#2021-33, October 22, 2021

Biden Administration, Democratic Leadership Revise IRS Reporting Proposal: Banker Advocacy Still Needed

This week, Congressional Democratic Leadership and the Biden administration endorsed a revised IRS reporting proposal that increases the threshold from $600 to $10,000.  Under the revised proposal, banks would be required to report information on gross inflows and outflows for all accounts above the $10,000 threshold.  In addition, the negotiators also indicated that the new language includes carve-outs for “wage and salary earners and federal program beneficiaries.”

Members of Congress from both sides of the aisle have criticized the reporting proposal, with bills introduced in the House and Senate to block it and a group of House Republicans calling on the Biden administration to formally withdraw it. 

Despite these recent changes, MBA remains strongly opposed to the IRS reporting proposal as we continue to believe it raises concerns regarding customer privacy and data security, increased compliance costs, and potential damage to customer relationships for community banks across America.  We strongly encourage all member bankers to contact your members of Congress through the links below to express your opposition to the revised reporting proposal.  The ICBA and ABA websites also include resources for consumers to oppose the proposal and we encourage you to direct any bank customers who raise concerns to these resources.

ACTION NEEDED: All member bankers are urged to contact Congress in opposition to the IRS reporting proposal.  The American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) have sample letters to send to your Representatives and Senators.  Both groups also have resources to share with your customers to encourage them to oppose this proposal as well. To access the ABA resources, click here, to access the ICBA resources, click here.

NCUA Approves MBA-Opposed CUSO Lending Authority Expansion

In a 2-1 vote earlier this week, the National Credit Union Administration (NCUA) board approved an MBA-opposed final rule significantly expanding the lending activity for credit union service organizations (CUSOs).  Under the final rule, CUSOs, which the NCUA has no authority to supervise or examine, can originate all types of loans that a federal credit union may originate, including auto loans and payday loans.

NCUA Chairman Todd Harper, who voted against finalizing the rule, expressed significant criticisms, warning that it will likely “open the door to predatory scams” and could lead to further losses in the credit union insurance fund. He also stated that the rule benefits large credit unions at the expense of smaller ones.  Since CUSOs are allowed to serve individuals who are not members of a credit union, the expanded authority would further undermine credit union field-of-membership restrictions, which is one of the central justifications for their tax-exempt status.

To read more, click here.

Federal Banking Regulators Urge Continued LIBOR Transition

This week, the federal and state banking regulatory agencies issues a joint statement emphasizing that supervised institutions are expected to continue to transition away from LIBOR ahead of the scheduled December 31, 2021, sunset of several LIBOR provisions.  The statement notes that, “failure to adequately prepare for LIBOR’s discontinuance could undermine financial stability and institutions’ safety and soundness and create litigation, operational and consumer protection risks.”

The statement also includes several issues banks should consider when selecting a reference rate.  These include understanding how the chosen reference rate is constructed and being aware of any fragilities associated with it and the markets that underlie it.  In addition, banks should develop and implement a transition plan for communicating with consumers, clients and counterparties, as well as ensure that systems and operational capabilities will be ready for transition to a replacement reference rate after LIBOR’s discontinuation.

To read the joint statement, click here.