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Ceos of all of the National Banks and Federal Savings Associations, Department and Division Heads, All Examining Personnel, and Other Interested events
Overview
Work of the Comptroller associated with Currency (OCC) is issuing this guidance to describe security and soundness measures that nationwide banking institutions and federal cost cost savings associations (collectively, banking institutions) should follow when they provide taxation products that are refund-related. This guidance replaces OCC Bulletin 2010-7 (February 18, 2010), which sent the “OCC Policy Statement on Tax Refund-Related items, ” but doesn’t supersede or amend every other OCC issuances.
Note for Community Banks
This guidance pertains to all OCC-supervised banking institutions that provide income tax refund-related services and products.
Shows
The guidance outlines security and soundness measures banking institutions should follow when they provide income tax products that are refund-related. Those measures consist of
- Making sure the lender’s board of directors keeps sound danger management policies, procedures, and methods to oversee all income tax refund-related services and products.
- Applying effective interior settings and review criteria to promote and solicitations.
- Providing disclosures that are appropriate explain material areas of the merchandise to customers.
- Applying appropriate diligence that is due sufficient procedures to make sure that tax refund-related items given by third events conform to relevant guidance.
- Making sure Bank Secrecy Act (BSA) conformity danger management systems cover income tax refund-related items.
- Supplying training programs (including certification processes) that target regulatory needs, internal policies and procedures, and duties for maintaining a compliance program that is effective.
- Keeping sufficient money and liquidity levels.
- Developing prompt and accurate administration information systems (MIS) for taxation refund-related services and products.
- Ensuring the lender’s compliance along with relevant legal guidelines, including those consumer protection that is involving.
Background
The term “tax refund-related services and products” encompasses credit services and products, deposit services and products, and settlement solutions to transfer tax-related funds. Tax refund-related items present safety that is particular soundness and compliance dangers, due to (1) their particular payment and value structures and (2) banking institutions’ reliance on third-party income tax return preparers whom communicate with customers. With appropriate customer defenses and danger management controls that target security and soundness concerns, but, the products might provide reasonable choices for clients.
Tax refund-related items can sometimes include some or most of the features that are following
- Item exists via a taxation planning solution.
- Item is predominantly provided during taxation period.
- Charges related to income tax preparation as well as other services or products are subtracted through the client’s income tax reimbursement.
- Consumer’s income tax reimbursement is employed to repay or collateralize the mortgage, or even start a deposit or prepaid account.
- Just a percentage that is small of, opened through the taxation period, stay active later on within the 12 months.
You can find three primary kinds of tax refund-related items:
Credit services and products
Tax refund-related credit services and products presently available on the market include the annotated following:
- Reimbursement expectation loans (RAL), that are short-term loans built in expectation of an tax reimbursement being qualified and compensated because of the irs (IRS) or perhaps state taxation authority. A bank makes the loan through third-party taxation preparers that provide both taxation planning solutions and RALs.
- “Holiday loans” and “pre-file” or “pay-stub” loans, that are provided through third-party income tax preparers prior to the client gets a W-2 kind when it comes to present 12 months. These loans display more credit danger than typical RALs because funds are advanced level predicated on past years’ earnings https://speedyloan.net/installment-loans-id or perhaps a pay stub that is current.
- Other bank programs that anticipate (whether or not they cannot always require) loan payment from future income income tax refund proceeds.
Deposit products and access that is prepaid
Tax refund-related deposit items presently available on the market include the transmittal of a income tax reimbursement by the relevant taxation authority 1 to (1) a small or special-purpose deposit account that the bank establishes to issue a check towards the client 2 or (2) a bank-issued prepaid access card. 3
Settlement solutions
Tax refund-related settlement solutions include the transmittal of the tax refund by the applicable taxation authority up to a bank-controlled account. The financial institution typically releases funds into the consumer after re re re payment to your taxation preparer because of its income tax preparation solutions.
Safe and Sound Methods regarding the Tax Refund-Related Items
This guidance addresses sound underwriting and system administration techniques for banking institutions offering tax refund-related services and products and it is in line with the premise that banking institutions should offer services and products that meet clients’ monetary needs on a nondiscriminatory foundation and without subjecting clients to unjust therapy.
Banking institutions’ danger administration policies, procedures, and methods for taxation refund-related items should really be (1) commensurate aided by the complexity and nature of these task; (2) in line with safe and sound banking methods and appropriate reporting demands; and (3) undertaken having an admiration of and ability to deal with all relevant customer security and reputation risk factors, in addition to appropriate conformity responsibilities, from the task.
The chance administration principles established in this guidance are split into three categories: (1) danger administration for many income tax refund-related services and products; (2) supplementary risk administration for income tax refund-related services and products involving an expansion of credit (income tax credit that is refund-related); and (3) supplementary danger management for income tax refund-related services or products for transmitting a reimbursement (taxation refund-related deposit services and products).
