2017 Annual Report

I. Management’s Discussion and Analysis

The Year in Review

DEPOSITOR AND CONSUMER PROTECTION

A major component of the FDIC’s mission is to ensure that financial institutions treat consumers and depositors fairly, and operate in compliance with federal consumer protection, anti-discrimination, and community reinvestment laws. The FDIC also promotes economic inclusion to build and strengthen positive connections between insured financial institutions and consumers, depositors, small businesses, and communities.

Rulemaking and Guidance

Community Reinvestment Act

In May 2017, the FDIC released revised publicly available examination procedures to align with internal guidance for Full and Limited Scope CRA Assessment Areas. These examination procedures provide instructions for examiners to follow when determining which assessment areas(s) should receive a full scope review and provide guidance on how to address assessment areas not selected for full scope review within a CRA performance evaluation. Assessment areas that are not reviewed using the full examination procedures are referred to as limited scope assessment areas.

In November 2017, the FDIC, OCC, and FRB issued a final rule amending their respective Community Reinvestment Act (CRA) regulations primarily to conform to changes made by the CFPB to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). In particular, the final rule revises the definitions of “home mortgage loan” and “consumer loan” in the agencies’ CRA regulations, as well as the public file content requirements. These revisions will maintain consistency between the CRA regulations and the recent changes to Regulation C, which generally became effective on January 1, 2018. In addition, the final rule contains technical revisions and removes obsolete references to the Neighborhood Stabilization Program.

Home Mortgage Disclosure Act

In August 2017, the FDIC, with the other FFIEC members, issued HMDA Examiner Transaction Testing Guidelines. To support the evaluation of financial institutions’ compliance with HMDA’s requirements, the agencies’ examiners will use these guidelines in assessing the accuracy of the HMDA data that financial institutions record and report. Used in conjunction with HMDA examination procedures, the guidelines describe how examiners validate the accuracy of HMDA data and the circumstances in which examiners may direct institutions to correct and resubmit HMDA data in connection with HMDA rules.

In October 2017, the FDIC, FRB, and OCC issued a list of Designated Key HMDA Data Fields for examination staff to prioritize when validating HMDA data in accordance with the guidelines.  The agencies will focus examination-related testing of HMDA data on certain agency-designated “key fields” considered most important to ensuring the integrity of analyses of overall HMDA data.

Promoting Economic Inclusion

The FDIC is strongly committed to promoting consumer access to a broad array of banking products to meet consumer financial needs. To promote financial access to responsible and sustainable products offered by IDIs, the FDIC:

• Conducts research on the unbanked and underbanked populations;
• Engages in research and development on models of products meeting the needs of lower-income consumers;
• Supports partnerships to promote consumer access to and use of banking services;
• Advances financial education and literacy; and
• Facilitates partnerships to support community and small business development.

Advisory Committee on Economic Inclusion

The Advisory Committee on Economic Inclusion (ComE-IN) provides the FDIC with advice and recommendations on important initiatives focused on expanding access to mainstream banking services to underserved populations. This may include reviewing basic retail financial services such as low-cost, safe transaction accounts; affordable small-dollar loans; savings accounts; and other services that promote individual asset accumulation and financial stability, and may also include exploring demand-side factors such as consumers’ perceptions of mainstream financial institutions.

The ComE-IN met twice during 2017. The April 27, 2017 meeting reviewed discussions from the FDIC’s Economic Inclusion Summit, explored methods for evaluating neighborhood access to bank branches, and assessed resources for affordable mortgage lending. The October 18, 2017 meeting featured panel discussions on Safe Accounts, the 2016 FDIC Bank Survey results, economic inclusion for persons with disabilities, and research on neighborhood access to bank branches.

Economic Inclusion Summit

The FDIC held an Economic Inclusion Summit on April 26, 2017. The day-long event convened representatives from banks, community organizations, and researchers to discuss developments related to economic inclusion as well as next steps for the field.

FDIC National Survey of Unbanked and Underbanked Households and Related Research

As part of its ongoing commitment to expanding economic inclusion in the United States, the FDIC works to fill the research and data gap regarding household participation in mainstream banking and the use of nonbank financial services. In addition, Section 7 of the Federal Deposit Insurance Reform Conforming Amendments Act of 2005 mandates that the FDIC regularly report on underserved populations and bank efforts to bring individuals and families into the conventional banking system.  In response, the FDIC regularly conducts and reports on surveys of households and banks to inform the public and enhance the understanding of financial institutions, policymakers, regulators, researchers, academics, and others.

During 2017, the FDIC conducted survey research and analysis in partnership with the U.S. Census Bureau to understand the terms and conditions of basic, entry-level checking accounts from FDIC-insured institutions, with the survey questions embedded in the FDIC Small Business Lending Survey. The survey asked about eligibility, costs, balance requirements, and other details about basic, entry-level checking and savings accounts, as well as prepaid debit card programs offered by banks. Findings from the analysis were made public on October 18, 2017, at a meeting of the ComE-IN.

In 2017, the FDIC also conducted an analysis to better understand residential neighborhood access to full-service bank branches.  This work culminated on October 18, 2017, with a public presentation of an analysis of residential bank access in all metropolitan areas of the United States, at the same meeting of the ComE-IN. The presentation focused on identifying residential neighborhoods that had both relatively less convenient access to bank branches and concentrations of population segments that research has shown to disproportionately rely on branches to access their account. Examples of populations known through the 2015 FDIC National Survey of Unbanked and Underbanked Households to have a relatively high reliance on bank branches include older households, lower-income households, and households with lower educational attainment.

Community and Small Business Development and Affordable Mortgage Lending

In 2017, the FDIC provided technical assistance to banks and community organizations through more than 125 outreach events designed to increase shared knowledge and support collaboration between financial institutions and other community, housing, and small business development resources and to improve knowledge about the Community Reinvestment Act.

The FDIC’s work emphasized sharing information to support bank efforts to provide prudent access to responsible, affordable mortgage credit. Late in 2016, the FDIC released the Affordable Mortgage Lending Guide, a three-part resource to help community banks identify affordable mortgage products. Part 1: Federal Agencies and Government Sponsored Enterprises and Part II: State Housing Finance Agencies were released in 2016. Part III: Federal Home Loan Banks was released in April 2017. Part II was updated in July 2017, and Part I is scheduled to be updated in early 2018.

As part of this effort, the FDIC also launched the Affordable Mortgage Lending Center, a website that houses these publications and other resources. Together these resources provide a comprehensive overview of the programs and products available to community banks to support affordable mortgage lending, particularly to low- and moderate-income borrowers. By year-end 2017, the Affordable Mortgage Lending Center:

• Had a 400 percent increase in subscribers from year-end 2016 to over 9,000;
• Experienced more than 10,000 downloads since inception; and
• Received more than 50,000 page views since inception.

Also in 2017, the FDIC, other federal regulators, and federal and state housing agencies hosted 19 affordable mortgage lending forums and conducted 35 outreach activities and events to offer technical assistance to help expand access to mortgage credit for low- and moderate-income households. Community Affairs staff in every Region exhibited at a State Bankers Association Conference. The FDIC also offered information about the Affordable Mortgage Lending Guide and website through participation in national conferences, including the Independent Community Bankers Association Conference and the American Bankers Association’s National Conference for Community Bankers, and presented at the Council of Community Bankers Association Executives’ annual meeting in March 2017.

In addition, the FDIC sponsored sessions with interagency partners covering basic and advanced CRA training for banks. The agencies also offered CRA basics for community-based organizations, as well as seminars on establishing effective bank-community collaborations for community development in more than 45 communities. The FDIC focused on encouraging community development initiatives in rural communities. This work included workshops that highlighted housing needs and programs, economic development programs, and community development financial institution collaborations, including those serving Native American communities.

Advancing Financial Education

Financial education helps consumers understand and use bank products effectively and sustain a banking relationship over time. The FDIC continued to be a leader in developing high-quality, free financial education resources and pursuing collaborations to use those tools to educate the public. In particular, the FDIC designed strategies to reach two particular segments of the population that the National Survey of Unbanked and Underbanked Consumers revealed are disproportionately unbanked and underbanked: low- and moderate-income young people and persons with disabilities. The FDIC’s work during 2017 focusing on young people was also consistent with the Financial Literacy and Education Commission’s focus on Starting Early for Financial Success.

Youth Financial Education

Recognizing the promise of hands-on learning approaches, the FDIC’s youth work centered on helping banks understand strategies to connect financial education to savings accounts. On March 28, 2017, the FDIC released the Youth Savings Pilot report which examines the experiences of 21 diverse banks in designing and implementing youth savings programs. The report describes promising practices banks can use to develop or expand their own youth savings programs. The report is accessible through the FDIC’s new Youth Banking Resource Center website, which had more than 11,000 page views between its launch in late March and the end of December. The release of the report was followed by a webinar to communicate key learnings from the pilot to financial institutions.

The FDIC also launched the Youth Banking Network to support banks as they work with school and nonprofit partners to develop youth savings programs using the knowledge gained from the pilot. The FDIC convened three network conference calls that focused on topics of interest, including program design and financial education delivery. Bankers and other experts shared their experiences and promising practices. The FDIC provided periodic assistance to members in response to specific questions.

The FDIC launched an updated version of the Teacher Online Resource Center. The site was redesigned to allow educators to more easily find Money Smart for Young People and other relevant resources. New videos provide a quick overview of the curriculum tools. Other enhancements to the site include links to relevant resources that can support the delivery of financial education in the classroom. The site had more than 35,000 page views during 2017.

The FDIC pursued strategies to improve financial education and access to mainstream financial services for youth participating in youth employment programs, including those funded through the Workforce Innovation and Opportunity Act (WIOA). For workforce providers and their partners teaching financial education, the FDIC developed a tool to map Money Smart to WIOA’s financial education element. The FDIC also released a supplement to Money Smart designed to help prepare youth to open their first savings or transactional accounts. As a member of the Financial Literacy and Education Commission, the FDIC helped develop two resource guides for financial institutions and youth employment program providers to discuss opportunities of mutual benefit.

The FDIC led three webinars in collaboration with the Department of Labor to increase awareness of Money Smart among organizations that receive federal funding for youth employment. In addition, the FDIC participated in three regional events in collaboration with the Department of Labor and Federal Reserve Banks to strengthen the capacity of workforce development organizations in working with financial institutions on financial capability initiatives. The FDIC was selected to hold a “quick shop” and a panel presentation at two national workforce association meetings.

The FDIC’s Money Smart Alliance is a network of diverse organizations that use Money Smart to provide financial education training to organizations, consumers, and small businesses. The FDIC hosted a national webinar on February 28, 2017, to discuss the Money Smart Alliance and opportunities to join. The FDIC website also now features a searchable database of the Alliance members to help facilitate collaborations among organizations to use Money Smart and to help consumers find training. FDIC Community Affairs staff also continued to provide technical assistance to the Alliance members to support their implementation of Money Smart. For example, on June 28, 2017, a peer-to-peer learning webinar for Alliance members featured representatives of a financial institution and a non-profit organization discussing how they use Money Smart. A total of 350 organizations joined the Money Smart Alliance during 2017. A total of 614 organizations have renewed memberships or joined the Alliance since the inception of the new enrollment process in early 2016. Money Smart for Small Business was used by 297 of these Alliance members.

Financial Education for Persons with Disabilities

The FDIC emphasized strategies to promote economic inclusion for persons with disabilities, given this population is disproportionally unbanked and underbanked. As one element of these strategies, the FDIC expanded efforts with local partners through 15 community events to bring banks and organizations representing persons with disabilities together at the state and local levels.

Together with the CFPB, the FDIC hosted a meeting of organizations that support persons with disabilities at Gallaudet University in May 2017. The organizations are part of the CFPB’s Focus on Disabilities cohort and together they learned about the CFPB’s Your Money, Your Goals toolkit and the FDIC’s Money Smart financial education program. The meeting was followed by two in-person trainings and two webinars to further assist members of the cohort advance financial capability for persons with disabilities.

The FDIC revised its Guide to Presenting Money Smart for Adults to include updated information to help instructors support participants with disabilities, including more tips about reasonable accommodations and sample language to include on registration forms. Also, the FDIC released an Instructor’s Guide Supplement including four scenarios that feature individuals with disabilities dealing with a financial situation in their lives that can be used with any financial education curriculum.

Money Smart for Adults

The FDIC began to revise and update the instructor-led Money Smart for Adults curriculum to ensure accuracy and relevance. Five organizations, including two banks, tested three of the draft redeveloped modules, providing the FDIC with valuable information that helped inform the redevelopment of the remaining modules. All of the modules in the redeveloped curriculum will be tested and released in 2018.

Money Smart for Small Business

The FDIC continues to highlight the Money Smart for Small Business curriculum with a focus on informational events for bankers, community organizations, and entrepreneurs, and on increasing partnerships at the state and local levels for small business access to credit resources. In collaboration with diverse partners, particularly the Small Business Administration (SBA) and its partner network – including the Small Business Development Centers, Women’s Business Centers, and SCORE Association chapters – the FDIC convened forums and roundtables featuring safe small business products and services and provided information and technical assistance to support initiatives geared to increase access to capital for small businesses. In 2017, Community Affairs staff completed 92 events and activities primarily focused on small business.

Partnerships for Access to Mainstream Banking

The FDIC supported community development and economic inclusion partnerships at the local level by providing technical assistance and information resources throughout the country, with a focus on unbanked and underbanked households and low- and moderate-income communities. Community Affairs staff support economic inclusion through work with the Alliances for Economic Inclusion (AEI), Bank On initiatives, and other coalitions originated by local and state governments, and in collaboration with federal partners and many local and national non-profit organizations. The FDIC also partners with other financial regulatory agencies to provide information and technical assistance on community development to banks and community leaders across the country.

In the 12 AEI communities and in other areas, the FDIC helped working groups of bankers and community leaders develop responses to the financial capability and services needs in their communities. To integrate financial capability into community services more effectively, the FDIC supported seminars and training sessions for community service providers and asset-building organizations, workshops for financial coaches and counselors, promotion of savings opportunities for low- and moderate-income people and communities, initiatives to expand access to savings accounts for all ages, outreach to bring larger numbers of people to expanded tax preparation assistance sites, and education for business owners to help them become bankable.

The FDIC worked in 10 Bank On communities to convene 18 forums and roundtables with almost 900 participants that helped advance strategies to expand access to safe and affordable deposit accounts and engage unbanked and underbanked consumers. The FDIC provided technical assistance to bankers, coalition leaders, and others interested in understanding opportunities for banking services designed to meet the needs of the unbanked and underbanked.

In total, the FDIC sponsored more than 165 events during 2017 that provided opportunities for partners to collaborate on increasing access to bank accounts and credit services, opportunities to build savings and improve credit histories, and initiatives to significantly strengthen the financial capability of community service providers who directly serve low- and moderate-income consumers and small businesses.

Consumer Complaints and Inquiries

The FDIC helps consumers by receiving, investigating, and responding to consumer complaints about FDIC-supervised institutions and answering inquiries about banking laws and regulations, FDIC operations, and other related topics. In addition, the FDIC provides analytical reports and information on complaint data for internal and external use, and conducts outreach activities to educate consumers.

The FDIC recognizes that consumer complaints and inquiries play an important role in the development of strong public and supervisory policy. Assessing and resolving these matters helps the agency identify trends or problems affecting consumer rights, understand the public perception of consumer protection issues, formulate policy that aids consumers, and foster confidence in the banking system by educating consumers about the protection they receive under certain consumer protection laws and regulations.

Consumer Complaints by Product and Issue

The FDIC receives complaints and inquiries by telephone, fax, U.S. mail, email, and online through the FDIC’s website. In 2017, the FDIC handled 16,817 written and telephonic complaints and inquiries. Of this total, 9,460 related to FDIC-supervised institutions. The FDIC responded to 97 percent of these complaints within time frames established by corporate policy, and acknowledged 100 percent of all consumer complaints and inquiries within 14 days. As part of the complaint and inquiry handling process, the FDIC works with the other federal financial regulatory agencies to ensure that complaints and inquiries are forwarded to the appropriate agencies for response. The FDIC carefully analyzes the products and issues involved in complaints about FDIC-supervised institutions. The number of complaints received about a specific bank product and issue can serve as a red flag to prompt further review of practices that may raise consumer protection or supervisory concerns.

In 2017, the four most frequently identified consumer product complaints and inquiries about FDIC-supervised institutions concerned consumer loans (19 percent), checking accounts (15 percent), residential real estate (13 percent), and credit cards (13 percent). Consumer loan complaints and inquiries most frequently described issues with reporting erroneous information and collection practices, while the issues most commonly cited in correspondence about checking accounts were concerns with account discrepancies or transaction errors. Complaints and inquiries about residential real estate related to disclosures and repossession/foreclosure. Consumer correspondences about credit cards most often raised issues regarding billing disputes/error resolution and reporting erroneous information to the credit reporting agencies.

The FDIC also investigated 81 Fair Lending complaints alleging discrimination during 2017. The number of discrimination complaints investigated has fluctuated over the past several years but averaged approximately 80 complaints per year between 2012 and 2017. Over this period, nearly 43 percent of the complaints investigated alleged discrimination based on the race, color, national origin, or ethnicity of the applicant or borrower; 18 percent related to discrimination allegations based on age; nearly 14 percent involved the sex of the borrower or applicant; and roughly 7 percent concerned disability.

Consumer refunds generally involve the financial institution offering a voluntary credit to the consumer’s account, often as a direct result of complaint investigations and identification of a banking error or violation of law. In 2017, consumers received more than $669,000 in refunds from financial institutions as a result of the assistance provided by the FDIC’s Consumer Affairs Program.

Public Awareness of Deposit Insurance Coverage

An important part of the FDIC’s deposit insurance mission is to ensure that bankers and consumers have access to accurate information about the FDIC’s rules for deposit insurance coverage. The FDIC has an extensive deposit insurance education program consisting of seminars for bankers, electronic tools for estimating deposit insurance coverage, and written and electronic information targeted to both bankers and consumers.

The FDIC continued its efforts to educate bankers and consumers about the rules and requirements for FDIC insurance coverage during 2017. For example, as of December 31, 2017, the FDIC conducted four telephone seminars for bankers on deposit insurance coverage, reaching an estimated 5,513 bankers participating at approximately 1,575 bank sites throughout the country. The FDIC also features deposit insurance training videos that are available on the FDIC’s website and YouTube channel.

As of December 31, 2017, the FDIC Call Center received 91,918 telephone calls, of which approximately 36,767 were identified as deposit insurance-related inquiries. The FDIC Call Center handled approximately 18,655 inquiries and Deposit Insurance subject matter experts (SME) handled 18,112 complex telephone calls identifying a total of 49,277 deposit insurance issues. In addition to telephone inquiries about deposit insurance coverage, the FDIC received 781 written inquiries from consumers and bankers identifying a total of 1,771 deposit insurance issues. Of these inquiries, 100 percent received responses within two weeks, as required by corporate policy.