Fees Under Fire – October 2022

Fees Under Fire –

A “fee” is any charge to a customer account, regardless of the naming convention employed. It includes origination and servicing charges, which can include corporate advances. A “fee” does not include interest, this is considered pricing.

The Consumer Financial Protection Bureau (CFPB) has voiced the loudest concerns over overdraft fees and credit card late fees. This along with other Federal Regulators have touted institutions start committing to the removal or reduction of various fees, particularly in the overdraft space.

Through all of the information being disseminated we can learn a couple of processes to implement to assist:

First: Implement a fee management program that identifies what in your institution is defined as a “fee.”Compliance in your institution should consider using the broadest definition as possible.

Second: Establish protocols for reviewing new or modified products and the fees that may be a part of these products.

Third: Implement an immediate process to review all existing and any new product disclosures. It is imperative that the disclosures are consistent with any and all fees that are assessed to your clients.

Fourth: Verify that all fees are consistent with UDAAP guidelines. These guidelines want any fee to be reasonable. Reasonable is defined as: First, never pay for benefits that have not begun. Next, the fee needs to be in line with the expected value of the product or service. Third, all fees must be compliance with the State law. Last, verify that no fees create a barrier to obtaining account information or restricts the ability to account access.

All employees should be training on the UDAAP requirements and the definition of “Unfair or Deceptive” Practices. Also, be very aware that all disclosures are matching the fees charged in practice on all checking account transaction returns.

Short Compliance Topic

• Form 1099-C – OMB No. – when the IRS first released its 2022 version of Form 1099-C (Cancellation of Debt), the version posted on the IRS website reflected a change in the OMB No. from “1545-1424” (used in calendar year 2021) to “1545-2281”.
• However, on 7/29/22, the IRS posted another version of Form 1099-C (apparently without any type of announcement that it was doing so) which reflects the “old” OMB No. of “1545-1424”. In other words, the OMB No. has been changed back to the way it was in calendar year 2021 (from “1545-2281” back to “1545-1424”).

Reference: Compliance New / September 2022 / Page 5

EARN ACT / S.4808

9/8/22 – Introduced in the Senate by Ron Wyden.

Key Provisions:

• Enhancing American Retirement Now Act
• Would encourage small businesses to adopt retirement plans.
• Would make it easier for part-time workers to participate in retirement plans.
• Would expand the saver’s credit for low- and middle-income workers.
• Would permit an employer to make a matching contribution to the employee’s retirement account in the amount of his or her student loan payment.
• Would expand the minimum participation standards for part-time workers by reducing the retirement plan eligibility for such workers..
• Would permit taxpayers to withdraw up to $1,000 per year for qualifying emergencies without a tax penalty.
• Would permit survivors of domestic abuse to withdraw up to $10,000 (or 50% of their account balance, whichever is less) without incurring the 10% tax.
• Would increase the starting age for required minimum distributions (RMDs) from age 72 to age 75 effective 2032.
• Would permit the current tax credit for individual contributions to retirement plans to be received as a government contribution to the plan (instead of cash as part of a tax return) of up to 50% of the individual’s contribution or $2,000, whichever is greater.
• Would provide an eligible employer of 100 or fewer employees with a tax credit equal to their contributions to an employer-sponsored plan (up to the first 2% of the employee’s contributions and for their first five years of employment)