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[¶11,655] In the Matter of North Milwaukee State Bank, Milwaukee, Wisconsin, Docket No. 99-020b (9-10-99)
A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices. (This order was terminated by order of the FDIC dated 3-8-01; see ¶16,275.)
[.1] Consumer and Civil Rights Laws—Eliminate Violations
[.2] Truth in Lending Act—Compliance Required
[.3] Truth in Lending Act—Monetary Reimbursement to Consumer
[.4] Home Mortgage Disclosure Act—Compliance Required
[.5] Loan Application Register—Review and Correct
[.6] Consultants—Qualifications Specified
[.7] Bank Operations—Training Program Required
[.8] Compliance Officer—Reviews Loan Applications Requiring Consumer Disclosures
[.9] Shareholders—Disclosure of Cease and Desist Order Required
In the Matter of
NORTH MILWAUKEE STATE BANK
MILWAUKEE, WISCONSIN
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-99-020b
North Milwaukee State Bank, Milwaukee, Wisconsin ("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 or regulation alleged to have been committed by the Bank, and of its right to a hearing on the charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 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 July 21, 1999, whereby, solely for the purpose of this proceeding and without admitting or denying the charges of unsafe or unsound banking practices and violations of laws or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
Whereas the Board of Directors of the Bank entered into a Stipulation and Consent to the Issuance of an Order to Cease and Desist on October 17, 1997, and the FDIC issued an Order to Cease and Desist on December 19, 1997 ("1997 Order").
Whereas the FDIC's Compliance Report of Examination of the Bank as of August 17, 1998 ("Compliance Report") alleged substantial non-compliance, the 1997 Order remains in effect.
Whereas, in addition to non-compliance with the 1997 Order, the Compliance Report alleged violations of applicable Consumer Laws. For purposes of this ORDER, "Consumer Laws" means those laws and regulations referenced in the FDIC Compliance Examination Manual, including the laws and regulations referred to in the Compliance Report.
The FDIC considered these matters and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and had violated laws or regulations. The FDIC, therefore, accepted
{{12-31-99 p.C-4795}}the CONSENT AGREEMENT and issued the following:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns, cease and desist from the following unsafe or unsound banking practices and violations of laws or regulations:
(a) Violating applicable Consumer Laws as set forth in the FDIC's Compliance Report; and
(b) Failing to provide adequate supervision of the Bank's compliance program to prevent violations of the Consumer Laws.
IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:
[.1] 1. The Bank shall eliminate or correct all violations of the Consumer Laws set forth on pages 26 through 50 of the Compliance Report. The Bank shall eliminate or correct these violations in the time frames set forth in this ORDER. In addition, the Bank shall adopt and implement systems and controls to ensure its future compliance with the Consumer Laws.
[.2] 2. Within 30 days after the effective date of this ORDER, the Bank shall comply with the Truth in Lending Act, 15 U.S.C. §§ 1601-1693, and Regulation Z of the Board of Governors of the Federal Reserve System ("Regulation Z"), 12 C.F.R. Part 226, by adopting and implementing systems and controls to ensure its compliance. These systems and controls shall have specific provisions for accurate disclosure of the annual percentage rate and finance charge for automobile refinance loans involving charges of processing fees as required by sections 226.18(e) and 226.18(d) of Regulation Z, 12 C.F.R. §§ 226.18(e) and 226.18(d).
[.3] 3. Within 30 days after the effective date of this ORDER, if it has not already done so, the Bank shall identify, notify, and provide monetary adjustments to all consumers affected by the Bank's failure to provide complete and accurate disclosures on automobile refinance loans containing charges of processing fees under section 108(e) of the Truth In Lending Act, 15 U.S.C. § 1607(e), consistent with the following guidelines:
(a)The Bank shall calculate monetary reimbursements to consumers using the examples in the Compliance Report as a guide.
(b) The Bank shall send the monetary reimbursement to the consumers together with the letter or other text submitted by the Bank pursuant to this paragraph and approved by the Regional Director of the Chicago Regional Office of the FDIC's Division of Compliance and Consumer Affairs ("Regional Director").
(c) The Bank shall notify the Regional Director within 10 days after the completion of the reimbursement program, and shall maintain a complete record of the reimbursement program for review at the FDIC's next compliance examination or visitation.
[.4] 4. Within 30 days after the effective date of this ORDER, the Bank shall comply with the Home Mortgage Disclosure Act, 12 U.S.C. §§ 2801-2810, and Regulation C of the Board of Governors of the Federal Reserve System ("Regulation C"), 12 C.F.R. Part 203, by adopting and implementing systems and controls to ensure compliance. These systems and controls shall have specific provisions to accurately collect and record required data on applications for, and originations, purchases and refinancings of, home purchase and home improvement loans on a register in the format required by section 203.4(a) of Regulation C, 12 C.F.R. § 203.4(a). The data required by section 203.4(a) shall be recorded within 30 days of the applicable transaction. The accuracy of the data shall be verified within ten days of the end of the month in which the data was recorded.
[.5] 5. Within 60 days after the effective date of this ORDER, the Bank shall review and correct all entries on the Bank's 1997 loan application register ("LAR"). The Bank shall retain a copy of the corrected LAR and the returned certified mail receipt in its files for review by the FDIC.
[.6] 6. Within 30 days after the effective date of this ORDER, the Bank shall seek the assistance of a qualified consultant or third party. If the Bank has already engaged a consultant or third party by the effective date of this ORDER, the Bank shall comply with
{{12-31-99 p.C-4796}}this paragraph within 30 days after the effective date of this ORDER. The Board of Directors, with the assistance of a qualified consultant or third party, shall review the Bank's current compliance program for sufficiency, and shall implement procedures to ensure that Bank personnel adhere to the established compliance program. The Bank shall notify the Regional Director in writing of the qualifications of the consultant or third party within 30 days of engaging the services of said consultant or third party. The Bank shall base the determination of whether the consultant or third party is qualified within the meaning of this paragraph upon the following:
(a) The consultant or third party shall have an established history in the consumer compliance field.
(b) The consultant or third party shall have experience in establishing and managing an effective compliance program.
(c) The consultant or third party shall have experience in providing training to bank personnel in the regulations and prohibitions of the Consumer Laws. Nothing in this ORDER shall be interpreted as relieving the Board of Directors of its fiduciary duties with respect to compliance with this ORDER and the 1997 Order.
7. Within 30 days after the effective date of this ORDER, the Bank shall establish, with the assistance of a consultant or third party, the qualifications of a competent compliance officer and/or a compliance process which uses the services of a consultant or third party in lieu of a compliance officer, to meet the requirements of paragraph 15(a) of the 1997 Order. The Bank's Board of Directors shall work with a consultant or third party to assess the effectiveness of a compliance officer and/or a compliance process which is based on the use of a consultant and/or third party in achieving compliance with this ORDER, the 1997 Order, and the Consumer Laws.
[.7] 8. Within 60 days after the effective date of this ORDER, the consultant shall assist the Bank in establishing and implementing a monthly training program with a time schedule for training. At a minimum, the following training shall take place:
(a) Lending personnel involved with any aspect of taking applications, the evaluation of applications, or extension of credit, shall be trained in the areas of Truth in Lending, Real Estate Settlement Procedures, Equal Credit Opportunity, Fair Housing, and Home Mortgage Disclosure.
(b) Operations personnel involved with placing account holds shall receive training on the Expedited Funds Availability Act.
[.8] 9. Within 30 days after the effective date of this ORDER, the Bank shall devise a system whereby at least 25 percent (or other representative sampling not less than 25 percent) of (a) the Bank's Expedited Funds Availability account hold notices, and (b) each loan officer's volume of loan applications requiring consumer disclosures (whether resulting in an incomplete or withdrawn application, origination or denial of a loan) are reviewed on a monthly basis by the Bank's compliance officer and/or qualified consultant or third party retained by the Bank. Such reviews shall be performed within 30 days of the previous month's end. "Loan applications requiring consumer disclosures" within the meaning of this paragraph references applications/loans requiring compliance with Truth in Lending, Real Estate Settlement Procedures, Equal Credit Opportunity, Fair Housing, and/or Home Mortgage Disclosure. Should errors involving a pattern or practice be noted in the Bank's account hold notices or in a loan officer's representative sample, Bank personnel/loan officer(s) involved in the errors shall be trained in the implicated area(s) within 30 days of the review to avoid errors in the future. As used in this paragraph, a pattern or practice shall be deemed to exist where there are more than isolated occurrences involving violations. Documentation showing that the reviews (and training, as indicated) required by this paragraph have been conducted, and the results thereof, shall be retained by the Bank for review at its next compliance examination.
10. As of the effective date of this ORDER, a written progress report detailing the form and manner of any action taken to secure compliance with this ORDER and the 1997 Order shall be presented to the Board of Directors at its regularly scheduled monthly meeting, and shall be recorded in the minutes of said meeting(s). Within 10 days after each monthly Board meeting following the effective date of this ORDER, the Bank shall furnish its monthly written progress report to the Regional Director on the action taken by the Bank during the previous month toward compliance with this ORDER and the 1997 Order. Progress reports shall be signed by at least one outside Board
{{9-30-01 p.C-4797}}member prior to submission to the Regional Director. As used in this paragraph, outside Board member is defined to mean a member of the Board who is not an active officer of the Bank. Reports as required by paragraph 18 of the 1997 Order shall be filed monthly, concurrent, and may be included in the reports required by this ORDER.
[.9] 11. 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 (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, notice, or statement shall be sent to the FDIC, ATTN: Registration and Disclosure Section, 550 17th Street, N.W. (F-640), 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.
The effective date of this ORDER shall be ten days after the date of its issuance by the FDIC.
The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated parties, and any successors and assigns thereof.
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.
Pursuant to delegated authority.
Dated this 10th day of September, 1999.
