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FDIC Enforcement Decisions and Orders

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   [11,177] In the Matter of Bank of Hollandale, Hollandale, Miss., Docket No. 95-52b (5-11-95).

   Bank is ordered to appoint and retain a qualified consumer compliance officer; reimburse borrowers affected by non-real estate consumer loans in which the annual percentage rate and finance charge were understated; develop and implement a written compliance program; establish a consumer loan review system; develop and implement procedures for requesting and retaining data on home purchase loan applications; eliminate and/or correct all violations of law and/or regulations identified in an FDIC compliance report; train employees on consumer protection laws; develop and implement a written Bank Secrecy Act compliance program; review its Community Reinvestment Act delineated community to ensure that the delineation is reasonable; notify shareholders of this order; and furnish the FDIC regional manager with progress reports every third month detailing actions taken to comply with this order.
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   [.1] Consumer Laws—Compliance Officer Required
   [.2] Truth in Lending Act—Understated Annual Percentage Rates and Finance Charges—Reimburse Borrowers
   [.3] Consumer Laws—Compliance Program—Minimum Requirements
   [.4] Consumer Loan Review System
   [.5] Fair Lending—Home Purchase Applicants—Data Collection
   [.6] Violations of Law—Eliminate/Correct
   [.7] Consumer Laws—Employee Training
   [.8] Bank Secrecy Act—Compliance Program Required
   [.9] Community Reinvestment Act—Delineation of Community
   [.10] Shareholders—Disclosure—Cease and Desist Order
   [.11] Cease and Desist Order—Progress Reports

In the Matter of

BANK OF HOLLANDALE
HOLLANDALE, MISSISSIPPI
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-95-52b

   Bank of Hollandale, Hollandale, Mississippi ("Bank"), having been advised of its right to 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)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), 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 May 3, 1995, solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe and 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 had committed violations of law and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following ORDER:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED that the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of affairs of the Bank, cease and desist from the following unsafe or unsound banking practices:
   (a) Operating in violation of the following laws and regulations:

       1. The Truth in Lending Act, 15 U.S.C. § 1601, et seq., and Regulation Z of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 226, promulgated thereunder;
       2. The Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601–2617, and Regulation X of the Secretary of the Department of Housing and Urban Development, 24 C.F.R. Part 3500, promulgated thereunder;
       3. The Equal Credit Opportunity Act, 15 U.S.C. §§ 1691–1691f, and Regulation B of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 202, promulgated thereunder;
       4. The Community Reinvestment Act of 1977, 12 U.S.C. §§ 2901–2905, and Part 345 of the FDIC Rules and Regulations, 12 C.F.R. Part 345, promulgated thereunder;
       5. Sections 326.8(c)(1), 326.8(c)(2), 326.8(c)(4), 338.7(a)(1)(ii), and 339.5 of the FDIC Rules and Regulations, 12 C.F.R. §§326.8(c)(1), 326.8(c)(2), 326.8(c)(4), 338.7(a)(1)(ii), and 339.5;
       6. Sections 103.22(b) and 103.22(c) of the Treasury Department's Financial Recordkeeping Regulation, 31 C.F.R. §§ 103.22(b) and 103.22(c);
       7. Section 615(a) of the Fair Credit Reporting Act, 15 U.S.C. § 1618m(a); and
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       8. Section 42(c) of the Act, 12 U.S.C. § 1831r-1(c);
   (b) Operating with management whose policies and practices are detrimental to the Bank; and
   (c) Operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank.
   IT IS FURTHER ORDERED that the Bank take affirmative action as follows:

    [.1] 1. (a) Within 30 days of the effective date of this ORDER, the board of directors of the Bank shall appoint and retain a qualified compliance officer to oversee and coordinate the Bank's overall compliance efforts, including the training and supervision of all affected personnel in compliance-related matters. If the compliance officer is to be added as a director or a senior executive officer of the Bank, the Bank shall comply with the requirements of section 32 of the Act, 12 U.S.C. § 1831(i), and section 303.14 of the FDIC Rules and Regulations, 12 C.F.R. § 303.14, prior to the addition of the compliance officer.
       (b) Each calendar quarter, the compliance officer shall perform, or supervise the performance of, an internal audit of the Bank's CRA and consumer laws compliance programs, and shall report the results of the audit to the Bank's board of directors. The Bank's board of directors shall record the results of said audit and any recommendation by the compliance officer and/or the board in the board's minutes.
       (c) The compliance officer shall be assessed on his/her ability to:
         (i) Comply with the requirements of this ORDER;
         (ii) Improve and thereafter maintain the Bank's compliance program in a safe and sound manner; and
         (iii) Comply with applicable state and federal laws and regulations.

    [.2] 2. (a) Within 60 days of the effective date of this ORDER, the Bank shall conduct and complete a file search identifying all outstanding non-real estate consumer loans originated since the April 10, 1992, FDIC Compliance Examination of the Bank and all terminated non-real estate consumer loans originated since September 6, 1992, in which the annual percentage rate and finance charge were understated due to the Bank's inclusion of "miscellaneous fees" in the amount financed rather than in the finance charge as required by the provisions of section 226.4 of Regulation Z of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 226.4 for non-real estate transactions. The Bank shall spread across the minutes of the board of directors the loans identified by the file search and the method(s) employed by the Bank in conducting the search; and
       (b) Within 60 days of the effective date of this ORDER, the Bank shall complete full reimbursement to all affected borrowers identified by the above file search in accordance with section 108(e) of the Truth in Lending Act, 15 U.S.C. § 1607(e), and the FDIC Statement of Policy, "Administrative Enforcement of the Truth in Lending Act - Restitution."

    [.3] 3. (a) Within 60 days of the effective date of this ORDER, the Bank shall develop and implement a written compliance program which, at a minimum, shall expressly provide for the following:
         (i) A comprehensive consumer laws training program for all compliance personnel which shall be conducted at least every 12 calendar months.
         (ii) The establishment of non-discriminatory lending criteria.
         (iii) The establishment of loan application procedures.
         (iv) The establishment of a consumer loan review system to review all consumer loan documentation.
         (v) The establishment of procedures to monitor the Bank's compliance with consumer laws, the results of which should be periodically presented to the board of directors.
         (vi) The establishment of procedures to handle consumer complaints.
         (vii) The establishment of review procedures to monitor each loan officer's compliance with consumer laws.
       (b) The compliance program shall be in a form and manner acceptable to the Regional Manager as determined at subsequent examinations and/or visitations.

    [.4] 4. (a) Within 60 days of the effective {{7-31-95 p.C-4024}}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, adverse action notices, flood zone indications, written loan applications, rescission forms, and good faith estimates and to identify, categorize and correct errors contained in such documents prior to dissemination to the consumer.
       (b) The System shall provide that the reviewer of each document shall be an individual(s), other than the preparer of such documents, knowledgeable in state and federal consumer laws and regulations.
       (c) The System shall provide for a monthly written report to be furnished to the Bank's board of directors which shall identify the number of transactions reviewed and the number of transactions found to be in noncompliance with all state and federal consumer laws and regulations. A written summary of each monthly report shall be attached to the progress reports required by paragraph 10 below.

   [.5] 5. Within 60 days of 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.

   [.6] 6. Within 60 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and/or regulations which are set out on pages 2 through 2-a-7 of the FDIC Compliance Report of the Bank as of September 6, 1994. In addition, the Bank shall henceforth ensure that adequate procedures are in place to comply with all applicable laws and regulations.

    [.7] 7. (a) Within 60 days of the effective date of this ORDER, the Bank shall train all persons involved in the credit solicitation and review process on the requirements of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a)(1); Regulation B of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 202; The Truth in Lending Act, 15 U.S.C. § 1601, et seq.; Regulation Z of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 226; the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601–2617; and Regulation X of the Secretary of the Department of Housing and Urban Development, 24 C.F.R. Part 3500.
       (b) The training required in this paragraph shall be conducted at least every 12 calendar months.
       (c) The Bank may use an outside vendor/ contractor to provide the training required herein.

    [.8] 8. (a) Within 60 days after 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).
       (b) The Bank Secrecy Act compliance program shall designate a senior Bank official who shall be responsible for coordinating and monitoring day-to-day compliance with the Bank Secrecy Act, 31 U.S.C. §§ 5311–5326.
       (c) The board of directors shall approve the written Bank Secrecy Act compliance program and/or any 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 Bank Secrecy Act compliance program and/or any subsequent modification thereto.

    [.9] 9. (a) Within 60 days after the effective date of this Order, and at least annually thereafter, the Bank shall review the delineation of the local community that comprises its entire community as required by the Community Reinvestment Act of 1977, 12 U.S.C. § 2901–2905, and Part 345.3 of the FDIC Rules and Regulations, 12 C.F.R. Part 345.3, to ensure that the delineation is reasonable.
       (b) Within 60 days after the effective date of this Order and at least annually thereafter, the Bank shall review its CRA Statement and act upon any material change made in the interim at its first regular meeting after the change. Such actions {{5-31-96 p.C-4025}}shall be noted in the board of directors' minutes.

   [.10] 10. 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 Section, 550 17th Street, N.W., Washington, D.C. 24029-9990, 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.

   [.11] 11. On the fifteenth day of the second month following the effective date of this ORDER, and on the fifteenth day of every third month thereafter, the Bank shall furnish a written progress report to the Regional Manager detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Manager has released the Bank in writing from making further reports.
   The effective date of this ORDER shall be ten (10) days from the date of its issuance.
   The provisions of this ORDER shall be binding upon the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of the Bank.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision of the ORDER shall be modified, terminated, suspended, or set aside by the FDIC.
   Dated: May 11, 1995.
   Pursuant to delegated authority.

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