CASH 2018 Annual Report

34 The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“Regulatory Relief Act”) Passed by Congress and signed into law on May 24, 2018, the Regulatory Relief Act includes a number of provisions that positively affect smaller banking institutions (e.g., those with less than $10 billion in assets) like the Bank. Specific provisions of the Regulatory Relief Act that benefit smaller banks include a loosening of Volcker Rule requirements (as discussed in “—Volcker Rule” below) if the bank has trading assets and trading liabilities that are less than 5% of its total assets, modifications to the “qualified mortgage” criteria under the “ability to repay” rules for certain mortgages that are held and maintained on the bank’s portfolio, and relief from certain capital requirements required by an international banking capital framework. Most significantly for the Bank, the Regulatory Relief Act also includes a provision that allows certain federal savings banks with less than $20 billion in assets, such as the Bank, to elect treatment as a national bank for most regulatory purposes without requiring a charter conversion application to the OCC. Federal savings banks that make such an election will no longer be subject to qualified thrift investment rules but may lose the ability to invest in service corporations. Anti-Money Laundering (“AML”) Laws and Regulations Continuing a trend that started with the enactment of the USA Patriot Act of 2001 (the “Patriot Act”), AML and financial transparency laws and regulations have been enhanced to impose strict standards for gathering and verifying customer information in order to ensure funds or other assets are not being placed in U.S. financial institutions to facilitate terrorist financing and laundering of funds. Among other provisions, the Patriot Act requires financial institutions to have AML programs in place and requires banking regulators to consider a holding company’s effectiveness in combating money laundering when ruling on certain merger or acquisition applications. Failure to comply with such laws and rules and to have and maintain a robust AML program can have a material adverse effect on a financial institution. Privacy The Bank is required by statute and regulation to disclose its privacy policies to its customers on an annual basis. The Bank does not share nonpublic personal information about its customers with non-affiliated third parties for marketing purposes. The Bank is also required to appropriately safeguard its customers’ personal information. Preemption Under the preemption standards established under the Dodd Frank Act for both national banks and federal savings associations, preemption of a state consumer financial law is permissible only if: (i) application of the state law would have a discriminatory effect on national banks or federal thrifts as compared to state banks; (ii) the state law is preempted under a judicial standard that requires a state consumer financial law to prevent or significantly interfere with the exercise of the national bank’s or federal thrift’s powers before it can be preempted, with such preemption determination being made by the OCC (by regulation or order) or by a court, in either case on a “case by case” basis; or (iii) the state law is preempted by another provision of federal law other than Title X of the Dodd-Frank Act. Additionally, the Dodd-Frank Act specifies that such preemption standards only apply to national banks and federal thrifts themselves, and not their non-depository institution subsidiaries or affiliates. Specifically, operating subsidiaries of national banks and federal thrifts that are not themselves chartered as a national bank or federal thrift may no longer benefit from federal preemption of state consumer financial laws, which now apply to such subsidiaries (or affiliates) to the same extent that they apply to any person, corporation or entity subject to such state laws. The Bank has one wholly owned service corporation subsidiary as of the date of this Annual Report on Form 10-K. Prohibition on Unfair, Deceptive and Abusive Acts and Practices The Bureau was created by the Dodd-Frank Act to administer and carry out the purposes and objectives of the federal consumer financial laws and to prevent evasions thereof, with respect to all financial institutions that offer financial products and services to consumers. The Bureau is also authorized to prescribe rules applicable to any covered person or service provider identifying and prohibiting acts or practices that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. The authority to prohibit “abusive” acts or practices was newly added to federal law with the passage of the Dodd-Frank Act. The Bureau has engaged in rulemaking and taken enforcement actions that directly impact the business operations of financial institutions offering consumer financial products or services including the Bank and its divisions, and is expected to adopt a regulation related to the definition of “abusive” acts or practices in the near future.