ISSUE 3 2024-25 PRESIDENT’S MESSAGE Staying Engaged in the Political Process OFFICIAL PUBLICATION OF THE NEBRASKA BANKERS ASSOCIATION
233 S. 13th St., Ste. 700 Lincoln, NE 68508 Phone: (402) 474-1555 • Fax: (402) 474-2946 www.nebankers.org NBA BOARD OF DIRECTORS RICHARD BAIER President and CEO richard.baier@nebankers.org KARA HEIDEMAN Director of Communications and Marketing kara.heideman@nebankers.org NBA EDITORIAL STAFF BRAD KOEHN NBA Chair Midwest Bank, Lincoln MARK LINVILLE NBA Chair-Elect First State Bank, Randolph LYDELL WOODBURY NBA Past Chair First Nebraska Bank, Valley KRISTY BARTAK Nebraska State Bank & Trust Co. Broken Bow NICK BAXTER FNBO Omaha CORY BERGT Wells Fargo Bank, N.A. Lincoln KRYSTI CUNNINGHAM Security National Bank of Omaha Omaha CURTIS HEAPY Western Nebraska Bank Curtis ZAC HOLOCH Cornerstone Bank York JEFF KANGER First State Bank Nebraska Lincoln ZAC KARPF Platte Valley Bank Scottsbluff JOHN KOTOUC American National Bank Omaha KRISTEN MARSHALL-MASER Five Points Bank Grand Island JEREMY McHUGH Corn Growers State Bank Murdock AARON OTTEN Elkhorn Valley Bank & Trust Norfolk KEVIN POSTIER Henderson State Bank Henderson JAY PRESTIPINO First Interstate Bank Omaha LUKE RICKERTSEN Flatwater Bank Gothenburg BRIAN SCHWEIGER U.S. Bank, N.A. Lincoln RYNE SEAMAN Cattle Bank & Trust Seward TRAVIS SEARS Union Bank & Trust Co. Lincoln RYAN STEFFENSMEIER First Community Bank Beemer KELLY TRAMBLY South Central State Bank Campbell NICK VRBA RVR Bank Fremont ANDREW WITT Dundee Bank Omaha 4 NEBRASKA BANKER
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EDITORIAL: Nebraska Banker seeks to provide news and information relevant to Nebraska and other news and information of direct interest to members of the Nebraska Bankers Association. Statement of fact and opinion are made on the responsibility of the authors alone and do not represent the opinion or endorsement of the NBA. Articles may be reproduced with written permission only. ADVERTISEMENTS: The publication of advertisements does not necessarily represent endorsement of those products or services by the NBA. The editor reserves the right to refuse any advertisement. SUBSCRIPTION: Subscription to the magazine, which began bimonthly publication in May 2006, is included in membership fees to the NBA. ©2025 The Nebraska Bankers Association (NBA) | The newsLINK Group LLC. All rights reserved. Nebraska Banker is published six times per year by The newsLINK Group LLC for NBA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of NBA, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Nebraska Banker is a collective work, and as such, some articles are submitted by authors who are independent of NBA. While a first-print policy is encouraged, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. CONTENTS 12 15 8 PRESIDENT’S MESSAGE STAYING ENGAGED IN THE POLITICAL PROCESS Richard J. Baier, President and CEO, Nebraska Bankers Association 12 WASHINGTON UPDATE IT’S TIME FOR A REGULATORY RESET Rob Nichols, President and CEO, American Bankers Association 15 COUNSELOR’S CORNER DATA BREACH SAFE HARBOR STATUTES Baird Holm LLP 21 UNDERSTANDING THE RISKS AND REWARDS OF AI Chad Knutson, Chief Executive Officer, SBS CyberSecurity 26 ACCOUNT AGREEMENTS AND COMPLIANCE CONSIDERATIONS FOR BANKS Jefferson Sorley, Jur.M, CRCM, Director of Reviews & Products, Compliance Alliance 30 2025 EDUCATION CALENDAR 6 NEBRASKA BANKER
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PRESIDENT’S MESSAGE The holidays of 2024 are in the rearview mirror, and our collective attention has shifted toward changes occurring in both the banking and political arenas. As we know all too well, political decisions made at the state and federal levels can have a profound impact on our industry and our ability to serve our customers effectively. Regardless of your preferred candidates or political Staying Engaged in the Political Process Richard J. Baier, President and CEO Nebraska Bankers Association 8 NEBRASKA BANKER
philosophy, staying engaged in the political process remains vital. Let me begin at the state level by congratulating long-time NBA General Counsel Bob Hallstrom on his election to represent District 1 in the Nebraska Legislature. Bob, his family and his supporters gave an extraordinary effort throughout his campaign. I know he will bring the same dedication and commitment to serving the citizens of Nebraska as an elected official. During the 109th Legislature, Bob will serve as the vice chairperson of the Banking, Commerce and Insurance Committee and will also be a member of the Judiciary Committee. Bob’s connection to the NBA dates back more than 42 years, starting when he joined the law firm contracted by the NBA to provide legal and government relations services. In 2000, following the passing of Bill Brandt, the firm’s principal and NBA general counsel, Bob stepped into that role. He served in that capacity until he began his campaign for legislature, when Ryan McIntosh was elevated to the position. During his time with the NBA, Bob was instrumental in the drafting and passage of hundreds of legislative bills benefiting the banking sector. Equally as important, Bob’s deep knowledge and strong personal relationships allowed him to stop or mitigate anti-banking legislation on multiple occasions. Bob’s transition from lobbyist to legislator is unprecedented and marks a new chapter for the NBA. To that end, the NBA has restructured its approach to lobbying and government relations to limit any real or perceived conflicts of interest. For more than 60 years, the NBA has contracted with Brandt, Horan, Hallstrom & Stilmock law firm and its predecessors for lobbying, legal and compliance services. The current partners are Bob, Ryan and NBA Associate General Counsel Jerry Stilmock. To ensure a clear, thick wall between the NBA’s government relations efforts and Bob’s new role as a lawmaker, the NBA recently restructured its contract with the firm. The firm will continue to provide legal services for the NBA and compliance services for our members. Meanwhile, Stilmock McIntosh Government Relations — a new entity formed by Jerry and Ryan — will take over the association’s lobbying and government relations work. This arrangement ensures that Bob can continue assisting members with compliance questions while remaining uninvolved in government relations activities. Thank you to everyone involved for effectively navigating this process. I am confident this new arrangement provides the best possible lobbying, legal and compliance services for the NBA and our members. Nebraska is also fortunate to have two bankers serving in the Unicameral. Sen. Rob Clements, As we know all too well, political decisions made at the state and federal levels can have a profound impact on our industry and our ability to serve our customers effectively. 9 NEBRASKA BANKER
American Exchange Bank in Elmwood, was re-elected by his peers as chair of the Legislature’s powerful Appropriations Committee. Sen. Mike Jacobson of NebraskaLand Bank in North Platte was elected to serve as chair of the Banking, Commerce and Insurance Committee. The NBA is grateful for the knowledge, commitment, leadership and sacrifices these elected leaders provide our state. Turning to the federal level, President Trump moved quickly to assemble a team of cabinet leaders and staff focused on helping to carry out the vision for his “America First” agenda. We anticipate significant shifts in leadership and policy at all of the banking regulators. The Consumer Financial Protection Bureau, the Office of the Comptroller of Currency and the Federal Deposit Insurance Corporation will all have new leaders. However, immediate changes at the Federal Reserve remain somewhat unclear due to the lack of current openings on the Federal Reserve Board of Governors. The NBA has submitted letters to the new Treasury Secretary as well as to members within the Presidential administration to encourage the appointment of current Federal Reserve Gov. Miki Bowman to the role of vice chair for supervision at the Federal Reserve. These transitions at the regulatory agencies open the door to the review or repeal of the rules and regulations proposed or adopted in recent years. Legal challenges to many of these regulations add another layer of complexity. The NBA staff will work diligently to stay on top of these changes and will keep members informed through email updates, the weekly NBA Update newsletter, member virtual updates, social media posts and other channels. LINCOLN BRUNING endacotttimmer.com 402-817-1000 Legal advice. Community banking experience. NBA members and staff with Sen. Pete Ricketts during last year’s visit to Washington, D.C. We want to bring an even larger group of bankers this year to continue strengthening our voice on Capitol Hill. With these anticipated federal changes, it’s important for bankers to be proactive about the future of our industry. We encourage you to join the NBA at the ABA Washington Summit on April 7-9 in Washington, D.C. This event provides an opportunity to meet with members of the Nebraska congressional delegation, share insights on the challenges facing our industry and advocate for policies that support the banking industry. 10 NEBRASKA BANKER
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WASHINGTON UPDATE It’s Time for a Regulatory Reset Rob Nichols, President and CEO American Bankers Association Over the last four years, the banking industry has battled an onslaught of new rules and regulatory changes that have threatened to fundamentally alter how financial institutions in this country operate. Regulators have taken a de facto “one-size-fits-all” approach to rulemaking — ignoring the diversity of bank sizes, charters and business models within the banking sector, as well as the undeniable trickle-down effects of regulations that are, on paper, only targeted toward larger institutions. For whatever reason, they have also chosen to pursue rulemakings more tied 12 NEBRASKA BANKER
to the past than the present. It’s time to stop fighting the last war and stay focused on the present and the future. ABA and the state associations have stepped up on behalf of our members, challenging misguided final rules in court wherever warranted and pushing back with facts and data to stop faulty assumptions from underpinning major regulatory changes and bogus claims about our industry from spreading. We’ve had some notable successes over the last four years, but it hasn’t been easy. As we welcome 2025, a new presidential administration and a new Congress, it’s time to reset the conversation around banking regulation. That effort began right after the election during the transition, as ABA worked to communicate our priorities to the incoming Trump administration. With leadership changeovers anticipated at the regulatory agencies following the inauguration — including at the FDIC, OCC and CFPB — we expect to have the opportunity to share our perspective with the new players and help refocus the conversation around rightsizing the supervision and regulation of the banking sector. But while we can expect some of the new regulators to pause some proposed rulemakings altogether, and Congress could use the Congressional Review Act to undo some of the most recent regulatory proposals, it’s important to remember that the new administration and new Congress will not wield a magic wand. Undoing policy changes in a durable way can take just as long as putting new regulations into place since the Administrative Procedure Act and its notice and comment procedures apply. As we welcome 2025, a new presidential administration and a new Congress, it’s time to reset the conversation around banking regulation. 13 NEBRASKA BANKER
As we have noted in our many active lawsuits, regulators have frequently flouted the APA in recent years, and partisan agendas have too often driven a rulemaking process that is supposed to be even-handed and fact-based. We have the opportunity now to get it right — by following a transparent process and by working constructively to engage policymakers of both parties in crafting common sense regulations that ensure our banking sector remains safe, sound and well-capitalized. That’s how we bring about meaningful, long-lasting change. At ABA, we are ready to roll up our sleeves and get to work together with our state alliance partners — and we need your help. We need every banker in this country to stay engaged on the issues that matter. Reach out to your members of Congress, particularly in states where freshmen lawmakers are taking office. Get to know your representatives, invite them to your bank and introduce them to your customers and your employees. Help them to understand not just the important work banks do each day but the ripple effect that the provision of credit can have in our cities, towns and neighborhoods. Finally, I invite every banker in this country to join us in Washington, D.C., April 7-9 for the 2025 ABA Washington Summit. This year’s annual gathering of bank leaders will be critically important in making sure we have a policy environment that will unleash economic growth and allow banks to serve their customers and communities. We need all of you there to make sure our industry’s voice is heard loud and clear. Email Rob at nichols@aba.com. 800.228.2581 MHM.INC Now more than ever people want self-service options. With our core integrated ITMs we can make this a reality both in the lobby and in the drive-up of your branch. SELF-SERVICE BANKING 14 NEBRASKA BANKER
COUNSELOR’S CORNER Introduction In an increasingly digital world, businesses face the constant threat of cyber breaches that jeopardize the security of personally identifiable information (PII) and protected healthcare information (PHI). As a response to this growing concern, several states in the U.S. have introduced or passed data breach safe harbor statutes to provide some level of protection for companies from class action lawsuits resulting from these breaches. Data Breach Safe Harbor Statutes Protection for Businesses in the Age of Cybersecurity Threats Baird Holm LLP 15 NEBRASKA BANKER
The Nebraska Legislature recently introduced a bill (LB 241) to provide protection from liability for cyber breaches in which PII or PHI were breached. The bill provides protection for a private entity from liability “unless the cybersecurity event was caused by willful, wanton or gross negligence on the part of the private entity.” The bill is one of several such bills which have either been passed or are under consideration by several states. Impetus for the Bill The increases in data breach class actions, ease of filing and rising settlements are just some of the motivations for this legislation. In 2017 the number of data breach class actions was under 200, while for the year 2024, the number of class actions filed were just short of 1500.¹ Each data breach notification brings a number of class actions, especially for large data breaches. A company facing notification requirements can expect a suit shortly after the letters are mailed. Data breaches are unique in that companies must disclose an event which may lead to a lawsuit. Adding to the issue, many state Attorneys General publish data breach notifications on their website. It is an easy task for a plaintiff’s attorney to find a notice, find a victim and then file complaint using a template from a prior class action. The ease of the process is inviting even more attorneys to this practice. This rise in the number of class action cases has also led to a rise in the amount the plaintiffs’ attorneys are demanding to settle the suits. Some of the bigger settlements are well known and published, such as: 1. Meta — $1.3 billion. 2. Didi Global — $1.19 billion. 3. Amazon — $877 million. It is troubling that foreign threat actors/hackers are able to wreak havoc on private entities and there is little the company can do about it after the fact. Then, to add insult to injury, plaintiff’s attorneys attempt to collect fees on behalf of affected individuals in class actions; but, the vast majority of the money is collected by the attorneys and very little, if any, actually inures to the benefit of the victims. A couple of examples are as follows: 1. In re Wright & Filippis LLC Data Security Breach Litigation class action settlement: ◦ The attorneys received a percentage of a $2.9 million settlement. ◦ The victims received credit monitoring worth an estimated $30 each. 2. Crumpton v. Octapharma Plasma Inc. Class Action settlement: ◦ The attorneys received a percentage of a $9.9 million settlement. ◦ The victims received approximately $400 to $800 based on submitted claims. 16 NEBRASKA BANKER
Zero-Day Events Threat actors are able to attack at will because of zero-day vulnerabilities. Protecting networks and information is hard, and zero-day events make security even harder. Zero-day events are vulnerabilities which are previously unknown or which have no patch available.² These are often exploited by foreign threat actors. Threat actors often scan networks and catalog exposed networks and applications. When a zero-day vulnerability is published then, it is very quick and simple for the threat actor to search their database, find a vulnerable company and exploit the vulnerability. Over the past several years, the number of zero-days tracked by the National Institute for Standards and Technology (NIST) has skyrocketed: ³ 17 NEBRASKA BANKER
NIST Statistics on Common Vulnerability and Exposures (CVE) Year Number of CVEs 2019 17305 2020 18349 2021 20155 2022 25043 2023 28817 2024 39999 A few years ago, NIST began tracking the number of CVE which are exploited. In the past three months alone the number of exploited vulnerabilities has been 33, of which nine are critical.⁴ Which means, there are exploited zero-days which even the most efficient, competent and proactive information technology staff cannot control. Current Statutes Safe harbor statutes come in two variations. The first variation provides an affirmative defense for entities who adhere to specific cybersecurity frameworks or standards to qualify for liability protection. These frameworks may include the NIST Cybersecurity Framework, the Center for Internet Security (CIS) Controls, or the International Organization for Standardization (ISO) standards. The primary goal is to reduce the financial and reputational risks associated with data breaches while promoting higher standards of data protection. The current statutes in the first category include: • Connecticut: An Act incentivizing the adoption of cybersecurity standards for businesses (HB 6607). • Iowa: An Act relating to affirmative defenses for entities using cybersecurity programs (HB 553). • Florida (Proposed HB 473). Continued on page 20 18 NEBRASKA BANKER
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WALENTINE O’TOOLE, LLP When time is of the essence, experience counts. Walentine O’Toole blends confidence, experience and knowledge with the personal attention you can expect from a regional law firm. www.walentineotoole.com 402.330.6300 11240 Davenport St. • Omaha, NE 68154-0125 • Ohio: Data Protection Act of 2018 (SB 220). • Utah: Cybersecurity Affirmative Defense Act (HB 80). • Federal Law: HIPAA Safe Harbor Act (HR 7898). A second category of safe harbor statutes require proof of more than just negligence. These statutes do not require adherence to a cybersecurity standard, just raise the bar to prove such a case. Statutes in this category are: • Nebraska: Proposed LB 241. • Tennessee: Tennessee Information Protection Act (TIPA) (HB 1181). Finally, one state passed a safe harbor law that only applies to hospitals: • Oklahoma: Hospital Cybersecurity Protection Act of 2023 (HB 2790). Most of the safe-harbor laws allow for an affirmative defense. The plaintiff attorneys, however, are filing their claims seeking a fast settlement before a defense can even be asserted. The settlements are being offered by the plaintiffs’ attorneys almost immediately after the action is filed. In one recent case, the suit was filed and a settlement was proposed and agreed to within weeks. Which negates the benefit of having an affirmative defense. Regarding the current Nebraska bill and Tennessee law, plaintiffs’ attorneys will most likely add allegations of gross negligence to the pleading which will ultimately still require organizing and providing a defense to prove otherwise. Criticisms and Limitations Despite their benefits, safe harbor statutes face criticism and challenges. Some argue that these statutes may provide undue protection to companies, allowing them to avoid accountability for data breaches. Others contend that the standards required for compliance may be too stringent or costly for smaller businesses to implement. While safe harbor statutes offer protection, they are not absolute. Companies may still be held liable in cases of willful, wanton or gross negligence, as noted in the Nebraska bill. Additionally, businesses must continuously update their security practices to keep pace with evolving threats, as failure to do so could void their safe harbor protection. Continued from page 18 Conclusion Data breach safe harbor statutes represent a crucial step in addressing the growing threat of cyber breaches and the resulting legal repercussions. By offering liability protection to companies that adhere to recognized cybersecurity standards, these statutes promote a culture of proactive security and help mitigate the financial and reputational risks associated with data breaches. As more states consider and adopt such legislation, it is essential to strike a balance between providing protection for businesses and ensuring accountability for safeguarding sensitive information. 1. https://www.duanemorris.com/pressreleases/duane_morris_llp_publishes_its_ data_breach_class_action_review_2025_0225.html 2. https://en.wikipedia.org/wiki/Zero-day_vulnerability 3. https://nvd.nist.gov/vuln/search/ 4. https://nvd.nist.gov/vuln/search/results?isCpeNameSearch=false&resul ts_type=overview&hyperlink_types=CISA+Known+Exploited+Vulnerabilities&fo rm_type=Basic&search_type=last3months 20 NEBRASKA BANKER
Understanding the Risks and Rewards of AI Chad Knutson, Chief Executive Officer SBS CyberSecurity With its incredible potential for innovation and efficiency, artificial intelligence (AI) is reshaping how organizations operate. However, like any disruptive technology, it comes with risks that must be understood and managed. Keep reading to explore the benefits of AI and its associated risks to help you make informed business decisions and unlock its full potential for your organization. The Benefits of AI AI has revolutionized business operations, offering tools that drive efficiency, enhance decision-making and improve cybersecurity. By incorporating AI strategically, organizations can gain a competitive advantage, streamline operations and foster growth. 1. Operational Efficiency One of the most compelling benefits of AI is its ability to enhance 21 NEBRASKA BANKER
productivity across an entire organization. By automating repetitive and time-consuming tasks, AI allows employees to focus on higher-level strategic efforts. AI streamlines everyday tasks such as drafting emails and creating presentations while also tackling more complex processes like data analysis. By quickly processing and interpreting large datasets, AI enables faster, data-driven decision-making and reduces the risk of human error. 2. More Proactive Cybersecurity The benefits of AI in cybersecurity are also substantial. AI can detect anomalies in network traffic more accurately than traditional methods, allowing businesses to respond to threats faster and more precisely. Additionally, AI can predict attack patterns by analyzing historical data, helping organizations implement preventive measures before threats materialize. 3. Competitive Advantage and Market Growth Businesses that integrate AI strategically can gain a significant competitive advantage. AI can speed up market analysis, allowing businesses to adapt quickly to changing trends and sales opportunities. Many new AI-enabled products are entering the market, creating innovative digital channels for customer interaction. These tools help businesses enhance customer engagement, open new revenue streams and drive sustainable growth. By incorporating AI strategically, organizations can gain a competitive advantage, streamline operations and foster growth. The Risks of AI It’s important to recognize that while AI presents tremendous opportunities, it also carries significant risks. Understanding these challenges is key to leveraging AI effectively and responsibly. 1. Data Privacy Concerns As AI systems process large volumes of data, they inevitably encounter sensitive information, raising significant AI compliance risks. For example, if not properly managed, AI can inadvertently expose personal data, leading to breaches in data privacy management. The lack of clear regulations around AI in many regions only adds to the complexity. 2. Compliance and Security Issues The disadvantages of AI in cybersecurity often revolve around its misuse by cybercriminals. Hackers are using AI to execute more advanced attacks like deepfakes, automated phishing schemes, and malware, which can lead to hackers gaining access to your network. Moreover, AI systems can face compliance issues as they interact with regulated data, raising concerns about compliance with legislation like the Gramm-Leach-Bliley Act and HIPAA. 3. Strategic Risks While AI promises growth, adopting it too early without proper planning can result in wasted investments. Conversely, late adoption risks falling behind competitors. Businesses must weigh AI compliance risks and consider how it fits into their broader strategy while also recognizing that adopting AI equips them with the knowledge and tools to identify and mitigate the cybersecurity risks it introduces. Continued on page 24 22 NEBRASKA BANKER
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Leveraging AI Safely To reap the rewards of AI, businesses must also develop strategies to manage their risks. 1. Managing AI Risks Managing AI risks involves creating a comprehensive risk management framework that ensures responsible AI use. Similar to how businesses addressed data storage risks during the cloud transition, AI integration should involve strict compliance with security protocols and data protection laws. 2. Choosing the Right Tools AI tools like Microsoft’s Copilot and other trusted platforms offer safer, enterprise-ready business solutions. These platforms often have robust security features, such as data encryption and access controls, to help safeguard sensitive information. Prioritizing these tools over more experimental models reduces security vulnerabilities and minimizes potential misuse. Effective vendor management is essential to maintaining security, particularly when paired with comprehensive risk assessments. Organizations should evaluate vendors Continued from page 22 for general security practices, compliance with industry standards and ability to address AI-specific risks. This involves expanding traditional risk assessments to include tailored controls and questions for AI technologies. 3. Guidelines for AI Use Developing clear policies for AI usage is essential to ensure safe and effective implementation across the organization. These policies should outline which tools are approved, what types of data can be processed, and how vendors are vetted. It’s equally important to establish and document acceptable use guidelines for employees, ensuring they understand the boundaries and best practices for AI use. These guidelines should be incorporated into regular training, easily accessible and periodically reviewed to keep pace with evolving technologies and risks. How to Start Leveraging AI in Your Organization For businesses, banning AI use entirely in workplaces may seem like a solution to avoid risks, but it is often impractical. Instead, companies should focus on creating safeguards and boundaries 24 NEBRASKA BANKER
that allow AI to be used responsibly and safely within their operations. 1. Efficiency Gains Through AI AI can help streamline workflows, improve efficiency and reduce human error, especially in tasks like threat detection, data entry, content creation, office communications and repetitive tasks. Businesses should focus on deploying AI in areas where it can deliver immediate value, assist with major pain points and improve employees’ work lives. 2. Training and Workforce Adaptation Organizations must equip employees with the knowledge and skills to use AI tools effectively. Ongoing training programs will help teams stay current on the latest AI tools and trends, teaching them how to extract value from these technologies while ensuring adherence to security protocols and company policies. Additionally, training on sophisticated phishing and deepfake methods that leverage AI is crucial, as these attacks are increasingly harder to detect. 3. AI for Fraud Detection and Cybersecurity AI is a powerful tool for detecting fraud and managing cybersecurity threats. By analyzing transaction patterns and flagging anomalies, AI can help prevent fraud and protect organizations from malicious attacks. Balancing the Risks and Benefits of AI AI brings with it both significant risks and substantial rewards. While the AI risks should not be overlooked, with careful management, organizations can safely harness the benefits of AI to boost productivity, enhance cybersecurity and drive business strategy forward. This article was originally published on sbscyber.com. SBS helps business leaders identify and understand cybersecurity risks to make more informed and proactive business decisions. For more information, contact Valerie Spicer at (605) 270-9381 or valerie.spicer@sbscyber.com. Learn more at sbscyber.com. 25 NEBRASKA BANKER
Account Agreements and Compliance Considerations for Banks Banks provide account agreements to consumers, outlining critical terms and conditions that govern their business interactions. These agreements serve as essential documents that clarify the rights, obligations and expectations of the banking relationship. Typically, banks provide two types of agreements: one for bank accounts and another for loans. The details included in these agreements vary depending on the type of account or service. Common categories of information in the agreements include bank and customer liability, deposit and withdrawal rules, check processing, rights to setoff (offset), account information security, and procedures for addressing disputes and errors. Additionally, they serve to ensure that consumers are well-informed about their relationship with the bank, enhancing transparency and fostering a better understanding of each party’s responsibilities. Content Requirements and Disclosures in Agreements Banks have some flexibility in determining the content of their account agreements; however, state and federal regulations mandate certain disclosures to be provided to consumers at specific stages, such as at application or at account opening. Integrating these disclosures directly into their account agreements helps banks streamline processes and mitigates the risk of regulatory breaches. In addition to regulatory compliance, banks often incorporate legal disclaimers and waivers to minimize liability and clarify any limitations on the bank’s obligations to customers. Ensuring Compliance Through Clear Disclosures Regulatory requirements extend beyond simple disclosure mandates. Banks must also ensure that disclosures are clear, accurate and not misleading. Ambiguities or inaccuracies can expose banks to litigation and regulatory penalties. Effective disclosures empower consumers by providing them with the knowledge they need to make informed decisions about their banking relationships. Consequently, banks must review their agreements regularly to ensure that the language used remains consistent with current legal standards and consumer protection regulations. Jefferson Sorley, Jur.M, CRCM, Director of Reviews & Products Compliance Alliance 26 NEBRASKA BANKER
Prohibited Terms and Conditions in Consumer Agreements While banks have considerable leeway in crafting their agreements, certain terms and conditions are explicitly prohibited by law. In June 2024, the Consumer Financial Protection Bureau (CFPB) released a circular highlighting unlawful and unenforceable terms that banks must avoid. The circular, “Unlawful and Unenforceable Contract Terms and Conditions” (CFPB Circular 2024-03), outlines a range of prohibited practices that banks need to be aware of. Prohibited terms and conditions commonly seen in agreements that need to be corrected or clarified include: 1. Prohibited Arbitration Clauses in Mortgage and Credit Agreements The inclusion of certain terms in contracts for consumer financial products or services may violate the prohibition when applicable federal or state law renders such contractual terms, including those that purport to waive consumer rights, unlawful or unenforceable. The Truth in Lending Act (TILA) prohibits the inclusion in a Banks that proactively monitor agreements ensure terms and conditions uphold consumer protections and minimize legal risks. 27 NEBRASKA BANKER
residential mortgage loan or open-ended consumer credit plan secured by the principal dwelling of terms requiring arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling claims arising out of the transaction. This measure ensures that consumers retain the right to pursue legal action in court if necessary. By maintaining consumer access to judicial recourse, TILA reinforces critical consumer protection measures. See 12 CFR 1026.36(h)(1) § 1026.36 Prohibited acts or practices and certain requirements for credit secured by a dwelling. | Consumer Financial Protection Bureau (consumerfinance.gov). 2. Limitations on Servicemembers’ Legal Rights The Military Lending Act (MLA) generally prohibits terms in certain consumer credit contracts that require servicemembers and their dependents to waive the covered borrower’s right to legal recourse under any otherwise applicable provision of state or federal law, including any provision of SCRA. See 32 CFR part 232.8(b) eCFR :: 32 CFR 232.8 Limitations. If the Servicemembers Civil Relief Act (SCRA) applies, creditors may not compel arbitration. Additionally, the SCRA was amended to codify the unwaivable right of servicemembers to bring and participate in class actions, “notwithstanding any previous agreement to the contrary.” To view 50 USC 4042(a), scan the QR code. https://www.govinfo.gov/content/pkg/ USCODE-2022-title50/pdf/ USCODE-2022-title50-chap50- subchapVIII-sec4041.pdf 3. Restrictions on Remittance Transfer Consumer Claims Under the Electronic Fund Transfers Act (EFTA), remittance transfer providers are barred from limiting a consumer’s ability to seek damages or recover costs and attorney fees in disputes. Such limitations are in direct conflict with provisions found in sections 1693m(a)(3) and 1693(l) of the EFTA, which establish liability for providers and ensure that consumers have recourse to adequate remedies. This protection emphasizes the importance of holding remittance providers accountable for errors, delays or failures that can have significant financial repercussions for consumers. To view 15 USC 1693(m)(a)(3) and 1693(1), scan the QR code. https://www.govinfo.gov/content/pkg/ USCODE-2011-title15/pdf/USCODE-2011-title15- chap41-subchapVI.pdf MORE FACE TIME. LESS WAIT TIME. Visit NebraskaBlue.com/Telehealth to learn more. Health benefits that give you access to virtual visits with doctors and specialists, even if you’re out of state. So you can get the care you need — wherever you are, whenever you need it. An independent licensee of the Blue Cross and Blue Shield Association. 4. Disclaimers That Misrepresent Legal Obligations Contractual disclaimers such as “subject to applicable law” or “except where unenforceable” are insufficient to cure the inclusion of otherwise unlawful terms. The use of these disclaimers can mislead consumers into believing certain actions are permissible under some conditions when, in fact, they are not. Courts, including in Ruth v. Triumph Partnerships (577 F.3d 790, 801-02), have found such phrasing problematic, as it implies a conditional legality that is often legally unsupported. Banks must avoid using disclaimers that create an appearance of legality where none exists. Regular Compliance Reviews and Legal Counsel Involvement Given the complex and evolving regulatory landscape, banks are encouraged to conduct compliance reviews of their account agreements at least annually. Legal counsel should play a key role in this review process, as attorneys can provide expertise on current legal standards, identify potential issues with existing disclaimers and waivers, and recommend necessary updates to reflect new legal developments. Banks that proactively monitor agreements ensure terms and conditions uphold consumer protections and minimize legal risks. 28 NEBRASKA BANKER
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2025 EDUCATION CALENDAR FEBRUARY Mid-Winter IRA Essentials Workshop February 10-11 Virtual CFO/Controller Forum February 12 Lincoln, NE Mid-Winter Advanced IRA Workshop February 12-13 Virtual CEO Executive Forum February 13 Lincoln, NE HSA Seminar February 14 Virtual Bank Executives & Directors Conference February 19-22 La Jolla, CA Business Financial Statements & Tax Returns Analysis Workshop February 25-26 Virtual MARCH School of Lending Principles March 3-7 Manhattan, KS Supervisor Boot Camp Conference March 18-19 Lincoln, NE Basic Personal & Business Tax Return Analysis Workshop March 26 Virtual APRIL Spring Agribusiness Conference April 1-2 Kearney, NE School of Banking Fundamentals April 7-11 Kearney, NE Opening Business Accounts Seminar April 10 Virtual The Active Shooter Seminar April 15 Virtual Intro to Consumer Lending Workshop April 16 Virtual MAY NBA Annual Convention May 7-9 La Vista, NE BSA/AML Compliance Management Workshop May 20-21 Virtual Relationship & Business Development School May 20-22 Manhattan, KS For more information about in-person and virtual education events and training tools, contact the NBA at (402) 474-1555 or nbaeducation@nebankers.org or visit nebankers.org/education. 30 NEBRASKA BANKER
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