With the current volatility in our regulatory environment, it’s hard to keep track of what is changing, what isn’t, what is being delayed, etc. As you get ready to look at updating your risk assessment for the new year, you will want to consider some of the following topics:
Overdrafts and Junk Fees
While regulatory pressure may have temporarily eased, scrutiny around fees such as overdraft, late fees, out-of-network ATM charges, and closing costs continues. Financial institutions should proactively review their fee structures with a focus on:
- Capping fees or limiting the number of charges
- Eliminating overdraft fees
- Reviewing representment fees
- Evaluating charge processing order (e.g., Authorize Positive/Settle Negative)
- Assessing closing costs
- Ensuring clear customer notifications and disclosures
FDIC Signage Changes
Although the compliance deadline for some elements has been extended to March 1, 2026, financial institutions should begin preparing for the updated FDIC signage requirements to ensure full compliance.
Key Requirements:
- Physical Signage: Compliance Date – May 1, 2025
- Must be posted at each location where deposits are typically received, or
- In a visible area within the deposit-taking space (if non-deposit products are not offered).
- Digital Signage (for deposit-taking channels): Compliance Date – March 1, 2026
- Must appear on homepages, landing/login pages, and any pages where deposit transactions occur
- Include signage within mobile apps
- ATMs must display signage (physical signs are permitted for ATMs installed before 1/1/2025)
- Non-Deposit Product Disclosures: Compliance Date – March 1, 2026
- Required wherever non-deposit products are offered alongside insured deposit services
Fair Lending
Despite some regulatory rollbacks, third-party relationships—particularly in lending—remain under heightened scrutiny. Many financial institutions have expanded their loan portfolios through indirect lending, relying on auto dealers, solar companies, and other intermediaries to initiate contact with borrowers and, in some cases, conduct preliminary underwriting. Additionally, rising labor costs and the pressure to remain competitive have led some institutions to outsource underwriting and origination functions. These practices elevate the importance of monitoring third-party activities to ensure compliance with fair lending laws and to mitigate associated risks.
Key considerations:
- Ensure third parties provide fair lending training aligned with ECOA and FHA, and that staff are equipped to avoid discriminatory practices.
- Clarify whether the third party will conduct fair lending analysis or if this responsibility lies solely with the financial institution. Ensure appropriate data sharing to support oversight.
- Recognize the potential impact on your institution’s reputation if a third party engages in unfair or unlawful practices.
- Verify third-party practices comply with ECOA, FHA, and UDAAP. Ensure controls are in place to support consistent, compliant decision-making.
- Your service agreement should clearly outline each party’s compliance obligations, training expectations, and audit rights.
Banking Cannabis Businesses
While state-level legalization has opened opportunities, federal prohibition continues to pose legal and regulatory risks. For financial institutions, cannabis banking can be a high-risk, high-reward proposition requiring a strong compliance and risk framework.
Key considerations:
- Due Diligence & Monitoring: Conduct thorough onboarding and maintain ongoing transaction monitoring to ensure compliance with evolving regulatory guidelines.
- Integrated Risk Strategy: Financial institutions must adopt a comprehensive risk approach that includes:
- Rigorous Risk Assessment: Evaluate operational, financial, reputational, and counterparty risks, and set limits on exposure and client concentrations.
- Tailored Risk Management: Align oversight efforts to the unique volatility of the cannabis industry, including enhanced monitoring and contingency plans for business disruption.
- Mitigation Measures: Develop detailed policies and procedures, design customized services and agreements, engage the Board of Directors, and maintain open communication with regulators.
- Business Case Development: Cannabis banking should align with institutional financial objectives to justify the resources and risk involved.
ACH, FedNow & Real-Time Payments: Risk Considerations
As faster payment systems like FedNow and real-time payments (RTP) evolve, financial institutions must reassess their risk management and operational readiness.
Key areas of focus:
- Risk Assessment: Reevaluate fraud, settlement, and liquidity risks associated with faster, often irreversible transactions.
- Real-Time Monitoring: Implement advanced fraud detection tools, transaction velocity controls, and immediate alert systems to manage the speed of payments.
- Operational Readiness: Ensure systems, staffing, and vendors can support 24/7 processing with resilient infrastructure and rapid exception handling.
- Customer Communication: Clearly disclose the risks and limitations of instant payments to manage expectations and reduce liability.
If you need further guidance or have any questions, 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.
