May 5, 2019 Via Electronic Submission (comments@fdic.gov

May 5, 2019

Via Electronic Submission ([email protected])

Robert E. Feldman, Executive Secretary

Attention: Comments

Federal Deposit Insurance Corporation

550 17th Street, N.W.

Washington, D.C. 20429

RE: 12 CFR Part 330 Proposed Rule Changes / RIN 3064-AF04

Dear Sir,

First, we want to thank the FDIC for hearing the concerns of the Covered Institutions

(CIs) regarding workability issues of FDIC Ruling Parts 330 and 370. We feel that the

proposed changes are a good step towards a more workable approach to meeting the goal

of 370 for a timely insurance determination while considering the burden placed on the

CIs to comply.

This letter will aim to answer the FDIC’s “request for comment” questions relating to the

changes proposed for FDIC Ruling Part 330, specifically regarding joint account

signature card requirements. BMO Harris Bank N.A. (the “Bank”) is generally in

agreement with the proposed changes, but has more specifically answered the FDIC’s

proposed questions below as it relates to the Bank’s operations.

1) Can IDIs, including IDIs that rely on deposit account systems designed or

maintained by third-party vendors, obtain information on account usage or

access by the co-owners of an account?

Our Response:

In some instances, specifically if the transaction is made using online banking, automated

telephone banking, or a debit card for a point of sale or ATM transaction, we can obtain

information regarding account usage by owner. However, for a check, the system would

not readily have available information as to which account owner wrote the check.

Likewise, though branch staff verifies that the customer is an authorized owner of the

account, we currently have no systematic way to capture which owner conducted the

transaction at a branch, as the transaction is completed in the system at the “account

level”, not at the “customer level”.

2) Would the proposed rule sufficiently address satisfaction of the signature card

requirement through electronic methods, given the variety of account opening

procedures used by IDIs? If not, what clarifications or changes are necessary?

Our Response:

Yes, we believe that the proposed rule accomplishes allowing IDIs to satisfy the signature

card requirement through electronic means.

3) Is any data available concerning the cost or effort that might be required for IDIs

to obtain deposit account signature cards for co-owners where a signature card is

currently not available in the deposit account records of the IDI?

Our Response:

In order to evaluate the completeness of joint signature cards, a bank can manually or

electronically review signature cards. The effort for a bank to manually review signature

cards is undetermined but could be substantial based on the number of accounts at the

bank, whether the signature cards are in paper or electronic format, where paper signature

cards are stored, and the number of full time employees needed to review each signature

card.

In order for the Bank to electronically review signature cards, we have confirmed that we

would have to build and configure an Optical Character Reader (OCR) to scan all of our

digitally imaged signature cards and identify where we are missing a signature. The cost

of building and configuring this OCR is roughly $275,000. Once the signature card

evaluation is complete, we would then have to analyze the accounts missing signatures to

identify which accounts have otherwise satisfied the signature card requirement in

accordance with the proposed changes. In the end, we anticipate still having a group of

joint account customers who do not satisfy the signature card requirement. We will need

to conduct outreach to those customers at an additional unknown cost, with an expected

response rate of only 25% or less.

4) How should the FDIC approach ensuring that a depositor does not use another

person’s personally identifiable information to establish a deposit account

without the other person’s knowledge simply to increase deposit insurance

coverage?

Our Response:

The nature of a joint account provides that both owners have the same rights to the

account. That means that both owners can withdraw all the funds or close the account

without approval from the other owners. Therefore we do not believe this to be a valid

concern, seeing as it would be very risky to add a co-owner just to increase deposit

insurance coverage, when that co-owner could close out the account at their sole

discretion.

5) Are there any additional factors that the FDIC should consider in determining

whether the alternatives to the proposed rule described above would better satisfy

the agency’s policy objectives of reducing regulatory burden and promoting the

prompt payment of deposit insurance consistent with the FDI Act in the event of

an IDI’s failure?

Our Response:

Yes, the FDIC should consider additional factors that may particularly impact “aged” or

inactive accounts.

The FDIC should consider clarifying the requirements for a transaction to qualify as

evidencing usage of a deposit account. For example, clarification is needed around

whether a transaction satisfies the signature card requirement when the transaction is

“dated” such that the Bank no longer retains evidence of the transaction on its account

activity records.

Additionally, the FDIC should consider providing clarification around IDIs providing

evidence that they have issued a mechanism for accessing the account including timing of

issuance of the access device. For example, if an access device was issued but has

expired and no replacement was issued, the FDIC should provide clarification as to

whether the original issuance of an access device satisfies the signature card requirement.

Examples of access devices may include debit cards and online or automated telephone

banking system usernames and passwords.

Finally, we would like to note that the proposed changes, though providing more options

to meet the requirements of Rule 330, are still a net increase in the work the Bank must

perform to analyze the joint account population. However, we anticipate that these

changes will decrease the impact to customers and minimize the number of joint account

owners we would need to contact.

6) Are there other alternatives that the FDIC should consider that would better

satisfy those objectives?

Our Response:

We propose that the ruling should be further clarified to allow for other means of proving

access to a joint account, including having automated telephone banking and online

banking access. Online banking access is distinguishable by owner based on the owner’s

unique user name and password. Not all joint accounts choose to have online banking

access, and not all have debit cards. Additionally, savings accounts do not typically come

with a debit card. Specifically including automated telephone banking and online banking

access as a means of satisfying the signature card requirement, similar to debit card

issuance and transactional history, would help us evaluate joint accounts to minimize the

number of accounts that may require remediation/customer outreach and decrease the

impact to customers.

One key question we have is around the spirit of the requirement. Is the spirit of the joint

account requirement to ensure a customer knows their account is designated as a joint

account, or is it to confirm that all owners have the same equal rights to the account? If

it’s the latter, then the proposed rule should be revised to provide for system coding to be

sufficient evidence of a joint account.

At our Bank when customers open a joint account, they must provide personally

identifiable information for all owners of the account. The account is given an internal

system “relationship code” of “JNT” which stands for joint. That relationship code

dictates the type of access the owners of the account have. In the case of a JNT

relationship code, all parties listed as owners on the account have equal access rights to

the account. The relationship code is how we identify the population of joint accounts.

This coding should be sufficient evidence that the customers intended to open an account

as a joint account as it is based on all owners’ information at account opening.

If the spirit of the proposed changes is to ensure that customers know they are joint

account owners, we propose another option to satisfy the signature card requirement.

That option would be to communicate with those joint account customers for whom we

do not have evidence of joint access to ensure they are aware that they are joint account

owners. For example, we could highlight to the customer that they have a joint account

and provide the customer with information regarding how they can sign up for online

banking access. By doing so, the customer is made aware they have joint ownership

rights but it is up to them to take the next step to initiate account access via online

banking, or contact the Bank to get the account type changed.

7) Does the proposed rule minimize the potential for depositor confusion over the

requirements for joint accounts?

Our Response:

We believe the proposed rule provides more options for the joint account requirements

but the clarifications and recommendations described above should be considered to

minimize potential depositor confusion. Without these changes, we believe that

customers may be confused or concerned upon the receipt of communications from the

Bank requesting missing signature card information.

The Bank suggests, and respectfully requests, that the FDIC amend Rule 330 by

incorporating the additional clarifications and recommendations stated above into the

published proposal.

Thank you once again for the opportunity to provide input on this important matter.

Please do not hesitate to contact me if you have any questions or would like to discuss the

above.

Sincerely,

Daniela O’Leary-Gill

Chief Operating Officer

BMO Financial Corp.