NAFCU Compliance Blog

Unfair, Deceptive or Abusive Acts or Practices: Airline Taxes Edition

Written by Steve Van Beek

Ok, we're going a bit off-topic for a couple of reasons.

1. It is Friday.
2. Why not?
3. It is interesting to think of the issues facing compliance officers in other industries.

The Washington Post ran a recent opinion piece from George Will which highlighted a requirement for airlines when they disclose taxes and fees:

"Spirit, Allegiant and Southwest are low-cost carriers that have thrived since the deregulation of the airline industry, which began in 1978. The government retains a narrow authority to prevent deceptive advertising practices. But as the airlines argued in petitioning the Supreme Court to hear their case, the government is micromanaging their speech merely to prevent the public from understanding the government’s tax burdens.

The government’s total price rule forbids the airlines from calling attention to the tax component of the price of a ticket by listing the price the airline charges and then the tax component with equal prominence. The rule mandates that any listing of the tax portion of a ticket’s price “not be displayed prominently and be presented in significantly smaller type than the listing of the total price.” The government is trying to prevent people from clearly seeing the burdens of government.

These three low-cost carriers compete for the most price-conscious travelers, and they want to tell those travelers which portion of a ticket’s cost the airlines control. The government, far from regulating to prevent customer confusion, is trying to prevent customers from understanding the taxes and fees that comprise approximately 20 percent of the average airline ticket." (Emphasis added).

I'm not trying to get political - but I found it very interesting that airlines face regulations which tell them their tax and fee disclosures cannot be displayed prominently. 

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I wonder what the CFPB would say about such a regulation......Have a great weekend!

FFIEC's Proposed Social Media Guidance

Editor's Note by Steve Van Beek

NAFCU's offices are technically closed today due to the weather in the Washington D.C. area.  Of course, we'll still be available to help NAFCU member credit unions.  To help ensure employee safety, some of our compliance team is working remotely.  If you have a compliance question, the best way to reach us is via email: compliance@nafcu.org.

NAFCU's Ability to Repay/Qualified Mortgage Webcast.  Today's webcast will continue as planned.  Andy Keeney from Kaufman & Canoles will be speaking and I'll be moderating.  If you're joining us - see you there (or, at least, you'll see me there)!  If the weather prevents your credit union from viewing today, the webcast - as with all NAFCU webcasts - will be available for on-demand viewing allowing you to reschedule and watch at a more convenient time.

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Written by Bernadette Clair, Regulatory Compliance Counsel

The FFIEC is seeking comment on proposed social media risk management guidance designed to address the applicability of federal consumer protection and compliance laws, regulations, and policies to activities conducted via social media by credit unions and other financial institutions.  The guidance would cover credit unions’ activities on Facebook, Twitter, blogs, forums, and YouTube, to name just a few of the covered social media tools.

The proposed guidance discusses various risks associated with social media –such as compliance, legal, reputation, and operational risks – and sets forth a framework for establishing a risk-based management program designed to identify, measure, monitor, and control these risks.  Of note, the proposed guidance states that the components of a risk management program should include the following:

• A governance structure with clear roles and responsibilities whereby the board of directors or senior management direct how using social media contributes to the strategic goals of the institution (for example, through increasing brand awareness, product advertising, or researching new customer bases) and establishes controls and ongoing assessment of risk in social media activities;
• Policies and procedures (either stand-alone or incorporated into other policies and procedures) regarding the use and monitoring of social media and compliance with all applicable consumer protection laws, regulations, and guidance. Further, policies and procedures should incorporate methodologies to address risks from online postings, edits, replies, and retention;
• A due diligence process for selecting and managing third-party service provider relationships in connection with social media;
• An employee training program that incorporates the institution's policies and procedures for official, work-related use of social media, and potentially for other uses of social media, including defining impermissible activities;
• An oversight process for monitoring information posted to proprietary social media sites administered by the financial institution or a contracted third party;
• Audit and compliance functions to ensure ongoing compliance with internal policies and all applicable laws, regulations, and guidance; and
• Parameters for providing appropriate reporting to the financial institution's board of directors or senior management that enable periodic evaluation of the effectiveness of the social media program and whether the program is achieving its stated objectives.

The FFIEC invites comments on any aspect of the proposal, but is specifically requesting comments on the following questions:

1. Are there other types of social media, or ways in which financial institutions are using social media, that are not included in the proposed guidance but that should be included?
2. Are there other consumer protection laws, regulations, policies or concerns that may be implicated by financial institutions’ use of social media that are not discussed in the proposed guidance but that should be discussed?
3. Are there any technological or other impediments to financial institutions’ compliance with applicable laws, regulations, and policies when using social media of which the Agencies should be aware?

If you would like to weigh in on this proposed guidance, comments must be received by the FFEIC on or before March 25, 2013.

NAFCU's Regulatory Compliance School Just Got Better - Regulatory Update Day

Written by Steve Van Beek

We've heard you!  For the past couple of years, we've received the following feedback about NAFCU's Regulatory Compliance School (paraphrased, of course):

"School is great and provided a solid foundation for understanding the regulatory requirements credit unions face on a daily basis.  BUT, the rules are changing so fast that it would be great to receive updates on what has just changed and what is changing next."

With this in mind, we've created Regulatory Update Day at NAFCU's 2013 Regulatory Compliance School (March 18-23 in National Harbor, Maryland).  

Regulatory Update Day (Thursday, March 21st) will provide:

• A clear understanding of what changes NCUA has in store for 2013 – including their Exam Focus

• An overview of the scope and applicability of the CFPB’s seven new mortgage regulations*

• A detailed look at the CFPB’s Qualified Mortgage/Ability-to-Repay requirements*

• Answers to Frequently Asked Questions on the mortgage rules from NAFCU’s compliance team*

• Insight from credit union attorneys and practitioners on how best to set up your implementation strategy

You can find more information on Regulatory Update Day here.  The three sessions with the "*" are sessions that are also part of NAFCU's Mortgage Reform Webcast Series.

The other 4 days of Compliance School will remain the same as will the opportunity to take the NAFCU Certified Compliance Officer (NCCO) exams.  Good luck!  

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And, all attendees at NAFCU's 2013 Regulatory Compliance School will receive NAFCU's 2013 GPS (coming soon!) as well as NAFCU's Scope & Applicability Charts.

Remember:  You do not need to be a NAFCU member credit union to attend NAFCU's conferences or webcasts.  In fact, you don't even need to work at a credit union.  Each School usually features a handful of consultants, vendors and other credit union "peeps" who support credit unions - in one way or another - on a daily basis.      

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Upcoming Webinars and Webcasts; NAFCU's October Compliance Monitor

Written by Steve Van Beek

Webinars and Webcasts.  There are quite a few free webinars to keep on your radar:

• October 4 at 3:00 p.m. EDT - Town Hall with Chairman Matz - Registration is Still Open

• October 16 at 2:30 p.m. EDT - New Requirements for Remittance Transfer Providers - Sign-Up by sending an email to CFPB_RemittanceRule@cfpb.gov by October 9.  If you have a question you'd like answered during the webinar - send it to CFPB_RemittanceRule@cfpb.gov by October 5.  

• October 17 at 2:00 p.m. EDT - Fair Lending Hot Topics by the Philadelphia Federal Reserve's Consumer Compliance Outlook

• Archived:  Servicemember Financial Protection (Compliance with the SCRA) - Slides are here.

NAFCU also has a couple of upcoming webcasts that might be of interest:

• October 10 - BSA/OFAC for Directors and Supervisory Committee  - Keep in mind that you can watch the archived webcast for up to one year - making this perfect for a future Board meeting or training event.  Sign up by October 3 and Save $100.  

• October 24 - Social Media and Website Compliance - This webcast will also be viewed live by all Regulatory Compliance Seminar attendees.  Sign up by October 17 and Save $100.  

• November 7 - CFPB's Latest Mortgage Proposals - NAFCU's Compliance team will overview the mortgage loan originator proposal, interagency higher-risk appraisal proposal and the Regulation B appraisal proposal.  Sign up by October 31 and Save $100.    

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NAFCU's October Compliance Monitor.  NAFCU Members: Our October Compliance Monitor is now available for download.  This issue includes lengthy articles on the "high-cost" mortgage proposal (including a discussion of the potential change to the definition of "finance charge") and the CFPB's mortgage servicing proposals.  We've also attached a six-page chart which helps organize the 20 new notices included in the mortgage servicing proposals.  Happy reading!

Changes to Equal Housing Lender Poster (for FCUs); NCUA Letter on Corporates

Written by Steve Van Beek

Last Thursday, the NCUA Board approved a couple of Technical Corrections at their March Board Meeting.  One of these changes provides clarity for Federal Credit Unions in an area full of confusion since the creation of NCUA's Office of Consumer Protection:  the address required on the Equal Housing Lender poster.

Equal Housing Poster.  NCUA amended Part 701.31(d)(3) of their regulations to update the address that Federal Credit Unions are required to have on their posters.  In the past, the address was the Office of Examination & Insurance but it should now be NCUA's Office of Consumer Protection.  

Updated Language.  This rule change was included in the Federal Register yesterday and the Electronic Code of Federal Regulations for 12 C.F.R. 701.31(d)(3) should be updated in the next couple of days.  The language for the updated poster can be found here.

Federal Credit Unions.  Part 701.31 only applies to federal credit unions.  State-chartered credit unions should look to the HUD's Equal Housing Poster in 24 C.F.R. 110.25.  

Note:  NCUA did not make the distinction in their technical corrections but the existing language of 12 C.F.R. 701.31 indicates NCUA's poster requirement only applies to federal credit unions - here is from Subsection (d)(2):

"(2) Lobby notice of nondiscrimination. Every federal credit union that engages in real estate-related lending must display a notice of nondiscrimination. The notice must be placed in the public lobby of the credit union and in the public area of each office where such loans are made and must be clearly visible to the general public. The notice must incorporate either a facsimile of the logotype and language appearing in paragraph (d)(3) of this section or the logotype and language appearing at 24 CFR 110.25(a). Posters containing the logotype and language appearing in paragraph (d)(3) of this section may be obtained from the regional offices of the National Credit Union Administration."  (emphasis added).

Technically, Federal Credit Unions could use either NCUA's poster of the HUD poster - but it makes much more sense to use the NCUA specific language with the new updated address for the Office of Consumer Protection.

Timing?  The changed rule became effective immediately - March 21, 2012.  However, NCUA staff did indicate at the Board meeting that credit unions would have a reasonable amount of time to update their posters.

While I'm sure a lot of credit unions appreciate the informal implementation time, I'm hoping NCUA has passed this flexible interpretation to their examiners as well.  

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On Tuesday, NCUA issued Letter to Credit Unions 12-CU-03 which indicates that the unlimited share insurance coverage for shares invested with Corporate Credit Unions will end - as scheduled - on December 31, 2012.  The program is formally known as the Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) - See Letter 09-CU-01 for more information on the program.

If your credit union has funds with a corporate, make sure your credit union is aware of Letter 12-CU-03 as it does a very good job of explaining how the expiration of the unlimited share insurance could impact credit unions.

Note:  This does not impact share insurance coverage for funds held at natural person credit unions.  Similarly, it does not alter the timeframe for the unlimited share insurance for noninterest-bearing transaction accounts (which is also slated to expire on December 31, 2012 according to Dodd-Frank).

ATM Fee Disclosures; CFPB & Privilege; Footnotes

Written by Steve Van Beek

Just a quick update on a few issues you might have seen in the news.

ATM Fee Disclosures.  NAFCU, CUNA, the ABA and other trade associations have joined together to call for an amendment to the Electronic Funds Transfer Act to end the "ATM Fee Disclosure" class action lawsuits.  You can read more on this issue in the NAFCU Today.  The letter sent to the Hill is available here.  

CFPB and Privileged Information.  NAFCU also sent a letter to the Hill urging support of a bill that would change the law to ensure information shared with the CFPB would remain confidential.  The law currently provides this protection for information shared with NCUA.  More from the NAFCU Today here and here.

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Footnotes.  The NAFCU Compliance Team is currently updating NAFCU's Credit Union Compliance GPS with new information, updated links and citations.  I felt a duty to share with the blog readers this footnote from the Regulation Z chapter.

Here is the text:

"Disclosures included in a footnote⁶ are not considered 'in a prominent location.'"

The footnote material is here....and very true:

"6 You read this footnote because you are a compliance officer and required to follow very detailed laws and regulations. Regulators are starting to disallow disclosures in footnotes through the increased use of “clear and conspicuous” requirements. This trend will most likely continue under the CFPB."

The "prominent location" reference in this situation comes from the promotional rate and fee disclosures from Reg Z's open-end advertising requirements in 12 C.F.R. 1026.16(g).  Of course, the restriction on using footnotes to provide the required disclosures is included in the official staff commentary!! 

What is the saying?  Do as I say……

More on Advertising; BSA Advisory Group

Written by Steve Van Beek

Yesterday's blog post mentioned the difference between the requirements for the "official sign" and the requirements for the "official advertising statement."  

Thanks to a helpful commenter, we were informed of our inaccurate discussion of when the "official sign" is required.  It is required at teller windows and:

"Each insured credit union must also display the official sign on its Internet page, if any, where it accepts deposits or open accounts, but it may vary the font sizes from that depicted in paragraph (b) of this section to ensure its legibility."  

Yesterday's post (which has been updated) indicated the official sign was required on the CU's main Internet page.  However, 12 CFR 740.5(a) indicates that credit unions need to use the official advertising statement on their main Internet page:

"§ 740.5   Requirements for the official advertising statement.

(a) Each insured credit union must include the official advertising statement, prescribed in paragraph (b) of this section, in all of its advertisements including, but not limited to, annual reports and statements of condition required to be published by law, and on its main Internet page, except as provided in paragraph (c) of this section. For annual reports and statements of condition required to be published by law, an insured credit union must place the official advertising statement in a prominent position on the cover page of such documents or on the first page a reader sees if there is no cover page."

Thus, for pages where the credit union accepts deposits or opens accounts the official sign would be required.  However, if the credit union does not accept deposits or open accounts on its main Internet page - the credit union could use any of the three versions of the official advertising statement discussed yesterday.

That being said, I think it makes a lot of sense to include the official sign on your main Internet page.

• The official sign (NCUA logo) is one that members are accustomed to seeing on credit union main pages.
• Non-members searching your website would be informed of your insured status upfront via the official sign - which catches the eye more than "Federally insured by NCUA."
• The use or non-use of the official sign is an easy item for examiners or auditors to catch.  Even if the official sign is not a requirement on your main Internet page, the credit union might need to defend its decision to use the official advertising statement rather than the official sign. 

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The Financial Crimes Enforcement Network (FinCEN) requested nominations to fill 14 seats on its Bank Secrecy Act Advisory Group (BSAAG).  One seat is designated for a representative of a credit union trade group.  NAFCU is seeking individuals who are interested in serving on the BSAAG and wish to be nominated.  The term runs for three years. 

The group is tasked with providing policy recommendations to the Treasury regarding the BSA.  The BSAAG is comprised of representatives from federal regulatory and law enforcement agencies, financial institutions and trade groups, whose members are subject to the BSA. 

The nomination notice can be found here.

If you are interested in being nominated, please contact Dillon Shea, NAFCU’s regulatory affairs counsel at dshea@nafcu.org or at 703-842-2212.

NCUA Official Sign; Official Advertising Statement; NAFCU Services Video Ads

Written by Steve Van Beek

As the January 1, 2012 compliance date approachs, we've seen a steady influx of questions related to the changes in NCUA's advertising regulations.  

Part of the confusion stems from the terminology used in the regulation.  Part 740 of NCUA's regulation discusses the "Official Sign" as well as the "Official Advertising Statement."  

For example, Section 740.4(a) requires that the official sign be used at teller windows and on the credit union's main Internet page on Internet pages where the credit union accepts deposits or opens accounts (edited: Nov. 29 at 12:45 p.m.):

"§ 740.4   Requirements for the official sign.

(a) Each insured credit union must continuously display the official sign described in paragraph (b) of this section at each station or window where insured account funds or deposits are normally received in its principal place of business and in all its branches, 30 days after its first day of operation as an insured credit union. Each insured credit union must also display the official sign on its Internet page, if any, where it accepts deposits or open accounts, but it may vary the font sizes from that depicted in paragraph (b) of this section to ensure its legibility."

To meet this requirement, credit unions need to use the official sign itself.

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For advertisements, credit unions have flexibility in disclosing the official advertising statement.  Credit unions can use any of the following:

1. The Official Sign
2. The long version - "This credit union is Federally insured by the National Credit Union Administration"
3. The short version - "Federally insured by NCUA"  

That flexibility comes from 12 CFR 740.5(b).  The credit union only needs to include one of these disclosures on its advertisements.

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NAFCU Services Corporation, a subsidiary of NAFCU, has video ads for NAFCU-members.  These ads can be customized for credit unions for $150.

Importantly, the ads have been updated to reflect the new advertising rule changes.  

If you haven't seen the ads before, take a look and see if one or more might be of use for your credit union.  For example, there are ads on the benefits of credit unions as well as ads describing the federally-insured status of credit unions.  These might be useful for attracting new members and educating those new members of their insurance coverage.   

Upcoming Compliance Dates; Veterans Day

Written by Sarah Zimmermann

I believe we've touched on these upcoming compliance issues separately but we thought it might be helpful to put them together in a cohesive post. Below are three compliance issues that are coming up soon.

SAFE Act Renewal.  MLOs that were registered before July 1 are required to renew their registrations before December 31 and they will not need to pay a renewal fee this year. Individual employees who registered after July 1 are not required to renew their registrations by the December 31 deadline but must do so in coming years. All institution accounts need to renew on an annual basis regardless of when the initial registration occurred and will pay a $100 fee. For more information the Nationwide Mortgage Licensing System & Registry has a Federal Registry Renewal and Reactivation Handbook.

 

NCUA's Advertising Rule.   NCUA's final advertising rule has a mandatory compliance date of January 1, 2012. This rule requires credit unions to include the agency’s official advertising statement on annual reports and financial statements of condition required to be published by law and shortens the radio and television advertisement exemption requiring the statement with advertisements that are 15 seconds or longer. This final rule also defines the term “advertisement” and details the size requirement for NCUA’s official advertisement statement in print materials. NAFCU members, you can read more about this in NAFCU's Final Regulation 11-EF-15, which can be accessed from this page.

Member online authentication. In June, NCUA issued Letter to CUs 11-CU-09 which included supplemental guidance to the 2005 FFIEC guidance on online member authentication. NCUA notes in the letter that examiners will evaluate authentication controls under the enhanced expectations outlined in the supplemental guidance, which includes further guidance on layered security.

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In honor of Veterans Day, NAFCU offices will be closed tomorrow, November 11. As always, we'd like to extend our gratitude and appreciation to those who have served, do serve, and will serve. Your service allows us to the live the lives we do. On that note, Anthony penned a great blog last year reminding us of the laws that protect servicemembers financially. Rather than recreate, I figured we could link to it.

Have a great weekend everyone. We'll be back on Monday.

Upcoming Compliance Dates

Written by Steve Van Beek

Thursday marks the one-year anniversary of the signing of Dodd-Frank Act.  Of course, that day, July 21, 2011, also marks the day that current federal regulators - including NCUA - transfer authority of consumer regulations to the CFPB.

Dodd-Frank also provided credit unions some wonderful anniversary gifts (isn't it supposed to the other way around?)  A number of provisions of Dodd-Frank become effective on July 21, 2011.  Including:

Regulation CC.  A change in Regulation CC from $100 to $200 for next-day availability.  The Federal Reserve has proposed changes to Reg CC that have not been finalized.  This change to $200 becomes effective though the Federal Reserve has not changed the language of Reg CC.  

This change requires credit unions to review their policies and make sure they are updated.  This present from Dodd-Frank also triggers 229.18(e) of Reg CC which requires credit unions to provide notice of the change to their policy.  This notice is required even though the change is beneficial to members.

Reality Check: Why didn't the Fed propose two different rules?  Rather than confuse the entire financial industry, the Fed could have easily issued one rule to implement the Dodd-Frank change and a separate rule to propose its other changes to Reg CC.

Exemptions to Reg Z & Reg M.  Dodd-Frank also increased the exemptions in Regulation Z and Regulation M from $25,000 to $50,000.  These exemptions were also tied to inflation and will increase to $51,800 after January 1, 2012.

Credit Score Information.  Section 1100F of Dodd-Frank - which requires credit score information to be disclosed on adverse action and risk-based pricing notices - becomes effective July 21, 2011.  The Federal Reserve has issued model forms for credit unions to use and obtain a safe harbor.  

If you are looking for a recap of past blog posts on these changes, see our FCRA category.

NAFCU Members:  The Regulatory Finals on both the adverse action and risk-based pricing notices are available here.

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Outside of the Dodd-Frank requirements, there are other compliance dates impacting credit unions.

Financial Literacy Requirement for Directors.  The financial literacy requirement for credit union directors becomes effective July 27, 2011.  Anthony did a great post  in February which stresses the importance of having a policy in place to document the credit union's efforts.  

Remember that this rule applies to new directors going forward as well.  Within six months of election, directors will need to have the financial skills expected by NCUA.  This means if your election occurs in August - new directors have six months to get up to speed.  Your policy should cover these situations as well as how the CU will address situations where a new director comes aboard between elections.

SAFE Act.  The initial registration for the SAFE Act ends July 29, 2011.  Credit unions need to have their mortgage loan originators registered and ready to go by that date.  Only registered MLOs can originate mortgage loans after July 29, 2011.  NCUA implemented the SAFE Act requirements in Part 761 of NCUA's Regulations.  

Clarifications to the Credit CARD Act.  It has been amazing how many pages of regulations came out of the 33-page Credit CARD Act.  In March, the Federal Reserve issued "clarifications" to its previous three final rules of Regulation Z.  These changes become effective October 1, 2011.  

NAFCU webcast:  Sarah and I will be doing a webcast on August 10, 2011 discussing these new clarifications and potential changes credit unions will need to make prior to October 1.       

Changes to NCUA's Advertising Rules.  In May, NCUA finalized a rule to amend its requirements for the display of the "official advertising logo" on advertisements.  This blog post from May 20 highlights the changes which become effective January 1, 2012.  Importantly, there is no "grandfathering" so existing advertisements are not exempt from these requirements.  Any advertisement used after January 1, 2012 would need to comply with these new requirements.