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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 for the Comptroller for the 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 income tax refund-related items. This guidance replaces OCC Bulletin 2010-7 (18, 2010), which transmitted the “OCC Policy Statement on Tax Refund-Related Products, ” but does not supersede or amend any other OCC issuances february.
Note for Community Banks
This guidance relates to all OCC-supervised banks that provide income tax refund-related items.
Features
The guidance outlines security and soundness measures banking institutions should follow when they provide income tax refund-related services and products. Those measures consist of
- Making certain the financial institution’s board of directors keeps sound risk administration policies, procedures, and techniques to oversee all taxation refund-related services and products.
- Applying effective controls that are internal review requirements for advertising and solicitations.
- Providing disclosures that are appropriate explain material components of these products to customers.
- Applying appropriate diligence that is due sufficient procedures to make sure that tax refund-related services and products given by 3rd parties adhere to relevant guidance.
- Making certain Bank Secrecy Act (BSA) conformity danger management systems cover taxation products that are refund-related.
- Supplying training programs (including certification processes) that address regulatory needs, interior policies and procedures, and obligations for keeping a compliance program that is effective.
- Keeping sufficient money and liquidity levels.
- Developing prompt and accurate administration information systems (MIS) for income tax refund-related items.
- Ensuring the financial institution’s conformity along with applicable legal guidelines, including those involving customer security.
Background
The term “tax refund-related products” encompasses credit services and products, deposit items, and settlement solutions to transmit tax-related funds. Tax refund-related items present safety that is particular soundness and conformity dangers, due to (1) their particular payment and expense structures and (2) banking institutions’ reliance on third-party income tax return preparers whom connect to customers. With appropriate customer defenses and danger management controls that target safety and soundness issues, nevertheless, the products may possibly provide options that are reasonable clients.
Tax refund-related items can sometimes include some or every one of the after features:
- Item is offered through a income tax planning solution.
- Item is predominantly provided during taxation period.
- Costs connected with income tax planning along with other services or products are subtracted through the client’s income tax reimbursement.
- Client’s tax reimbursement is employed to repay or collateralize the mortgage, or even to start a deposit or prepaid account.
- Just a percentage that is small of, exposed through the income tax period, remain active later on into the 12 months.
You will find three primary kinds of taxation refund-related items:
Credit items
Tax refund-related credit services and products presently available on the market include the immediate following:
- Reimbursement expectation loans (RAL), that are short-term loans manufactured in expectation of a income tax reimbursement being qualified and compensated by the irs (IRS) or perhaps state taxation authority. The mortgage is manufactured with a bank through third-party taxation preparers that provide both taxation planning services and RALs.
- “Holiday loans” and “pre-file” or “pay-stub” loans, that are provided through third-party taxation preparers ahead of the client receives a W-2 type when it comes to year that is current. These loans display more credit risk than typical RALs because funds are advanced level according to past years’ earnings or perhaps a present pay stub.
- Other bank programs that anticipate (even when they don’t fundamentally require) loan payment from future tax refund proceeds.
Deposit products and prepaid access cards
Tax refund-related deposit services and products presently available on the market include the transmittal of the taxation refund by the applicable income tax authority 1 to (1) a finite or special-purpose deposit account that the bank establishes to issue a check towards the client 2 or (2) a bank-issued access card that is prepaid. 3
Settlement services
Tax refund-related settlement solutions include the transmittal of the income tax reimbursement because of the relevant income tax authority up to an account that is bank-controlled. The financial institution typically releases funds towards the client after re payment to your income tax preparer for the taxation planning services.
Safe and Sound Techniques regarding the Tax Refund-Related Items
This guidance addresses noise underwriting and system administration techniques for banking institutions that provide tax refund-related services and products and is in line with the premise that banking institutions should provide services and products that meet clients’ economic requirements for a nondiscriminatory foundation and without subjecting clients to treatment that is unfair.
Banking institutions’ risk administration policies, procedures, and methods for income tax refund-related items must be (1) commensurate with all the complexity and nature of these task; (2) in line https://speedyloan.net/installment-loans-in/ with safe and banking that is sound and appropriate reporting needs; and (3) undertaken by having an admiration of and ability to deal with all relevant consumer security and reputation danger factors, along with appropriate conformity responsibilities, from the task.
The danger management principles established in this guidance are split into three groups: (1) danger administration for several income tax refund-related services and products; (2) supplementary danger administration for income tax refund-related items involving an expansion of credit (taxation refund-related credit services and products); and (3) supplementary danger management for taxation refund-related services or products for transmitting a reimbursement (taxation refund-related deposit items).