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Overdrafts
The Electronic Funds Transfer Act, as implemented by the Federal Reserve’s Regulation E, governs transfers initi-
ated through automated teller machines (“ATMs”), point-of-sale terminals, and other electronic banking services.
Regulation E prohibits financial institutions from assessing an overdraft fee for paying ATM and one-time point-of-
sale debit card transactions, unless the customer affirmatively opts in to the overdraft service for those types of
transactions. The opt-in provision establishes requirements for clear disclosure of fees and terms of overdraft
services for ATM and one-time debit card transactions. The rule does not apply to other types of transactions, such
as check, automated clearinghouse (“ACH”) and recurring debit card transactions. Additionally, in November 2010,
the FDIC issued its Overdraft Guidance on automated overdraft service programs to ensure that a bank mitigates the
risks associated with offering automated overdraft payment programs and complies with all consumer protection laws
and regulations. The procedural changes and fee adjustments necessitated by those regulatory changes resulted in
lower overdraft income for the Company, and could further adversely impact non-interest income in the future.
Consumer Financial Protection and Financial Privacy
Dodd-Frank created the Consumer Finance Protection Bureau (the “CFPB”) as an independent entity with broad
rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit
products, residential mortgages, home-equity loans and credit cards. The CFPB’s functions include investigating
consumer complaints, conducting market research, rulemaking, supervising and examining bank consumer
transactions, and enforcing rules related to consumer financial products and services. CFPB regulations and
guidance apply to all financial institutions, including the Bank, although only banks with $10 billion or more in
assets are subject to examination by the CFPB. Banks with less than $10 billion in assets, including the Bank, will
continue to be examined for compliance by their primary federal banking agency.
In January 2013, the CFPB issued final regulations governing primarily consumer mortgage lending. One rule
imposes additional requirements on lenders, including rules designed to require lenders to ensure borrowers’ ability
to repay their mortgages. The CFPB also finalized a rule on escrow accounts for higher priced mortgage loans and a
rule expanding the scope of the high-cost mortgage provision in the Truth in Lending Act. The CFPB also issued
final rules implementing provisions of the Dodd-Frank Act that relate to mortgage servicing. In November 2013, the
CFPB issued a final rule on integrated mortgage disclosures under the Truth in Lending Act and the Real Estate
Settlement Procedures Act, compliance with which is required by August 1, 2015.
The CFPB also has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks,
including, among other things, the authority to prohibit “unfair, deceptive or abusive” acts and practices. Abusive
acts or practices are defined as those that materially interfere with a consumer’s ability to understand a term or
condition of a consumer financial product or service or take unreasonable advantage of a consumer’s: (i) lack of
financial savvy, (ii) inability to protect himself in the selection or use of consumer financial products or services, or
(iii) reasonable reliance on a covered entity to act in the consumer’s interests.
The Bank continues to be subject to numerous other federal and state consumer protection laws that extensively
govern its relationship with its customers. These laws include the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited
Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement
Procedures Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Service Members
Civil Relief Act, and respective state-law counterparts to these laws, as well as state usury laws and laws regarding
unfair and deceptive acts and practices. These and other federal laws, among other things, require disclosures of the
cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit
transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair,
deceptive and abusive practices, restrict the Company’s ability to raise interest rates and subject the Company to
substantial regulatory oversight.
In addition, the Bank, like all other financial institutions, is required to maintain the privacy of its customers’ non-
public, personal information. Such privacy requirements direct financial institutions to: (i) provide notice to
customers regarding privacy policies and practices; (ii) inform customers regarding the conditions under which their
