Each depositor insured to at least $250,000 per insured bank



Home > Regulation & Examinations > Bank Examinations > FDIC Enforcement Decisions and Orders




FDIC Enforcement Decisions and Orders

ED&O Home | Search Form | Text Search | ED&O Help


{{6-30-95 p.C-3698}}
   [11,006] In the Matter of First State Bank, Harrah, Oklahoma, Docket No. FDIC-94-79b (7-12-94).

Bank to cease and desist from such unsafe or unsound practices as engaging in violations of consumer laws and failing to provide adequate supervision over the bank's compliance program to prevent such violations. This order was terminated by order of the FDIC dated 4-14-95. See ¶15,995.

[.1] Consumer Laws—Compliance Officer
[.2] Violations of Law—Eliminate/Correct
[.3] Consumer Laws—Compliance Program
[.4] Real Estate Settlement Procedures Act—Compliance Required
[.5] Loans—Residential Real Estate—Data Collection
[.6] Fair Credit Reporting Act—Compliance Required
[.7] Bank Secrecy Act—Compliance Program Required
[.8] Currency Transaction Reports—Procedures Required
[.9] Loans—Residential Real Estate—Flood Insurance Requirements
[.10] Community Reinvestment Act—Written Policy Required
[.11] Loan Policy—Lending Criteria
[.12] Loans—Consumer—Documentation System Required
[.13] Shareholders—Disclosure—Cease and Desist Order

In the Matter of

FIRST STATE BANK
HARRAH, OKLAHOMA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-94-79B

   First State Bank, Harrah, Oklahoma ("Bank"), through its board of directors, having been advised of its right to the issuance and service of a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 {{9-30-94 p.C-3699}} U.S.C. § 1818(b), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC") dated June 23, 1994, whereby, solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
   The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and violations of laws and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS FURTHER ORDERED, that the Bank and its institution-affiliated parties cease and desist from the following unsafe or unsound banking practices and violations of laws and/or regulations:
   a. Engaging in violations of applicable consumer laws and/or regulations; and
   b. Failing to provide adequate supervision and direction over the Bank's compliance program to prevent violations of consumer laws and/or regulations.
   IT IS FURTHER ORDERED, that the Bank take affirmative action as follows:

      [.1] 1. (a) (i) Within 90 days from the effective date of this ORDER, the Bank shall have and thereafter retain a qualified compliance officer who shall be given stated written authority by the Bank's board of directors to implement and supervise the Bank's compliance program, including but not limited to, providing training for the Bank's employees in all consumer laws and regulations, establishing internal controls and procedures reasonably designed to prevent violations of consumer laws, and performing or supervising periodic internal audits to ascertain compliance with consumer laws and regulations and/or the Bank's compliance program. The compliance officer shall report directly to the board of directors.
         (ii) The Bank shall promptly notify the Regional Director of the FDIC's Dallas Regional Office ("Regional Director") of the identity of said compliance officer. If the compliance officer is to be added as a director or employed as a senior executive officer of the Bank, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. § 1831i, and section 303.14 of the FDIC Rules and Regulations, 12 C.F.R. § 303.14, prior to the addition of the compliance officer to such position.
       (b) The Bank's compliance officer shall be evaluated on his ability to comply with the requirements of this ORDER and to comply with applicable consumer laws and regulations.

   [.2] 2. After the effective date of this Order, the Bank, consistent with sound banking practices, shall to the extent possible eliminate and/or correct all violations of laws and regulations existing in the Bank as of December 14, 1993, as more fully set forth on pages 2 through 2-a-13 and pages 3 and 3-a of the Compliance Report. In addition, the Bank shall ensure its future compliance with all applicable laws and regulations.

    [.3] 3. (a) Within 90 days from the effective date of this ORDER, the Bank shall develop and implement a written compliance program which, at a minimum, shall expressly provide for:
         (i) Comprehensive training in consumer laws conducted at least once a year for all Bank employees whose duties and responsibilities include the need to comply with consumer laws and regulations; and,
         (ii) Procedures for monitoring the Bank's compliance with consumer laws, including an internal audit of the Bank's compliance program to be performed or supervised by the compliance officer each calendar quarter. The compliance officer shall report the results of said audit to the Bank's board of directors, and the Bank's board of directors shall record the results of said audit and any recommendations by the compliance officer and/or the board of directors in the board of directors's minutes of the meeting;
       (b) The board of directors shall approve the written compliance program and/or any {{9-30-94 p.C-3700}}subsequent modification thereto, which approval shall be recorded in the minutes of the board of directors. Thereafter, the Bank, and its successors and assigns shall follow the written compliance program and/or any subsequent modification thereto.
       (c) As used herein, "compliance program" means a consciously planned and organized effort to meet the Bank's compliance responsibilities in a comprehensive manner on an ongoing basis.

   [.4] 4. Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that the Bank provides to applicable credit applicants the Special Information Booklet, Good Faith Estimate of Closing Costs, Mortgage Servicing Disclosures, and to require the use of the Uniform Settlement Statement (Form HUD-1) in all transactions covered by the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq., and Part 3500 of Regulations X of the Department of Housing and Urban Development, 24 C.F.R. Part 3500.

    [.5] 5. (a) Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures for requesting and retaining data on home purchase loan applicants as required by section 338.7 of the FDIC Rules and Regulations, 12 C.F.R. § 338.7.
       (b) Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that information on applicants for residential real estate loans is properly recorded as required by section 338.8 of the FDIC Rules and Regulations, 12 C.F.R. § 338.8.

    [.6] 6. (a) Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that the Bank notifies loan applicants of action taken pursuant to section 202.9(a) of the Regulation B of the Board of Governors of the Federal Reserve System as required by section 202.9(a) of Regulation B, 12 C.F.R. § 202.9(a);
       (b) Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that the Bank informs loan applicants when credit is denied and/or costs increased based, either wholly or in part, upon information obtained from a consumer reporting agency and supply the loan applicant the name and address of the reporting agency as required by section 615(a) of the Fair Credit Reporting Act, 15 U.S.C. § 1681m.

   [.7] 7. Within 90 days from the effective date of this ORDER, the Bank shall develop and implement a written Bank Secrecy Act compliance program in accordance with the provisions of section 326.8(c)(2) of the FDIC Rules and Regulations, 12 C.F.R. § 326.8(c)(2), to ensure monitoring and independent testing for compliance with the provisions of the Bank Secrecy Act, 31 U.S.C. §§ 5311-5326, is conducted by bank personnel or by an outside party, and to provide training for appropriate personnel as required by 12 C.F.R. § 326.8(c)(4).

    [.8] 8. (a) Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that required Currency Transaction Reports are filed in all applicable transactions as required by section 103.22(a) of the Department of the Treasury Regulations, 31 C.F.R. § 103.22(a).
       (b) Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures to comply with section 103.29(a) of the Department of the Treasury Regulations, 31 C.F.R. § 103.29(a), including, but not limited to, ensuring that all required information is maintained on the chronological logs of transactions.

   [.9] 9. Within 90 days from the effective date of this ORDER, the Bank shall develop and implement procedures to ensure that, for all extensions of credit secured by improved real estate or a mobile home, the Bank maintains sufficient records to indicate the method used by the Bank to determine whether the extensions of credit fall within the provisions of section 339.3 or section 339.4 of the FDIC Rules and Regulations, 12 C.F.R. § 339.3 or § 339.4, including, but not limited to:
       (a) The date and complete panel number of the Federal Emergency Management Agency map used;
       (b) The date flood maps were reviewed; and
       (c) Insuring that flood insurance coverage is obtained when required.

    [.10] 10. (a) Within 120 days from the effective date of this ORDER, the Bank shall adopt a written Community Reinvestment Act ("CRA") policy which:
    {{9-30-94 p.C-3701}}
       (i) Provides for CRA goals and objectives, and employee training;
       (ii) Provides a methodology for periodic self-assessment of the Bank's CRA performance.
       (iii) Ensures that an ongoing analysis and ascertainment of the credit and credit-related service needs of the community takes place pursuant to the terms and provisions of the Community Reinvestment Act, 12 U.S.C. §§ 2901-2907, and Part 345 of the FDIC Rules and Regulations, 12 C.F.R. Part 345;
       (iv) Provides for a periodic review of the Bank's community delineation; and
       (v) Provides for a routine review of the geographic distribution of the Bank's loan applications, extensions of credit and credit denials.
       (b) Such a policy should also include:
       (i) A provision providing for the oversight and involvement of the board of directors in the CRA process. The board of directors's minutes shall document all discussion and review of the Bank's CRA-related activity;
       (ii) A formal strategy designed to inform the community of the Bank's available credit products;
       (iii) Internal review of advertising efforts to ensure all areas of the delineated community are made aware of the Bank's credit services and deposit products;
       (iv) A formal strategy to effectively ascertain community credit needs by direct contact with various community members. Outreach with groups representing low or moderate income groups should be in proportion to their percentage of the total population. The results of such contacts should be documented;
       (v) Increased geographical analysis of the geographic distribution of credit applications, denials, and loans. The results of this analysis should be reviewed by the board of directors and incorporated into the CRA process;
       (vi) Implementation of policies, procedures, and training to ensure that the Bank does not discriminate in the granting of credit. The policies, procedures, and training should be reviewed by the board of directors; and
       (vii) A more active role by the board of directors in supporting and development or implementation of specific projects promoting economic revitalization and growth. Board involvement should include establishing a working relationship with government and private sector representatives to identify opportunities for the Bank's involvement in addressing community development needs.

   [.11] 11. Within 90 days from the effective date of this ORDER, the Bank shall revise its written lending policy to establish definite lending criteria such as debt-to-income and loan-to-collateral values to ensure that all loan applicants are evaluated in an equal manner.

    [.12] 12. (a) Notwithstanding the requirements set forth in any of the preceding paragraphs, within 90 days after the effective date of this ORDER, the Bank shall establish a consumer loan review system ("System") to review the Bank's consumer loan documentation, including but not limited to disclosure statements and adverse action notices, and to identify, categorize, and correct errors contained in such documents prior to dissemination to loan applicants.
       (b) The System shall provide that the review of each document shall be by an individual, other than the preparer of the document, who is knowledgeable of Federal and State consumer laws and regulations.

   [.13] 13. Following the effective date of this ORDER, the Bank shall send to its shareholders a description of this ORDER, (a) in conjunction with the Bank's next shareholder communication, and also (b) in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the FDIC, Registration and Disclosure Unit, 550 17th Street, N.W., Washington, D.C. 20429-9990 for review at least 20 days prior to dissemination to shareholders. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.
   14. Within 30 days after the end of the {{9-30-94 p.C-3702}}first calendar quarter following the effective date of this ORDER, and within 30 days after the end of each successive calendar quarter, the Bank shall furnish written progress reports to the Regional Director detailing the form and manner of any action taken to secure compliance with this ORDER and the results thereof. All progress reports and other written responses to this ORDER shall be reviewed by the board of directors of the Bank and made a part of the minutes of the board meeting. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director has released the Bank in writing from making additional reports.
   The effective date of this ORDER shall be 10 days after the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank and its institution-affiliated parties.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Dated at Dallas, Texas, this 12th day of July, 1994.
   Pursuant to delegated authority.

ED&O Home | Search Form | Text Search | ED&O Help

Last Updated 6/6/2003 legal@fdic.gov