In the highly regulated banking industry, it takes a coordinated effort throughout the organization to ensure compliance with myriad rules that not only require technical expertise but also philanthropic investment. The Utah-based Merrick Bank houses the example of this versatile compliance department as well as multiple corporate officers who dedicate time to both the financial institution and the local community. And for one of its legal leaders, Brian W. Jones, a personally fulfilling aspect of this work includes teaching kindergartners about financial principles.
“My mom was a kindergarten teacher for thirty years,” says Jones, general counsel at Merrick Bank. “Maybe it’s in my blood.” Since his arrival at Merrick Bank in 2005, Jones has applied his expertise in banking, consumer lending, payment systems, and litigation management to grow the nationwide bank—a top twenty-five issuer of Visa branded credit cards and a top thirty merchant acquiring bank in the United States.
His involvement in the classroom stems from Merrick Bank’s efforts to support its community under the Community Reinvestment Act of 1977. The law mandates a certain percentage of a bank’s assets be invested in CRA-qualified investments such as certain Government National Mortgage Association (GNMA) bonds. That’s a job for specialists, but another requirement—to donate time for charitable causes—provides bank employees opportunities to exercise their altruistic impulse.
Merrick Bank goes above and beyond to fulfill this second CRA requirement. Last year, it partnered with the nonprofit organization Youthlinc to create a curriculum and provide teaching aids and instructors to teach junior high children personal financial management principles. Jones was one of dozens of Merrick Bank employees who participated in the effort. Merrick Bank has also partnered for several years with Junior Achievement to teach its Money Basics program in a local elementary school. The program includes topics such as savings and budgeting.
As part of its community involvement initiatives, Merrick Bank contributes to community programs such as Utah Microenterprise Loan Fund and First Step House. The bank also donates hundreds of thousands of dollars to various nonprofit organizations each year. Jones views this work as an essential component of the $3 billion bank’s role in the Salt Lake City area. Merrick Bank, which was founded in 1997, specializes in providing credit cards and boat and RV loans to customers looking to rebuild their credit.
Jones says he has enjoyed spending one hour per week for five weeks teaching a local kindergarten class. The curriculum is focused on essential principles for managing money. “It may seem basic to many of us,” Jones says. “But, for kids who have parents from a different country or those with two working parents, it is super helpful.”
The Merrick Bank program has been highly successful, based on the feedback from educators. “The local school where we conduct the program has invited us back for the last ten years or so,” Jones says. “It’s been a great partnership.”
The company’s efforts have also impressed its outside counsel. External partner firm Satterlee Stephens, in New York City, is a regular funder of scholarships to the local Cristo Rey national network of schools and applauds Jones’s and Merrick Bank’s community commitment. “Grassroots involvement enriches equally those that give and those that receive,” says Satterlee Stephens partner Daniel Gurfein.
The Federal Deposit Insurance Corporation (FDIC) rates banks’ performance regarding the CRA as either “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance.” Merrick Bank aims for “outstanding,” Jones says. Yet achieving that goal requires extensive employee participation. The hourly donation to reach an “outstanding” status translates into three hours per year per employee for CRA-qualified community service, according to Jones.
“It can be difficult to get people to take an hour out of their day for a month to teach, but we get great participation,” Jones says. “We make big efforts to get everyone in the bank involved.”
The CRA was enacted to ensure that banks meet the needs of borrowers in all segments of their communities, including those in low- and moderate-income neighborhoods, and many see it as a law focused on housing-related lending. Even though Merrick Bank’s business is focused on issuing credit cards, making loans for recreational vehicles, and servicing the payment processing needs of merchants, “there’s a lot about CRA that doesn’t really have anything to do with housing,” Jones says.
To ensure the CRA mandate receives appropriate attention, Merrick Bank has a leadership committee focused on the regulation. Today, the committee consists of Jones, the chief compliance officer, the bank president, and the chief financial officer. This group vets all proposals for CRA initiatives and is responsible for creating the bank’s strategic CRA plan, a 150-page document that is revised and presented to the FDIC for approval every five years.
The plan must also be made available for public comment before Merrick Bank submits it to the FDIC. External nonprofit organizations are encouraged to weigh in and shape its development. “Outside groups have great insights,” Jones says. “They have a different perspective on the world than a typical banker or lawyer might have.”
For example, Jones recalls how one commenter noted that financial literacy is an important tool to help low-income people break out of the cycle of poverty. “Many of the individuals who use our services do not have a basic understanding of budgets, checking accounts, car loans, or long-term financial planning,” the commentator added. Feedback like that, along with Merrick Bank’s own research, has inspired its financial literacy initiative.
Jones notes that his CRA compliance work is one example of how having in-house counsel to proactively apply the law to the bank’s business is beneficial. Jones says an in-house counsel’s primary “value-add” is their intimate knowledge of the client’s business and how that business interacts with law. So, getting in-house counsel involved early in the decision-making process—rather than merely in the review process, after a business decision has been made—is critical. And, to the extent businesses fail to do that, they’re not fully utilizing the skill set of their in-house counsel.
With Merrick Bank’s strategic CRA plan, the proactive review process empowered by the bank allows Jones to flag points in the text that the regulators might find problematic. “I’m involved with the strategic plan before it goes to the FDIC, not just after it comes back,” he says. “It’s better to ask your lawyer about issues before you make a decision rather than merely seek a critique after decisions have already been made.”
Today, Jones is a 2019 candidate for an LLM degree in Litigation Management from Baylor Law School, but he’s also continuing to monitor new developments in how the FDIC interprets regulations as he keeps Merrick Bank on track to meet its “outstanding” CRA goals. An important aspect of his role, he adds, includes evaluating the effectiveness of the charitable programs. “We want to make sure the donations we make are being used in the way we expect,” he says, “and we are always looking for other ways we can provide support to our communities.”
Satterlee Stephens is a full-service law firm with substantial expertise in counseling and litigation for financial institutions. The firm takes great pride in the longevity and breadth of its client relationships, and its staff believes its success is best measured by the strength of its relationships with industry leaders in the credit card, credit rating, and investment banking sectors. Satterlee Stephens’s clients demand the best and count on the firm not just to win the case or close the deal but to know their business and help navigate emergent risks.