators that additional scrutiny might be warranted; including but not limited to: inconsistencies among multiple identity documents submitted by the customer; a customer’s inability to satisfactorily authenticate their identity, source of income, or another aspect of their profile; and inconsistencies between the identity document and other aspects of the customer’s profile. You can read the alert below for more details. #FinCEN #creditunions #cusos #compliance #AI

The NCUA recently issued a letter to Boards of Directors and Chief Executive Offiers regarding Board of Director Engagement in Cybersecurity Oversight. The NCUA highlighted that in the last year since the NCUA’s cyber incident notification rule became effective, federally insured credit unions reported 1,072 cyber incidents. Seven out of ten of these cyber incident reports were related to the use or involvement of a third-party vendor. The NCUA reminds readers that the credit union's board needs to be engaged in ongoing education and ensure employees are properly trained. The letter also reminds boards of their obligations to approve security programs and oversee operational management and that cybersecurity is not just an "IT" issue. You can read the letter below and find additional cybersecurity resources on the NCUA's website. #creditunions #NCUA #vendormanagement

Our newest episode of In the CU has dropped. Mike Heller and Michael Mulvey discuss what credit unions are thinking, and what CUSOs should think about, regarding data security and confidentiality protections in credit union due diligence and contract writing and negotiating. These protections are topics covered in every critical service contract. This podcast includes some tips and industry best practices to help the information-sharing and contract negotiation processes go smoother and therefore, more quickly. If you aren't already following In the CU, be sure to subscribe while you're there! #creditunions #cusos #IntheCU #podcast #vendormanagement