NAFCU Compliance Blog

Check Out NAFCU's Other Blog - Musings from the CU Suite

Written by Steve Van Beek

It's been a while since I kissed up to Anthony mentioned Anthony's outstanding credit union management/leadership blog.  So, I thought a Friday post would be a great time to link to some of the best blog posts - in my opinion - that Anthony has penned over the past few months.    

• November 27th:  The 8 "Must Haves" of Leadership

• October 30th:  Presentations...First Things First

• September 25th:  Benjamin Franklin, Habits, and Email

• September 18th:  Fish or Cut Bait

As I was going through these, I ran across Anthony's own Top 10 blog post list that I needed to share as well:

• August 30th:  My Top "10" List

That list includes a very appropriate blog post for this crowd as well:  7 Compliance Rules for Non-Compliance Managers.  And, Anthony's very first post - Decision Fatigue - is very relevant today as we all face increasing workloads due to complex regulatory changes.  

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If you like those posts, consider signing up for the blog feed (new posts happen each Tuesday and Thursday).  

Have a great weekend everyone!  

NCUA Finalizes Rule to Correct Inaccurate Citations in Regulations

Written by Steve Van Beek

This morning, NCUA issued a final rule in the Federal Register that would fix numerous inaccurate citations.  The majority of the citations were inaccurate due to the transfer of regulatory authority to the CFPB in July 2011 and the subsequent republishing of the regulations by the CFPB in December 2011.

These incorrect citations where pointed out to NCUA in NAFCU's comment letter on July 23, 2012 (including a listing on the last page):

"Updating NCUA Regulations

NAFCU would like to take this opportunity to urge the NCUA to update its regulations by making technical changes to various incorrect references. For example, NCUA’s regulations are replete with incorrect references to Federal Reserve Board regulations that have been transferred to the Bureau of Consumer Financial Protection (CFPB). The NCUA should make these technical changes as quickly as possible, as incorrect references unnecessarily create confusion and difficulties with compliance.

To help facilitate with this endeavor, NAFCU has attached Appendix A to this comment letter, a list of incorrect references in NCUA’s regulations."

Additionally, our March 30, 2012 blog post was hopeful that NCUA would correct all these inaccurate citations and remove one headache from credit union compliance officers:

"Bonus:  Inside of 12 CFR 701.31 is a citation to Regulation B.  Unfortunately, it references 12 CFR 202.2(f) rather than the accurate citations of 12 CFR 1002.2(f).  While this seems minor it does cause confusion and unnecessary headaches and really should have been addressed during NCUA's Technical Amendments to Part 701.31.  

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Hopefully NCUA's Annual Regulatory Review will include a thorough review of their regulations to ensure the citations accurately reflect the CFPB's authority over the consumer regulations."

We all abhor when regulators use cross-references.  But, when they do - it is better that they be accurate.  So, kudos to NCUA for getting this done within one year of when the regulations where republished by the CFPB.  

CFPB Updates Thresholds; Waiting on HMDA

Written by Steve Van Beek

Recently, the CFPB announced the 2013 threshold levels for HOEPA/Section 32/High-Cost loans as well as exemption levels for both Reg Z and Reg M.  They haven't released the HMDA asset threshold for 2013 yet, but we'll be sure to pass that along when it is published (last year's release was, unfortunately, delayed until February 15th).  

• The HOEPA fee threshold for 2013 will be $625 in fees.  

• The Regulation M (consumer leasing) threshold for 2013 will be $53,000 (up from $51,800 in 2012).

• The Regulation Z threshold for 2013 will also be $53,000 (up from $51,800 in 2012).  

For the Reg Z threshold, a couple of things to keep in mind:

• Private student loans are subject to Reg Z regardless of the loan amount.
• Loans secured by real property (mortgages) are subject to Reg Z regardless of the loan amount.  
• Loans secured by personal property used or expected to be used as the member's principal dwelling are subject to Reg Z regardless of the loan amount.

Additionally, most credit unions provide the Reg Z disclosures for all loans (even a $55,000 closed-end car loan) in order to keep consistent for their loan teams.  

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HMDA.  Last year's asset threshold was released on February 15th even though the Federal Reserve had historically announced the updated threshold in December of the year prior.  Hopefully the CFPB has learned from its growing pains of the first year and realizes how important it is to be timely with issues as important as the annual HMDA asset threshold.

CFPB Extends Remittances Effective Date - New Proposal Coming Soon

Written by Steve Van Beek

Earlier this afternoon, the CFPB issued Bulletin 2012-08 on the remittance transfer requirements under Regulation E:

"The Consumer Financial Protection Bureau (CFPB or the Bureau) expects to issue a proposal next month to refine three elements of its rule regarding foreign remittance transfers.  The proposal will be narrowly targeted to address the rule’s provisions on: (1) errors resulting from incorrect account numbers provided by senders of remittance transfers; (2) the disclosure of certain foreign taxes and third-party fees; and (3) the disclosure of sub-national, foreign taxes.  The Bureau will proceed on a fast track with a notice of proposed rulemaking, which will propose these changes. This notice will propose to amend the final rule issued earlier this year, currently set to take effect on February 7, 2013.  The notice will also propose a brief extension of the effective date of the rule until 90 days after the Bureau finalizes the proposal. The Bureau anticipates providing this extension in order to permit providers to adjust their systems in response to the proposed requirements.  The Bureau expects that the proposed effective date will be sometime during the spring of 2013." 

In short, the CFPB will be proposing changes to certain parts of the remittances rule (although it doesn't appear to be considering an increase in the 100 safe harbor level) and this proposal will also extend the effective date of the rule.  

The CFPB's Bulletin indicates it will fast-track the proposal and final rule and that the new effective date will be later in the Spring 2013.  For additional information, be sure to review the proposed rule when it is issued.  The CFPB also has a remittances page - including a PDF document with the full regulation and staff commentary - which might be useful. 

CFPB Delays Certain Disclosures Related to TILA/RESPA Integrated Disclosures

Written by Steve Van Beek

On November 16th, the CFPB announced it was finalizing a rule to formally delay the effective date of certain new disclosures.  The new disclosures are related to the CFPB's TILA/RESPA Integrated Disclosure rulemaking and the CFPB reasoned that the new disclosures should be delayed until there is a final rule for the new Integrated Disclosures.  NAFCU wholeheartedly agrees.  Here is from the final rule (published in last Friday's Federal Register):

"The Bureau of Consumer Financial Protection (Bureau) is amending Regulation Z (Truth in Lending) to, in effect, delay implementation of certain new mortgage disclosure requirements in title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act that would otherwise take effect on January 21, 2013. Instead, to avoid potential consumer confusion and reduce compliance burden for industry, the Bureau plans to implement these disclosures as part of the integrated mortgage disclosure forms proposed earlier this year, which combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act and the Real Estate Settlement Procedures Act. Accordingly, this rulemaking exempts persons from complying with these mortgage disclosure requirements and provides that such exemptions are intended to last only until the integrated mortgage disclosure forms take effect."

Here is a listing of the new disclosures mandated by Dodd-Frank that will be delayed:

• Warning regarding negative amortization features. Dodd-Frank Act section 1414(a); TILA section 129C(f)(1).
• Disclosure of State law anti-deficiency protections. Dodd-Frank Act section 1414(c); TILA section 129C(g)(2) and (3).
• Disclosure regarding creditor's partial payment policy prior to consummation and, for new creditors, after consummation. Dodd-Frank Act section 1414(d); TILA section 129C(h).
• Disclosure regarding mandatory escrow or impound accounts. Dodd-Frank Act section 1461(a); TILA section 129D(h).
• Disclosure prior to consummation regarding waiver of escrow in connection with the transaction. Dodd-Frank Act section 1462; TILA section 129D(j)(1)(A).
• Disclosure of monthly payment, including escrow, at initial and fully-indexed rate for variable-rate residential mortgage loan transactions. Dodd-Frank Act section 1419; TILA section 128(a)(16).
• Repayment analysis disclosure to include amount of escrow payments for taxes and insurance. Dodd-Frank Act section 1465; TILA 128(b)(4).
• Disclosure of aggregate amount of settlement charges, amount of charges included in the loan and the amount of such charges the borrower must pay at closing, the approximate amount of the wholesale rate of funds, and the aggregate amount of other fees or required payments in connection with a residential mortgage loan. Dodd-Frank Act section 1419; TILA section 128(a)(17).
• Disclosure of aggregate amount of mortgage originator fees and the amount of fees paid by the consumer and the creditor. Dodd-Frank Act section 1419; TILA section 128(a)(18).
• Disclosure of total interest as a percentage of principal. Dodd-Frank Act section 1419; TILA section 128(a)(19).
• Optional disclosure of appraisal management company fees. Dodd-Frank Act section 1475; RESPA section 4(c).

These are the "Affected Title XIV Disclosures" and they, along with the Post-Consummation Escrow Cancellation Disclosure, are delayed until the CFPB finalizes the TILA/RESPA Integrated Disclosure:

"The final rule implements the Affected Title XIV Disclosures and the Post-Consummation Escrow Cancellation Disclosure in § 1026.1(c) of Regulation Z and provides for a temporary exemption for persons from these statutory disclosure requirements. The Bureau is issuing this final rule implementing the Affected Title XIV Disclosures and the Post-Consummation Escrow Cancellation Disclosure prior to the statutory provisions becoming self-effectuating on January 21, 2013. Accordingly, persons will not be required to comply with these statutory disclosure requirements until such time as the Bureau removes the exemption, which it plans to do in the final rule for the TILA-RESPA integrated disclosures, and such removal takes effect."

The above is from the Summary of the Final Rule.  

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Other Disclosures Not Delayed.  Keep in mind that in the same announcement, the CFPB did not delay the following disclosures:

• Disclosure regarding notice of reset of hybrid adjustable rate mortgage. Dodd-Frank Act section 1418(a); TILA section 128A(b).
• Loan originator identifier requirement. Dodd-Frank section 1402(a)(2); TILA section 129B(b)(1)(B).
• Consumer notification regarding appraisals for higher-risk mortgages. Dodd-Frank Act section 1471; TILA section 129H(d).
• Consumer notification regarding the right to receive an appraisal copy. Dodd-Frank Act section 1474; ECOA section 701(e)(5).

These disclosures are not included in the "Affected Title XIV Disclosures."  Thus, the final rules for these new disclosures will still be issued prior to January 21, 2013.  For more on these requirements, check out NAFCU's On-Demand Mortgage Webcast Series.      

What is a Civil Investigative Demand?

Written by Steve Van Beek

With a new regulator (the CFPB), come new regulatory powers.  One of these new powers is the Civil Investigative Demand (CID) which acts like a subpoena request for information.  In short, Dodd-Frank authorizes the CFPB "to conduct investigations to ascertain whether any person is or has been engaged in conduct that, if proved, would constitute a violation of any provision of Federal consumer financial law."  

The CFPB has issued a final regulation that govern their investigations - 12 CFR 1080.  

The CFPB's ability to issue a CID is not limited solely to institutions under its primary enforcement powers.  Even if your credit union is less than $10 billion in assets - the CFPB could issue you a CID.  Here is from a September CFPB blog post:

"The mission of the CFPB is to ensure compliance with federal consumer financial laws through effective enforcement of those laws. When the Office of Enforcement needs to gather information, it may issue a Civil Investigative Demand (CID) to people and institutions that may have materials relevant to an investigation. The law that created the CFPB gives us the authority to gather information this way, and several other federal agencies have similar processes.

We carefully consider what to request in each Civil Investigative Demand. A recipient of a CID may challenge a CID by petitioning the CFPB’s Director. The Director can respond in three ways: he can reaffirm our decision to obtain the information, modify the demand, or set it aside altogether."

As indicated in the quote above, there is a process to appeal a CID.  Unfortunately, the ultimate decision-maker is the Director of the CFPB.  As you can imagine, the current track record for appeals is not good.  The first two have been denied by Richard Cordray and you can find that information here.  

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If your credit union receives a CID - call your attorney.  Quickly.  

Timing.  The CFPB's timeframe only allows 10 days for the credit union to meet, in person, with the CFPB.  12 CFR 1080.6(c).  Additionally, you only have 20 days to petition the CFPB to modify or set aside the CID.  12 CFR 1080.6(d).  And, the petition cannot be a general objection to the CID:  "[s]uch petition shall set forth all factual and legal objections to the civil investigative demand, including all appropriate arguments, affidavits, and other supporting documentation. The attorney who objects to a demand must sign any objections."  Further, if you do not have the "10 day meeting" the CFPB will not allow your petition to modify or set aside the petition to go forward.  Which is what occurred when Next Generation Debt Settlement appealed the CFPB's CID.  

Thank You

Written by Steve Van Beek

As the Thanksgiving holiday rolls around, it reminds us of things we should be doing more throughout the year - namely saying Thank You and spending time with family and friends.  I hope everyone has a great holiday weekend.

I did want to say a few Thank Yous of my own:

• To the Blog Readers - thanks for allowing us to bombard your inboxes every day with a few tidbits of compliance information.  We appreciate the feedback on what we did right, where we can improve and everything in between.  Thank you - we'll do our best to help everyone keep up with the ever-increasing pace of regulatory change.

• To my Colleagues - thanks for all your hard work.  We've had some outstanding blog posts this past year from JiJi, Bernadette, Mike and Shari.  And, if you are a NAFCU-member, you've most likely talked with a member of the Compliance Team recently.  As you prepare for upcoming proposed rules, you've most likely reviewed NAFCU's Regulatory Alerts prepared by Carrie, Tessema and Shelby.  And, for every compliance webcast or compliance conference there are many NAFCU employees whose hard work comes together to organize, market and execute a great program.  Thanks everyone.  

• To my Wife - thank you for everything.  It takes a special person to put up with me on a daily basis and I'm very thankful to have you in my life.  Thank you.  

From our recent trip to Europe.   

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Programming Note:  NAFCU's Offices will be closing early today and will be closed on both Thanksgiving and Friday.  We'll be back blogging on Monday.  

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And, lastly, Go Blue!  Beat the Buckeyes!  Have a very Happy Thanksgiving weekend everyone!

Check out NAFCU's Updated Compliance Webpage

Written by Steve Van Beek

As everyone tackles their last items heading into the Thanksgiving holiday, we wanted to make sure you checked out our updated compliance section on the NAFCU website.  We've made these changes to help streamline the information on our pages in order to help you find the information when you need it.  

In addition to the new main page, we have four updated tabs to help you find what you need:

• Contact the Compliance Team

• Compliance Resources

• Compliance Certification Program

• Compliance Training

The goal is to remove some of the extraneous text (we all have enough reading already) and help you pinpoint what you are looking for.  If you need to find contact information for the NAFCU Compliance Team, we have that all on one page.  Or head to the Compliance Resources page for the latest Compliance Monitor or BSA Blast.  Or the Book of Answers.  

We have other planned updates (and upgrades) that we'll be ready to unveil in 2013.  For now, take a tour and let us know your thoughts.     

Hurricane Sandy: Supplemental Interagency Guidance on Supervisory Practices; Additional Resources

Written by Bernadette Clair, Regulatory Compliance Counsel

Federal regulators, including the NCUA, have issued supplemental guidance on supervisory practices regarding financial institutions and borrowers affected by Hurricane Sandy.  The guidance is intended to encourage institutions to consider all reasonable and prudent steps to assist those affected by recent storms.

The guidance indicates that examiners will consider the unusual circumstances institutions are facing in the affected areas when conducting exams and other supervisory activities.  Institutions that implement prudent efforts to meet customers’ cash and financial needs will generally not be subject to examiner criticism, and those that implement prudent loan workout arrangements will not be subject to criticism for engaging in these efforts even if the restructured loans have weaknesses that result in adverse classification or credit risk grade downgrade.

Examples of prudent relief efforts to meet customers’ cash and financial needs can include the following, when consistent with safe and sound banking and credit union practices:

• Waiving ATM fees for customers and non-customers
• Increasing ATM daily cash withdrawal limits
• Waiving overdraft fees
• Waiving early withdrawal penalties on time deposits
• Waiving availability restrictions on insurance checks
• Easing restrictions on cashing out-of-state and non-customer checks
• Easing credit card limits and credit terms for new loans
• Waiving late fees for credit card and other loan balances
• Offering payment accommodations, such as allowing loan customers to defer or skip some payments or extending the payment due dates, which would avoid delinquencies and negative credit bureau reporting caused by storm-related disruptions

The guidance also covers prudent loan modifications, evaluating restructured loans to determine whether a particular loan should be reported as a troubled debt restructuring (TDR), and guidance regarding Bank Secrecy Act compliance with Customer Identification Program (CIP) requirements.  See the guidance for complete details.

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Additional Resources.  Here are links to additional helpful resources.

• NCUA’s Website.  This page on NCUA’s website lists numerous resources regarding hurricane preparedness and recovery for credit unions and credit union members.
• Freddie Mac and Fannie Mae.  Both Freddie Mac and Fannie Mae issued statements regarding relief options available to borrowers affected by the hurricane.
• Scam Warnings.  The IRS issued a warning about possible scams targeting consumers in the wake of Hurricane Sandy. FinCEN Advisory FIN-2006-A001 also provides guidance to financial institutions about potential fraudulent schemes during natural disasters.

November NCUA Board Meeting

Written by Michael Coleman, Regulatory Compliance Counsel

Yesterday at the November NCUA Board Meeting, the two member NCUA Board approved three items:

• NCUA's 2013 operating budget. The NCUA Board approved a budget of $251,387,091, which is a 6.1 percent  ($14,532,305) increase over the agency’s 2012 budget. 
• An Overhead Transfer Rate (OTR) for 2013 of 59.1 percent, a decrease from the 2012 OTR of 59.3 percent.
• The 2013 federal credit union operating fee scale of 0.24 percent, and an elimination of operating fees for FCUs with assets less than $1 million.

NCUA's Board Action Bulletin provides a summary of these actions. The most contentious action taken was undoubtedly the 6.1 percent increase in NCUA's operating budget. NAFCU has serious concerns with this increase in the budget and has expressed these concerns to NCUA, you can read more about this issue in the NAFCU Today. 

The Board Action Bulletin quotes NCUA Chairman Matz concerning the approved 2013 NCUA budget: 

“'This is a realistic, responsible and prudent budget. It’s a sound investment for credit unions to protect their bottom lines and the Share Insurance Fund from any industry losses,' Chairman Matz said. 'As the industry’s assets grow and credit unions engage in increasingly complex activities, NCUA must keep pace. We held the line in this budget with no increase in authorized staffing levels from 2012, and we reaffirmed our commitment to keeping costs under control by engaging in zero-based budgeting where every projected expense is justified.'”

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Also at the meeting, NCUA briefed the NCUA Board on an estimated range for National Credit Union Share Insurance Fund (NCUSIF) premiums and Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund) assessments in 2013. For the NCUSIF, the estimated range was 0-5 basis points. For the Stabilization Fund the range was 8-11 basis points. For more details see NCUA's Board Action Bulletin.

Have a great weekend!