Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer

EIP – Round 2

The second round of the Economic Impact Payments (EIP) has arrived. NACHA and the IRS have updated some of their FAQs to reflect some of the nuances with this second round.

NACHA Updated FAQs can be found here.

IRS updated FAQs can be found here and an educational poster can be found here.

This second round of payments is being directed to account information provided on the 2019 tax return, non-filer registration or entered on Get My Payment before December 22, 2020. The payment information cannot be changed for this second round. If an individual doesn’t receive a payment and they are eligible for one, it may be claimed on their 2020 tax return as the Recovery Rebate Credit.

As discussed by the updated NACHA FAQs, the second round EIPs are exempt from garnishment as specifically set forth in the Consolidated Appropriations Act, 2021. This is different than the first round of EIPs under the CARES Act. The U.S. Treasury will use the encoding of “XX” in the first two positions of the Company Entry Description field to designate the EIPs by ACH as exempt. Please refer to the U.S. Treasury’s Green Book for additional information on the processing of Treasury payments that are exempt.

Also, with regards to an EIP to a deceased individual, under the COVID Relief Package, deceased individuals that died on or after Jan. 1, 2020, are eligible for EIPs (but may be subject to other eligibility criteria). RDFIs may post received EIP with the assumption that has been screened for eligibility. 

If the second Economic Impact Payment was sent to an account that is closed or is no longer active the financial institution must, by law, return the payment to the IRS, they cannot hold and issue the payment to an individual when the account is no longer active. The IRS is advising people that if they don’t receive the full Economic Impact Payment they should file their 2020 tax return electronically and claim the Recovery Rebate Credit on their tax return to get their payment and any refund as quickly as possible.

The U.S. Department of the Treasury and the Federal Reserve System hosted a webinar on the second round of federal economic impact payments to individual taxpayers and important information on the distribution of cash to financial institutions. The recording can be found here.


Paycheck Protection Program (PPP) Policy Updates

The Small Business Administration (SBA) has issued interim final rules in response to the PPP second draw loans and other changes made in response to the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), this interim final rule can be found here.

Additionally, the SBA issued guidance on assessing capital for minority, underserved, veteran and women-owned business concerns. The Economic Aid Act set aside funds for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders. As discussed in this guidance, to efficiently and effectively implement the Economic Aid Act and to ensure increased access to PPP for minority, underserved, veteran, and women-owned business concerns, SBA is undertaking certain steps, which includes accepting PPP loan applications only from community financial institutions for at least the first two days when the PPP loan portal re-opens.

Please note that the SBA has added a demographic reporting section on the PPP borrower application. PPP lenders should encourage borrowers to report the optional information that has been added to better inform lenders and SBA on the success of our efforts to reach underserved, minority-owned, veteran-owned, and women-owned businesses.

With regard to the PPP second draw loans interim final rule, (found here) in general the same terms, conditions and requirements as First Draw PPP Loans. These include, but are not limited to the following terms: the guarantee percentage is 100 percent; no collateral will be required; no personal guarantees will be required; the interest rate will be 100 basis points or one percent, calculated on a non-compounding, non-adjustable basis; the maturity is five years; all loans will be processed by all lenders under delegated authority and lenders will be permitted to rely on certifications of the borrower to determine the borrower’s eligibility and use of loan proceeds.

To be eligible for the Second Draw PPP loans the borrower must have 300 or fewer employees. Furthermore, the Economic Aid Act provides that, to be eligible for a Second Draw PPP Loan, the borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019. In addition, the Economic Aid Act provides that a Second Draw PPP Loan may only be made to an eligible borrower that (i) has received a First Draw PPP Loan, and (ii) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower. The borrower must have spent the full amount of its First Draw PPP Loan on eligible expenses under the PPP rules to be eligible for a Second Draw PPP Loan.

The Economic Aid Act prohibits several additional categories of borrowers from receiving a Second Draw PPP Loan. These categories of prohibited borrowers include:

  • A business concern or entity primarily engaged in political activities or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or that describes itself as a think tank in any public documents;
  • Certain entities organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or with other specified ties to the People’s Republic of China or the Special Administrative Region of Hong Kong;
  • Any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (22 U.S.C. 612);
  • A person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid Act;
  • Entities in which the President, the Vice President, the head of an Executive department, or a Member of Congress, or the spouse of such person owns, controls, or holds at least 20 percent of any class of equity;
  • A publicly-traded company, defined as an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f).

For more information, join SBA and Treasury Department officials for an overview of the new PPP features associated with the recently-passed Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act. This "Ask the Regulators" webinar will take place on Monday, January 11, at 1 p.m. CT. The presentation is open to all SBA lenders who participated in the SBA PPP lending program. Register here:


NCUA Letter to Credit Unions – Consolidated Appropriations Act, 2021

The National Credit Union Administration (NCUA) recently issued Letter to Credit Unions 21-CU-01 which provides a summary of the certain provisions of the Consolidated Appropriations Act. This Letter can be found here. Two items of note are the extension of the central liquidity facility and troubled debt restructuring provisions from the CARES Act.


NCUA Letter to FCUs – FOM

The NCUA also issued Letter to Federal Credit Unions 21-FCU-01 regarding community charter conversations and expansions. This letter can be found here. The letter provides guidance and templates to assist FCUs seeking to convert to a community field of membership or expand their existing community field of membership. Templates include business marketing plan, streamlined business and marketing plan, and pro forma financial statements.


FinCEN Advisory

The Financial Crimes Enforcement Network (FinCEN) issued advisory FIN-2020-NTC4, which can be found here. This advisory alerts financial institutions about the potential for fraud, ransomware attacks, or similar types of criminal activity related to COVID-19 vaccines and their distribution. This advisory includes instructions SAR filing instructions.


Staying safe online

The IRS issued tips to help people stay safe online that may be useful to share with members as an educational piece. These tips include: No one should reveal too much information about themselves. People can keep data secure by only providing what is necessary. This reduces online exposure to scammers and criminals. For example, birthdays, addresses, age and especially Social Security numbers are some things that should not be shared freely. In fact, people should not routinely carry a Social Security card in their wallet or purse.


Check Out RecoveryPro!

The RecoveryPro Disaster Planning Manual provides an organized approach to developing your business continuity plan. From identifying potential risks to creating emergency procedures to documenting procedures for restoring key technologies and services for your credit unions, RecoveryPro will guide you through it all.

NCUA requires all federally insured credit unions to have a written and tested disaster contingency plan. The NCUA states: “Contingency planning is crucial to the operation of each credit union. Each credit union should have a tested plan in place to ensure the smooth operation of the credit union in the event of a disruption of service for whatever cause. Examiners will continue to review and evaluate these plans at future examinations.”

RecoveryPro includes:

  • A twelve chapter Disaster Recovery Plan outline with model plan content and guidance to help you gather important information for risk assessment, plan scope, emergency procedures, human resources considerations, recovery procedures, public relations, insurance and funding information, key reference and contact information, and more.
  • A library of sample forms that can be downloaded and used to capture important information such as software and hardware inventories, risk analysis, staff and vendor contact information, facilities inventory and more.
  • Storage area allows you to upload documents (PDF, Excel, Word, etc.) and post these within RecoveryPro for easy access to procedures, system diagrams, inventory and contact lists, and more.

RecoveryPro comes in an easily customizable format to help you get critical information assembled and readily available when you need it most. Learn more about this tool here and purchase this tool here.

As always, feel free to contact me with any compliance-related questions.



<< Go to Memo List