NAFCU Compliance Blog

Grab Bag

Posted by Anthony Demangone

Please let me pause our Regulation Z discussion to touch upon some things that have been bouncing around my in-box.  I understand how important Reg Z is, but other things continue to happen.

• HUD has updated its RESPA FAQs again.
• The FTC settled charges against an apparel company for alleged violations of COPPA.  You don't see these very often, so the settlement serves as a nice reminder that COPPA is alive and well.  And yes, it applies to credit unions.  The announcement also provides background information on COPPA.
• Earlier this month, the Fed announced its annual adjustments to the Regulation D reserve tranches.  I like this update each year, because it is the only time get to use the word tranche.
• NCUA issued Letter to Credit Unions 09-CU-21to remind credit unions about how to properly use the NCUA official sign.  This would be a good piece of guidance to share with marketing.

• HOEPA's higher-priced mortgage loans will affect HMDA reporting.  The OTS has updated its exam procedures, and they do a great job of highlighting these changes.

• The free go-to-webinar that will discuss our on-line training program will take place next Tuesday from 1 until 2 p.m. EST.  I had the wrong time in yesterday's blog posting.  Register here.

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The Saturday after our Regulatory Compliance Seminar, I had the pleasure of watching Penn State play Michigan with my colleague, Steve.  Steve is a big Michigan fan, and I went to Penn State.  I didn't watch all of it, as I was distracted by a couple of brand new Penn State fans who joined us to watch the game.  Kate was so excited to wear her Penn State shirt that she couldn't sit still for the photo.

A Little of This; A Little of That

Posted by Anthony Demangone.

Here are a number of things that caught my eye recently:

1. If you're credit union does "drawings" or other types of incentive-based marketing contests, please read this blog postingby Robert Rutkowski.   Good, good stuff.  There are more compliance issues than meet the eye.

2. Our paralegal, Shari Pogach, wrote a nice summary of a Federal Reserve study that examined violations by banks and thrifts in the areas of Regulations Z, B, DD (Truth in Savings), CC, E, and P (privacy).  Available for members here, the article could serve as a simple auditing tool.  Review the errors made by others to see how you measure up.

3. Here's a good flood insurance update that I recently read.

4. Our Book of Answers keeps being updated.  NAFCU members can access the latest version here.

5. NCUA has released the agenda for next week's board meeting.  The only compliance related item will be a final rule concerning the "Official Sign."  Access the agenda here.

6. It is official.  HUD has delayed enforcement of the "required use" provision from the RESPA final rule for 90 days.  Access its Federal Register notice here.

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NAFCU's offices will be closed next Monday and Tuesday.   My goals are to finish assembling the twins' cribs and watch my Steelers win against Baltimore.  I mentioned those goals to someone else earlier this week, and this is what following:

 

Coworker: You should really enjoy the game this weekend.
Compliance Guy:  I plan on it.

Coworker: I don't think you understand.  This may be the last time you get to see the Steelers play in peace for the next 18 years.  Once the twins come, forget about it.

Compliance Guy: (Blank stare.)
Coworker: You know that I'm serious, right?  And that assumes they leave the house at age 18.  It could be 20 years.

Compliance Guy: (Blank stare.)

 

Have a great weekend, everyone!  Even you Ravens' fans!  Until Wednesday, stay warm!

This and That; The Cookbook!

Posted by Anthony Demangone

My head is still spinning from last week.  Here's a little of this, and a little of that.  

• Note that on Thusday, the Fed issued a final rule to amend Regulation DD.  That's the bank version of Truth in Savings.  The changes take affect January 1, 2010, and they address overdraft protection programs.  NCUA has its own Truth in Savings reg, and I fully expect NCUA to follow suit quickly.  Here's a link to the final Reg DD rule.  What will it do?   It will require all depository institutions to disclose aggregate overdraft fees on periodic statements, and not solely institutions that promote the payment of overdrafts. The final rule also addresses balance disclosures provided to consumers through automated systems.
• NCUA has extended the CU Harp Deadline to December 29, 2008.  I thought the original deadline seemed a bit rushed.  I guess someone else agreed with me.

• On Thursday, the Fed announced its annual asset size bump for Reg C (HMDA.)  Credit unions with assets of $39 million or less as of December 31, 2008, are exempt from collecting data in 2009.

• The FDIC released the Winter 2008 issue of Supervisory Insights.   This is good reading.  This issue talks aobut liquidity risk (timely, eh?), reverse mortgages, and a discussion of "unfair and dececptive acts and practices." 

• NCUA issued Letter to Credit Unions 08-CU-25.  The guidance addresses holding foreclosed properties as Foreclosed and Repossessed Assets.  (Unfortunately, this is timely as well.) 

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Download Holiday Recipes!  The previous link takes you to the first annual, NAFCU Holiday Treats and Assorted Diet Busters Compliance Guide.  Enjoy, enjoy!  And many thanks for those who shared their wonderful recipes.

NCUA Board Meeting; Major FDIC Insurance Tweak Regarding Trusts?

Yesterday, NCUA held its monthly Board meeting.  You can access the results and the relevant documents here.  Overall, it was a good day for credit unions compliance officers. 

• NCUA issued a proposed rulemaking to amend its RegFlex rule to provide additional flexibility to qualifying federal credit unions when acquiring unimproved land for future expansion.  Now, when a credit union acquires unimproved land for future expansion and does not fully occupy it within a year, the credit union must partially occupy the completed premises within three years, or obtain a waiver.  The proposal would increase the three years to six years without necessitating a waiver.  NCUA also proposes to make conforming amendments to its fixed asset rule to provide consistency with the RegFlex changes.
• NCUA also issued a final rule that amends Part 740 of its rules and regs.  You may recall that in April, NCUA proposed that Part 740 be revised to allow insured credit unions greater flexibility in meeting the requirement of giving notice of their insured status. The final rule amends §740.5(b) as proposed to allow insured credit unions to satisfy the advertising statement requirement by using one of three methods:
  • The basic official advertising statement itself; or 
  • The shortened version of the official advertising statement, “Federally insured by NCUA” alone; or
  • The official insurance sign alone, as shown in §740.4(b).  That's right - you'd only need to use the sign, should you wish.

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Yesterday, the FDIC announced that it will broadcast its Board of Director's Meeting today at 10 a.m.  You can access information about that meeting here.  There is a very eye-catching agenda item:

  Memorandum and resolution re: Simplification of Deposit Insurance Rules for Trust Accounts.

The word on the street is that the FDIC may propose a major change regarding how trust accounts are insured.  NCUA's insurance system is very similar to the FDIC's, so this is something that you will want to keep a eye on.  We certainly will, for sure.

Have a great weekend, everyone!  (With the exception of the Illinois football team, that is.)

Email Signatures; Das Photos

Many credit unions (and NAFCU for that matter) use the email signature area to market products and services.  But here's a thought: how many have reviewed their email signature for compliance with Regulation Z, Truth in Savings, and NCUA's advertising requirements? 

It seems to me that an email signature that promotes a savings or loan product would qualify as an advertisement.  Regulation Z contains no exceptions whatsoever for its advertising requirements.  TIS has some exceptions for certain advertisements, as does NCUA's advertising rules.  I haven't gone through the entire analysis in my head yet, but I think it is something worth thinking about.  And how many of you compliance gurus review signature lines of a marketing nature before they go final?

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OK, you wanted wedding photos. Here they are! 

Have a great weekend, everyone!

Marketing Opt-Out?; NAFCU Swept

NCUA's privacy regulation and the ever-approaching affiliate marketing rules raise an interesting issue for credit unions.  I call it the consumer opt out confusion issue.  Under both regulatory structures, credit unions might have to offer members the right to opt out of certain information sharing practices. 

Where does the confusion come in?  The opt-outs noted above are very limited in scope.  One limits the ability of a credit union to share information with third parties, and the other limits the ability of credit unions to share/use information with affiliates for marketing purposes.  There are a number of exceptions to these opt-outs; some are large enough to drive a truck through.  For credit unions that do or will offer opt-outs, I wonder whether members understand what they are really opting out from. (Yes, I know that sentence ended in a preposition.  What was I thinking of?)  My guess is that many members do not.  They may view these opt outs as a way to "unsubscribe" from marketing campaigns.  At the very least, members that select an opt-out are raising their hand to let you know how much they value their personal information and privacy. 

With that in mind, I spoke with a credit union today that gives their members the right to a "marketing opt-out."  These members have the right to exclude themselves from all credit union marketing campaigns.  (Interestingly, this credit union currently does not need to offer their members an opt-out under the privacy rules and does not plan on offering an affiliate information opt-out.)  I asked how it worked, and the compliance officer said that it seemed to keep a very specific segment of their membership happy.  "And happy members deposit more," she added.

The affiliate marketing rule contains a model disclosure (in Appendix C) along these lines.  Here's what it says:

C–5—Model Form for Voluntary ‘‘No  Marketing’’ Notice—Your Choice To Stop Marketing
• [Name of Affiliate] is providing this notice.
• You may choose to stop all marketing from us and our affiliates. To stop all marketing, contact us [include
all that apply]:
• By telephone: 1–877–###–####
• On the Web: www.---.com
• By mail: Check the box and complete the form below, and send the form to:
[Company name]
[Company address]
____ Do not market to me.

While there's no requirement to offer such an opt out, I think it is a good way to manage member expectations and manage your reputation risk.  Do any of you offer this marketing opt-out?  How is it working?  (To add a comment if you received this posting via email, you'll need to click on the title above, scroll to the bottom of the posting, and then...well, follow directions.)

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Last Thursday, NAFCU's softball squad (4-8) was pummelled by the undefeated Llamas.  I'm not even going to share the scores.  Let's put it this way, one at bat by our opponents lasted 45 minutes.  No joke.  If it weren't for the fence, some of their hits would still be rolling.  Now, I'm not saying that the Llamas were using ringers, but 4 of their women hit from the left side and looked like they were employed as college softball hitting coaches.  Not that I'm bitter about it.

Proposals Available; NAFCU Softball

Yesterday, the NCUA Board was very, very busy.  They approved three compliance related proposals.  Those materials are now available as outlined below.  I didn't provide a whole lot of analysis here.  Rather, I pulled much of the purpose for each rule from the NCUA proposals and provided links to the actual language.  I suggest that you read the material below.  If you think that a specific proposal would affect your credit union, then by all means download the proposal and give it a read.  Our Reg Affairs staff will issue Regulatory Alerts on these shortly.  (Thanks, Carrie!)  In the mean time, I'll read through these over the next few days and holler if anything catches my eye.

1. NCUA issued a proposal to use median family income (MFI) to determine if a credit union qualifies for a low-income designation and assistance from the Community Development Revolving Loan Fund (CDRLF).   NCUA indicated that it designed the proposal to eliminate the confusion associated with adjusting median household income (MHI) in metropolitan areas with higher costs of living.   NCUA also indicates that it will better align NCUA criteria for a low-income designation with the criteria for the addition of an underserved area to a federal credit union (FCU) field of membership and certification as a Community Development Financial Institution (CDFI).  You may access the proposal here.
2. NCUA also issued a proposal to revise the requirements for use of the official insurance sign and official advertising statement to permit insured credit unions to use the basic form of the official advertising statement, a shortened form, or the official sign in advertisements. NCUA hopes the proposal will give credit unions added flexibility in advertisements. As compared to the current requirement, credit unions will be able to use the shortened form or the official insurance sign in advertisements as alternatives to the basic official advertising statement; under the current rule, credit unions may only use the shortened form if they also include the official sign.  You may access the proposal here.
3. NCUA also issued a proposal to change its credit union service organization (CUSO) rule by adding two new categories of permissible CUSO activities: credit card loan origination and payroll processing services. The proposal would also add new examples of permissible CUSO activities within existing categories and would expand the scope of two categories of services to include persons eligible for credit union membership. The proposal would impose new regulatory limits on the ability of credit unions to recapitalize their CUSOs in certain circumstances. While the CUSO rule generally only applies to federal credit unions (FCUs), the proposal would revise and extend to all federally insured credit unions the provisions ensuring that credit union regulators have access to books and records and that CUSOs are operated as separate legal entities. The proposal would also clarify that CUSOs may buy and sell participations in loans they are authorized to originate under the current rule. Finally, NCUA proposes to delete as unnecessary the section in the current rule concerning amendment requests. These amendments will clarify the rule while enhancing CUSO operations and addressing safety and soundness concerns.   You may access this proposal here.

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Last evening, NAFCU's softball team (0-2) lost both ends of a doubleheader, 15-5 and 6-3.   Gold stars go to Eddie "Arnold Palmer" Ambrose, Quincy "We Are Marshall" Enoch (4-for-4 in the second game), and Larry "The Acrobat" Palmer, who reportedly did a flip after a gold-glove catch in center field.  They are just a few of the folks who work their tails off for NAFCU's members.  Many of you haven't met many of our staff, so here's a pic of some of the team members. Most importantly, everyone had a great time, no one was hurt, and we spent the better part of 2 hours extolling the virtues of financial cooperatives to the opposing team.  Have a great weekend, everyone.