NAFCU Compliance Blog

NCUA Issues Final IRPS on Section 205(d)

Yesterday, NCUA issued IRPS 08-1, an IRPS that does...well, I'll allow NCUA to explain.

Section 205(d) of the FCU Act prohibits a person who has been convicted of any criminal offense involving dishonesty or breach of trust, or who has entered into a pretrial diversion or similar program in connection with a prosecution for such offense, from participating in the affairs of an insured credit union except with the prior written consent of the NCUA Board. This IRPS provides direction and guidance to federally-insured credit unions and those persons who may be affected by Section 205(d) because of a prior criminal conviction or pretrial diversion program participation by describing the actions that are prohibited under the statute and establishing the procedures for applying for NCUA Board consent on a case-by-case basis.

You can access the IRPS here.  It is a fairly quick read.  But it is a must read for your HR department.   And if you're a compliance officer, I'd give it a read as well.

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The Compliance Guy is looking at a weekend of minor league baseball, family, friends and barbecue.  I hope you have as much fun as I plan on having.  Have a great weekend, everyone.

NCUA Board Meeting; Shameless Plug for Caucus

NCUA's monthly board meeting takes place today.  Here is a link to today's itinerary.  If you are reading this after 9 a.m. EST on Thursday, you can see the draft board items here.

I've highlighted the interesting items below:

1. Request from Horizon One Federal Credit Union to Convert to a Community Charter.        
2. Quarterly Insurance Fund Report.
3. Reprogramming of NCUA’s Operating Budget for 2008.
4. Proposed Rule:  Parts 702 and 704 of NCUA’s Rules and Regulations, Prompt Corrective Action; Amended Definition of Post-Merger Net Worth.
5. Final Interpretive Ruling and Policy Statement (IRPS) 08-1, Guidance Regarding Prohibitions Imposed by Section 205(d) of the Federal Credit Union Act.
6. Request for Board Authorization to Seek Approval for a New Agency Seal.

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I also wanted to give a shout-out to NAFCU's Congressional Caucus.  This conference takes place each September in Washington, D.C.  NAFCU's Congressional Affairs staff does a great job of attracting key NCUA and Congressional leaders.  A good understanding of the legislative system is a must for today's compliance officer.  And this conference is a great way to see what is brewing on Capitol Hill.  You can go here for additional details.

Calming Member Fears and your CAMEL Rating

Many credit unions are communicating the fact that they are safe and sound to their members.

Good move.  But beware of the CAMEL bite.  

Credit unions are not free to share their CAMEL rating with their membership.  CAMEL ratings are confidential, and NCUA does not publish them.  Members, however, may question your sincerity if you refuse to give them that number. 

Well, point members to NCUA's frequently asked questions page.  Question and answer #11 address the CAMEL issue.

If you really want to slam the door on this issue, give the member this NCUA FOIA decision.  In the decision, NCUA indicates that:

The CAMEL Evaluation Form contains your credit union's ratios for the CAMEL components, the parameter code and its component and composite CAMEL ratings. This information fits squarely within exemption 8 of the FOIA, its release could harm the financial security of a credit union as well as interfere with the relationship between NCUA and the credit union. The Confidential Section of the examination contains information concerning the credit union's management and financial security. Its release could also cause the harms sought to be avoided by withholding the information under exemption 8. Although the Confidential Section may contain some additional information, courts do not require agencies to segregate and disclose those portions of documents that are unrelated to the financial condition of the institution.

This might make a good training topic for front-line staff.  I can just imagine a teller on his first day hearing a question about a credit union's camel.   A quick, confident response from a teller or member service representative should be enough for most members. 

Two tickets, some popcorn, and housing discrimination

HUD has announced that it is now running a public service advertisement (PSA) in movie theaters in 28 U.S. cities.  The PSA will educate consumers about fair lending/housing rights.  The PSA will run through July 25.

• Here is HUD's news release with more details.
• Here's a list of the cities where the PSAs will air.
• Here's a link to a page where you can find the PSA.  (Good luck.  I couldn't get it to work.)

HUD does enforce the Fair Housing Act for all credit unions in the U.S.  I would scan the list of cities to see if theaters in your area will be showing the PSA. If so, just be prepared that some homeowners may contact you in reaction to the PSA. Note: HUD did pick 10 cities "with some of the highest foreclosure rates in the country."

Share Insurance: Don't Forget the Reg

The share insurance calls keep on coming.  And while NCUA has a bunch of great brochures and booklets that address how the share insurance system works, the NCUA share insurance regulation is a fantastic resource that goes into great depth.  Share insurance questions often fall into gray zones that are not clearly addressed in general guidance documents. 

You can find NCUA's share insurance regulations (part 745 of their regs) here.  The appendix includes a number of good examples that flesh out the regulations.

Good stuff, people.  Good stuff.

Go here to see the blog's other postings on share insurance.

Share Insurance, Multiple Accounts and PODs

Yesterday, I heard from even more credit unions who are getting hammered with questions about share insurance.  With that in mind, I wanted to touch upon two issues that seem to be generating some confusion.

1. The National Credit Union Share Insurance Fund (NCUSIF) insures different types of accounts separately in each institution.  If a member, for example, has an individual account and is a joint owner on a joint account, these two accounts offer separate share insurance protection up to $100K.  (Some retirement accounts get up to $250K.)  So, it is very easy for a member to get $200K of coverage by having an individual account and a joint account.  But a member cannot multiply his or her coverage by opening multiple accounts of the same type at the same credit union .  For an example, a member could have 20 different individual accounts in a credit union. His or her interest in all individual accounts at an institution is insured up to $100K.  So one individual account or 20 at the same institution is all the same when it comes to share insurance.
   
2. NCUA treats POD accounts as an informal revocable trust account.  This means that every owner of of a POD/revocable trust account gains $100K of share insurance for each qualifying beneficiary of the account(s).  Qualifying beneficiaries are spouses, children, grandchildren, parents, and siblings of the account owner.  Note that NCUA requires credit unions to include POD or trust designation on the account title.

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The rumors were true. Next Friday, July 25, NAFCU will host a free webcast for NAFCU members and nonmembers to go over the fundamentals of share insurance.  It will take place from 2-3:30 EST.  With all the questions from members, we thought now would be a great time to do this.  Members and nonmembers can sign up here. The webcast will be archived and available for 6 months following the airing.  If you are going to have more than one location watch, we ask that each location sign up separately.

Over and out.  Have a great weekend everyone!

Newspapers; Married Life

Last Sunday, Michelle Singletary of the Washington Post wrote an article about how some creditors have been garnishing protected funds.  You can read her article here.  (You may have to sign up for free to view the content.) 

I won't get into the pros and cons of her article.  The garnishment of funds is a very complicated subject with very little guidance from our regulators.  There is this proposed joint interagency guidance on the subject.  And then there is the issue of offsetting against accounts where protected funds have been deposited. 

Here's my point for today: articles such as Ms. Singletary's can generate a good deal of buzz within your membership.  I'm sure that quite a few members read her article and then asked themselves whether their credit union garnished protected funds.  Some of them might actually call you and ask.  That's why I think it is important for compliance officers to read the newspapers that their membership might read.  Scan headlines at a minimum to see if an article touches upon an issue that is important for you or your members. 

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So, I received another shopping list from my wonderful wife.  But there was one item that, while appearing simple, turned out to be quite difficult.

Three small turnips.

I had heard of turnips.  I know a turnip is some sort of vegetable.  But I realized that in my 36 years of life on this planet, I had not purchased one.  And as I stared at the poorly labeled vegetable section, I suddenly realized that I probably could not identity a turnip in a vegetable line-up.  I asked one woman for help who admitted that she was in the same boat.  (Before asking why in the world I was purchasing them.  I blamed Mandy.  The woman said she understood.)

Eventually, I found the right vegetable tray.  So know I know what a turnip is, which might come in handy some day.

This marriage thing can be an education in surprising ways.

IndyMac and your Call Center; Shameless Plugs

Last Friday, the FDIC decided to close IndyMac Bank, of Pasadena, California.  It was a very big bank failure, and it has raised the question about the federal insurance of bank deposits.  Reportedly, police had to keep the calm outside a number of IndyMac branches on Tuesday.  Chairwoman JoAnn Johnson of NCUA indicated on Monday that the credit union share insurance fund is in good shape.  That being said, many members have contacted their credit unions to ask about share insurance.  Well, they asked two questions in particular.

1. Are all my shares insured?
2. And if not, what can I do?

This is a great time to train staff on basic share insurance issues.  This NCUA page contains all of its share insurance resources.  For staff putting together a training program, it is a must visit.

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Also, note that NAFCU plans to offer a webcast next week to help credit unions train their front-line staff on how the share insurance system works.  Stay tuned.

Finally, NAFCU sells share insurance statement inserts.  You may want to consider inserting these in an upcoming periodic statement to educate members.

Fed Issues Final Rule Affecting Mortgages

Yesterday, the Federal Reserve Board approved a final rule aimed at ending certain abusive practices by home mortgage lenders.  You can read the Fed's announcement here. I would read this Fed overview before diving into the final rule itself, because the final rule is more than 400 pages in length. The long, draft Federal Register notice can be found here.

Compliance with the rule is October 1, 2009. (One provision relating to escrows takes effect one year later.)

Word of warning: this rule contains some provisions that affects credit unions that offer high-priced mortgages (as defined by HOEPA) AND some provision that affect ALL closed-end home-secured mortgages.  The bottom line is this: if your credit union offers mortgage lending, this is a must read.

NCUA Issues Legal Opinion Letter on Gift Cards

NCUA recently issued Legal Opinion Letter 08-0121 (June 10, 2008) where it indicated that a federal credit union could offer gift card-related services for Texas Tech University, assuming that the University or its Athletic Department were members of the credit union.  In NCUA's words:

You have asked about the permissibility of a proposal Texas Tech Federal Credit Union (FCU) is considering where the FCU would receive payments for gift cards and track payments for the Texas Tech University Athletic Department (Athletic Department). We conclude it is within the FCU’s incidental powers to offer this financial service to the issuer of the gift card if the issuer is a member of the FCU.

The Athletic Department wants to offer Texas Tech fans a gift card for the purchase of athletic event tickets, concessions at events, and apparel at the university’s athletic store. Fans would access information about gift cards on the Athletic Department’s web site; when the fan initiates a card purchase, the fan would be transferred by an electronic link to the FCU’s website. The FCU would receive funds electronically from the purchaser on behalf of the Athletic Department into an account the Athletic Department would maintain at the FCU. The FCU will track the use of the gift card and debit its member’s account when the card purchaser uses the card to make a purchase. A local bank with which the FCU already has a relationship will provide the cards showing the logos of the FCU and the Athletic Department.

This letter also underscores the benefits of having your sponsor become a member of the credit union.  Be sure to read NCUA's letter for all the details. 

This guidance has me thinking about the upcoming football season already.  Let's go State!