First Interstate joins others fined for flood insurance

The civil monetary penalty First Interstate Bank of Billings, Montana is paying to settle alleged federal flood insurance violations add to a continuous stream of enforcement actions in this area.

The $70,000 fine by the Federal Reserve Board of Governors addresses what it alleged was a “pattern or practice” in which the bank neglected its hedging responsibilities.

The fine is consistent with reports that regulators have remained active this year in enforcing the responsibilities of lenders and servicers to track, ensure coverage and provide notices relating to mortgaged properties in special flood risk areas.

“We have seen numerous violations with significant civil financial penalties pending,” said Dean Stockford, president and CEO of financial services consulting firm M&M Consulting, during a June podcast hosted by Len Suzio, President of GeoDataVision.

The areas where Stockford said he has seen deficiencies are in proof of receipt and the amount of coverage required. Also of concern was ordering floodplain determinations early enough in the process to provide notices within timeframes that regulators found acceptable.

Other financial institutions that entered into consent orders with the Fed board to resolve alleged flood insurance violations in recent years include Birmingham, Alabama-based Regions Bank, which paid a particularly large fine of nearly $3 billion in 2023, and Select Bank of Forest, Va., which agreed to pay a $9,600 civil penalty in February.

Even before the outbreak of the pandemic in 2020, Citibank agreed to pay a fine of nearly $18 million for violations of the Flood Disaster Act in an enforcement action by the Office of the Comptroller of the Currency.