Kyle Hauptman, an existing board member of the National Credit Union Administration (NCUA), has been named chairman of the NCUA Board, succeeding former Chairman Todd Harper.

America’s Credit Unions quickly extended its congratulations to Chairman Hauptman, underscoring its support for his leadership. In a letter to the new chairman, the organization emphasized the need for “right-sized” regulation to ensure credit unions can effectively serve their members.

Chairman Hauptman’s appointment marks a new chapter for the NCUA. “I look forward to leading the agency’s dedicated professionals and working with my Board colleagues to create a regulatory structure that promotes growth, opportunity, and innovation within the credit union system,” said Hauptman. Learn more about his priorities as chairman.

The Government National Mortgage Association (Ginnie Mae) extended the comment period on its Request for Input (RFI) on Eligibility Requirements for Single-Family MBS Issuers by an additional 60 days. The revised submission deadline for formal comments to this RFI is October 8, 2021.

As reported on Tuesday in The Advocate newsletter, the Carolinas Credit Union League will join CUNA in submitting comments in opposition to the proposal and encourages member credit unions to do likewise. The central issue is in Ginnie Mae’s long-held exclusion of credit unions in the definition of “depository institutions” – grouping credit unions with nonbank mortgage lenders as CUNA’s letter noted.

“Ginnie Mae’s proposal would continue the agency’s unfair and unrealistic treatment of credit unions as non-depository mortgage lenders, despite the fact that credit unions are and always have been insured depositories regulated routinely for safety and soundness by prudential regulators,” said Evelyn Hawthorne, VP of Governmental Affairs for the League. “If the proposal moves forward, 24 percent of credit unions could be excluded as qualified issuers.”

Instructions for submitting comment can be found on page 4 of Ginnie Mae’s proposal.

As the next cycle for Call Reports approaches on April 1, 2021, the Carolinas Credit Union League’s CU Accounting Services team is well prepared for the year – staying informed on the regulatory changes to reporting and available to help any credit unions in the Carolinas navigate the Call Report process.

Call Reports for this upcoming cycle are due July 30, 2021.

Additionally, NCUA’s March 2021 Call Report provides accounts to properly report changes in fair value due to Accounting Standards Codification (ASC) 321. ASC 321 went into effect for credit unions in January 2020. It requires credit unions to present equity securities at fair market value each reporting period. Credit unions should recognize changes in fair market value in net income.

Lastly, account IS0004 is being retired so that changes in fair market value do not affect net interest margin ratios.

Click here for a detailed list of Call Report changes in March 2021.

For Call Report preparation or other support from Credit Union Accounting Services, reach out to cuaccounting@carolinasleague.org or call 800-822-8859, extension 436.

Related News

NCUA extends 2021 Call Report due dates; League available to help

As credit unions witness the continued impact of COVID-19 on their members and operations in 2021, the National Credit Union Administration (NCUA) has extended Call Report due dates by one week for each 2021 Call Report cycle, reminds the Carolinas Credit Union League’s Credit Union Accounting Services, which is prepared to help members with pandemic-affected reporting.

Credit unions’ December 2020 Call Reports were due January 31, and the agency had amended it early in December to clarify reporting of CARES Act loan modifications, align delinquency reporting with industry standards, and to clarify in instructions that SBA Paycheck Protection Program (PPP) loans are commercial loans.

Those reporting considerations will remain as the year continues and credit unions track already-extended member support and accommodate new needs. Having submitted December 2020 Call Reports for existing customers, the Credit Union Accounting Services team is well prepared for the year ahead, according to VP of Credit Union Resources Tully Maragakis.

“We’ve been alongside throughout the accounting shifts that have already occurred, and we are ready and able to help more credit unions,” Maragakis noted. “Credit union management and staff are rightly focused on much-needed member support. We want to help them do that best by relieving some of the pressure to complete reports and other routine requirements.”

For Call Report preparation or other support from Credit Union Accounting Services, reach out to cuaccounting@carolinasleague.org or call 800-822-8859, extension 436.

        2021 Call Report Cycle and Due Dates

NCUA Board Member Todd Harper (center) shares his perspective with South Carolina credit union leaders in a November 2 virtual roundtable hosted by the League. 

In the League’s November 2 virtual roundtable with South Carolina credit union leaders, National Credit Union Administration Board Member Todd Harper engaged participants in discussion of the economy, NCUA priorities and response to the pandemic, and the value of diversity, equity, and inclusion (DEI).

“Your work as financial first responders…is protecting the financial and economic health of 1.6 million members,” Harper began in appreciation, foreshadowing his closing challenge for them. Between those he offered perspective, clarified roles, and suggested appropriate credit union action.

• Look to late-2021 and the current economic bright spots. In a recession expected to be the worst since the Great Depression, SC credit unions are performing well. Their aggregate net-worth ratio exceeds the national average, and delinquency among all loans is lower thanks to strong underwriting and member caution. Home sales and refinancing have remained positive and at higher-than-average prices. Homeowners’ equity far exceeding 2008’s can help cover their expenses while protecting credit unions from losses.
• NCUA is prioritizing health and safety on multiple levels. Its top priority is the physical health of its staff so they can perform needed work. That includes its other priorities: assessment of the pandemic’s impact on members and operations, and determining impact on the financial condition of credit unions and the National Credit Union Share Insurance Fund (NCUSIF). While expecting credit union performance to lag overall recovery and CAMEL ratings to decline, Harper urges close attention to and quick action on issues with capital, asset quality, earnings, and liquidity.
• The NCUSIF may require a premium—and modification. While its equity ratio fell close to triggering a restoration plan and should recover, the reality is that a Share Insurance Fund premium may be necessary. Harper also wants to work with Congress on post-crisis changes to allow for greater reserves in better times.
• There is much more liquidity available. A combination of NCUA action and the CARES Act has afforded credit unions greater assurance via the Central Liquidity Facility (CLF). Since being part of it illustrates their cooperative character, Harper urges any non-members to join.
• The NCUA is protecting members and working with credit unions. The agency has shared its pandemic-sensitive approach and is allowing for prudent relief for members while easing certain regulatory, capital, and PCA requirements. Details have been shared in more than twenty communications since March.
• Diversity, equity, and inclusion inform and benefit the NCUA and credit unions. They help the NCUA to better understand and supervise, and the agency is working to advance economic equality. They also create opportunities for credit unions. While 40% of SC credit unions are low-income designated and several are minority institutions, all can help the under-resourced by promoting retirement savings, homeownership, and lending for existing and new minority-owned small businesses.

The group raised specific questions these points and more in open discussion, including fair lending, overdraft protection and payday loans, CECL, the role of corporates, and the future makeup of the NCUA Board. Throughout, Harper reinforced his pledge of focus on members and the system, his advice on expenses, liquidity, and open communication with the NCUA, and his urging of thoughtful, open service to members.

“We need you to stay focused on serving your members, including people of color. They will remember who supported them during their times of need,” Harper had concluded prior to inviting questions. “That loyalty will not only lead to better earnings in the future, but also your efforts should facilitate the strength of the recovery in all communities.”

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Related:

NCUA Diversity Self-Assessment

NCUA Central Liquidity Facility

NCUA Letters to Credit Unions and Other Guidance

Credit union associations on the national and state levels are actively working with regulators to provide flexibility and more guidance to ease this transition. Credit Union National Association (CUNA) leaders met with National Credit Union Administration (NCUA) board member Todd Harper April 24 to discuss several credit union priorities, including a strategy to ensure credit unions are prepared for CECL.

The National Association of Federally-Insured Credit Unions (NAFCU) continues to share industry concerns with the Financial Accounting Standards Board (FASB) and urge them to offer flexibility with compliance, or even exemption.

As a result of these efforts, credit unions should note these recent developments:

• FASB recently issued an update with amendments related to measurement and presentation of available for sale debt securities within the scope of CECL, and clarifies guidance related to when an entity should include recoveries when estimating the allowance for credit losses;
• The update also reflects FASB's recent decision to allow preparers to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis; and
• Financial regulators released a new CECL FAQ document to help institutions implement the standard.
  

To assist credit unions in CECL preparedness, CUNA is hosting a Current Expected Credit Loss School in Tempe, Arizona September 5-6. For those who can't attend in-person, CUNA will also offer a CECL eSchool in June. Federal regulators conducted an "Ask the Regulators" CECL webinar April 11, which is now available on demand.

Carolinas Credit Union League will also roll out materials and educational opportunities in the coming months. In the meantime, CCUL's Accounting Department stands ready to assist member credit unions and answer any questions. Email accounting@carolinasleague.org for information.

In the last days of December 2017, the Department of Justice (DOJ) announced that it has withdrawn two Advanced Notices of Proposed Rulemaking (ANPRM) pertaining to website accessibility under the Americans with Disabilities Act (ADA): Title II which was applicable to state and local governments and Title III which related to private businesses open to the public.

As reported in CUNA’s Removing Barriers Blog, the DOJ stated that it is, “evaluating whether promulgating regulations about the accessibility of Web information and services is necessary and appropriate. Such an evaluation will be informed by additional review of data and further analysis. The Department will continue to assess whether specific technical standards are necessary and appropriate to assist covered entities with complying with the ADA.”

These ANPRMs were part of a 2010 proposal by the DOJ concerning how the ADA applies to website accessibility. But since then, the DOJ has only considered revising the regulations and never set specific requirements as a guide for businesses, leaving the titles open to interpretation in the courts. This lack of clarity has left credit unions vulnerable to demand letters and predatory lawsuits claiming their non-compliance with ADA regulations. In the past month, several credit unions in the Carolinas have reported receiving such demand letters.

However, even with the withdrawal of these two ANPRMs the issue of combatting these predatory lawsuits remains.

“While it’s good that the DOJ made the decision to withdraw their ANPRMs on website compliance, it doesn’t mean that this type of predatory litigation will stop,” warned Jeanne Couchois, VP, compliance & regulatory counsel for the Carolinas Credit Union League. “The League in partnership with CUNA and CUNA Mutual Group will continue to encourage the DOJ and Congress to provide clear guidance.”

In the interim, it’s important that credit unions develop a plan to make their website ADA compliant. The plan should include a timeline for compliance in addition to steps for ongoing review of the website to ensure it remains compliant.

“Having an ADA website compliance plan in place provides your credit union with some leverage should you receive an ADA demand letter or be sued,” Couchois added.

The League continues to monitor the ADA demand letters circulating throughout the Carolinas, and is asking any credit unions that receive a demand letter to notify Jeanne Couchois at jcouchois@carolinasleague.org or call 800-822-8859 ext. 565.

Related News & Resources

So, you got an ADA demand letter? Here’s what to do next (12/21/17)

Jan. 17: Free webinar on digital accessibility, ADA compliance best practices (12/6/17)

CCUL | ADA Website Accessibility Compliance Resources

Alexandria, VA--The National Credit Union Administration (NCUA) this week posted its proposed 2018-22 strategic plan and 2018-19 budget, which include incorporation of Region III with the Region IV office based in Austin, TX by December 31, 2018. The plan and budget are expected for NCUA Board review and approval at its Thursday, November 16 meeting.

The proposed budget of $298.2 million reduces costs including its workforce, which would drop an equivalent of forty-two (42) full-time staff. The NCUA invites "specific, actionable recommendations" from credit unions via email to BudgetComments@ncua.gov until 5 p.m. Friday, October 27. A public budget briefing is set for 2 p.m. Wednesday, October 18.

Credit unions in the Carolinas, which have been served by the Region III office in Atlanta, should see little change in day-to-day and examination functions, according to League Vice President Regulatory/Compliance Counsel Jeanne Couchois.

"NCUA examiners will report through someone in Atlanta, who in turn will report to the Austin office," Couchois noted. "Overall, we see positive potential in the NCUA's plans to reduce costs, modernize regulations, and specialize examiners."

Couchois anticipates submitting a League comment letter reflective of those sentiments.

Visit ncua.gov for more on NCUA strategic plans and budgets.

As previously published, the HMDA rule required credit unions to report open-end lines of credit if they made 100 such loans in each of the previous two years. Thursday's final rule increases that threshold to 500 loans through calendar years 2018 and 2019 while the Bureau considers whether to make the change permanent. Credit unions originating fewer than 500 open-end lines of credit would not be required to begin collecting such data until January 1, 2020.

In a July comment letter on the CFPB's proposal, the Carolinas Credit Union League urged for an even higher exemption cap for reporting HELOCs.

“In general, CCUL supports a temporary increase to the threshold but considers 1,000 open-end lines of credit to be more appropriate,” stated CCUL’s Jeanne Couchois in the letter. “It is CCUL’s position that the CFPB not only raise the temporary threshold to 1,000 but make the increase in the threshold permanent instead of just the two years outlined in the proposed rule.”

CCUL will reengage with the CFPB to ensure these recommendations are considered.

The CFPB's executive summary also highlighted other changes to the final HMDA rule including:

• Establishing a new reporting exclusion and optional reporting for certain transactions and data points; and
• Clarifying certain key terms defined in the 2015 HMDA Rule, including multifamily dwelling and automated underwriting system, among others.

For the most part, the Bureau’s final HMDA rule changes are set to take effect January 1, 2018, with most data submissions under the new provisions due in 2019. The rule changes affect HELOCs, establish transactional thresholds for coverage and expand the number of HMDA data points to be collected from credit unions.

Related News

CCUL submits letter on CFPB proposal to temporarily raise HMDA reporting threshold (8/2/17)

Responses to the questions below should be emailed to CCUL VP, Compliance & Regulatory Counsel Jeanne Couchois at jcouchois@carolinasleague.org. The deadline to submit responses to the League is Monday, August 28.

1. NCUA believes the purpose of the Stabilization Fund has been fulfilled, and on July 27, 2017, the agency published a Notice for Comment announcing their intention to close the fund and transfer all the assets to the National Credit Unions Share Insurance Fund (NCUSIF). If closed, the NCUSIF’s equity ratio would increase and allow for any equity above the normal operating level to return to insured credit unions. However, the agency is proposing to raise the normal operating level to 1.39% (currently 1.3%).

Question: Assuming the fund is closed, should NCUA raise the normal operating level to 1.39% to cover the potential changes on the transferred assets? Please explain.

2. On August 1, 2017, NCUA issued a proposed rule to amend §741 to provide federally-insured credit unions (FICUs) with greater transparency regarding the calculation of a FICU's proportionate share of a declared equity distribution from the NCUSIF. See CUNA’s summary.

In an effort to make equity distributions more transparent, the agency is proposing to use the four quarter averages of insured shares method. This method uses the average of the four quarter-end insured share balances reported on the FICU's call reports during the calendar year to an NCUSIF equity distribution. NCUA considers this method the most equitable because it captures the seasonal fluctuations of insured shares. However, the agency also requests comments on using a year-end insured share balance method.

Question: Should the agency change the method used to calculate a credit union’s equity distribution? If yes, which method should NCUA use to calculate a credit union’s equity distribution, average insured share balance or year-end insured share balance?

3. The agency also proposes to add a temporary provision (§741.13) declaring any NCUSIF equity distributions for calendar years 2017-2021 to be a direct result of closing the Stabilization Fund. NCUA requests comments on whether the equity distributions should be made on a FIFO (first-in, first out) or LIFO (last-in, first-out) method.

Under the FIFO approach, NCUA would make an equity distribution to each FICU up to the total dollar amount of the FICU’s corporate assessments beginning with the first assessment period in 2009. Under the LIFO approach NCUA would make an equity distribution to each FICU up to the total dollar amount of the FICU’s corporate assessments beginning with the last assessment period. NCUA prefers the LIFO method but requests comments on both.

Question: Which method should NCUA adopt, FIFO or LIFO? Why?

The rule would:

1. Revise and clarify the contents and format of the member notice;
2. Require the merging credit union to disclose all merger-related financial arrangements for covered persons;
3. Increase the minimum member notice period; and
4. Provide procedures to allow reasonable member-to-member communications regarding the proposed merger.
   

Advocating on behalf of credit unions in North and South Carolina, the League outlined reasons why the current rule on financial disclosures of merging credit unions is sufficient, illustrated potential problems with member-to-member communications, and proposed maintaining the current state-adopted merger rules.

"Credit unions value the views of their member-owners and support efforts to ensure they are aware of any changes that could impact the credit union’s safety and soundness," writes League VP Compliance/Regulatory Counsel Jeanne Couchois in the letter. "CCUL concurs with NCUA that transparency, clarity, and adequate information are essential prerequisites in a voluntary merger. How we get there is the issue."

View the full comment letter here.

The CFPB’s latest proposal builds upon a 2015 final rule amending HMDA (Home Mortgage Disclosure Act), which includes a new requirement on the collection and reporting of data concerning open-end lines of credit. Within that requirement, effective January 1, 2018, is an exclusion for credit unions that originate fewer than 100 open-end lines of credit in the two preceding calendar years.

CFPB now seeks to temporarily increase the reporting exclusion from 100 to 500 open-end lines of credit through calendar years 2018 and 2019, so credit unions would not be required to begin collecting such data until January 1, 2020.

In the letter, VP, Compliance & Regulatory Counsel Jeanne Couchois states, “In general, CCUL supports a temporary increase to the threshold but considers 1,000 open-end lines of credit to be more appropriate. It is CCUL’s position that the CFPB not only raise the temporary threshold to 1,000 but make the increase in the threshold permanent instead of just the two years outlined in the proposed rule.”

“In the proposed rule, the CFPB states that it “did not have robust data for making the estimates that went into establishing the open-end coverage threshold.” Until the agency has more accurate data credit unions should not be subject to rules that are burdensome,” Couchois added.

The NCUA Board issued the ANPR in early February to solicit comments on alternative forms of capital federally insured credit unions could use in meeting capital standards required by statute and regulation. For purposes of the ANPR, alternative capital includes two different categories: secondary capital and supplemental capital.

Advocating on behalf of credit unions in North and South Carolina, the League expressed support for the development and implementation of a supplemental capital rule.

Reasons for supporting supplemental capital as an alternative capital option include:

• Credit unions are currently the only financial institutions that do not have the authority to raise supplemental capital and have it count towards the statutory capital requirement;
• Rapidly changing technology;
• Member demands for new products and services; and
• The current regulatory burden on credit unions.

“These factors are ample justification for a regulation that will assist credit unions in managing their capital,” said Jeanne Couchois, VP, compliance and regulatory counsel for the League.

The letter goes on to address specific issues around public policy, regulatory factors for consideration when drafting a regulation, mergers, and tax status implications.

Log in to view the full comment letter here.

Consumer Financial Protection Bureau Director Richard Cordray (Credit: Washington Times)

The letter raised four communications from Capitol Hill, all of which requested that Director Cordray use the CFPB’s exemption authority laid out in Section 1022 of the Dodd-Frank Act. Two of those communications were signed by a combined 399 members of the U.S. House and Senate, comprising a supermajority of both chambers. All but one member of the Carolinas delegation signed the correspondence. Congresswoman Virginia Foxx (R-NC5) said the letter did not go far enough and that she would prefer to see the CFPB go away.

In this latest letter, CUNA and the leagues communicate frustration over the unwillingness of Director Cordray to recognize the will of Congress with regard to the exemption.

“Where there is no evidence of harm to or abuse of consumers, the Bureau should exercise this authority so that providers that have been serving consumers in a safe and affordable manner can continue to do so efficiently. The Bureau’s resistance to the plain language of the statute and the subsequent bipartisan message of more than three-quarters of the elected representatives in the federal government is baffling and disrespects the consumers who elected the Congress.”

The strong language in CUNA’s latest correspondence sums up the frustration of many months of pleas falling upon deaf ears.

"I wholeheartedly support all of these efforts to get Director Cordray to use the tools he has to support credit unions’ service to communities,” stated CCUL President John Radebaugh. “The CFPB needs to recognize the fact that these policies aren’t helping consumers—they’re hurting them by threatening the existence of the financial institutions that serve them."

1. CUNA Meets with DoD

On March 15, the Credit Union National Association and other trade associations met with officials from the DoD, CFPB, NCUA, FRB, and the FTC to share credit unions concerns with rule implementation and to request detailed guidance. During this meeting, CUNA provided a document with a list of credit union compliance concerns to each agencies representative.

2. CUNA Submits Suggested Guidance Language

After the March 15^th meeting, CUNA was contacted by the DoD to submit proposed guidance language for the MLA regulations. So last week, CUNA responded by providing the guidance language on changes to the MLA regulation. CUNA also signed onto a joint letter with other trade associations recommending clarifications and changes.

CUNA’s guidance suggestions include:

• Defining ancillary products more specifically, as any product other than credit insurance, a debt cancellation contract, or a debt suspension agreement, that could have a direct impact on the covered loan balance;
• Allowing lenders to, prior to establishing an open-end account, describe only the interest rate, payment amount and payment frequency, instead of the current language that requires the entire document to be disclosed aloud; and 
• Exempting credit unions from the requirement that creditors can only take a security interest in an account opened in conjunction with the loan and only in deposits made after the loan is established. If the DOD cannot exempt credit unions, CUNA presented five paragraphs that define when and how an account can be established to meet the rule requirements.

In the signed joint letter, additional suggestions and solutions for various issues in the final rule's language include:

• Adding language that would allow a covered borrower to make a payment or a creditor to accept a payment from a check or other method of access to an account maintained by the covered borrower; 
• Allowing creditors to provide information to borrowers though mail, phone or fax; and 
• Allowing creditors to impose a one-time application fee.

“CUNA’s proposed guidance language to the DoD specifically addresses the concerns of our credit unions,” noted Jeanne Couchois, VP compliance and regulatory counsel for the Carolinas Credit Union League. “By working in cooperation with CUNA, the League has a greater platform to express those concerns to the DoD.”

Credit unions in the Carolinas encountering roadblocks in the implementation of MLA requirements should contact Jeanne Couchois at jcouchois@carolinasleague.org or 800-822-8859, ext 565.

Sources

News Now: Per DOD request, CUNA submits MLA guidance suggestions (4/11/16)

Regulatory Report: CUNA and League secure MLA guidance, seek CU specifics (3/9/16)

CFPB Director Richard Cordray provided opening remarks during the open session and participated in the discussions throughout the meeting. During the meeting, several issues outlined in the CFPB’s strategic outlook were discussed.

Credit unions remain concerned that including credit union products and services within policy makings following from the strategic outlook could add to the regulatory burdens that they already face.

In the discussions, several CUAC members questioned the CFPB about rulemakings that have, or could, impact credit union operations and members. For example, a CUAC member questioned whether the forthcoming arbitration rulemaking, which will likely result in more class action lawsuits, will actually benefit credit union members instead of the plaintiffs’ bar. CUNA has expressed similar concerns to the CFPB.

Another member of the committee noted that any upcoming debt collection rules from the CFPB should allow credit unions to continue contacting their members about outstanding debts, noting there should be different considerations between those who actually cannot pay their debts, and those that simply don’t want to. In the past, CUNA has advocated that first-party creditors should be treated differently than third-party debt collectors.

One CUAC member said he had hoped the CFPB would give credit unions a “breather” to digest the existing rules affecting credit unions before beginning to work through the lengthy agenda encompassed in the strategic outlook. Credit unions continue to struggle to find the resources to implement the massive overhaul to rules in the mortgage market, as well as other recent policy-makings from the CFPB.

The meeting also included a discussion of elder financial abuse and efforts to protect senior credit union members and their families, an issue in which CUNA has been actively participating. A bill recently introduced in the Senate by Sen. Susan Collins (R-Maine), which is supported by CUNA, would provide legal immunity when reporting elder abuse. This bill would encourage more wide-scale reporting when fraud or abuse is suspected.

A recording of this meeting will be posted on the CFPB’s website in the coming weeks.

Resource Link

CUAC Members Ask CFPB for a “Breather”

“Without interpretation guidance, it is much more difficult for credit unions to develop policy and procedures, and to work with data processors and forms vendors,” said Jeanne Couchois, VP compliance and regulatory counsel.

Because the rule adds burden on credit unions when dealing with active duty military service members and their dependents, the League reached out to CUNA’s advocacy team and with their help is addressing issues with all interested parties. CUNA also shared an overview of its process for answering common questions.

Credit unions facing roadblocks as they work through implementation of the MLA rule should contact Jeanne Couchois at jcouchois@carolinasleague.org.

“Your specifics help us advocate for you by reinforcing our positions with factual basis,” Couchois added.

The League will continue to meet with CUNA and share any new information as it becomes available.

League comments were crafted with input from member credit unions and were favorable on nearly all provisions, which would affect community, multiple common bond, and trade, industry, or profession (TIP) charters. Proposed changes also address definitions of other eligible persons, rural districts, and underserved areas.

“Many industry parties have expressed their concerns that the federal charter is more rigid and burdensome than some state charters and thus less attractive," Couchois recognizes in the letter. "The proposed rule represents a step forward in easing the burden and restrictions of the federal credit union charter while “enhancing the menu of strategic options for FOM expansions.”

While in agreement with two proposed aspects, the League recommends adjusted approaches.

• On the proposal to extend the population limit for a Core-Based Statistical Area to be qualified as Well-Defined Local Community (WDLC), CCUL encourages elimination of the limit since it is not a requirement under the Federal Credit Union Act and a Core Based Statistical Area is by definition a WLDC.
• On the proposed broadened definition of a TIP to include employees of entities with strong dependency relationships within the same industry, the League suggests consideration of additional options such as interdependency relationships with sponsors.

"(T)he proposal provides some regulatory relief and recognizes that federal credit unions are better positioned than mere statistical data to define what qualifies as a community," Couchois concludes. "The proposed changes offer all three types of charters more options to grow and thrive."

View the full letter »

Before enactment, NCUA’s insurance coverage had been limited only to those clients of the attorney who were also members of the insured credit union where the attorney established the lawyers’ trust account.

Under the new law, only the lawyer or person administering the escrow account must be a member of the federally insured credit union in which such account is maintained for share insurance coverage to flow through to each client or principal, regardless of that person’s membership status.

“The law allowed the NCUA to also extend coverage to “other similar escrow accounts,” CUNA reported. This includes real estate escrow accounts and prepaid funeral accounts. “However, the NCUA has stated that if all the prepaid card program participants are members of the credit union and all recordkeeping requirements are met, the funds in the program are insured,” the article stated.

Additional facts about the new rule include:

• It does not impose any additional IOLTA recordkeeping requirements, but existing regulations state that records must show conclusive evidence of the relationship between the credit union and the member;
   
• Credit unions must ensure that Bank Secrecy Act (BSA) due diligence responsibilities are met, which could require updated BSA policies as IOLTAs and similar accounts may contain funds from nonmembers; and
   
• Funds in IOLTA and other similar escrow accounts do not count toward a federal credit union’s limit on the receipt of payments on shares from nonmembers.  

In North Carolina, the North Carolina Bar is still awaiting approval from the N.C. Supreme Court on the necessary rule changes related to credit unions practicing the IOLTA program. Approval is expected by the end of this quarter or sooner. Meanwhile in South Carolina, the S.C. Supreme Court amended its rules in May 2015 to allow credit unions to become eligible institutions in South Carolina’s IOLTA program (Rule 412).

SC credit unions should contact the South Carolina Bar Foundation for process details and application prior to offering such accounts.

Related News

CCUL reflects on IOLTA final rule, sets sights on future reg advocacy efforts (12/28/15)
S.C. Supreme Court approves IOLTA program; Rule changes still underway in N.C. (6/1/15)
Parity Act opens door for credit union to offer IOLTAs in the Carolinas (2/2/15)

“Specifically, we recommended that the agency add to its current definition of escrow accounts to include realtor accounts, prepaid funeral accounts, and agent–trust fiduciary accounts,” said Jeanne Couchois, VP compliance & regulatory counsel.

The League did not advocate for the inclusion of prepaid cards as it feared the additional regulatory burden that would be placed on member credit unions.

“It was our position that including such accounts would erase any ambiguity among state laws and would minimize the need for a case by case analysis of whether an account qualifies as an escrow account,” Couchois added.

The final rule, which explicitly excluded prepaid cards, will take effect 30 days after it is published in the Federal Register. NCUA will distribute guidance on the rule to credit unions before it goes into effect.

The League views this as another win for member credit unions. In addition to this advocacy effort, CCUL also voiced credit union concerns in the following areas this year:

• Examiner Relationships/Examination Issues
• Cybersecurity
• Credit Union Membership of Choice
• Save to Win
• TNCs (Transportation Network Companies)

And on the regulatory front, the League provided successful advocacy through poignant comment letters on issues such as the NCUA’s RBC rule and fixed asset rule.

“As we look ahead to next year, the CCUL advocacy and regulatory counsel will maintain efforts to share the credit union viewpoint by focusing on wet signature & electronic titling, enhancing our relationship with state and federal regulators, and weighing in on field of membership while addressing detailed, state-specific issues that arise,” said Trichina Pierce, compliance manager/associate counsel.

The agency’s exam appeals process is discussed in the “Review Of NCUA’s Examination And Complaint Processes For Small Credit Unions,” Report #OIG-12-10, August 31, 2012, which was produced by the NCUA Office of Inspector General (OIG) in response to a request from the Senate Banking Committee. The report found serious flaws in the agency’s record keeping as it relates to appeals but was able to ascertain that from 2007 through 2011, a yearly average of only six credit union “complaints” to their regions regarding exams were filed. Only two such appeals made their way to NCUA headquarters during that period. In 2011, NCUA supervised over 7,000 credit unions.

What accounts for such a low number of exam appeals, particularly during the financial crisis? Is it the result of examiner performance or were other factors present? A murky process? Fear of retaliation?

What Is Wrong with NCUA’s Process: 

What our process is and what it should be are just not the same. The 2012 NCUA OIG report described NCUA’s Appeals Process: “…NCUA has an appeals process where credit unions can question examination results through informal and formal channels. Specifically, NCUA has in place a two-tiered appeal process which encourages that disputes over examiner determinations get resolved at the regional office level and at the central office level through the SRC (Supervisory Review Committee, parenthesis added).”

Such a process might indeed produce an objective procedure in which credit union officials feel free to disagree with and challenge exam results without reproach and without sensing that the deck is stacked against their claim, yet credit union officials say this is not the reality. Credit union officials who speak to me feel they can’t even present reasonable alternatives or dispute exam conclusions, much less actually seek a review. These directors and officers also express their uncertainty about how the appeals process actually works in practice. The OIG report recommended that the agency develop a better system of reporting determinations at the regional level and an electronic system to document any Supervisory Review Committee decisions. It is unclear how even these modest recommendations have been fully addressed by the agency.

NCUA must address a credit union’s right to appeal now:

I support appropriate supervision and the full measure of enforcement for bad actors, but every credit union that reasonably concludes an exam directive is inappropriate should be entitled to challenge that directive in a cost effective manner and without fear of retaliation.

NCUA must have an open and fair process that allows for such challenges and provides each credit union an appropriate level of due process, consistent with our Constitution, the Federal Credit Union Act, and other applicable laws. Two bills are pending in Congress to improve supervisory appeals for credit unions and banks, S. 774 and H.R. 1941, both of which NCUA and other regulators oppose.

Recommendations for NCUA action:

NCUA on its own authority, right now, could develop a much more open and user-friendly appeals process by taking some simple steps:

• Seek general comments from credit unions and other stakeholders through an Advance Notice of Proposed Rulemaking on the flaws in and improvements to our appeals process. NCUA Interpretive Ruling and Policy Statement 11-1, as amended, could serve as a starting point;
• Use those comments to develop a new proposal on exam appeals that articulates the kinds of issues that may be reviewed and the procedures for the review; and
• Allow credit unions and other stakeholders to comment and respond to the comments by modifying the final rule as needed, including revisiting the final rule as part of NCUA’s rolling regulatory review.

Read this full article in the December 2015 issue of The NCUA Report  here.

“Investment advisers are on the front lines of a multi-trillion dollar sector of our financial system,” said FinCEN Director Jennifer Shasky Calvery. “If a client is trying to move or stash dirty money, we need investment advisers to be vigilant in protecting the integrity of their sector.”

This proposed rulemaking would address money laundering vulnerabilities in the U.S. financial system. Presently, illicit actors seeking to access the financial system may attempt to gain such access through an investment adviser as a means to avoid detection of their activity which might otherwise occur in dealings with financial institutions that have AML programs and suspicious activity reporting requirements.

Requiring investment advisers to establish AML programs and file reports of suspicious activity would bring them under similar regulations as other financial institutions subject to the BSA, such as mutual funds, broker-dealers in securities, banks, and insurance companies. Requiring investment advisers to file CTRs and comply with the recordkeeping requirements of the BSA may also deter illicit actors from using them as conduits.

The proposal would apply to investment advisers that are required to be registered with the U.S. Securities and Exchange Commission (SEC), including advisers to certain hedge funds, private equity funds, and other private funds. FinCEN would delegate its authority to examine investment advisers for compliance with these requirements to the SEC.

Written comments on this proposed rulemaking must be submitted on or before 60 days after its publication in the Federal Register. Please email your comments to VP Regulatory/Compliance Counsel Jeanne Couchois at jcouchois@carolinasleague.org by Thursday, October 15.

Free Member Business Lending Webinar - August 20: In a free August 20 webinar, CUNA Chief Economist Bill Hampel, Senior Director of Advocacy Lance Noggle, and Chief Advocacy Officer Ryan Donovan will offer details on the proposal and information to help you write your comment letter. See more on the NCUA MBL Proposal webinar, and register here.

NCUA's MBL Proposal Background: The proposed rule, which has an 18-month implementation period, would completely overhaul NCUA's MBL regulation by:

• Removing almost all requirements not in the Federal Credit Union Act.
• Creating a category of "commercial" loans for safety and soundness purposes while using the category of MBLs for compliance with the Act's limitations on member business lending.
• Removing all of the specific requirements that currently require waivers, including the personal guarantee requirement.
• Exempting some CUs with less than $250 million in assets from the board of director and management responsibility requirements and commercial loan policy requirements.

For more background, review the Federal Register Notice and CUNA's Detailed Summary.

Use PowerComment: The PowerComment online tool offered by CUNA provides seven questions to consider, an opportunity to post additional questions and discussion for other commenters, template letter content for your customization, and a copy of your final letter via email to you. Because your perspective is essential to the League’s own comment letter, we ask that you forward the copy you receive from PowerComment—or your own if written independently—to jcouchois@carolinasleague.org. 

The National Association of State Chartered Credit Unions (NASCUS) has been leading the charge in pushing for greater transparency as it relates to the OTR. As part of its effort to raise awareness, NASCUS recently released a video explaining NCUA funding model and the increasing reliance on the OTR.

The 'overhead transfer rate' (OTR) in brief from NASCUS on Vimeo.

Related Articles

NASCUS: 2011 report gives weight for need for 'notice and comment' on OTR (July 27)
NASCUS: Ito statement on NCUA 2015 budget reprogramming (July 24)

This week, the league received word from the N.C. Bar Association that revisions to the IOLTA rule had been republished for comment.

“The rules committee will meet again in October to determine if the new proposal should be approved,” said Jeanne Couchois, VP Regulatory/Compliance Counsel. “If the rule is approved in October then it will be sent to the NC Supreme Court in January 2016 for final approval.”

In South Carolina, the S.C. Supreme Court amended its rules in June allowing credit unions to become eligible institutions in South Carolina’s IOLTA program. An approval and training process is required before South Carolina credit unions can offer IOLTA accounts.

For more information on IOLTAs, visit League InfoSight here. The CCUL Compliance team is also available to discuss any concerns related to the local development of IOLTAs in your state.